On Wednesday, March 5, 2025, Lumen Technologies (NYSE: LUMN) took center stage at the Morgan Stanley Technology, Media & Telecom Conference. CFO Chris Stansbury outlined the company’s strategic pivot from legacy technologies to a network-centric model, focusing on AI and multi-cloud environments. Despite challenges, Lumen is set on stabilizing cash flow and driving revenue growth, while also managing cost reductions and debt.
Key Takeaways
- Lumen is transitioning to a network-centric approach to support AI and multi-cloud environments.
- A $1 billion cost savings program is underway, aiming for completion by 2027.
- Revenue inflection is projected for 2028-2029, driven by new technologies.
- Lumen aims to reduce its leverage ratio to or below three times in the next two to three years.
- Quantum Fiber remains a strategic asset, with potential for future sale.
Financial Results
- Free Cash Flow: Lumen aims to stabilize and enhance free cash flow.
- EBITDA: The company expects an annual EBITDA inflection next year.
- Revenue: Projected revenue inflection in 2028-2029, with digital innovation potentially accelerating growth.
- Cost Savings: A $1 billion cost savings initiative is in progress, targeting a $250 million annualized run rate by the end of 2025.
- Capital Allocation: Focus on debt reduction and simplifying the debt structure to lower the cost of capital.
Operational Updates
- Network Modernization: Consolidation of four networks into one unified network by year-end, enabling digital consumption.
- Quantum Fiber Build: Approximately 500,000 homes built last year, with 4.1 million enablements out of an 18 million copper footprint.
Future Outlook
- Revenue Inflection: Expected in 2028-2029, supported by new technology areas.
- Digital Innovation: Emphasis on digital network consumption with significant growth potential.
- Cloudification Expansion: Continued investment in R&D, with possible M&A activities for strategic acquisitions.
- Quantum Fiber Strategy: Open to potential sale for deleveraging and reducing CapEx.
Q&A Highlights
- Competition: Limited competition at scale, particularly in enterprise and innovation sectors.
- Cloud On-Ramps: Direct cloud on-ramps for faster and more cost-effective connectivity.
- Challenges: Complexity in modernizing legacy IT and network infrastructure.
- Balance Sheet Objectives: Aim to achieve a leverage ratio at or below three times within two to three years.
For a comprehensive understanding, readers are encouraged to refer to the full transcript below.
Full transcript - Morgan Stanley Technology, Media & Telecom Conference:
Operator: Great. So why don’t we start? So thank you all for joining us. We have Chris Tansbury here from Lumen.
Chris, thank you for joining and thank you for the time. Good to be here. Let me quickly start with our disclosure. For important information, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales rep value add.
Chris Stansbury, CFO, Lumen: Yes. Well, and for my portion of that, our disclosures are on our higher website at Luma. So I will never try to recite those back from memory.
Operator: Good. Terrific. Why don’t we start, Chris? You’ve been CFO for about three years now. Yes.
It’s been an active three years. Yes. You guys have made tremendous progress over the last twenty twenty four around the balance sheet, around the progress and transition for the business. What gives you excitement and what’s your agenda for 2025?
Chris Stansbury, CFO, Lumen: Yes, it’s been a great journey. It’s obviously been challenging, but I think what excites us the most is we’re now in that place where momentum shifts from a negative to a positive. And so much of what we’ve had to do is really around the financial side of the business and the balance sheet and dividends and all the big things that are tough to address. And we’ve made a lot of progress on that. And that has really started to unlock value in the underlying network as evidenced by the big deals that we talked about last year.
We think there’s some more there. But as we go to the future, I mean, think about it as a page turn from the past of legacy technology to one where the network becomes such a critical part of AI in a multi cloud environment where enterprise networking has never been flexible, it’s never been easy to consume. And in a world where data is getting further and further away from the point of consumption, it’s critical. So we’re moving well beyond a world of just connectivity. Connectivity is table stakes.
