UPDATE 2-Telefonica Deutschland teams up with rivals to improve network coverage

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BERLIN, Jan 19 (Reuters) - Telefonica Deutschland said on Tuesday it would expand its 5G coverage in Germany as it unveiled an alliance with Deutsche Telekom and Vodafone to plug gaps in network coverage.

The subsidiary of Spain’s Telefonica also said in a strategy update that it would achieve cumulative revenue growth of 5% by the end of 2022 and bring about a sustained improvement in profitability.

Telefonica Deutschland’s network-sharing deal followed an order by the Federal Cartel Office, Germany’s antitrust watchdog, to the country’s big three operators to work together to cover “grey spots” in their networks.

Deutsche Telekom and Vodafone had announced a network- sharing partnership last year, leaving Telefonica Deutschland out in the cold. That bilateral arrangement was “problematic in terms of competition”, the cartel office said on Tuesday.

Telefonica Deutschland is Germany’s No.2 mobile operator by revenue, with a market share of 25.5%, behind leader Deutsche Telekom on 31.7%, industry data shows.

In the strategy update, Telefonica Deutschland, which operates under the O2 brand, said it would connect 30% of German households to its 5G mobile network this year, and provide complete coverage by 2025.

“Our operational business is very resilient,” CEO Markus Haas said. “We have made significant progress in expanding the network and can now look our competitors in the eye.”

Telefonica Deutschland said it would propose a dividend of 0.18 euros for the business year just ended, up from 0.17 cents the year before. The 2020 dividend would also serve as a floor for payouts from 2021 to 2023. (Reporting by Nadine Schimroszik, writing by Douglas Busvine Editing by Caroline Copley and Jane Merriman)