Report: Top Three Colocation Operators Extending Leadership Via Acquisitions
Equinix continues to have a strong lead in retail colocation while Digital Realty holds a similar position in wholesale colocation.
New Q1 data from Synergy Research Group shows that revenue growth for the world’s three leading colocation operators far outstripped overall market growth thanks in large part to recent acquisitions. While total colocation revenues grew 9% from the first quarter of 2015, Equinix, Digital Realty, and NTT in aggregate grew by over 30%. All three were successfully growing their revenues organically, but recent results have been further boosted by Equinix’s acquisition of Telecity and Bit-isle, Digital Realty’s acquisition of Telx and NTT’s acquisition of e-shelter. Beyond these three companies, the other top ten operators grew their colocation revenues by 7% while the companies ranked 11 to 20 grew by 12%. Within the top 20 other companies whose growth rates were well above average, included QTS, CyrusOne, CoreSite, China Telecom, DuPont Fabros, and KDDI-Telehouse.
The Q1 data, which covers both retail and wholesale colocation, shows that the market is expanding steadily across all regions, though APAC has the highest growth rate. The major countries with the highest growth rates in Q1 were China, Japan, and Germany. Historically wholesale colocation revenues have been growing more rapidly than retail colocation, though in Q1 the growth rates were broadly similar. Equinix continues to have a strong lead in retail colocation while Digital Realty holds a similar position in wholesale colocation. Notably, Digital Realty and NTT now have significant market shares in both the retail and wholesale sectors.
“Acquisitions by the big three and a few other players are helping to slowly concentrate colocation market power in the hands of operators that can afford to build and support huge data center footprints spanning multiple regions,” said John Dinsdale, a chief analyst and research director at Synergy Research Group. “We’ve seen a constant stream of M&A activity over the past five years and several more big deals are in the pipeline — and yet there remains a very long tail of independent small-to-medium sized colocation operators. Many of these will continue to operate successfully by focusing on specific metros or countries, while others will inevitably succumb to market consolidation.”