Teraco gears up for growth in data centre space

After seven years of organic growth Teraco Data Environments – South Africa’s independent co-location data centre operator – is ready to put its foot on the acquisitive pedal to drive growth and expand its facilities.

Executives will spend the year focusing on making sure that the company taps into strong growth in internet usage and the increased adoption of cloud services.

The data centre market, which is one of the fastest-growing industries, is buoyed by increased internet usage and proliferation of smart devices in Africa as well as the rise in data centre outsourcing.

The industry in SA is also growing rapidly – a development that has benefitted Teraco, which was founded
in 2008.

Regarded as Sub-Saharan Africa’s top “vendor neutral” data centre operator, Teraco is preparing to invest more money in infrastructure development to enable it to take advantage of opportunities.

As part of its growth strategy, Teraco has invested about R50m to extend the size of its data centre facility in Cape
Town to more than 1 600m2 up from 1 000m2, bringing its investment in Cape Town to R100m in total.

The expansion of the facility is already 70% complete and is driven by continued demand for colocation services.

Teraco builds and operates colocation data centre facilities that enable clients to deploy telecommunications equipment and other key IT infrastructure in a scalable way. The colocation data centre houses equipment, data storage space and bandwidth that are available for rental to its customers.

It further provides clients with a secure environment where they are able to easily connect to submarine cable systems, local terrestrial networks, most major African IP backbones and key content aggregation hubs.

Teraco also operates 6 000m2 of data centre space in Cape Town, Durban and Johannesburg, which serves various
clients from cloud, network and services providers to outsourcing firms and enterprise customers.

The company’s need for more storage space for clients at its data centres is an indication of growing demand for the service.

“We still see huge potential for growth in this business and it’s a fun business to be in and an exciting market to be in, because it is growing so quickly,” says Teraco CEO Lex van Wyk.

As a result Teraco is planning to more than double the data centre facility in Johannesburg from the current 4 000m2 to 9 000m2 with 16MVA (megavolt ampere) power plant.

Building of the new 5 000m2 facility at Teraco’s offices in Isando, Johannesburg, will begin around July and will be completed in 18 months. It is expected to go live within 20 months.

The new data centre space will also provide much-needed facilities for Sub-Saharan Africa.

Asked how much it will cost the company to build the new data centre, Jan Hnizdo, Teraco’s chief financial officer, sets a price tag of about R500m. The first phase will cost about R250m.

So far the company has raised R400m from Barclays Africa to fund the infrastructure build. Hnizdo says R100m will come from Teraco’s internal resources.

The company, which has seen rapid expansion since 2008 on the back of the boom of SA’s telecoms sector, is also eyeing new acquisition growth opportunities in other parts of Africa.

This will be in line with the new shareholder Permira’s drive to grow the business into Sub-Saharan Africa. In December 2014, Permira in partnership with Teraco management bought 100% of the equity in the South African firm for an undisclosed amount.

Permira backs companies with a growth profile and helps them to achieve their full potential. The company, which has committed capital of about €25bn (R324bn), sold 12% of its stake earlier this month in Hugo Boss. Permira had been invested in the fashion firm for the past seven years. During that time it made huge returns on its investment.

Permira is a long-term investor and is backing Teraco’s Africa expansion.

“They will follow our strategy. Permira buys into our plans… we had a great run in South Africa and it’s continuing to run,” said van Wyk, adding that Permira are also looking at investments into Sub-Saharan Africa through Teraco.

“The first prize will be to do an acquisition in Sub-Saharan Africa if we get a company with a solid management team that has proven their strategy works,” he said, adding that Kenya and Nigeria, among others were on the company’s radar for possible growth.

Teraco also runs NAPAfrica, the largest internet exchange point (IXP) in Africa, providing colocation clients with
access to more than 50 African countries.

This has helped Teraco to grow into a signif icant African telecommunications hub. It is a viable and low-risk entry point for organisations with African strategies.

NAPAfrica aims to stimulate the development of a neutral internet exchange and reduce internet protocol interconnection costs and complexity in Africa. Its objective is also to ensure that content is no longer sourced from
Europe, but cached and available locally on the African continent.



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