KPN seeks control of Reggefiber to strengthen FTTH hand

Dutch national operator KPN says it has reached agreement with Reggeborgh, its partner in the Reggefiber fiber-to-the-home (FTTH) network and services joint venture since 2008, to acquire several service provision arms of Reggefiber. It also says it has agreed with Reggeborgh on an amendment of the joint venture that would provide KPN with what it called “a clear roadmap toward ultimate control for KPN.”

Dutch national operator KPN says it has reached agreement with Reggeborgh, its partner in the Reggefiber fiber-to-the-home (FTTH) network and services joint venture since 2008, to acquire several service provision arms of Reggefiber and Reggeborgh itself. It also says it has agreed with Reggeborgh on an amendment of the joint venture that would provide KPN with what it called “a clear roadmap toward ultimate control for KPN.”

The moves are part of a larger strategy designed to enable KPN to capture more than 45% of the Dutch broadband services market by 2015. The carrier plans to use both FTTH and VDSL to reach these subscribers.

The sublimation of Reggefiber will occur in stages. First, KPN says it has agreed to terms for the acquisition of service providers Edutel, XMS, and Concepts ICT from Reggeborgh and Lijbrandt from Reggefiber. The acquisition will bring approximately 110,000 customers, all of whom currently receive service over Reggefiber’s FTTH network. KPN also has reached an agreement to buy Reggefiber Wholesale, which it will meld with its own wholesale operations.

The price KPN plans to pay for these assets was not disclosed. The transactions would require the approval of NMa, the Dutch competition authority. If approved, Reggefiber would be left to focus exclusively on deployment and open access operation of its FTTH network. At the end of September of this year, the network passed 844,000 homes, of which 687,000 were receiving services.

Meanwhile, KPN has its eyes on increasing its current 41% stake in the joint venture. The original agreement with Reggeborgh had given KPN the right to grow its holdings in the venture if certain roll out milestones were met. That agreement has been reworked, KPN says, so that it can attain as much as 60% ownership in two phases:

  1. In the first, KPN can exercise a call/put option for an additional 10% of the shares when Reggefiber reaches 1 million homes connected or the end of next year, whichever comes first. KPN would pay 99 million euros for the additional shares.
  2. Subsequently, KPN could exercise a call/put option for another 9% of the shares when homes connected reach 1.5 million or January 1, 2014, again whichever occurs first. The exercise price is expected to range between 116 million and 161 million euros, depending on Reggefiber’s capex efficiency. Completion of this second option likely would require NMa approval as well.

Reggeborgh, meanwhile, can sell the remaining 40% of shares 3.5 years after KPM exercises its second option, over a period of 1.5 years for 647 million euros, or after seven years at “fair value.”

“Today’s announcement forms an integral part of our wireline strategy,” said Eelco Blok, CEO of KPN. “KPN believes that FTTH is an important long-term technology and provides regional strength in the medium-term. We see good results in the fiber areas with increasing broadband and TV market shares and we will continue to roll-out FTTH in promising areas via the Reggefiber joint-venture.”



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