Lumen finally appears ready to move forward with a potential sale of its consumer fiber operations, according to a Reuters report that broke on December 20 and said the company has hired Goldman Sachs to gauge potential interest in Lumen’s consumer fiber assets.
Impact: For now, Lumen is mostly in the exploratory phase of a potential sale after spending most of 2024 conducting a strategic review of its Mass Markets unit to discover how to best monetize it after years of revenue declines. Options under consideration included selling off the entire Mass Markets unit, divesting specific markets, and possibly forming a joint venture or strategic partnership. Some of those options are reportedly still in play, depending on the outcome of the Goldman Sachs assessment. The potential sale, which LightReading estimated could bring in anywhere from $6 billion to $9 billion, will likely serve as a precursor to a larger Lumen effort that involves exiting the legacy telecom business altogether. That strategy will likely culminate with the demise of Mass Markets, potentially leaving customers in some areas of its footprint without an ILEC provider unless it can convince someone to acquire its remaining legacy copper assets and upgrade them. The motive for Lumen to do so comes down to money, as the company needs to get out from under a substantial amount of debt and plans to shift its overall strategy to capitalize on potentially lucrative opportunities in AI-
focused enterprise.
Lumen closed Q3 with 4.1 million fiber locations, part of an ongoing multi-year expansion strategy that will likely culminate in a total of 7 million total fiber passings if Lumen doesn’t sell off the unit. But progress has been slow, and Lumen is well behind most other fiber providers in terms of expansion and increasing its fiber subscriber base, which surpassed 1 million in July and closed Q3 at 1.04 million (out of 2.6 million total Mass Markets customers) after adding a record 43,000 new customers in the quarter. Prior to the news that Lumen would look to sell off its consumer fiber operations, CFO Chris Stansbury spoke at a Bank of America conference and called Lumen’s consumer fiber business “a great asset that is probably better suited in somebody’s hands that has a wireless offering.” Since Lumen has no plans to get into wireless, in retrospect that was a pretty big clue about the company’s intentions for its consumer fiber operations. But part of the reason Lumen hasn’t moved to sell its fiber assets sooner relates to its overall fiber assets and how many of those are tied up in its business operations. It’s likely the strategic review took so long because the company had to determine a way to break off its consumer fiber operations without harming its enterprise network, which is most definitely not for sale given its prominence in recent AI-focused deals with Microsoft and Google Cloud.
The decision to sell off its consumer fiber assets is the most recent in a long line of transactions for Lumen, formerly known as CenturyLink, which in 2021 sold off a huge chunk of its ILEC footprint where it didn’t plan to make fiber upgrades to Apollo Global Management. That deal established Brightspeed, which has embarked on its own fiber expansion effort, as the new ILEC in those areas. CenturyLink previously merged with Level 3 Communications in 2017. No public movement on a potential deal occurred over the last 10 days of the year following the Reuters report. But that doesn’t mean Lumen hasn’t been involved in negotiations or that it won’t find a rival or private equity firm interested in its assets. But MoffettNathanson analysts think that because Lumen has only upgraded to fiber 19% of its Mass Markets footprint, the company poses a significant capex risk for potential buyers.
