January 2, 2019
AT&T Inc. Jan. 1 completed the sale of its data center colocation operations and assets to Brookfield Infrastructure and its institutional partners.
AT&T received $1.1 billion for the transaction to support the company’s goal of reducing its net debt-to-EBITDA-ratio to the 2.5x range by the end of 2019. AT&T, which owns WarnerMedia, ended 2018 with a debt ratio of 2.8. Wall Street looks for a company to have a debt ratio between 0.3 and 0.6, according to some analysts.
WarnerMedia, which is setting up its own subscription streaming service to compete with Netflix and Disney+, is reportedly interested in selling its 10% stake in Hulu as part of AT&T’s debt reduction initiative. WarnerMedia’s share could be worth about $1 billion.
AT&T expects to generate $1.5 billion in cost savings (corporate overhead, procurement purchasing, marketing, etc.) and another $1 billion in revenue savings (churn reduction, cross-selling products) by 2021, including $700 million in savings by the end of 2019, $2 billion by the end of 2020.
Brookfield has established a company called Evoque Data Center Solutions to own and operate the assets. Customer contracts, employees supporting the colocation operations, fixed assets, leases and specified owned facilities have been transferred to Brookfield.
Evoque joins AT&T’s global colocation ecosystem program offering business customers access to 350+ data centers around the world.