Today's Edition
A. SREENIVASA REDDY (ABU DHABI)
Telecommunications companies in the UAE and the wider GCC will play a central role in the expansion of the region’s data centre industry by providing the infrastructure and connectivity required to support growing demand, S&P Global Ratings said in an assessment.
Strict data localisation regulations and sovereign cloud policies are increasing demand for domestic data centres, making national telecommunications operators such as e& and du important participants in the UAE’s emerging digital infrastructure ecosystem, the report said.
“Telcos will remain central to the data centre boom in the Middle East. We expect they will evolve from simple connectivity enablers to integrated infrastructure partners,” S&P Global Ratings said.
Even when they do not finance or own most large data centres, telecom operators will remain essential because of their advanced mobile and fibre networks, subsea cable connectivity and ability to provide infrastructure capable of supporting artificial intelligence workloads, the ratings agency said.
As data centres become operational, the focus will gradually move from building facilities to operating them efficiently and securing reliable, long-term customers. Telecom companies that successfully integrate high-capacity fibre networks into their offerings will be best placed to capture the industry’s long-term value, the report said.
The sector could also provide new revenue streams for UAE telecom operators, particularly from fibre connectivity, as they diversify beyond their core telecommunications businesses.
UAE-based e& aims to increase the contribution of its technology business, or “techco”, to 40% of total revenue, according to the report. However, S&P Global Ratings said operators would need to preserve profitability as their business mix expanded into activities that could offer lower margins.
Connectivity represents another growth opportunity. Emirates Integrated Telecommunications Company, which operates under the du brand, is investing in the Singapore India Gulf subsea cable project.
Although such projects require significant expenditure, S&P Global Ratings expects their effect on leverage to remain within the headroom available under operators’ credit ratings. These investments are generally undertaken through partnerships that distribute costs and are funded through a combination of internally generated cash and external debt.
The projects should improve network connectivity, attract high-value customers and strengthen telecom operators’ business risk profiles, the report said.
“While this expansion will drive increased capital expenditure, telcos’ credit profiles are expected to remain resilient,” S&P Global Ratings credit analyst Rawan Oueidat said.
“This stability is due to a strategic shift towards partnership-led investment models, where telcos utilise minority stakes rather than full ownership to scale their presence in the sector,” she added.
S&P Global Ratings expects telecom operators to align their strategies with national agendas and work with hyperscalers and sovereign wealth funds. Acquiring minority stakes instead of building and owning entire data centres allows operators to expand their digital businesses without assuming the debt associated with full ownership.
The ownership structure of the data centre industry is already becoming more diverse. Telecom-owned facilities currently account for about 30% to 35% of the Middle East’s total information-technology power capacity.
However, S&P Global Ratings expects the share of new capacity owned by telecom companies to fall below 10% between 2026 and 2030 as private equity firms, sovereign wealth funds and other investors increase their participation.
The report cited e&’s sale of its 40% interest in Khazna Data Center Holdings to G42 in February 2025. Together with investments by Silver Lake and UAE investment company MGX, the transaction turned Khazna into a non-telecom-owned data centre operator.
Nevertheless, telecom companies would remain crucial to the industry because data centres depend on their fibre networks, subsea cables and domestic connectivity.
S&P Global Ratings expects the UAE and Saudi Arabia to add between 2 gigawatts and 3 gigawatts of IT power to the Middle East’s data centre market by 2030. The two countries are expected to account for more than 80% of the region’s capacity additions.
