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Digital Edge starts building interconnection-focused colocation business in Japan

Categories Analyst Insight  |  Connectivity  |  Real Estate
Digital Edge starts building interconnection-focused colocation business in Japan

Singapore-based Digital Edge is a new data center colocation firm focused on the APAC region. The company confirmed a recent investment from Stonepeak Infrastructure Partners, an infrastructure-focused investment firm, to invest in their vision of a data center market that allows for the decentralization of network and platform resources away from the handful of providers that currently dominate the APAC market.

Stonepeak, its investors, and the Digital Edge management team have together invested a combined US$1b equity capital commitment to the platform.

The following company briefing has been made available through our partnership with Structure Research, an independent research and consulting firm with a focus on the cloud, edge, and data center markets.

Team: The team is primarily made up of ex-Equinix senior management and executives from Tata Communications, Macquarie, and Facebook.

– Samuel Lee, CEO: former president for APAC at Equinix for over 19 years.

– Kei Furuta, president: former MD, North Asia at Equinix for over 10 years.

– Andrew Rigoli, chief strategic investment officer: former VP corporate development and strategy at Equinix for almost 17 years.

– Jonathan Chou, chief strategist: former VP corporate development for APAC at Equinix for nine years.

– Jay Park, chief development officer: former VP data center infrastructure at Facebook.

Target Market: Digital Edge has closed two initial investments in Japan.

– The first is a partnership with Keihanshin Building Co. and Kanden Energy Solution Co., Inc. (Kenes – Kansai Electric Power group company) for the development of a 12MW data center in central Osaka.

– The second is a strategic partnership with ITOCHU Techno-Solutions Corporation and its Mejirozaka data center in Tokyo.

Financial Backing: Stonepeak is no stranger to the data center space and has been active with investments in:

– Cologix (majority owner), a provider focused on Canada and the US, with 30 interconnected data centers hubs and four hyperscale facilities.

– euNetworks, a high bandwidth connectivity provider in Europe, with fiber networks in 17 cities and long-haul networks spanning 15 countries.

– Earlier this year, Stonepeak acquired Xplornet Communications, a provider of broadband connectivity in rural Canada.

Angle: Structure Research has known about the Digital Edge platform coming together for some time. Given the pedigree of the management team in building up Equinix’s APAC business, they will likely be an interesting provider to watch in the APAC region with ambitions to build a pan-APAC platform that potentially combines established markets like Japan and others from the emerging tier.

The initial sites that Digital Edge has acquired point to more of an interconnection-focused retail colocation platform to start rather than a hyperscale one of the likes of AirTrunk. That being said, it would not be surprising if Digital Edge at some point pivots into the hyperscale side at a later stage given its experience seeing Equinix shift from a purely retail strategy into more dedicated hyperscale builds in Europe and APAC (and given hyperscale proximity is a way to enhance and augment interconnection).

Off the bat, it appears Digital Edge is looking to build an Equinix 2.0 for the APAC region, with interconnection-focused retail colocation (later enabled by hyperscale) being the foundation of the business. Building this would be relatively more challenging than a hyperscale platform given the scarcity of carrier-dense assets available for acquisition and the many markets in the region that are dominated by state-backed carriers or are simply at earlier stages of development. Developing a collection of the right data center assets and seeding an ecosystem is not easy either but if there is a group of data center veterans that can pull it off it would be the Digital Edge management team.

With essentially every new data center market entrant being a large footprint hyperscale-type provider, it is refreshing to see a different type of data center platform looking to further decentralize a traditionally very centralized marketplace for interconnection-oriented colocation. And unlike markets in the US and Canada, there is more room in the competitive landscape for such a platform.

Jabez Tan, Head of Research, Structure Research

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