ST Telemedia in pursuit to acquire Tata Telecommunications’ data centre business

ST Telemedia in pursuit to acquire Tata Telecommunications’ data centre business

Singapore Technologies Telemedia, an investment division of Singapore’s Temasek Holdings, has become the front runner to acquire the data centre business presently owned and managed by Indian conglomerate Tata Groups communication arm known as Tata Communications. As per the people who have the knowhow of the situation, are estimating the agreement to be locked around the figure of $700 million (Rs 4,421 crore). The interested company, popularly known as Temasek is an investment venture maintained by the Government of Singapore.  Set up in the year 1974, the company manages and owns a net portfolio worth S$266 billion (US$ 177 billion, as on 31st March, 2014), and operate primarily within the geographical boundary of Singapore and Asian market.

 

As per the internal resources an agreement to procure the business, which has a global presence with 44 data centers, is being formulated. But the process is still competitive as another party is also aggressively keen and pursuing to acquire the business.

The primary reasons which have led to the decision to sell off the data centre business owned by Tata communications is that the business requires commitment of huge working capital and then it still demands and requires a long payback period in regards to the generation of returns on investments.

 

Although Tata Communications has decided to avoid and refrain from making any official statement regarding the ongoing deal before the press meets. But they are seeking the consultation of investment bank Jeffries on the matter of sale proceeds and process.

 

The on sale data centre business owned by Tata Communications also has onboard the Government of India, and the national government of the country holds a share of 26% in the company. The business has revenues in excess of $150 million (Rs 948 crore). A substantial number of data centre’s owned by the company are located in India and has contributed in earning almost half of the revenue figures by earning the revenue of Rs 436 crore with an operating profit margin of 27 per cent in the financial year 2015.

 

Tata Communications said that there is a possibility that people quoted earlier might opt to hold a marginal share in the data centre business.

 

Singapore Technologies Telemedia also known as ST Telemedia is itself a forerunner in data centres business in Singapore and has been in the business since late 1990s. Its interest in acquiring the on sale business is in line with its vision to expand its business operations, especially in an emerging economy like India.

 

In a similar move ST Telemedia has also made a substantial investment in Virtus Data Centres from United Kingdom.

 

The Temasek Holdings and the Indian conglomerate Tata Group have a rich history of long association as sovereign wealth fund was one of the initial private equity stake holders in few of the Tata companies which include Tata Teleservices. And another point to note is that Ratan Tata, chairman emeritus of Tata Group is presently a trustee of the philanthropic arm of sovereign wealth fund, Temasek Trust.

 

It was also reported earlier that Google, the search engine giant and Amazon, the e-commerce major were also keen to acquire the data centre businessof Tata Communications, as it ranks second in the country and trailing behind Reliance Communications.

 

The decision to trade the data centre business of Tata Telecommunication has come at the confluence when many major global players like Microsoft are formulating plans to build similar such services in India, the third largest amongst Asian economies.

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