- T-Mobile may form a joint venture with KKR to buy the fiber provider Metronet
- It sounds very similar to the JV that T-Mobile formed with EQT to buy Lumos
- New Street Research says a KKR/Metronet deal would be T-Mobile’s largest fiber play, so far
T-Mobile is reportedly in discussions to form a joint venture for ownership of the fiber provider Metronet, according to TMT Finance.
The joint venture would be between T-Mobile and the investment firm KKR, with each party owning a 50% stake. KKR already owns a stake in Metronet as does Oak Hill Capital Partners. Metronet has also been a leader in raising money through asset-backed security (ABS) debt.
The rumored JV sounds very similar to the recent joint venture that T-Mobile formed with EQT to own the broadband provider Lumos.
Metronet, based in Evansville, Indiana, is the largest privately-owned fiber provider in the U.S. According to its website, it passes nearly two million customers in 16 states and is rapidly expanding its footprint. In a note to investors today, New Street Research said the company has more than 500,000 broadband subscribers.
One tactic Metronet uses for expansion is working with local municipalities to bring broadband to underserved communities, although it does not ask cities or towns for any funding.
New Street Research wrote, “When the Lumos deal was announced, we wrote that the JV would help T-Mobile reach 2-3% of U.S. households by 2028."
"If this [Metronet] deal goes through, it will give T-Mobile immediate access to about 1.5% of U.S. households. It would be the largest fiber deal that T-Mobile has entered into so far,” the analysts continued.
In October 2023, Metronet shuffled its executive management, promoting Dave Heimbach from chief operating officer to CEO. Prior to joining Metronet in 2021, Heimbach served as COO at Shentel, where he oversaw the operator’s fiber expansion strategy and the sale of its wireless assets to T-Mobile.
T-Mobile’s fiber strategy
T-Mobile has been expanding its fiber offerings but doing so rather subtly.
The Seattle-based carrier announced its Lumos JV on the same day as its first quarter 2024 earnings call with investors. Asked for more detail on where T-Mobile plans to target fiber, CEO Mike Sievert said at the time, “We’re not rolling out a plan that this [the Lumos JV] is the beginning of a big wave of initiatives here. We're really happy about this initiative and how it augments 5G broadband.”
Sievert elaborated that “fiber can be a strategy that relieves some pressure on the 5G network.” He said that fiber and fixed wireless access (FWA) can also help T-Mobile extend its total addressable market beyond just 5G. And he said the three technologies can be used synergistically. For instance, fiber can be added to markets where there’s a lot of FWA demand. And when people in a neighborhood subscribe to T-Mobile’s fiber, then they might also switch to T-Mobile for their wireless plans.
But Sievert may have just been playing it cool on the last earnings call. T-Mobile’s second quarter earnings call is scheduled for July 31, and analysts are sure to ask about Metronet.
New Street wrote today that the Lumos JV and potentially a Metronet JV “are smart transactions,” but they do not provide enough scale to T-Mobile for nationwide convergence. “If converges become the need of the hour, we would expect T-Mobile to enter into larger transactions.”
T-Mobile does appear to be constantly adding fiber offerings in more towns and cities. Currently, it’s T-Fiber website shows available fiber services in more than 25 locations.
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