But CIOs want to consume the network the way they consume public cloud. It’s on demand and it’s super flexible. So that’s where we’re going. And I think we’re now in a cycle where you’ll see more and more product news. We’ll have some bigger thing around in Analyst Day in September.
But between now and then, you’ll hear more from us. We’ll continue to share metrics around that. And there’s a lot of room for us to improve the balance sheet along the way. And we had some great upgrades this week, and I think that’s just a start. Great,
Operator: great. You’ve talked about the path to EBITDA growth. That’s been a big focus of the conversation. Tell us about how you think about that going forward. What are the drivers to kind of transitioning the business towards more of the growth oriented opportunity?
Chris Stansbury, CFO, Lumen: Yes. I mean, what we said is that if you think about the financial algorithm, the first thing that we would do is stabilize free cash flow and we’ve done that and there’s more opportunities to drive that further. The second is inflect EBITDA and then the third is revenue. And really the order of that is driven by the PCF deals around free cash flow. As it relates to EBITDA, we guided both ’25 and ’26 when we gave the ’25 guidance because we’re confident in an EBITDA inflection on an annual basis next year.
It’s really driven by two things. One is, the underlying rate of decline in the enterprise business will improve. And the second is a lot of modernization and simplification opportunities that reduce cost, but they actually make the network more flexible, easier to consume and more customer friendly. The enterprise landscape is one of a lot of consolidations and the IT stacks have never been consolidated by any of us. And so today, a customer when they buy a solution from Lumen has to buy four different networks, with 13 different order entry systems.
Our own operations team can’t see one order in terms of what’s being delivered to the customer. That will all change by the end of this year when we’ll have one unified network, which then allows us to not only improve that process, but digitally enable all the ports on that network. So the network can be consumable remotely. So those two things really drive the pivot and then from there we’ll continue to grow EBITDA and we’ll see margins improve as well.
Operator: And is that part of the $1,000,000,000 cost savings? Sorry.
Chris Stansbury, CFO, Lumen: That’s really what’s driving it. Yes. So we said that exiting this year would be at a $250,000,000 annualized run rate. That will obviously grow next year and will be at the $1,000,000,000 by the time we exit $27,000,000,000
Operator: And any other components to that $1,000,000,000 are the one we just talked about? That’s the
Chris Stansbury, CFO, Lumen: key driver, and it really is about cleaning up the technology, but that also obviously impacts hard assets, right? We have a lot of real estate that isn’t fully utilized today. You think about old technology and the footprint that it required versus the new and there’s lots of opportunity for us
Operator: to consolidate that. And of your grow nurture harvest buckets, how do you think about the trajectories of each one of those segments going forward and where the opportunities come from?
Chris Stansbury, CFO, Lumen: Yes. It’s a really good question because and the reason we disclosed that not quite three years ago or shortly after I came, there was a lot of appetite to understand what was going on inside of enterprise. And the point is that we’ve been focused on selling newer items more so than our competition for some time. And we’re now escalating that even further. So when you think about things like everything from dark fiber to IP and waves, SASE SD WAN, edge compute security, those are big growth items.
And that portfolio as a percentage of our mix is now over 40% of our revenue and well over 50% of our sales. So that’s the starting point. The other buckets, Nurture and Harvest, Nurture really being VPN, Ethernet, Harvest legacy voice, those are declining at market rates. And we’re not trying to defy gravity there. That’s real.
But if you project those growth rates forward and you roll in the impact of PCF and a little bit of digital innovation without any kind of aggressive assumptions. We get to a point of revenue inflection in 2028, ’20 ’20 ’9, just doing the geometry on that. So if we can pull forward digital consumption of the network, which we view as more of a J curve kind of expansion, then that
Operator: just pulls that forward. Inflection meaning starts to grow. Exactly. Yes. It’s kind of 2829 timeframe.
Chris Stansbury, CFO, Lumen: Yes. But that’s without a big inflection from digital innovation. So we’re not trying to call when that hits. We’re going to continue to bring it. But we think that when they when those innovations start to grow, they’re going to be explosive growth.
