AT&T completes sale of data center business to Brookfield

data center
AT&T is the latest telco to exit the data center and colocation space with the sale of its assets to Brookfield Infrastructure. (Pixabay)

AT&T announced that all of its customer contracts, employees supporting the co-location operations, fixed assets, leases and the related facilities have been transferred over to Brookfield.

With the deal in hand, Brookfield Infrastructure Partners now has 18 data centers in the U.S. and 13 globally. Brookfield has formed a wholly owned company, Evoque Data Center Solutions, to own and operate the assets.

Evoque has joined AT&T's global co-location ecosystem program whereby AT&T will offer Evoque's co-location services to its business customers. AT&T's ecosystem program offers business customers access to more than 350 data centers around the world.

AT&T will use the $1.1 billion to pay down the debt it has accumulated from buying Time Warner, some of Yahoo's internet assets and DirecTV over the past several years.  AT&T said the deal would help it reduce its net-debt-to-EBITDA-ratio to the 2.5x range by the end of 2019. 

Trend-wise, the Brookfield transaction is notable on two fronts. Similar to service providers exiting the cloud business, AT&T has become the latest carrier to sell off data center assets. Instead of competing against large co-location and cloud service providers, telcos have decided to get out of the data center and co-location business in order to invest in more media assets and other areas of technology.

In 2016, Verizon sold its 24 data center sites and operations to Equinix for $3.6 billion. A year later, CenturyLink sold its data center and co-location business for $2.3 billion to a consortium that included Medina Capital Advisors and Longview Asset Management. Those assets were used to form Cyxtera Technologies.

RELATED: Cyxtera serves up on-demand, connectivity and compute data center services

Going back four years, Windstream parted ways with its data center division by selling it to TierPoint for $575 million in cash.

More investments to come in data center sector

The second trend is investors are starting to put more of their funds toward data centers and co-location facilities. Hyperscale providers such as Microsoft Azure, Google and Amazon Web Services are pushing the capacity demands of data centers while telcos and enterprises are also using them to enable their business services and applications.

According to a story by Data Center Knowledge, there will be more data center investments to come this year by traditional infrastructure investors. Investors are viewing data centers as desirable physical assets that are similar to their investments in toll roads, power plants, airports and cell towers.

In September of last year, Digital Reality Trust teamed up with Brookfield Asset Management in a deal to buy Brazil-based Ascenty from private-equity firm Grant Hill Partners for about $1.8 billion. Ascenty leases data center space to hyperscale cloud providers, according to Data Center Knowledge.

Last year, Cologix was acquired by private equity firm Stonepeak Infrastructure Partners.