It was revealed that Telefonica and Entel are set to merge their fiber infrastructure in Peru, with plans to sell a majority stake to KKR. This majority stakeholder will subsequently infuse more funds into broadening the network footprint.

According to the conditions of this agreement, the Peruvian fiber networks of Entel and Telefonica, inclusive of those under Telefonica’s PangeaCo investment vehicle, will be consolidated into an independent company principally controlled by KKR. The investment firm will possess a controlling stake of 54% in the newly established ON*NET Fibra de Perú. The remaining owners will be Telefónica Hispanoamérica, which owns 36% and Entel Peru with its 10%.

This move has likely spent a notable amount of time in the pipeline. A similar strategy has been seen with Telefonica’s activities in Chile and Colombia, where it isolated its fiber businesses and sold 60% stakes to KKR in the past year or two. Hence, it was predicted that a similar turn of events would occur in Peru, with KKR anticipated to be a frontrunner in gaining control over the venture.

The situation in Peru is somewhat unique as Entel maintains a stake in the newly formed company, unlike in Chile where it only functions as a retail player utilising the network. Regardless, the Peru deal largely mimics the trend for fibre agreements seen elsewhere.

The new business, operating as an independent, open access wholesale fibre network, will aim to broaden high-speed connectivity countrywide. It has set its sights on reaching 5.2 million homes in 86 provinces by 2026’s end, a significant increase from the current 2 million.

To reach this goal, KKR will inject USD200 million into the network. Although the exact details of the deal have not been revealed, a crude estimation can be made based on Telefonica’s previous deals in other countries.

KKR has shared some of the successes of its ventures in Chile and Colombia. At the completion of 2022, ON*NET Fibra de Chile had passed 3.7 million homes, while ON*NET Fibra de Colombia had doubled its reach to 2.4 million homes. This information suggests that the venture is likely to make substantial progress in Peru, where only around 35% of households currently have access to high-speed fiber networks, despite 88% of households being connected to mobile or fixed internet service.

The transaction awaits approval from several sectors, including the Peruvian antitrust agency, INDECOPI. However, any major obstacles are unforeseen, especially given that this strategy has proven to be effective in other countries across the region. As the telecommunications industry races towards a digitally-empowered future, these types of strategic partnerships between tech giants will become increasingly crucial.