High and low fiber

The KPN/Reggefiber story seems to be generating a lot of interest, understandably so. Rudolf raises some interesting points and questions in his post, the first of which I think I can answer. 

"KPN announced this morning that they will also be doing a stock buy back worth EUR1 billion. Where are they getting the money?"

Going back to KPN's announcement of the Reggefiber deal in May, KPN will be acquiring 41% of Reggefiber, and this is below the threshold at which it would have to consolidate Reggefiber's results in its own reporting. I think this is a master stroke, because it allows KPN to continue with dividends and buybacks to satisfy shareholders, while effectively outsourcing fiber capex, presumably until such time as the rollout is mature enough, and investors are fiber-friendly enough, to allow an outright acquisition. 

As for the structure of the joint fiber build discussed in Trouw, I assume that KPN and Reggefiber will form a new entity under some sort of tax-efficient limited partnership structure (which I believe is called a B.V. in Dutch), and use that entity to raise project finance. Who would invest in such a vehicle? I think Rudolf's right to assume that pension funds, infrastructure funds, and others interested in long-term investment horizons would be interested. I also believe that a substantial number of the institutions who already hold KPN's debt might be interested, as this new vehicle would represent the cornerstone of KPN's reassertion of hegemony at layer one. 

Meanwhile, back in the UK, tomorrow brings the OFCOM conference, and I am honored to have been asked by the organizers to write a little piece on issues around NGA in the UK. I didn't realize it was going to be placed on the web, but here it is, typos, gloom and all. Everyday I love my cable modem more and more...