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Business deals

KKR invests in Philippine telecom tower builder

US fund bets on a sector under pressure from Duterte to improve services

Two women use their mobile phones in Manila. President Duterte wants mobile carriers to improve services.    © Reuters

MANILA--Investment fund KKR has put money into a company building telecom towers in the Philippines, scenting opportunity in a sector that has faced pressure from President Rodrigo Duterte to improve services.

KKR said on Tuesday that it invested in Pinnacle Towers, whose principal subsidiary Frontier Tower Associates Philippines builds independent towers in the Southeast Asian nation. KKR declined to disclose the amount of the investment.

The Philippines' two established mobile service providers, PLDT and Globe Telecom, and incoming China Telecom-backed Dito Telecommunity have expressed interest in enlisting independent tower builders to ramp up network expansion.

Duterte demanded in July that Globe and PLDT "better improve" services or face expropriation, amid complaints of poor services. The president also told local government units to speed up telco permit processing and cut red tape, which companies said slowed tower construction.

The Philippines only had 17,850 towers as of third quarter of 2019, according to a Tower Exchange report last year. In contrast, Vietnam which has a smaller population, had about 90,000 towers.

"The telecommunications sector in the Philippines has grown rapidly in the past few years amid the increasing demand for connectivity," said David Luboff, partner and head of Asia Pacific infrastructure at KKR. "This has led to a resource imbalance and the need to expand existing infrastructure to allow operators to provide better service and coverage to their customers."

Demand for telecom and internet services has surged in recent months as the coronavirus pandemic spurred remote work set-up and online schooling. Converge ICT Solutions, whose fiber internet service boomed amid lockdown, listed on the Philippine Stock Exchange last month, raising around $600 million.

US fund Warburg Pincus, which invested $225 million in Converge last year for a 29% stake, made a partial exit during the initial public offering.

The investment in Pinnacle is the second by KKR's infrastructure fund in the Philippines. KKR acquired 11.9% stake in energy company First Gen for 9.6 billion pesos ($192 million) in June.

In April, KKR participated in the second major fundraising of Voyager Innovations, which owns mobile payment app PayMaya.

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