So it’s just hard to predict in time when they’ll hit.
Operator: So diving into that a little bit more, I mean, a big theme generally, but of this conference, obviously, is AI demand and demands for bandwidth. We’re seeing that in almost every conversation, every presentation that’s pervasive. What are you all seeing kind of on the front lines of that? What are the opportunities?
Chris Stansbury, CFO, Lumen: Yes. So, really three phases to AI. The first phase is training, where the hyperscalers need enormous bandwidth just to train their own learning algorithms. It’s for their own internal consumption. We think that’s about billion of TAM.
We’ve already contracted $8,500,000,000 of that. We think there’s another opportunity for $3,000,000,000 to $3,500,000,000 more. Interestingly, that second batch is really less about capacity. It’s more about reducing latency because we can get from A to B today pretty much anywhere in The U. S.
But we may have to go through an extra node and they’re trying to eliminate that node because latency kills AI. And I think that’s an important precursor to where large enterprise goes and why our network is so critical and why the flexibility over consuming that network is so critical. So, the second phase is inference, which is where large enterprise will start to consume those models and run their business on it. And I think the honest answer today is that large enterprise is dabbling, right? They’re using some applications, some agents, but we’re not at the point yet where there’s been massive adoption.
But what we are seeing is large enterprise starting to position themselves for that. So our waves growth last year was pretty much at market growth rates mid single digits. But 10 gig waves are flattening and I think we’ll start to see those decline soon. The real growth is coming from 104 gig waves where our growth rates last year were over 50%. And the fiber that we’re pulling today is very expandable.
So as the equipment evolves over the next couple of years, those 400 gig waves can easily become 800, one point six terabyte. So I don’t think large enterprise has it figured out yet. I don’t think any of us do, But the decisions around positioning are starting to take place.
Operator: As you go after that market opportunity, whom you’re competing against? It’s really interesting.
Chris Stansbury, CFO, Lumen: At scale, I would say not too many people. I mean, the reality is we’re the only of the big three that compete in this space. We’re the only ones that are focused on the enterprise and innovating. The others are focusing on where they feel the best return is, which is really around convergence between fiber to the home and wireless. So at scale, I would say we’re the only ones.
There are smaller competitors. Zayo has obviously talked about Wave’s expansion and that’s great. I mean, I think they play an important role. The big difference though is, again, as I said earlier, connectivity is table stakes. And enterprise telecom has proven over decades that you can’t scale your way to greatness because the price per bit declines every year.
So it’s about a service layer that drives value either through lower latency or through reduced cost, not because we’re reducing prices, but because we provide enterprise the opportunity to reduce their cost of networking, from other means. So in our Q4 call, we shared a slide about cloud on ramps. And today it’s really clunky. If you’re Morgan Stanley and you want to connect to the cloud, you’ve got to go through a third party provider and cross connect to the server of the public cloud. It’s slow, it’s really expensive.
And, our network will have direct cloud on ramp, so you don’t have to do that. So it’s going to be faster, more seamless, very flexible in terms of consumption and cheaper to use.
Operator: And it sounds like that product goes after some of the data center products as well?
Chris Stansbury, CFO, Lumen: Yes. I mean, it’s really our point here is to provide a better way. And that’s the beauty of what you see in the tech space, right, is constant innovation. And the network is a place that hasn’t seen innovation in decades and there’s a huge potential there to unlock. Okay.
Operator: You’ve done a bunch of private network opportunities and deals. I know you haven’t been willing to share some of the economics of those transactions. But curious if you can share anything at all about how the benefits of those deals are to you all going forward
Chris Stansbury, CFO, Lumen: on the balance sheet? Yes. For sure. It’s we’ve shared quite a bit. The reality is that the $8,500,000,000 that we signed is really on existing network footprint.
And if you get right down to the underlying strategic advantage of Lumen, it’s our conduit based network. So twenty five years ago, Level three almost bankrupted itself by running conduit all over the country between cities and cities. There was obviously acquisitions as part of that. But with fiber technology advances, that conduit was never fully utilized. So there was this dormant asset sitting in the ground.
