Real estate investment trust American Tower is shelling out billions to buy CoreSite and bolster its mobile edge compute business in the age of 5G.

American Tower on Monday announced the $10.1 billion purchase of CoreSite. The deal will likely close by the end of 2021 or at the beginning of 2022. JP Morgan is serving as the lead financer for the deal.

American Tower owns seven data centers in the U.S., as well as 42,000 U.S. cellphone tower sites in the U.S. Now it will bring into the fold CoreSite’s 25 data centers, 21 cloud on-ramps and 32,000-plus interconnections. Executives also said the deal will improve the company’s mobile edge compute business as wireline and wireless networks converge. The deal combines American Tower’s wireless connectivity with CoreSite’s “highly interconnected” data center facilities to help support 5G applications.

Executive Views

American Tower’s Tom Bartlett

American Tower CEO Tom Bartlett said the company is moving through the “early stages” of a ongoing digital transformation.

“We expect the combination of our leading global distributed real estate portfolio and CoreSite’s high quality, interconnection-focused data center business to help position American Tower to lead in the 5G world. As the convergence of wireless and wireline networks accelerates and classes of communications infrastructure further align, we anticipate the emergence of attractive value creation opportunities within the digital infrastructure ecosystem. We look forward to welcoming CoreSite’s talented team to American Tower and working together to capitalize on those opportunities to drive enhanced long-term value creation for our customers and shareholders as we continue to connect billions of people across the globe,” Bartlett said.

CoreSite’s Paul Szurek

CoreSite CEO Paul Szurek said his company’s U.S. metro data center campuses will help accelerate American Tower’s edge computing strategy. He also said CoreSite’s team and interconnection platform will fit well with existing American Tower sites.

“The combined company will be ideally positioned to address the growing need for convergence between mobile network providers, cloud service providers, and other digital platforms as 5G deployments emerge and evolve. In addition, we expect the enhanced scale and further geographic reach to provide a platform for the combined company to accelerate its growth trajectory and expand into additional U.S. metro areas, as well as internationally, leveraging American Tower’s extensive presence across the globe,” Szurek said.

Rival Acquisition

The deal comes on the same day that fellow data center operator CyrusOne announced its $15 billion sale to private equity firms KKR & Co. and Global Infrastructure Partners. Reuters noted that remote work has helped escalate the value of data center providers and cloud-based services.

Reuters estimated last week that CoreSite was worth at least $8 billion. Reports circulated that CoreSite had hired an investment banker and spoken to American Tower, Digital Realty and private equity firms.

Partner Perspectives

Chip Hoisington is senior director of engineering for Avant. Hoisington pointed to how CoreSite bolster’s American Tower’s 5G support. Specifically, he said American Tower needed more underlying connectivity.

Avant’s Chip Hoisington

“When thinking about the acquisition in terms of 5G and wireless connectivity, it makes sense, because American Tower likely has 2-3 fiber providers connecting to their towers to backhaul wireless traffic, many times at 10 gigabyte bandwidths. These towers still need to connect through data centers to access higher bandwidths for nationwide transport,” Hoisington said. “The acquisition of CoreSite multiplies their access to on-net fiber providers. CoreSite has numerous 100 gigabyte connections through various fiber providers which will be required to support the backhaul traffic as the nationwide 5G footprint grows. Additionally, the acquisition provides low latency access to American Tower clients for both CSP and SaaS access, which is another major focus the channel should have on this deal.”

Mejeticks’ Robert Devita

Robert Devita, founder and CEO of Mejeticks, didn’t cast as optimistic a view.

“Just not buying into the American Tower strategy on acquiring CoreSite,” Devita wrote …… on LinkedIn. “We have seen this movie before. A non-aligned ‘strategic’ buys large data center platform. Destroys it and then spins it out or sells it for parts.”

Channel Program

American Tower has invested in the indirect sales channel in a big way in 2021. The company has turned to partners to help it sell the edge data center portfolio it launched in 2019. American Tower historically sold cellphone tower space to large wireless carriers and government agencies. However, it is now catering to a broader range of business customers with its edge data centers.

“We are not going to build a huge sales force to do that,” director of business development David Fox said last month. “We want to build all of that through the channel.”

Program benefits include evergreen commissions for agents, discount incentives for resellers and market development funds.

JS Group’s Janet Schijns

Janet Schijns leads the the JS Group, which consults with American Tower. Schijns said she sees the announcement as a positive step.

“The JS Group team continues to be excited by American Towers channel-friendly and edge compute-centric approach in the market.  This latest acquisition announcement of CoreSite further demonstrates their commitment to having the best solutions in the market and continues to solidify their leading market position in the cloud and edge space. The channel reaction at the Channel Partners Conference to the American Tower strategy was overwhelmingly positive and I am certain this news will only serve to further reinforce that enthusiasm in the channel.”