Lumen Sells Assets to Apollo Global Management

Lumen Technologies has agreed to sell a collection of telephone and broadband infrastructure that covers six million residential and business customers across 20 states, mostly in the U.S. Midwest and Southeast (according to initial reports) to Apollo Global Management. The $7.5 billion deal value includes $1.4 billion of assumed debt. 

What some will find interesting is that the assets seem to represent much of  the original CenturyTel assets. CenturyTel was a rural telco at the time. Some will still argue that AT&T’s spin out of content assets is the bigger move, but the Lumen asset sale is highly significant.

Many would have described the CenturyLink (including Qwest, CenturyTel and Level 3 Communications as an amalgamation of rural telco assets with an enterprise- and whole-focused capacity business. 

It was an odd match. In the third quarter of 2020, for example, 75 percent of Lumen revenue came from business customers, wholesale or international connectivity services. 

The companies have not yet released information about the actual geographic extent of the assets, but the original CenturyTel operated rural assets concentrated across the old BellSouth, Ameritech, SBC Communications and Bell Atlantic (Verizon) areas where US West (Qwest) did not operate fixed local networks. 

US West served customers in Colorado, Idaho, Iowa, Minnesota, Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming. What made US West different from the other RBOCs was the largely-rural character of its service territory. US West served a relative handful of tier-two cities or smaller metro areas and larger swaths of rural density. 

source: FCC 

CenturyTel had holdings across the United States, but did not overlap with US West (Qwest) in the Southeast, much of the Midwest and South Central United States, shown in green on this map, while US West (Qwest) operations are shown in blue. 

source: Denver Business Journal 

The logical disposition would be the former CenturyTel assets in BellSouth, Ameritech, SBC Communications and Verizon areas. It would be relatively easy to keep the former CenturyTel assets in the Lumen (former US West/Qwest) areas. 

CenturyLink purchased (some would say the firms merged) the Qwest assets in 2011. That deal was valued at $12.2 billion. 

At the time, the firms had combined revenue of $18.6 billion. CenturyLink later also purchased Level 3 Communications and Savvis. 

So the new deal essentially breaks out the former CenturyTel assets, leaving Lumen Technologies with the Qwest, Level 3 and Savvis assets. The new Lumen will derive even more of its total revenue from business services and customers. 

It will likely be a while before we can determine the change in customer mix and revenue sources. Still, Lumen Technologies will become even more focused on enterprise, wholesale and business customers than before, though it still likely serves consumers in 13 states.