Bell Canada Purchases Q9 Networks

by Jordan Richardson on June 6, 2012

Bell has partnered with a group of investors and financial backers to purchase Q9 Networks, a data centre provider.

The deal went down with a $1.1 billion price tag and is the latest in what seems to be a series of deals involving telecommunications companies purchasing data centre companies in bids to expand cloud computing services.

The breakdown of the deal has Bell Canada putting in $180 million, the Ontario Teachers Pension Plan chipping in $420 million and Providence and Madison Dearborn, two American private equity firms, ponying up the rest.

“Q9 looks forward to working with these leading private equity firms and Canada’s largest communications company, all of which have a strong track record of growing leading-edge companies like Q9,” said Q9 Networks CEO Osama Arafat. There are no plans to replace Arafat as CEO and it is expected that Q9 will operate as a “standalone” company in Toronto, so it should be business as usual.

RBC Capital Markets analyst Drew McReynolds stated in a note to clients on Sunday that this deal means Bell is serious about diversifying its services. “Although the capital contributed is not financially material for BCE, the structure of the deal is consistent with the objective of improving the company’s mix of growth services, either directly or strategically through this type of arrangement,” he wrote.

Q9 has 11 data centres across the country and is one of the largest data hosting providers in Canada. The company went public in 2004, but was acquired by Boston-based private equity firm ABRY Partners in 2008 for roughly $361 million. ABRY Partners profits in a big way from this deal, repeating its performance from when it purchased CyrusOne and sold it to Cincinnati Bell. Private equity firms have a vested interest in snagging data centres with so many telecommunications companies looking to upgrade their cloud services.

“Q9 is a recognized leader in data centre services for business customers large and small, an ideal partner to grow our hosting and cloud-based business while leveraging our world-leading broadband network infrastructure,” said Tom Little, President of Bell Business Markets.

With more indications that things are swinging into the cloud, Canada’s telecommunications companies will continue to make moves to bolster their capacities and generate more service opportunities for customers. Even as some rightly question the security of the cloud, it doesn’t look like much is going to stop the advance into the virtual skies.

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Written by: Jordan Richardson. Follow by: RSSTwitterFacebook, or YouTube.

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