Salim Group tycoon intensifies Indonesia data centre battle

Photo by Taylor Vick on Unsplash

Anthoni Salim, CEO of Indonesian conglomerate Salim Group, has raised his stake in Data Center Indonesia by an additional 1.02 trillion rupiah ($71 million) as competition heats up in the country’s cloud space on the heels of recent announcements by Tencent and Microsoft.

With the increased personal stake, Salim now directly controls 11.12% of shares in the local cloud services operator, up from 3.03% before the transaction, DCI said in a filing to the Indonesia Stock Exchange on Thursday. The company’s share price rose 20% to 19,800 rupiah in same-day trading following the announcement and jumped another 20% on Friday to close at 23,750 rupiah.

Last week, DCI inaugurated its fourth data center facility in Bekasi, an industrial town east of Jakarta, increasing total capacity to 37 megawatts. The company said it has enlisted three “top global cloud service providers” and the seven “biggest e-commerce platforms in Indonesia [and] Southeast Asia” among its clients, as well as more than 100 financial services providers and 30 telecommunications companies.

DCI, which opened its first data center in 2013, said it aims to build as many as 15 such facilities in Southeast Asia’s largest economy with a total power capacity of 200 MW.

Indonesia, a vibrant democracy, is one of the hottest battlegrounds for cloud services in Asia, pushing up demand for local data centers owing to its expanding digital economy supported by the world’s fourth-largest population and internet-savvy youth demographic, as well as local laws regarding data storage. Online services such as e-commerce, video conferencing, streaming and gaming have enjoyed an additional boost during the coronavirus pandemic.

A report released in January by Google, Temasek and Bain & Company projected that Indonesia’s internet economy grew 11% to $44 billion last year and will further expand 23% annually to reach $124 billion in 2025.

Salim’s move follows Chinese internet conglomerate Tencent Holdings’ announcement in April of a plan to open two data centers in Indonesia by the end of the year. Earlier in February, U.S. tech giant Microsoft reiterated its plan to establish its first data center in the country.

Chinese internet giant Alibaba, through its cloud arm Alibaba Cloud, currently runs two data centers in Indonesia and said it was planning to launch a third this year. Amazon, through Amazon Web Services, also has mentioned a plan to build a data center, while Google last year localized its cloud services for Indonesian clients by partnering with local data center operators after previously using overseas centers.

DCI, founded and led by Otto Toto Sugiri, a former IT manager at a local bank, has seen its business grow sharply during the COVID crisis. It posted 55% revenue growth to 759.4 billion rupiah last year, while net profit surged 71% to 183 billion rupiah. In the first three months of this year, revenue and net profit rose 25% and 55%, respectively, to 171.5 billion rupiah and 48 billion rupiah.

The company’s share price has multiplied 45 times since going public in January.

DCI said in its annual 2020 report released last month that Indonesia’s internet users grew from 92 million in 2015 to 152 million in 2019 — or nearly 60% of the population. The Google and Temasek study, meanwhile, said 37% of all digital service consumers in Indonesia last year were new.

“Despite the rapid growth of the population adopting Internet services and the growth of the digital economy, the capacity per capita of local data centers remain low,” DCI said in the report. “Thus, the demand for high-quality data center services with international standards has increased.”

The company also said Indonesia’s market for “co-location data centers” — in which the facilities are available for rent to retail customers — had a total capacity of 72.5 megawatts at the end of last year, half of which was controlled by DCI. It projected that capacity to grow 22.3% annually over the next five years.

Heru Sutadi, executive director of Jakarta-based information and communication technology-focused think tank ICT Institute, said that besides the booming digital economy, a government regulation requiring local data storage has also enticed internet giants to set up in Indonesia.

“[Storing data locally] is mandatory for public entities. There are some exceptions for the private sector, but only if a [government-appointed] committee decides that some technologies required for their data centers are not available here,” Sutadi told Nikkei Asia on Friday.

“Google and Facebook are building international fiber-optic networks that transit Indonesia, so Indonesia also has a strategic position … we hope it can become a digital hub for Southeast Asia,” he added.

Salim’s increased stake in DCI marks a deeper foray by the Salim Group — best known for its instant noodle producing unit Indofood — into the burgeoning digital economy. He also personally owns a stake in Indonesian multimedia company Elang Mahkota Teknologi, which has invested in local e-commerce unicorn Bukalapak and digital wallet Dana.

His son, Axton Salim, is involved in startup incubator Block 71, which has offices in Jakarta and Singapore, and also in local e-sport development.

This article was first published in Nikkei Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.