- Digi Portugal is already planning to launch services in 2024, and now also hopes to buy the market’s fourth-largest player
- The move comes less than a month after Vodafone failed in its efforts to buy Nowo
- Meanwhile, Vodafone and Three face a longer wait for a merger decision in the U.K.
Fresh from signing a national roaming and wholesale services agreement with Telefónica in Spain, Romania-based Digi Communications unveiled plans to expand its nascent presence in Portugal through the acquisition of the market’s fourth-largest player, Nowo Communications.
In a brief statement, Digi said its local unit, Digi Portugal, entered into a share purchase agreement with Lorca JVCO for the acquisition of 100% of Nowo’s parent company Cabonitel for €150 million. Lorca JVCO also owns Spain’s Masmovil and therefore holds a 50% shareholding in the MasOrange joint venture with Orange Group.
Notably, the move by Digi comes less than a month after Vodafone was thwarted in its plan to buy Nowo in order to shore up its Portuguese operations. The Autoridade da Concorrência (Portuguese Competition Authority or AdC) ruled that Vodafone’s proposed takeover of Nowo would not be permitted because of competition concerns.
Regulatory stance
It remains to be seen how the AdC will view Digi’s plan to buy Nowo, but there are significant differences between the two proposed transactions.
For example, Vodafone Portugal is already one of three large mobile network operators (MNO) in Portugal, alongside Altice Portugal (MEO) and NOS. If it had acquired Nowo, it would have considerably enhanced its market power by swallowing up the fourth player.
This is in stark contrast to Digi, which has yet to officially launch operations in Portugal, although it has previously indicated it aims to do so in the second half of 2024. The acquisition of Nowo would support its ambitions here given that Digi has been unable to secure a national roaming agreement (NRA) with an existing Portuguese MNO to support its services as it builds its own 5G network.
Digi Portugal secured spectrum in the 900 MHz, 1800 MHz, and 3.6 GHz bands in 2021, while Nowo has licenses for frequencies in the 1800MHz, 2.6 GHz and 3.6 GHz bands. According to Digi, Nowo has about 270,000 mobile telephony clients and 130,000 fixed telecoms customers.
In view of the differences in market power, AdC may look more favorably upon a Digi-Nowo combination as it would create a more robust fourth MNO to take on the three incumbents.
Meanwhile, should Digi launch services as planned in Belgium and Portugal this year, it would then be operational in five European markets by the end of 2024. It already provides services in Romania, Italy and Spain; in the latter market it is in the process of transitioning from an MVNO to an MNO following the Telefónica wholesale and NRA deal.
CMA pushes back Vodafone-Three merger decision
As far as Vodafone Group is concerned, the failure of its Portuguese expansion plan came as a setback following its successes in finding buyers for other challenged national operators, such as those in Spain and Italy. Vodafone Spain has now been offloaded to Zegona Communications, and Vodafone Italy is in the process of being sold to Swisscom.
Vodafone is also still battling to secure regulatory approval for the planned merger of Vodafone UK with Three UK. The Competition and Markets Authority (CMA) is currently investigating the proposed transaction and last week extended the statutory deadline for its decision from October 12 to December 7.
Vodafone CEO Margherita Della Valle has previously said the deal should be passed without any concessions at all and continues to urge the CMA to allow the merger to go ahead. For instance, she recently told the Guardian newspaper that the new U.K. Labour government will fail to achieve its manifesto promise of nationwide access to 5G by 2030 if the merger is blocked.
“Everyone now talks about [things like] artificial intelligence, all of these things cannot happen without good networks,” Della Valle said.
She warned that without the merger, Vodafone UK would not have the scale to invest in projects such as “5G across the board, which is what the U.K. needs.”
“At the moment, the U.K. has been lagging behind. By creating a third scale operator – [from] the two little guys – the merger has the ability to unlock this,” she added. Vodafone and Three have said that the combination of the third and fourth largest players in the market is essential to drive investment and compete against BT/EE and Virgin Media O2.