According to people with knowledge of the matter, Verizon Communications Inc. is considering the option of selling some of its enterprise assets that are worth $10 billion or thereabouts. The largest US wireless carrier wants to focus more on its core business. The people said that this sale would include that of Verizon’s data center unit, Terremark and the business that was formerly known as MCI, which provides internet and landline services to large business customers. Advances in cloud computing have turned out to be a major setback against these businesses and they have had to contend with tough competition from the likes of Amazon.com Inc. and Alphabet Inc.
However, separating the enterprise assets of Verizon is probably easier said than done and commercial agreements would have to be signed by a potential buyer with the company in order to make use of them properly. The sources said that the wireless communications firm is still thinking about how to structure the sale of these assets and no deal has been drafted up as yet. Earlier this year, Verizon was conducting talks with CenturyLink Inc., wireline provider for selling some of the assets. However, the people revealed that no agreement could be reached as different terms were being set by the involved parties.
This week, a change of strategy was evident as CenturyLink announced that it would be exploring some other options regarding its data centers, which include the possibility of selling them. Verizon is being advised about the possible sale of its enterprise assets by Citigroup Inc. The people said that they have estimated annual earnings before deductions of depreciation, taxes, amortization and interest to be about $2 billion. The sources did not wish to be revealed because these matters are still confidential and not to be revealed to the public.
In recent years, considerable adjustments had to be made by the enterprise telecommunications industry because corporate customers were now seeking more cheaper and sophisticated offerings for their data management needs. For a while now, AT&T was considering selling off its data center assets whereas last month, TierPoint bought out the data center business from Windstream Holdings Inc. for a cost of $575 million. Fran Shammo, the Chief Financial Officer for Verizon spoke on October 20th, during the third quarter earnings call of the company. He said that they were working on working through the economic and secular challenges with its global enterprise division.
In the quarter ended 30th September, the division reported a decline in revenue of about 4.9%. In 2006, Verizon had successfully acquired MCI for $8.4 billion after a tough bidding war with Qwest Communications, now owned by CenturyLink. In 2011, the company had acquire Terremark for a cost of $1.4 billion. Verizon has been considering selling some of its other non-core assets too. In February, the wireless carrier announced the sale of its tower portfolio for a price of $5 billion and $10.5 billion for the sale of its residential landline assets, which were purchased by Frontier Communications.