Partners See Possible Cloud Business Boost As CenturyLink Reportedly Set To Sell Data Center Facilities

Months of speculation and uncertainty around CenturyLink's data center future might be coming to an end as its physical data center assets reportedly have attracted the attention of some possible buyers. Now partners are pondering how a potential sale would impact their cloud, hosting and co-location revenue.

A group of four private equity firms -- GTCR, Charlesbank Capital Partners, Berkshire Partners and Stonepeak Infrastructure Partners -- are getting ready to jointly bid for Monroe, La.-based CenturyLink's 58 data center facilities, according to a report from Thomson Reuters earlier this month.

CenturyLink did not return CRN's request for comment by publication time regarding if a potential data center sale would impact resources available to partners.

Similar to competing telecoms that are also in the data center space today, data center operations has been a secondary, or "fringe" business for CenturyLink, said one solution provider and CenturyLink partner who asked not to be named.

[Related: CenturyLink Plans Layoffs, Partners Hope Recent Emphasis On Channel Continues]

CenturyLink's reported decision to sell off its data centers could steer some partners away from suggesting CenturyLink's data center services to its business customers, at least for now while ownership may be uncertain, the solution provider said.

"Despite what the companies may say about a merger or acquisition, when the company changes hands, the tools and people are never the same so it absolutely would influence those decisions," the executive said. "You wouldn't want to take a high-billing customer and put that revenue at risk for something that may or may not resemble tomorrow what it does today."

But while CenturyLink's possible shedding of its data center facilities would make the solution provider reconsider suggesting its data center services to a customer, the executive believes that CenturyLink's decision could help the company grow in the cloud space.

"This could infuse them with some cash, and help them narrow their focus on strategic products and services, especially in the cloud," the solution provider executive said.

On its past three earnings calls, CenturyLink CEO Glen Post told investors that the carrier is considering several strategic options for its data center business. Post said that these options include a partnership or joint venture, a sale of all or a portion of the data centers, or even holding onto some or all of its data center locations.

Post said during the carrier's second-quarter 2016 earnings call that he anticipated that "the probable sale" of its data center business would be announced during the third quarter.

A carrier's decision to part with its data center facilities isn't surprising to solution providers. According to Michael Bremmer, CEO of TelecomQuotes.com, a telecom consultancy based in Moreno Valley, Calif., the data center wars have been won by the large data center operators and cloud providers, such as Amazon, Google and Equinix. But luckily for most service providers, such as the carriers that are offering cloud services, they don't need to be in the server business to offer cloud, he said.

Other carriers have backed out of the business of owning and operating data centers. Telecom provider Windstream sold off its data center facilities to data center operator TierPoint for $575 million in October 2015. And, according to Verizon CFO Fran Shammo during a June media conference, the Basking Ridge, N.J.-based carrier is also looking to offload its 48 data centers, worth an estimated $2.5 billion, that the carrier acquired from Terremark in 2011.

Scottsdale, Ariz.-based master agent PlanetOne Communications sits squarely in CenturyLink's footprint and sells its co-location and hosting services through its community of solution provider partners. The company's reported selling of its data centers shouldn't change its growing portfolio of strategic offerings, said Ted Schuman, CEO of PlanetOne, CenturyLink Premier Elite partner.

Schuman doesn't anticipate the potential data center sale having a negative impact on partners.

"CenturyLink is really driving toward solution-selling, and this includes cloud," he said. "Selling off those [data center] assets wouldn't change my confidence in suggesting CenturyLink because they have a lot of resources to help partners go to market to make the solution sale."

Cash freed up from the potential data center sale could also help CenturyLink deepen its foothold in the cloud space by giving it room to make a cloud-related acquisition, the anonymous solution provider said.

"All telecoms today are dependent on cloud revenue in some way, shape or form," the solution provider executive said. "Carriers that aren’t quite there have to get there somehow."