Telefónica Colombia and KKR have formed a new company to build a new wholesale fiber to the home (FTTH) network in Colombia, covering locations in nearly 90 cities in the country in the next three years.
The network will cover 4.3 million Passed Property Units (PDUs).
The new company will be 60 percent owned by KKR and 40 percent by Telefónica Colombia. Telefónica will contribute its current FTTH infrastructure, which already reaches 50 cities and municipalities covering 1.2 million homes.
The new company is valued at US$ 0.5 billion, representing 20 times pro forma operating income, or US$ 410 in enterprise value per location.
The company presently has adoption of about 32 percent of passings. KKR, it might be argued, seems to believe penetration can be increased, both by Telefónica as well as third party wholesale customers.
Telefónica Colombia will receive a payment of US $0.2 billion and will be eligible for a performance-based consideration of up to US $0.1 billion as part of the deal. That is a minimum of $166 per location passed, assuming zero contribution from performance payments, or $250 if the performance bonus is earned.
Of course, in addition to the upfront cash injection, Telefónica Colombia will reduce its capital investment exposure, but also presumably its revenue upside from FTTH. Telefónica Colombia has done similar investment sharing deals elsewhere in South America.
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