The TMT M&A Forum APAC 2024, held on 8 May in Singapore, brought together leading investors and executives to discuss Asia’s rapidly evolving digital infrastructure landscape, with a particular focus on South East Asia. The conference explored how data centres, fibre connectivity and telecom towers are critical in supporting the region’s digital growth, with artificial intelligence (AI) playing a transformative role across these sectors.

AI is reshaping digital infrastructure

The transformative potential of AI was an overarching theme cutting across all segments of the digital infrastructure landscape, driving unprecedented investments and innovation across segments.

Hyperscalers and leading AI players are ramping up investments in specialised infrastructure to support the training and deployment of increasingly sophisticated models. NVIDIA’s efforts to establish ‘sovereign clouds’ in partnership with local data centre operators across the region highlight the growing importance of AI-optimised infrastructure.

Chip designers are pushing the boundaries of performance and power efficiency, with next-generation AI accelerators driving rack power density to unprecedented levels. Data centres are now facing requirements of 100 kW per rack from the latest AI chips — a trend that is only set to intensify. As power densities continue to rise, liquid cooling is proving to be an essential technology for meeting these evolving demands. However, deploying liquid cooling at scale comes with its own set of challenges, such as leakage risks, which are driving caution among data centre operators.  

Speakers also highlighted the need for close collaboration between AI customers, data centre operators, equipment vendors and other ecosystem partners to navigate the complexities of AI infrastructure deployment. Standardisation efforts around rack design, power specifications and management application programming interfaces are gaining momentum as stakeholders seek to accelerate time-to-market and reduce ownership costs.

Unprecedented demand for AI in data centres

The forum highlighted the unprecedented speed and scale required for AI data centre deployments to keep pace with soaring demand, but navigating speed, scale and complexity is challenging. Hyperscale customers are seeking four to five times capacity commitments delivered at a velocity never seen before. In the past, something in the US would take a few years to come to Asia, but now it’s happening simultaneously.

Staggering capex requirements was a hot topic, with projections that AI data centres alone will need US$1 trillion in investment globally over just the next five years, matching the total spend on hyperscale cloud data centres over the past 15 years. Operators are grappling with complex location decisions to navigate the power constraints capping expansion in established hubs like Singapore. This has led to an exploration of expanding capacities in alternative locations, demonstrating the importance of secondary markets in the region. Power availability and accessibility have emerged as the biggest bottlenecks to serving this surging demand.

The hyperscalers’ need for speed also forces data centre operators to rethink their design and construction strategies. The ability to build large-scale capacity quickly while retaining the flexibility to accommodate rapidly evolving requirements is emerging as a key differentiator. Operators are exploring modular designs, prefabrication and standardisation to accelerate deployment timelines without sacrificing customisation.

However, data centre operators face significant challenges in building AI-ready facilities:

  • Greenfield projects take two to three years to build, making it difficult to ensure the specifications will still be relevant for hyperscale or AI customers upon completion
  • The rapid evolution of AI chips, with power densities already reaching 100 kW per rack, creates a risk of building infrastructure that becomes obsolete within a few years
  • Striking the right balance between scale, timing and power density is critical; building too early, too small or with insufficient power capacity can result in stranded assets or missed opportunities
  • The lack of clear answers on future AI requirements, even from hyperscalers themselves, due to the rapidly evolving chip designs, adds an extra layer of complexity to data centre planning

Transforming the fibre landscape demands an ambitious overhaul

With average screen time plateauing, it was emphasised that AI and other emerging applications will drive demand for higher-quality internet access, requiring substantial bandwidth upgrades. However, the region’s fibre infrastructure is still rudimentary and will need a complete overhaul to support this growth over the next decade, creating a compelling investment opportunity.  

The economics of fibre deployment vary widely across markets, making country-level analysis critical to identifying the most attractive opportunities. Infrastructure-sharing models are gaining traction, particularly in countries with supportive regulatory frameworks like Indonesia, India and the Philippines. By enabling operators to share the high upfront costs and accelerate time-to-market, these arrangements are helping unlock fibre investments in previously underserved markets.

Industry leaders also highlighted the significant valuation arbitrage between fibre infrastructure and service provider business models. A key question is whether to pursue an infrastructure model like a dark fibre service-oriented approach. While the optimal model varies, leading indicators point to growing investor interest in pure-play fibre infrastructure platforms that can be leveraged across multiple use cases. The journey to overhaul the region’s fibre landscape will be arduous, but the potential rewards are substantial for those who can navigate the complexities.

Telecom towers are entering a ‘brave new world’

Conference speakers expressed confidence in the telecom tower sector’s continued growth potential despite near-term capex pressures linked to the macro environment. Ongoing 4G densification and future 5G deployments are expected to drive healthy tenancy growth, although the pace of 5G rollouts varies significantly across markets.

Significant investment has been made in the tower business over the past decade, with a total sunk capital of US$16.5 billion in selected Asian markets from 2013 to 2023. Tower investment intensity is around 68% of the industry revenue, highlighting the sector’s critical role in enabling digital growth.

The industry is entering a ‘brave new world’ phase — as described by the keynote speaker — earlier than expected. The market reset phase (2022-23) was characterised by hampered data growth, negative macro impact and contracted TowerCo multiples. However, the brave new world phase (2024 onwards) is being triggered by increasing data growth, improved macro conditions and returning operator investment in radio access networks (RAN).

