Lumen Technologies To Sell off Latin American Business For $2.7B

On the heels of news that Lumen is reportedly in talks to divest its consumer business, the struggling telecom announced it is selling its LATAM business to investment firm Stonepeak.

Lumen Technologies revealed on Monday plans to divest its Latin American Business to focus its energies on boosting business services and its more strategic telecom offerings.

The communications service provider, which has struggled with returning to financial growth in recent years, is selling the business unit to investment firm Stonepeak for $2.7 billion. Lumen’s Latin American business will then operate as an independent, U.S.-headquartered portfolio company of Stonepeak, the two companies said in a statement about the deal.

Via the terms of the deal, Lumen’s current Latin American leadership team and organization will remain in place, headed by Lumen’s Regional President of Latin America, Hector Alonso. Lumen also will maintain a strategic relationship with the new LATAM company to continue to serve joint customers in the region, Lumen said.

[Related: Lumen Technologies CEO: ‘We’re Not Satisfied’ And Are Focused On Growth]

“This transaction unlocks value for our shareholders while allowing us to maintain our global presence through our strategic relationship with the New LATAM Company,” Lumen’s President and CEO Jeff Storey (pictured) said in a statement. “This transaction allows Lumen to focus investments in key areas of the business to drive future growth while providing flexibility for our capital allocation strategy.”

The relationship between Lumen and the new LATAM company, under Stonepeak, will include reciprocal reselling and network arrangements that use each other‘s extensive fiber footprints, data centers and other network assets. Upon the completion of the transaction, customers in the Latin America region will work directly with the new Stonepeak company or through the strategic Lumen partnership, the two companies said.

“As part of the strategic partnership we created, our channel partners can continue to serve their customers’ needs in Latin America. They will also have the opportunity to work directly with the New LATAM Company,” a spokesperson for Lumen told CRN.

“Stonepeak has made it very clear that they are committed to enterprises that operate in Latin America. This transaction provides the New LATAM Company with more autonomy to serve its customers and the enhanced ability to react to and invest in changing market conditions in the Latin America region,” business unit leader Alonso said in a statement.

Lumen Technologies, formerly known as CenturyLink, has been hit hard by the pandemic. The service provider during its most recent quarter -- Q1 2021 -- reported total revenue of $5.03 billion and diluted earnings per share of 45 cents, a 3.8 percent decline compared with $5.23 billion and 35 cents per share in Q1 2020. Revenue from the company’s Large Enterprise segment dipped 3 percent and its Mid-Market unit also slipped by 5.9 percent during the quarter.

Monroe, La.-based Lumen generates about three-quarters of its revenue from business services.

“I want you to hear directly from me. We’re not satisfied and are focused on growth,” Storey told investors in March, noting COVID-19-related financial impacts to its business and public sectors. Storey said at the time that Lumen is willing to consider divestitures of non-core assets as a means of returning to growth in the future.

Storey said that the company is relying on its strategic services, including fiber, edge computing, and the cloud-based Lumen platform, which unites global networking, cloud edge computing, security expertise and collaboration services, as ways to drive long-term growth.

A report surfaced in July that Lumen was reportedly in negotiations to sell off its consumer operations to investment management firm Apollo Global Management. The business unit is valued at more than $5 billion. Lumen did not confirm the report at the time, noting its policy to not comment on speculation.

“As a normal part of our business, we also evaluate all aspects of our business to ensure we are using our assets to deliver the best value for our customers, and shareholders. If we see opportunities to increase value with alternate approaches, we look into our options,” a spokesperson told CRN in an email earlier this month.