Summary Bullets:

• News of Turkcell’s $27 billion investment over its 30-year span will spur further development in the country’s technology infrastructure as the operator seeks to sell a quarter of its shares, possibly to a wealthy Gulf player.

• With this announcement, Turkcell is positioning itself strategically in Turkey as the go-to operator for enterprise solutions for government and large enterprises, and it is presenting itself as an indispensable partner for B2B services.

Turkish telecoms operator Turkcell disclosed it has invested $27 billion in communications and technology since its founding in 1994, of which $350 million have been allocated to data center technology. While this represents a meager 1.3% of the total investment, GlobalData expects the figure to ramp up significantly as the telecoms operator moves away from legacy products, services, and solutions to B2B and enterprise. GlobalData’s revenue forecast for Turkey’s data center and hosting market is growth from $551 million in 2023 to $729 million, representing a CAGR of 6.8%. The telecoms operator says its objective is to make the country a ‘global data hub.’ In order to maximize this opportunity, on July 11, 2024, Turkcell announced a new data subsidiary, TDC, which now operates as a standalone entity. Turkcell states it has evolved from a telecoms operator to an end-to-end technology provider.

The announcement comes on the back of Turkey’s sovereign wealth fund (TWF) reportedly mulling the sale of its 26.2% stake in Turkcell, which it bought in 2020. Highlighting the success story of Turkcell is critical to the sale in a market that has been seen to play second fiddle to Gulf players in terms of next-generation enterprise technologies. Arabian investors are reportedly interested in purchasing the stake: It would make sense for Gulf operators like stc or Etisalat by e& with significant interests in data centers to buy as they seek to boost their own data center footprint.

Turkcell currently provides cloud and data hosting services for over 3,000 local and international businesses, boasting eight data centers (four of which are next-generation-grade) and an active white space of 36,500 square meters – the largest of any Turkish operator. The localization rate – i.e., domestic production of technology for the construction of data centers – averages well above 50%. The company operates across multiple sectors and is well-diversified. Continuous investment will assist Turkcell in maintaining relevance and steady revenue growth in an ever-evolving market.

Competition in the data space is not limited to Turkcell’s telco competitors like Turk Telekom and Vodafone Turkey, which also operate their own centers. Global giants like Amazon, Google, and Microsoft are also vying for dominance in the data and cloud technology space. The question remains whether Turkcell will be able to effectively compete in the country and region against its rivals and the global hyperscalers in terms of reliability and scalability, even with the $350 million invested. Where Turkcell can compete is in the ability to offer aggressive pricing, superior uptime, and advanced local features. If it so happens that a Gulf investor or telco assumes Turkcell’s stake, it might become an effective competitor against the likes of Google, Amazon, and Microsoft. It will almost certainly solidify the operator’s status as a leading data center provider in the region.

Summary Bullets:

• Qatar-based telecoms group Ooredoo and US chipmaker Nvidia signed a deal for Ooredoo to buy and deploy thousands of Nvidia graphic processing units (GPUs).

• Ooredoo will build its AI cloud services platform and offer GPU-as-a-service to customers across its footprint: Qatar, Algeria, Kuwait, Tunisia, Oman, and the Maldives.

In one of the most significant moves made by any telecoms operator in MENA to turbocharge AI capabilities, Ooredoo Group is boosting its 26 data centers by incorporating Nvidia’s high-density GPUs. It is also becoming the region’s first Nvidia Cloud Provider. As a result, Ooredoo will develop an AI – and an ML-ready platform powered by Nvidia’s stack of software and services, including generative AI (GenAI).

The deal follows a similar one struck by Ooredoo’s Indonesian unit, Indosat, with Nvidia in February 2024 where it was announced that Nvidia’s Blackwell platform will be incorporated into Indosat’s infrastructure to bring sovereign AI cloud and services to Indonesia via a planned $200 million AI data center in Surakarta (Indonesia).

A step up from central processing units (CPUs), GPU chips aid in workload acceleration of heavy processing tasks, offering enterprise customers access to the latest AI capabilities tailored for high-demand computing tasks. Sectors that can significantly benefit from this are infrastructure, energy, and mining, with healthcare, finance, education, and telecommunications also set to profit.

As a Nvidia Cloud Provider, Ooredoo has signaled its intent to be a leading digital infrastructure provider in MENA. Each Ooredoo unit will be able to establish its own local clouds, bringing AI infrastructure closer to both Ooredoo and non-Ooredoo customers, and allow for greater data sovereignty and security in compliance with local laws. Ooredoo stated it is investing $1 billion to boost its data center capacity by 65% by 2030, adding that it is seeing cloud adoption growing by an average of 30% YoY.

The export of advanced proprietary US technology has been a concern to US lawmakers, with government restrictions being placed on Middle Eastern orders for high-end AI chips, in an attempt to thwart China potentially intercepting them. There is currently a bottleneck of regional customers ordering chips and other technologies from Nvidia, Advanced Micro Devices (AMD), and Intel, as well as the US hyperscalers. Ooredoo’s deal with Nvidia can be interpreted in one of three ways:

1. The policy has been unofficially relaxed to mitigate increasing Chinese tech encroaching into MENA, as evidenced by Huawei’s recent deployment of a cloud region in Egypt – the first global tech firm to do so in North Africa.
2. The GPUs purchased by Ooredoo have been downgraded and categorized as mid-range technologies that fall outside the high-end, to which stringent US restrictions apply.
3. The geographical restriction of technologies like AI manufactured by the likes of Nvidia is not sustainable in the long term. So, vendors are testing the limits of strict criteria of US export controls.

To assuage any fears, Ooredoo added that the three Middle Eastern countries where it operates – Qatar, Kuwait, and Oman – host US military bases and large US corporations, which can, in turn, be consumers of these technologies. It is possible that all three reasons are true to some extent. Other Middle Eastern AI vendors, like the UAE’s G42, are phasing out Chinese hardware, which has enabled G42 to secure a $1.5 billion AI deal with Microsoft in April 2024.

Whatever the case, it is clear that MENA is heating up as a tech battleground between China and the US. The telecoms operators in MENA, and by extension local and regional businesses, will profit from this dynamic.