Just ahead of St. Valentine's Day on 11 February, 2015, Telecity Group, a London-based provider of carrier-neutral multi-tenant data centers, announced specifics of an all-share merger with Interxion. Headquartered in the Netherlands, Interxion is also a top player in the multi-tenant (colocation) industry in Europe. The combination would bring some measure of consolidation to a competitive market landscape by creating a market leader that would hold close to 30% share of revenue in EMEA.
As it stands today, Equinix, the global leader in multi-tenant data centers, holds the top spot in Europe as well. Telecity is a close second with Interxion just behind in third place.
Above: EMEA multi-tenant data center revenue market share - Q3 2014
Should the tie-up become reality, there will be a shake-up at the top. The combined Telecity/Interxion would claim leadership in Europe and hold 27% (calculated by summing respective shares as of Q3 2014). Interestingly, IHS estimates that no other vendor has more than 20% share of revenue in the Americas or EMEA, suggesting that the wave of consolidation may continue.
Above: EMEA multi-tenant data center revenue market share - Q3 2014 (Telecity and Interxion combined)
Telecity and Interxion compete head-to-head in major markets like London, Paris, Amsterdam and Frankfurt. 68% of Telecity’s available customer power is found in these markets. Similarly, 65% of Interxion’s turnover is from these “Big 4” cities. While these are mature markets, growth continues to be strong in these established areas as connectivity creates a rich environment for interconnections between customers. Moreover, the prospect of having cloud ecosystems develop in these facilities is seen as a continued driver of expansion.
However, Telecity and Interxion are more complimentary in tertiary markets across Europe. Telecity has built a presence in Dublin and Stockholm as well as emerging countries like Poland, Bulgaria, and Turkey. Interxion, on the other hand, rounds out coverage in central Europe with data centers in Denmark, Belgium, Spain, Switzerland, and Austria. All in, the combined company would take in over $1 billion in sales annually. The deal values Interxion at $2.2 billion.
Though the combined Telecity/Interxion would be far and away the market leader in Europe, IHS does not believe there will be significant regulatory hurdles to overcome. There is still a wide range of first and second tier providers across the continent.
Demand for multi-tenant data centers has been strong in Europe in the past year, with revenue up 13% as of Q3 2014 (as measured in Euro). The industry has benefited from enterprises outsourcing their data center operations and the desire for customers to be in premium, low-latency locations, with access to a wide range of connectivity options from carriers and other providers within the data center.
Should the deal go through, where might Telecity and Interxion go from there? There is likely to be some ambition to expand outside of Europe and become a global provider. There has been activity in this direction with KDDI (Asia) purchasing a majority stake in RagingWire (Americas) and Colt (Europe) buying KVH (Asia). History suggests that acquisition would be the preferred route to a worldwide footprint. It just may take some time after the integration process is underway. For the time being, it certainly looks like the relationship between these two companies has entered the "serious" phase.
IHS regularly analyses the market development of the colocation/multi-tenant data center industry as part of its global Multi-Tenant Data Center Intelligence Service. For more information please contact Jason dePreaux at firstname.lastname@example.org.