Lumen Technologies’ ‘Reset Year’ Includes Investments In NaaS, Security
“I’m here now,” says Lumen’s new president and CEO, Kate Johnson, during the company’s Q4 2022 earnings call, referring to 2023 as a “pivotal” time in the company’s history as it positions itself to invest in growth.
Kate Johnson
Telecom giant Lumen Technologies, formerly CenturyLink, sees 2023 as its “reset year” as the company makes ambitious moves to grow by divestiture while making internal investments, according to executives.
The company, which has struggled to gain financial footing over the last couple of years, has shed several business units in recent months to help it return to revenue growth and leave room to invest in strategic business services and fiber.
Lumen’s new president and CEO, Kate Johnson, who joined the company in September, called 2023 a “pivotal” time in the company’s history with hard work ahead as Lumen makes changes in how it serves customers.
“I’m here now and there’s a huge opportunity,” Johnson said during the company’s Q4 2022 earnings call Tuesday evening. “When you think about the pivot to growth, Lumen [is] a collection of companies that was trying to drive synergy from a bunch of mergers … There was no anchoring North Star [or] focus on, ‘how do we innovate for growth?’ We weren’t in a position to invest in growth. Now we are,” she said.
In its most recent divestiture plans, the company in November announced an exclusive arrangement for the proposed sale of its EMEA business to Colt Technology Services for $1.8 billion. 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. Two months earlier, Lumen closed the sale of its Latin American Business to investment firm Stonepeak for $2.7 billion.
Reflecting impacts from the company’s two recently closed divestitures, Lumen’s large enterprise segment dipped 4.3 percent to $1.21 billion during the quarter compared with revenue of $1.27 billion a year ago. The midmarket segment declined 7 percent to $522 million in the fourth quarter compared to $559 million in Q4 2021. The service provider eliminated its SMB reporting segment last year. Enterprise Channels, a relatively new reporting segment for the service provider, fell 7 percent to $2.17 billion from $2.33 billion a year prior.
Overall, Lumen’s total business segment revenue slipped down 5 percent, totaling $3.01 billion in the fourth quarter compared to $3.50 billion a year ago. The mass markets segment, which accounted for 66 percent of Lumen’s business during the quarter, slipped 7 percent to $795 million from $1.35 billion in Q4 2021. Wholesale revenue slumped slightly by .5 percent during the quarter to $819 million from $891 million in the year-ago quarter.
Chris Stansbury, Lumen’s CFO, said that 2023 will involve the company moving from “playing offense to defense.” The company plans to invest in areas such as customer experience, digitization, networking as a service (NaaS), security and IT simplification. These growth and optimization investments are expected to total between $150 million to $200 million.
Stansbury said the company expects its revenue to stabilize at the end of 2024.
For the fourth quarter of 2022 that ended Dec. 31, Lumen reported a net loss of $3.07 billion, which the company said included a non-cash goodwill impairment charge of $3.271 billion, compared to reported net income of $508 million for the fourth quarter 2021. The company reported total revenue of $3.80 billion and diluted earnings per share of 43 cents, a 21 percent decline compared with $4.85 billion and 51 cents per share in fourth-quarter 2021.
For the full 2022 year, Lumen posted total operating revenue of $17.48 billion, down 5.5 percent when excluding the company’s now-sold Corrections Facilities Business from $19.69 billion in 2021. Lumen reported diluted earnings per share for 2022 of $1.55 compared to $1.91 a year ago. The company’s net income was $2.04 billion for the year.
Lumen last week announced changes to its executive leadership team. The company brought on tech veterans Sham Chotai as executive vice president of product and technology and Jay Barrows as executive vice president of enterprise sales and public sector. Lumen said the changes will better position it for growth and to place more of an emphasis on customer experience.