Home » Digital infrastructure deals in Asia Pacific set a new record | JD Supra

Digital infrastructure deals in Asia Pacific set a new record | JD Supra

The ongoing and rapid digitalization of economic and social activity in the region make data centers and fiber networks some of the most highly sought-after assets

Digital infrastructure M&A in the Asia Pacific region (APAC) was exceptional in 2022, with 31 deals worth US$20.7 billion, topping any previous full year on Inframation record.

Australia led this charge by both volume and value, with eight deals worth US$5.7 billion. The Philippines was close behind in terms of volume with seven deals in the digital infrastructure sector spanning various assets including broadband, data centers, fiber optics, subsea cable and wireless transmission.

Data centers have been in especially high demand over the past three years, having been identified by private equity (PE) as critical infrastructure on which much economic and social activity depends.

Data compounds

It is often said that it is better to sell the picks and shovels than to join the gold rush. By investing in infrastructure such as data centers that facilitate connectivity rather than the companies that produce data, investors mitigate the risk of having to pick the winning horse.

Data creation continues at an unstoppable rate—Statista estimates that, globally, 94 zettabytes of data was produced in 2022 and this will come close to doubling in the next two years, compounding every year. Data is created at a much faster rate than it is destroyed and much of it is saved. The rise of the Internet of Things (IoT) is adding to this cumulative effect, spurred by increasing connectivity in industrial ecosystems and the ongoing standardization of cellular technologies.

Some of the largest digital infrastructure deals in APAC this year have involved the pipelines and networks through which this commodity passes rather than the data centers where it is stored. Australian telecoms infrastructure company Uniti Group was the subject of a US$2.7 billion take-private by Commonwealth Superannuation Corporation, Brookfield and the Morrison & Co Infrastructure Partnership, in the second-largest digital infrastructure deal in the region according to Mergermarket. Uniti, which owns fiber broadband builders OptiComm and LBNCo, as well as Telstra’s former fiber-to-the-premises business Velocity, specializes in wholesale telco services, infrastructure, communications platform-as-a-service and consumer and business telco services.

Also in Australia, AustralianSuper and Singtel met a US$2.5 billion price tag for Axicom, which owns and operates approximately 2,000 telco tower sites in metro and outer-metro locations across all eight states and territories and major cities in the country. The deal was made via Australia Tower Network, in which Australia Tower Network acquired a 70% stake from Singapore’s Singtel in November last year.

Hard to reach places

While these fiber network and mobile tower deals involve critical assets that cover built-up metro areas, large areas throughout the APAC region remain underserved by 5G. According to the Ericsson Mobility Report published in November 2022, “By the end of 2028, five billion 5G subscriptions are forecast globally, accounting for 55% of all mobile subscriptions. 5G subscription uptake is faster than that of 4G following its launch in 2009, with 5G expected to reach one billion subscriptions two years sooner than 4G.” By 2028, the report forecasts 5G mobile subscriptions to reach 5 billion.

Not all of this will be achievable by retrofitting and building new infrastructure towers on land. The next frontier for digital infrastructure is in the sky. Low earth orbit (LEO) satellites are increasingly being launched to extend 5G network coverage to hard-to-reach places or where the population is spread out. The potential of this technology was brought to the fore last year when SpaceX launched several batches of its Starlink satellites, creating a network to keep Ukraine’s military and citizens online during the ongoing conflict.

Private equity is already dipping its toe into this emerging field. Following a major contract win with the US Department of Defense’s LEO project, in October satellite manufacturer York Space Systems was the subject of a buyout by PE firm AE Industrial Partners. According to McKinsey, investors are stepping into the arena to tap partnerships, spin-offs and private investment rounds, funding product roadmaps as this commercial opportunity opens up. With the exponential rise in connectivity and data volumes that is already in play, LEO networks may become the next big investment opportunity for funds in the APAC region, in the same way that terrestrial telecoms infrastructure networks are today.

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