After Singapore imposed a moratorium on new data centres from 2019 to 2022, some operators moved their operations to Johor. Singapore Telecommunications Z74 (Singtel) is also expanding into Malaysia, with plans to establish a presence there. On June 15, Telekom Malaysia (TM) and Singtel’s Digital InfraCo unit announced a joint venture (JV) to develop data centres in Malaysia. Their first project will be a sustainable, hyper-connected, AI-ready data centre campus in Johor.
The TM-Singtel partnership is designed to meet the needs of hyperscalers, next-gen AI application providers and enterprises that are accelerating their digitalisation and cloud computing efforts in the region. This JV leverages TM’s extensive subsea cable networks and Singtel’s Digital InfraCo to offer global connectivity with lower latency and improved reliability.
Located in Iskandar Puteri, just 16km from Singapore, the data centre campus will be the largest ever for TM and Singtel’s subsidiary Nxera. It will adhere to the latest reliability, security and sustainability standards and provide top-notch local and international connectivity. Its proximity to subsea cable links between Singapore and Malaysia positions it perfectly to meet the growing demand driven by digitalisation and development initiatives in both countries.
The JV company plans to acquire a plot of freehold land in Mukim Pulai, Johor. Measuring approximately 168,959 sq m, this land parcel will house the upcoming data centre facility. The purchase consideration for the land acquisition is approximately RM178.2 million ($51.2 million).
The initial phase of the data centre is planned for 64MW and can be scaled up to 200MW in response to market demand. Nxera MY and TM DC Educity will hold 49% and 51% in the newly incorporated Malaysian JV company, ST Dynamo DC. The two companies have also agreed to fund the JV company via the subscription of new ordinary shares in the 49:51 proportion, based on the agreed-upon business plan of the JV company, which considers the necessary capital requirements.
Nxera and TM have agreed to commit up to RM1.15 billion as initial capital for the JV company, with Nxera’s pro rata commitment being RM564 million over five years. Nxera will fund its subscriptions from internal cash resources.
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Singtel joins a growing list of data centre developers in Johor, where several clusters of data centre parks have already emerged. These include Nusajaya Tech Park, Sedenak Tech Park (STeP), YTL Green Data Centre, and Nusa Cemerlang Industrial Park. These parks are designed to attract data centre developments and offer abundant energy and water — resources that are more limited in Singapore — and enhanced security.
The Malaysian government has also supported the expansion of these data centre parks. In February, Bursa-listed CapitaLand Malaysia Trust announced it had acquired three freehold factories in Nusajaya Tech Park for RM27 million. Nusajaya Tech Park is “minutes away” from the Second Link.
The new Johor-Singapore Special Economic Zone (JS-SEZ), announced by the two governments in January, has further boosted the development of data centre parks in Johor.
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According to Maybank Securities, Singapore and Johor complement each other in terms of data centre demand and supply. Singapore, Asia’s leading data centre market, holds about 53% of Asean’s total capacity. However, the government has limited new data centre builds to 60MW of additional capacity per year due to land and power constraints. This has led to stricter specifications and higher capital expenditures per megawatt.
Analysts Tan Chi Wei and Hussaini Saifee expect Gen AI to speed up the demand in regional data centres. BCG consultancy group also adds that the demand for US data centre power is expected to increase at a CAGR of 15% between 2022 and 2023. Asean, with three to four times lower data centre capacities per capita than the US, should see an even higher demand. “Given relative new capacity constraints in Singapore, we see Johor as a satellite market will be a bigger beneficiary of data centre demand on the back of gen AI,” say the BCG analysts.
They assume the demand for regional data centres will expand at a 19% CAGR from 2022 to 2030. Given the undercapacity and with Singapore demand only growing at an 8% CAGR due to new build constraints, Johor demand could expand at a CAGR of 43% over FY2021–FY2030, hitting 1.9GW by 2030.
“Besides a better physical and connectivity infrastructure, potential tax breaks and easy permits (helped by SEZ initiative) could work more in favour of Johor compared to Batam,” they add, highlighting Singtel and TM as potential beneficiaries, as well as Time dotCom and YTL Power.
Maybank Securities has a “buy” call on Singtel and TM, with target prices of $3.40 and RM7.50, respectively.