Future drivers for the telecommunications industry include 5G densification, new market opportunities and the rise of Generation Z and Generation Alpha users. Massive data growth is expected, driven by generative AI, metaverse use cases, short-form videos and AI-powered recommendation engines. Despite improving macro indicators, TowerCo multiples remain low, and regulators are allocating new mid-band spectrum to support this data growth. Mobile network operators’ (MNOs) return on investment in RAN equipment depends on technology consumption, and a typical MNO investment cycle in the brave new world phase includes cost inflation stabilisation, improved macro conditions and increased data demand, leading to higher expected return on invested capital in telco.

Several countries are taking steps to support the digital infrastructure growth:

Malaysia is making significant strides in supporting data growth, with the government reclaiming 70 MHz of mid-band spectrum from CelcomDigi and raising the minimum quality of service download speed to 7.7 Mbps. The country boasts a total bandwidth of 610 MHz across various spectrum bands, with 1,622 subscribers per site and 8.1 Hz of spectrum per site, setting the stage for a robust digital future.

Bangladesh, despite facing economic hurdles such as high inflation rates (7.55% in 2024) and currency depreciation against the US dollar (-4.01% in 2024), is pushing forward with its digital ambitions. The government has issued 5G guidelines, with rollout expected within the next year. The country has a total bandwidth of 345 MHz across various spectrum bands, with 2,615 subscribers per site and 2.9 Hz of spectrum per site, highlighting the need for efficient spectrum utilisation.

The Philippines is experiencing a surge in 5G adoption, with quarterly data traffic growing approximately twofold year on year. The country has a total bandwidth of 765 MHz across various spectrum bands, with 7,540 subscribers per site and 5.7 Hz of spectrum per site. With an expected 5G penetration rate of 48% by 2028, the Philippines is poised to become a leading technology adopter in the ASEAN region.

Indonesia, while grappling with a shortage of mid-band spectrum (1-7 GHz) for 5G deployment, has maintained relatively stable inflation rates (3.91% in 2024) and currency depreciation against the US dollar (-3.12% in 2024). The country has a total bandwidth of 452 MHz across various spectrum bands, with 3,272 subscribers per site and 0.8 Hz of spectrum per site, emphasising the need for efficient spectrum management to support its digital growth.

Pakistan and Sri Lanka are among the eight selected South and South East Asian markets covered in the 10-year view of the brave new world phase. These markets are expected to contribute to the projected 1.02 billion population (11% of the world population) and 2,700 exabytes of total mobile usage per annum by 2033. The TowerCo role in these markets is expected to evolve from tower, energy and field operations for 5G (current) to connected cars, drones and the sunrise of 6G (10-year view), highlighting the long-term potential for digital infrastructure growth.

However, the mobile industry in Asia is facing a spectrum shortage, which could hinder future growth. Most of the international mobile telecommunications spectrum bands have been allocated or are fully used, resulting in lower spectrum availability per site compared to developed markets. ‘Dark spots’ with low data speeds are emerging due to pandemic-driven data growth and limited spectrum availability, emphasising the need for more efficient spectrum utilisation and allocation.

Enabling sustainable growth requires strategic investments

With the digital infrastructure sector poised for rapid growth, speakers emphasised the importance of ensuring this expansion is sustainable and inclusive. Renewable energy sourcing remains a key bottleneck, particularly for power-hungry AI deployments. Operators are investing in solar, wind, nuclear and other clean energy projects to secure a reliable and cost-effective supply of green power.

The need to expand digital infrastructure beyond Tier 1 cities to enable more broad-based and resilient economic growth was also highlighted. With 90% of funding in Indonesia still flowing to the Jakarta metro area, developing connectivity and data centre infrastructure in underserved regions will be critical to supporting the next wave of tech-enabled startups and small and medium-sized enterprises.

Fostering digital literacy and skills development emerged as key priorities, particularly in markets like Indonesia where a lack of qualified IT talent is constraining enterprise cloud adoption. Industry leaders called for closer collaboration between government, academia and the private sector to align curriculum with industry needs and expand access to training and upskilling programs.

Navigating macro uncertainties requires agile capital allocation

While the long-term demand outlook for digital infrastructure remains robust, investors are closely monitoring near-term macro uncertainties and emphasising the need for agility in capital allocation. Rising interest rates, supply chain disruptions and geopolitical tensions are prompting a more selective approach to market entry and expansion, as well as a proactive approach to regulatory challenges.

Regulatory and policy risks are a significant focus, especially as regional governments strive to balance the need for foreign investment with concerns about data sovereignty and national security. There is a recognised need for proactive engagement to shape a supportive and stable regulatory environment that facilitates long-term investment.

Cybersecurity and data privacy are also top of mind, as the growing scale and sophistication of digital infrastructure creates new vulnerabilities. Operators are investing in advanced threat detection and response capabilities, as well as collaborating with customers and ecosystem partners to develop industry standards and best practices around data governance and security.

The future of digital infrastructure in Asia is bright

The TMT M&A Forum underscored the immense digital infrastructure opportunities in Asia. The region is on the brink of explosive growth in data consumption and digital services, intensifying the need for investments in data centres, fibre networks and towers.  

Investors and operators poised to leverage the disruptive potential of technologies like AI and meet the crucial demands of speed, scale and sustainability, are positioned to capture significant value creation opportunities. There has never been a more exciting time to engage in the digital infrastructure space in Asia.

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