After the rush by telcos to grow their data center services business through both acquisition and construction a few years ago, some of them are now seeking to get out of the market.
Google and Amazon are said to be looking at the data center assets of the Indian telco Tata Communications, a subsidiary of the Mumbai-based conglomerate Tata Group. Indian business news daily The Economic Times reported that both US internet giants recently had talks with the telco’s management about its data center business, citing anonymous sources.
The paper reported last month that Tata had hired US investment banking firm Jefferies to shop its data center business around, saying the assets were worth about $500 million. Friday’s report, however, said the deal was expected to make $650 million to $700 million.
Another giant telco that’s reportedly hoping to sell off its data center services business is AT&T. Reuters reported in February – also citing anonymous sources – that AT&T was mulling the sale of about $2 billion worth of data center assets to pay down debt.
Tata is also reportedly hoping to reduce the size of its debt by selling a 70-plus-percent stake in its data center services business and focusing on its core network carrier segment.
Buying a fleet of data centers that already house other companies’ equipment would be a big strategic change for a Google or an Amazon. The internet giants design build their own so called “web-scale” data centers and lease smaller bits of data center capacity from commercial data center providers in facilities closer to densely populated metros.
Other than their public cloud infrastructure offerings, these companies don’t provide data center services themselves.
Tata says it has 1 million square feet of colocation space across 44 locations worldwide on its website. But the company doesn’t own all of that footprint. Its latest international expansion push, announced last year, was through partnerships with companies like NextDC in Australia, Interxion in Europe, and Pacific Link Telecom in Malaysia.
The highest concentration of Tata data centers is in India, but it has facilities all over the rest of Asia-Pacific, as well as in Europe, South Africa, US, and Canada.
According to The Economic Times, other suitors for Tata’s data center business include a list of American private equity firms, including the Blackstone Group, Carlyle, KKR, Bain Capital, and Advent International.
Correction: An earlier version of this post said Singapore's Sembcorp Industries had talks with Tata about buying Tata's data center business, which is what was reported by The Economic Times. A Sembcorp spokesperson contacted us saying the company never took part in such talks, and the article has been corrected accordingly.