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Verizon and CenturyLink close to colocation datacentre sell-offs, say reports

Reports suggest both CenturyLink and Verizon could be on the cusp of off-loading their colocation assets, after months of speculation

Verizon and Centurylink are reportedly on the cusp of reaching separate agreements to divest their datacentre assets, as both telcos look to exit the increasingly competitive colocation market.

According to a Reuters report, CenturyLink is being courted by private equity consortium, BC Partners, which is said to be interested in acquiring its datacentre portfolio for around $2.5bn.

CenturyLink operates 59 datacentre across the US, Europe and Asia, with the majority leased from third parties rather than owned outright.

Sources, quoted by Reuters, cited the leased nature of CenturyLink’s assets as a complicating factor in the deal.

Computer Weekly contacted CenturyLink for comment on this story, but had not received a response at the time of writing.

Looking back

CenturyLink first outlined its intentions to sell-off its datacentre portfolio in November 2015, when it used its third quarter results to confirm it was mulling over its future in the colocation space, given how much it would need to invest in growing that part of its business.

Verizon, meanwhile, has been at the centre of speculation about what will become of its datacentre portfolio since at least the beginning of 2016, following reports it had appointed CitiGroup to oversee the sale of 48 of its US facilities.

An analyst report, dated 6 October 2016, suggests the firm may have finally found a suitor in the form of colocation giant, Equinix, which has been steadily buying up sites to build out its global datacentre footprint in recent years.

According to the document, authored by Cowen & Co analyst Colby Synesael, a transaction between the two is “imminent”, with Equinix on course to pay around $3.5bn for Verizon’s facilities.

Computer Weekly contacted Equinix and Verizon for comment on this story, but had not received a response at the time of publication.

A history of mergers and acquisitions

Both CenturyLink and Verizon bought their way into the colocation market through their own merger and acquisition activities, with the latter paying out $1.4bn to acquire Terremark and its sites in 2011, while the former snapped up Savvis and its facilities the same year for $2.5bn.

Investor interest in the datacentre market continues unabated, with market watchers often pointing to the sizeable and predictable returns many of these firms make by snapping up sites containing tenants on multi-year leases.

Speaking to Computer Weekly, Steve Wallage, managing director of datacentre-focused analyst house Broadgroup Consulting, said the Verizon and CenturyLink deals highlight the different ways in which telcos seem to view their colocation assets.

“Telcos seem to be grappling with how important datacentres are to their future, with some seeing them as a non-core, expensive and low margin business whose sale generates attractive monies for investment elsewhere,” he said.

“Others view datacentres as core to their cloud offerings and value their up-selling opportunities. In Europe, particularly, we have seen more of the latter with the likes of TeliaSonera, T-Systems and Telefonica investing heavily in new facilities.”

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