KKR’s Italian Telecom Investment Faces Headwinds
Global investment firm KKR has chosen to forgo dividends from its Italian telecommunications venture FiberCop after accelerated customer losses, according to reports from the Financial Times. The decision suggests one of Europe’s largest private equity deals may be underperforming initial expectations, with the €22bn acquisition of Telecom Italia’s fixed-line network business facing operational challenges.
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Customer Losses Impact Financial Projections
Sources indicate that FiberCop lost 364,000 customers in the first half of 2025, reducing total connections to 14.1 million as of June. This performance puts the business on course to fall short of KKR’s initial projection of 15 million active connections by year-end 2025. The customer decline has reportedly led FiberCop to opt against paying dividends to KKR and other investors, including the Italian ministry of finance and Abu Dhabi’s sovereign wealth fund Adia.
Internal documents seen by the Financial Times reportedly showed that KKR initially envisaged FiberCop would begin paying dividends from December 2024. Analysis suggests KKR’s projected five-year returns would be several percentage points lower without these anticipated payouts. However, a person close to KKR stated that the board had never formally approved this dividend timing and is choosing to reinvest into FiberCop instead.
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Government Relations and Competitive Pressures
The situation has created tensions with the Italian government, which is reportedly pressuring KKR to merge FiberCop with smaller state-controlled rival Open Fiber. According to three people familiar with the discussions, KKR fears any merger terms would be unfavorable given FiberCop’s customer losses and the subsidies Rome is providing to Open Fiber. The Italian government seeks to maintain oversight of what it considers strategic national infrastructure.
James Ratzer, an analyst at New Street Research, suggested that while FiberCop was expected to be “a steady cash generator,” tough competition means the cash flow outlook is now “far worse than the initial business plan.” This assessment comes amid broader industry challenges similar to those affecting other telecommunications providers and technology companies facing market pressures.
Management Changes and Operational Challenges
The deal has experienced significant turbulence since its July 2024 completion. Reports indicate that in a draft business plan shared with investors in January, FiberCop’s management forecast a €2bn shortfall in EBITDA over five years relative to KKR’s original projections. This led to a clash between KKR and FiberCop’s management, resulting in the departure of then-CEO Luigi Ferraris.
In spring 2025, the KKR partner who oversaw the original deal, Alberto Signori, was replaced on FiberCop’s board by Tara Davies, a more senior figure at the firm who co-heads KKR’s business in the region. These management changes reflect the complex challenges facing major infrastructure investments, not unlike those encountered in other sectors such as advanced manufacturing and technology security.
Financial Performance and Credit Concerns
Rating agency Moody’s has placed FiberCop on negative outlook, reflecting expectations that its credit metrics will be hurt by substantial investment over the next two years. Moody’s reportedly stated that “additional pressure could emerge from the implementation of a financial policy that prioritises shareholder returns over creditor interests, including debt-funded acquisitions or dividend distributions, during the fibre rollout phase.”
Despite these challenges, KKR maintains that FiberCop has “performed strongly” since the buyout and has over €5bn of liquidity. The company stated that “claims of underperformance or financial strain are inaccurate and contradicted by audited results, a successful bond issuance, and positive ratings coverage from all three major agencies.” This defense echoes similar positions taken by companies in other sectors, including technology firms facing operational hurdles.
Strategic Outlook and Reinvestment Plans
FiberCop stated that a reduction in lines was expected this year as it replaces its legacy copper network with fibre. During this transition, customers are not automatically switched over and are free to leave for competitors. A person familiar with KKR’s thinking added that the impact of customer losses was being offset by higher revenues from business accounts and cost savings.
The same source indicated that FiberCop’s scope to return money to investors would be greater once its network rollout completes in 2027. FiberCop said in a statement last month that dividends would be “prudently” decided on a yearly basis and that “the half-year results are in line with the expectations of our shareholders.”
According to the reports, FiberCop’s earnings totaled €1.9bn in 2024, with the first six months of 2025 generating €824mn in earnings. A person close to KKR said FiberCop’s earnings and free cash flow were tracking in line with the company’s expectations, suggesting the situation may stabilize as the fibre network modernization progresses.
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