American firm acquires African data centre operator in $3.5b deal
An independent American data centre, Digital Realty, has struck an agreement to acquire a majority stake in Teraco, Africa’s leading provider of carrier-neutral colocation services, in a deal valued at $3.5 billion.
The move will enhance Digital Realty’s presence in Africa amid increased pressure by competitors to tap into the growing potential of the continent’s digital services sector.
Digital Realty explained that it will hold a 55 per cent stake following the deal’s closure expected in H1 2022, after sealing an agreement with a consortium of investors that include Berkshire Partners and Permira, which will retain a minority stake in Teraco.
Digital Realty was one of the companies that had placed an earlier bet on Africa’s ongoing development: It already has assets in Africa, including data centres in the Kenyan cities of Nairobi and Mombasa. To further boost its presence in the continent, it moved to form a joint venture in October 2021 with the purchase of two data centres in Nigeria from Medallion Communications.
The firm invested $500 million in Medallion Communications, which the CEO, Ikechukwu Nnamani, described as a boost to the Federal Government’s plan to create a fully digital economy.
Digital Realty’s acquisition of Teraco is coming few weeks after Equinix, another USA firm, agreed to acquire African company, MainOne in a $320 million deal, which the company President and Chief Executive Officer, Charles Meyers, at the time tipped as a “critical point of entry” for its platform into the “rapidly growing African market.”
Under the terms of the Digital Reality deal, the US-based giant will add Teraco’s seven “state-of-the-art” facilities, located across the South African cities of Johannesburg, Cape Town and Durban, as well as a base of more than 600 customers, to its portfolio.
Digital Realty’s CEO, A. William Stein, described the move as “highly strategic” as it “immediately cements Digital Realty as the leading colocation and interconnection provider in Africa, a region experiencing rapid digital transformation”.
He also noted the deal will boost its aim to serve global customers and, as a result, will enhance its coverage and capabilities worldwide through increased exposure to “highly connected, network- and carrier-dense facilities”.
Describing the transaction as a means to capitalise on “the favourable industry trends and tremendous market opportunity”, Teraco’s chief Jan Hnizdo expressed belief the pair will form “a truly global, scaled platform serving our customers in Africa and beyond”.
Teraco touts itself as “the largest and the most densely interconnected data centre platform” in the continent and its Johannesburg campus is said to be one of the most densely interconnected sites across the globe.
Digital Realty noted that Teraco already has access to seven existing subsea cable systems that provide major data links to the rest of the world, and that additional international capacity is being built by consortiums of major cloud and content giants, citing in particular three additional subsea cables that are set to land during the next three years.
“The significant investment in these proprietary networks underscores the tremendous expected future growth of digital infrastructure in Africa, and the leadership transition from telco-led consortia to content-controlled partnerships is expected to transform internet connectivity across the continent. These new and existing cable systems encircle Africa, offering low-latency access from the east and west coasts of Africa to Europe and Asia,” noted Digital Realty in its announcement about the deal.
Through the Teraco takeover, Digital Realty appears to look to tap into what it dubs a “tremendous” future growth of digital infrastructure expected in the continent.