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Summary

Data center operators, TeleCity and Interxion are to merge; the transaction is scheduled to close in mid-2015. Technically, TeleCity is purchasing Interxion, and the new combined entity will be based in London. Both firms provide services in the major European markets and have been trying to expand beyond basic data center co-location services, while geographically expanding beyond Western Europe.

The TeleCity/Interxion merger had to happen if either wanted to become a major player

The merger will create a larger entity that at best will become a major regional data center operator in Europe. Along with the usual messaging about synergies and efficiencies, the combined entity will have a stronger play in its home region, but must continue to increase its services and expand into other regions to become a significant player in the global market. There is mention of expansion in the Middle East and Africa, and the combined entity most likely plans to enter Asia-Pacific and North America (Interxion is listed on the NYSE). However, this will require more capital and likely another M&A transaction to come to fruition.

The merger will provide additional capital and allow the new entity to capture more of the demand from enterprises, financial services, carriers, and most importantly, IT cloud services providers. The additional capital will allow for growth that enables the merged company’s cloud/IT ecosystem customers to consume data center infrastructure “by the slice” and not have to depend on their own capital investment or manage an empty inventory of space on their books.

Appendix

Authors

Mike Sapien, Principal Analyst, Enterprise Services

mike.sapien@ovum.com

Ian Brown, Senior Analyst, IT Services

Ian.brown@ovum.com

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