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Lumen Technologies Will ‘Look Very Different’ A Year From Now, Execs Say

The service provider’s two major divestures will free up the company, formerly known as CenturyLink, to focus on its Quantum Fiber buildout and “aggressively” growing its enterprise business, Lumen’s CEO and CFO told investors.

Lumen Technologies, formerly CenturyLink, said its two major divestures, worth more than $10 billion collectively, will help the company prioritize strategic fiber investments and grow its enterprise segment.

The carrier plans to “aggressively” grow its Quantum Fiber footprint, its premier fiber-based connectivity option, by tapping into the addressable market opportunity consisting of more than 12 million locations, said Jeff Storey, Lumen’s president and CEO said during the company’s Q3 2021 earnings call on Wednesday evening.

For enterprises, Lumen will continue to heavily invest in strategic IT solutions, such as edge computing and storage, security, and managed services, Storey said.

“Our company will look very different a year from now,” said Neel Dev, Lumen’s CFO. “We [have] a clear focus on positioning Lumen to capitalize on our growing and most profitable areas of our business.”

[Related: Lumen Technologies’ Dave Young On Channel Chief Role And The Carrier’s New Indirect Channel Structure]

The service provider in August confirmed plans to divest two parts of its business as it faced financial headwinds. Lumen announced it would sell its incumbent local exchange carrier (ILEC) business, which includes its consumer, small business, wholesale and mostly copper-served enterprise customers and assets in 20 states to investment management firm Apollo Global Management in a $7.5 billion deal. Lumen will hold onto its ILEC assets in 16 states, as well as its national fiber routes and its competitive LEC networks. The company expects the deal to close during the first half of 2022.

Lumen in July also revealed plans to divest its Latin American Business to investment firm Stonepeak for $2.7 billion in another deal that the company said will help it return to revenue growth and leave room for Lumen to invest in strategic business services. That deal is also expected to close during the second half of 2022.

Storey said that even in the midst of divesting two of its businesses, the carrier is still open to “smart optimization” of its existing assets. “We’ve already demonstrated our discipline in driving and working toward the right deal, not just a deal, to get something done,” he said.

Monroe, La.-based Lumen generated 72 percent of its revenue from business services in Q3, a segment that had been stressed in recent quarters because of Lumen‘s struggling -- and now offloaded -- SMB segment and the impact of the COVID-19 pandemic on business buying trends.

Lumen’s Large Enterprise segment, which contributes to 75 percent of the carrier‘s business revenue, dipped 6 percent to $932 million during the quarter compared to revenues of $990 million a year ago. Mid-Market also slipped by 10 percent from $692 million in Q3 2021 to $666 this quarter. The service provider eliminated its SMB reporting segment during the first quarter of 2021.

Overall, Lumen’s total business segment revenue continued its downward trajectory, totaling $3.51 billion during the third quarter, a 5.4 percent decrease from last year’s result of $3.69 billion. The consumer segment, which Lumen renamed “Mass Markets” in Q1, brought in 28 percent of the company’s revenue. Wholesale revenue also continued to slump during the quarter, falling 7 percent to $891 million from $958 million in the year-ago quarter.

For the third quarter that ended on Sept. 30, Lumen reported net income of $544 million compared to $366 million in the same quarter a year ago. The company reported total revenue of $4.89 billion and diluted earnings per share of 51 cents, a 5 percent decline compared with $5.17 billion and 34 cents per share in Q3 2020.

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