Lumen eyes asset sales as Q1 revenue falls

Lumen HQ sign
CEO Jeff Storey said Lumen is actively pursuing potential sales but noted, “I’m not ready to announce any deal because we don’t have one.” (Credit: Lumen Technologies)

Lumen Technologies CEO Jeff Storey revealed the company was actively looking for opportunities to shed non-core assets after revenue growth eluded it in Q1 2021.

Net income jumped 51% year on year to $475 million, up from $314 million in Q1 2020. However, revenue fell nearly 4% year on year to $5.0 billion, with Business Segment and Mass Markets Segment sales each dipping 4% to $3.6 billion and $1.4 billion, respectively.

Lumen’s total number of Mass Markets broadband subscribers fell from 4.9 million to 4.7 million. It came out of the quarter with 2.5 million homes enabled with fiber and a total of 715,000 customers on its fiber service. On an earnings call, CFO Neel Dev noted about 15% of its Mass Markets broadband customers were on fiber, according to a transcript.

During the call, Lumen CEO Jeff Storey acknowledged the revenue slump, stating the company was not satisfied with the results, and “we have a strong sense of urgency to accelerate top-line growth.” He added Lumen is actively looking to offload non-core assets as a way to juice growth through inorganic means, though noted “I’m not ready to announce any deal because we don’t have one.”

Storey identified the company’s Quantum Fiber product and fiber infrastructure, as well as its platform capabilities and edge computing pursuits as core to its business. Copper appeared to be on the block, though, with Storey noting “what we will look at with respect to the consumer copper network…would be looking at markets that we don't think are necessarily core to our Quantum Fiber strategy.”

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The CEO wouldn’t comment on what kind of deal would be considered positive for the company, but said price and “our ability to separate the business from Lumen” would be key factors in deciding whether to pursue a transaction.


Analysts were skeptical of Lumen’s sale prospects.

Analysts at Wells Fargo Securities were the most upbeat, speculating any potential asset sale “would likely be in the Consumer/Mass Markets segment” and that “with residential fiber sale multiples at all-time highs, we see potential for LUMN to accretively sell a stake in its consumer business.”

However, Ramyond James analyst Frank Louthan argued in a research note that given Lumen’s $31 billion in net debt, “a 1.5% reduction in debt from a sub-$50M deal is unimpressive, and they need to shoot higher.” He warned “we do not believe they will be successful in selling assets.”

Cowen analysts agreed there has been a “renaissance” of interest in residential assets, but pointed out “LUMN trades at 5.7x 2022E (post-CAF II) EBITDA, thus would need to sell above this level for value accretion.” They concluded it is yet to be seen whether anyone will pay up “meaningfully for copper, enough to make it notably value accretive to Lumen.”