Watching The AT&T-BellSouth Deal

The AT&T-BellSouth deal will inevitably mean consolidation, but leases for office space are probably more vulnerable than data center operations.

Rich Miller

March 6, 2006

1 Min Read
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There's tons of media coverage on the AT&T-BellSouth deal, much of which is focusing on the "back to the future" angle and competitive issues. Several stories have noted the companies' announcement that they'll realize $2 billion in savings while consolidating their operations. This is bound to affect some leases, although the near term focus would probably be on office space rather than data center space, since the office leases can be analyzed and consolidated more quickly.

Among those watching the deal carefully will be the folks at Digital Realty Trust, as AT&T is among their largest tenants, with seven leases spanning 289,343 square feet, according to recent SEC filings by DRT. Both companies have substantial web hosting operations, including AT&T's advanced hosting unit, which is a dominant player in the fast-growing world of massively multiplayer online games (MMORPGs). AT&T provides hosting for World of Warcraft (6 million users) and some Sony Online games, and recently signed a large deal with Microsoft to host MMO content for Xbox Live. That fact, plus the broader growth trends we've discussed here in recent weeks, probably provide some protection for data center space.

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