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CenturyLink Sells Data Centers for $2.15B

Mitch Wagner
11/4/2016

Following its announcement this week of plans to buy Level 3 Communications, CenturyLink said Friday it will sell its data center and colocation business to a group of investors for $2.15 billion in cash. CenturyLink will also get a minority stake valued at $150 million in the consortium's global secure infrastructure company.

CenturyLink Inc. (NYSE: CTL) is selling off its portfolio of 57 data centers to the consortium, comprising funds advised by BC Partners , Medina Capital Advisors and Longview Asset Management, the telecom company said in statement Friday. The deal is expected to close in the first quarter of 2017.

CenturyLink will use the money to partly fund its $24 billion acquisition of Level 3 Communications Inc. (NYSE: LVLT), announced Monday. (See CenturyLink Splashes $34B on Level 3 Buy.)

The data centers will become part of a joint venture between BC Partners and Medina Capital, expected to launch in the first quarter of 2017, focusing on cybersecurity, data analytics and IT infrastructure, the two companies said in a statement. Other services in the joint venture include Cryptzone, for perimeter security; Catbird, for segmentation, visualization and security policy enforcement across cloud infrastructure; Easy Solutions for fraud detection; and Brainspace for machine learning, data discovery and analytics, and insider threat detection.


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The new joint venture will have more than 3,500 customers and 2.6 million square feet of raised floor capacity, the partners said.

Manuel Medina, founder and managing partner of Medina Capital, will be CEO of the new company, joined by the executive team from Medina Capital, including the former senior leadership of Terremark, a data center, cybersecurity and infrastructure services company acquired by Verizon in 2011 in a $2 billion transaction, the partners said. (See Verizon Taps Terremark for $1.4B.

Early last month, Verizon was reportedly in a deal to sell its data center assets to Equinix for about $3.5 billion, but nothing has been confirmed yet. (See Verizon Nearing $3.5B Data Center Sale to Equinix – Report.)

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— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, Editor, Light Reading Enterprise Cloud

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cleelread4567
cleelread4567
11/7/2016 | 4:22:50 PM
Telcos Cant Do Data Center
Agree with a lot of the posts - this seems crazy.  Having worked for some of the large telcos many years ago in Access Mgmt I think one of the main reasons that the Telcos failed in the colo arena is that they built their facilities where the customer had the Telco as the only connectivity option.  No customers wants to be constrained to 1 vendor.  The opposite of this is Equinix whose facilities are massive interconnection centers which drives value for its customers (and Equinix) and fosters large marketplaces.  It is in the telco's DNA to want to control things and our economy doesnt work that way anymore.

They also tried their hand at IaaS which didnt work well for them as AWS pretty much crowded everyone out.  Now AWS is one of the largest data center builders (at least where I live in Ashburn, VA).  Building and operating data centers is a capital /scale  intensive business which doesnt work well if you dont have scale and capital - which the telcos dont so best option is to sell for something to someone who can earn some return on these assets.  See more consoidation to come.
rauf.sulya
rauf.sulya
11/6/2016 | 3:26:01 AM
Too many Mergers & Acquisitions !!! Confused..
Tata sold their Data center business to ST Telemedia. Verizon wants to sell it off. 

Ceuntury link now..Why ? Why ? Stratgegy to be player only as ISP ?

I would say, they might have overprovisioned datacenter and expecting customers to colocate. As mentioned, now these providers will make customer premises as small data center..too much bandwidth demand...

 

 
danielcawrey
danielcawrey
11/5/2016 | 3:06:20 PM
Re: Will this be a seesaw trend?
It seems as though the tenor is that datacenters are not wanted; that doesn't mean in the future they will become desirable again. 

I can see from a security perspective why in the long run they might become something that organizations want. Physical security in terms of total ownership of a datacenter cannot be discounted. 
WilliamBrown99
WilliamBrown99
11/5/2016 | 10:10:12 AM
Tara
I think this is quite insane, it's absolutely too much!
jbtombes
jbtombes
11/4/2016 | 3:32:33 PM
Re: Will this be a seesaw trend?
Here's my pitch, a new reality show: "Flip that DC." Tech, money, geeks. Big Bang Theory meets Silicon Valley meets Property Brothers. I'm booking CenturyLink for the first season. Three dozen data center expansion projects over past five years. It's all about the ROI.
inkstainedwretch
inkstainedwretch
11/4/2016 | 3:11:28 PM
Re: Will this be a seesaw trend?
Yes.

I would assume that which way you go would depend in part on whether you could afford to build/buy your own data centers in the first place, and then it would depend in part on how much you need to invest in keeping your data centers versus how much you can charge depending on whether you own or rent? Or are there other significant factors to consider?

--Brian Santo
mhui0
mhui0
11/4/2016 | 3:01:06 PM
Re: Will this be a seesaw trend?
Data Center as a Service. That's the trend.

 

Telcos can stitch together data centers near their customer's office and rent that as a complete data center, despite not owning any of those buildings and hardware.
inkstainedwretch
inkstainedwretch
11/4/2016 | 2:30:19 PM
Re: Will this be a seesaw trend?
There's an incipient trend in which smaller data center customers can stitch together their own regional CDN/cloud networks. Should that hybrid CDN architecture become common, that would be an argument for companies like CenturyLink owning their own networks of CDNs and local data centers.

But if you want to buy Level 3, the cash has to come from somewhere. And you can always cut connectivity deals with the data centers you spin off.

--Brian Santo

 

 
msilbey
msilbey
11/4/2016 | 2:29:34 PM
Re: Will this be a seesaw trend?
I do feel like this is a push-pull cycle. I assume data centers are difficult on the balance sheet (lot of capex and opex), but at the same time, if you're a big enough telco, wouldn't owning be better than leasing in the long term?
Ray@LR
[email protected]
11/4/2016 | 2:13:10 PM
Will this be a seesaw trend?
Data center ownership - will this be something that CSPs will want, then not want, then want again etc etc?

Should large telcos own their own data center facilities? 
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