Industry Trend Analysis - Consumer Choice To Benefit From Digi-Invitel Acquisition - SEPT 2017


BMI View : Digi ' s acquisition of Invitel creates a much-needed strong third national converged services provider and the expan sion will boost consumer choice as well as the digital economy. The deal also aligns with our view that 2017 will see increased M&A activity amongst smaller players in the fragmented CEE telecoms markets.

Digi, the Hungarian wireline broadband services unit of Romania-based RCS&RDS, has agreed to acquire Invitel Tavkozlesi for EUR140mn, six months after Invitel had been sold to China Central and Eastern Europe Investment. In our view, Digi would better monetise Invitel's infrastructure and commercial potential than private investors, as it has ample incentive to transform itself into a complex multi-services player. It merely needed scale to provide better consumer choice in a converged services market dominated by Magar Telekom and UPC and this deal will provide that scale.

Although licensed to build Hungary's main alternative wireline network and provide full competition to Magyar Telekom, Invitel struggled to finance its expansion and transform legacy rural access networks that the former state-owned incumbent had not inherited post privatisation. The business did well to amass 426,000 voice, 273,000 broadband and 180,000 TV subscribers by the end of 2016, but it was still dwarfed by the better-financed Magyar Telekom (in which Deutsche Telekom is a major shareholder) and cable broadband operator UPC (owned by pan-European player Liberty Global Inc) and has struggled to escape its rural-market mindset.

Digi Must Compete With A Strong Incumbent
Magyar Telekom Monthly Multi-Play ARPU (HUF)
Source: Magyar Telekom

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