Analysts note CenturyLink move could be start of additional spin offs
Regional telecommunications provider CenturyLink said it was looking at strategic alternatives for its data center and colocation business operations in a move analysts noted could include further breaking apart of CenturyLink’s operations.
CenturyLink said it has 59 data centers in North America, Asia and Europe with more than 185 megawatts of power across 2.6 million square feet of raised floor capacity. The company said it was looking at a “full range of options,” including a partnership or joint venture, or the sale of all or a portion of the data centers.
“We are confident in our strategy of combining enhanced network and hosting capabilities with a suite of related managed services offerings for our customers,” explained CenturyLink President and CEO Glen Post, in a statement. “We expect colocation services to remain part of our service offerings, but we do not believe ownership of the physical data center assets is necessary to effectively deliver those services. Therefore, we are exploring all of the strategic alternatives available for our data centers. We have not set a timetable for completion of this process and will take the time necessary to ensure we best position CenturyLink and deliver value to our shareholders, while remaining focused on providing our colocation customers excellent service.”
Macquarie Capital analyst Kevin Smithen noted Digital Realty Trust, which is the landlord for the CenturyLink properties, could be a potential acquirer of the assets, with recent private market multiples for data center assets having ranged from 10x to 12.5x earnings before interest, taxes, depreciation and amortization.
Smithen also wrote the move by CenturyLink could lead investors to look at further asset sales from the company, including the potential spin off of rural access lines from its Qwest enterprise business. The analyst firm claims CenturyLink’s assets could provide a company valuation in excess of $45 per share.
CenturyLink’s stock (CTL) was trading up more than 4% early Thursday at $29.23 per share.
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