Lumen considers wholesale and JV options for its consumer Mass Markets business

“As we look ahead, we will continue our market-by-market assessment of the mass markets business as we explore a range of strategic options to maximize its value,” he said. Those options include potential joint ventures and wholesaling arrangements to improve its EBITDA contribution, asset-backed securitization, and future divestitures to generate incremental cash.” 

This development comes as T-Mobile, through a venture with EQT, announced a deal to acquire regional fiber provider Lumos Networks for $1 billion. The goal is to bring services to 2 million homes in underserved markets by 2026.

While he did not specifically mention the T-Mobile/Lumos deal, when pressed by an analyst about the company’s assessment, he alluded to how other providers are engaging in new fiber broadband partnerships.

“So, we're looking at all possible arrangements,” Stansbury said. “There's no secret; there was an announcement last week that joint venture arrangements exist with several of our competitors, so we're looking at those. Wholesaling could be added to that, and there may be opportunities to sell any given market if the valuation is right.”

He added, "The whole point here is on driving incremental enablements and penetration, and then how we increase our EBITDA leverage on those investments as we go forward.”

Raising broadband revenues

During the quarter, Lumen reported broadband revenue grew 11.8%, representing approximately 35% of the Mass Markets segment broadband revenue.

Stansbury noted that Lumen’s “exposure to legacy voice and other services revenue improved by approximately 170 basis points year over year.”

The service provider also made progress in passing more locations with fiber.

“Broadband-enabled location adds 129,000, bringing our total to approximately 3.8 million, as of March 31st,” Stansbury said. “We are pacing toward our targeted annual 500,000 build target this year.”

Scaling fiber customers

As Lumen considers the options for the future of its Mass Markets segment, the service provider has focused on growing its fiber broadband subscriber base.

During the quarter, the telco added 36,000 quantum fiber customers, which it said was its best fiber net add quarter reported to date. This brings its total to 952,000. At the end of the first quarter, Lumen’s penetration of legacy copper broadband was less than 10%, and its Quantum Fiber penetration stood at approximately 25%.

The service provider is on track to deliver over 500,000 new fiber-enabled locations this year. It is optimizing its pre-sales motions to drive penetration into those assets as quickly as possible.

“Our strong fiber sales momentum from late last year continued, highlighted by our Q1 quarterly fiber net adds being the best we've ever reported,” said Kate Johnson, CEO of Lumen. “This was achieved with our sales, marketing, and retention efforts, including improved results converting existing copper customers to our best-in-class Quantum Fiber product.”

Fiber ARPU was flat sequentially and increased year over year to approximately $61 in the first quarter.

“We have scaled the marketing and continue to refine that approach, which is the goal,” Stansbury said. “So, I can tell you that the team is intensely focused on driving that performance, and hopefully, we can continue to show good results in the coming quarters.”

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