Digital Realty Acquires Teraco, Opti9 Technologies, and More

Last updated on by Christian Koch

It didn't take long for this year to get off to a fiery start as Digital Realty dropped a bombshell M&A announcement on the first business day of 2022, and today's newsletter we'll take a look at the transaction in more detail.

We're a week away from PTC, and although it appears a few companies have pulled out, the ongoing consensus is that a lot of people are still going, and I'm looking forward to seeing many of you there.

PS: Keep an eye out for a number of 2022 Outlook notes on the way, posted on, and a round up email coming later this week. For now, you can read my 2022 Outlook for Equinix

Let's get into this week's update

Your Weekly Briefing

Digital Realty Acquiring Majority Stake in Teraco -  Digital Realty will pay $1.7B to acquire a majority (55%) stake in Teraco, from a number of investors including Berkshire Partners and Permira, while a group including Berkshire Partners, Permira, van Rooyen Group, Columbia Capital, Stepstone Ventures and the Teraco Connect Trust will own the remaining 45% after the transaction closes. The group of investors will have the right to sell their stake to Digital 3.5 - 5.5 years after closing, and Digital will have the right to buy their stake 5.5 - 6.5 years after closing through a put/call clause in the purchase agreement. The transaction values Teraco at $3.5B, representing a cap rate of ~3.5%.

Analysts at Cowen assume $100M in EBITDA, and additionally have noted that in early 2021, 60% of Teraco's business was from interconnection/ecosystem-oriented customers, while the remaining 40% was from hyperscale, which has likely grown larger by now.

On several occasions in the past, rumors have surfaced around the sale of Teraco, along with the suggestion that Equinix had tried to acquire the company, which would have fit Equinix's target profile and strategy like a glove, so I'd imagine they were in discussions during this process as well. At the Citi AppsEconomy conference last week, Andy Power disclosed that Digital tried to invest in Teraco a few years ago in 2018, as well, likely during the same time as Equinix, and when Berkshire first invested, but was also shut out.

"The last time the business transacted, I think over 3 years ago, we've made some inquiries about even making just a small minority investment into that partnership, which at that time they weren't willing to share the potential upside in the business. But I think those long-term relationships we fostered and coming to the table with a flexible and agile approach in terms of structure and a playbook where you could say we quite successfully in South America replicated this with a very strong management team and a private partner with a public company partnership similar to what we're doing here." - Andrew Power, President and CFO @ Citi AppsEconomoy Conference (01-07-2022)

Teraco's portfolio includes seven data centers across South Africa in Johannesburg, Cape Town and Durban, supporting 75 MW and includes ownership on the freehold to six of them, along with land adjacent to its Johannesburg and Cape Town campuses to support the future development up to 93 MW.  Additionally, Teraco has 19 MW of capacity under construction. The company has ~22,000 cross connects, and its Johannesburg Isando campus (JB1, JB3, and Teleport) have over 13,000 cross connects, making it one of the densest sites in Africa, which is comparable to Equinix São Paulo in Brazil, which has 13,550+ interconnections, Equinix's 14th most interconnected metro. The Teleport consists of satellite ground/earth stations, which I believe will be a first for Digital, and should be positive addition with all of the larger public CSP's adding satellite connectivity to their product and service lineups.

Teraco has over 600 customers, including 275+ connectivity providers, ~300 enterprises, and ~25 cloud and content companies. The PR says the company has seven cloud on-ramps, and my research shows  AWS and Microsoft in JB1, and CT1, which is four on-ramps, and Cloudflare Network Interconnect but looking at other cloud providers shows that Google has no current or planned cloud region in Africa, Tencent and Alibaba both have no current cloud region in Africa, and then Oracle is planning a cloud region in Africa. None of the latter have a cloud on-ramp in the country as per respective websites and cloud documentation. Google, however, has a network pop, in SA, where it connects to the NAP Africa IXP, and while customers can peer with them, and use a VPN connection to reach their infrastructure in Google Cloud,  but this is not a true on-ramp in the traditional sense, where dedicated equipment exists and Cloud Interconnect product is delivered.

