‘We are not here to find revenue growth in legacy telco. All of our transformation work is in service to customers who need and want to leverage technology like Gen AI to transform their business. The legacy networks of yesterday just won’t serve tomorrow’s enterprise … the customer experience in legacy telco is neither quick nor effortless, especially in complex, multi-cloud, hybrid environments, which have become the norm for every business,” Lumen CEO Kate Johnson says.

Lumen Technologies, formerly CenturyLink, is betting big on AI as a way for the telecom-turned-technology provider to continue its turnaround, but it will still take some time to show up in the company’s financials, according to the company’s top executives.

Lumen President and CEO Kate Johnson said that unlike other carriers in the same market, Lumen is not looking to grow with traditional telecom services.

“I want to be clear here. We are not here to find revenue growth in legacy telco. All of our transformation work is in service to customers who need and want to leverage technology like GenAI to transform their business. The legacy networks of yesterday just won’t serve tomorrow’s enterprise. They’re not big enough, they’re not fast enough, and they’re not secure enough. And of course, the customer experience in legacy telco is neither quick nor effortless, especially in complex, multi-cloud, hybrid environments, which have become the norm for every business,” Johnson told investors during the company’s third-quarter 2024 earnings call Tuesday evening.

Johnson said that the three largest cloud providers — Amazon Web Services, Microsoft Azure and Google Cloud, as well as social media giant Meta — have chosen Lumen as their trusted network for AI.

“Lumen is building the backbone for the AI economy. The market now recognizes that AI needs data in these data centers, and those data centers need to be connected … Big tech is choosing Lumen because our geographically diverse, conduit-based intra and intercity fiber network was built for this moment,” she said.

Lumen also said that its network-as-a-service (NaaS) platform, which was introduced in July 2023, was off to a promising first year as more than 400 enterprise customers have adapted Lumen NaaS. Johnson said the offering has “fundamentally repositioned” the company.

“The NaaS overlay really lets our customers get the network pieces they want, when they want it, how they want it, in true consumption form,” she said.

The CEO acknowledged that the plan Lumen is pursuing is different than the other telecom giants that are doubling down on their core connectivity services.

“It’s going to take some time for the growth factors I talked about to overcome the secular headwinds and show up in our financials, but we’re confident that our plans will achieve exactly that,” Johnson said.

Q3 2024 Financial Results

Lumen in 2022 split its portfolio of business services into three segments. The Grow segment, which includes the carrier’s higher-margin offerings, such as SASE, security, cloud, and UC collaboration services, saw maintained growth of 4 percent during the quarter. The Grow segment accounted for 45 percent of the company’s total business revenue.

Lumen’s Nurture segment includes VPN Data Networks and Ethernet services and accounted for 29 percent of its business during the quarter, but declined 15.2 percent. The Harvest segment, which house the carrier’s legacy services, including voice, represented 16 percent of Lumen’s Q3 2024 business revenues and declined 14.1 percent.

Lumen’s Large Enterprise segment dipped 8.2 percent to $839 million during Q3 compared with revenues of $914 million a year ago. The midmarket enterprise segment declined 6.9 percent to $471 million in the third quarter compared to $506 million in Q3 2023. North American Enterprise Channels fell 6.9 percent to $1.74 billion from $1.87 billion a year prior.

Overall, Lumen’s total Business segment revenue slipped 12.7 percent, totaling $2.54 billion in the third quarter compared to $2.91 billion a year ago. The Mass Markets segment fell 6.9 percent to $685 million from $736 million in Q3 2023. Wholesale revenue slumped 9 percent during the quarter to $706 million from $776 million in the year-ago quarter.

Chris Stansbury, Lumen’s CFO, said about 32 percent of Lumen’s Business revenue decline came as a result of its recent divestures, post-closing commercial agreements, and CDN contracts sold.

The company last November closed the sale of its EMEA business to Colt Technology Services for $1.8 billion. Lumen in October 2023 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 two-year old company that was launched by former Verizon executives.

Stansbury hinted at the potential future sale of Lumen’s consumer business as the company continues to turn its attention toward becoming “an enterprise company.” The Monroe, LA.-based service provider has indeed shifted its operations in recent years towards business services, which now account for about 75 percent of its revenue.

For the third quarter of 2024 that ended September 30, Lumen reported total revenue of $3.22 billion, falling short of Wall Street’s expectations and representing a decline of 11.5 percent compared to $3.64 billion in the year-ago period.

https://www.crn.com/news/networking/2024/lumen-technologies-ceo-we-re-building-the-backbone-for-the-ai-economy