Verizon Communications has started a process to sell its data center assets, hoping to fetch more than $2.5 billion, people familiar with the matter said on Tuesday, as the U.S. telecommunications conglomerate focuses on its core business.
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A sale would represent the latest effort by Verizon, the No. 1 U.S. wireless carrier, to streamline its portfolio following a divestment last year of a chunk of its landline business and a portfolio of wireless towers.
It would also mark a reversal of its strategy to expand in hosting and colocation services after it acquired data center operator Terremark Worldwide Inc in 2011 for $1.4 billion.
The so-called 'colocation' portfolio up for sale includes 48 data centers, and generates annual earnings before interest, tax, depreciation and amortization of around $275 million, one of the people said.
Citigroup is advising Verizon on the possible sale of its data centers, the people added.
The sources asked not to be identified because the auction is confidential. Verizon and Citigroup declined to comment.
Verizon initially explored a sale of a larger portion of its enterprise business, including the former MCI assets, but could not reach an agreement with a buyer. It held discussions with wireline provider CenturyLink last year for its enterprise business, Reuters reported in November.
The enterprise telecommunications industry has had to adapt in recent years to corporate customers seeking more sophisticated and cheaper offerings to manage their data. Verizon joins a host of its rivals in telecommunications who are shedding their data centers.
AT&T has been exploring a sale of its data center assets since last year, while CenturyLink announced in November 2015 that it was exploring strategic alternatives for its data centers. Windstream Holdings also sold its data center business for $575 million to TierPoint last year.
Verizon has been facing stiff competition from companies such as T-Mobile US and Sprint Corp, which have been offering deep discounts on cellphone and data plans.
(Reporting by Greg Roumeliotis and Liana B. Baker in New York; Additional reporting by Malathi Nayak in New York; Editing by Bernard Orr)