The operation meant a reduction in the Spanish teleco's net debt of around 200 million euros (US$ 210.9 million).

Telefónica, the Kohlberg Kravis Roberts (KKR) fund and the Chilean National Telecommunications Company (Entel) have broken the agreement through which KKR and Entel would jointly acquire 64% of Pangea, the wholesale fiber optic company in Peru, a deal that included the Spanish teleco maintaining 34% of the property through its subsidiary Telefónica Hispam.

On the one hand, Entel has informed the Chilean Financial Market Commission, equivalent to the National Securities Market Commission (CNMV) in Spain, that the agreement has been broken because Pangea has reported the "non-compliance with certain closing conditions stipulated" in the deal.

"Pangea has communicated that, due to the failure to comply with certain closing conditions stipulated in the SSA (in reference to the agreement), related to a parallel transaction between KKR and Telefónica Hispam regarding Pangea that will not materialize, Telefónica Hispam has expressed its intention to formally document the termination of the SSA. To date, the parties to the SSA are in discussions regarding the terms and conditions of said termination," explains Entel in its statement.

"At this stage it is not possible to estimate the impact that the termination of the transaction may have on the company's consolidated profits," Entel added.

For its part, Telefónica's subsidiary in Peru has informed the Superintendency of the Securities Market of the South American country that, to date, its controlling shareholder, that is, the Telefónica group, has informed them that the parties to the aforementioned transaction "are holding discussions" and that once "any relevant development" occurs, the market will be informed.

THE AGREEMENT

Specifically, the agreement reached in July last year contemplated that KKR would acquire 54% of Pangea and that Entel would acquire another 10%, meaning that Telefónica Hispam would maintain 36% of the Peruvian wholesale fiber optic company.

With this operation, the Telefónica group would reduce its net debt by around 200 million euros (US$ 210.9 million), the company reported to the National Securities Market Commission (CNMV).

As part of the transaction, Telefónica del Perú and Entel would sell to Pangea certain assets of their fiber-to-the-home (FTTH) infrastructure, while a series of contracts would be signed, including for the provision of wholesale connectivity services with both Telefónica del Perú and Entel Perú.

According to the operator's explanation, when the transaction is closed, the net financial debt of the Telefónica group would be reduced by around 200 million euros (US$ 210.9 million), to which would be added "certain variable payments" over the next four years.

In this context, KKR's objective was to create and control a new wholesale fiber optic company in Peru, which would combine the fiber optic networks of Pangea, Telefónica del Perú and Entel Perú.

In fact, KKR's idea was to make an additional investment of approximately US$200 million to "more than double the country's ultra-fast fiber network" and go from coverage of around 2 million homes to 5.2 million.