FierceTelecom recently published an article about AT&T wanting to relinquish its data center business, and it is another example in a list of telecom providers who have either done the same thing or are preparing to do so. The article sites the reason for the intended sale is so that the carrier can focus on its wireless and video businesses. Another source of motivation for AT&T in this decision could be that it would allow them to get more funding for their lagging acquisition of Time Warner.
AT&T is joining a number of other providers who have recently sold or divested their data center businesses, including Verizon, CenturyLink and Level 3. Many are selling to companies such as Equinix, who can manage the services and relieve them of the resources and cost it takes to run the facilities, especially as demand continues to ramp up. Many providers are seeing that as the telecom industry diverges into different services that customers want, it is becoming increasingly hard to compete with big data center operators when their resources would be better allocated towards developing other bundles and services, such as more widely available wireless, and streaming services. We asked our CEO, Mike Murphy, what he thought about about this data center business trend:
“Managing a data center portfolio is very much a real estate play that requires special resources. Many of the carriers seem to have come to the conclusion that they can be more competitive focusing on providing the services that live in the data center versus managing the data center real estate. The sale of the data center portfolio also serves to provide an infusion of capital that helps service providers invest in their core businesses.”
As this trend progresses, colocation operators are on a similar race to the top, with a number of acquisitions happening in their market. Equinix has always been the name that comes to mind for these operators, but recently Digital Realty and Peak 10 (now Flexential) have made acquisitions that will make them very competitive. It is entirely possible that in the next few years we see these 2 branches of the industry start to solidify their own markets even more, with providers focusing on services they can provide to customers like bandwidth and storage and data center operators focusing on maintaining their centers and increasing the resources available within them to their customers.