Why might Verizon start selling its colocation assets?

11 Jan 2016

In an apparent reversal of a statement that Verizon Communications’ CFO made last November, Reuters suggested in an article on 6 January that Verizon is starting a process of selling its entire data centre portfolio. TeleGeography’s Senior Analyst, Jonathan Hjembo, poses the question: does this signal a U-turn in the wider trend of data centre acquisitions by carriers over the last four years?

A TeleGeography blog entry notes that in 2011, Verizon, along with CenturyLink and Time Warner Cable, purchased major carrier-neutral colocation assets – moving increasingly into the colocation and cloud business units. Other carriers followed suit as well, including Zayo and NTT, snapping up individual assets and adding them to their portfolios. However, Hjembo underlines that not only might Verizon now be selling the 13 Terremark facilities that it previously acquired, but possibly all 47 of the group’s data centres will be up for grabs. Furthermore, other companies have started looking at divestment. In fact, if this is indeed a trend, it began a couple of weeks ago with Tierpoint purchasing the data centre assets of US fixed network operator Windstream Communications. CenturyLink and AT&T are now also considering similar moves.

‘So why the reversal?’ Hjembo asks. The answer appears to be that competition has been too stiff from public cloud providers like Amazon and Microsoft. The analyst continued: ‘For some carriers it has been just too difficult to make headway in this particular business. So it will be interesting in the coming months to see who might purchase Verizon’s assets, whether it is one entity or several, and who follows suit in making a similar move. We may be witnessing a narrowing of focus among some carriers and a return to core business.’