Verizon weighing $14.2bn sale of enterprise assets

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Verizon weighing $14.2bn sale of enterprise assets

Struggling in face of cloud competition.

Verizon Communications is exploring a sale of its enterprise assets which could be worth as much as US$10 billion (A14.2 billion), according to people familiar with the matter, as the largest US wireless carrier seeks to focus on its core business.

The sale would include the business formerly known as MCI, which provides landline and internet services for large business customers, as well as Terremark, its data centre unit, the people said this week.

The businesses have struggled to keep up with advances in cloud computing, and face fierce price competition from players such as Google and Amazon.

Verizon's enterprise assets might not be easy to separate and any potential buyer would likely have to sign commercial agreements with the company, some of the people said. Verizon is still considering how some of these asset sales could best be structured and no deal is imminent, the people added.

Wireline provider CenturyLink was in talks with Verizon earlier this year to buy some of the assets but could not agree on terms, the people said. In a strategy shift, CenturyLink announced this week it would instead explore options for some of its data centres, including possibly selling them.

Citigroup has been advising Verizon on the possible sale of the assets, which have estimated annual earnings before interest, taxes, depreciation and amortisation of around US$2 billion, the people added.

The sources asked not to be identified because the matter is confidential. Verizon, CenturyLink and Citigroup declined to comment.

The enterprise telecommunications industry has had to adapt in recent years to corporate customers seeking more sophisticated and cheaper offerings to manage their data.

AT&T has been exploring a sale of its data centre assets for some time, while Windstream Holdings sold its data centre business for US$575 million to TierPoint last month.

Verizon CFO Fran Shammo last month said the company continues "to work through secular and economic challenges" with its global enterprise division, which posted a 4.9 percent decline in revenue in the quarter ended Sept. 30.

Verizon's US$8.4 billion acquisition of MCI was completed in 2006 following a fierce bidding war with Qwest Communications, which is now part of CenturyLink. It acquired Terremark in 2011 for US$1.4 billion.

Verizon has been looking to sell other non-core assets as well. In February, it announced the sale of residential landline assets to Frontier Communications for US$10.5 billion, and unloaded its tower portfolio for more than US$5 billion.

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