Keppel DC REIT Invests in $430M JV to Operate M1 Network Infrastructure in Singapore

Keppel DC REIT is expanding into the network infrastructure space under the terms of a deal announced late last week between its sponsor, Keppel Corporation, and Singapore Press Holdings which creates a new jointly held firm to hold telecom operator M1’s mobile, fixed and fibre assets.

Keppel Corp and SPH, which jointly control M1, have agreed to sell the network assets to a spinoff named M1 Network Pte Ltd for their book value S$580 million ($430 million), with the transaction financed in part by Keppel DC REIT, the SGX-listed firms said in a joint release.

The spinoff is positioned to allow Keppel to raise cash from the assets and further streamline the group’s structure under a plan unveiled last year, while Keppel DC REIT will receive S$11 million on an annual basis for 15 years. M1 and Keppel DC REIT will have equal representation on NetCo’s board.

“The proposed realisation of value from M1’s network assets is part of the Keppel Group’s asset monetisation strategy and asset-light business model under Keppel’s Vision 2030,” said M1 CEO Manjot Singh Mann. “When completed, this will unlock value from M1’s existing network assets, enhance M1’s ability to fund its growth initiatives and accelerate its aspirations as Singapore’s first digital network operator.”

15-Year Service Pact

Under the terms of the cash deal, M1 Network will acquire the network assets through external financing of up to S$493 million, plus a bond issuance of S$88.7 million to be subscribed by Keppel DC REIT and the sale of S$1 million in preference shares to a subsidiary of the data centre trust, Keppel said Thursday in a release.

The deal, which is subject to approval by regulators and Keppel DC REIT unitholders, also includes a 15-year network services agreement under which M1 and its mobile virtual network operators can use M1 Network’s infrastructure. M1 will also perform the day-to-day operation and maintenance of, as well as capital expenditure works for, the network assets.

Anthea Lee, CEO of Keppel DC REIT’s manager, said the investment in M1 Network’s bonds and preferred shares aligns with the trust’s strategy to provide unitholders with regular and stable distributions.

“The investment will also strengthen our income resilience, allow us to benefit from further diversification in income streams and create a stronger platform for acquisition growth via better access to capital and debt markets,” Lee said.

The parties expect all the proposed transactions to be completed by the end of 2021.

Singapore Inc Restructures

M1’s owners, Keppel and Singapore Press Holdings, are both in the midst of transformation plans marking a shift in their strategic direction.

Keppel in August announced an offer to privatise SPH’s non-media business, which consists primarily of real estate assets, in a cash-and-scrip deal valuing the Straits Times publisher at S$3.4 billion ($2.5 billion). SPH shareholders

The buyout proposal followed SPH’s announced plan to spin off its media operations into a not-for-profit unit after years of shifting from its newspaper roots in favour of profits from a real estate portfolio in Singapore and new property investments overseas.

For its part, Keppel last year announced a management shake-up — including the promotion of Keppel Land chief operating officer Louis Lim to CEO of the development flagship and Keppel DC REIT’s Lee from head of investment to CEO of the trust’s manager — as the group sought to unify operations that span real estate, infrastructure, offshore marine and fund management.

The new leadership is charged with implementing the Vision 2030 plan, with a focus on key sectors like energy and environment, urban development, connectivity and asset management.

“The proposed acquisition of SPH is very much in line with Keppel’s Vision 2030, where we seek to grow Keppel’s business as a provider of solutions for sustainable urbanisation through organic and inorganic options,” Keppel CEO Loh Chin Hua said in August.