Chris Stansbury, Lumen executive vice president and chief financial officer, discussed areas that Lumen is focusing on to position the company for success during the Morgan Stanley Technology, Media & Telecom.
The priority, according to Stansbury, is to create financial stability, which revolves around the closing of a transaction support agreement (TSA) expected to be finalized later this month. Other areas of focus include the core business and the company’s innovation portfolio.
“If I look at the way we run the business today, there's much deeper inspection at every level,” said Stansbury. “There's a much greater focus on what we're doing and, almost more importantly, what we're not doing anymore. We continue to invest in cleaning up what are really poor processes, and the innovation portfolio has evolved significantly. But we're really excited about where we are in the journey and what comes next.”
Stansbury predicts that Lumen’s EBITDA (which is down year-over-year according to the company’s Q4 earnings report) will turn later next year, with the public sector pivoting towards growth later this year.
“I don't think it will grow sequentially Q1 versus Q4,” Stansbury said. “There was a big equipment deal in Q4 but as we go forward, you're going to see public sector grow because those deals are already sold. We're now at the point of installation. Mid-markets probably follow, then large enterprises.”
Investing in AI
Satish Lakshmanan, executive vice president and chief product and strategy officer, is new to Lumen and previously served as the AWS global head of artificial intelligence and machine learning. Lakshmanan focuses on Lumen Digital, and he sees AI as an opportunity for monetization.
Lakshmanan joined Lumen in December. His appointment comes as Lumen moves on various initiatives to drive profitability in its business services segment by enhancing its cloud service set and developing new sales team training methods.
“We are excited about growth opportunities even in our traditional business,” said Lakshmanan. “The AI wave has direct implications on how much bandwidth across metropolitan areas that it really drives. And we feel that demand is really going to accelerate in the future. And so we can monetize our core network for sure, in more ways than we have done in the past. Fiber to the data center using that bandwidth across data centers, private networks, from enterprises-to-cloud, and cloud-to-cloud data movement because multi-cloud is a reality across enterprises. So all of that, I think, monetizes our underlying network.”
Stansbury believes AI is here to stay, and the company is focusing on it accordingly.
“There is an enormous demand for underlying (AI) infrastructure as well as how best to manage that in a flexible way,” said Stansbury. “So, it's a perfect environment for us to execute the turnaround because the core of what we do, which is that conduit-based infrastructure that allows us to quickly deploy additional capacity with a service layer on top of that, that allows you now to consume it very efficiently, very flexibly. That's where we see a real opportunity.”
Lakshmanan also discussed Lumen Digital, which encapsulates networking as a service, security services, edge capabilities for specific workloads beyond traditional IT workloads, and Lumen’s managed services.
“When I look at each of these elements,” said Lakshmanan, “we are unlocking, I think, about $40 billion, $41 billion of incremental total addressable market (TAM), which is all growth opportunity for Lumen.”
ExaSwitch, which Lumen describes as a faster, more cost-effective way for enterprises to connect to the cloud, is also an aspect of Lumen Digital.
“The best way for me to describe ExaSwitch,” said Lakshmanan,” is if you're thinking about your workload that requires you to go straight to a cloud data center. Suppose you think about peering workloads between cloud data centers. In that case, from one enterprise location to another, you can do it in a digital way through ExaSwitch, and that saves you the complexity of having to manage all this infrastructure, either in your data center or in a third-party data center, and abstracts that entire complexity out. And customers are willing to pay for the ease and flexibility to do so incrementally.”
Consumer business
Lumen sees fiber as a growth area and has increased its focus on the market. Stansbury reported that Lumen has 3.7 million fiber enablements in the ground now and is planning on deploying another 1.5 million over the course of 2024.
“Our expertise is really in enterprise services,” said Stansbury. “So, our goal right now is to continue the investment pace in consumer because the value is in fiber. Continue to drive subscription growth where we've ramped up our marketing efforts and are seeing some good results. But ultimately, we're taking a market-by-market approach, on how best to monetize those assets. We don't think big transactions are in the near future.”
For related articles, visit the Business Topic Center.
For more information on high-speed transmission systems and suppliers, visit the Lightwave Buyer’s Guide.
To stay abreast of fiber network deployments, subscribe to Lightwave’s Service Providers and Datacom/Data Center newsletters.