Superloop (ASX: SLC), an Australia-based fiber infrastructure provider, today announced that it has agreed to sell its Hong Kong fiber operations and select Singapore fiber assets, to Columbia Capital and DigitalBridge Group’s Digital Colony Partners II private equity fund, for over A$140m ($104m USD). Specifically, Superloop is selling its Superloop (Hong Kong) Limited entity and certain assets from its Superloop (Singapore) Pte Ltd entity.

Notably, the sale price represents a 30% premium, or A$32m ($23.7m USD) above the A$108m ($80m USD) carrying value of the assets on Superloop’s balance sheet. Overall, the company has an asset carrying value for the entirety of its Hong Kong and Singapore assets of A$117m ($86.8m USD). Therefore, Superloop is selling the vast majority (i.e., 90%+) of its Hong Kong and Singapore fiber assets.

Finally, the transaction is expected to close in early 2022.

Superloop’s Hong Kong, Singapore Fiber – Columbia Capital, DigitalBridge

Columbia Capital and DigitalBridge are buying all of Superloop’s Hong Kong, and the vast majority of its Singapore, fiber assets. Superloop’s Hong Kong and Singapore fiber assets, in their entirety, encompass:

Hong Kong Fiber

Superloop’s Hong Kong fiber assets comprise 158 miles (255 kilometers) of fiber, connecting to 34 buildings. Overall, this network generates A$3.8m ($2.8m USD) of revenue. Particularly, this fiber connectivity links to on-net data centers and on-net enterprise buildings.

Superloop Hong Kong Fiber Network Map
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For example, Superloop’s Hong Kong fiber connects to Equinix’s HK1, HK2, HK3, and HK5 facilities; Digital Realty’s data center in Tseung Kwan O; and various sites of NTT Global Data Centers.

Singapore Fiber

Superloop’s Singapore fiber assets comprise 161 miles (259 kilometers) of fiber, connecting to 69 buildings. Overall, this network generates A$15.0m ($11.1m USD) of revenue. Similarly, this fiber connectivity links to on-net data centers and on-net enterprise buildings.

Superloop Singapore Fiber and Duct Network Map
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For example, Superloop’s Singapore fiber connects to Equinix’s SG1, SG2, SG3, and SG4 facilities; Digital Realty’s data center in the Jurong East area; and Keppel DC REIT’s Singapore 1 site at 25 Serangoon North Avenue 5.

INDIGO Subsea Cable

Superloop is also a minority partner (via SubPartners) in the INDIGO subsea cable consortium, alongside AARNet, Google, Indosat Ooredoo, Singtel, and Telstra. However, it does not appear as though Columbia Capital and DigitalBridge are acquiring Superloop’s interest in the INDIGO subsea cable. Instead, all three parties are establishing a new preferential supply agreement for the INDIGO subsea cable (see below).

Superloop Agreements with Columbia Capital, DigitalBridge

As part of the transaction, Columbia Capital and DigitalBridge will sell to Superloop a 15-year indefeasible right of use (IRU) on the existing Singapore and Hong Kong networks for A$15m ($11.1m USD). In turn, Superloop will be able to maintain operations in Singapore and Hong Kong post-transaction.

INDIGO Subsea Cable

Columbia Capital and DigitalBridge will also partner with Superloop to drive incremental traffic on the 5.8k mile (9.3k kilometer) INDIGO subsea cable. Specifically, this subsea cable connects Singapore to Perth, Australia and Perth to Sydney, Australia, with its two discrete systems known as INDIGO West and INDIGO Central.

INDIGO Subsea Cable Map

Columbia Capital and DigitalBridge will sign a 5-year preferential supply agreement to carry traffic from its Singapore network to the INDIGO Subsea Cable. Accordingly, they will have the right to sell capacity on the INDIGO Subsea Cable, subject to a rate card.

Customers

Superloop’s Singapore customers and contracts, excluding INDIGO customers, will be novated to Columbia Capital and DigitalBridge’s new entity.

Columbia Capital, DigitalBridge – Transaction Rationale

One of Columbia Capital and DigitalBridge’s primary goals will be to better monetize Superloop’s international assets. To this end, as of June 30, 2021, Superloop’s Singapore assets had only 18.7% utilization, while its Hong Kong assets had only 5.2% utilization.

Columbia Capital and DigitalBridge expect to benefit from increasing regional demand from businesses and consumers for end-to-end fiber connectivity. Additionally, both firms are broadening their current fiber investments in the Asia-Pacific region, given that they will be carrying traffic and providing connectivity services in the Singapore and Hong Kong markets.

Broader Digital Infrastructure Portfolios

For Columbia Capital, the firm is adding Asia-Pacific exposure to its current digital infrastructure portfolio, which is primarily focused on the United States and Europe. Presently, Columbia Capital’s digital infrastructure investments include Bandwidth IG, Cologix, euNetworks, SummitIG, and Teraco.

Alternatively, DigitalBridge is in the process of making inroads into Hong Kong. The firm is doing this through Vantage Data Centers’ acquisition of PCCW Ltd’s data center business. However, today’s announcement marks the firm’s first fiber investment in the Asia-Pacific region.

Superloop – Transaction Rationale

Following divestment of its infrastructure in Hong Kong and Singapore, Superloop will become a managed services provider, outside of Australia. Indeed, this is a similar approach to that of GTT Communications, which sold its infrastructure division to I Squared Capitalrenaming it EXA Infrastructure.

Superloop will continue operating in Singapore, supporting Columbia Capital and DigitalBridge’s network for a period of at least three years. Specifically, Superloop will function under a transition service agreement and a lit services management agreement.

Additionally, Superloop will provide end-to-end connectivity services to its INDIGO subsea cable customers in the region. Finally, Superloop will continue to own and operate its metropolitan fiber networks in Australia.

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