Lumen may be a large service provider with a sizeable foothold in the enterprise and wholesale markets that grew through acquisitions.
While Lumen was a key consolidator of the enterprise services market via its acquisitions of the former Global Crossing, Level 3, Qwest, and TW Telecom, integrating these four key assets has posed various challenges.
Speaking at the recent BofA Securities 2024 Media, Communications & Entertainment Conference, Chris Stansbury, CFO of Lumen, said that the provider wants to “drive more efficiency inside of the network.”
“Today, inside the enterprise segment of Lumen, we operate four networks which were driven through acquisitions, and they were never integrated,” he said. “We refer to them by colors—CenturyLink, Global Crossing, Level 3 and tw telecom.”
A unified vision
Lumen sees an opportunity to unify the network and back-office systems of the disparate network elements that make up the company. It believes this integration could take out $1 billion in costs.
While its enterprise customers have become accustomed to purchasing disparate elements to get the solution they need, Stansbury said that drives “enormous complexity.”
“There are a dozen order entry systems, and those order entry systems each drive a piece of a customer solution,” he said. “The enterprise customer can’t see one thing being delivered at the other end, so there’s a lot of human intervention to make those things work.”
There is hope. Lumen has set a goal to unify a significant portion of its network this year, a process that will be completed in 2025.
“By the end of this year, 70 percent of that network will be unified,” Stansbury said. “Then, by the end of next year, the entire thing will be unified into one.”
This integration has several benefits for Lumen, including reducing obsolete systems and deploying technicians to activate services and address network issues.
“This integration allows us to go hard at legacy IT that needs to be turned off once and for all,” Stansbury said. “It also allows us to more efficiently manage truck rolls where a truck roll is required and get to the digital future where you don’t have as many truck rolls.”
Enterprise challenges, opportunities
From a revenue perspective, Lumen has been challenged by continual declines in legacy enterprise services, a factor illustrated in its second-quarter 2024 results. Second-quarter revenue from Lumen’s business segment was $26 billion, declining 11.4%.
The service provider reported that approximately 42% of the decline was due to divestitures and commercial agreements.
Regardless of these challenges, the service provider has progressed with next-gen services such as optical wavelengths. According to Vertical Systems Group, Lumen leads the U.S. Wavelength services segment, ranking first for the third consecutive time.
One of the bright spots in the second-quarter enterprise revenues was the public sector, which reported revenues of $448, up 7% sequentially.
Lumen’s public sector division has won critical contracts with federal agencies, including USDA, USPS and the Government Accountability Office (GAO). These contracts were awarded through the General Service Administration’s Enterprise Infrastructure Solutions (EIS) program.
Stansbury attributes its success in the public sector to its solution-based approach. “The public sector is the closest example to a customer-focused structure that always existed inside Lumen,” he said. “We understand the customer’s needs well and are bringing services and solutions that meet those needs.”
He added that this approach drove “a lot of contract wins with USDA and USPS, which are well underway and are starting to hit revenue, which is why we have a good line of sight to seeing the revenue recovery.”
Alternatively, in the large enterprise and mid-market segments, Lumen is working through the process of regaining revenue growth.
During the second quarter, Lumen reported that large enterprise and mid-market declined 2% to $837 and $478 million, respectively.
“On the large enterprise and mid-market space, we’re a little bit behind because there was more rebuilding that needed to be done within the selling organization, but we’re seeing improved rates of sales.”
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