Singtel to sell 20% stake in regional data centre business valued at $5.5 bil
Singtel Telecommunications has agreed to sell 20% of its regional data centre business to KKR, a global investment firm. They will be committing up to $1.1 billion in cash, making the enterprise value of Singtel’s overall regional data centre business a whopping $5.5 billion, around 60% higher than the $3.4 billion estimate by DBS Group Research.
The telco will be able to make use of KKR’s expertise in investing in data centres and telecom infrastructure around the world, in addition to the capital they will provide. This is the first time the two companies collaborate, and KKR will have the option to increase its stake to 25% by 2027 at a pre-agreed valuation.
The proceeds from the transaction will be used to expand Singtel’s regional data centre business across the ASEAN markets, as well as to explore more markets, such as Malaysia. This business forms part of the Digital InfraCo unit that the telco formed in June, and Singtel is one of the largest data centre operators in Singapore.
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Currently, Singtel has 62MW of existing capacity in Singapore, but they are also building a new, 58MW DC Tuas in Singapore, and they have also partnered with Telkom and Medco Power in Indonesia and GULF and AIS in Thailand to develop data centres in Batam and Bangkok, respectively.
Once all of these projects are operational in 2025, the data centre portfolio will have a total combined capacity of over 155MW, with room to scale up even more and reach more than 200MW.
These investments will allow Singtel to grow into one of the region’s leading green and sustainable data centre platforms, with hyper-connectivity services. It is estimated that the data centre market in Southeast Asia will grow by 17% over the next five years, compared to 12% for the rest of the world.
The unaudited net assets of Singtel’s regional data centre business as of June 30 was approximately $19 million, and the transaction is expected to be completed by the fourth quarter of 2023.
KKR’s expertise in data centres, paired with Singtel’s valuable experience in designing, building, and operating data centres, make for a powerful combination. With more than $6 billion being unlocked since Singtel embarked on their strategic reset two years ago, this investment is expected to bring value for their shareholders in the coming months.
It is projected that anywhere from US$9 billion to US$13 billion in investments will flow into the region in the upcoming years, and Malaysia, Indonesia, and Thailand are expected to have the biggest increase in capacity. Johor, in particular, stands to benefit from Singapore’s supply constraints. The demand for data centres is expected to outpace supply due to higher data consumption, businesses transitioning to the cloud, and the rapid growth of AI in the region.