Digital infrastructure investment: Unveiling 2023’s M&A landscape

Explore the latest digital infrastructure investment activities through an analysis of recent M&A activity, shedding light on the broader developments expected in 2023.


2023 will be another intriguing year for investment in the digital infrastructure space. As we continue to consume more data, exacerbated by recent advances in AI, the demands on digital infrastructure continue to grow. This comes at a time when headwinds for supply are developing: banking market conditions, high interest rates, an ever-growing green agenda, and several other key macro trends have fostered uncertainty. The digital infrastructure segment must adapt to these pressures.

This article highlights recent investment activity in the space, and what this might tell us about the year to come. Some of the trends highlighted are not new, but external conditions may mean 2023 is the year that they require real attention. The article highlights the following trends:

1. The battle between ‘AltNets’ in the UK;
2. Sustainable data centres come to the fore;
3. Continued strong data centre growth in Southeast Asia.

STL Partners has been tracking investments in the edge computing sector for the last few years (see our previous outlook articles for 2020 and 2021), and in 2022 we launched our Edge Computing Investment Tracker. If you wish to discuss these resources, the content of this article, or our wider M&A services then please do get in contact at or visit our website.

Empower your M&A strategy with STL Partners’ expertise in networking, digital infrastructure, and software

Make sound investment decisions with the support of our experienced team. Schedule a consultation to learn more.

Book a consultation

1. The battle between ‘AltNets’ in the UK

Netomnia completed its latest fundraising round, raising £230 million in debt financing from HSBC UK, ING, NIBC, RBC, Standard Chartered, and UKIB. This is on top of £295 million in equity financing secured from Digital Bridge in 2022 and is another signal that the battle in the ‘AltNets’ market in the UK is intensifying.

A large number of alternative fibre network companies have been trying to roll out networks as quickly as possible to steal market share from BT Openreach, the incumbent. Netomnia now claim to be the fourth largest of these AltNets in the UK, reaching over 410,000 premises. CityFibre is the largest of the newer players and secured £4.9 billion in debt finance from a consortium of banks and investors in June 2022.

The existing players are naturally responding, with Virgin Media O2 securing £4.5 billion investment for a fib-re-building joint venture with owners Telefónica and Liberty Global, as well as InfraVia Capital Partners, in July 2022.

BT’s chief executive has warned new entrants that there isn’t space in the market, asking “Why do you need multiple providers?”. Indeed, if the top 10 largest AltNets along with Virgin Media O2 and Openreach, continue their build out, then each home will have access to 2.78 fibre connections by 2026/27. This is, clearly, not sustainable and AltNets will need to win significant market share from the two established players – it is estimated that companies need to secure at least 30% of customers in a given location to make their business viable. AltNets may therefore be more successful if they can avoid areas with overbuild, and may choose to target less densely populated areas. Competition in these areas will be lower but build costs higher and ROI harder to achieve.

This rise by Netomnia is the latest in a series of large investments in AltNets in the UK. Over the next year we expect to see consolidation, this was likely given the natural market dynamics for fibre but has been accelerated by interest rates and rising costs in deployment. As private finance becomes harder to come by, many AltNets are more likely to be acquired – two infrastructure firms are near a deal to buy Trooli, the next biggest AltNet after Netomnia, for over £100 million. The deal by Vauban Infrastructure Partners and Axione is therefore likely to be the first in a flurry of AltNet acquisitions in the next year. A critical question is whether sellers can achieve a premium price or are considered a ‘distressed asset’ owing to having too few customers to be viable. For those that fall into the latter category, the resulting transaction is likely to be at a deep discount to book value.

2. Sustainable data centres come to the fore

Actis is acquiring 11 data centres across the Americas, from Asterion Industrial Partners and Telefonica. The roughly $500 million deal involves a portfolio of data centres in Brazil, Chile, Mexico, Peru, Argentina, plus a 23MW facility in Florida.

This is another notable investment by Actis, one of the leading global investors in sustainable infrastructure, taking their total investment in digital infrastructure over $1 billion, adding to their five existing data centre platforms globally. Sustainability has been climbing the agenda within telecoms and digital infrastructure for a couple of years, but at STL Partners we see 2023 as the year when it becomes a core consideration in deals and operational decisions. Indeed, a recent JLL report found that 85% of data centre managers in Asia-Pacific believe that sustainability will significantly impact their operations and decision-making.

