Africa’s biggest independent data centre builder is being bought by a US operator in a deal valuing the company at $3.5bn, as global investors race to take advantage of the explosive growth of internet use on the continent.
New York-listed Digital Realty will acquire a 55 per cent stake in South Africa’s Teraco, which operates some of the continent’s biggest “carrier neutral” data centres in Johannesburg, Cape Town and Durban, the companies said.
Teraco’s previous owners, including private equity groups Permira and Berkshire Partners, will remain minority shareholders.
The deal is the biggest yet in one of the world’s last major untapped internet markets, where demand for connectivity and data is surging among hundreds of millions of new phone users.
Teraco, founded in 2008, is at the centre of this boom, with tech giants and cloud computing providers seeking greater “co-location” in Africa, allowing them to house content in data centres closer to users and increase service speeds.
“This highly strategic transaction immediately cements Digital Realty as the leading co-location provider in Africa, a region experiencing rapid digital transformation . . . Teraco is the industry leader in South Africa and the continent’s connectivity hub,” said A William Stein, Digital Realty’s chief executive.
Teraco at present operates data centres with a power load of 75 megawatts, but has a total planned capacity of nearly 190MW and is constructing major new facilities.
The deal will “create a truly global, scaled platform serving our customers in Africa and beyond” and will “capitalise on the favourable industry trends and tremendous market opportunity”, said Jan Hnizdo, Teraco’s chief executive.
In the next few years, African data centre operators are also set to benefit from the completion of major subsea internet cables that are being financed by Google, Facebook’s parent Meta and other investors.
Teraco also operates NAPAfrica, the continent’s biggest internet exchange point that connects hundreds of telecoms and content providers and that has been a barometer of surging internet activity in Africa.
In 2021, NAPAfrica’s peak traffic breached two terabits a second for the first time, having hit one terabit a second just before the pandemic, a milestone it took eight years to reach.
“Over the last seven years, Teraco has transformed itself into one of the most unique data centre platforms globally,” said Pierre Pozzo, principal at Permira. The company’s organic earnings have grown nearly 20 times since Permira’s investment in 2015, he added.
Barely 1 per cent of the world’s data centre capacity is in Africa, where demand far outstrips supply. Outside South Africa, Nigeria and Ghana are also fast-growing markets for this infrastructure.
In December Equinix, a US data centre builder, announced a deal worth $320m to buy MainOne, a major west African operator founded in 2010.