Contact: Ben Kolada
Amid double-digit revenue growth in the cloud infrastructure market, US telcos are increasingly buying their way into this industry in an effort to stem losses in their traditional wireline businesses. However, just as the hosting and colocation sectors are growing rapidly, so too are the major players being acquired. So far this year, we’ve already seen three of the largest hosters scooped up by eager telco service providers, with CenturyLink’s $2.5bn Savvis purchase being the most recent. If the remaining telcos don’t move fast enough, they could increasingly be squeezed out of the growing cloud infrastructure space. And competition for the remaining firms is expected to increase as foreign operators could look to enter the US market as well.
Atlanta-based Internap Network Services is among the short list of firms most likely to be taken out next. The company has a wide-reaching geographic footprint, with facilities spread throughout the US, Europe, Asia and Australia. The company’s large US and international presence makes it a particularly attractive target, especially for large CLECs such as tw telecom and PAETEC, or even cable MSO Comcast. However, its footprint could also attract foreign operators looking for synergies in their home markets, as well as entry into the US market. My colleague Antonio Piraino at Tier1 Research recently penned a piece reminding buyout speculators that just a few years ago Internap rebuffed a takeover offer from Indian telco Reliance Communications. He notes that Reliance may once again be a potential suitor, alongside Asian firms Pacnet and China Telecom or European provider Colt Technology Services Group.
Though opportunities for US acquisitions are diminishing, domestic telcos still have options. Given the hyper-competitive takeover market that is expected for remaining US hosters, US telcos may instead look for international deals. As seen by regional stalwart Cincinnati Bell’s CyrusOne unit expanding into London, US telcos are showing no fear of international expansion when it comes to their hosting and colocation businesses. If US telcos look abroad, we wouldn’t be surprised if they checked out Interxion. The Schiphol-Rijk, Netherlands-based firm operates 28 datacenters in 11 countries spread throughout Europe, and pulled in more than €200m in revenue in 2010, a 21% jump from the previous year.