A strategy for Africa | Media Capacity

In the words of company president Andrew Power, Digital Realty has come to a fast and furious end in 2021.

The last quarter began with the announcement of an investment in AtlasEdge, a joint venture (JV) between Liberty Global and DigitalBridge with a network of over 100 edge installations across Europe. Next, Digital Realty’s third-quarter financial results saw a 4% increase in reported revenue from the prior quarter, up 11% year-over-year. There was Digital Core REIT’s December listing on the Singapore Stock Exchange, then Power’s promotion to chairman of the company – the first in Digital Realty’s 17-year history and a role that began just when her second daughter was born.

But there were also major announcements from Africa: iColo’s expansion into Mozambique and Digital Realty’s JV with Pembani Remgro Infrastructure Fund to acquire Medallion Data Centers.

Medallion has two facilities, in Abuja and Lagos, the latter hosting over 70 carriers and ISPs, as well as over 80% of the public peering traffic on the Nigerian Internet Exchange. It also serves as a peering point for all submarine cables currently in service in Nigeria, and will serve as a peering point for another nine new submarine cables planned by 2023.

“I’m watching Africa like clockwork with these critical connectivity destinations in Africa and on the periphery of Africa, which really connect the exit and entry of our customers’ growth, their data, even starting outside from Africa with Marseilles and Athens and working along the coast to Kenya,” explains Power.

At the time, PlatformDIGITAL’s expansion was described as “just the start” of Digital Realty’s US$500 million investment in Africa over the next decade, but it wasn’t the first step. business on the continent. That came with the acquisition of Interxion for $8.4 billion in 2019, which brought over 200 installations across six continents, including a presence in Mombasa and Nairobi under the aforementioned iColo brand.

“When we partnered with Interxion, Africa was certainly on the radar and both companies had approached things in a more nimble, flexible and nimble approach with partnerships along the way,” Power says.

Continuing the momentum of this year, in January news of the Teraco deal was announced. Described by Power as “the jewel in the crown”, the company connects “our Africa strategy to our critical connectivity destinations, but in a format that supports local expertise and provides our local platform. Often in certain areas , we are partnering to bring the best of both worlds to our customers.”

Teraco buy

Digital Realty acquired a 55% stake in Johannesburg-headquartered Teraco Data Environments in January, buying out the interests of a consortium of investors including Berkshire Partners and Permira, and valuing the company at $3.5 billion. of dollars.

Jan Hnizdo, Teraco

Jan Hnizdo, Teraco

“It was a scenario where the management team and existing shareholders said they had done great things with the company and it would be great to align with a global strategic partner, but I don’t agree. ready to go home. The night is too young,” Power says.

As a result, Berkshire and Permira, along with existing investor van Rooyen Group, retained a minority stake while the current management team remained in place and will continue to be “significant investors” in the business.

Digital Realty’s relationship with Teraco predates Berkshire and Permira’s involvement. When they came on board, Power said Digital Realty was looking for a minority stake, but “it just wasn’t the right time.” Still, they developed a relationship with Teraco’s management team and stayed in touch, paving the way for the January deal.

“We are huge fans of the company and they are extremely important to our platform and our customers now and in the future,” says Power.

“What we saw was a combination of large South African markets and critical connectivity destinations that essentially flourished over time to reach 22,000 cross-connections,” he adds.

“They’ve landed all the major clients of multinational service providers. They’d basically built a solid business with 600 different clients, they’d bought adjoining land banks, and they’d built a team of people – people really matter – and that combination that we saw was like a huge gap in what concerns South Africa”, The Power Continues.

The Teraco platform comprises 187MW of total planned capacity and the company has full ownership of six of its seven data centers, representing more than 85% of total revenue, including its densely interconnected campus in Johannesburg. Landbanks Power references will support the development of up to 93 MW of additional capacity.

Praising chief executive Jan Hnizdo’s leadership, Power says he “has done some great things with the company.” For now, the deal with Teraco complements immediate acquisition plans for Africa, although Digital Realty will still invest in additional land purchases and construction as needed. However, that leaves some work to do on the brand front.

As with Interxion’s facilities in Africa, Digital Realty is not immediately looking to change the names above any of the doors it now owns – in whole or in part – but all are now Digital Realty companies.

European facilities could see a name change “as soon as possible”, while Ascenty in South America will likely migrate to Digital Realty South America or Digital Realty Brazil over time.

“It’s important that we have that balance, day one we don’t want to launch a Digital Realty brand that nobody in this part of the world has ever heard of. That’s been our style and I think you’ll see us continue down that road for a little while,” Power says.

Fiber and the future

Bill Stein DR NEW.jpg

Bill Steinm Digital Realty

Bill Steinm Digital Realty

The acquisition of Teraco – like the others – is part of a larger strategy, the whiteboard of which dates back to the beginning of Bill Stein’s tenure as CEO. He asked Power to become CFO and the focus at this point was where to take the company to globalize its capabilities.

This was not the start of the collaboration between Stein and Power. Stein was CFO when Digital Realty went public in 2004 – he’s now CEO – and before officially joining, Power was not just involved in the IPO, but in every capital raise the company made. (see timeline).

“We have worked quite hard for several years to expand our reach in more than 50 metropolitan areas and more than 25 countries on six continents. We’ve done this through organic and inorganic means over several years because our customer base appreciates the capabilities of this platform,” says Power, who reports that customer base is growing by 130-140 additions every quarter.

In the early years of all this inorganic growth – and over the ocean in Brazil – Digital Realty acquired Ascenty. The deal closed in 2018, and in addition to its data center assets, it came with a fiber business. In the Latin American market, where underwater projects abound but land connections are time-shifted, it’s a useful resource to have on hand.

Power says Ascenty’s fiberco business case was “we can be the best data center operator, but [without fibre] someone will drop the ball when exiting the data center”. Could it be the same in Africa? There are parallels between the two markets, says Power, but at this point it’s a matter of never say never.

“That doesn’t mean we won’t be forever and ever a fiber supplier in Brazil. And that doesn’t mean we have to replicate that in other parts of the world. But we keep in mind that our capabilities are highly dependent on our locations and the physical infrastructure surrounding those locations,” he says.

“Today, I don’t see us racing to build terrestrial fiber in Africa. If the right facts and circumstances have come to light and there is a need for capital or other support, we are all here to help our clients succeed, because it is in our culture and our DNA to think creative way when we have to,” he adds. .

As to where things are going, there are a few things going on behind the scenes, “moving the ball on our service provider customers” while staying relevant on the business side and, of course, keeping a eye on the impact of inflation.

Or, to put it another way, “really stand up and give Equinix a run for its money in this category of corporate camp,” Power says. Oh, and a new connectivity solution will launch “sometime in 2022” with “more updates on the space and power front,” Power says.

There is also more news to come on BAM Digital Realty, the Indian JV with Brookfield Infrastructure confirmed last July. The approvals are now obtained and Seema Ambastha has been appointed CEO.

“It’s been a fast and furious shutdown of 2021,” Power says. “And, it looks like a cannonball in 2022 in terms of activity.”

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