The impending T-Mobile and KKR joint venture with Metronet is a significant development, signalling a potential wave of private equity-backed infrastructure deals in the broadband sector. This transaction, expected to close in 2025, highlights several key trends. But first, a deal synopsis and a who’s who on the deal.
Deal synopsis
Upon closing in 2025, T-Mobile will invest $4.9 billion for a 50% stake in the joint venture, acquiring all of Metronet’s residential fibre operations and customers, while also providing additional funding. KKR, leveraging its extensive $61 billion global infrastructure portfolio, is investing through this strategy. KKR has been a minority investor in the Company since 2021. Notably, the JV will also acquire Oak Hill Capital’s existing stake. However, Oak Hill Capital will re-invest for a minority share alongside founder John Cinelli who will also retain a minority position once the deal closes.
Advisors
Bank Street Group LLC and TD Securities served as financial advisors to Metronet. Paul, Weiss, Rifkind, Wharton & Garrison LLP and Polsinelli served as legal counsel to Metronet. Lazard served as financial advisor to Oak Hill.
Barclays and Morgan Stanley & Co. LLC are serving as lead financial advisors to KKR, with Goldman Sachs, Mizuho and MUFG also serving as financial advisors. Simpson Thacher is serving as KKR’s legal advisor.
Private Equity’s Growing Appetite for Fibre
Private equity firms, like KKR, are increasingly recognising the value of fibre infrastructure as a long-term, stable asset class with attractive returns. The demand for high-speed, reliable internet access continues to surge, driven by remote work, streaming, and the growing number of connected devices. This creates a lucrative opportunity for investors to capitalise on the expanding fibre market.
Telcos Leveraging Private Capital for Expansion
For telecommunications companies like T-Mobile, partnering with private equity firms provides access to significant capital and expertise in infrastructure development. This allows telcos to accelerate their fibre rollout plans without solely relying on their own balance sheets. The Metronet deal demonstrates how T-Mobile can leverage KKR’s financial backing and Metronet’s operational experience to rapidly expand its fibre footprint and reach millions of new customers.
The Rise of Wholesale Fibre Providers
Metronet’s transition to a wholesale provider model is a notable shift. This strategy enables the company to focus on its core competencies of network design, construction, and maintenance, while T-Mobile handles customer acquisition and support. This collaborative approach streamlines operations and allows both companies to leverage their respective strengths.
Meeting the Demand for High-Speed Broadband
The COVID-19 pandemic has further amplified the need for robust broadband infrastructure. With millions of people working and learning from home, the demand for fast and reliable internet access has never been higher. This transaction addresses this need by accelerating the deployment of fibre networks, especially in underserved areas.
What Makes the T-Mobile-KKR-Metronet Deal Unique?
Strategic alignment
This deal is a win-win for all parties involved. T-Mobile gains access to Metronet’s extensive fibre network and expertise, while KKR benefits from T-Mobile’s brand recognition and marketing capabilities. Metronet, in turn, receives the financial backing and operational support needed to scale its business rapidly.
Focus on underserved markets
Metronet’s focus on expanding fibre access in underserved areas aligns with the broader push for digital equity. This transaction will help bridge the digital divide by bringing high-speed internet to communities that have traditionally lacked adequate connectivity options.
Complementary offerings
The joint venture complements T-Mobile’s existing 5G Home Internet service, providing customers with a wider range of broadband choices. This diversified portfolio allows T-Mobile to cater to different customer needs and preferences, ultimately enhancing its competitive position in the market.
What’s next?
The T-Mobile-KKR-Metronet deal is a sign of the growing collaboration between private equity firms and telecommunications companies in the broadband sector. As the demand for high-speed internet continues to soar, we can expect to see more of these strategic partnerships, driving the rapid expansion of fibre networks and bridging the digital divide.
The summer holidays may be a time for rest, but the fibre infrastructure industry shows no signs of slowing down.
