T-Mobile & KKR's Joint Venture Acquisition of Metronet
- Rohan Golla
- Aug 9, 2024
- 7 min read
Deal Overview
Acquirer: Joint Venture between T-Mobile & KKR
Target: Metronet
Total Transaction Size: $4.9 billion
Closed Date: Expected in 2025
Target Advisors: Citigroup (T-Mobile), Barclays, Morgan Stanley (KKR)
Acquirer Advisors: Bank Street Group, TD Securities
In a landmark deal that underscores the growing importance of broadband connectivity in the digital age, T-Mobile and global investment firm KKR have announced the formation of a joint venture to acquire Metronet, a leading independent fiber-to-the-home (FTTH) operator in the United States. The transaction, valued at approximately $4.9 billion, represents a strategic expansion for T-Mobile into the fiber broadband market, complementing its already robust 5G Home Internet offering.
The joint venture will see T-Mobile taking on full responsibility for Metronet’s residential fiber retail operations and its customer base, which currently includes over 2 million households across 17 states. T-Mobile’s CEO, Mike Sievert, emphasized the significance of this acquisition, stating, "This is a unique opportunity and a smart, capital-efficient deal that enables T-Mobile to profitably build on our success in broadband and provide fast, affordable, and reliable connectivity options to millions more customers nationwide as a complement to our wireless growth strategy."
Acquirer Details - T-Mobile
T-Mobile, a major player in the U.S. telecommunications industry, has consistently been at the forefront of innovation in mobile and broadband services. Known as the “Un-carrier,” T-Mobile has revolutionized the industry with its customer-centric approach, aggressive pricing strategies, and rapid deployment of 5G technology. The company’s leadership in 5G has not only bolstered its position in the wireless market but also enabled it to expand into fixed wireless broadband services, offering high-speed internet to millions of households nationwide.
With a strong focus on expanding its broadband portfolio, T-Mobile has made significant investments in fixed wireless access (FWA) and fiber broadband solutions. The company’s existing 5G Home Internet service, which leverages fallow network capacity over its extensive 5G network, currently reaches over 5 million households and businesses. This acquisition of Metronet will further enhance T-Mobile’s ability to deliver high-speed, reliable broadband services, particularly in underserved and rural areas.
Founded: 1994 (as VoiceStream Wireless PCS)
Headquarters: Bellevue, Washington
CEO: Mike Sievert
Number of employees: 75,000
Market Cap: $180bn (as of 31/6/2024)
EV: $215bn
LTM Revenue: $80.1bn
LTM EBITDA: $30.5bn
LTM EV/Revenue: 2.7x
LTM EV/EBITDA: 7.0x
Acquirer Details - KKR
KKR, a global investment firm, has a long history of strategic investments in a wide range of industries, including telecommunications and digital infrastructure. Since its founding in 1976, KKR has grown to become one of the world’s leading investment firms, managing over $500 billion in assets across private equity, infrastructure, real estate, and credit. KKR’s involvement in the Metronet acquisition is part of its broader strategy to invest in high-growth digital infrastructure assets, particularly in the fiber broadband sector.
KKR has a strong track record in building and scaling fiber networks globally. The firm’s investments in FTTH providers have resulted in the creation of independent open-access wholesale fiber optic network companies in countries such as Chile, Colombia, Peru, and the Netherlands. KKR’s extensive experience in the fiber sector positions it as an ideal partner for T-Mobile in this joint venture, enabling the expansion of Metronet’s fiber network and the enhancement of its service offerings.
Founded: 1976
Headquarters: New York, New York
CEO: Henry Kravis & George Roberts
Number of employees: 2,000+
Assets Under Management (AUM): $550bn (as of 31/6/2024)
Target Details - Metronet
Metronet, founded in 2005, has rapidly grown to become the largest and fastest-growing privately owned fiber-to-the-home company in the United States. Headquartered in Evansville, Indiana, Metronet has built a reputation for delivering ultra-fast, reliable fiber broadband services to households and businesses across 17 states. The company’s fiber network currently reaches over 2 million homes, and it has ambitious plans to expand this footprint to 6.5 million by the end of 2030.
Metronet’s business model is built on a state-of-the-art broadband platform, providing pure play fiber solutions that offer symmetrical multi-gigabit internet service directly to homes and businesses. The company’s high-speed fiber network, coupled with its commitment to customer service, has earned it accolades such as PCMag’s “Fastest Major ISP” for 2023 and 2024. Metronet’s ability to rapidly deploy and expand its fiber infrastructure makes it a valuable asset for T-Mobile and KKR as they seek to enhance their broadband offerings.
