Oak Hill and Cinelli Family to Sell Metronet to KKR and T-Mobile Joint Venture

Rhea-AI Summary

Metronet, a leading independent fiber-to-the-home (FTTH) operator in the U.S., has announced its sale to a joint venture between KKR and T-Mobile. The transaction, expected to close in 2025, will transform Metronet into a wholesale services provider, with T-Mobile taking over residential fiber retail operations. Metronet's network currently reaches over 2 million households across 17 states.

Key points:

• Oak Hill Capital and the Cinelli family, Metronet's majority shareholders, will retain minority investments in the JV
• Metronet will focus on network infrastructure while T-Mobile handles customer acquisition and support
• The company boasts the highest build pace among private fiber companies in the U.S.
• The deal aims to expand fiber broadband services to more U.S. consumers

Positive

• Metronet's network reaches over 2 million households across 17 states
• Highest build pace among private fiber companies in the U.S.
• Net Promoter Scores well above industry averages
• Potential for expanded market reach through T-Mobile's retail and marketing capabilities

Negative

• Loss of direct control over residential customer relationships
• Transition period may impact short-term operations and customer experience
• Regulatory approvals could delay the transaction closure until 2025

Insights

Financial Analyst

As a financial analyst, this acquisition of Metronet by a joint venture between KKR and T-Mobile is a significant development in the telecommunications industry. Here are key insights:

• The deal represents a major consolidation in the fiber-to-the-home (FTTH) market, with Metronet being the leading independent FTTH operator in the U.S.
• T-Mobile's involvement signals a strategic move to diversify its offerings beyond wireless services, potentially positioning it as a stronger competitor against traditional cable and telecom companies.
• KKR's continued involvement (from minority investor to JV partner) suggests confidence in Metronet's growth potential and the broader FTTH market.
• The transaction structure, with Metronet becoming a wholesale provider and T-Mobile taking over retail operations, could lead to operational efficiencies and improved customer acquisition strategies.

While specific financial terms weren't disclosed, the deal's expected closure in 2025 indicates a complex transaction that may involve regulatory scrutiny. For investors, this move highlights the increasing value of fiber infrastructure in the evolving telecom landscape and may spark further consolidation in the sector.

The retention of Oak Hill and the Cinelli family as minority investors suggests a belief in continued upside potential. However, the long timeline to close also introduces execution risk and potential for market changes before completion.

Telecom Industry Expert

This acquisition marks a pivotal shift in the U.S. telecom landscape. Here's my analysis of the implications:

• T-Mobile's entry into the fiber market is a game-changer. It allows them to offer a 'quad-play' bundle (wireless, broadband, TV and home phone), potentially increasing customer stickiness and average revenue per user (ARPU).
• Metronet's impressive growth - from 80,000 to over 2 million locations passed in a decade - underscores the demand for high-speed fiber internet in underserved markets.
• The deal leverages each party's strengths: Metronet's fiber expertise and T-Mobile's brand power and customer service reputation (evidenced by Metronet's high Net Promoter Scores).
• This move could pressure other wireless carriers to seek similar fiber partnerships or acquisitions to remain competitive in the evolving connectivity landscape.

The transaction's structure is intriguing. By focusing Metronet on infrastructure and T-Mobile on retail operations, the JV could accelerate fiber deployment while improving customer acquisition efficiency. This model could become a template for future telecom partnerships.

However, the long closing timeline (2025) raises questions about potential regulatory hurdles and how the competitive landscape might shift in the interim. It also gives competitors time to react and potentially make counter-moves in the fiber space.

Joint Venture Will Offer Leading Fiber Solution to More U.S. Consumers

EVANSVILLE, Ind.--(BUSINESS WIRE)-- Metronet (the “Company”) today announced that, together with its majority shareholders, Oak Hill Capital (together with its affiliates, “Oak Hill”) and the Cinelli family, it has entered into definitive agreements to sell the Company to a Joint Venture (“JV”) between KKR and T-Mobile. Following the transaction’s close, Metronet will become a wholesale services provider for its retail customers and 100% of its residential fiber retail operations and customers will transition to T-Mobile. T-Mobile will have full responsibility for residential customer acquisition and support, leveraging its differentiated retail, marketing, brand and service model, and will utilize Metronet’s deep digital and fiber infrastructure expertise to expand to more households with fiber broadband services. Metronet will focus on build plans, network engineering and design, network deployment, and customer installation. An affiliate of Oak Hill will make a minority investment in the JV, and the Cinelli family will also remain minority investors in the JV alongside KKR and T-Mobile.

Metronet’s management team and Oak Hill have worked together for more than 10 years to build Metronet into the leading independent fiber-to-the-home (FTTH) operator in the U.S., and KKR has been a minority investor in the Company since 2021. Today, Metronet’s fiber network reaches more than 2 million households across 17 states, with pure play fiber solutions that are built on a state-of-the art broadband platform. Metronet has the highest build pace of any private fiber company in the U.S., the third fastest build pace nationally overall and has Net Promoter Scores well in excess of industry averages.

