On Monday (18/9), Singapore Telecommunications (Singtel) announced that global investment firm KKR will acquire a 20 percent stake in Singtel's regional data centre business for S$1.1 billion (US$806.87 million).
KKR is one of the region's largest investors in the server and pipe infrastructure needed to support Internet connectivity and the development of next-generation artificial intelligence services. Demand for such services is growing rapidly, particularly following the launch of OpenAI's ChatGPT.
The deal brings the total value of Singtel's regional data centre business to S$5.5 billion (US$4.03 billion). The proceeds will be used to expand the data center business in various Southeast Asian markets, including Singapore, Indonesia and Thailand, Singtel and KKR said in a joint statement. KKR's investment is part of its infrastructure strategy in Asia.
The data center market in Southeast Asia is expected to grow by 17 percent over the next five years, compared to global growth of approximately 12 percent. Investment in the sector in the region is expected to reach between $9 billion and $13 billion, according to a joint statement.
The funds invested by KKR will be used to accelerate the expansion of Singtel's regional data centre business across Southeast Asia, including Singapore, Indonesia and Thailand. It will also be used to explore new markets, including Malaysia, the statement said.
KKR said it has made a tailored investment and also has an option to increase its stake to 25 percent by 2027 at a pre-approved valuation.
This deal reflects KKR's recent investments in infrastructure in the Southeast Asia region and data centers globally. It adds to KKR's existing investments in the region, including Pinnacle Towers and Aster Renewable Energy.
This is the first transaction between Singtel and KKR, allowing Singtel to leverage KKR's expertise in investing in global strategic data centers and telecommunications infrastructure, in addition to KKR's capital contribution.
Singtel's data center portfolio is expected to grow to a combined capacity of over 155 megawatts by 2025, with the ability to scale up to over 200 megawatts from its current capacity of 62 megawatts. The transaction is expected to close in the fourth quarter of 2023.
Previously, the private equity firm raised approximately $3.9 billion for its first Asia-Pacific infrastructure fund around 2021, one of the largest capital raises in the region. The fund will invest in sectors ranging from renewable energy to communications infrastructure.
Digital activity has surged during the pandemic, although valuations of internet companies have fallen as Covid's influence has waned. The firm has previously invested in a variety of sectors, including Indian energy companies and Pinnacle Towers, a leader in the power generation industry and a telecom operator in the Philadelphia area.