Digi inks network deal with Telefonica to become full MNO

The new deal, which comes into force on 1 January next year, includes both RAN sharing and a national roaming agreement. It replaces Digi's current MVNO agreement with Telefonica.

The pair signed a non-binding MoU on network-sharing earlier this year, as disclosed by Telefonica at its first quarter results announcement in May. They have now formalised that arrangement and shared more details of their long-term plan to work together.

The new agreement has a duration of a minimum of 16 years and includes a number of strands, in both mobile and fixed. It includes a RAN-sharing element; as well as the physical network, the operators will also share the mobile spectrum they each own in the 3.5 GHz band. Digi will also be able to roam onto Telefonica's mobile network in areas where it does not – yet – have coverage.

Digi has also signed a fixed broadband bitstream wholesale agreement with Telefonica, initially for a 10-year period, but with the possibility to be extended. That part of the deal also extends an existing relationship between the two operators.

"Following the company's announcement from 12 December 2023 regarding the purchase of spectrum licenses in Spain, the conclusion of the agreements announced today will enable the company to execute an efficient and timely transition of its mobile telephony business in Spain from a mobile virtual network operator (MVNO) to a mobile network operator (MNO) and to roll-out its own mobile network," Digi said, in a statement.

That spectrum deal at the back end of last year saw Digi agree to pay €120 million for 2x10 MHz of 1800 MHz frequencies, 2x10 MHz at 2.1 GHz, and 20 MHz at 3.5 GHz from MasMovil, which was required to offload airwaves in order to get its merger with Orange over the line. That tie-up essentially positioned Digi as Spain's fourth national operator, both in its own eyes and in those of the EU and other regulatory authorities.

And now the telco has to put itself in a position to be able to occupy that fourth spot as a credible competitor.

Regulatory body the CNMC has yet to update its statistics to show MasOrange as a merged entity and as such Digi does not appear in its own right, being categorised as 'other' in the fixed market and 'MVNOs' in mobile. However, the landscape is still pretty clear. Orange and MasMovil served just over 43% of Spain's mobile users as of the end of April, followed by former market leader Telefonica with almost 27% and Vodafone in third with 21%; the MVNOs together claimed just under 9%. And the picture is similar for fixed broadband.

Digi has some way to go before it can claim to have made a serious impact on the market.

The Telefonica deal will help it on its way though. And it will help Telefonica, in that it provides a valuable wholesale revenue stream. Naturally, the companies did not disclose the value of the deal, but in a statement of its own the Spanish incumbent alluded to its importance from a balance sheet perspective.

"With this new agreement, Telefónica increases its sustainability by ensuring a long-term revenue stream in line with the existing one," it said.

The deal is a win for both Telefonica and Digi. While the latter is keen to make its mark on the Spanish telecoms scene, the former has a long-standing position to retain in the face of new competition.