Digital Realty acquires Telx – is Interxion next on DRT’s list?

No surprise to hear Digital Realty has acquired Telx from their private equity owners ABRY Partners overnight for USD$1.9bn.

The two companies already had a close working relationship with Telx running a number of meet-me-rooms in DRT facilities across the States and this transaction confirms DRT’s seriousness in moving into the retail colocation market.  This is the continuation of the trend we have been commenting on for some time at Colo-X, of not just DRT but pretty much all wholesale providers (or shall we say former wholesale) rapidly becoming indistinguishable from the established retail colocation operators and so presenting retail colocation buyers with an ever widening range of options in the market.

There remains much further speculation in the industry that Digital’s next step will be to acquire Europe’s Interxion (whose London facility is pictured) – which when combined with the 20 facilities that Telx operates across the US might create a big enough footprint to present a viable challenger to the mighty Equinix.  We’ll have to see how quickly DRT can make move for Interxion, the risk being that if DRT wait too long one of their US based competitors might make a move for the sole-remaining pan-European carrier neutral colocation operator first.  We shall see!

In the meantime the convergence of both wholesale and retail in the UK colocation market has opened up fascinating opportunities for colocation buyers. Our 2015 report on the London colocation market highlights just how much price compression there has been over the past few years between the best rates that wholesale buyers can obtain (eg companies buying 1MW on a long term lease) and the amazing rates on offer for small scale retail buyers (buying racks).  At the same time the price premium now attached to the key leading colocation ecosystems compared to undifferentiated capacity has significantly widened, meaning buyers are starting to think more strategically about how they allocate their colocation deployments across the range of options in the market.