Equinix (EQIX) Eyes Expansion in Chile & Peru With Entel Buyout
Equinix, Inc. EQIX is planning its expansion in Chile and Peru with the $705 million acquisition of four data centers from Empresa Nacional De Telecomunicaciones S.A. (Entel), a leading Chilean telecommunications provider.
The acquisition, which is expected to close in the second quarter of 2022, is likely to be immediately accretive to Equinix's adjusted funds from operations (AFFO) per share on the close, excluding integration costs. Particularly, this transaction involves three data centers in Chile. It may also include one data center in Peru, pending the finalization of a definitive agreement.
Per the agreement, both Equinix and Entel agreed to form a strategic partnership to facilitate enterprises in Chile and Peru to leverage hybrid multicloud solutions to speed up their digital transformation.
The acquisition seems a strategic fit for Equinix as Chile emerged as the fourth-largest economy in South America, with the highest GDP per capita in the region. Specifically, in South America, Santiago is evolving as a technology hub and serving both regional cloud and content demand along with local enterprises.
Apart from these, it is important to note that approximately $53 million of annualized revenues are generated by the four facilities. Also, more than 100 Entel customers presently operating in the four data centers will become Equinix customers. Encouragingly, more than 75 of these customers represent net-new customers and comprise a diversity of sectors, making this buyout a robust one for EQIX.
Equinix’s efforts to bolster its presence in this strategic market will add scale and strengthen its position in the region, thereby solidifying its leadership as the top regional provider of digital infrastructure services.
Solid growth in cloud computing, the Internet of Things and big data and a greater call for third-party IT infrastructure are spurring demand for data center properties. Moreover, growth in AI, autonomous vehicles and virtual/augmented reality markets is anticipated to be robust over the next five to six years, helping data center REITs to flourish.
However, the increased competition could prompt rivals to resort to aggressive pricing policies, making Equinix vulnerable to pricing pressure.
Shares of Equinix have rallied 9.8% over the past year, outperforming the industry's growth of 6.3%. EQIX currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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