Will Vocus Group Ltd sell off its data centres?

Under pressure telecommunications company Vocus Group Ltd (ASX:VOC) may be under pressure to sell some non core assets

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Vocus Group Ltd (ASX: VOC) is rumoured to be considering the sale of its data centres, which could realise as much as $160 million, according to media reports.

The Australian Financial Review (AFR) reports that the company is in preliminary negotiations to sell its data centre business, with data centre specialist Nextdc Ltd (ASX: NXT) rumoured to be among the interested parties.

Vocus has a portfolio of 20 data centres across Australia, but they have long been considered as non-core assets.

The telecommunications company has seen its share price crash from a high of $9.40 in May 2016 to a 52-week low of $2.35 and is currently trading at $2.38. Analysts and investors appear worried about the group's large debt pile of more than $1 billion, and the ability of current management to integrate four major companies into one. Vocus merged with Amcom at a cost of $1.2 billion, M2 Group for $3.8 billion and bought Nextgen for $807 million in June last year.

The company also saw executive director James Spenceley, previously CEO of Vocus, leave the company after a failed board spill. M2 Group's Geoff Horth was appointed CEO of Vocus after the merger with M2 Group.

A series of surprise profit downgrades have also shocked the market and management appear to have lost credibility.

Vocus management also may have to deal with a potential takeover offer, with media reports suggesting private equity firms are circling the troubled group, following the massive fall in the share price.

Foolish takeaway

With such a huge debt pile, two profit downgrades and a lack of management credibility, investing in Vocus now could be a mistake. Investors might want to wait for more results to flow through, before reconsidering. As for me, I'm holding onto my Vocus shares as I'm investing for the long term.

Motley Fool contributor Mike King owns shares of Vocus Communications Limited. You can follow Mike on Twitter @TMFKinga The Motley Fool Australia owns shares of Vocus Communications Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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