And as the hyperscalers are in a race to develop the best learning algorithm, they needed massive capacity as fast as possible. And so that allowed us to unlock the potential of that conduit. And what’s really interesting and we also shared some information on this on Q4 earnings is we’re increasing the capacity and the utilization of that conduit and there’s still a lot left. And the reason is, the fiber optic technology has far outpaced demand. And so, back twenty five years ago, they were talking about pulling kind of a few strands of fiber through every conduit.
Before our agreement with Corning, we were all pulling four thirty two count fiber and we’re now multiples above that as we’ve said on earnings. So the ability to scale the capacity of that conduit as fiber optic technology scales is infinite. It’s directly tied to that innovation. So, it was a great way for us to monetize an underutilized asset in a way that mattered. We’ve said that our after CapEx margin, our cash contribution margin looks a lot like our EBITDA margin for enterprise.
And the cash for those builds is front end loaded. So that has allowed us to reduce debt by $1,800,000,000 since those deals were signed. And it really puts us in a good place and that’s why we’re starting to see upgrades.
Operator: And when you think about your fiber capacity, how do you make that decision to use go after your lit fiber or dark fiber transactions? Yes.
Chris Stansbury, CFO, Lumen: So it really is, it’s been a journey. So we’ve been looking at this now for a few years. And I would say that the hyperscale conversations really started to heat up in mid to late twenty twenty three. So it was right when we were in the middle of all the debt things. And that’s why getting the debt transaction behind us was so critical because we needed the noise to go away.
We didn’t want to be distracted and that allowed us to focus on closing those deals. And so as we looked at it, the reality was in our discussions with Corning and we saw the innovation that was coming. The answer is that we just don’t see ourselves running into a wall on capacity because of the ability not just to pull latest generation fiber through empty conduit, but we can also rip and replace old conduit. So if you think about four thirty two count fiber even, which is kind of latest generation until now, you could pull out two or three of those and consolidate them into one. So we have many more moves that we could make.
So it wasn’t about scarcity of conduit capacity. It was it’s really about, what’s the value of that conduit in terms of speed for the customer because they want to deploy as fast as possible. And the customers were looking at kind of a build versus buy decision. And I got a lot of feedback when I came to Lumen on the things that we did wrong. It was a long list.
But the one thing that was always viewed as a positive was our ability to deploy networks and operate networks. And so I think the reality is that customers wanted to find a solution if we could make the math work and we did.
Operator: So does that mean from a practical standpoint that given the supply of fiber that you have, you really have the ability to provide whether it’s a bespoke solution to the customer, but also from your standpoint, you can do IRU, you can do lift fiber, whatever works.
Chris Stansbury, CFO, Lumen: Exactly, whatever works. And we’re being smart about it. I mean, we’re not making big speculative bets, but as we’re constructing these dark fiber networks, where we have more limited, say, waves capacity near major metro or a certain group of metros, Eastern Seaboard, then we’re pulling additional fiber at the same time. So we’re doing this in a very cost effective way while we have crews in field. And the decision process as
Operator: to which way to go sounds like it’s based on this question, the customer need, your supply at any particular market and also I assume balance sheet requirements as well.
Chris Stansbury, CFO, Lumen: Yes. And I’d say that the balance sheet really isn’t even a consideration anymore. So we’re not constraining ourselves. We have ample capacity with these deals to do what we need to do, but we’re not making big spec out of bets because we don’t see the need to. And even on the new builds, you think about level three twenty five years ago, in the biggest builds, they were laying twelve two inches conduits.
When we look at how much might we speculatively put in the ground on a new route for future consumption, we’re nowhere near that because again, the scalability is just so much higher today. Okay.
Operator: Okay. Talk a bit more, if you can, Chris, about cloudifying the business. Yes. Right. I think you’re using yourself as a customer first.
Yes. So what kind of describe for us what that really means and what that means for you as a customer to be learned?
