CenturyLink CFO: Sell Data Centers; Still Offer Colocation Capabilities & Managed Services
Century Link’s Data Center & Colo Plans:
In yet another sign that there’ll be fewer cloud providers with their own mega-data centers, Century Link has proposed to divest more than 18 data centers it acquired in 2011 when it purchased Qwest and then Savvis. With the Savvis aquisition, Century Link also picked up managed services and cloud services. CenturyLink became a colocation provider through the acquisitions. That move to divest its data centers won’t necessarily disrupt the company’s colocation business, according to Chief Financial Officer Stewart Ewing.
In a recent speech to investors during this week’s Citi 2016 Global Internet, Media & Telecommunications Conference, Ewing described the company’s evolving managed services business, saying that data center ownership is not necessary for monetization.
“When we bought Savvis, we indicated that we really would not invest in the data-center business such that we would be able to grow revenues at the same rates that the colocation companies would get … because we just simply didn’t want to make the investment there,” Ewing said. “And we bought Savvis more so for the managed services and cloud.”
After operating the facilities for a few years, CenturyLink has decided that “we don’t really have to own the data centers so we’re going to run through a process to see what level of interest is out there and our ability to monetize that asset, and if we can’t we’ll keep it,” he said.
“But we think that if we can monetize it, we can still sell colocation services from a wholesale perspective with whomever we sell the data centers to, or potentially other colocation providers, as well as … continue to be a customer of that business from the standpoint of managed services cages for customers being in those data centers, as well as the cloud pods that are in some of those data centers,” Ewing said.
CenturyLink wants to keep the managed services and cloud services pieces because, when coupled with its network and IT services, it gives the company a differentiator between it and others that aren’t able to “put the whole package together for customers,” he said.
“So as more midsize and enterprise customers, and smaller customers start moving their infrastructure from their data center and closets to the cloud, we think that we can facilitate that process for customers, and it will give us, again, a differentiator,” Ewing said.
Other telcos are making major decisions regarding their data-center assets. This week, Reuters reported that Verizon Communications has started a process to sell its data-center assets as it focuses on its core business. It reportedly hopes to sell the assets for more than $2.5 billion. In October, Windstream announced the sale of its hosted unit to TierPoint for $575 million.
Kelly Morgan, research director at 451 Research, said there’s been no apparent downside for telcos selling their data-center assets. “I think that so far there haven’t been a lot of drawbacks,” she told Channel Partners. “It all depends on the pricing,” she added.
Colocation Market:
The market leader is Equinix, with close to 8.5 percent of global market revenue. Digital Realty is the the second-largest supplier in terms of revenue (5.6 percent) but the largest in terms of operational square feet, with or 9.6 percent of global capacity.
The market leader is Equinix, with close to 8.5 percent of global market revenue. Digital Realty is the the second-largest supplier in terms of revenue (5.6 percent) but the largest in terms of operational square feet, with or 9.6 percent of global capacity.
“This remains an extremely fragmented industry,” said Kelly Morgan, research director, North American Datacenters. “The majority of colocation facilities are provided by local operators with only one to three facilities each. However, it is becoming harder for them to compete with the more geographically diverse providers that are now entering many local markets. We will see continued consolidation in this sector.”
Consolidation in the data center market has been ongoing. The biggest recent deal was the merger between Interxion and TelecityGroup in Europe. A recent example in the U.S. was the Fortune Data Centers and Dallas Infomart merger last October.
Other consolidation is occurring in the form of telecoms and cable companies buying service providers. Zayo acquired Latisys, and Canada’s Shaw Communications acquired ViaWest. Large communications companies have been acquiring into the data center and cloud market for years. One big past example was Verizon acquiring Terremark.
The market seems split between those focusing on core markets and those focusing on emerging markets. Equinix and Coresite focus specifically on their core markets, while other players like 365 Data Centers and EdgeConneX focus on underserved metros.
“This remains an extremely fragmented industry,” said Kelly Morgan, research director, North American Data centers. “The majority of colocation facilities are provided by local operators with only one to three facilities each. However, it is becoming harder for them to compete with the more geographically diverse providers that are now entering many local markets. We will see continued consolidation in this sector.”
Consolidation in the data center market has been ongoing. The biggest recent deal was the merger between Interxion and TelecityGroup in Europe. A recent example in the U.S. was the Fortune Data Centers and Dallas Infomart merger last October.
Other consolidation is occurring in the form of telecoms and cable companies buying service providers. Zayo acquired Latisys, and Canada’s Shaw Communications acquired ViaWest. Large communications companies have been acquiring into the data center and cloud market for years. One big past example was Verizon acquiring Terremark.
The market seems split between those focusing on core markets and those focusing on emerging markets. Equinix and Coresite focus specifically on their core markets, while other players like 365 Data Centers and EdgeConneX focus on underserved metros. Other colocation providers include Telx, and SV Colo.
451 Research estimates that less than half of the world’s current. total operational space for colocation (space supporting IT equipment) is in North America: about 43 percent. EMEA and Asia-Pacific compose a large portion of the other half, each accounting for one quarter of the market. However, this is the first quarter that APAC has edged out EMEA as the second-largest market. Latin America is around 4.5 percent of the market.
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