Lumen’s CFO says it’s still considering various options for its consumer business
Lumen is weighing options for its broadband and overall consumer business as more service providers look for opportunities to participate in the broader consolidation of the broadband service industry.
Speaking to investors during its third-quarter earnings call, Chris Stansbury, CFO of Lumen, said that it has many paths to consider for its Mass Markets consumer business.
“As we look ahead, we'll continue our market-by-market assessment of the mass markets business and explore various strategic options to maximize its value,” he said. “Those options include potential joint ventures, wholesaling arrangements, or future divestitures to generate incremental cash.”
While he would not offer any specific details yet, Stansbury reiterated that Lumen sees the consumer segment as two main businesses—legacy copper and fiber. The provider could carve out both business segments.
“You have a copper business that generates most of the EBITDA and a fiber business that consumes most of the capex,” he said. “The reality is it's possible to separate. Nothing is easy, but we've done harder things. And I think we've proven to the market that we're not afraid of doing hard things.”
Lumen’s comments come on the heels of BCE announcing its intent to purchase regional fiber broadband provider Ziply.
By purchasing Ziply, BCE gains an immediate foothold in the large, underpenetrated U.S. fiber market while increasing its scale and diversifying its operating footprint.
Stopping short of commenting directly on the Ziply/BCE deal, Stansbury said that ongoing deals made to purchase last-mile fiber assets support its consolidation stance.
“The transactions taking place in the market more broadly validate our thesis that consolidation needs to happen and that there's tremendous value in these assets,” Stansbury said. “We have a sizable investment in this consolidation play.”
Attractive market dynamics
Another key point of Lumen’s assets is the potential to upgrade its large-scale copper customer base to fiber.
Lumen has 18 million copper customers overall today, most of whom reside in rural markets.
“So, what we've said publicly is that of those 18 million, there's a sizable piece that's rural,” Stansbury said. “However, there are 8 million homes with potential, which is reasonable. Maybe it's a little more, maybe it's a little less. We're at 4 million right now.”
He added that service providers like itself and others target markets with fiber that can create good returns.
“The reality is that the markets where fiber is being built are attractive,” Stansbury said. “If you look at the size of our fiber footprint today and the potential fiber footprint, we are the largest asset out there that has yet to be consolidated.”
Fiber broadband rising
Lumen continued to see fiber broadband growth during the third quarter with increased subscribers and enabled locations.
“At the end of the third quarter, our penetration of legacy copper broadband was approximately 9%, and our Quantum Fiber penetration stood at approximately 26%,” Stansbury said.
However, fiber ARPU was $62, flat sequentially and up slightly year-over-year.
The service provider added 131,000 fiber-enabled locations, bringing its total to over four million as of September 30.
Stansbury said it is “pacing towards our targeted annual 500,000 build target this year.”
Lumen also saw gains in Quantum Fiber subscribers, adding 43,000 customers. Stansbury said this was “our best fiber net add quarter reported to date, bringing our total to over 1 million.”
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Sean Buckley
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