What happened? *This morning Handelsblatt reported the potential ''redefinition'' of the relationship between Telefonica and United Internet (who own the majority of 1and1, the German MVNO and broadband wholesale operator). The article quotes people familiar with the discussions. *The article highlights potential ''cooperation'' between the two parties, and notes that ''takeover is also being considered in the long term'', though talks are still at an early stage. The recent announcement that Telefonica''s German CEO, Markus Haas, would soon be departing the company is also highlighted and the article notes that this ''could facilitate a rapprochement'' between the two parties. *At time of writing 1and1 shares are +9%, United Internet is +8% and TEF is up 2%. BNPP Exane View: *This is the most explicit article to suggest that TEF may be looking to acquire 1and1/ United Internet and consolidate the German telco market - recent press reports have focused mainly on Spain where TEF is reportedly looking to acquire Zegona. *Telefonica will host a CMD on November 4th, with potential MandA deals and a capital raise being the focus of recent press reports (see here). Of the potential options available to Telefonica (acquiring 1and1 in Germany, Zegona in Spain or other bolt-on tech acquisitions), investors are most in favour of a German deal - we see this as the main reason for TEF shares outperforming today. *Any in-market telco consolidation deal is likely to take 18-24 months to be reviewed by the EC competition authorities, and whilst operators/ investors are optimistic for a more benign regulatory outcome, this is by no means a given. *We also note that recent press reports have suggested that deals in either German or Spain could take longer to come through - and believe that there is a higher likelihood of no deal being announced at the CMD itself (TEF may instead choose just to announce a capital raise), before mgmt. come back with more detailed plans in 2026 (any...