Additionally, Teraco operates one of the largest internet exchange points in the world, NAP Africa, with an IXP in each Cape Town, Johannesburg, and Durban. Over 500 unique networks are connected with over 1,540 ports, and an aggregate of ~2 Tbps of traffic is exchanged across the exchange points.

And finally, rounding out the connectivity capabilities across the platform is access to submarine cable systems, including ACE,  WACS, SAT3, SAFE and SACS (from CT1), METISS, EASSy, Seacom, (from DB1), and ACE, METISS, EASSy, WACS, SAT3 / SAFE, Seacom and SACS (from JB1), as well as future cables including 2Africa, Equiano, and Africa-1.  View on Map

This is a big win for Digital, and it's clear the company is serious about securing an early lead in Africa. Much of this can be attributed to David Ruberg, the former CEO of Interxion who got an early start positioning the company in Marseille back in 2014 when it acquired SFR Netcenter, which would eventually elevate Interxion to being the dominant player in town with barely any competition. The question, as with all Digital acquisitions remain whether or not the company can retain the talent, which has not been the case with previous acquisitions such as Telx and recently Interxion, which is undergoing an exodus similar to what was witnessed after buying Telx. The other challenging question is can the company bring a cohesive, and consistent product and customer experience to the market under a single brand, and with the number of M&A transactions and JV's as of late, only further exacerbates the looming identify crisis, akin to NTT.  Digital Realty PR ,  Berkshire Partners PR ,  Digital Realty 8-K ,  Teraco PR   Digital Realty Presentation

BONUS Content: Steve Song's Annual Roundup of Internet Infrastructure across Africa in 2021

Last Week in Digital Infrastructure

EXA Infrastructure and Islalink announced a partnership for the landing of the IONIAN submarine cable system, as well as provide terrestrial fiber backhaul in Italy, as well as become an anchor tenant taking capacity on the cable system.

DataGryd is acquired by Cordiant Digital Infrastructure fund for $74M. DataGrid occupies 120K SQFT of raised floor space in 60 Hudson with access to 15MW of power capacity.  Cordiant plans to launch a new brand name and invest an additional $75M into the company over the next three years. The acquisition is subject to the consent of the landlord's lender.

Crown Castle signed a new 12-year lease agreement with T-Mobile for towers and small cells. Crown expects to recognize ~$250M of additional site rental revenues for 2022 for the tower segment, compared to the FY2022 outlook from October 2021, as well as a commitment from T-Mobile for 35K small cells. Network grooming from T-Mobile/Sprint is expected to impact rental revenues nay ~$45M, w/ the majority occurring in 2023, and offset by ~$10M/yr of anticipated pre-payments.

STACK Infrastructure announced the development of a new 216MW data center campus in Ashburn

Amazon acquired land in Santa Clara from IPI Partners, and separately acquired land in Dallas, where notably, it doesn't operate a cloud region today besides a Local Zone.

Taiwan Mobile is acquiring rival mobile operator, Taiwan Star

Opti9 Technologies launched, focused on delivering hybrid cloud solutions, and was created by the merger of Webair and Jelecos.


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Further Reading

Pura Explains Frequent Fibre Cuts And Plans To Explore Securing Second Fibre Cable And Extra Backup Facilities

Web Technologies of the Year 2021

Dallas DFW Data Center Report Year-End 2021 | Insights | United States | Cushman & Wakefield

Supercloudifragilisticexpialidocious II: Questions Remain – Platformonomics

Improving the cloud for telcos: Updates of Microsoft’s acquisition of AT&T’s Network Cloud | Microsoft Azure

Facebook’s Data Center Plans Rile Residents in the Netherlands | WIRED UK

Oman welcomes Vodafone as its newest operator - Developing Telecoms

Amazon Sidewalk Bridge Pro offers professional-grade connectivity

Mimik aims to create a decentralized platform for the edge - Stacey on IoT

Rosenworcel Stands Firm on Net Neutrality in Face of Lawmakers Urging Status Quo : Broadband Breakfast

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