Report: Verizon may sell data centers for $2.5B

Verizon (NYSE: VZ) has devised a plan to sell its data center business in a potential $2.5 billion deal, according to a Reuters report citing people close to the company.

Selling its data center business is just one of several moves the telco has made to realign its asset portfolio.

The telco in the process of selling its wireline properties in three states -- California, Florida, and Texas -- to Frontier Communications for $10.5 billion. In December, the deal was approved by California's public utility commission (CPUC), clearing the last regulatory hurdle it needs to close the acquisition on schedule later this year. Verizon also sold its wireless towers to American Tower.

If Verizon is successful in finding a buyer for its data centers, it would mark the end of its foray into the business that it started in 2011 when it purchased Terremark.

One of the sources that spoke to Reuters said that Verizon's colocation assets include 48 data centers, which currently generate earnings of about $275 million.

A report emerged in November that Verizon was going to sell its entire enterprise business for $10 billion, a unit that includes the former MCI, which Verizon acquired in January 2006, and the Terremark data center business. Among the potential suitors for that unit were CenturyLink (NYSE: CTL), but no deal ever materialized.

Fran Shammo, CFO of Verizon, later told investors during the Wells Fargo Securities 2015 Technology, Media & Telecom Conference that reports about the state of its enterprise business "are factless, baseless and there's no foundation behind these comments."

Verizon is not the only telco that has expressed a desire to shed its data center assets given the cost of building and operating the centers plus the strong competition from competitors such as Equinix.

AT&T also is rumored to be talking to potential buyers about its data centers. In addition, CenturyLink revealed during its third quarter earnings call that is considering various options for its data center business, including a possible sale. Besides selling the data center assets, it said it is also looking at bundling colocation with managed services through a partner.

Windstream has made the boldest move out of all of the telcos, selling its data center business to TierPoint, a data center specialist, for $575 million last October.

By selling off its data center business, Windstream has been able to free up more capital to further some of its strategic projects around consumer broadband and expand its network to satisfy wholesale and retail business demands.

As part of its Project Excel program, Windstream has dedicated $250 million from the proceeds it got from its data center sale to enhance its last mile network by installing VDSL2 network equipment to support up to 100 Mbps in more of its rural markets. It is simultaneously trialing 1 Gbps capable FTTH services in select parts of its wireline footprint, starting with Lexington, Ky. and four additional markets this year.

For more:
- See this Reuters article

Related articles:
Report: Verizon mulls $10B sale of enterprise business
Verizon likely won't sell wireline assets, says analyst firm
Verizon's Shammo: We'll have FiOS coverage in 70 percent of our East Coast footprint

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