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US data centre REIT Digital Realty’s $500m Africa gamble lands Nigeria acquisition and fuels wider expansion
Nigeria, Kenya, and Mozambique are set to bear Digital Realty’s logo as the rush to expand into one of the most untouched data centre markets in the world gains pace.
Founder and Editor, The Tech Capital
October 25, 2021 | 10:12 PM BST
Colocation operator Digital Realty (NYSE: DLR) has further penetrated into the African continent becoming the US’ first pure real estate investment trust (REIT) to be present on three countries beating rivals including Equinix (NASDAQ: EQIX), CyrusOne (NYSE: CONE), and CoreSite Realty (NYSE: COR).
The move has been carried out through the acquisition of Nigeria’s colocation and interconnection provider Medallion Data Centres for US$29 million through a joint venture with the Pembani Remgro Infrastructure Fund.
Medallion operates two data centres, one in Lagos, the most populous urban metropolitan area in Africa with approximately 15 million people, and one in Abuja, the capital of Nigeria.
Medallion’s Lagos data centre serves as a connectivity hub in Western Africa with over 70 carriers and internet service providers, over 80% of the public peering traffic on the Nigerian Internet Exchange, and a peering point for all subsea cables currently operating in Nigeria with plans to serve as a peering point for the nine new subsea cables scheduled to be in operation in Lagos by 2023.
As part of the transaction, the joint venture is also acquiring a land parcel adjacent to the Lagos data centre to provide near-term expansion capacity. Medallion’s management team, led by CEO and co-founder Ike Nnamani, will continue to lead the business.
William Stein, Chief Executive Officer of Digital Realty, said: “Over the next decade, there will be huge opportunity for global businesses to tap into Africa’s expanding internet economy – with predictions that it could reach 5.2% of the continent’s GDP by 2025, contributing nearly $180 billion to its economy (up from $115 billion in 2020).
“By 2050, the internet economy has the potential to contribute $712 billion. Through major investment in the continent’s internet infrastructure, Digital Realty aims to be a core enabler of these economic and quality of life gains.”
He continued adding that there is a huge opportunity to both meet growing customer demand for connectivity in Africa and improve the internet infrastructure that serves over one billion people who do not yet have proper access to the benefits of internet.
“The expansion of our platform announced today is a leap forward but it is just the start of our $500 million commitment to investment in the continent over the next decade,” Stein said. “We see a huge opportunity to underpin Africa’s expanding internet economy and play a central role in its growth.”
With a population of over 200 million, Nigeria is Africa’s most populous country and the seventh most populous in the world.
Its GDP is the largest in Africa and was the 26th largest globally in 2019. With a large and young population, a growing and diversifying economy as well as a maturing regulatory environment, Nigeria has experienced strong economic growth in recent years.
The JV between Digital Realty, which today manages 291 facilities in 47 metros across 24 countries on six continents, and Pembani Remgro Infrastructure Fund, a joint initiative established by Remgro, Phuthuma Nhleko and the investment team, based in Johannesburg, South Africa, is not new.
The two brands have since 2019 partnered with Kenyan data centre operator iColo which has today also announced that it will enter Mozambique through the development of its first data centre in the country, located in the capital and port city of Maputo.
The iColo campus in Mombasa was recently expanded to deliver an additional 1.6 megawatts of power and 12,900 square feet of capacity for new and existing customers, along with the new subsea cable landing equipment.
In addition, iColo has expanded its Nairobi campus with the acquisition of an additional 215,000 square feet of land that will support 14 megawatts of future data centre capacity.
Rahiel Nasir, Research Analyst at 451 Research, part of S&P Global Market Intelligence, said: “With its youthful population, Africa has seen the rise of a tech-savvy generation that is fuelling ever-greater demand for digital services.
“This is being boosted by the expansion of fibre networks, terrestrial and subsea connections that continue to connect major metro areas. Data centres play a vital role in the communications infrastructure landscape. Without them, further digital development across the continent risks hitting a roadblock, especially for enterprises seeking colocation and cloud services as part of their digital transformations.
“According to our latest forecasts, overall multi-tenant data centre capacity in the Middle East and Africa will see a compound annual growth rate of 10% from 2020 to 2023. We estimate that net operational floorspace will increase from 5.4 million to 7.2 million square feet during the forecast period, with net UPS power rising from around 733 megawatts to almost 900 megawatts.”
Digital Realty is set to release its financial results for the third quarter of 2021 after the market closes on Tuesday, October 26, 2021.
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