By Matthew Holley
Telecom Financing Week, 28 August 2000
German-based KKF.net's US$45 million capital infusion from Kohlberg Kravis Roberts & Co, the U.S. buy-out firm, allowed the company to forego the prospect of a public equity offering, which it had been considering. "We are quite lucky to have avoided the pressure in the market from an IPO. We're not very big so we could have had problems managing the process. It's easier to have help from a big partner," said Michael Koenig, co-founder and director of KKF.net.
The investment also ensures KKF.net retains control of the company, as KKR received just under 45% of the company. A distribution and cooperation agreement with Tenovis, the former private networks division of Bosch Telecom, now owned by KKR, is also included. So KKF.net not only gains capital to roll out its DSL service, but also gets access to Tenovis' marketing resources and business customers. Oliver Haamann, an executive at KKR, noted that KKF.net can also take advantage of being the first mover in DSL services in Germany, with its nearest rival being QS Communications. Haamann said the timing of the deal takes advantage of a window of opportunity in Germany. "There's a lot of pent-up demand for high-speed Internet access in Germany among small- to medium-sized business customers. DSL has an opportunity to gain rapid market penetration because the incumbent's pricing is prohibitively expensive, cable networks are only now beginning to be upgraded, and wireless local loop competition is still a year away from large scale deployment."
Both KKF.net and KKR are planning further expansion in Europe and are open to offers for similar deals. London-based investment bank, ARC Associates, was adviser to KKR and approached KKF.net on arranging the capital infusion.
Reproduced from Telecom Financing Week®
http://www.telecomfinancingweek.com