“We started Metronet to bring Main Street USA two things their internet providers weren’t delivering—hyper fast speeds and warm customer service,” said John Cinelli, co-founder and current chairman of Metronet. “Today we have found a strong partner in T-Mobile, a digital infrastructure leader equally focused on cutting-edge technology and the customer experience. We could not have grown so far, so quickly, to reach this moment without the decade-long support of Oak Hill Capital and, for the last three years, KKR. Their visionary support, together with our hardworking associates, have provided the capital and energy to build the best fiber-to-the-home company in the U.S.”

“Our involvement in the Metronet expansion story has been a joyful experience for all of us at Oak Hill—from our first meetings with John Cinelli, Al Cinelli and Lohn Weber in 2010, to our initial investment in the company in 2014, to the decade of remarkable growth we have achieved together since that time. Over the past 10 years, Metronet has expanded its network from 10 small towns in Indiana to over 300 communities across a 17-state footprint, and from 80,000 locations passed to more than 2 million, all while maintaining an unwavering commitment to providing an outstanding experience for its loyal customers and dedicated associates,” said Benjy Diesbach, Senior Operating Advisor, and Scott Baker, Managing Partner of Oak Hill. “We are extremely grateful for the contributions of each of the talented executives with whom we have worked so closely over the years, and we remain excited about Metronet's future potential with T-Mobile and KKR.”

“Metronet is an amazing American business success story, thanks in large part to Al and John’s entrepreneurial spirit and leadership, and Oak Hill’s support. We are proud of all that Metronet has achieved since we first invested in the Company in 2021, and are thrilled to continue to work with the management team and their associates to build upon the Company’s 20-year legacy. We look forward to embarking on this new chapter with T-Mobile and supporting the Company in its future growth,” said Waldemar Szlezak, Partner and Global Head of Digital Infrastructure at KKR.

The transaction is expected to close in 2025, subject to customary closing conditions and regulatory approvals.

Bank Street Group LLC and TD Securities served as financial advisors to Metronet. Paul, Weiss, Rifkind, Wharton & Garrison LLP and Polsinelli served as legal counsel to Metronet. Lazard served as financial advisor to Oak Hill.

Barclays and Morgan Stanley & Co. LLC are serving as lead financial advisors to KKR, with Goldman Sachs, Mizuho and MUFG also serving as financial advisors. Simpson Thacher is serving as KKR’s legal advisor.

About Metronet

Metronet is PCMag's “Fastest Major ISP” for 2023 and 2024, providing multi-gigabit internet service to homes and businesses in cities like Colorado Springs, Des Moines, Indianapolis, Lexington, Norfolk, Tallahassee and more than 300 other communities across 17 states. Expanding its fiber-optic network in more than 90 communities at any one time, Metronet has become the country's largest and fastest-growing privately owned fiber-to-the-home company. More information on the Evansville, Ind.-based company can be found at metronet.com.

About Oak Hill Capital

Oak Hill is a longstanding private equity firm focused on the North America middle-market. Oak Hill applies a specialized, theme-based approach to investing in Media & Communications, Industrials, Services, and Consumer. The Firm implements a highly systematic approach to theme development, proactive origination, and value creation in partnership with management to build franchises of lasting value. Over the past 35+ years, Oak Hill and its predecessors have raised over $23 billion of initial capital commitments and co-investments and invested in over 110 companies. For more information, please visit www.oakhill.com.

About KKR

KKR is a leading global investment firm that offers alternative asset management as well as capital markets and insurance solutions. KKR aims to generate attractive investment returns by following a patient and disciplined investment approach, employing world-class people, and supporting growth in its portfolio companies and communities. KKR sponsors investment funds that invest in private equity, credit and real assets and has strategic partners that manage hedge funds. KKR’s insurance subsidiaries offer retirement, life and reinsurance products under the management of Global Atlantic Financial Group. References to KKR’s investments may include the activities of its sponsored funds and insurance subsidiaries. For additional information about KKR & Co. Inc. (NYSE: KKR) please visit KKR’s website at www.kkr.com. For additional information about Global Atlantic Financial Group, please visit Global Atlantic Group’s website at www.globalatlantic.com.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240724285262/en/

Media Contacts

Metronet

Scott Shapiro

media@metronet.com

Oak Hill

Nadia Damouni / Kiki O’Keeffe

pro-OakHillCapital@prosek.com

KKR

KKR Media Relations

Media@KKR.com

Source: Metronet

FAQ

What is the main outcome of the Metronet sale to KKR and T-Mobile joint venture?

Metronet will become a wholesale services provider, with T-Mobile taking over 100% of its residential fiber retail operations and customers.

How many households does Metronet's fiber network currently reach?

Metronet's fiber network currently reaches more than 2 million households across 17 states in the U.S.

When is the KKR and T-Mobile joint venture acquisition of Metronet expected to close?

The transaction is expected to close in 2025, subject to customary closing conditions and regulatory approvals.

What will be Metronet's focus after the sale to the KKR and T-Mobile joint venture?

After the sale, Metronet will focus on build plans, network engineering and design, network deployment, and customer installation.