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Telefonica Selling Worldwide Data Center Assets PDF Print E-mail
Wednesday, 20 February 2019 08:58

Telefónica has officially confirmed the sale of its data center portfolio across Europe, the US and Latin America after months of speculation in another bid to cut its debt which amounts to more than $48bn.

Equinix, Digital Realty and Brookfield are understood to be on the frontline to acquire the assets after making it through the first round which terminated on January 21, according to Spanish newspaper El Pais.

Bank of America Merrill Lynch is said to be coordinating the divestiture which could lead to one of the largest M&A in the data centre space at $600m.

Other companies interested in the sale but which are understood to not have gone ahead after the January 21 deadline include fund management firms such as I Squared Capital, Blackstone and KKR.

Shares of the Spanish telco were up this morning 0.57%. Telefónica’s market capitalization was also this morning evaluated at $43.34bn.

Telefónica said in a press statement: “Based on the news that appeared in the media this morning, we can confirm that within the company’s management structure of its assets, based on value creation and strategic positioning, Telefónica is considering the sale of some of its data centers, which could result in one or more transactions.”

Data Economy has contacted Telefonica for further clarification, but the company is yet to reply. Brookfield, Digital Realty and Equinix were not immediately available for comment.

The data center portfolio includes 25 facilities spread across the US, Europe and Latin America including eight sites in Spain, three in Brazil, three in Colombia, three in Equator, two in Peru, two in Chile, two in Argentina and one in Miami and one in Mexico.

The data centers are currently managed under different branches of Telefónica, with for example, Telefónica España and Telefónica Hispanoamérica controlling the sites in Spain and Chile respectively.

Rumours of the sale appeared in November last year, after a source told Bloomberg of the internal discussions to divest the data centre portfolio, in a deal evaluated at the time between $500m and $1bn.

The sale of the data centers could be similar to what happened with the Verizon and CenturyLink portfolios, which were split into different transactions answering the buyers’ needs on a regional level.

For example, Equinix’s $3.6bn M&A of the Verizon assets was only partial, with the US colocation provider opting for sites in North America and LATAM, and not taking others elsewhere.

With a growing appetite for Latin American sites, as the local digital economy booms, the Telefónica portfolio could prove a big differentiator to any of the parties still in the race to acquire its data centres.

In Europe, the acquisition of the Spanish facilities could lead to the revival of Spain as a leading colocation data center destination in the continent and help boost Madrid’s profile as one of the Top 10 data center hot spots of Europe.

It is not known yet when the first tranche of the Telefónica portfolio will be sold, or indeed if the portfolio will be sold as a whole to a single operator – provided that the M&A is accepted under regional competition laws.

Telefónica’s move to sell its data centres confirms a growing trend amongst the telecommunications game board with several market rumours suggesting other European operators are in the process of or deliberating the sale of their own data center assets.