Digi Telekom Romania deal to even up Romanian mobile market

OTE and Digi separately posted stock exchange announcements on Monday confirming the deal. The pair have signed an MoU to that effect and are in the process of applying for approvals with various Romanian authorities, they said, but noted that they have yet to ink the final transaction documents. Further, due diligence has yet to be completed.

The companies have not shared any details about purchase price at this time.

We knew a deal was coming, but the identity of the buyer comes as something of a surprise.

In November last year OTE announced it was in talks to offload its mobile operations in Romania to Quantum Projects Group, owner of domestic media outfit Clever Media. That announcement came at a similar stage in proceedings we are at currently with Digi: they had signed an MoU and filed documentation with the relevant regulatory bodies.

But all then went quiet. Until Monday, when OTE revealed that "negotiations now progress with a new purchaser group, West Network Invest." It did not expand on what happened with the previous buyer, which, incidentally, seemed like an ideal choice, given that it does not already have fixed or mobile networks in Romania and therefore would likely offer a smooth regulatory path.

West Network Invest is an investment vehicle majority owned by Digi Romania, with a minority interest held by the aforementioned Clever Media. Digi not only has an existing presence in the country's telecoms market, but also a strong presence, which might raise eyebrows amongst competition regulators. That said, if the deal gets over the line, it would level the playing field in the mobile space, from a market share perspective, which might appease regulators somewhat.

As it stands, Orange leads the mobile market with 9.5 million customers as of the end of last year, but it is closely followed by Vodafone's local unit. Vodafone is not particularly forthcoming with data on its Romanian operation, but according to news outlet Romania-Insider, it had 8.81 million customers at the same date.

Digi reported having 6 million mobile RGUs at the end of March, while at the same date Telekom Romania Mobile had 3.66 million, according to OTE's parent company Deutsche Telekom. No complex maths needed to point out that the merged entity would be just ahead of Orange.

However, a merger may well not be on the cards. According to Digi, "in the event the transaction is completed, Telekom Romania Mobile will remain in the market as an independent telecommunications operator."

What that actually looks like in real life remains to be seen; presumably the Deutsche Telekom T branding would have to go, for example. But retaining the company as a fourth MNO might help the companies clear the competition hurdles and potentially satisfy any European Commission rumblings.

Digi is already the largest fixed-line operator in Romania; earlier this year Analysys Mason described it as the most profitable operator in the country despite hefty fibre investment and low prices, and pointed out that it has adopted the strategy of a challenger operator to increase its market share. That fixed presence may or may not impact on this transaction.

Should it all come to pass, it will be interesting to see how Brussels approaches this deal.

On a separate note, the main protagonist in this deal is quickly establishing itself as one to watch in Europe.

Digi is working hard to establish itself as a credible fourth MNO in Spain, having picked up spectrum assets and a roaming deal as part of the MasOrange merger earlier this year. It is also working on plans to launch in Portugal and Belgium in the near future.

It's an ambitious outfit, and this latest Romania deal is just part of its growth strategy.

Conversely, the sale of Telekom Romania Mobile spells the opposite for OTE. Once the transaction is complete, OTE will have no remaining presence in Europe outside of its home market. Where one company prioritises expansion, another retrenches.