Entel Chile announces sale of fiber network to Telefonica/KKR joint venture, bringing in largest portion of $360 million
There's nothing unusual about telecom operators offloading infrastructure assets anywhere in the world, especially in the current climate; it's a tried-and-true method of raising money. However, it is somewhat unusual for a telco to transfer these types of assets to another telco, especially when the buyer is a market competitor.
OnNet Fibra, which is 60 percent owned by KKR with the rest in the hands of Telefonica, has agreed to pay $358 million for Entel's fiber-to-the-home (FTTH) network, which currently passes through 1.2 million homes and businesses. Combined with OnNet Fibra's assets, the infrastructure will cover 3.9 million premises, and the companies have committed to increasing coverage to 4.3 million by 2024, a commitment likely aimed at helping them gain regulatory approval.
Telefónica divested its Chilean fiber-optic network business and sold its majority stake to KKR in early 2021 in a deal valued at $1 billion. At the time, the company (then known as InfraCo) covered 2 million homes, and by 2022 it will have expanded its network to 3.5 million, or more than half of the country's households.
Of course, that means it will do so by building more fiber, but in the last few years it has only added coverage to 700,000 premises.
The deal with Entel will allow it to achieve that goal, and the parties involved expect the deal to close in the first half of 2023, subject to regulatory approval and other closing conditions.
Fiber currently accounts for more than half of Chile's fixed Internet connections, according to regulator Subtel. The country has 2.43 million FTTX connections by the end of 2021, following fairly rapid growth in previous years. Still, Telefónica, Entel and their competitors have some work to do to convince customers to connect to the infrastructure they are rolling out.
The deal doesn't mean Entel is getting out of the fiber game. Under the terms of the deal, it will continue to provide services to end users over the network. Essentially, OnNet Fibra has grown as a wholesaler and gained a sizable retail customer base in the process. The deal should help drive the rollout of fiber in Chile, bringing greater advantages of scale, but it will be up to regulators to decide whether it constitutes sufficient competition.
A similar deal is possible in Peru, where Entel says it is still considering options for its FTTH business.
Interestingly, there were reports this summer that Telefónica was looking to replicate its Chilean fiber model in Peru. Reuters quoted the Spanish expansion company as saying that the telco is in talks to sell a majority stake in its Peruvian fiber business to KKR, although there's no official word on that yet.
