CenturyLink considers wholesale model for data center business

A top CenturyLink (NYSE: CTL) executive said that the provider is considering using its existing colocation facilities to offer wholesale services to businesses and other service provider customers. 

Speaking to investors during the Citi 2016 Global Internet, Media & Telecommunications Conference, Stewart Ewing, CFO of CenturyLink, said that CenturyLink might offer customers colocation through a wholesale model if it sells its colocation assets. 

"After operating it for a few years, we decided that we don't have to own the data centers so we're going run through a process to see what level of interest is out there and our ability to monetize those assets and if we can't we'll keep them," Ewing said. "We think that if we can monetize it if we can still sell colocation service from a wholesale perspective with whomever we sell the data centers to other colocation providers as well as be a customer of that business for managed services in those data centers and the cloud pods in those data centers."

CenturyLink immediately became a colocation provider through its acquisitions of Qwest, which had 18 data centers, and later Savvis.

However, when CenturyLink purchased Savvis in 2011, the service provider had no intention of expanding the data center business at the same scale of data center specialists like Equinix or Telx. The more valuable part of the business to CenturyLink it gained from Savvis was its managed and cloud services.

"When we bought Savvis we indicated that we really would really not invest in the data center business such that we would be able to grow revenues at the same rates the colocation companies are growing revenue, and we simply did not want to make the investment there," Ewing said. "We bought Savvis mainly for managed services and cloud."

Regardless of any decision about its data center assets, CenturyLink wants to continue providing managed and cloud services.

"We really want to keep the managed services piece and the cloud piece because we think, when we couple that with network and the IT services we provide, it gives us a differentiator between us and some of the other competitors that may have point solutions with having only network or cloud, but not being able to put the whole package together," Ewing said. "As more enterprises and mid-sized customers start moving their infrastructure from their data centers and closets to the cloud, we think we can facilitate that process for our customers and it will give us a differentiator."  

CenturyLink told investors during its third quarter earnings call that it was considering various options for its colocation business, including selling its assets and bundling colocation with managed services through a partner. As of this point, it has not made any specific decision about its assets.

Interestingly, CenturyLink's statements come amidst a flurry of activity in the data center space where a number of service providers are realigning their strategies.  

Rumors emerged this week that Verizon is going to sell its data center assets in an auction for $2.5 billion, while Windstream recently completed the sale of its data center business to TierPoint.

For more:
- hear the webcast (reg. req.)

Related articles:
As Windstream ditches its data center business, CenturyLink, others mull their future - Year in Review
CenturyLink establishes greater cloud presence with $2.5 billion deal for Savvis
Report: Verizon may sell data centers for $2.5B
CenturyLink drops 37K broadband customers as it tightens credit policies

This story was updated on Jan. 7 to clarify CenturyLink's stance on its colocation business.