Romania's Digi gears up for international growth in 2024

In 2022, a company called Citymesh, part of the European IT Group Cegeka, acquired spectrum as a new entrant in Belgium's somewhat delayed auction of 5G-friendly spectrum. The aim of the connectivity provider and operator was to build a nationwide 5G network in a joint venture with RCS&RDS, the Romanian group that is also the founder of the Digi brand.

Over in Portugal, an equally delayed 5G auction in 2021 also ushered in two new entrants, namely Dixarobil Telecom, established by Digi through its Spanish business; and Nowo, the Portuguese cable company owned by Spain's MasMovil. 

Fast forward to 2024, and Digi is now shaping up to become the – not always popular – fourth 5G player in a growing number of European markets including Belgium, Portugal and now Spain, where it recently became the remedy that allowed Orange and Másmóvil to form the MasOrange joint venture.

It has also established a reputation for offering some pretty aggressive prices, prompting French broadsheet Les Echos to label it the "Ryanair of telecoms." Below, we take a look at Digi's progress to date, and what it hopes to achieve in the year ahead.

In the works: from MVNO to MNO in Spain

In the Spanish market, Digi Spain is in the process of transforming itself from a mobile virtual network operator (MVNO), hosted by Telefónica, to a full-fledged mobile network operator (MNO). 

The Orange-Másmóvil merger remedies included an agreement by Digi to buy Másmóvil's spectrum for €120 million (US$129.8 million). This includes two slightly lower range frequency bands (1800 MHz and 2100 MHz), as well as the 3.5GHz mid-band.

Digi is also in the process of establishing a new mobile network agreement with existing wholesale partner Telefónica. The deal would cover both national roaming and RAN sharing options, although Digi Spain still has the option to use a national roaming arrangement previously agreed on with Orange- Másmóvil.

The combination of its own spectrum assets and a national roaming agreement should then pave the way for the MVNO to become a facilities‑based player in Spain. During the recent earnings call for the first quarter (Q1) of 2024, Serghei Bulgac, CEO of Digi Communications, indicated that Digi expects to "initiate" its own network some time in 2025. 

Meanwhile, Digi Spain has also been building a fiber‑to‑the‑home (FTTH) network in Spain. It recently agreed to a €750 million ($815 million) sale of part of the network to Sota Investments, a consortium of investors Macquarie Capital, abrdn and Arjun Infrastructure Partners. At the same time, it signed a 25-year lease agreement that "guarantees us proper access to the network we built and designed, which we will continue to utilize according to our needs," Bulgac said.

Bulgac noted that Digi's fiber network currently passes 9 million homes in Spain, of which 4,250,000 homes are being sold to the Macquarie consortium. Here, the plan is to pass a further 1.75 million homes over the coming four years, to reach 6 million in total. Notably, the 9 million also includes homes passed by a separate joint venture with abrdn.

Coming soon to Belgium: mobile services, followed by fixed

In Belgium, the Citymesh-RCS&RDS joint venture is now named Digi Belgium and aims to provide mobile services via its own network as well as through a five-year national roaming agreement with Proximus. Digi has also agreed to buy 400 sites from the former incumbent.

During the Q1 earnings call, Bulgac was still reluctant to provide a precise date for the launch but noted that it would take place in the second half of 2024. 

At the same time, Digi Belgium is already signaling that it will be launching with some fairly aggressive mobile plans. According to Jeroen Degadt, CEO of Digi Belgium, the operator wants to enter the market with "prices never seen before in Belgium" – a claim no doubt being anxiously monitored by rivals including Proximus as well as Orange Belgium and Liberty Global's Telenet.

Digi plans to launch mobile services first, followed by fixed services later in the year. It aims to serve 30% of the population through its own mobile network by Q4 2025, rising to 70% coverage by the end of 2028 and then 99.8% by the end of 2030, when it would need to have installed 4,500 antennas. 

Bulgac said that while Digi is "eager to introduce fixed services," the operator will need to "assess our progress and determine the optimal timing for their rollout." The operator has said it already passes 60,000 homes with a fiber network in Brussels and has indicated it is open to collaborating with other providers. 

"We are very interested in any industrial initiatives, whether they involve mobile sharing, fixed sharing, fiber sharing, or any other infrastructure sharing," Bulgac added.

Portugal: mobile and fixed to come, but national roaming proves elusive 

Dixarobil changed its name to Digi Portugal in 2022, a year after spending about €67.34 million ($73.1 million) on 900MHz, 1800MHz, and 3.6GHz spectrum. The aim is to launch mobile and fixed services in the second half of 2024, which is somewhat later than was originally planned. 

"It is true that we were bullish," Bulgac conceded. "However, launching the network approximately two years after winning the frequencies and licenses, and ensuring it is a 100% proprietary network, is a very short timeframe for any operator. Postponing the network launch by a couple of months is not a significant delay from our side." 

In contrast to Belgium and Spain, Digi has so far been unable to secure a national roaming agreement (NRA) with an existing Portuguese MNO. Bulgac indicated that Digi had received offers, but clearly regarded the terms as too expensive. 

While noting that Digi would be keen to establish a roaming deal, Bulgac stressed that the operator will proceed "regardless of whether an NRA agreement is in place or not. While we are open to signing one, it is not our primary strategy. We believe we can operate without a roaming agreement in Portugal." 

On the fixed side, Digi has been building its own fiber network in Lisbon and also indicated it would be open to wholesale agreements with other operators. Bulgac noted that Digi has already signed an agreement with Vodafone Portugal given its plan to buy Nowo. However, Vodafone is currently struggling to secure regulatory clearance for the Nowo deal.

The story so far 

Despite the setbacks and delays, Digi could well be up and running in what would then be five markets by the end of 2024, expanding its current footprint in Romania, Spain and Italy. It is no longer active in Hungary, having sold its operations there to 4iG in 2021.

In the meantime, it has continued to report ongoing growth. In Q1 2024, Digi Communications reported a 12% increase in revenue to €446.7 million ($484.7 million). Adjusted EBITDA rose 21.9% to €163.1 million ($177 million), attributed to the "expanding customer base across Romania, Spain, and Italy." 

The group also noted that it is moving closer to the milestone of 25 million revenue generating units (RGU) across the three markets, of which 17.3 million are in Romania.

Italy is still a relatively small market for the operator, although mobile users increased by 18.2% to 435,000 RGUs in Q1. Here, Digi is currently experimenting with fixed-line services, although it has not divulged any further information as yet.

Quick facts: Originally founded in 1992 as a cable TV business called TVS Holding, Romania Cable Systems (RCS) was established in 1996, followed by Romania Data Systems (RDS) in 1997. The Digi brand arrived in 2004, with Digi Mobil then launched in 2007. Digi Communications was established as the group holding company in 2000 and listed on the Bucharest stock exchange in 2017.