SINGAPORE -- Singapore Telecommunications is selling part of its overseas mobile network infrastructure to fund a rollout of 5G next-generation technology while the company also looks to expand its data center business in Southeast Asia.
The telco on Friday announced that it will sell a 70% stake in Australia Tower Network for A$1.9 billion ($1.37 billion), which includes the sale of 2,312 cellphone towers and rooftop sites.
The move is part of Singtel's plan to capitalize on the value of its regional infrastructure assets, including mobile towers, data centers, subsea cables and satellites, as it looks to meet soaring demand for data services accelerated by the COVID-19 pandemic.
"The capital released from the ATN divestment will be efficiently recycled and reinvested to drive growth," said Yuen Kuan Moon, Singtel's group chief executive, at an online press briefing on Friday. "We will actively review opportunities for unlocking capital from our extensive portfolio of infrastructure," he added.
AustralianSuper, Australia's largest superannuation fund, will take over the base station assets and manage the towers, with the transaction expected to be completed this month. Singtel will continue to hold a 30% stake in ATN.
Under the deal, Optus, Singtel's Australian subsidiary, will have continued access to the towers through a long-term lease agreement with ATN. Optus will also be the anchor tenant on 565 new towers to be built over the next three years, which will form a part of its 5G network.
"This ATN tower sale that we've conducted actually only represents 25% to 30% of the sites that Optus operates to deliver our mobile coverage," Optus CEO Kelly Bayer Rosmarin said at Friday's press briefing. "We have made sure to negotiate a long term 20-year lease with ATN that gives us very good commercial terms," she added.
Singtel also intends to build more data centers in member countries of the Association of Southeast Asian Nations as part of its efforts to expand in this segment.
By market capitalization, the Singapore Exchange-listed company is the largest telecom operator in ASEAN's 10 member countries. Singtel plans to leverage its position to snag market share as the bloc gradually shifts to 5G, which promises data transfer speeds 10 times faster than existing 4G networks.
The telco intends to export 5G mobile tech throughout Southeast Asia through its regional associates. Singtel has stakes in ASEAN peers including Indonesia's Telkomsel, the Philippines' Globe Telecom and Thailand's Advanced Info Service.
The telco on Friday said it has formed a partnership with Thailand's Gulf Energy, a power and infrastructure company, to build and develop data centers across the kingdom.
"We believe that data centers will be crucial to support Thailand's growth in the digital economy," said Sarath Ratanavadi, CEO of Gulf Energy. "This collaboration signifies the beginning of a long-term partnership that will allow us to pursue more data center businesses in Asia in the future."
Singtel said it is also in advanced talks with partner Telkom to explore acquiring and building data center assets in Indonesia and elsewhere in the region. Singapore, Thailand and Indonesia jointly make up more than 70% of the data center market in ASEAN, the company said.
Singtel's strategy involved using its home base as a test-bed for technology before rolling out hardware and software to other markets in the region. It is already one of the largest data center operators in Singapore.
In a reset of its strategy it announced in July, the operator named investment in 5G and emerging technology as a key pillar to reinvigorate its core consumer and enterprise businesses.
While the coronavirus pandemic has accelerated the penetration of digital services in ASEAN, it has also closed borders as governments struggle to control the spread of the disease. This has hurt Singtel's ability to draw revenue from mobile roaming services used by travelers.
But signs are afoot that the outlook is brightening for Singtel. The telco booked a net profit of SG$445 million for the three months ended in June, reversing a net loss of SG$20 million for the same period a year ago as the business environment improved.
Singtel's data centers in Singapore serve customers from multinational companies to government agencies and cloud media streaming players, CEO Yuen told journalists on Friday.
The centers contribute revenue of over SG$250 million and generate earnings before interest, taxes, depreciation, and amortization of about SG$150 million, he said.
Given growing demand in this area, Singtel expects its portfolio in this area to grow to "well above" SG$5 billion dollars in assets under management in the next three to five years.
The company's model for regional expansion in this segment is to construct and operate its own centers, either independently or through joint ventures with local partners, much like its collaboration with Thailand's Gulf Energy.
"Demand driven by digitalization, accelerated by COVID-19 -- everyone is going to the cloud, doing more analytics and needing physical infrastructure," Yuen said. "Who can operate more efficiently, who can build faster, who can bring in more differentiated services will grab a larger share of the growth in the region."