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

Partnership between Singtel and KKR has seen the telco agree to sell KKR a stake of 20% in its regional data centre business. KKR will be able to increase their stake further to 25% by the pre-agreed valuation in 2027. Singtel’s regional data centre business, part of their Digital InfraCo unit, has an enterprise value of $5.5 billion and is set to expand across Asean with the cash from the transaction.

Singtel has joined forces with Kohlberg Kravis Roberts & Co. L.P. (KKR), a global investment firm, to form their first collaboration, selling 20% of the telco’s regional data centre business to KKR. The stake is set to be acquired through a fund managed by KKR, with the firm committing up to $1.1 billion in cash. This puts the enterprise value of the business significantly higher than the $3.4 billion estimate by DBS Group Research – at $5.5 billion.

On top of capital, Singtel will be able to benefit from KKR’s expertise in telecommunication infrastructure and data centres on a global scale, as this is part of KKR’s Asia infrastructure strategy. This investment will go towards the expansion of the regional data centre business in countries such as Singapore, Indonesia, and Thailand, with plans to explore Malaysia and more.

With an unaudited net asset of $19 million as of June 30th, the proceeds from the transaction will also be used to bolster Singtel’s already existing 62MW capacity in Singapore. Further, the telco is planning the construction of a new 58MW DC Tuas in Singapore as well as to partner with Telkom and Medco Power in Indonesia and GULF and AIS in Thailand to develop data centres in Batam and Bangkok respectively. This is expected to raise the combined capacity of their data centres to over 155MW once completed in 2025, with room to extend further up to 200MW.

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Bill Chang, CEO of Singtel’s Digital InfraCo knew the value of the data centre portfolio, adding that “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.”

The data centre industry is growing at a rapid rate due to the current industry trends, and KKR partner and head of Asia Pacific Infrastructure, David Luboff, expressed “we look forward to our strategic partnership in scaling up the platform to become a meaningful growth engine for Singtel”. With an estimated US$9 billion to US$13 billion flowing into the region for investments, KKR’s investment in Singtel will help to illuminate value for their shareholders in the coming months, according to Arthur Lang, group CFO of Singtel.

The transaction is expected to be completed by the fourth quarter of 2023. KKR’s option to increase their stake to 25% by 2027, will hopefully contribute to the growth of the regional data centre market in Southeast Asia, expected to experience a 17% growth in the next five years, with Malaysia, Indonesia, and Thailand expected to benefit the most.