Southeast Asia’s largest telecom operator Singapore Telecommunications has agreed to sell a 20% stake in its regional data center business to U.S. private equity giant KKR for S$1.1 billion ($807 million).
The deal puts the enterprise value of the Singtel unit at S$5.5 billion, according to a joint statement on Monday. It marks KKR’s largest investment in Southeast Asian infrastructure and data center infrastructure globally. The New York-headquartered investment firm will have the option to raise its stake to 25% by 2027.
Singtel said it will use the proceeds to fund the expansion of the regional data center business across Southeast Asia, including Singapore, Indonesia and Thailand, while venturing into new markets such as Malaysia. The two companies said the deal is expected to be closed by the fourth quarter.
“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,” Arthur Lang, CFO of Singtel, said in the statement. “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.”
Southeast Asia has been a hotbed for infrastructure investment due to the region’s demand for private capital to develop and upgrade telecommunications, transportation, utilities and other infrastructure. Last year, KKR raised more than $4 billion for its latest Asia infrastructure fund, topping the $3.9 billion it raised for its inaugural Asia Pacific fund in 2021. Its investment portfolio in Southeast Asia includes Pinnacle Towers, a leading telecom tower company in the Philippines, and Aster Renewable Energy, a platform that operates solar, wind and energy storage projects in the region.
Singtel and KKR said in the statement that they estimated the Southeast Asian data center market will grow by 17% over the next five years, drawing $9 billion to $13 billion of investments during the period.
Singtel serves more than 770 million mobile customers in 21 countries, including Singapore, Australia, India, Indonesia, the Philippines, Thailand and in Africa. The company has been seeking to raise capital from divestments to fund the launch of its 5G network. In September last year, Singtel sold a 3.3% stake in Indian mobile carrier Airtel to Bharti Telecom, its joint venture with billionaire Sunil Mittal’s Bharti Enterprises, for S$2.25 billion.