Singtel to sell 20% stake in regional data centre business valued at $5.5 bil

Singtel Z74 2.07% has reached an agreement to sell a 20% stake in its regional data centre business to global investment firm KKR. KKR, through a fund it manages, will commit up to $1.1 billion in cash to this effort. This injection of capital puts the enterprise value of Singtel’s data centre business at $5.5 billion, around 60% more than the $3.4 billion estimated by DBS Group Research.

This is the first collaboration between Singtel and KKR. Singtel will be able to take advantage of KKR’s extensive experience in telecommunication infrastructure and data centre investments around the globe, in addition to capital. This investment is also a part of KKR’s Asia infrastructure strategy.

The revenue generated from the transaction will be used for the expansion of the regional data centre business in countries such as Singapore, Indonesia, Thailand as well as exploring markets in Malaysia and beyond. Singtel’s data centre business is a part of the Digital InfraCo unit it formed in June.

KKR will have the option of boosting its stake to 25% of the data centre business, at a pre-agreed valuation, by 2027. This move will help Singtel’s regional data centre business develop and grow, with the total combined capacity when the three new projects are completed expected to reach over 155MW, with the potential to reach over 200MW.

Additionally, Singtel has 62MW of existing capacity in Singapore and is constructing a new 58MW data centre in Tuas.

Singtel’s group CFO, Arthur Lang, expressed the telco’s confidence in KKR’s investment as being reflective of the quality of its data centre portfolio. He also highlighted the need to capitalise on the digitalisation and rapid AI adoption occurring in the region. Bill Chang, CEO of Singtel’s Digital InfraCo, spoke on the strength of the strategic partnership, which he expects to yield a ‘leading green and sustainable data centre platform with rich hyper-connectivity services’.

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On the same note, David Luboff, Partner and Head of Asia Pacific Infrastructure at KKR, opined that the investment will help enable Southeast Asia’s digital economy, with Singapore being the hub. He also mentioned the firm’s interest in working closely with Singtel’s team.

The growth of the data centre market in Southeast Asia is expected to be greater than the rest of the world, at 17% compared to 12%. Investments in this market could reach between US$9 billion and US$13 billion over the next five years. Malaysia, Indonesia and Thailand may see the biggest increase in capacity.

The unaudited net assets of Singtel’s data centre business as of June 30 was about $19 million. It is expected that the deal will be closed by the fourth quarter of 2023.