MAINBOARD-LISTED telco Singtel Singtel : Z74 -0.76% said on Thursday (Apr 14) that it has signed 2 memoranda of understanding (MOUs) with its Indonesian partner Telkom to collaborate regionally in the data centre and fixed broadband segments.

 

Under the first MOU, Singtel will collaborate with Telkom, which is also the parent company of Singtel' s regional associate Telkomsel, to build and acquire data centres in the region.

 

" As strategic partners for over two decades, this move into data centres expands on the close collaboration between Singtel and Telkom to build out Indonesia' s mobile communications and digital infrastructure," Singtel said.

 

Singtel chief executive Yuen Kuan Moon noted that the company' s planned data centre platform would support the digital-transformation needs of customers who want to deploy in Indonesia, as well as Indonesian businesses looking to grow beyond the country.

 

The company signed a similar MOU with Thai power and infrastructure company Gulf Energy to build and develop data centres last October.

 

Under the second MOU, Singtel and Telkom will jointly explore the integration of Telkomsel' s mobile business with Telkom' s fixed broadband business.

 

" By combining the strengths of the two companies, Telkomsel will be able to enjoy significant synergies and enhance its leading position in the market with converged solutions that will give customers the best digital experience," Singtel said.

Singtel unit Australia Tower Network (ATN) intends to acquire Axicom, a provider of telecommunications tower infrastructure in Australia, for A$3.6 billion (S$3.7 billion).

 

ATN&rsquo s shareholders - Singtel and AustralianSuper - on Friday (April 1) said the strong synergies between Axicom and ATN will provide exceptional growth opportunities that will benefit customers, employees and the community in the long term.

 

Axicom owns and operates 2,000 telecommunications sites across Australia. Meanwhile, ATN owns mobile networks and rooftop sites in Australia, and also operates telecommunications towers for Singtel&rsquo s Australian telco subsidiary, Optus.

 

AustralianSuper head of infrastructure Nik Kemp said Axicom is complementary to its existing digital infrastructure portfolio and the combination of the two businesses will &ldquo result in the creation of a provider with a truly national footprint&rdquo .

 

He also noted that AustralianSuper will continue to seek further opportunities in this sector both domestically and globally, as it looks to double its infrastructure portfolio over the next five years.

 

After the proposed acquisition, Singtel, which currently has a 30 per cent stake in ATN, will hold an effective interest of 18 per cent in the combined ATN and Axicom business.

Meanwhile, AustralianSuper&rsquo s stake in the business will grow to 82 per cent.

 

Singtel had in October 2021 sold a 70 per cent stake in ATN to AustralianSuper for A$1.9 billion, as part of its efforts to reinvest in growth areas that will underpin sustainable dividend payouts for investors.

 

Telcos have been seeing the need to improve economies of scale by consolidating with peers &ndash particularly around building and running networks &ndash as they pursue growth opportunities and try to spread out the cost of 5G capital expenditure.

 

This comes as players in the sector face rising competition, yet still see substantial investment costs in new technology areas such as 5G.

 

In 2021, Total Access Communication (Dtac) &ndash majority-owned by Norwegian telco Telenor &ndash and Thai conglomerate Charoen Pokphand Group&rsquo s telco unit True Corporation proposed a merger in a bid to retain market share and drive cost efficiencies. The merger would make the combined entity the largest telco in Thailand with more than 50 per cent market share.

 

Meanwhile, in Indonesia, telcos Indosat and Hutchison 3 Indonesia have completed a merger to form Indosat Ooredoo Hutchison and gain around 26 per cent of revenue market share.

 

For companies offering different services, a merger could also improve customer experiences and operating synergies, such as in the acquisition of broadband Internet and cable TV provider Link Net by Indonesian telco XL Axiata and its parent company Axiata Group.

 

In fact, carving out tower or data centre assets may also improve the valuation of such assets, particularly as Covid-19 has created new demand for data centre space, as more work is done remotely.

 

Singtel said it will fund A$212 million of the acquisition through the issue of new ATN shares and unsecured shareholder loans.