T-Mobile and KKR set sights on Metronet – report

　　T-Mobile and investment firm KKR are in talks to form a joint venture for Metronet, a fiber service provider that provides services in more than 300 communities in 17 states, reports TMT Finance (subscription required).

　　T-Mobile, KKR and Metronet have been asked for comment.

　　The possible 50/50 structure would share similarities to T-Mobile's transaction with EQT for Lumos, a fiber operator focused on the mid-Atlantic region with expansion ambitions.

　　A potential valuation or investment requirement for each side wasn't reported, but "[i]t would be the largest fiber deal that T-Mobile has entered into so far," New Street Research analyst Vikash Harlalka explained in a research note distributed via email.

　　He estimates that Evansville, Indiana-based Metronet has about 2 million passings across 17 states, and is expanding its footprint by about 500,000 locations annually. In recent months, Metronet has announced a $21 million investment to bring fiber to three communities in Minnesota (Chanhassen, Shorewood and Victoria), and another $2.3 million for an expansion into Belle Plaine, Minnesota.

　　Metronet offers residential speeds up to 5 Gbit/s in select markets. It doesn't offer its own pay-TV service, but has partnered with MyBundle to help its broadband customers explore and analyze their streaming options.

　　Metronet has also been identified as a fiber provider that has explored ways to bring mobile to the bundle. T-Mobile could provide an obvious option there. Meanwhile, Craig Cowden, a former exec with charter Communications, Bright House Networks and Sprint known for his mobile and wireless expertise, joined Metronet as EVP and chief technology and product officer in April 2024.

　　Word of its possible participation in a JV for Metronet would plunge T-Mobile even deeper into the fiber game and its own play on converged networks and services.

　　Harlalka noted that based on its expansion projects, the Lumos deal would enable T-Mobile to reach 2% to 3% of US households by 2028, while a Metronet deal would provide T-Mobile with access to about 1.5% of US households.

　　"It would be the largest fiber deal that T-Mobile has entered into so far," the analyst added. "While these are smart transactions, they do not provide enough scale to T-Mobile for nationwide convergence." For that, T-Mobile would have to pursue larger deals, Harlalka added.

　　He called Metronet, which counts KKR and Oak Hill Capital as investors, a "pioneer" in the broadband industry with respect to issuing asset-backed security (ABS) debt, having used that vehicle to raise about $3.5 billion so far.

　　Generally, Metronet has been known to tap into private equity funds, rather than government grants, to help fuel its fiber expansion activities. It has also expanded through M&A, including a deal for Vexus Fiber in 2022, CTS in 2021, Jaguar Communications in 2020 and LightSpeed Fiber Communications in 2019.

　　Frontier Communications, a telco amid a massive fiber network upgrade, has also used the ABS path to raise funds. And it apparently is exploring the JV option as well. Bloomberg reported earlier this month that Frontier is in talks with Stonepeak to form a JV focused on fiber network investments. Word of that possible JV arrives as Frontier undergoes a strategic review that could result in potential partnerships, divestitures and/or mergers.