Telefonica, Germany's No.2 mobile operator behind Deutsche Telekom, said adjusted operating income before depreciation and amortisation (OIBDA) - a proxy for cash flow - gained by 29.4 percent to 528 million euros (454 million pounds).

On a comparable basis, adjusting for the rule change, OIBDA was up by 1 percent in the first quarter.

The bump resulted from IFRS 16, a new accounting rule that changes the treatment of leases - a significant factor for telecom firms that often rely on such arrangements to manage their networks.

Telefonica said it had added 306,000 contract customers in the quarter, and another 44,000 broadband connections, while an agreement to gain access to Vodafone's network would help boost its fixed-line offering in future.

Vodafone agreed this week to open its network to Telefonica in a bid to win approval from European Union regulators for its $22 billion deal to buy Liberty Global assets in Germany and central Europe.

Telefonica Deutschland confirmed its guidance for stable revenues and a flat to slightly positive OIBDA in 2019 as a whole, after adjusting for the financial impact of regulation.

(Reporting by Douglas Busvine; Editing by Michelle Martin)