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1&1 Leverages Vodafone’s 5G: A Win-Win or a Risky Bet?

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In a remarkable turn of events, 1&1 has secured a roaming agreement that grants it entry to Vodafone‘s impressive 5G influence in Germany. This fresh alliance is beneficial to both parties and is a blow to Telefonica, 1&1’s incumbent MVNO host. The specifics of the agreement remain in draft, yet they hope for a conclusive deal soon. This news unveils that 1&1 will subsequently leverage Vodafone’s 5G network in areas where its service coverage has been slow to implement, a contentious point for 1&1.

Moreover, 1&1 is granted the opportunity to ride on Vodafone’s 2G and 4G infrastructure while also acceding to “future mobile standards and technologies”. In the scope of the consensual agreement that spans five years from the final pact between them, or as 1&1 puts it, by the latest of October next year, these novel technologies could surface. The deal, however, contains an extension possibility for 1&1 by an extra decade, in increments of five years, which includes an appended transitional period of three years.

1&1 asserts that it will sow a fixed rate per percentage point for the quantity of the Vodafone network accessed by its customers. It’s worth noting that although there’s the potential for this rate to vary, hinging on the evolving costs affiliated with Vodafone’s network enhancement, 1&1 finds solace in the payment model’s certainty. “The conditions are hereby geared to future market developments and enable 1&1 to make competitive offers over the long term,” the company stated, implying a lacking certainty in its present relation with Telefonica, amongst other elements.

Earlier this year, 1&1’s parent company United Internet’s founder and CEO – Ralph Dommermuth – criticized its contract with Telefonica as outdated. According to Berenberg analyst Usman Ghazi, who spoke to Bloomberg, a whopping 40% of Telefonica Deutschland’s free cash flow is generated from the 1&1 deal, approximating a significant loss to Telefonica from an effectively lost contract.

As a reaction, Telefonica’s shares showed a downtrend after the news was released, however, remains unaffected with full-year outlook, dividend commitment, and a 4G roaming deal with 1&1 in place till the end of June 2025, guaranteeing revenue streams. In its bid to find a silver lining, Telefonica mentioned possible surplus network capacity for itself or partnership customers.

Despite the agreement, Vodafone‘s reserve is essential as it combats 1&1 concerning the latter’s 5G infrastructure rollout. The Federal Cartel Office is considering if Vodafone has violated competition law by hindering 1&1’s 5G deployment via its Vantage Towers unit. An accusation against Vantage, by 1&1, stimulated the investigation – claiming it to be deliberately obstructing its rollout by withholding access to its sites as per the contract.

Nonetheless, the new roaming deal signifies possible reconciliation between the telecom corporations while bestowing 1&1 with the means to rival its more established competitors with 5G services that hold their own. “1&1 sets course for nationwide 5G…” it stated. “The long-term assured access to nationwide 5G national roaming services is another milestone in the building of Europe’s most innovative mobile network.”

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