Vodafone inks MoU to buy Romanian mobile operator

The deal is still in the preliminary stages and we don't as yet have many details. It seems though that while Vodafone and Digi are working together on this transaction and have signed an MoU to that effect, they will each acquire different parts of the business.

"Vodafone Romania and Digi Romania have today signed a Memorandum of Understanding (MoU) with Hellenic Telecommunications Organization (OTE) in relation to potentially acquiring separate parts of its 100% subsidiary Telekom Romania Mobile Communications (TKRM)," Vodafone announced in a short stock exchange filing.

"Under the terms of the MoU, Vodafone could potentially acquire the Company, including a significant proportion of its assets, while Digi could also acquire certain assets of TKRM," it said.

And that's really all we have to go on for now.

We already knew that TKRM was on the block, and indeed has been for some time. Greek incumbent OTE announced that it was in talks to divest the business nearly a year ago, as part of a move to focus on its home market. However, negotiations with Quantum Projects Group, owner of domestic media outfit Clever Media, clearly failed and in May OTE revealed it had inked an MoU with a new purchaser: Digi.

To say that Digi's decision to buddy up with Vodafone on the deal was unexpected is something of an understatement though.

From a regulatory point of view, much depends on how the final deal is structured. As we noted back in May, there are question marks over whether Digi would get the regulatory go-ahead to buy TKRM, given that it is an existing player in the Romanian mobile market and a fairly strong one at that; a tie-up between Digi and TKRM would create a new market leader, ahead of Orange and second-placed Vodafone.

Naturally, Vodafone faces the same hurdle, and is arguably even less likely to clear it, having a stronger presence than Digi to start with. And therefore it appears an odd choice of partner for Digi. But by carving up the market minnow between them, Vodafone and Digi might be able to swing the regulatory pendulum in their favour and create a more level three-player market.

On the other hand, Vodafone's statement suggests that it will acquire the bulk of TKRM with Digi just picking up certain assets, which is something of a head-scratcher as far as competition approvals are concerned.

But even more unusual is that we have Vodafone, in the midst of a slimming down exercise, announcing itself as the purchaser in a potential M&A deal.

Vodafone CEO Margherita Della Valle has made much of her endeavours to "right size" her company's operations. Her tenure has already seen the telco group sell out of Spain and its planned Italian exit is still in the hands of regulators but looks set to get the green light. Meanwhile, the firm is also embroiled in a high-profile merger attempt with Three in the UK.

It's fair to say we did not see an acquisition coming.

There are, of course, no guarantees that a deal will actually emerge.

"The parties still need to complete detailed due diligence and discussions remain at an early stage. There is no certainty that a transaction will be agreed," Vodafone said.

And given how the attempted sale of TKRM has progressed to date, that statement is particularly pertinent. We'll just have to wait for further information.