The combination of the country’s fourth operator (Nowo) and a new entrant (Digi) may be an opportunity to intensify competition facing the ‘big three’ providers
The deal would expand Digi’s spectrum assets, give it a ready-made subscriber base and add to the size of its fixed network
On 2 August 2024, Romania-headquartered operator Digi announced an agreement to acquire MasMovil-owned Cabonitel, the parent company of cableco Nowo, for €150m (£128.9m). Approval from the national competition authority, the Autoridade da Concorrência (AdC), would be required, but the odds currently appear favourable as the deal would not remove a major competitor from the fixed or mobile markets, but would effectively strengthen the country’s fourth player (Nowo) and its ability to take on the ‘big three’ operators (NOS, MEO and Vodafone). The transaction would also represent a significant step up in scale for Digi as it looks to enter the Portuguese telecoms market. Having secured reserved ‘new entrant spectrum’ at the multi-band auction in 2021, Digi has been deploying its own 5G network since June 2022, with a commercial launch planned for later this year. Nowo – which acquired 1800MHz, 2.6GHz and 3.6GHz spectrum at the same auction – reportedly has around 270,000 mobile customers (via a wholesale access agreement with MEO) and 130,000 pay TV and broadband accounts. The proposed deal would therefore boost Digi’s spectrum portfolio and give it an existing subscriber base at launch, while complementing investments it is making to deploy fibre.
The transaction comes not long after the AdC prohibited Vodafone’s attempt to acquire Nowo, which would have removed a player from the market
The Digi/Nowo deal comes a month after Vodafone’s failed purchase of Nowo that faced opposition from both the communications regulator ANACOM and the AdC. In December 2022, ANACOM published its opinion on that proposed acquisition, stating it would reduce competition and increase prices. The AdC’s preliminary review, which was completed in April 2023, confirmed the merger could have negative impacts on competition and consumers. In July 2024, following an in-depth investigation, the authority confirmed that the transaction would likely create significant impediments to effective competition in various telecoms markets in Portugal, principally due to an increase in market power for Vodafone and its main competitors (i.e. unilateral effects), enhanced conditions for coordination across industry (i.e. coordinated effects) and reinforced barriers to market entry. During the review, the AdC rejected four commitments packages offered to get the transaction through, which included the divestment of spectrum to, and wholesale fibre access for, Digi. Had the AdC’s competition concerns been addressed and the deal approved, Vodafone’s position in the market would have been bolstered by the absorption of Portugal’s fourth largest converged operator, expanding its network footprint and subscriber base, while reducing the number of fixed operators from four to three.
Vodafone has made no indication it is looking to exit the Portuguese market, although STC is said to be weighing up a bid
As things now stand, Vodafone appears to be at a crossroads regarding its future in Portugal. It has not signalled an intention to exit, unlike in Italy (where it has agreed to sell its business to Swisscom) and Spain (where Zegona has acquired its assets for €5bn (£4.3bn)). However, there are reports that Vodafone may be subject to a takeover bid from STC, which had been interested in the indebted Altice, although the parties could not broker terms. STC has already made an investment in another European operator, purchasing 4.9% in shares and a further 5% in “financial instruments” in Telefónica in September 2023. This triggered a strategic investment by the Spanish Government – via state-owned industrial holding company Sociedad Estatal de Participaciones Industriales (SEPI) – and could be expected to raise some concerns among policymakers in Portugal should STC firm up its interest. Cross-border investments have already caused some governments to strengthen legal frameworks, including Italy, which has leveraged its ‘Golden Power’ rules to veto proposed takeovers – often from Chinese organisations – of domestic firms considered to operate in strategically important sectors.
