Telecity has delivered another positive signal of growth in its Q3 interim statement this morning, as the UK and European co-lo markets continue to benefit from the unceasing rise in demand for connectivity and capacity. The company says “trading remains strong” and it “confirms its positive outlook”. The UK’s largest listed co-lo player is even feeling confident enough to promise “the commencement of a progressive dividend policy” next year. Telecity’s share price is currently flat this morning, versus a FTSE100 that’s down 1.4%.
On the phone this morning, CEO Mike Tobin told us that the dividend was a sign of Telecity becoming a “complete and grown-up company”. That turn of phrase probably undersells the position of a player which can claim no.1 spot in the large and ever-growing London market for co-lo, and which has also established expanding operations in other major European markets such as Dublin, Paris and Amsterdam.
The reason Tobin and Co can promise a dividend is of course the growing and cash generative nature of their business (see Telecity rounds off strong H1 with Irish acquisition). Don’t expect anything radically different in the period ahead. Telecity will keep on scaling and buying data centre capacity and filling as much of it as it can. It’s very unlikely to move “above” its co-lo sweetspot into managed services and so on, not least because that would kick off serious channel conflicts with a lot of its customers. And moreover, when market trends mean it can reasonably, for now, be confident of healthy occupancy rates and stable pricing for the capacity it can afford to build and buy, why take any risks? Co-lo at Telecity’s level of the market is an area with big barriers to entry. As competitor Equinix also showed recently (see Equinix rides the infrastructure wave to growth), if you have the assets in place, it’s a nice place to be right now.