Digi’s IPO leaves Telefonica’s only merger option with Vodafone

Digi confirmed yesterday that it intends to list its Spanish subsidiary, while announcing that it has already acquired 10.2 million customers in our country, but without always losing control of Romania. The group said it was considering entering the stock market for a “minority stake” “in line with our strategy to continue to improve the capital structure and long-term financing position of our subsidiaries”. This means that under any scenario, the Romanian parent company will continue to control more than 50%. The aim is to attract institutional investors to support our country’s growth strategy, continue the deployment of fiber optics and develop mobile networks. Sources in the sector confirm that the Romanian telecom company started considering this possibility before the summer. So they started researching the market, which shows they don’t want to accelerate stock issuance with an eye toward 2026, but are instead taking a calm approach.

At the same time, Digi completely denied any rumors about any operation with Telefonica, saying it was not considering “any operation” that would cause it to lose control of the company. The possibility of Marc Murtola’s telco approaching the Romanian company had been discussed by market players, investment banks and within the group, but the most talked about deal was with Vodafone.

And just after Digi’s statement, vodafone That’s the only option. Telefónica announced its strategic plan a few days ago, stressing that it is “preparing for the possible opportunities that may arise” and will therefore advance its operations in the markets in which it is present.

“We are in ongoing dialogue in each of our major markets,” company president Mark Murtola said, adding that any business operation would be subject to three conditions: “cost and network synergies, appropriate pricing, and appropriate ‘relief’ with regulators.”

These conditions that Telefónica imposes on itself make it difficult for Telefónica to operate a company of a certain scale, particularly in relation to the “remedies” conditions set by the authorities for approving the merger. For example, if the company agrees to merge with Vodafone, but competition authorities force it to separate parts of the business and create a separate independent operator, the merger would be truncated. This is something Murtola himself has recently pointed out, as it makes no sense to integrate another large company and at the same time be forced to sell some of its assets.

The partnership with Vodafone could be caught up in this issue and would need to be reviewed by competition authorities. Telecommunications sector players believe that consolidation in Spain would include operations for a red operator, which could eliminate it and make one of the other three companies on the market fatter, or all three at the same time.

The possibility of four-party management is beginning to emerge in the market. This means that Vodafone Spain will cease to exist and its assets/business will be distributed to three other companies. Telefonica, Masorange, Digi. However, everything is unclear in this area at the moment, and some are unsure whether Marc Murtola’s group will be able to foster real integration in Spain.

These doubts about the merger also arise from Telefonica’s own statements that there are different ways to carry out the integration of the divisions in its strategic plan. On the one hand, there are traditional mergers and acquisitions, and on the other hand, there is “infrastructure sharing”. A clear example of this last step is the fiber optic joint venture they have set up with Vodafone, or the rumored existence of another fiber optic joint venture with Masorange.

Apart from that, there will also be the issue of how to finance the merger, taking into account the debt of the blue businesses. Telefonica is considering the possibility of a capital increase, but it will be necessary to see how shareholders will perceive it.