Lumen Technologies is in talks to sell a portfolio of its assets to the investment firm Apollo Global Management, according to unnamed sources of Bloomberg.
Lumen would carve out its consumer operations in certain U.S. states in a transaction valued at more than $5 billion, according to Bloomberg’s sources. The news outlet cautioned that terms of a deal are not completed and may not happen.
Lumen CEO Jeff Storey did say on the company’s first quarter 2021 earnings call that it was “actively looking at selling non-core assets to unlock value in our business.”
The company’s consumer business falls under its Mass Markets moniker, run by Maxine Moreau, president of Mass Markets. She’s in the unenviable position of dealing with the company’s legacy DSL copper plant and other traditional phone infrastructure, along with its newer fiber-to-the-home (FTTH) assets.
Recently, Lumen executives have been touting their plans to increase FTTH passings to meet modern customer demand for high-speed internet.
Analysts at Wells Fargo led by Eric Luebchow wrote today, “The focus of any non-core asset sales, in our view, would be around its Consumer/Mass Markets, either in locations where it had minimal overlap with enterprise customers or markets with limited FTTH build-out. We think it's unlikely Lumen would sell its entire Mass Markets business based on their recent commentary.”
The Wells Fargo analysts think Lumen’s entire Mass Markets business (excluding CAF-2 subsidy revenues) could be worth as much as $15 billion. But they admit it’s hard to estimate a value without knowing exactly what’s for sale and whether it includes fiber passings.
In early June the analysts at MoffettNathanson penned a lengthy research report, teasing out all the pros and cons of Lumen selling its Mass Markets business. The analyst firm concluded that in terms of shareholder value, Lumen is better off pushing FTTH upgrades, rather than selling its mass markets business.
But it did note that interest in fiber opportunities is hot right now. “There’s been a meaningful uptick in interest in FTTH opportunities, including copper to fiber fixer uppers, especially over the past year,” wrote Moffett. It cited WaveDivision’s and Searchlight’s acquisition of Frontier’s Pacific Northwest properties. Searchlight also invested in Consolidated Communications to help fund its FTTH rollout. And Macquarie acquired Cincinnati Bell.