Singtel, KKR agreed to put in checks to address CCI concerns on $ 1.3-billion data centre deal

CCI had certain concerns regarding the deal from competition market standpoint prompting Singtel to offer voluntary safeguards.

Singtel, the Singapore-based telecommunications company promoted by Temasek, and KKR put in place several safeguards to secure the Competition Commission of India’s approval for the $1.3-billion deal in ST Telemedia Global Data Centers, the anti-trust body’s final order, which was released recently, shows.

The deal, which was okayed by CCI in November but the detailed order was released recently, involved a consortium of two investors – Singtel and KKR (via Ruby Asia Holdings) – infusing $1.3 billion in the data services company STT Global Data Centers (GDC). The consortium will own a 26 percent stake in STT GDC, the global entity.

CCI had flagged concerns about what the deal would mean for competition in the market, prompting Singtel to offer voluntary safeguards.

Singtel owns about a 30 percent stake in Bharti Airtel, through direct and indirect holdings. Airtel has a subsidiary Nxtra, which is in the same line of business as STT GDC and both are competitors in the Indian market.

Both STT GDC and Nxtra are among the biggest players in the Indian data services and co-location market. Their combined market share was significant in several big cities, prompting CCI’s reservations.

Emails sent to Singtel seeking comments remained unanswered. KKR declined to comment.

To address CCI’s concerns, Singtel agreed to put in place safeguards to avoid conflict of interest situations. Singtel, for instance, has agreed not to nominate any of its employees as board observers in STT GDC. It has also said its board nominee in STT GDC would recuse from discussions about the company’s India business.

“In relation to the Singtel Minority Investment, Singtel agrees and undertakes that the consortium observer nominated by it to the board of STT GDC will recuse himself /herself from all discussions / deliberations of the board or board committee of STT GDC which relate to the business of STT GDC India / Indian market. By doing so, the consortium observer will not have access to any discussion relating to STT GDC India / Indian market at the meeting of board or board committees of STT GDC.” Singtel told CCI.

Further, no Singtel employee will receive any market-specific information about STT GDC. “In relation to the Singtel Minority Investment, no employee or officer of Singtel, including the consortium observer nominated by Singtel on STT GDC .… shall receive any market-specific information about STT GDC India / Indian market and shall only receive aggregated / anonymized information at STT GDC group level in so far as STT GDC India or the Indian markets are concerned,” the CCI order says.

In several metro, the combined market share of STT and Nxtra is high, the order says. For example, in Pune both the entities combined own 90-95 percent of existing installed capacity, while in Chennai it is around 30-35 percent, the CCI order says. In Delhi-NCR, the combined market share of STT and Nxtra was 25-30 percent, data shows.