China Telecom leads rivals with new external projects

China Telecom (SEHK: 0728) is stepping up its expansion across Asia, ahead of its two bigger mainland rivals, with a slate of new infrastructure investments in Hong Kong and Singapore. The country's leading fixed-line network operator has made an initial investment worth HK$200 million to build two new internet data centres in the two cities, and link these to its existing network of 260 data centres across the mainland, according to Deng Xiaofeng, chairman and chief executive of subsidiary China Telecom (Hong Kong) International. Data centres are specialised facilities, where operators house large enterprises' server computers and storage systems, with dedicated power, cooling, security, technical support and high-speed internet connections. "With the current growth in e-commerce, China Telecom is committed to connecting Chinese enterprises to the world and supporting multinational corporations develop their business in the Asia-Pacific region, especially in China," Deng said. Its target customers include enterprises in the banking and financial services, transport and logistics, internet and media sectors. According to research firm Frost & Sullivan, total revenue from the data centre co-location and managed hosting services market in the Asia-Pacific will amount to US$9.18 billion this year and reach US$10.68 billion next year. Leading data centre hubs in the region are Japan, Australia, Singapore, Hong Kong and, to a lesser degree, mainland China, India and Malaysia. The largest of these hubs, Japan, accounted for more than 71 per cent of the estimated US$8 billion in data centre services revenue in the region last year. The internet, media, telecommunications and information technology industries together account for up to 45 per cent of data centre services demand in the Asia-Pacific. These sectors are expected to continue to be the biggest users of data centre space over the next four to five years. Demand for data centre hosting currently exceeds supply, according to Frost & Sullivan. "In fact, over 80 per cent of the major data centres in the Asia-Pacific are running at close to 90 per cent capacity and space is at a premium," it said. Amid the growing regional opportunity, Deng said China Telecom "will increase investments in designing and building data centres". He said there could be further expansion first in Hong Kong and Singapore, before China Telecom decides to invest in new data centres in other Asian countries. China Telecom has set up a 27,000 square foot data centre in Chai Wan, at premises run by iAdvantage, a unit under Sun Hung Kai Properties (SEHK: 0016)' technology arm SUNeVision. In Singapore, the carrier has established a 3,500 square foot operation inside a facility run by data centre partner Equinix. Following the 2008 telecommunications industry restructuring on the mainland, China Telecom, China Mobile (SEHK: 0941, announcements, news) and China Unicom (SEHK:0762, announcements, news) are all to become integrated fixed-line and wireless network operators. Deng said China Mobile and China Unicom are also keen to expand their services outside the mainland, but China Telecom has been well ahead in developing its business across Asia.