TORONTO - Bell Canada will sell most of its data centres for $1.04 billion to California-based Equinix Inc., which provides locations to house equipment for cloud computing and internet services.
Montreal-based Bell, the main subsidiary of BCE Inc., will also form a partnership that provides about 600 clients of Bell Business Markets with full access to the Equinix platform.
"Our data centres house the key digital infrastructure that powers the digital economy," said Jon Lin, Equinix's president for the Americas.
"We've been very committed to the Canadian market and looking for expansion opportunities over the years."
Lin said Equinix has been operating in Canada for about a decade, mostly in the Toronto area, but sees the acquisition as a way to expand geographically and gain more than 500 new customers currently with Bell.
"We see a great opportunity to expand Bell's ability to serve Canadian multinationals everywhere around the world," Lin said.
Equinix currently has more than 210 data centres in 55 cities around the world, including two in Toronto. The Bell deal will add 25 of data centres at 13 locations in eight cities. Besides Toronto, others are in Vancouver, Kamloops, B.C., Calgary, Winnipeg, Ottawa, Montreal and Millidgeville, near Saint John, N.B.
"We don't actually touch or handle the customers data," he added. "They're putting their servers, their storage infrastructure inside of our building and we're making sure the building is secure for them."
Bell will continue to own and operate five of its data centres at its own operations in Calgary, Halifax, Saint John, St. John's, N.L, and Toronto.
Analysts said Bell could be use proceeds from the sale for the next round of spectrum auctions, which will provide Canadian wireless networks with more of the frequencies they'll require for deploying fifth-generation services over the coming years.
"In our view, this will be a positive for the stock given that the valuation is solid (ahead of our expectations) and it affords BCE greater balance sheet flexibility going into the spectrum auctions," Canaccord Genuity analyst Aravinda Galappatthige wrote in a note to clients.
Drew McReynolds of RBC Dominion Securities also noted that data hosting and co-location services have become less of a priority for telecom companies.
"We believe the transaction enables BCE to redeploy capital to more strategic opportunities (such as network investment including spectrum)," McReynolds wrote.
Bell Canada said the sale is expected to serve the needs of its enterprise clients while strategically redeploying capital to be used in other parts of its business, which includes Bell and Virgin Mobile wireless, Fibe internet and television, and Bell Media.
"This transaction reinforces Bell's strategy to focus investment on the network infrastructure, content and services necessary to advance how Canadians connect with each other and the world," Mirko Bibic, president and CEO of both Bell Canada and its parent BCE Inc., said in a statement.
The cash deal is expected to close in the second half of 2020, subject to regulatory approval and completion of other conditions.
This report by The Canadian Press was first published June 1, 2020.
Companies in this story: (TSX:BCE)