Telenor sells a third of its $3.4 billion fibre business

Telenor has spun out its multi-billion-dollar passive fibre infrastructure business and inked a deal to sell a 30% stake to an investment consortium including KKR.

The investment group, which also includes Norwegian life insurance company Oslo Pensjonsforsikring, has agreed a deal that values the business as a whole at 36.1 billion kroner (US$3.4 billion). As a result, Telenor picks up approximately NOK10.8 billion, or a shade over $1 billion in proceeds.

A fair slice of that money will be spent on share buybacks, the telco said; around 30 percent, to be more precise. But that still leaves Telenor with a reasonable chunk of change from the deal.

Which of course is why Telenor and its peer elsewhere in the industry are entering into agreements like this that enable them to monetise their passive infrastructure. Towers deals are perhaps more prevalent, but investors love fibre too and there is no shortage of arrangements like these across the global industry.

Indeed, last week the Spanish press reported that Vodafone has hired an advisor to help it explore the sale of a stake in its fixed network. According to Cinco Dias, the telco is working with investment bank Evercore on its options, which could include the sale of either a majority or minority holding in its fixed infrastructure, with a view to attracting private equity interest.

But back to Norway. Telenor said it will maintain control of the fibre asset, retaining its 70 percent stake, and has also written a right of first refusal into the contract, should KKR et al elect to sell at some point in the future. Further, should Telenor choose not to exercise that right, the Norwegian government may step in to buy the stake, which is one way to deal with the national interest question that so often sits alongside the sale of strategic or potentially sensitive assets.

“This transaction highlights the value in our infrastructure and unlocks capital to support continued high fibre roll-out in Norway, and we are bringing in strong investors with a long-term horizon,” said Tone Hegland Bachke, Telenor Group’s chief financial officer, her comments echoing the rationale behind all such deals.

There has been no specific comment from either Telenor or the investors about how the deal might affect the pace of fibre rollout or the amount of money being ploughed into it. But, as you would expect, all parties are making the right noises about infrastructure investment.

“We are very excited to be investing long-term capital behind Norwegian infrastructure. KKR has significant experience within telecom infrastructure investing, and we look forward to supporting Telenor with its fibre strategy in Norway,” said Julian Barratt-Due, Director, European Infrastructure at KKR.

The transaction is slated to close early next year.

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