BT threatens to axe data centres

Around half of BT's portfolio of 20 data centres, the centrepiece of its IT services division Ignite, are sitting empty.

The revelation will bring further calls for BT to scale back the loss-making business, which is suffering from the slowdown in the technology market.

Andy Green, chief executive of Ignite, told The Independent on Sunday: "Vacancy rates at the centres are around the 50 per cent mark. Our aim is to run the centres at a 70 to 80 per cent rate."

Mr Green also revealed that some of the centres may be closed. "We are asking ourselves, 'Do we need all the hosting centres?'," he said.

The data centres, sometimes known as "internet hotels", are dotted around Europe and used by companies to house their internet and IT equipment. As well as leasing the space, BT offers to manage the equipment for its customers.

But, say analysts, BT's vacancy rate is higher than the industry norm. "When you take out all the smaller, perhaps flakier, players, then the average vacancy rate is between 40 and 50 per cent," said Eric Paulak, an analyst at research group Gartner. "The growth of data centres across Europe was similar to the commercial property speculation boom of the late Eighties. Companies built millions of square feet of floor space without the market being there to sustain it."

Like many other telecoms companies, BT two years ago had grand plans to pepper Europe with data centres. At the peak of the technology boom, its Ignite arm announced plans for 44 centres and hinted even at spinning off as a separately listed company from BT, with a market value of £10bn.

But today Ignite has been singled out by BT's new chief executive Ben Verwaayen as a business that needs to pull up its socks. As such, Mr Green is considering selling or closing parts of Ignite's operation.

He said: "If we find that an Ignite business is not adding value, then we will close it. We have to be ruthless. We are in the business of making money for our shareholders.

"This will be done mostly through hard work and active management."

Asked exactly which Ignite units face the chop, he said: "[We are reviewing] some of the businesses focused on small-to-medium sized enterprises."