On Monday, private equity giant KKR announced it has reached a deal with Latin American and European telecommunications giant Telefónica to establish Chile’s first open access wholesale fiber optics company, a transaction that will bring greater broadband access to Chile.
Under the agreement, KKR will acquire a majority stake in Telefónica Chile’s existing fiber optic network, the largest such network in Chile, and make that network open access through a newly established independent Chilean company with assets managed locally. Telefónica, which serves 342 million customers across multiple regional markets, will retain a 40 percent stake in the business. The newly formed enterprise will serve as Chile’s first wholesale digital infrastructure network open to all current and future telecom operators in Chile, creating a competitive marketplace benefitting consumers and businesses across the country.
The deal is valued at around $1 billion and is expected to close in the first half of 2021, pending regulatory approvals.
Room to grow
While Chile ranks among Latin America’s leaders in GDP per capita, KKR notes that the country is currently third-ranked in fiber-to-the-home connectivity. Fiber optic service offers very high reliability and speeds 10-1000 times faster than cable and legacy telecommunication networks.
Once completed, the new business will expand broadband coverage in Chile from 2 million households today to at least 3.5 million households by 2023, and will provide wholesale service to more than 40,000 businesses, telecom towers, and small cells. The newly formed network will provide access to under-served areas: more than two-thirds of households to be covered by the network are located outside of high-income urban areas.
The fiber optic network, which will be transferred to the newly formed company, has been built to the highest technical standards, its existing infrastructure having supported reliable service over the past year when covid-related disruptions increased bandwidth needs for remote school, school, health, and other essential services. In 2020, the network was recognized as Chile’s Best and Fastest Fixed Network.
“We are excited to be working with Telefónica to create the first-ever open access wholesale fiber network in Chile. This will create competition where none exists today, helping Chilean families, companies, and the economy recover and grow in the digital economy,” said KKR investment team senior leader Waldemar Szlezak, commenting on the acquisition.
“This transaction demonstrates the value of our infrastructure and our willingness to contribute to the sustainable development of the fiber market in Chile,” said Alfonso Gómez Palacio, CEO of Telefónica HispAm. “We have seen increased commercial activity over the last 12 months, and this transaction will further support this momentum as we will be able to accelerate the fiber-optic deployment. Our stake in the new company provides us with substantial flexibility in the long-term, in a market with enormous future potential. We are proud to share this project with our partners at KKR, a company with whom we have worked on key initiatives for Telefónica.”
The new company will be controlled by KKR, drawing from its global experience in digital infrastructure and fiber networks. Previous comparable investments for KKR include FiberCop in Italy, Hyperoptic in the U.K., Deutsche Glasfaser in Germany, Telxius in Europe and Latin America, Hivory in France, Global Technical Realty in Europe, Indus Towers (formerly known as Bharti Infratel) in India, and Pinnacle Towers in the Philippines.
KKR is investing through its Global Infrastructure Investors III Fund, a strategy first launched in 2008 that has since become one of the most active infrastructure investors around the world. Since 2008, KKR has deployed more than $24 billion across approximately 40 infrastructure investments, supported by a team of 45 investment professionals.
