Speaking to investors during its third-quarter earnings call, Chris Stansbury, CFO of Lumen, said that the telco will focus on meeting the build-out goals it previously set. The service provider is on track to add 500,000 new fiber broadband locations to reach 3.5 million this year.
“We will continue to build at a pace like what we're doing this year, but we'll increase our focus on driving penetration, ARPU, and growth,” he said.
However, he emphasized that Lumen is not abandoning its consumer fiber strategy.
“We're not walking away from the consumer build,” Stansbury said. “We're saying that we will stay relatively flat to where we are this year. That is still a substantial investment in consumers. And I think if you look across the fiber space with the rising cost of capital, all our competition has pulled back.”
Fiber return focus
Lumen’s call to focus on deepening its subscriber base and returns in its consumer fiber business comes when subscriber additions fell below its expectations.
In its Mass Markets segment, Lumen reported that overall revenue declined 2.2% sequentially. However, Lumen’s Mass Markets fiber broadband revenue grew 3.2% sequentially, representing approximately 32% of Mass Markets broadband revenue.
As of September 30, total fiber broadband entablements were 141,000, bringing the total fiber-enabled locations to approximately 3.5 million.
During the third quarter, Lumen added 19,000 Quantum Fiber customers. However, fiber ARPU was flat sequentially and increased year-over-year to approximately $61 in the third quarter. At the end of the quarter, Lumen’s penetration of legacy copper broadband dropped below 11%, and its Quantum Fiber penetration stood at approximately 25%.
Kathleen Johnson, CEO of Lumen, said the company took steps to improve operations by combining CenturyLink Fiber and Quantum Fiber brands, merging inventory and field tech systems into one, and improving order-to-install commitments.
“While we believe these operational activities, coupled with lower move activity, dampen subscriber adds this quarter, we know that we need to do better selling and penetrating existing builds,” she said. “Therefore, as we face a more constrained capital environment, we'll prioritize sales and marketing investments over enablement growth.”
Competitive encroachment, consolidation
Like other traditional telcos offering fiber broadband, Lumen is aware of a growing base of new providers looking to establish a name and gain market share.
However, Lumen maintains these providers are not a real threat because they all face the challenge of a constrained capital market. “I'm not worried about encroachment because I think the market has already spoken about its willingness to invest,” Stansbury said.
At the same time, Lumen is watching the ongoing consolidation in the telecom industry. In the past few weeks, Consolidated and Shentel made vital deals.
Consolidated Communications agreed to be acquired by Searchlight Capital Partners and British Columbia Investment Management Corporation in a $3.1 billion deal where it will become private. Shentel hatched an agreement to acquire Horizon Telecom to enhance its commercial fiber business and serve as a new ramp for its Glo Fiber fiber-to-the-home (FTTH) broadband program.
While not commenting on any specific deal or Lumen’s approach to consolidation, Stansbury said it remains open to any ideas. “The goal here is to build two significant assets: an enterprise business and a consumer business,” he said. “And what happens with those businesses over time, we're very open to considering what that looks like.”
He added, “We believe that consolidation will continue to take place in the consumer space, and we would expect at the right point to participate.”
