Verizon confirmed that it’s on track to finalize a sale of its data center assets, a move that will enable it to sharpen its focus on wireless and content services. The carrier's top financial executive said they are negotiating with just one unnamed party.
“We should have something to formally announce to everyone early in the fourth quarter,” said Fran Shammo, CFO of Verizon, during the company's third-quarter earnings call. “More to come on that but we are progressing with the sale of our data centers."
Shammo would not say who is interested in the assets, but indicated they are talking with a single party. “At this point we are in negotiations with one individual,” Shammo said.
A recent Cowen and Company research note suggested that Verizon has been in talks to sell the data centers to Equinix for nearly $3.5 billion.
According to a Reuters report issued in January, Verizon's colocation assets include 48 data centers, which currently generate earnings of about $275 million.
The telco has built a sizeable set of data center assets. In particular, the Miami, Florida, and Culpeper, Virginia, data center assets which are major internet traffic hubs, are viewed as the most valuable ones that Equinix and others would like to have in their portfolio. Besides owning the Terremark data centers, Verizon has built its own data centers in various markets.
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By selling off its data center assets, Verizon would be leaving a market where it once hoped to become a major player.
In 2011, Verizon purchased Terremark for $1.4 billion with plans to couple data center services with its portfolio of cloud-based services.
Verizon continues to expand its cloud portfolio with new services like SD-WAN, but the telco realized, like ILEC peers CenturyLink and Windstream, that the key challenge was the capital it takes to maintain and operate these centers.
While Verizon and CenturyLink have been public about their data center sale plans, what AT&T will do remains a question. AT&T, according to a report from The Street, sold its Hawthorne, California, data center facility to Carter Validus Mission Critical REIT II for nearly $79.5 million.
Outside of the traditional telco arena, it’s clear that the data center market has entered a period of consolidation. Equinix purchased TelecityGroup in January and then sold a portfolio of eight European data centers to Digital Realty for $874 million six months later to satisfy regulatory concerns. In October 2015, Digital Realty acquired Telx Group from Abry Partners and Berkshire Partners for $1.89 billion.