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) deployments and digital transformation strategies.
“Middle East telecom operators are making significant investments in regional data centres and cloud infrastructure. These investments are positioning telecom operators to capture market share from hyperscalers like Amazon Web Services (AWS), Microsoft, and Google, while managing high capital expenditures and debt levels,” credit rating agency S&P Global Ratings reported.
According to S&P Global Ratings, national development programmes, including Qatar National Vision 2030 and Saudi Vision 2030, are accelerating demand for local hardware and sovereign cloud setups across the region.
S&P Global Ratings stated that regional operators possess distinct structural advantages over global hyperscalers because local data center assets offer compliance with national data residency regulations.
It noted that telecommunications companies are leveraging established land holdings and direct power grid access to establish facilities without facing typical market entry bottlenecks.
Operators are utilising joint ventures, asset spin-offs, and strategic partnerships to scale up enterprise technology infrastructure efficiently, S&P pointed out. It also highlighted that e& and Ooredoo established Khazna Data Centres to create a large-scale data infrastructure footprint across Middle Eastern markets.
S&P observed that STC Group separated its data center portfolio into Center3 to manage hyperscale infrastructure and international submarine cable connectivity in Saudi Arabia. It further explained that Zain Group is building out ZainTECH and data centre resources across Kuwait, Saudi Arabia, and the UAE.
The credit rating agency indicated that high initial capital expenditures for land, specialized graphics processing unit cooling infrastructure, and power generation place pressure on cash flows. It mentioned that increased borrowing to fund facility construction could affect corporate credit profiles if capacity utilisation falls behind completion schedules.
S&P stressed that financial returns depend on securing long-term tenant contracts before new infrastructure comes online. It added that telecom companies are adopting non-recourse project financing and sale-and-leaseback options to manage financial exposure.
