Singtel, Asia's leading communications technology group, has reached a major agreement with global investment firm KKR. In this first-time partnership, KKR will invest up to S$1.1 billion (US$800 million) for a 20% share in Singtel's regional data center business. Singtel's regional data center business is valued at S$5.5 billion as a result of this investment. KKR also has the option to grow its share to 25% by 2027 at a predetermined valuation.
Singtel will benefit from KKR's experience in data center investments and key communications infrastructure on a worldwide scale. The revenues from this will be used to accelerate Singtel's regional data center business development throughout ASEAN markets such as Singapore, Indonesia and Thailand, as well as further study of markets such as Malaysia and beyond.
Bill Chang, CEO of Singtel's Digital InfraCo, expressed his enthusiasm for the partnership, saying, “KKR's investment underscores the quality of our data center portfolio and confidence in our plans to scale the business by capitalizing on the digitalization and rapid AI adoption that is transforming this region. Our expertise in designing, building and operating data centers 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. We look forward to building on the strong momentum we have achieved to grow the business into one of the region's leading green and sustainable data center platforms with rich hyper-connectivity services.”
Singtel's regional data center business is managed by the Digital InfraCo, formed in June 2023. Currently, the company has 62 MW of existing capacity in Singapore and is building a new 58 MW DC Tuas plant. Partnerships are also in place with Telkom and Medco Power in Indonesia, as well as GULF and AIS in Thailand, for the building of data centers in Batam and Bangkok, respectively. With these projects scheduled to be completed by 2025, the total capacity of the data center portfolio will reach 155 MW, with room for additional development to more than 200 MW.
“The data center industry is growing at an accelerated pace given the unprecedented industry trends we are witnessing. KKR is a highly credible partner in the data center space, and we look forward to our strategic partnership in scaling up the platform to become a meaningful growth engine for Singtel. The investment by KKR crystallizes the latent value of our data center 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,” explained Arthur Lang, Group CFO at Singtel.
Over the next five years, the Southeast Asia data center market is expected to grow by 17%, exceeding the worldwide growth rate of 12%. Investments in the region are estimated to range from $9 billion to $13 billion. From 2021 to 2026, demand for data center capacity is expected to expand at a compound annual growth rate of 19%, driven by increased data consumption, business cloud conversions and the region's rapid adoption of AI. Malaysia, Indonesia and Thailand are expected to see the greatest capacity expansions, with Johor in particular benefiting from spillover demand from Singapore due to supply restrictions.
David Luboff, partner and head of Asia Pacific Infrastructure at KKR, expressed his satisfaction with the tailored solution provided to support Singtel's regional data center platform, saying, “Robust digital infrastructure, including high-quality data centers, 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. We look forward to working closely with Bill, Arthur and Singtel’s talented team to meet this tremendous demand and sharing our global expertise and network to accelerate the platform’s growth across the region.”