Equinix Mulling Purchase of CenturyLink and Verizon Data Centers

Data center colocation giant in talks with big telcos about buying some of the assets they’re looking to offload

Yevgeniy Sverdlik

February 18, 2016

3 Min Read
NAP of the Americas, Miami

Equinix is one of the companies involved in talks with Verizon and CenturyLink about potentially buying data center assets the two big US telcos are looking to offload, as they hit the brakes on expansion into the cloud services market.

“They’re talking to several people; we are one of them,” Equinix CEO Stephen Smith said on the company’s fourth-quarter earnings call Thursday.

Smith did not name Verizon and CenturyLink specifically but said there were a “couple big telcos” that have said publicly that they were interested in divesting data center assets. The only two big telcos that have said this publicly are Verizon and CenturyLink.

There are other telcos that have not confirmed publicly such divestiture plans, and Equinix is “in exploratory stages” with them as well, Smith said.

It’s likely that AT&T is one of those other telcos. The company has been looking to offload about $2 billion worth of data center assets since at least early last year, when Reuters reported on these plans citing anonymous sources. AT&T offloaded at least some of those assets last year, handing its managed hosting business, including equipment and access to data centers, over to IBM.

Echoing what has been clear for some time now, Smith said telcos that acquired big cloud and data center services companies several years ago in hopes of building out successful cloud businesses have found it difficult to compete with the biggest cloud infrastructure providers: Amazon, Microsoft, and Google.

“There’s a lot of activity [by telcos looking to offload data center assets], mostly pressured and driven by the big Infrastructure-as-a-Service companies that are going as fast as they are,” he said. “Now, [telcos] are trying to get out of it, and their data centers go with it.”

Read more: Who May Buy Verizon's Data Centers?

No big telco has actually said it was getting out of the cloud services business, but the attempts to get rid of assets that support the bulk of those businesses are indicative of their health.

CenturyLink executives said the company would continue providing cloud services, but it would look for an alternative data center strategy for hosting them. Verizon has been vague on this front, but its CFO Francis Shammo said in January the company was undertaking an “exploratory exercise” to see if selling its data center assets would make business sense.

Read more: Why CenturyLink Doesn't Want to Own Data Centers

News reports saying that Verizon was looking to sell some or all of its data centers have been coming out since November, but they relied on anonymous sources, and the company has avoided commenting on them.

Verizon has already killed at least one of its cloud infrastructure services. Last week, the company sent users of its Public Cloud compute service a notice that they had two months to move their data elsewhere, after which it would shut the service down.

As we reported earlier, while there are some data center assets in Verizon’s massive portfolio that many players in the industry would find very attractive – primarily data centers that came with its $1.4 billion acquisition of Terremark in 2011 – it will be difficult for the telco to find a buyer who would agree to absorb the entire portfolio in bulk.

“There are certain assets in those portfolios that we would be interested in,” Smith said, referring to the two big telcos’ data center portfolios. “But there are many of those assets that wouldn’t make any sense for us.”

Equinix reported $2.7 billion in revenue for 2015 – up 12 percent from the previous year. Its net income for the year was $188 million.

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