Lumen Technologies Bets Big On NaaS To Turn Around Struggling Enterprise, Business Revenues
Lumen’s NaaS platform’s Internet On-Demand feature highlights just one of the areas in which CEO Kate Johnson called “the first and a very important step towards the company’s bold vision to disrupt the telecom industry” during the carrier’s Q2 2023 earnings call. Even so, Lumen’s stock was down 7.4 percent in after-hours trading Tuesday after the firm reported a net loss of $8.79 billion for the quarter.
Kate Johnson
Telecom giant Lumen Technologies, formerly CenturyLink, is seeing early traction in the growth areas in which it’s prioritizing, including in Network as a Service (NaaS) and fiber, according to the company.
Lumen during its second fiscal quarter of 2023 saw a slight increase in Lumen’s “Grow” business product revenue category. The Grow category, which includes next-generation networking services and unified communications, pulled in $1.14 billion during the quarter compared to $1.13 billion a year ago.
Lumen on Monday unveiled its first and flagship capability as part of its long-awaited Network-as-a-Service (NaaS) platform: Lumen Internet On-Demand, a service that customers can use to buy and deploy instant internet connections to public data centers and port-enabled business locations. President and CEO Kate Johnson told investors during Lumen’s Q2 2023 earnings call on Tuesday evening that Internet On-Demand is already oversubscribed.
“This is the first and a very important step towards the company’s bold vision to disrupt the telecom industry,” Johnson told investors. “By offering customers radical flexibility [with] managed network and services, Lumen is cloudifying traditional telecom.”
[Related: Lumen Technologies Boosts NaaS Strategy With Flagship On-Demand Internet Capability]
Lumen’s large enterprise segment, which contributed to 32.2 percent of the company’s revenue during the quarter, dipped 17.4 percent to $1.18 billion during Q2 compared with revenues of $1.43 billion a year ago. The midmarket enterprise segment declined 9.7 percent to $507 million in the first quarter compared to $562 million in Q2 2022. The service provider eliminated its SMB reporting segment last year. Enterprise Channels, a relatively new reporting segment for the service provider, fell 15.3 percent to $2.10 billion from $2.48 billion a year prior. Enterprise Channels represented 57.3 percent of Lumen’s Q2 2023 earnings.
Johnson said that the Enterprise and Midmarket segments are still being impacted by slower IT buying decisions. However, Lumen has been coaching its internal sales teams to focus more on business outcomes as opposed to products, a new motion for sellers which Lumen believes will be appreciated by customers.
Lumen in June brought on telecom veteran Kye Prigg as its new executive vice president of the service provider’s enterprise operations.
Overall, Lumen’s total Business segment revenue, which accounted for 79.1 percent of the company’s revenue, slipped 15.2 percent, totaling $2.90 billion in the first quarter compared to $3.41 billion a year ago. The Mass Markets segment, which accounted for about 20.9 percent of Lumen’s business during the quarter, fell 36.1 percent to $764 million from $1.20 billion in Q2 2022. Wholesale revenue slumped down 14.2 percent during the quarter to $797 million from $929 million in the year-ago quarter.
The company increased its Quantum Fiber-enabled location pacing, deploying approximately 130,000 fiber locations during 2023’s second quarter. Fiber broadband accounted for 20.5 percent of Lumen’s Q2 2023 Mass Markets segment’s revenue.
For the second quarter of 2023 that ended June 30, Lumen reported total revenue of $3.66 billion, in line with Wall Street’s expectations, but representing a decline of 20.6 percent compared to $4.61 billion in the year-ago period. The company attributed about 72 percent of its revenue declines to post-closing commercial agreements and lingering results of its divestitures.
Lumen at the end of 2022 revealed an exclusive arrangement for the proposed sale of its EMEA business to Colt Technology Services for $1.8 billion. The deal is expected to close at the end of 2023 or early 2024, according to the company. Lumen in October finalized the $7.5 billion sale of its incumbent local exchange carrier (ILEC) business, which included its consumer, small business, wholesale and mostly copper-served enterprise customers and assets in 20 states to Brightspeed, a brand new company that launched its operations last Fall. Earlier in 2022, Lumen closed the sale of its Latin American Business to investment firm Stonepeak for $2.7 billion.
The company reported non-GAAP earnings per share of 10 cents, a 70.5 percent decline compared with 34 cents per share in Q2 2022. Lumen reported a net loss of $8.74 billion for the second quarter 2023, which included a non-cash goodwill impairment charge of $8.79 billion compared to $344 million in net income the second quarter last year.
“The goodwill impairment was driven by the difference between the company’s market capitalization and the carrying value, primarily in its North America business reporting unit,” the company said in a release.
Lumen Technologies’ stock was down 7.4 percent in after-hours trading Tuesday to $1.88 per share following the release of its Q2 2023 financial results.