“We are building the foundation for an artificial intelligence economy”

“We’re not here to get revenue growth from legacy telecom companies. All of our transformation work is designed for clients who need and want to use technologies like Gen AI to transform their businesses. The legacy networks of yesterday simply won’t serve the businesses of tomorrow… customer service at legacy telcos is neither quick nor easy, especially in the complex, multi-cloud, hybrid environments that have become the norm for every business,” Lumen CEO Keith Johnson. speaks.

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

Lumen President and CEO Kate Johnson said that unlike other carriers in the same market, Lumen is not seeking growth through traditional telecommunications services.

“I want to be clear here. We’re not here to see revenue growth from legacy telecom companies. All of our transformation work is designed for clients who need and want to use technologies like GenAI to transform their businesses. The legacy networks of yesterday simply will not serve the enterprise of tomorrow. They are not big enough, fast enough, and secure enough. And of course, customer service at legacy telcos is neither quick nor easy, especially in the complex, multi-cloud, hybrid environments that have become the norm for every business,” Johnson told investors on the company’s earnings call for third quarter 2024 on Tuesday. evening.

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

“Lumen creates the foundation for the AI ​​economy. The market now recognizes that AI needs data in those data centers, and those data centers need to be connected… Big tech companies are choosing Lumen because our network was built for this moment,” she said.

Lumen also said its network-as-a-service (NaaS) platform, introduced in July 2023, is enjoying a promising first year as more than 400 enterprise customers have adopted Lumen NaaS. Johnson said the proposal “fundamentally repositioned” the company.

“The NaaS overlay really allows our customers to get the parts of the network they want, when they want it and how they want it, in a true form of consumption,” she said.

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

“It will take some time for the growth drivers I’ve talked about to overcome age-old headwinds and show up in our financial results, but we are confident that our plans will achieve just that,” Johnson said.

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

Lumen’s Nurture segment includes VPN data networks and Ethernet services. It accounted for 29 percent of its business during the quarter, but that figure declined 15.2 percent. The Harvest segment, which features the carrier’s legacy services including voice, accounted for 16 percent of Lumen’s business revenue in the third quarter of 2024 and declined 14.1 percent.

Lumen’s large enterprise segment fell 8.2 percent to $839 million in the third quarter, compared with revenue of $914 million a year ago. The mid-market segment declined 6.9 percent to $471 million in the third quarter, compared to $506 million in the third quarter of 2023. North American corporate channels fell 6.9 percent to $1.74 billion from $1.87 billion a year earlier.

Overall, Lumen’s total business segment revenue fell 12.7 percent to $2.54 billion in the third quarter, compared with $2.91 billion a year ago. The mass market segment fell 6.9 percent to $685 million from $736 million in the third quarter of 2023. Wholesale revenue fell 9 percent in the quarter to $706 million from $776 million in the year-ago quarter.

Chris Stansbury, Lumen’s chief financial officer, said about 32 percent of the decline in Lumen Business revenue was the result of recent sales, post-closing commercial agreements and the sale of CDN contracts.

Last November, the company closed the sale of its EMEA business to Colt Technology Services for $1.8 billion. Lumen in October 2023 completed the sale of its operating local exchange carrier (ILEC) business for $7.5 billion.which included consumer, small business, wholesale and mostly enterprise copper customers and assets in 20 states, to Brightspeed, a two-year-old company founded by former Verizon executives.

Stansbury hinted at a potential future sale of Lumen’s consumer business as the company continues to strive to become an “enterprise company.” The service provider, headquartered in Monroe, Louisiana, has really shifted its focus in recent years toward business services, which now makes up about 75 percent of its revenue.

For the third quarter of 2024 ended Sept. 30, Lumen reported total revenue of $3.22 billion, missing Wall Street expectations and representing an 11.5 percent decline from $3.64 billion in the same period last year. .