Lumen Technologies Shares Surge on Potential Sale of Consumer Fiber Division
Lumen Technologies (NYSE:LUMN) shares rose by 4.3% following a Reuters report indicating that the company has initiated a process to sell its consumer fiber operations. This sale is part of Lumen's strategy to pivot away from its legacy mass markets business and focus on growth by leveraging the artificial intelligence boom.
The Louisiana-based telecommunications company is working with Goldman Sachs 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 early stages, and there is no certainty that a deal will be reached. The consumer fiber business, which provides high-speed internet to residential customers, could be valued between $6 billion and $9 billion, depending on the structure of any agreement.
Lumen's shift toward artificial intelligence and technology services has been highlighted by recent contract wins with major tech companies including Microsoft, Meta, Alphabet, and Amazon. Despite a decline in revenue compared to last year and a broader net loss in the latest quarter, these new agreements have contributed to a significant increase in Lumen's stock price this year. Additionally, the company's fiber broadband business showed a 16.6% growth compared to the same quarter last year.
The move to divest the consumer fiber operations aligns with comments made by Lumen's CFO Chris Stansbury at the Bank of America Leveraged Finance Conference. Stansbury noted that while the fiber business is a valuable asset, it could be better managed by a company with a wireless offering.
Lumen's decision to sell its fiber unit is also viewed as an effort to reduce its significant debt, which stood at $18.1 billion as of September 30. The company conducted a debt swap in September 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, indicating a potential upgrade following the impact of recent artificial intelligence contract wins on the fourth-quarter results.
Previously known as CenturyLink, Lumen has undergone several strategic changes over the years, including the sale of its local exchange carrier assets to Apollo-backed Brightspeed for $7.5 billion in 2021. The company's focus on network and cybersecurity services for large technology firms is part of a broader plan to distance itself from its declining legacy business and embrace new technology trends.