As your conquer more provinces or lose more provinces there will be more or less theatre zones (NOT theatre HQs).
In 1939 Germany only has one theatre, while in 1942 it probably has 2. The OKH for the east, and the OKW for the west
That's now what he's saying, however. He describes what seems to be an action by the player that involves merging or splitting Theaters, in some unspecified fashion.