KKR to Purchased the 20% of Singtel’s Datacenter Arm for $800 Million

KKR & Co. has entered into an agreement to acquire a 20% stake in Singapore Telecommunications Ltd.'s (Singtel) regional datacenter business for S$1.1 billion ($807 million), demonstrating its ongoing commitment to investing in Asian digital infrastructure.

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This investment includes an option for KKR to increase its ownership stake to 25% by 2027, as outlined in the statement. The deal values Singtel's datacenter unit at approximately S$5.5 billion. Singtel, Singapore's largest telecommunications provider, intends to utilize the capital infusion to support its expansion efforts across Southeast Asia, including new markets such as Malaysia and Vietnam, as stated by Chief Financial Officer Arthur Lang in an interview with Bloomberg TV's Rishaad Salamat, Yvonne Man, and David Ingles. The initial announcement resulted in a temporary uptick in Singtel's shares, rising by as much as 1.7% early on Monday.

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KKR has established itself as a significant player in the Asian digital infrastructure sector, investing in server networks and essential infrastructure to facilitate internet services and AI applications, which have witnessed a surge in demand following the advent of technologies like OpenAI's ChatGPT. As part of the agreement, KKR will have the opportunity to appoint up to two board members to Singtel's datacenter business, according to Lang.

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Around 2021, the private equity firm successfully raised $3.9 billion for its inaugural Asia-Pacific infrastructure fund, amassing one of the largest capital pools in the region dedicated to investments spanning renewable energy and communication infrastructure, among others. The pandemic led to a significant upswing in digital activity, although internet valuations have moderated since the decline of the COVID-19 pandemic. KKR's previous investments in the region have included Indian electricity companies and Pinnacle Towers, a leading power producer and telecommunications operator in the Philippines.

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Arthur Lang emphasized the growing demand for datacenter storage and compute capacity in Singapore, highlighting that power allocation is just as critical, if not more so, than land supply in this context. Singtel has strategically partnered with local entities to facilitate its expansion throughout Southeast Asia.

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In recent years, global private equity firms have shifted their focus away from traditional buyouts, transitioning into diversified investment firms with portfolios spanning alternative assets, including infrastructure and real estate. These firms have found receptive partners in Asian governments seeking private investment to fund projects such as airports, toll roads, and utilities.

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The joint statement from KKR and Singtel anticipates an average annual growth rate of 17% in the regional datacenter market over the next five years, attracting investments ranging from $9 billion to $13 billion during this period. Both parties expect the transaction to conclude by the end of 2023.

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