Telefónica, KKR and Entel break their agreement linked to Pangea, the wholesale fiber optic operator in Peru

The operation represented a reduction in the net debt of the Spanish telecom company of around 200 million euros.

Nov 29. () –

Telefónica, the Kohlberg Kravis Roberts fund (KKR) and the Chilean National Telecommunications Company (Entel) have broken the agreement through which KKR and Entel would jointly acquire 64% of Pangea, the wholesale fiber optic company in Peru , a deal that included the Spanish telecom company maintaining 34% ownership through its subsidiary Telefónica Hispam.

On the one hand, Entel has informed the Commission for the Financial Market of Chile, equivalent to the National Securities Market Commission (CNMV) of Spain, that the agreement has been broken because Pangea has reported the “non-compliance with certain conditions closing dates” in the deal.

“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 with respect to Pangea that will not materialize, Telefónica Hispam has expressed that it has the intention to formally document the termination of the SSA. To date, the parties to the SSA are holding conversations regarding the terms and conditions of said termination,” explains Entel in its statement.

“At this point it is not possible to estimate the impact that the completion of the transaction may have on the company’s consolidated profit,” Entel added.

For its part, Telefónica’s subsidiary in Peru has informed the Superintendency of the Stock Market of the South American country that, to date, its controlling shareholder, that is, the Telefónica group, has informed them that the parties of the aforementioned transaction “are in talks” and that once “some relevant development” occurs, the market will be informed.

THE AGREEMENT

Specifically, the agreement reached in July of last year contemplated that KKR would acquire 54% of Pangea and that Entel would acquire another 10%, so Telefónica Hispam would maintain 36% of the Peruvian wholesale fiber optic company.

With this operation, the Telefónica group would reduce its net debt by around 200 million euros, as the company then reported to the National Securities Market Commission (CNMV).

As part of the transaction, Telefónica del Perú and Entel would sell certain assets of their fiber optic-to-the-home (FTTH) infrastructure to Pangea, while a series of contracts would be signed, including for the provision of wholesale connectivity services. both with Telefónica del Perú and with Entel Perú.

As the operator explained then, when the transaction was closed, the Telefónica group’s net financial debt would be reduced by around 200 million euros, to which “certain variable payments” would be added over the next four years.

In this context, KKR’s objective was to create and control a new fiber optic wholesale company in Peru, which would combine the fiber optic networks of Pangea, Telefónica del Perú and Entel Perú.

In fact, KKR’s idea was to make an additional investment of approximately 200 million dollars (almost 190 million euros) to “more than double the ultra-fast fiber network” of the country and go from coverage to around 2 million homes to 5.2 million.