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AT&T to Sell Data Center Colocation Operations to Brookfield

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In a concerted move to exit the capital-intensive data center business and reduce debt, AT&T Inc. (T - Free Report) has inked an agreement with Brookfield Infrastructure and its institutional partners to divest the properties and related assets. The transaction worth $1.1 billion is likely to be completed by the end of the year subject to mandatory closing conditions and regulatory approvals.

Under the terms of the agreement, AT&T will transfer the ownership of 18 Internet Data Centers in the United States and 13 in international locations to Brookfield. On successful completion of the deal, Brookfield will form a wholly-owned subsidiary to manage the business. AT&T will continue serving the diversified clientele of more than 1,000 companies across technology, financial, industrial, media retail and other sectors as an anchor tenant of the colocation operations.  

Over the years, Brookfield has established itself as a leading owner and manager of essential infrastructure assets across the globe. With more than $75 billion in assets under management across the communications infrastructure, utilities, transport, energy, renewable power and sustainable resources sectors, it aims to leverage AT&T’s assets to gain a solid foothold in the colocation data center business.

The strategic alliance is expected to build on AT&T’s nearly two-decade history of providing customers access to premier data centers across the globe and its impeccable success record in the colocation services ecosystem. Moving forward, AT&T and Brookfield will continue working under a joint marketing agreement that will enable both companies to participate in sale/resale opportunities. The proceeds from the transaction are likely to be utilized to reduce AT&T’s debt burden, which apparently surged to $180 billion post the acquisition of Time Warner.

Meanwhile, AT&T is aiming to augment its footing in the digital ad sales market in order to revive its growth trajectory. The company is reportedly holding advanced level talks to acquire AppNexus, a technology firm that operates the world’s largest independent marketplace for digital advertising. AppNexus’ acquisition will likely offer AT&T the requisite wherewithal to better compete against its rival Verizon Communications Inc. (VZ - Free Report) , which already has a significant presence in online advertising, as well as gain a foothold in the market, which is virtually commanded by Facebook, Inc. (FB - Free Report) and Alphabet Inc.’s (GOOGL - Free Report) Google.

AT&T has underperformed the industry in the past six months with an average loss of 9% compared with a decline of 1.8% for the latter. Whether such collaborations and strategic acquisitions can benefit the stock in the future remain to be seen.


AT&T currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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