Verizon Reportedly Starting New Year by Selling Data Centers

Verizon Communications reportedly has started a process to sell its data-center assets as it focuses on its core business.

The telco hopes to sell the assets for more than $2.5 billion, according to a Reuters report citing anonymous sources. Citigroup is advising Verizon on the possible sale of its data centers, it said.

The portfolio for sale includes 48 facilities. The move would mark a reversal of Verizon’s strategy to expand in hosting and colocation services after it purchased data center operator Terremark for $1.4 billion in 2011.

Janet Brumfield, Verizon’s director of corporate communications, said the company does not comment on rumors.{ad}

In November, Fran Shammo, Verizon’s chief financial officer, denied a Reuters report that it is considering selling off its Terremark data-center unit as well as “the business formerly known as MCI, which provides landline and Internet services for large business customers.” The assets are worth an estimated $10 billion.

IHS' Cliff GrossnerBy Verizon “cashing out,” it will be free to invest in other areas that it might deem “more strategic to the business,” said Cliff Grossner, research director of data center, cloud and SDN at research firm IHS.

“Participating in the off-premises IaaS cloud-services business requires a very large and ongoing commitment to invest in order to keep pace with the large cloud service providers such as AWS, Microsoft Azure and Google,” Grossner told Channel Partners. “The big three have been relentlessly cutting prices over the last 24 months as they benefit from larger scale, making it more difficult for tier-2 players to compete unless they invest to diversify to satisfy specialized needs such as keeping data in-country, or compliance with vertical-specific legislation such as HIPAA in health care.”

This is the latest instance of a shift in the data-center industry as more traditional telcos move away from running their own facilities and/or hosting divisions. In October, Windstream announced the sale of its hosted unit to TierPoint for $575 million. Also, CenturyLink told investors it may consider selling its data centers; however, it does not plan to exit the business, Grossner said.

“I had a recent discussion with them, and they reassured me that they were not planning to exit,” he said.

Last month, AT&T and IBM announced an expanded agreement that transitions control of the former’s managed application and managed hosting services unit to the latter. IBM will align its newly controlled managed-service capabilities with its cloud portfolio. It also gets equipment and access to floor space in AT&T data centers that support the applications and managed hosting operations.

Regarding a trend of cloud service providers selling their assets and getting out of the off-premises cloud-services business, “we are certainly seeing some consolidation in the IaaS marketplace as it matures with recent strategic shifts by HPE and Colt to exit this business,” Grossner said.

“We might see some more of the tier-2 IaaS providers make a similar move, but there is also opportunity for smaller cloud service providers to differentiate,” he said. “In our recent North American Enterprise survey, respondents indicated that on average they used 10 different cloud service providers in 2015, and expected this to grow to 14 by 2017.”

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