KKR & Co. and GIC Pte. are the final bidders for a 40% stake in a fiber-optic broadband joint venture owned by MasOrange and Zegona Communications, according to sources familiar with the situation.

The bidding process has entered its second round, but no final decision has been made, and stakeholders may choose not to proceed with the sale.

The joint venture, established in January 2024, is valued between €8 billion (US$8.6 billion) and €10 billion (US$10.8 billion).

In this arrangement, MasOrange holds a 50% stake, Vodafone Spain retains 10%, and the remaining 40% is available for purchase.

Proceeds from the potential sale are expected to help reduce debt.

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🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Spain’s fiber dominance attracts global infrastructure investors amid telecom consolidation

Spain stands as a European leader in fiber deployment with 95.2% FTTP (Fiber to the Premises) coverage and 93.5% of fixed broadband subscriptions offering speeds above 100 Mbps, creating attractive infrastructure investment opportunities 1.

The Spanish telecommunications market is projected to reach €40 billion by 2025, with data services expected to account for over 50% of telecom revenue by 2026, driven by streaming and cloud computing demand 2, 3.

This fiber joint venture emerges amid broader consolidation in Spain’s telecom landscape, following MasOrange’s creation through the merger of Masmovil and Orange’s Spanish operations, and Zegona’s €5 billion acquisition of Vodafone Spain.

The trend reflects how telecom operators increasingly separate their physical infrastructure from service operations to unlock value, reduce debt, and create specialized investment vehicles that appeal to infrastructure-focused funds like KKR and GIC.

2️⃣ Fiber infrastructure’s superior economics drive investment appeal despite market competitiveness

Fiber technology consistently outperforms cable, satellite, and wireless alternatives in capacity, reliability, and latency metrics, creating sustainable competitive advantages that protect long-term infrastructure value 4.

Modern fiber networks support median download speeds exceeding 210 Mbps in Spain (up from 173 Mbps a year ago), with leading providers delivering speeds over 320 Mbps – performance that drives customer satisfaction and reduces churn 1.

The “high margins and minimal maintenance costs” mentioned in the article stem from fiber’s physical durability and future-proof capacity, with glass fiber cables remaining viable for decades while supporting exponential bandwidth increases through equipment upgrades rather than cable replacement.

3️⃣ Ratchet mechanisms reveal investor caution about Spanish market competition

The inclusion of a ratchet mechanism in this deal, granting additional equity if revenues fall below thresholds, indicates sophisticated risk management in a market known for intense competition 5.

Ratchets are typically deployed when there’s uncertainty about valuation or future performance, providing downside protection for investors while allowing sellers to maintain higher initial valuations 6.

This protection is particularly relevant in Spain’s telecommunications sector, where competitive pressures have historically constrained profitability despite robust infrastructure and high-quality services.

The mechanism demonstrates how infrastructure investors are adapting their approaches to balance long-term asset value against short-term competitive market dynamics, creating more flexible investment structures that can accommodate different market outcomes.

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