Lumen Technologies – Q1 2023 Update & Competitive Dynamics

Could you share an overview of Lumen’s operating environment and pull out 2-3 trends or drivers that you see impacting the business?

Lumen has a new CEO, Kate Johnson, who previously worked at Microsoft, GE and Oracle and replaced long-time CEO Jeff Storey at the end of 2022. What will be Johnson’s top priorities for the current quarter and 2023 as she starts at Lumen?

You mentioned that Johnson might first look at a unified vision for Lumen and the need to continue some divestment of businesses that are not performing as well as others. What parts of the business are performing vs the ones that could be part of further divestments?

You mentioned a decline in MPLS [multiprotocol label switching] service. What factors are at play here? You also noted that Lumen does need to address this. What are the actionable steps? Is this a better investment, or should the company consider other offerings entirely? Are there things specifically within this business line that can be improved?

Regarding Lumen’s current investments, you highlighted that capital investment and priorities have been a bit misguided in some areas. You mentioned that there were a lot of investments in the edge compute area, and that there’s potential to be a leader here. However, there are some compounding factors, such as the company’s leadership team. What have been Lumen’s investment priorities vs what should be its investment priorities today?

You mentioned Lumen’s state following some of its asset sales, as well as its M&A history and various assets. What are the company’s most valuable assets in its current portfolio?

There has been a lot of divestment activity at Lumen over the last year or two. Most recently, the company announced the sale of European assets, as well as its completed sales its of LATAM and ILEC [incumbent local exchange carrier] businesses, which you referenced earlier. What was Lumen’s rationale behind these sales? What’s your view on these divestments?

Where do the divestments leave Lumen’s international footprint if it’s exiting Europe and LATAM? What are your thoughts on its presence across emerging markets or outside the US?

You mentioned Lumen’s major business segments, which are business services and mass market. What are the greatest threats in each area? Could these be fixed wireless, fibre or corporate lay-offs?

You mentioned Lumen’s levels of success across service enterprise channels, mass markets and wholesale, with enterprise being the largest, accounting for over 50% of revenue. You also noted some customer pain points, with customer service being one of them. Where exactly do you see the company doing well? Within that, which customers is the company servicing the best? What things would you highlight as to why Lumen is winning new business?

Circling back to the competitive pressures, eg fixed wireless, could you expand on the threat from fibre overbuilders and competition there, highlighting parts of Lumen’s territory that are at most risk?

Lumen segments its product groups into three categories of grow, nurture and harvest. How is this segmentation taking place? How might this impact the company’s approach towards selling or delivering its services?

Lumen highlighted some product offerings, such as – in addition to edge computing – Dynamic Connections, security, Hybrid WAN [wide area network] and UCaaS [unified-communications-as-a-service]. What’s the potential of these offerings? What growth can we see from them?

What is your assessment of Lumen’s wholesale business? Looking at the company’s various segments, both on the business and mass markets sides, they saw declining YoY growth rates in Q3 2022. However, wholesale did see an uptick of about 1% or so. Could you walk us through some of the developments at play there?

Who would you highlight as Lumen’s most common competitors, especially considering its enterprise business, as well as some of the newer entrants to look out for going forwards?

How does Lumen price the enterprise and B2B contracts? Is the company doing very long-term agreements? Are these annual renewals?

Looking at 2023, it seems some enterprises are delaying bigger decisions in terms of renewals or their operations. Is this indicative of a more cautious approach and potentially even faster decline of the enterprise telco industry for 2023? What are your thoughts on the current backdrop? How might this play out?

We’ve highlighted a number of Lumen’s challenges across specific business lines, as well as some industry challenges. What do you see as a things-going-right scenario in 2023 with the new CEO? What key areas should the leadership team look towards as either being indicators of the company getting on the right track or a response that will show some progress?

What do you see as the largest risk or challenge for Lumen over the next 1-3 years?