The negotiations for Telefónica’s sale of their Peruvian fiber network to KKR and Entel have reached an impasse. This halt deals a significant blow to Telefónica’s strategy to trim down operations and reduce debt. Last July, the proposal aimed at selling a 54% share to KKR and a 10% share to Entel, assigning the transaction a total value of €550 million, including debt.
The intended deal also intended to introduce On Net Fibra de Peru, projecting it as an independent open access wholesale fiber network. KKR planned to expand its coverage to reach 5.2 million connections by 2026. After gaining approval from Peru’s competition authority, the path seemed clear for the closing of this transaction.
Yet, last week Entel reported in a regulatory document in Peru that discussions fell apart due to unmet conditions. Entel revealed, “Pangea has communicated that, due to the failure to comply with certain closing conditions stipulated in the SSA (in reference to the agreement), related to a parallel transaction between KKR and Telefónica Hispam regarding Pangea that will not materialize, Telefónica Hispam has expressed its intention to formally document the termination of the SSA. To date, the parties to the SSA are in discussions regarding the terms and conditions of said termination.”
For Telefónica, the sale represented a chance to alleviate its substantial €26 billion debt by €200 million. This move aligned with the telecom company’s broader trend of divesting non-essential assets to concentrate on core markets such as Spain, Brazil, and Germany.
In the telecommunications industry, KKR boasts a strong footprint in vital infrastructure investments. Recently, the investment firm engaged with projects in Telecom Italia and acquired parts of Telefónica’s fiber operations in Chile in 2021.
The deal’s collapse raises questions about future opportunities for partnerships in the sector. However, it showcases the complex nature of international telecommunications negotiations, where regulatory approval and strategic alignment need meticulous attention. This development places Telefónica’s efforts in achieving financial restructuring in the spotlight. As they critically evaluate their assets and strategies, stakeholders will closely watch their next decisions.