In order to attract investment in future, data centres will need to have greater visibility and control of their energy usage. Especially as governments tighten rules on what constitutes a climate-friendly investment. This happened in the EU recently and forced several asset managers to remove the label from £145 billion of funds in just over three months.

It is likely we will see early-stage funding flow to innovative start-ups addressing the data centre industry’s energy-usage headache, such as the recent announcement that edge data centre company Deep Green is heating swimming pools using its excess energy. However, on a larger scale it will be necessary for data centres to upgrade, using more energy-efficient infrastructure and improving operational efficiency. ZeroPoint, who claim to be able to cut data centre energy consumption by more than 25% through better memory management, recently raised €3.2 million in seed funding.

Data centre management company DCD Data Center Developers and global investment firm Angelo Gordon launched a joint venture to develop and operate sustainable data centre facilities in Germany last year, beginning construction of the first of these in Frankfurt in December 2022. The Asian Infrastructure Investment Bank (AIIB) invested $120 million in the Seraya Southeast Asia Energy Transition and Digital Infrastructure Fund, to support the region’s green energy transition in data centres and other infrastructure assets. EdgeConneX, who own and operate more than 60 data centres in 30 countries, closed €2.4 billion in sustainability-linked financing in October 2022. We expect these kind of ventures to continue to emerge over the next year, as sustainable investors enter the sector, and those already with positions pivot to higher energy-efficiency as a priority.

3. Continued strong data centre growth in Southeast Asia

This article has already highlighted recent activity in Southeast Asia, and this will continue to emerge over 2023. NTT recently announced a $90 million investment in what will be Thailand’s largest data centre, to add to other new facilities in Jakarta and Cyberjaya in Malaysia.

The data centre colocation market in Southeast Asia is expected to grow at 16.5% over the next five to seven years, compared to 11.6% for the rest of the world. Data centre capacity is becoming more distributed, occurring in local countries beyond just regional hubs such as Singapore. Data sovereignty and a lack of regulation across the different markets in the region means that there may be a higher density of data centre build within countries than in Europe or the US where borders are less prohibitive. The region is also seeing the same trends as the rest of the world with increasing data usage. As well as data consumption increases from developments in AI and other technologies, South East Asia’s level of economic development means it is likely seeing more accelerated growth in data consumption than other, more economically developed regions.

The Philippines saw the second-highest number of digital infrastructure deals in 2022 in the whole of Asia-Pacific (second only to Australia), with seven deals across broadband, data centres, fibre optics, subsea cable, and wireless transmission. The Philippines is increasingly seen as a good market for data centres because of the growing use of e-commerce platforms and wider digitalisation initiatives. Digital Edge announced that a new 10MW facility in Manila will open in 2023, to add to 12 other distinct third-party data centre facilities in the city. Arch Capital are also planning a 70MW facility in Manila, and EdgeConneX have launched a new joint venture to build two new facilities. We are likely to see more joint ventures in this mould, Gaw Capital Partners recently launched one with A3 Capital to invest in data centres in Malaysia, Indonesia, and Singapore.

South East Asia will likely be fertile for all types of digital infrastructure investment in the coming years. Barring Singapore, the region has lagged behind North America, Europe and the rest of Asia-Pacific, so there are significant growth opportunities. The attractiveness of each country may depend on the extent of any government intervention.

Matt Bamforth


Matt Bamforth

Senior Consultant

Matt is a Senior Consultant at STL and has experience in consulting projects across a wide range of topics. These span areas such as 5G, private networks, telco cloud, and edge computing. Matt has previous experience in strategy consulting, as well as in the Fintech sector. He holds a BSc in Economics from University College London.

M&A Opportunities Insights Pack

M&A Opportunities Insights Pack

This 25-page document will provide you with a summary of our insights from our M&A consulting and research work.

M&A trends in the data centre market

During the past five years, digital infrastructure M&A has focused heavily on data centres. Data centre M&A activity remains on an upward trend, while private equity involvement in edge data centres is burgeoning. This article sets out STL’s views on data centre M&A in the US and Europe for 2023, and explores criteria to be considered by private equity houses active in this space.

TMT M&A trends and outlook

In this article, we explore mergers and acquisitions activity in telecoms, media, and technology over the last 3-4 years and what the outlook will be going forward – including the key drivers of M&A and which sectors will attract most interest.

Digital infrastructure market trends

Digital infrastructure (networks, data centre and software) is growing significantly globally. Tier 1 hubs are densifying and opening up opportunities in new markets. This article provides an overview of the market landscape and dives into the key trends driving growth.