Founded: 2005
Headquarters: Evansville, Indiana
CEO: Dave Heimbach
Number of employees: 1,600+
Market Cap: Privately Held
EV: $4.9bn (Transaction Value)
Short-term Effects
The formation of the joint venture between T-Mobile and KKR to acquire Metronet is expected to generate several immediate impacts, particularly in expanding T-Mobile’s presence in the broadband market. The transaction, which includes the acquisition of Metronet’s residential fiber retail operations and its existing customer base, represents a strategic expansion for T-Mobile into the fiber broadband market, complementing its existing 5G Home Internet offering.
Financially, the joint venture is expected to be accretive to T-Mobile’s earnings, as the company gains full responsibility for Metronet’s residential customer acquisition and support. This will allow T-Mobile to leverage its extensive retail, marketing, and service model to drive customer growth and enhance profitability. The transaction structure, which involves T-Mobile acquiring a 50% equity stake in the joint venture and 100% of Metronet’s residential fiber operations, is designed to minimize capital outlay while maximizing returns.
From an operational perspective, the acquisition is expected to enhance T-Mobile’s capabilities in the fiber broadband sector. Metronet’s deep digital and fiber infrastructure expertise will enable T-Mobile to expand its fiber network more rapidly and efficiently, particularly in underserved and rural areas. This expansion is expected to increase Metronet’s reach to 6.5 million homes by 2030, further solidifying T-Mobile’s position as a leader in broadband connectivity.
The joint venture will also benefit from KKR’s extensive experience in the digital infrastructure sector. KKR’s involvement will provide the joint venture with access to significant capital resources and expertise in scaling fiber networks, enabling Metronet to accelerate its build plans and reach more households with high-speed fiber broadband services.
Long-Term Effects
In the long term, the joint venture between T-Mobile and KKR is expected to yield substantial strategic benefits, particularly in the fiber broadband market. The acquisition of Metronet provides T-Mobile with a new growth driver in a market that is projected to experience significant expansion in the coming years. As demand for high-speed, reliable internet continues to grow, particularly in rural and underserved areas, the joint venture is well-positioned to capitalize on this trend.
The joint venture’s focus on expanding Metronet’s fiber network is expected to drive long-term value creation for T-Mobile and KKR. By leveraging Metronet’s expertise in network engineering, design, and deployment, the joint venture can accelerate the rollout of fiber broadband services, reaching millions of new customers by the end of the decade. This expansion is expected to generate significant revenue growth for T-Mobile, while also enhancing its competitive position in the broadband market.
The strategic fit between T-Mobile and Metronet extends beyond the fiber broadband market. The acquisition of Metronet’s fiber network and customer base will enable T-Mobile to offer a more comprehensive suite of connectivity solutions, including 5G wireless and fiber broadband services. This combination of wireless and fiber offerings will allow T-Mobile to provide seamless, high-speed connectivity to customers, regardless of their location or service needs.
Moreover, the joint venture is expected to benefit from KKR’s global network of digital infrastructure investments. KKR’s extensive experience in building and scaling fiber networks will provide the joint venture with valuable insights and best practices, enabling it to optimize its operations and maximize returns. The joint venture will also have access to KKR’s significant capital resources, which will support the expansion of Metronet’s fiber network and the development of new service offerings.
The long-term potential of the joint venture is further enhanced by the involvement of Oak Hill Capital and the Cinelli family, who will retain minority stakes in the business. Their continued involvement will provide stability and continuity, ensuring that the joint venture remains focused on its long-term growth objectives.
Risks and Uncertainties
Despite the significant potential benefits, the joint venture between T-Mobile and KKR to acquire Metronet is not without risks. One of the primary challenges will be the successful integration of Metronet’s operations into T-Mobile’s existing infrastructure. While Metronet is a smaller company, the integration process will require careful coordination to ensure that ongoing network build plans and customer support activities are not disrupted. Any delays or complications in this process could impact the expected synergies and slow the expansion of Metronet’s fiber network.
Another significant risk is the highly competitive nature of the broadband market. While the joint venture is well-positioned to capitalize on the growing demand for high-speed internet, it will face competition from established players such as AT&T, Comcast, and Verizon, as well as other regional and local fiber providers. The joint venture will need to differentiate its service offerings and demonstrate superior value to gain market share and attract new customers.
Financially, the joint venture represents a significant investment for T-Mobile and KKR, and the companies will need to manage the associated costs carefully. While the deal is structured to minimize capital outlay, any delays in the expansion of Metronet’s fiber network or the acquisition of new customers could impact the joint venture’s financial performance and limit the potential return on investment. Additionally, the joint venture may face challenges in securing the necessary regulatory approvals for the acquisition, which could delay the transaction’s close and impact its overall success.
Finally, the success of the joint venture will depend on its ability to retain key talent from Metronet and maintain high levels of employee engagement and morale during the integration process. The acquisition of a smaller, innovation-driven company like Metronet presents both opportunities and challenges. While the joint venture stands to benefit from the expertise and creativity of Metronet’s team, it will need to ensure that these individuals are effectively integrated into the broader organization and that the collaborative culture that fueled Metronet’s success is preserved.