DT Boosts Datacenter, SDN Strategy With Acquisition

Deutsche Telekom is strengthening its pan-European wholesale and enterprise services capabilities with the acquisition of most of GTS Central Europe for €546 million (US$731 million).

The move, which is subject to regulatory clearance, will give the German giant an extensive transport network and a number of datacenters across Central and Eastern Europe (though not in Slovakia, as the GTS assets in that country are not included in the transaction).

Deutsche Telekom AG (NYSE: DT) says the GTS Central Europe assets will help support its regional mobile service operations, particularly in the Czech Republic and Poland, and strengthen its business-to-business services portfolio. And although the German giant did not mention its TeraStream project in its official announcement, the move will certainly bolster its efforts to develop software-defined networking (SDN) capabilities.

GTS CE, which recently announced a network upgrade to 100G, offers a broad range of wholesale and enterprise services, including Ethernet connectivity, IP VPNs, wavelength services, datacenter collocation, cloud services (such as virtual hosting), and voice. It has about 38,000 enterprise and communications service provider (CSP) customers (including BT, Verizon, and Vodafone) and owns and operates its own fiber network (26,000 route kilometers), which reaches from Germany in the west to Russia in the east. It has datacenters in the Czech Republic, Hungary, Poland, and Romania.

The regional operator launched its infrastructure-as-a-service (IaaS) offering in 2011 and enables its customers to self-provision virtual services using a self-service portal.

Excluding the Slovak assets that are not included in the acquisition, GTS CE reported 2012 revenues of €347 million ($465 million) and EBITDA of €87 million ($117 million). GTS CE has been owned and managed by a consortium of private equity firms for the past six years.

Why this matters
There are a number of reasons why this acquisition is worth noting, as it highlights the increasing importance of network ownership to the major telcos.

Deutsche Telekom has extensive mobile operations across Central and Eastern Europe -- including Croatia, Czech Republic, Hungary, Poland, and Romania -- that will need ever-increasing support for the delivery (downlink and uplink) of data services as 4G LTE services are launched. By having its own transport network and datacenters, DT should be able to reduce its operating expenses (it won't have to pay as many third parties for network services), have greater control over content delivery (particularly video traffic) and also develop enterprise (particularly cloud) and wholesale services using the same infrastructure. The same drivers also led Vodafone Group plc (NYSE: VOD) to buy Cable & Wireless Worldwide. (See Vodafone Offers £1B for C&W Worldwide.)

But it doesn't stop there. Deutsche Telekom is also engaged in a radical project to transform itself into a software-defined operator: Having more extensive fiber and datacenter assets across Europe will help it trial and develop news ways of building and running its business in the coming years. (See Deutsche Telekom: A Software-Defined Operator.)

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— Ray Le Maistre, Editor-in-Chief, Light Reading