CSPs, Data centers

CenturyLink Data Centers: Potential Buyers Emerge

CenturyLink's data centers are still up for sale, and the telecom giant expects to fully engage interested parties in the next two weeks or so, according to CEO Glen Post. The discussions have several potential outcomes -- including CenturyLink selling some or all of its 60 data centers, or perhaps partnering with a buyer on various opportunities, Post added.

CenturyLink CEO Glen Post
Glen Post

The comments surfaced during CenturyLink's earnings call yesterday. CenturyLink began to explore strategic options -- i.e., a potential sale of its data centers -- in November 2015. Among the potential reasons: The company can't afford a head-on cold war arms race vs. Amazon Web Services, Microsoft Azure, Google Cloud Platform and IBM SoftLayer. Instead of building data centers in that arms race, CenturyLink wants to offer the cloud and managed services that run within them.

In preparation for a potential data center and co-location business sale, the unit now has a dedicated management team, and will soon have its own financial statements for potential suitors to study, Post said.

CenturyLink Data Center Sale: The Discussions

Still, the potential sale process could move in multiple directions. "We spoke to a number of interested parties who expressed interest in all options ranging from an outright purchase of our data centers and co-lo business, a partnership and/or a joint venture," Post said. "This is an ongoing process that could result in any one of these outcomes, including the potential sale of a portion of or all of our data center business. Also, as we have said, we could ultimately choose to retain these assets and related operations."

One potential path is CenturyLink selling the data centers but retaining a "wholesale opportunity" within those data centers. That would allow the company to avoid some capital expenditures, while shifting budget toward network-centric R&D.

CenturyLink is walking a fine line, saying it believes in the data center industry -- but that it doesn't need to own the physical assets to deliver a range of managed IT and cloud services. In other words: CenturyLink is suggesting the business will continue to perform well even if a buyer for the data centers doesn't emerge.

CenturyLink Data Centers: The Right Time?

Also, Post said data center valuations are healthy at the present time. "We think it is a good business," he said. "It is good, the margins are good, we are growing this business some, so it is not we are running from it.   we do not think we have to own those assets, so that is really areas we are looking at all the alternatives."

Asked for more details about the potential data center sale, Post said: "We are seeing interest from strategic buyers as well as potential buyers... Again, you never know, but the interest level is high right now."

Within the overall IT services ecosystem, data center M&A activity has been hot in recent months. Verizon also has considered a potential data center sale, according to reports.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.