When it was born, nothing indicated that it was going to be a success story. DigiMobil landed on the Spanish market in 2008, in the midst of the financial crisis, and with prepaid calling cards as the only offer. The cards allowed national and international calls because the clientele they were looking for were immigrants from Romania, the company’s own country of origin. At that time the Romanian community barely exceeded 730,000 people in Spain. That was basically their maximum potential audience. And its initial sales force (and for many years) were call centers for the migrant population, small grocery stores, neighborhood bazaars and little else.
Fifteen years later, Digi is a giant that has managed to burst the Spanish market of telecommunications based on aggressive prices, simple rates, and an increasingly complete range of services -already includes mobile data, fiber and landline- which has long since surpassed the limits of the public of original Romanian origin and has conquered the national customer. The operator currently has a portfolio of just over 6.1 million customers (almost 4.47 million with mobile lines, 1.24 million with fiber and internet at home and more than 400,000 with landline lines), placing it as the fifth largest telecommunications company – only behind Movistar, Orange, Vodafone and MásMóvil – and it is by far the company that is growing the most.
Digi has added 1.5 million new customers in the last year alone (almost 2.8 million in the last two) and has managed to clearly surpass MásMóvil (Yoigo, Pepephone, MásMóvil, Euskaltel, Virgin Telco, Lebara…), the old group challenger that shook the sector, as a leader in user acquisition. Much of the company’s expansion in recent years is based on stealing clients from the large traditional telecom companies. The Romanian company is at the top of the portability ranking (the company changes while maintaining the telephone number) and adds 1.9 million customers snatched from its rivals in the last two years.
The tiny niche operator and neighborhood call shop, which only counted on word of mouth as a marketing tool for that limited immigrant audience, last year surpassed 500 million euros in revenue for the first time in Spain (this year it is expected will exceed 680 million); It has its own fiber network that already reaches more than 6 million homes and has concrete plans to add another 2.5 million (although there is speculation that it will sell this network for around 1,000 million); has launched a plan to have a network of its own stores to sell its products; and from that restricted word of mouth it has gone on to have its logo appear on the shirts of Rayo Vallecano, Cádiz or Oviedo (and in past seasons also others such as those of Espanyol, Alavés or Deportivo de La Coruña).
Finish the assault
The telecommunications sector in Spain has been involved in fierce competition for years – for some companies, many years, too many. Telecom companies live in an almost permanent trade war driven by the continued and increasing strength of low-cost operators.
Low-cost companies, according to operators’ estimates, have been able to keep around 60% of all new registrations in the sector for years, both portability and lines with new numbering. Saving on the bill is the main reason that moves customers to change companies of telephone and internet services, according to the consumer trends survey of the National Markets and Competition Commission (CNMC).
In the large Spanish low-cost market, Digi has emerged as the great queen of low cost (The company has no qualms when endorsing that label, although it prefers to talk about “fair prices for quality services”). And now the operator is about to make a crucial shake-up that could allow it to take a giant leap and definitively complete the assault on the big telecos club Spanish.
Orange and MásMóvil have closed an agreement this week with Digi to transfer assets and pave the way to finally obtain approval from the European Commission for their merger, after two years of preparatory work. Brussels considers that the union of the two telecoms, which will create the largest operator in the Spanish market by number of clients, may have a negative impact on competition and is preparing to impose conditions (remediesaccording to economic and community jargon) to approve the merger operation
Digi Spain has closed an agreement with the two telecom companies in the process of merging to purchase radio spectrum for 120 million euros to build its own mobile network in the Spanish market. The purchase of spectrum contemplates the transfer of 60 megahertz in different frequencies (including one of those that will be used for the new generation of 5G communications) until now in the hands of MásMóvil.
And the pact also contemplates a wholesale rental contract option for the use of its mobile networks with advantageous prices, which Digi has the option to activate or not depending on its needs and which may imply that it stops using the network as it has up to now. of Telefónica, with the consequent million-dollar blow for the group’s wholesale business.
Digi had already anticipated its intention to launch an investment plan for 2,000 million euros in seven years if it managed to obtain the remedies of the merger. The defenders of Brussels imposing conditions on the operation and of the surplus assets ending up in a growing and already considerable company like Digi, point out that the agreement will encourage the company of Romanian origin to promote investments and continue to create jobs ( already has a workforce of 7,250 workers, more than double that of two years ago), will facilitate its permanence in the Spanish market in the long term, and can also serve to moderate your trading aggressiveness having to assume million-dollar investments to build its own network and its maintenance. But not everyone in the sector is so optimistic.
Fatten another great fourth operator
Orange and MásMóvil themselves, and also their rivals Movistar and Vodafone, have been defending during the very long process of waiting for the ‘ok’ from the European Commission that the operation should be authorized without imposing remedies hard The large telecos demanded approval without conditions, or almost, to advance in the consolidation of a deeply atomized sector like the Spanish one.
The largest groups already feared that the decision would once again be aimed at promoting a fourth operator and that, with this, it would not allow progress towards greater rationalization of the injured telecom business in Spain, with profitability and income falling due to the blow due to hypercompetition and the great weight of low cost. The European Commission has been guiding Orange and MásMóvil on which assets should be transferred and which candidate or candidates would be suitable to take over them. The big winner, as all the pools indicated, will be Digi, which will be reinforced with excess assets of the union of its rivals.
The European Commission has been promoting liberalization of the telecommunications sector for almost three decades based on maximizing competition to guarantee affordable prices for citizens and companies. A strategy originally designed to break down the old state monopolies that has actively sought to guarantee in each national market the existence of four reference operators with the capacity to compete and that has been completed by Brussels with vetoes or the imposition of severe conditions on some operations. merger between relevant companies.
“The conditions in Brussels for the merger of Orange and MásMóvil are going to lead to the worst scenario. Digi is going to be artificially primed as the fourth operator, when it is clear that it really did not need it after years of being the company that is growing the most,” criticizes an executive from the national telecom sector. Several companies hoped that the Orange-MásMóvil merger would allow the business to be concentrated around three large operators, but they already anticipate that the emergence of a fourth powerful operator will once again be fueled and that Digi will replace MásMóvil in that role.