U.S. buyout firm KKR and Singtel have teamed up to invest an initial S$3 billion ($2.2 billion) in ST Telemedia Global Data Centres (STT GDC) in the largest digital infrastructure investment in Southeast Asia this year as the region accelerates adoption of artificial intelligence technology.

Under the deal, which is subject to regulatory approvals, the partners are investing an initial S$1.75 billion to buy STT GDC’s redeemable preference shares with detachable warrants, the companies said in a joint statement. Upon full exercise of the warrants the duo will inject an additional S$1.24 billion in the Singapore-headquartered data center developer, giving KKR a 14.1% stake in the company and Singtel a 4.2% stake.

A unit of Temasek-backed ST Telemedia, STT GDC is one of the world’s fastest-growing data center operators. It operates 95 data centers, with a combined capacity of over 1.7 gigawatts, in over 20 major business markets across 11 geographies.

“Since our inception 10 years ago, STT GDC has developed into a leading data center provider with a significant footprint in Asia, UK and Europe, supporting the growth of the world’s largest cloud and enterprise customers,” Bruno Lopez, president and CEO of STT GDC, said in the statement. “With the industry experiencing unprecedented cloud and AI-led growth, this strategic partnership with KKR and Singtel will be a significant catalyst for STT GDC’s next chapter of growth as a leader in the digital infrastructure industry.”

STT GDC will use proceeds from the investment to support its continuing international expansion and growth plans through both organic and inorganic strategies. Following the transaction, ST Telemedia—which also has interests in telecommunications and media companies including StarHub in Singapore, SkyCable in the Philippines and U Mobile in Malaysia—will continue to be the majority shareholder of STT GDC.

“As a strategic investor and shareholder, ST Telemdia looks forward to working closely with our new partners to propel STT GDC in its exciting next phase of global growth,” Stephen Miller, president and group CEO of ST Telemedia, said.

KKR has been doubling down on its investments in data centers amid booming demand for digital infrastructure needed to power cloud computing and emerging AI applications across Asia. In September 2023, the New York-based private equity firm acquired a 20% stake in Nxera, Singtel’s regional data center business, for S$1.1 billion.

“Our investment in STT GDC is a rare opportunity to support the growth of a leading data center platform with a terrific track record of growth and significant potential, whilst deepening our existing collaboration with Singtel,” David Luboff, co-head of KKR Asia Pacific said in the statement.

Singapore-based Singtel, which also counts Temasek as its biggest shareholder, is the largest telecommunications company in Southeast Asia with over 780 million mobile customers across 21 countries in Asia, Australia and Africa. It also provides connectivity and digital infrastructure across the region.

“We see digital infrastructure, particularly data centres, as a growth asset and compelling investment with the remarkable rise of the sector driven by rapid digitalisation and AI adoption around the world,” Arthur Lang, group chief financial officer of Singtel, said.

Data centers are booming across Southeast Asia, one of the world’s fastest growing regions. In recent months, U.S. tech giants Amazon, Google, and Microsoft have announced plans to build cloud computing infrastructure across the region to accelerate the adoption of AI technology.

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