AT&T revisits data center sale in bid to refocus on wireless, video

Modern data centers ask for hyperconverged systems and beyond
AT&T is considering selling off its data center assets. (Image: iStockphoto)

AT&T is once again looking to shed its data center business as it looks to sharpen its sights on its wireless and video business operations.

The service provider, according to a Wall Street Journal report citing sources close to the matter, has tapped Bank of America to help it explore sale options AT&T for the data center business.

According to unnamed sources, AT&T’s data center business generates about $135 million. These sources added that the unit will garner an EBITDA of about $1 billion or more.

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RELATED: Editor’s Corner—How AT&T, Verizon and CenturyLink are exiting data centers and cloud services to become managed IT players

While selling off its data center business would enable AT&T to get potentially more funding for its pending Time Warner acquisition and other core projects related to its wireless and video business lines, sources said the process is ongoing and a sale might not happen.

In 2015, AT&T explored a sale of its data center business with Citigroup, but in the end, it only sold its hosting business to IBM.

AT&T is hardly alone in its desire to offload its data center assets as fellow telco Verizon and CenturyLink divested their data center assets over the past year. Verizon sold off not only its data center business to Equinix, but also its cloud services business to IBM. CenturyLink then sold off its data center assets to a venture capitalist consortium $150 million minority stake to a consortium led by BC Partners and Medina Capital.

Large telcos exiting the data center business has continued to ramp in recent years as the cost and resources it takes to run such facilities and out of the scope of the telco industry’s business focus.

John Dinsdale, chief analyst and managing director for Synergy Research Group, told FierceTelecom in an e-mail that it is surprising that AT&T had not started this process earlier. 

"The big telcos have a really hard time competing with either the major cloud providers or the big data center/colocation operators," Dinsdale said. "Some tried to get serious about it and most have now pulled back. It takes a lot of corporate focus and a lot of investment to be a big player in this game and it also usually takes companies with a global presence and global credibility to succeed in these markets."

Regardless of the telcos moving away from data centers, consolidation of the data center space has continued to ramp. While Equinix is clearly the most aggressive player, Digital Realty and Peak 10 have also been making moves to beef up their business lines.

Digital Realty acquired DuPont Fabros while Peak 10 acquired Via West. After completing its acquisition of Via West, Peak 10 rechristened the new company under the Flexential brand in January.

Interestingly, these data center providers are helping to also consolidate and solidify the top colocation markets. Synergy Research revealed in its latest report that the top colocation markets include 10 in North America, four in the EMEA region and six in the APAC region. Across the 20 largest metros, retail colocation accounted for 72% of third quarter revenues and wholesale 28%.