Some problems are nearly impossible to fix. Consider Lumen Technologies, a mashup of the former Level 3 Communications capacity business and the former US West local telco business. Right now, Lumen is facing declining revenue growth and a substantial debt load, acquired at the same time the firm made acquisitions of capacity assets growing its share of that business.
The current business strategy seems clear enough: refocus on what used to be the Level 3 Communications business (capacity and enterprise) and eventually get out of the former local telco business.
To be sure, the former US West (then Qwest, then CenturyLink) always was structurally challenged. The former US West had low customer density and limited business customer potential.
The former means its network costs on a per-location business were going to be high, while the latter means its organic growth potential is limited. All the other Regional Bell Operating Companies formed during the breakup of the AT&T system had denser network footprints and higher business customer potential.
On top of that, US West never developed a facilities-based mobility business, as did the other firms that eventually became AT&T and Verizon. And since mobility now is the revenue driver for a local telco, that also has hampered Lumen’s growth.
Today, the enterprise business represents about 75 percent of total Lumen revenues.
The issue is how Lumen could divest essentially all of its former local telco business, and to whom. Private equity is a possibility. Perhaps some rural telcos or independent broadband internet providers could buy parts of Lumen.
Perhaps some assets could be sold to new public-private partnerships, cooperatives or other joint ventures. That would be especially true of the rural assets.
By some estimates, the metro areas of Denver, Seattle, Phoenix, Salt Lake City, Portland, Minneapolis-St. Paul, and Orlando generate between 60 percent and 70 percent of all the local telco revenues Lumen generates.
The point is that nobody has been able to overcome the density and customer upside issues US West, Qwest, CenturyLink, Lumen have faced since the beginning. Prior to 2000, US West tried to create a position in cable TV services. Under Qwest, from 2000 to 2010 or so, the company shifted to the capacity business.
CenturyLink seemingly wanted both scale benefits and entry into a higher business customer profile. Lumen is reversing that focus, selling off essentially all the former CenturyLink rural telco assets and now its mass markets fiber to home business.
Lumen will become Level 3 Communications. The legacy telco assets will eventually be divested, somehow, to various buyers, in some way. It seems unlikely the whole former US West business will be appealing to any single buyer; and perhaps no single buyer will have the capital and business plan requiring all the assets, in any case.
Some problems seemingly cannot be fixed.
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