Lumen Technologies Explores Sale of Consumer Fiber Unit, Shifts Focus to AI-Driven Growth

Lumen Technologies launches sale of consumer fiber unit, sources say

The move to offload the fiber business, which provides high-speed internet services to residential customers, comes as Lumen is doubling down on the artificial intelligence boom to power its near-term growth, while grappling with a rapid decline in sales and profits from its legacy business.Lumen Technologies has kicked off a process to sell its consumer fiber operations, as the telecommunications company looks to phase out its legacy mass markets business and reduce its sizable debt pile, according to people familiar with the matter. The move to offload the fiber business, which provides high-speed internet services to residential customers, comes as Lumen is doubling down on the artificial intelligence boom to power its near-term growth, while grappling with a rapid decline in sales and profits from its legacy business. Monroe, Louisiana-based Lumen is working with investment bankers at Goldman Sachs to gauge interest for the business from potential acquirers that include industry rivals, the sources said, requesting anonymity as the matter is confidential. The company's shares closed up nearly 5% on the news on Thursday. Lumen could also choose to sell a stake in the fiber unit or sign a joint-venture deal with a strategic partner, the sources said, adding that the talks are at an early stage and a deal is not guaranteed. The company has been exploring options for the mass markets business, which houses the fiber operations, since earlier this year. At the Bank of America Leveraged Finance Conference earlier this month, Lumen Chief Financial Officer Chris Stansbury said the fiber business was "a great asset, but an asset that is probably better suited in somebody's hands that has a wireless offering." Any deal would require Lumen to split up its fiber business, which also offers internet services to large enterprise customers, the sources said, adding that the company is not planning to sell the enterprise fiber operations. As of the end of September, Lumen operated 4.1 million fiber-enabled locations. Depending on what parts of the consumer fiber unit Lumen chooses to sell and how a deal is structured, the transaction could be valued at $6 billion to $9 billion, the sources said. Lumen and Goldman Sachs both declined to comment. Strategic shift Known as CenturyLink before its 2020 rebranding, Lumen has changed course several times over the years, most recently in 2021 when the company sold its local exchange carrier assets in 20 states to Apollo-backed Brightspeed for $7.5 billion. Lumen's legacy business offers broadband, voice and other services to businesses and residential customers. It owns underground cables that are leased out through long-term contracts and helps provide fiber connectivity to customers. To turn around its fortunes, Lumen has restructured its debt and signed billions of dollars of new contracts to provide networking and cybersecurity services to Big Tech companies. Lumen has also been attempting to shrink its reliance on the legacy business, which was grown from past acquisitions - including its $25 billion merger with Level 3 Communications in 2017 - and has declined in value over the years as the technology has become outdated. In August, the company secured $5 billion in business from new customers, including Microsoft, to provide AI connectivity to cloud computing data centers. In its latest quarter, Lumen signed new contracts worth $3 billion, which included partnerships with Meta, Alphabet and Amazon. The contract wins have bolstered Lumen's share price, which has more than tripled in value this year, giving the company a market value of about $6.2 billion. Lumen's long-term debt stood at $18.1 billion for the quarter ended Sept 30. Lumen posted revenue of $3.2 billion in the third quarter, down 11.5% from the same period a year earlier, while its net loss widened to $148 million. Its fiber broadband business, which accounts for 40% of its mass markets broadband revenue, grew 16.6% from last year. In September, Lumen launched a debt swap for near-term bonds to extend some of its maturities. The exchange triggered a downgrade in Lumen's credit rating from S&P Global Ratings. In November, S&P assigned a CreditWatch Positive rating to Lumen on the back of the company's recent AI contract wins, indicating that its credit rating could be upgraded by a notch depending on its fourth-quarter results.

Lumen Technologies stock rises on potential sale of consumer fiber unit By Investing.com

Investing.com -- Shares of Lumen Technologies (NYSE:LUMN) climbed 4.3% following a Reuters report that the company has initiated a process to sell its consumer fiber operations. The sale is part of Lumen's strategy to move away from its legacy mass markets business and focus on leveraging the artificial intelligence boom for growth. The Monroe, Louisiana-based telecommunications firm is working with Goldman Sachs (NYSE:GS) to explore potential deals, which could range from selling the entire fiber unit to forming joint ventures or partial stake sales. The discussions are in the preliminary stages, and there is no certainty that a deal will be reached. The consumer fiber business, which delivers high-speed internet to residential customers, could be valued between $6 billion and $9 billion depending on the deal structure. Lumen's shift towards AI and technology services has been marked by recent contract wins with major tech companies, including Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), Alphabet (NASDAQ:GOOGL), and Amazon (NASDAQ:AMZN). These new deals have contributed to a significant increase in Lumen's share price this year, despite a decline in revenue and a wider net loss in the most recent quarter compared to the previous year. The company's fiber broadband business, however, showed a 16.6% growth compared to the same quarter last year. The move to divest the consumer fiber operations aligns with comments from Lumen's CFO Chris Stansbury at the Bank of America (NYSE:BAC) Leveraged Finance Conference. Stansbury indicated that the fiber business is a valuable asset but may be better managed by a company with a wireless offering. Lumen's decision to sell the fiber unit is also seen as an effort to reduce its substantial debt, which stood at $18.1 billion as of September 30. In September, the company undertook a debt swap to extend bond maturities, which led to a downgrade in its credit rating by S&P Global Ratings. However, in November, S&P placed Lumen on CreditWatch Positive, suggesting a possible credit rating upgrade following its fourth-quarter results, driven by the recent AI contract wins. Lumen, formerly known as CenturyLink (NYSE:LUMN), has undergone several strategic shifts over the years, including the sale of local exchange carrier assets to Apollo-backed Brightspeed in 2021 for $7.5 billion. The company's focus on networking and cybersecurity services for Big Tech firms is part of its broader plan to pivot away from its declining legacy business and embrace emerging technology trends.