• EC opens probe into KKR’s €22bn Italian FTTP acquisition 
• The broadband equipment sector is set for solid growth
• T-Mobile US and KKR complete acquisition of fibre ISP Metronet

In today’s industry news roundup: The European Commission is investigating whether private equity firm KKR provided misleading information in the build up to its acquisition of NetCo, Telecom Italia’s fixed line network; Dell’Oro Group expects the broadband access equipment sector to be worth $20.1bn by 2028; the joint venture between T-Mobile US and private equity firm KKR has completed the acquisition of US fibre broadband network operator Metronet; and more!

The European Commission (EC) has opened a “formal investigation” to determine whether, during the merger investigation of the acquisition by private equity giant KKR of NetCo – the fixed line network business of Telecom Italia (TIM) that included the telco’s FiberCop fibre-to-the-premises (FTTP) operation – “KKR provided incorrect or misleading information to the Commission”. Following a lengthy and often acrimonious M&A process, KKR finally closed the acquisition of NetCo, valued at up to €22bn, in early July 2024. The EC noted in this announcement that it had “unconditionally cleared KKR's acquisition of NetCo, by concluding that the transaction would not raise competition concerns in the European Economic Area (‘EEA'). In particular, the Commission investigated the impact of the transaction on the market for wholesale broadband access services in Italy and concluded that the merged entity would not be able to deteriorate the conditions for access to passive services, or terminate such access, thanks to long-term agreements that FiberCop entered into with several access seekers, including Fastweb and Iliad.” However, “under the investigation opened today, the Commission will assess whether KKR provided incorrect or misleading information about these agreements. Today's investigation is separate from the procedure which led to the unconditional approval of the KKR/NetCo transaction under the EU Merger Regulation.” The EC noted that KKR has been informed of the investigation. It also noted that it can “impose fines on companies that, either intentionally or negligently, supplied incorrect or misleading information pursuant to Article 14 paragraph 1 of the EU Merger Regulation. In addition, the Commission may revoke a decision adopted based on incorrect information under conditions set out in Article 6 paragraph 3 of the EU Merger Regulation.” Teresa Ribera, the EC’s executive VP for Clean, Just and Competitive Transition, who is in charge of competition policy, stated: “Our merger control rules require that merging parties disclose full and accurate information to the Commission when assessing their deal. We take any breach of this obligation very seriously. At this stage, the Commission has gathered sufficient elements to open a formal investigation to determine whether KKR has complied with this obligation.” KKR stated it would work with the EC to address its concerns and noted that as “part of the transaction clearance, we worked with the European Commission in good faith and provided specific and accurate information, and FiberCop continues to adhere to customer commitments and economic regulation governed by AGCOM [Italy’s telecom regulator]." 

This is obviously the season for revisiting previously closed M&A deals… The Cloud Infrastructure Service Providers in Europe (CISPE), an industry body that represents Europe’s “leading sovereign cloud infrastructure providers”, has filed a formal appeal before the European General Court challenging the EC’s decision to approve Broadcom’s acquisition of VMware, a $61bn deal that was completed in November 2023. The CISPE is “seeking an annulment of the Commission’s approval of that deal,” alleging that the EC’s decision was “based on errors in law and assessment”. The industry body noted that the EC “acknowledged that the acquisition posed significant risks to competition. However, it failed to impose any conditions on Broadcom to prevent a concentration of dominance or to mitigate the potential abuse of such a position. As such CISPE is claiming errors in law and manifest failures by the Commission in the competitive assessment process which are significant enough to seek an annulment of the decision. It has filed these claims with the General Court within the allowed appeal timeframe.” 

The radio access network (RAN) sector might not offer many growth opportunities during the coming few years, but there’s better news for the vendors active in the fixed line telecom sectors. We have already reported this week that research house Dell’Oro Group expects the optical transport networking technology sector to grow at an average rate of 5% for the next five years and be worth about $19bn in 2029. Now the same research firm has issued its forecast for the broadband access equipment market: The Dell’Oro team expects it to grow at an average annual rate of 1.6% from 2024 to 2029, with total revenue peaking in 2028 at $20.1bn, “driven by ongoing DOCSIS 4.0 and fibre expansion by cable and fibre ISPs”. Jeff Heynen, a VP and analyst at Dell'Oro Group, stated: "We continue to see broadband providers balance ongoing expansion of their networks while also deploying platforms that will allow them to deliver service convergence and customized broadband applications, while also incorporating AI and automation tools. Though market presence in the form of homes passed remains today's priority, future success will be all about delivering customized service tiers based on attributes beyond speed.” Dell’Oro expects the value of passive optical network (PON) equipment sales to grow from $10.7bn in 2024 to $12.6bn in 2029, “driven largely by XGS-PON deployments in North America, EMEA, and CALA, as well as FTTR (fibre to the room) and 50 Gbit/s deployments in China.”

Two weeks after the FCC’s Wireline Competition Bureau gave its blessing to the planned acquisition of fibre broadband network operator Metronet by a joint venture of T-Mobile US and private equity firm KKR (yes, that same company that the EC is now probing in Italy), the deal has been completed. The FCC’s approval came in the wake of T-Mobile US’s decision to ditch its diversity, equity and inclusion (DEI) policies. The planned acquisition of Metronet by the joint venture was first announced in July 2024, when T-MObile US unveiled plans to invest $4.9bn in a 50% stake in the JV. KKR noted that Metronet is “delivering multi-gigabit internet service in more than 300 communities in 19 states, with more communities added each month. More than 2.6 million homes and businesses have access to Metronet fibre, which covers more than 42,000 miles.” Metronet will now become a wholesale ISP, with T-Mobile Fiber as its partner for residential service. T-Mobile Fiber has acquired Metronet’s residential customers and will have responsibility for residential customer acquisition, support, and the customer experience. Metronet will continue to build new fibre access network infrastructure, maintain its existing network, and install service for new customers. “Metronet has built the industry’s most efficient fibre‑construction engine, bringing world‑class digital infrastructure to underserved communities at an unprecedented pace,” stated its CEO, Dave Heimbach. “With KKR and T‑Mobile, we have best‑in‑class strategic partners committed to taking our growth to the next level,” he added. 

– The staff, TelecomTV