CenturyLink today reached an agreement to sell its data centers to “funds advised by BC Partners, in a consortium including Medina Capital Advisors and Longview Asset Management.” The CenturyLink data center sale will generate $2.15 billion in cash for the company, subject to offsets. CenturyLink also will retain a minority stake in the newly-formed consortium and will continue to offer collocation services.
The news is not surprising. CenturyLink execs have made no secret of their desire to divest data center assets in recent months. CenturyLink said it will use the cash generated from the sale to partially fund its planned acquisition of Level 3 Communications announced Monday.
CenturyLink Data Center Sale
The CenturyLink data center sale is the latest example of an industry trend toward telecom data center divestiture.
Cincinnati Bell in 2012 was one of the first service providers to make this move. Since then, Windstream also has divested its data centers. And Verizon reportedly has been seeking a buyer or buyers for its data center assets.
Ironically, the telecom data center divestiture trend is occurring just a few years after the same industry was heavily focused on building and acquiring data center assets. An important data center acquisition for CenturyLink was Savvis.
More recently, however, it appears that service providers have determined that their money is better spent on their own networks. That’s what motivated Windstream’s move and is the likely reason behind Verizon’s apparent interest in the divestiture option. It’s also driving the CenturyLink move.
Service providers also may have come to the realization that the data center market is moving toward artificial intelligence and in other directions that would require further investment that the service providers would prefer not to make.
So were the telecom data center acquisitions for naught?
Not at all.
Service providers with a focus on the enterprise market generally feel they need to include collocation and hosting services, so generally when service providers sell off their data centers, they also negotiate an agreement with the new owner to continue to use the assets. And as those relationships continue, the service providers undoubtedly are in a better position than they would be had they entered into such agreements with no prior experience with the facilities.
Financial details about the CenturyLink data center sale can be found in today’s press release.