KKR to Create Colombia’s First Digital Infrastructure Company with Telefónica

Global investment firm KKR & Co. Inc. (KKR) inked an agreement with Telefónica Colombia, a subsidiary of Spanish telecom group, Telefónica. Both companies will together form Colombia’s first independent wholesale digital infrastructure company, thereby building a best-in-class digital infrastructure network in the country.

Per the terms of the agreement, KKR will invest $500 million to acquire a majority stake in Telefónica’s existing fiber-optic network and utilize it through the newly formed entity. KKR will hold a 60% majority stake in the new entity, with the remaining 40% stake to be held by Telefonica. The deal is subject to certain mandatory approvals.

The combined capabilities of both companies will lead to a high-quality, ultra-fast network, with connection speeds up to 1000 times faster than the existing networks.

KKR’s investment will extend existing fiber-optic coverage by 4x in Columbia, from 1.2 million homes currently, to over 4.3 million homes by the end of 2024. (See KKR stock charts on TipRanks)

Upon completion, the newly formed company will provide open access, wholesale connection services with the latest fiber-optic technology to all internet service providers in Colombia, including Telefónica.

Waldemar Szlezak, Senior leader of KKR’s infrastructure investment team, commented, “We are thrilled to, once again, be working with Telefónica to provide greater broadband access to those who need it, and to be doing so in Colombia, a country we believe is primed for significant growth ahead and which serves as an attractive destination for investors.”

He further added, “This new venture in Colombia, along with ON*NET Fibra de Chile, demonstrates the potential to invest in innovative financing and growth strategies to promote digital infrastructure in Latin America.”

Citigroup analyst William Katz recently increased the price target on KKR from $69 to $74 (27.1% upside potential) and maintained a Buy rating on the stock.

Consensus among analysts is a Moderate Buy based on 6 Buys and 3 Holds. The average KKR price target of $65 implies 11.6% upside potential from current levels.