Verizon Puts Its Colo On the Table

January 6th, 2016 by · 4 Comments

Reports this morning say that Verizon has done what they’ve been rumored to be considering for much of 2015.  They’ve apparently started a process to sell the company’s data center assets. With Citigroup advising, they hope to monetize some 48 facilities with a target of more than $2.5B.

That may sound like a bundle, but Verizon paid $1.4B for Terremark alone four years ago when the company had just $330M in annual revenues with three main locations. The idea at the time was to take a running start at the emerging cloud opportunity. They combined it with their own data center portfolio and put some significant money behind its expansion. Today Verizon’s data center business apparently has EBITDA of some $275M,.

We don’t exactly know the dividing line between what is for sale and what is not, but it has been apparent that the opportunity Verizon was chasing never really blossomed the way they hoped.  Tech giants like Amazon and Google sucking most of the oxygen out of the air on the public cloud side, and few telcos ever really found their footing in the cloud. That doesn’t mean the colo business itself isn’t good, but telco colocation has never gotten the same respect that similar carrier neutral facilities have. And so, many large telecom providers have soured on the whole idea, especially incumbents with more interesting wireless businesses to invest their resources in.

In November, Verizon was linked to further rumors that it is considering selling off its global networking arm as well. The Reuters report this morning suggests that they did hold talks with CenturyLink about selling that, but nothing came of it. Yet anyway… I suspect we have not heard the last of the idea.  They’re in the process of selling their ILEC footprints outside the northeastern corridor to Frontier.  Will we really see Verizon strip itself all the way down to a national wireless network with an incumbent FIOS territory?  It was not so long ago that the reassembly of Ma Bell was nearly complete…

As for who might buy Verizon’s data center assets and business, speculation will surely fall on the usual suspects.  That would be the carrier neutral data center REITs, possibly backed by private equity.  Equinix and Digital Realty would head the list, but any number of a dozen or more others could step into the ring – CoreSite, DuPont Fabros, QTS, Tierpoint, CyrusOne, etc.  There’s no need for Verizon to sell it all in one bloc either.  It would be relatively easy to break it up to maximize value.

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Categories: Datacenter · ILECs, PTTs · Mergers and Acquisitions

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4 Comments So Far

  • Anonymous says:

    So, they’ve lost customers and earn less on the assets, but want more for it? With a couple exceptions, they are not in all that great of locations nor truly unique markets. And finally, for a pure DC play it would come with a bunch of services junk that many players you listed would then have to sell that off.

    Sounds like a great deal….

    • Rob Powell says:

      So they can mark you down as a ‘maybe’? 🙂

      • Anonymous says:

        I think the real target for many buyers would be the Government related colo/cloud contracts and business is that is also part of the deal. Much like the QTS and Carpathia deal. The “Cloud first” marching order and the closing/consolidating of the government run data centers means there is still a ton of opportunity there for the data centers that want to get into the space. But its notoriously difficult to break into so I think there will be a lot of interest from potential buys based on that alone.

  • Anonymous says:

    For the established players, Equinix, DRT etc, who have a ready pipeline of customers and a growing business, I would have thought they could build 48 facilities themselves for less than $2.5Bn, and they would be fit for their purpose. They don’t need the customers, who for the most part are not a great fit for them anyway – those that bought telco DC facilities don’t generally want a lot of space and are generally tied into a networking contract.

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