Middle East telcos shift focus to regional AI data centre expansion, says S&P
Regional telecommunications operators across the Middle East are shifting focus to building extensive data centre and cloud infrastructure networks to capitalise on artificial intelligence (AI) deploy...
Middle East telecommunications companies are redirecting their attention towards establishing extensive data centre and cloud infrastructure networks to leverage artificial intelligence (AI) deployments and digital transformation strategies. Credit rating agency S&P Global Ratings revealed that telecom operators are making substantial investments in regional data centres and cloud infrastructure to compete with major hyperscalers such as Amazon Web Services (AWS), Microsoft, and Google.
The agency emphasized that these investments allow telecom operators to expand their market share while handling high capital expenditures and debt levels.
S&P Global Ratings highlighted that national development programs, including Qatar National Vision 2030 and Saudi Vision 2030, are driving demand for local hardware and sovereign cloud setups across the region. The agency explained that regional operators have structural advantages over global hyperscalers, as their local data center assets enable compliance with national data residency regulations.
Telecom companies can benefit from existing land holdings and direct power grid access, avoiding typical market entry obstacles.
To efficiently scale up enterprise technology infrastructure, operators are utilizing strategies such as joint ventures, asset spin-offs, and strategic partnerships. For instance, e& and Ooredoo established Khazna Data Centres to create a significant data infrastructure footprint across Middle Eastern markets. S&P Global Ratings noted that STC Group separated its data center portfolio into Center3, responsible for hyperscale infrastructure and international submarine cable connectivity in Saudi Arabia, and Zain Group is constructing ZainTECH and data center assets across Kuwait, Saudi Arabia, and the UAE.
S&P Global Ratings cautioned that high initial capital expenditures for land, specialized graphics processing unit cooling infrastructure, and power generation strain cash flows. The agency mentioned that increased borrowing to finance facility construction could impact corporate credit profiles if capacity utilization falls short of completion schedules.
Furthermore, the credit rating agency stressed that financial returns rely on securing long-term tenant contracts before new infrastructure becomes operational. Lastly, S&P Global Ratings mentioned that telecom companies are employing non-recourse project financing and sale-and-leaseback options to manage financial exposure.
Written by urgent.news from Gulf Times Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
