LUMN Sells Consumer Fiber Business to AT&T to Sharpen Enterprise Focus

Lumen Technologies, Inc. LUMN has announced a definitive agreement to sell its Mass Markets fiber-to-the-home business, including Quantum Fiber, across 11 states to AT&T for $5.75 billion in cash, subject to subject to working capital and other various purchase price adjustments. This transaction marks an important move in Lumen’s ongoing transformation into a leading digital enterprise networking company.

The transaction is expected to close in the first half of 2026, pending regulatory approvals and customary closing conditions.

What Does This Divestiture Offer?

The sale, which includes roughly 95% of Quantum Fiber in approximately 4 million fiber-enabled locations and close to 1 million subscribers as of March 31, 2025, is expected to contribute more than $750 million in annualized revenues, based on first-quarter figures. AT&T’s scale and consumer-centric strategy are expected to further accelerate the growth of this business.

Net proceeds from the deal, estimated at approximately $4.2 billion, combined with existing cash, will be used by LUMN to retire about $4.8 billion in super priority debt. This is expected to lower annual interest expenses by $300 million and reduce the company’s projected 2025 net debt to adjusted EBITDA ratio from 4.9 to 3.9. The deal will also reduce annual capital expenditures related to Mass Markets fiber by about $1 billion, allowing Lumen to reinvest in enterprise offerings and strengthen its balance sheet.

Lumen Technologies, Inc. Price and Consensus

Lumen Technologies, Inc. price-consensus-chart | Lumen Technologies, Inc. Quote

The company also retains its existing copper network, which mainly services consumer customers. Lumen plans to continue new fiber buildouts at a similar pace as in 2024 through the end of 2025.

Lumen aims to expand its intercity fiber network to 47 million miles by 2028. The company will also focus on growing the Lumen Digital Platform to deliver simpler, faster and more secure networking solutions for business customers. Lumen also intends to strategically integrate its physical infrastructure with its digital capabilities to boost network performance, scalability, intelligence and security via innovative architectures like Direct Fiber Access, Cloud On-ramps, and Multicloud Gateways.

Management highlighted that the transaction provides it with increased financial flexibility to reimagine enterprise networking in a multi-cloud, artificial intelligence (AI)-first world. Lumen will retain its core infrastructure assets, including its national and regional fiber backbone, central offices and real estate, which will serve as the foundation for its enterprise services. Its wholesale and enterprise fiber customers will remain under Lumen across all markets.

Increasing demand for Lumen's Private Connectivity Fabric (PCF) solutions amid rapid AI proliferation is emerging as an encouraging development. Lumen secured a total of $8.5 billion in PCF deals in 2024.  As AI needs surge, large companies across various industries are urgently seeking fiber capacity, which is becoming highly valuable and potentially scarce. Lumen has inked deals with multiple tech giants like Microsoft, Amazon, Google Cloud and Meta Platforms to provide the network capabilities for AI innovation. Lumen added that it continues to see overall PCF demand for both large deal CST levels and at the smaller enterprise deal level.

LUMN’s Zacks Rank and Stock Price Performance

Currently, LUMN carries a Zacks Rank #3 (Hold). In the past year, shares have surged 195.3% against the Zacks Diversified Communication Services industry’s decline of 2.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider in the Broader Utilities Space

Some better-ranked stocks from the broader utilities space are Fortis Inc. FTS, Southwest Gas Holdings, Inc. SWX and Telefonica, S.A. TEF. FTS and SWX presently sport a Zacks Rank #1, while TEF carries a Zacks Rank #2 (Buy).

Fortis’ earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 3.58%. In the last reported quarter, FTS delivered an earnings surprise of 1.45%. The company’s long-term earnings growth rate is 5%. Its shares have surged 21.3% in the past year.

Southwest’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, with the average surprise being 6%. In the last reported quarter, SWX delivered an earnings surprise of 2.48%. The company’s long-term earnings growth rate is 9.5%. Its shares have decreased 9.7% in the past year.

Telefonica’s earnings beat the Zacks Consensus Estimate in two of the trailing four quarters, with the average surprise being 18.3%. The company’s long-term earnings growth rate is 17.2%. Its shares have surged 15.3% in the past year.

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This article originally published on Zacks Investment Research (zacks.com).

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