KKR takes $800 million stake in Singtel's data centre ops

Private equity’s appetite for telco infrastructure shows no signs of abating despite the current economic climate, with KKR splashing out on a chunk of Singtel’s data centre business.

The US-based investment fund has agreed to pay S$1.1 billion ($800 million) for a 20% stake, valuing the Singtel Digital InfraCo at S$5.5 billion in total. Singtel said the investment will help fund its regional expansion.

Singtel offers colocation, connectivity and value-added services (VaS) to enterprise clients from seven data centres operating in Singapore and Hong Kong. It also has a partner network comprised of another 50 facilities, extending its presence to the US, UK and throughout Asia.

In August, Singtel began construction on DC Tuas, a 120,000 square foot, eight-storey data centre that will be Singapore’s largest when it comes online in 2025. It will almost double Singtel’s domestic data centre capacity to 118 megawatts, and will boast its own dedicated cable landing station.

“The data centre industry is growing at an accelerated pace given the unprecedented industry trends we are witnessing. KKR is a highly credible partner in the data centre space and we look forward to our strategic partnership in scaling up the platform to become a meaningful growth engine for Singtel,” said Singtel CFO Arthur Lang, in a statement.

Indeed, according to figures published in August by Synergy Research, global enterprise spending on cloud infrastructure services totalled $65 billion in the second quarter, up by $10 billion compared to 12 months ago. It represents the third successive quarter in which the market grew by $10 billion year-on-year. Synergy said growth remains healthy, despite economic uncertainty leading to some belt-tightening.

Telcos, hyperscalers and investors are understandably keen to maximise their exposure to this trend, and KKR is one of the more proactive of the bunch.

In 2021, it partnered with infrastructure investor Global Infrastructure Partners (GIP) to acquire data centre provider CyrusOne in an all-cash deal worth $15 billion. KKR’s telco interests don’t end with data centres, of course. Recent highlights include 2022’s acquisition by KKR – once again in partnership with GIP – of a $16 billion stake in Vodafone’s Vantage Towers unit. KKR is also currently the preferred bidder for Telecom Italia’s networks assets.

KKR and GIP were also in the running for a 51% stake in Deutsche Telekom’s towers business, but lost out to two other active telco infrastructure investors, Canada’s Brookfield and US-based DigitalBridge. The latter, which focuses on cloud, fibre networks, small cells and edge infrastructure in addition to towers, agreed last May to acquire data centre operator Switch for $11 billion.

Then there’s Swedish buyout firm EQT, which bought data centre operator EdgeConnex in 2020. Earlier this year it partnered with Italy’s Wind Tre to establish a new networks business valued at €3.4 billion.

Within this context, KKR paying $800 million for 20 percent of Singtel’s data centre business represents a fairly modest outlay.

Singtel, for its part, is eyeing growth opportunities for InfraCo in Indonesia, Malaysia and Thailand, as well as its home market.

“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 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.”

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