CenturyLink to acquire Savvis to boost hosting and cloud service growth
More than half of carrier's revenues will come from business services when deal is completed
CenturyLink’s plan to acquire Savvis, announced today, should further the carrier’s efforts to shift its service mix more toward the business side and speed its progress in the burgeoning managed hosting and cloud service businesses.
“We are creating a premiere managed hosting and managed services provider,” said CenturyLink CEO Glen F. Post III, on a conference call this morning to announce the acquisition plans.
The move comes just a few weeks after CenturyLink finalized its acquisition of Qwest, and Post said that when both acquisitions are completed, more than half of CenturyLink’s revenues will come from business customers. Shifting its service mix has become a key priority for the company, which does not have a substantial cellular business and which, like other carriers, has been losing traditional residential lines.
Managed hosting and cloud services are key
The managed hosting and cloud service business is projected to grow at a rate of 20% per year over the next few years, Post said. “By combining with a managed hosting and cloud services leader, we will be able to accelerate organic growth plans,” he said. “CenturyLink will be able to immediately address the complex [hosting] needs of our business customers.”
CenturyLink’s total number of data centers will rise from 16 to 48 with the Savvis acquisition, Post said. In addition, he noted that there is little overlap between the customer bases of the two companies, which means that the deal creates opportunities to cross-sell one another’s products to one another’s customer bases.
In addition, he said, the companies expect to see synergies of about $70 million as a result of the deal. While declining to provide specific details, Post said, “The vast majority are operational cost savings.”
Savvis to be a separate unit
Savvis will operate as a separate unit of CenturyLink and will continue to be based in St. Louis with CEO Jim Ousley at the helm.
“We’re competing against very big companies,” said Ousley on the conference call. “We need better access to capital, better access to network and channels and so forth—and this looked to us to be a perfect opportunity to [achieve] all of those.”
Savvis has made a concerted effort to shift its business mix toward managed services over the last few years. The company now gets 34% of its revenues from managed services, 38% from colocation and 28% from network services, Ousley said. The vast majority of the company’s business (83%) is in North America.
The deal is expected to close in the second half of 2011.
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