CenturyLink’s data centers attract private equity firms, says report

A data center
Balticservers.com/CC BY-SA 3.0

CenturyLink’s data centers have become the target for a group of four private equity firms joining forces to purchase the nearly $2.5 billion in assets.

Citing people familiar with the talks, Reuters reported that GTCR, Charlesbank Capital Partners, Berkshire Partners and Stonepeak Infrastructure Partners are hatching a joint bid for the data center facilities.

In addition to the private equity firms, the sources said that CenturyLink has been also been discussing a possible sale with other interested parties, including data center providers and BC Partners. However, no deal has been reached yet, and it’s unclear if the telco will accept the VC consortium's offer.

"As we stated in our second-quarter earnings call in early August, our strategic review process continues to progress well and we expect to complete the process by the end of this year," CenturyLink said in a statement. “We are exploring a full range of options including, but not limited to, a partnership or joint venture, a sale of all or a portion of the data centers, as well as keeping these assets as part of CenturyLink’s portfolio.”

GTCR, Stonepeak and Charlesbank did not respond to Reuters requests for comment, while Berkshire Partners and BC Partners would not comment on the issue.

Due to the capital cost of running its 58 data centers, CenturyLink told investors during its third quarter earnings call that it was looking at various opportunities for its data center and colocation business operations and considering a number of options for this segment. Those options include a partnership or joint venture, a sale of all or a portion of the data centers, and an option of keeping some or all of the assets and operations as part of CenturyLink's portfolio.

Glen Post, CEO of CenturyLink, said that if the telco established a joint venture for its data center business, the telco would be able to provide data center services to its business customers without the cost of running the assets themselves.

By selling the data center assets, CenturyLink could have more money on hand to invest in areas like broadband and virtualization. However, the telco has not revealed how it would use any proceeds from the sale.

At the same time, CenturyLink has continued to enhance its data center business. The telco recently expanded the number of network interconnection partners across 59 of its data centers throughout North America, Europe and Asia Pacific, giving customers access to 99 additional carrier and network provider sources.

CenturyLink isn’t the only telco that’s been reviewing their data center business. Windstream sold its data center business to TierPoint, a data center specialist, for $575 million in October 2015.

Verizon is also looking for a buyer for its data center business. In January, a report emerged in Reuters that the telco has devised a plan to sell its data center business in a potential $2.5 billion deal. Verizon's colocation assets include 48 data centers, which currently generate earnings of about $275 million. However, no deal has been made yet.

Fran Shammo, CFO of Verizon, told investors in June that the company is making progress on the sale of its data centers, and expects to make a final decision whether it will sell the assets this fall.

For more:
- see this Reuters article

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