Singtel will sell a 20% share in its regional data center business for $5.5 billion

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Singapore Telecommunications (Singtel) Z74 2.07%has agreed to sell 20% of its regional data centre business to a global venture capitalist KKR. It will then be purchased through a fund that is managed through Kohlberg Kravis Roberts & Co. L.P. (KKR) where it will invest as much as $1.1 billion of cash. The deal puts the overall value of Singtel’s global region-wide data center business to $5.5 billion, which is around 60% over the $3.4 billion estimated by DBS Group Research.

KKR can choose of increasing its share up to 25% by 2027 based on the agreed-upon valuation.

It is the very first time collaboration that has been made between Singtel with KKR. Based on the statement from the telecom they will have the ability to draw the KKR’s experience in investing in data centres and telecommunications infrastructure across the globe, in addition to capital. KKR owns the investment in its Asia infrastructure plan.

The profits from the deal will be used to expand the scope and expansion of our regional data center service across Asean markets that include Singapore, Indonesia and Thailand. Additionally, it will go towards investigating markets such as Malaysia and other countries.

Singtel’s regional data center business makes up the Digital InfraCo unit which was created in June. The company is among the biggest operators of data centres in Singapore.

In addition to the 62MW of capacity already within Singapore, Singtel is building an additional 58MW DC Tuas in Singapore and has also joined forces with Telkom as well as Medco Power in Indonesia and GULF and AIS in Thailand to build data centres located in Batam as well as Bangkok respectively. The portfolio of data centres will provide a total capacity of more than 155MW when the three projects are operational by 2025. There is the possibility of scaling up to over 200MW.

“KKR’s investment underscores the high-quality of our data centre portfolio as well as trust in our plan for scaling the business, leveraging the speed of digitalisation and AI implementation that are changing the region. Our expertise in the design and building data centres and our leading position in connectivity within the region, in conjunction with KKR’s long-standing track record of supporting digital infrastructure assets and platform-building skills make for a formidable combination. We’re looking at building on the momentum we’ve created to build the business to become one of the leading regional environmentally sustainable and green data center platforms, with a wealth of hyper-connectivity capabilities,” states Bill Chang, CEO of Singtel’s Digital InfraCo.

“The industry of data centres is expanding at an exponential pace due to the unprecedented trends in the industry we’re seeing. KKR can be described as a reliable company in the Data center sector and we look at our partnership as a strategic one in transforming the platform to become an effective expansion powerhouse for Singtel. The investment made by KKR highlights the hidden benefit of Singtel’s data centres, and we expect this to reveal the value of our shareholders over the months ahead. More than $6.5 billion is not being accessed since we started our strategic reset in the year 2000 and we are still focusing on maximizing potential value for our shareholders.” states Arthur Lang, group CFO at Singtel.

“We are delighted to offer this customized solution that will support the regional data center platform of Singtel which is one of the longest-running and prestigious companies located in Singapore and a top service provider of digital infrastructure across Asia Pacific. A robust digital infrastructure, which includes top-quality data centers are expected to play an important part in supporting Southeast Asia’s thriving digital economy and Singapore is well placed to become a key point for the region. We are looking forward working along with Bill, Arthur and Singtel’s skilled staff to satisfy this massive demand and to share our expertise and networks across the globe to boost the growth of the platform throughout the region.” declares David Luboff, partner and director for Asia Pacific Infrastructure at KKR.

The market for data centres within Southeast Asia is expected to expand by 17% in the course of five years as compared with 12% in the other regions of the globe. A range of US$9 billion ($12.27 billion) or US$13 billion worth of investments are expected to be poured into the region.

According to Singtel the demand for data centers is predicted to exceed supply due to increased data consumption, companies moving to cloud computing and the rapid growth AI (AI) in the region.

Malaysia, Indonesia and Thailand are likely to see the largest capacity increase, with Johor specifically benefiting from the spillover demands coming from Singapore due to Singapore’s supply limitations. The rising demand for the most demanding computing tasks, like AI that is generative AI can also lead to an increase in the number of graphic processing unit (GPU)-powered data centers in the near future.

The net assets unaudited of Singtel’s regional Data Centre business at the end of June was around $19 million.

The deal is expected be completed in the fourth quarter of 2023.