M1 Limited (M1), a subsidiary of Keppel Corporation Limited (Keppel Corporation), and Keppel DC REIT Management Pte. Ltd., as Manager of Keppel DC REIT (SGX: AJBU), have signed a non-binding term sheet with the intention to enter into definitive agreements with respect to a proposed investment by Keppel DC REIT into a special purpose vehicle (SPV), which is intended to be established by M1 to own and operate M1’s network assets including mobile, fixed and fibre assets.

With respect to the proposed transaction, it is contemplated that M1 will establish the SPV and the SPV will acquire the network assets from M1 at a cash consideration of approximately S$580 million, equivalent to the net book value of the network assets as at end February 2021.

The proposed transaction also takes into consideration the acquisition of the network assets which will be funded by the SPV through external financing of approximately S$493 million, and Keppel DC REIT’s investment of approximately S$87 million in return for a combination of debt securities and preference shares to be issued by the SPV. 

M1 will continue to retain 100% of the ordinary shares in the SPV. The companies said that it is also intended for the SPV to enter into a 15-year Network Service Agreement with M1, under which the SPV will contract its network capacity to M1, and M1 will undertake the operations and maintenance of the network assets, and (iv) the board of the SPV will have equal representation from M1 and Keppel DC REIT.

Manjot Singh Mann, CEO of M1, said: “The proposed transaction involving M1’s network assets is part of the Keppel Group’s asset-light business model under Vision 2030. Realising value from M1’s network assets will free up capital that can be used to help M1 invest in new capabilities and also fund other growth initiatives. 

“M1 will continue to operate and maintain the network assets to uphold network quality and availability. M1 will also continue to sharpen its focus on customer-centricity and its transformation into Singapore’s first digital network operator.”

Anthea Lee, CEO of the Manager of Keppel DC REIT, said: “The planned investment into quality network assets is in line with Keppel DC REIT’s drive to support the global digital economy. The SPV will own the network assets that underpin M1’s business offerings.

“We believe this adds to the growth and cashflow stability for Keppel DC REIT. It also allows us to gain a foothold in Singapore’s connectivity landscape, which we can leverage when seeking further opportunities for real estate and assets that support the digital economy.”