KKR buys majority stake in UK ‘altnet’ Hyperoptic
US fund’s acquisition of full-fibre operator marks first foray into UK telecoms sector
KKR has entered the UK telecoms market, acquiring a majority stake in full-fibre “altnet” company Hyperoptic to join broadband battle against BT and Virgin Media.
The US private equity fund bought the stake from Newlight Partners, a buyout firm spun out of George Soros’s family office last year that has backed Hyperoptic since 2013, and Mubadala, the Abu Dhabi sovereign wealth fund that bought into the business less than a year ago.
No value was put on the deal but one person with direct knowledge of the investment said Hyperoptic would be valued at about £500m.
While the transaction marks the first investment by KKR in British telecoms infrastructure, the firm has spent $3.5bn acquiring European telecoms assets including Deutsche Glasfaser, a German equivalent to Hyperoptic that is up for sale, 40 per cent of Telefónica’s towers company Telxius and 49 per cent of Altice’s French tower company SFR TowerCo.
Mubadala’s brief foray into UK telecoms appears to have been lucrative. Megabuyte, the technology research company, calculates that the sovereign wealth fund acquired a 21 per cent stake in Hyperoptic in 2018 at a £80m valuation.
The Abu Dhabi fund sold out as KKR wanted to take a majority stake in the British telecoms company, according to Dana Tobak, chief executive of Hyperoptic.
“This is less about Mubadala wanting to move out and more about KKR wanting to move in,” she said.
KKR is the latest fund to tap into the UK’s “altnet” scene looking to build full-fibre networks to compete with BT’s Openreach and Virgin Media, which is looking for partners to build a new fibre network outside its existing cable infrastructure.
In June Australia’s Macquarie acquired KCom, the Hull-based telecoms company that has just completed a fibre build in the city that KKR came close to bidding for, according to three people with direct knowledge of the talks.
Last year West Street Infrastructure Fund, managed by Goldman Sachs, jointly acquired CityFibre alongside Antin Infrastructure Partners and committed to pumping £2.5bn into a network build.
Hyperoptic initially concentrated on metropolitan areas by kitting out housing blocks with full-fibre lines, a plan labelled “Project Cherry Picking” by its founders who are veterans of the UK telecoms sector and founded the business in 2011.
It has since built out to 43 cities and towns, passing 400,000 homes and businesses. Hyperoptic has targeted 2m homes by 2021 but KKR is expected to back a faster buildout.
The KKR deal could intensify the race to build fibre against BT and Virgin Media.
“As the relationship grows, it gives us an opportunity to assess whether we can be more aggressive,” Ms Tobak said.
The investment coincides with UK prime minister Boris Johnson’s pledge to roll out “gigabit speed” broadband to the entire country by 2025.