I'm afraid I can't tell you anything about that device specifically, only that its not the standard grenade launcher device. Clearly a barrel extension, but that doesn't mean it was intended to be a flash hider. The Germans did a lot of strange stuff...
The rifle in the picture does not have the same kind of front sight I have on my Kar 98k. Nor is it what's on my VZ-24. The barrel is 2-3" shorter than the 989k I have, and you can see a "step" where the bayonet lug was relieved to allow the front sight band to be fitted. So, at a guess the barrel was shortened.
Just for general information, I'd like to point out that while we use flash hider and flash suppressor about interchangeably, they are slightly different devices. By the definitions the US used in WWII, a flash hider is solid (usually cone shaped) and a flash suppressor has holes or slots. We had "bolt on" flash hiders for the M3 Grease Gun and the M2HB .50 cal machine gun, that were still in service when I was in during the 70s.
More modern guns like the M14, M16, M60 etc, have flash suppressors, not flash hiders.
The intent of both is not that the enemy doesn't see the flash, but that the shooter's sees less flash (and/or a different shape) hopefully preserving more of his night vision.
Because of the length, and straight shape (and no holes) of the device pictured, it is not impossible it might have been intended as a firing port device, for a vehicle (or possibly ship?) and might not have been made for the Mauser rifle originally, but was fitted to one....because someone could??
Just a wild guess, and worth what you paid for it. But the Germans did do things like that, among other things. There was a curved barrel device "for shooting around corners" but really made for being able to shoot out of an armored vehicle. The "bump" under the front of the barrel of the MP40 SMG is there so that you could "hook" it over the side of the halftrack when firing and recoil wouldn't push the muzzle back inside the vehicle with decidedly undesirable results.
