Verizon is evaluating whether its data center assets are more valuable inside or outside its portfolio.

by Gina Narcisi on January 21, 2016

Telecom giant Verizon Thursday reported fourth-quarter 2015 earnings that beat Wall Street expectations. The carrier also broke its silence on recent reports that it may be shopping around its data center business, confirming that the matter is under consideration but no decision has been made.

Verizon attributed its strong quarter to seasonal growth in its wireless and wireline sales segments. Verizon's enterprise and small-business segments saw a decline in fourth-quarter 2015, which ended Dec. 31.

Verizon, Basking Ridge, N.J., reported revenue of $34.3 million and adjusted earnings per share of 89 cents, up 25.4 percent when compared with adjusted earnings per share of 71 cents during fourth-quarter 2014. These results surpassed analyst expectations of 88 cents per share on $34.06 billion in revenue, according to Thomson Reuters. Free cash flow also increased, totaling $18.8 billion.

Verizon's global enterprise revenue declined in the fourth quarter by 3.3 percent and 5.2 percent when compared to the period ending one year ago. The global wholesale business also saw a small decline in revenue of 0.2 percent in the fourth quarter and 3 percent when compared with fourth-quarter 2014. The carrier's small-business unit also experienced a decline of 5.6 percent in the fourth quarter.

"We are very focused on margins and improving profitability. We are committed to reducing our cost structure, while maintaining strong customer satisfaction," said Verizon CFO Fran Shammo on the company's earnings call.

In 2015, Verizon said it would sell specific wireline properties to telecom provider Frontier Networks. Proceeds from the deal, which is expected to close at the end of first-quarter 2016, will be used to pay down debt, Shammo said.

Despite disappointing revenue in the business segment, Verizon said new revenue streams from the Internet of Things are growing. The carrier noted revenue of approximately $200 million in the fourth quarter and about $690 million for the full year, marking a year-over-year increase of 18 percent.

During the question-and-answer portion of the earnings call, Verizon addressed industry rumors that it was considering the sale of its Terremark data center business unit for $2.5 billion. Shammo said no decision has been reached.

The potential sale of its data centers is currently an "exploratory exercise," Shammo said. Verizon is evaluating whether its data center assets are more valuable inside or outside its portfolio.

"Around asset sales, we will always looks for opportunities," he said. "I view that asset similar to how I view our towers -- is there a way to monetize that asset in a way that contributes value to our shareholders and gives us the capability to move that capital into higher-returning assets for Verizon?"

Given the publicity around the rumored data center sale, it's not surprising that Verizon addressed the issue during its earnings call. But whether or not the carrier plans on shedding its data center business, Verizon will most likely be cleaning things up this year, said Darryl Senese, vice president of carrier services at Atrion Networking, a Warwick, R.I.-based IT solution provider and Verizon partner.

"Verizon has some older MCI facilities and maybe they'll be refinancing them, or maybe focusing on facilities that are their bread and butter and reshifting their focus a little bit this year," Senese said.

Verizon's Shammo also confirmed that the company intends to participate in the Wi-Fi spectrum auctions this year.

"We remain committed to consistently investing in our network for the future," he said. "We are expanding capacity through a number of optimization techniques, effectively managing our spectrum, and further successfully densifying urban markets."
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