Verizon to auction off $3.5bn worth of US data centres

US telco Verizon has started a process to sell its data centre assets, hoping to fetch more than US$2.5 billion (A$3.5 billion), people familiar with the matter said on Tuesday, as the conglomerate focuses on its core business.

A sale would represent the latest effort by Verizon, the number one US 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 into hosting and colocation services after it acquired data centre operator Terremark Worldwide in 2011 for US$1.4 billion.

The so-called 'colocation' portfolio up for sale includes 48 data centres, and generates annual earnings before interest, tax, depreciation and amortisation of around US$275 million, one source said.

Citigroup is advising Verizon on the possible sale, they 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 centres.

AT&T has been exploring a sale of its own data centre assets since last year, while CenturyLink announced in November 2015 it was exploring strategic alternatives for its data centres. Windstream Holdings also sold its data centre business for US$575 million to TierPoint last year.

Verizon has been facing stiff competition from companies such as T-Mobile and Sprint, which have been offering deep discounts on cellphone and data plans.