The Singapore-based communication technology group Singtel and KKR have signed a definitive agreement, under which a KKR-managed fund will commit up to S$1.1 billion (~US$800 million) for a 20% stake in Singtel’s regional data centre business – a part of the Digital InfraCo unit, formed in June 2023.
This investment puts the enterprise value of Singtel’s overall regional data centre business at S$5.5 billion. KKR will have the option to increase its stake to 25% by 2027 at the pre-agreed valuation.
The transaction is expected to be completed by the fourth quarter of 2023, subject to regulatory approvals and customary closing conditions.
The collaboration is a first between Singtel and KKR and enables Singtel to tap on KKR’s expertise in investing in data centres and critical telecommunication infrastructure globally in addition to capital.
The proceeds from this transaction will be used to accelerate the expansion of the regional data centre business across ASEAN markets, including Singapore, Indonesia and Thailand while exploring markets like Malaysia and others. This will widen the business’ strategic choices, giving a variety of options to monetise in the future.
Singtel has been growing this business anchored by its expertise in Singapore where it is one of the largest operators. In addition to 62MW of existing capacity in Singapore, Singtel is building a new 58MW DC Tuas in Singapore and has also partnered Telkom and Medco Power in Indonesia and GULF and AIS in Thailand to develop data centres in Batam and Bangkok respectively.
The data centre portfolio will deliver a total combined capacity of over 155MW once the three new projects are operational in 2025, with room to scale up to more than 200MW.
“KKR’s investment underscores the quality of our data centre portfolio and confidence in our plans to scale the business by capitalising on the digitalisation and rapid AI adoption that is transforming this region,” said Bill Chang, CEO of Singtel’s Digital InfraCo.
“Our expertise in designing, building and operating data centres, and our connectivity leadership in the region, together with KKR’s strong track record in supporting digital infrastructure assets and its platform-building expertise makes for a powerful combination,” added Chang.
The investment by KKR crystallises the latent value of our data centre assets and we hope this illuminates value for our shareholders in the coming months. With more than S$6 billion being unlocked since we embarked on our strategic reset two years ago, we continue to focus on unlocking value for our shareholders,” commented Arthur Lang, Group CFO of Singtel.
“We are pleased to provide this tailored solution to support the regional data centre platform of Singtel, one of the most longstanding and distinguished corporations in Singapore and a leading digital infrastructure provider in Asia Pacific,” said Mr David Luboff, Partner and Head of Asia Pacific Infrastructure, KKR.
“Robust digital infrastructure, including high-quality data centres, will play a crucial role in enabling Southeast Asia’s flourishing digital economy, and Singapore is well-placed to serve as a central hub for the region,” added Luboff.
Data centre market in Southeast Asia is expected to grow by 17% over against 12% global market in the next five years. The Southeast Asia region expects investments between US$9 billion to US$13 billion.
Data centre capacity is poised to increase at a compound annual growth rate of 19% from 2021 to 2026. Increased data consumption, enterprises transitioning to the cloud and the rapid rise of AI in the region will increase demand outpacing the supply.