Lumen Technologies’ recent $5.75 billion sale of its consumer-focused fiber business to AT&T has allowed it to pay off significant debt overhang and has Lumen management bullish on growth backed by continued adoption of digital service offerings and surging data center connectivity needs.

AT&T closed on the Lumen fiber purchase earlier this week, quickly finalizing a deal that was initially announced last May. That deal marked a significant point for Lumen, which entirely exited the consumer fiber business to instead focus on the enterprise connectivity and services market.

More importantly, the deal provided Lumen with a pile of cash that it used to pay down debt and removed a capex burden.

CEO Kate Johnson told investors this week during Lumen’s latest earnings call that the company used $4.8 billion in net proceeds from the AT&T deal to pay off all of its outstanding “super priority bonds.” Johnson said that this move came just weeks after Lumen paid off a second-lien debt, which in total slashed its outstanding debt to just under $13 billion and ongoing interest payments by approximately $500 million.

“And lastly, this divestiture reduces our annual capex by over a billion dollars, driving a significant reduction in capital intensity as we stop fiber-to-the-home build and focus our capital on building a digital network services company,” Johnson added.

Fiber expansion plans

Lumen’s future capex will now be more focused on extending its enterprise and services fiber footprint. Lumen ended last year with 17 million miles of “intercity” fiber assets, with plans to extend that footprint to 58 million miles by the end of 2031.

That footprint is currently being utilized at 72% of total capacity, with hyperscalers noted as using 50% of that total capacity and the rest being used by enterprise channels and Lumen’s own services. That overall utilization is expected to grow only slightly as the footprint expands, but hyperscalers are forecast to increase their utilization to 59% of that total 2031 capacity.

To support that footprint growth, Johnson said that Lumen expanded its partnership with fiber producer Corning. Lumen struck a significant two-year deal with Corning in mid-2024 that reserved 10% of Corning’s global fiber production capacity, a deal that at that time was Lumen’s largest ever fiber purchase.

This has allowed Lumen to present scale as a way to outmaneuver data center build concerns that have started to creep into conversations.

“We have scale and scale across many different elements that really matter,” Johnson said. “Scale across the supply chain … our contracts are very favorable in terms of first off-the-line priority status. We have scale in terms of workforce. … If you want to join a construction team that's going to be at this for several years, you want to join one of our partners because they're building the largest expansion of the internet at large for Lumen. So our scale really, really matters here, and gives us the accessibility to all the things that we need to ensure that there are no constraints put on our ability to execute on time.”

Lumen’s management also downplayed concerns over broader data center build demand.

“I can say consistently and in terms of our engagements with those customers – and you can hear it in the market – hyperscalers are not talking about a bubble. They are talking about they don't have enough fast enough,” CFO Chris Stansbury said. “And I would also tell you that many of our contracts have performance bonuses in them for us to go faster. So that's the reality that we live with every day, and we're delivering against it.”