Singapore Technologies Telemedia to buy 74 per cent of Tata Communications data centre business

Mumbai: Ending months of negotiations, Singapore Technologies Telemedia (STT) has agreed to buy a majority stake in some of prime data-center business owned by India's Tata Communications Ltd., valuing those operations at about Rs 4130 crore ($616 million).

ST Telemedia, which is a unit of Singapore state-investment firm Temasek Holdings (Private) Ltd., through its arm through ST Telemedia Global Data Centres (STT GDC),will acquire a 74% stake in data centers in India and Singapore, while Tata Communications will hold the remaining 26% stake, a joint statement from both the companies said on Thursday.

The proposal was presented and cleared by the Tata Communications board on Wednesday.

The transaction will include Tata Communications' 14 data centres in key cities across India -- Delhi, Mumbai, Bengaluru, Chennai, Kolkata, Hyderabad and Pune -- and its three Singapore facilities. In 2014, the Indian data centre business of Tata Communications was transferred to its wholly-owned subsidiary Tata Communications Data Centers Private Ltd (TCDC) through a court approved process. These centres currently service a highly-diversified customer base, including blue chip enterprises in Asia, e-commerce platforms and global multi-national corporations. Both parties will work in partnership to ensure service continuity for customers and employee engagement.

With this acquisition, STT GDC is poised to become one of the largest Asian-headquartered data centre companies with significant platforms in key markets where we continue to see strong growth. It will further expand and strengthen its global data centre network to span four geographies, including strong bases in two of Asia's largest growth markets - India and China. Tata Communications will retain a stake in the colocation market in these important markets, while honing its focus on the development and introduction of its advanced managed services portfolio (including IP, cloud enablement and unified communications services), and continuing to invest in its strategic partnerships globally.

"Since ST Telemedia's initial investment in the data centre business in mid-2014, we have made remarkable progress in building a formidable data centre footprint internationally with strategic presence in key economic hubs to capture industry demand. The latest addition of India to the STT GDC network will be a major impetus to advance the company's ambition to be a significant global data centre service provider. We are pleased to partner with an established company like Tata Communications, to pursue opportunities in the growing data centre market," said Sio Tat Hiang, Executive Director, ST Telemedia.

"This new joint venture partnership will now allow us to hone our strategic focus on advanced services within the data centre that enable digital transformation for our customers, in addition to infrastructure services. Our new partnership also gives us the opportunity to redeploy capital behind other areas of our business, to further broaden the portfolio of services we can offer to meet our customers' current and future requirements," added Vinod Kumar, Managing Director and CEO, Tata Communications.

ET wrote about this transaction in this morning's edition, hours before it was officially announced. Earlier in November 2nd, it also reported that STT was the frontrunner.

In an effort to deleverage its balance sheet by over a billion dollars, Tata Communications had mandated investment bank Jefferies LLC last year to sell the cash guzzling business which also has a long payback period as part of a portfolio realignment.

Standard Chartered Bank advised STT in the transaction.

For 9M FY16, managed services, including data centre operations, contributed 31% or Rs 2407 crore of data services revenues, according to a company's investor presentation dated April 2016. Data Centres alone contributed Rs 650 crore revenues in the same 9 month period ending December 2015.

India is one of the fastest growing markets for cloud services in the world, estimated to grow from $423 million in 2013 to $1.3 billion in 2017, according to research firm Gartner.

Last year, Japan's NTT opened its largest data centre in the country, its ninth so far, spread across 3 lakh sq foot in Mumbai. Microsoft too opened three data centres ahead of schedule in India, while global players like Amazon are also expected to expand its services soon. Amazon was among the potential suitors for the Tata asset which had also drawn interests from Google and private equity players like Advent, Carlyle Group, Blackstone and Bain Capital.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.