Deutsche Telekom, United Internet in talks on fibre cooperation

* Telekom CEO proposes alliance to connect 5 mln households

* United Internet says 75/25 joint venture makes sense

* Bosses jockey for position ahead of 5G auction

FRANKFURT, Aug 14 (Reuters) - Deutsche Telekom and United Internet are in talks on cooperating to build out Germany’s fibre optic network, potentially defusing a standoff between the two firms ahead of 5G mobile licence auctions next year.

Market leader Deutsche Telekom has accused United Internet, and its mobile unit 1&1 Drillisch, of being a free rider on its multi-billion-euro investments in network upgrades needed to roll out fifth-generation mobile services.

But CEO Tim Hoettges offered an olive branch on Tuesday, proposing that the two companies team up.

“I’m making a binding offer to 1&1 that we immediately start to lay glass-fibre cable together to connect more than 5 million homes in Germany to the fast broadband network,” he told the Funke media group in an interview.

Responding, United Internet CEO Ralph Dommermuth said he was willing to take Hoettges up on his offer. He said the two companies had talked to each other about the matter, although he had not discussed it directly with Hoettges.

Dommermuth told reporters, however, that the joint venture should be 75 percent backed by Telekom and 25 percent by United Internet, to reflect their respective shares of the internet market.

Telecoms bosses in Germany often take to the media to lobby their cause, and the back and forth between the two bosses comes as the Federal Network Regulator (BNetzA) finalises the terms of the 5G auction round.

Germany now has three operators - Telekom, Vodafone and Telefonica Deutschland - and they have so far been hostile towards Dommermuth’s idea of bidding to become a fourth player on Europe’s largest market.

Yet the idea has been welcomed by the head of Germany’s anti-trust regulator, amid a broader recognition that a lack of competition has left the country with worse connectivity than many of its peers.

Hoettges said he had nothing in principle against a fourth operator, but to take part in the auction it should be required to build its own network.

Dommermuth has, for his part, called on the regulator to allow national roaming - effectively granting access to the existing networks of rivals where a firm doesn’t have its own coverage - which would enable United Internet to focus on building its 5G network in urban areas.

He has also proposed that the BNetzA arbitrate in commercial disputes on network access, but added that if Deutsche Telekom prefers instead to appoint an independent auditor to rule in such cases this would be a workable alternative. (Reporting by Douglas Busvine; Editing by Adrian Croft)