AT&T Sells 31 Data Centers to Brookfield for $1.1B

AT&T is the latest telecommunications giant to sell a massive data center portfolio.

The Dallas-based company announced Thursday a $1.1 billion deal to sell 31 data centers (18 in the US and 13 elsewhere) to Brookfield Infrastructure Partners, which buys and managed infrastructure assets around the world.

The assets and operations being sold comprise AT&T’s data center colocation business. The telco, which has a considerable portfolio of enterprise IT infrastructure services, will continue offering colocation – often packaged with other services – to its enterprise clients, but the colocation provider will be Brookfield.

If regulators approve, AT&T expects to close the deal in six to eight.

New Colocation Player

When (and if) the deal closes, Brookfield will become a new player in the global colocation market. To date, the Toronto-based company’s infrastructure assets have consisted of energy transmission, distribution, and storage in the US, Canada, and Australia; fiber network infrastructure and wireless towers in France; and timberland and agriculture operations in North and South America.

Brookfield said it will launch a wholly-owned subsidiary to own and operate the data center assets. It has selected Tim Caulfield, currently CEO of the IT management consultancy Antara Group, to lead the new data center company as chief executive.

Telcos Get Out of the Data Center Business

After rushing to expand their data center portfolios about seven years ago, hoping to take advantage of the big cloud services opportunity, telcos in recent years have shifted strategy. Data center services are a capital-intensive business, which specialist providers like Equinix and Digital Realty Trust have grown to dominate.

Winning share of the cloud services market has become harder and harder for companies other than giants like Amazon Web Services and Microsoft Azure, which have been investing billions of dollars every quarter to grow their already dominating presence.

Verizon sold a massive data center portfolio to Equinix in late 2016, getting $3.6 billion for 29 facilities across 15 metro areas in the US and Latin America. Around the same time, CenturyLink offloaded 57 data centers in North America, Europe, and Asia, getting $2.15 billion from a group of investors that went on to form a data center provider named Cyxtera.

Reports that AT&T was shopping its data center assets around have been surfacing since at least 2015. At the end of that year, it did sell at least some of those assets, agreeing to offload the equipment and operations of its managed application and hosting services to IBM.

This February, the Wall Street Journal reported that AT&T had rekindled the efforts to sell data centers. Anonymous sources told the Journal that more than 300 facilities worldwide could be under consideration. That means the Brookfield deal may not be the last big AT&T data center sale.

Pivots to Media are Expensive

In Thursday’s announcement, AT&T said it will use proceeds from the sale to pay down debt. Those proceeds will be a drop in the $180 billion bucket of net debt the company will have on its books after it closes the pending Time Warner acquisition.

Both AT&T and Verizon have been investing in realigning their businesses to become big media players. AT&T’s biggest step in that direction has been the Time Warner deal, while Verizon has bulked up its media assets by acquiring AOL and later most Yahoo! assets, combining them under the new brand Oath.