Summary Bullets:
• The acquisition doubles Colt’s EMEA network capacity, gives it 10+ subsea cable systems and landing stations, and cements its position as a leading partner for hyperscalers in the region.
• Colt has achieved growth and stability through a laser-tight market focus – the scale of this acquisition will challenge that stability.
GlobalData previously covered Colt’s acquisition of Lumen’s EMEA assets when the deal was first announced (for more, please see: Colt to Acquire Lumen’s EMEA Assets, Significantly Driving Its Growth Trajectory and Edge Strategy, November 9, 2022). This blog provides an update now that the deal has been completed.
Colt’s acquisition of Lumen’s EMEA assets is a significant undertaking for the provider: The $1.8 billion cost is approximately equal to Colt’s annual revenues, and the takeover will more than double the provider’s network capacity. Colt expects the integration process will take around two years, and the deal includes provisions for a changeover process to minimize disruption. Colt intends to bring the Lumen network fully on-net, although there will be rationalization between the two networks in spots where there is repetition of presence or products. Colt is at a very early phase of the rationalization process, and while its systems and portfolio will remain dominant (e.g., its IQ network platform and Ethernet and IP voice services) in certain areas, Lumen products will be favored, and its network infrastructure will become Colt’s primary asset over time.
There are clear benefits to Colt in terms of scale. Colt has steadily increased its footprint (including recently opening new dark fiber routes between London, England and Paris, France), but it would not have been realistic for the provider to build out additional assets as large as Lumen’s network in the EMEA region. Colt does not gain significantly in terms of adding to the 32,000+ connected buildings it has in Europe, but Colt has strengthened its position as both a wholesale partner of choice in EMEA for telcos, telehouses, and hyperscalers. Similarly, it gains scales as a cloud peering partner with connections to more than 1,000 data centers and partnerships with Amazon Web Services, Microsoft, Google, Oracle, IBM, Equinix, Digital Reality, Interxion, Telehouse, and Global Switch among others. Colt has also become one of the most attractive options for data connections across the Atlantic and from Europe to Asia, with strong route options also available between Asia and North America.
The challenge for Colt will be integrating network assets that have been built with different methodologies and to support different customer types. However, there are advantages for Colt: While it is transferring over network people from Lumen, it is not acquiring Lumen systems, which eases integration – although Colt will have to build out its own systems while simultaneously running the existing Lumen systems for an extended period. Colt and Lumen have also intimated that they foresee the potential for longer-term partnerships, which means there is a strong motive for constructive co-operation between the two companies during the transition period.
The downside for Colt is that Lumen’s network has been built primarily as a large-scale transit network for autonomous systems for internet traffic routing and peering. This is not a domain Colt has traditionally targeted, favoring transactional deals with wholesale customers and hyperscaler network build alongside its multinational enterprise WAN business. Combining the two strategies and different optical network technologies will not be simple. Colt will also have to bring Lumen’s network up to its own, more-demanding sustainability requirements.
As the integration process progresses, there will also be a cultural shift at Colt – this is no bad thing, but, after a stumble in strategy in the mid-2010s, Colt has displayed a laser-tight focus of purpose that has been the secret of its continued success despite the presence of many larger competitors. Colt needs to ensure that it still knows what it is and what it wants to be during and after its transition phase. However, the potential benefits of this deal are worth the risk, and Colt will be in a compelling position when it comes to cloud and network edge. If Colt can retain its discipline and focus on quality of service, it will be a provider to be reckoned with.