Telenor taps into $1B fiber funding from KKR

Petter Børre Furberg, the CEO of Telenor Norway, indicated in March that the operator was open to opportunities for profitable investments in fiber in its domestic market and was "evaluating the possibility of establishing a passive fiber infrastructure company."

Fast forward a few months, and the operator has just announced the formation of a separate company called Telenor Fiber AS. It has also agreed to offload a 30% stake in the new venture to a consortium led by US investor KKR, with pension firm Oslo Pensjonsforsikring as co-investor. The transaction is expected to be completed in early 2023.

Figure 1: Telenor sets up a new fiber company and plans to sell 30% to a KKR-led consortium.
(Source: gualtiero boffi/Alamy Stock Photo)

By making this move, Telenor is following in the footsteps of operators such as Telefónica, which has partnered with private investors to raise funding for a number of fiber network ventures, such as for rural coverage in Spain.

The transaction will add around 10.8 billion Norwegian krone (US$1 billion) to the operator's coffers, based on a total enterprise value for the Norwegian fiber business of NOK36.1 billion ($3.4 billion). The aim is also to use about 30% of the proceeds for share buy backs. The business generated a pro forma EBITDA of NOK1.7 billion ($158.5 million) in 2021.

Only Telenor

As Telenor explained, the new fiber venture has been established as a subsidiary of Telenor and will be part of the infrastructure business area. The company will own passive fiber assets in Norway including 130,000 km of cables and connecting more than 560,000 homes.

Although Telenor has invited KKR to invest in its fiber strategy, it is clearly keeping a pretty tight rein on its business operations and assets. For example, unlike other fiber JVs such as Telefónica's Bluevia Fibra, which will operate as a neutral wholesale company offering wholesale FTTH access to all telcos, Telenor Norway will be the fiber company's only customer.

In addition, Telenor will have the right to acquire KKR's minority stake in the event of a potential future sale. If Telenor doesn't buy it, then the government has first right of refusal. Notably, Oslo Pensjonsforsikring is wholly owned by the Municipality of Oslo.

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Indeed, the telco is placing enormous emphasis on retaining control of its network in "national and societal interest." Tone Hegland Bachke, EVP and CFO at Telenor Group, said the transaction benefits stakeholders "while safeguarding future investments in Norway's fiber."

The operator said the transaction will entail no change to Telenor's regulatory obligations, including security and Norway's Electronic Communications Act.

Mobile too?

Hegland Bachke told the DN news site that Telenor may also consider selling shares in its mobile towers businesses, although that is "some time ahead." In the Nordics, Telenor has access to 26,000 mobile towers and fully owns 21,000.

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— Anne Morris, contributing editor, special to Light Reading