The sale of the residential high-speed internet service division directly supports Lumen's strategic pivot toward leveraging the growth opportunities presented by the artificial intelligence sector, mitigating the impact of declining revenue and profitability in legacy operations.
Based in Monroe, Louisiana, Lumen is collaborating with investment bankers from Goldman Sachs to assess interest from potential buyers, including competitors in the industry, as per the sources who requested anonymity due to the confidential nature of the discussions. Following the announcement, the company's stock rose nearly 5% on Thursday.
Additionally, Lumen may consider selling a minority stake in the fiber unit or entering into a joint venture with a strategic partner, the sources indicated, noting that discussions are still in the preliminary phase and a transaction is not assured.
The company has been evaluating options for its mass markets division, which includes the fiber operations, since the beginning of the year. During the Bank of America Leveraged Finance Conference earlier this month, Lumen's Chief Financial Officer Chris Stansbury remarked that while the fiber business is a valuable asset, it may be better suited in the hands of a company with a wireless offering.
The company has been assessing opportunities within its mass markets division, which includes fiber operations, since the beginning of this year. During the recent Bank of America Leveraged Finance Conference, Lumen's Chief Financial Officer, Chris Stansbury, remarked that while the fiber business is "a valuable asset," it may be more effectively managed by a company with a wireless component.
Any potential transaction would necessitate Lumen separating its fiber operations, which also provide internet services to large enterprise clients. However, sources indicate that the company does not intend to divest its enterprise fiber segment. As of late September, Lumen had 4.1 million fiber-enabled locations in operation.
Depending on which segments of the consumer fiber division Lumen opts to sell and the structure of the deal, the transaction could be valued between $6 billion and $9 billion, according to sources.
Both Lumen and Goldman Sachs have chosen not to comment.
STRATEGIC SHIFT
Previously known as CenturyLink until its rebranding in 2020, Lumen has undergone several strategic changes over the years, the most recent being in 2021 when it sold its local exchange carrier assets in 20 states to Apollo-backed Brightspeed for $7.5 billion.
Lumen's traditional business provides broadband, voice, and various services to both business and residential customers. It owns underground cables that are leased through long-term agreements, facilitating fiber connectivity for its clients.
To enhance its financial position, Lumen has undertaken debt restructuring and secured multi-billion dollar contracts for networking and cybersecurity services with leading technology companies.
Furthermore, Lumen is actively mitigating its reliance on legacy business segments, stemming from past acquisitions—including the $25 billion merger with Level 3 Communications in 2017—which have depreciated in value due to technological advancements.