Why KKR and Singtel are raising S$5 billion to buy STT GDC
A deal would rank among Asia's largest data centre transactions and transform Singtel Nxera overnight.
KKR and Singtel are seeking to borrow S$5 billion to support a proposed purchase of STT GDC. If successful, the deal would rank among Asia's largest data centre transactions.
Here's why Singtel wants it and what the acquisition would mean for Asia's data centre landscape.
From growing to a powerhouse
After an initial S$1.75 billion investment last year, ownership of STT GDC looks like this: KKR currently owns about 14% of STT GDC, Singtel has a stake of more than 4%, and the rest is held by ST Telemedia, which is wholly owned by Temasek Holdings.
For KKR and Singtel, the latest move makes sense due to the existing plan to build Singtel Nxera - their digital infrastructure business - into a leading, global data centre player.
It is building large data centres in Johor, Batam, and Thailand. But it takes years to build new facilities. An acquisition would propel Nxera from a growing upstart into a powerhouse overnight.
Moreover, Singtel Nxera's consolidation in Singapore with the closure of five old data centres leaves it with facilities that lean towards the west of the island: DC Tuas in the west, DC West in the west, and DC Kim Chuan 2 in the east.
Interestingly, more of STT GDC's six data centres here are located in the east of Singapore. Talk about achieving balance.
Stronger together
Outside Singapore, STT GDC has grown steadily, building a presence in a dozen countries: six in Southeast Asia, India, South Korea, Japan, and three others in Europe.
It has a very deliberate strategy about the markets it enters: key Asia markets other than Australia and China, and mature and upcoming data centre markets in Southeast Asia.
But the data centre landscape has changed significantly over the last few years to become even more capital-intensive than it was. Moreover, the latest data centres are built massive, both to leverage economies of scale and to support power-hungry AI workloads, further increasing capital requirements.
Under Singtel Nxera, there could be a limited window of opportunity to become a dominant player by leveraging the sizeable footprint and know-how of STT GDC, tapping into more financing, and accelerating data centre builds.
What do you think?
