Singtel to sell 70% of Australia Tower Network to AustralianSuper for A$1.9B

SingTel outlet in SingaporeSingTel outlet in Singapore

Singtel has entered a deal to sell a 70 percent stake in Australia Tower Network (ATN) to Australia’s largest superannuation fund, AustralianSuper, for around A$1.9 billion, the regional telco operator said in a filing to SGX Friday.

In addition, Singtel is forming a regional data center platform, which will initially focus on Southeast Asia.

The tower deal values ATN, which operates the passive telecommunications tower infrastructure for Optus, Singtel’s wholly owned Australian subsidiary, at a pro-forma fiscal year 2021 enterprise value-to-ebitda (earnings before interest, tax, depreciation and amortization) multiple of 38 times, significantly above telco multiples, the filing said. The transaction involves 2,312 mobile network towers and rooftop sites, Singtel said.

Under the terms, Optus will continue to access the towers via a long-term lease agreement with ATN, and the telco will be the anchor tenant on 565 new build-to-suit towers over the next three years, forming an integral part of its 5G network, the filing said.

“We are pleased that the value of Optus’ towers has been duly recognised, reflecting the high quality of our assets and positive outlook for telco infrastructure. The value of the transaction, the calibre of our partner and the access arrangements under the terms of the agreement will protect Optus’ strategic advantage and preserve its network leadership as it accelerates its 5G rollout across Australia,” Yuen Kuan Moon, Singtel group CEO, said in the statement.

“This transaction also supports our larger infrastructure strategy to unlock value through an asset-right approach which will free up capital to reallocate and reinvest in key growth areas,” Yuen said.

The net proceeds will support the rollout of 5G and other growth initiatives, including expanding business-to-business (B2B) digital services in Singapore and Australia via NCS, and allow the company to deliver sustainable dividends, the filing said.

Singtel will retain the remaining 30 percent of ATN.

Data center business

In addition, Singtel said it would form a regional data center platform, initially focusing on Southeast Asia. Singapore, Thailand and Indonesia make up more than 70 percent of Southeast Asia’s data center market, the filing said.

Singtel has signed a memorandum of understanding (MOU) with Gulf Energy, a leading power and infrastructure company in Thailand, to build and develop data centers in the country, the company said, noting Gulf recently acquired a stake in Singtel associate Intouch Holdings.

Indonesia’s Telkom and Singtel are also in advanced talks to explore acquiring and building data center assets in Indonesia and the region, the filing said.

“We see data centres as a new growth catalyst for our group and are very excited about kicking off our regional data centre business with partners like Gulf who recognise the strong growth potential of digital infrastructure. We are also keen to work with our associates to enhance overall shareholder value for all parties,” Yuen said in the statement.

“With the blistering pace of digital growth, we are seeing strong demand for an integrated network of data centres across different markets to deliver consistent standards and value-added services to customers as they scale their presence regionally,” he added.

Sarath Ratanavadi, CEO of Gulf Energy, added his company believes data centers will be crucial to supporting Thailand’s growth in the digital economy.

“We are very happy to be working with Singtel as business partners to capitalise on this promising opportunity. We look forward to leveraging our local expertise in combination with Singtel’s strengths to build a strong data centre business in Thailand and to explore ways to add more value to the business through the integration of green energy solutions,” Sarath said in the statement.

Singtel noted the Covid-19 pandemic has boosted demand for data centers, with Asian data consumption expected to make the region the largest data center market globally. Southeast Asia’s data center capacity is expected to grow at a compound annual growth rate of 18 percent over 2020 to 2025, Singtel said, citing data from Frost & Sullivan.