In recent days we have been witnessing interesting movements in the communications market. While we are still seeing what Zengoa’s intention to purchase Vodafone Spain may look like, today we receive news about the possible sale by Digi of a part of its own fiber network.
Digi’s own fiber has been its main asset until now, thanks to it achieving rates as interesting as 1 Gbps for 20 euros per month or 10 Gbps for only 25 euros per month on the bill.
Digi could sell part of its network to Onivia
According to the newspaper Expansión, Digi is exploring options to find financing and part of this strategy could be to sell part of its fiber network to third parties. Specifically, Macquarie Capital and Abrdn are those negotiating to buy the fiber network from the Romanian operator. According to this newspaper, Digi could “segregate part of the extensive fiber optic network to the home (FTTH) that it has deployed in Spain and place it in specific vehicles owned by the funds.”
If these names do not sound familiar to you, you must remember that, for example, Digi has an agreement with Abrdn in Andalusia with a company with a 50% stake (which controls Digi by having one more share), to go beyond one million FTTH accesses and reach 2.5 million in seven of the eight Andalusian provinces.
The money obtained from this operation would be used to acquire the remedies that the European Commission will force Orange and MásMóvil to give up to authorize their merger. This is something that we have discussed in recent days and that Digi openly confirms. “We are interested in the remedies” or “We want to be a winner of these remedies. We believe that Spain needs a telecommunications market with four strong mobile telephone operators”, are phrases that make the intentions clear and that we were able to hear a few days ago from CEO Mario Varzaru in an interview with El Mundo.
The Australian firm Macquarie is the main shareholder of the Spanish company Onivia, in which Abrdn is also a reference shareholder. Onivia is a neutral wholesale fiber operator that until now has grown fundamentally by acquiring fixed fiber optic broadband networks from the MásMóvil group. Last May it announced its own deployment of 500,000 accesses in the Valencian Community and Murcia, with which it plans to reach 4.1 million homes covered with its network by the end of 2023. This could be the boost it needs.
It seems that this option of forming a fiberco could follow a similar pattern. Digi sells part of its network to Macquarie Capital and Abrdn and becomes a partner of these, still having the majority of the shares and being able to continue using its until now own network to market its fiber offers as before, so it should not have an effect on prices.
Moody’s and the need for financing
If you remember, a few weeks ago we reported that Moody’s had withdrawn Digi’s rating. The reason given by the Romanian operator was that the current contract with the financial rating agency ended this September. However, previous precedents indicate that Digi needs financing.
For example, in July 2023 data, Moody’s downgraded Digi’s rating. Specifically, from Ba3 to B1. According to the rating agency, “Digi’s credit metrics were going to weaken in the next 12-18 months, due to the greater material investment associated with its strong organic growth policy.”
This revision of Digi’s rating indicates that it could have a negative impact on its debt and the need to obtain financing to continue the fiber deployment, as well as to potentially obtain the remedies of the merger operation between MásMóvil and Orange. “It could hinder our ability to obtain financing for our investments and refinance our debt, with an effect on our businesses,” Digi said in its annual report.
