Digital Realty is entering the India data center market. The operator has enlisted Brookfield Infrastructure to help with both funding and local market knowledge.
The two companies are launching a 50/50 joint venture that will look for ways to establish data center footprint in the high-growth market that has been a conspicuous gap in the global portfolio of Digital, the world’s second largest data center provider. The plans include everything from greenfield development to acquisitions.
“We’ve been working for a while now to figure out the best market entry strategy to go into India,” Greg Wright, Digital’s chief investment officer, told DCK. “It took us a little while, but we think this is the right way to go in.”
As internet access expands in more countries in Asia Pacific, the region’s overall data center market is growing faster than North America’s, which it overtook in total size in 2018, Structure Research estimates. It’s growing so fast that by 2025 Structure expects the Asia Pacific data center market size to reach nearly double that of North America.
India is one of Asia’s largest and fastest growing data center markets. American and Chinese hyperscale cloud platforms have been investing in data center capacity expansion in India, and so have specialist data center operators and investors.
Singapore-based ST Telemedia recently acquired Tata data centers in India; Japan’s NTT acquired Indian data center operator NetMagic; and Equinix, the world’s largest data center operator, acquired GPX carrier hotels in Mumbai.
Digital is going after the hyperscaler opportunity there as well as interconnection. Its CTO Chris Sharp told us that Indian mobile carriers were of particular interest as a customer category.
India is a “mobile-first world,” Sharp said. The buildout of 5G infrastructure is making colocation data centers more attractive for mobile carriers, which have traditionally kept their network core equipment in their own facilities. Unlike previous-generation wireless technologies, 5G is designed specifically for data.
India’s top three mobile carriers are Jio, Bharti Airtel, and Vodafone Idea, which is reportedly looking to offload its own data centers to pay down debt.
The bulk of the low-latency applications that 5G promises to enable is likely to run on hyperscale cloud platforms, and interconnection-rich colocation data centers are where mobile carriers can link their networks directly to the cloud platforms. Equinix, Digital’s largest competitor, has been exploring this opportunity as well.
Joint venture with an investor that has local expertise has been a common way for global data center operators to de-risk entering into new markets. Digital and Brookfield created a JV in 2018 to enter Brazil by acquiring the local operator Ascenty. That deal came about a year after Digital created a joint venture with Mitsubishi to expand its data center footprint in Japan.
Brookfield Infrastructure, part of Brookfield Asset Management, said its portfolio includes $23 billion in data transmission, distribution, and storage assets. Part of that portfolio are about 140,000 operational wireless towers in India, where its parent has been investing in infrastructure, renewable energy, real estate, and private equity for more than a decade.
Digital’s Wright said the companies had identified “seven or eight major markets” in India to focus on for initial development or acquisition. He declined to say which markets they were, citing competition concerns.
Structure identified Bengaluru, Chennai, Hyderabad, Mumbai, and Pune as markets with the most opportunity for data center providers in India.