One of the top-four network carriers in the US, Verizon Communications Inc. (NYSE:VZ) will sell its data center assets to create a cash influx of roughly $2.5 billion. The move will also allow Verizon to concentrate more on its core business. However the auctioning process is considered to be confidential.
The divestment is strategic to the network carrier as it will prune its landline business assets to further strengthen its wireless carrying capabilities. It began to consolidate its wireless services with a disinvestment in 2014 of some of its landline assets and towers.
The divesture of the data centers was unexpected. In fact, it reverses an earlier strategy which was looking to expand the hosting as well as colocation services. The company had commenced on this business segment after it bought data center operator, Terremark Worldwide Inc in 2011 for $1.4 billion.
However, under Citigroup Inc.’s financial mentorship, Verizon Communications Inc. (NYSE:VZ) has opted to sell its data center assets.
Co-location sale
Verizon Communications Inc. (NYSE:VZ) portfolio for sale now include 48 data centers which have an annual earnings of roughly $275 million.
Earlier it was expected that Verizon would sell a big section of the enterprise business it conducts. Analysts expected that MCI assets too would be disposed during this stage. However, Verizon was unable to find a buyer for it, after talks with Century Link Inc failed in November.
Others divesting too
In addition to Verizon Communications Inc. (NYSE:VZ) other networks too are considering sale of their data center assets. This is because enterprise businesses are looking for faster, low-cost and sophisticated data management services. AT&T Inc (NYSE:T) is one of the other networks which is seriously exploring this option. The divesture and the cash inflow will allow Verizon to focus on its core business of wireless services. Verizon has been struggling in a crowded network marketspace. Nearly all competitors have cut into its market share by offering deep-discounts on their data plans for smartphones.
Anthony Young
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