Chris Stansbury, CFO, Lumen: Yes. This is the part that is really exciting and we’re just starting to get to it. Look, there’s been conversations now for years about the explosion in data centers. And that conversation has evolved to data centers are getting further and further away from the point of consumption because they’re in search of power and cooler temperatures. So you think even pre AI in a multi cloud environment as a user of your own data, it’s physically getting further and further away, which means in real time, if you’ve got a data center sitting in the middle of the country and you’ve got a team on the East Coast and a team on the West Coast and hitting that data at the same time, you get latency, everything’s going to fall apart.
And so it’s absolutely critical that as your data gets further and further away and frankly, you don’t even know where it is. You don’t know what server farm it’s sitting on, that the data and the information behaves like they’re two feet apart, not 2,000 miles apart. And so speed is absolutely critical, but ease of access is just as critical because legacy telecom really when it got down to it meant a truck roll. Okay. I need to get connectivity between A and B.
Do I have it? No, I don’t. Okay. I’m going to call my provider. When can you get out there?
Oh, it’s three weeks. Oh, it’s two months. People are out there plugging things into other things and it’s really slow. What we’re doing is unlocking the power of what is a super high capacity, super fast network where you can provision that in minutes just like you can provision compute and storage in minutes today. You used to have to go build a data center.
You don’t have to do that now. So why on earth wouldn’t the network do the same thing for you? And as we get to a unified network and we digitally enable all the ports on that network, you can create port connectivity, and self provision. And then when you think about a world where and we are customer number one in this, some of our ERP data sits on AWS, some on Google, some on Microsoft and each of those platforms has their own advantages. So it’s highly likely, in a large enterprise environment, you’re not just going to have everything sitting in one place.
So now you want to manipulate that data and you’ve got apps and data and APIs all over the place. You need the ability to quickly access it that isn’t expensive and isn’t slow so that you can do what you need to do. And maybe you’re pulling it down to an edge compute environment, which we have already built, and then do the manipulation you need to do and then send everything back to where it needs to go. And so that’s the future we envision. As we’re talking to CIOs and we’re in those forums, they’re asking us not why, they’re asking us how fast can I get my hands on it?
So it really is disruptive and it’s much needed because it just hasn’t been delivered in the past. And that’s beyond just cloud on ramps, right? You can think about ways that you can cloudify voice solutions. You can think about ways that you could with probably through partners create extra security layers, right? We have unmonetized assets like Black Lotus Labs, where we see most of the world’s Internet traffic because of our peering relationships.
And we’ve been able to identify threat actors because of changes in data flow that we see. Well that would allow us if we know what those IP addresses are to provide IP blocks, right? So there’s ways to bring layers of service that make the network not a necessary evil, but actually a really powerful part of your overall platform. And that’s where we see this going.
Operator: Who are your target customers over time?
Chris Stansbury, CFO, Lumen: It’s really large enterprise and government. Mid markets, it obviously plays a role. You think about again digital delivery that plays very well in the mid market space, but it’s really
Operator: the full gamut. And whom do you think you’ll be competing against here? I don’t know.
Chris Stansbury, CFO, Lumen: I don’t think today on connectivity we compete with a lot of people, right? The question is and we don’t think it’s really a question is will enterprise see the value in the service layer that can sit on top
Operator: of that and we do believe they will. And as a first mover on this and a first customer, what have been some of the lessons you’ve learned using this capability that you’ll apply going forward?
Chris Stansbury, CFO, Lumen: It always goes slower than you want it to. Okay. Deployment, you mean. Yes. I mean, I get asked a lot what keeps me awake at night and Kate and I talk about this a lot and it’s like, can we go faster, right?
But it’s hard, right? What it really comes down to and it’s why you see us doing the modernization and simplification is you got to fix the foundation of the house first before you start refurbishing. And the foundation of the house is the network and that’s collapsing four networks into one. It’s getting rid of old IT stacks and moving to the new. You have to have that investment in place and it takes time and then you can build the things on top of it.
Operator: And what are the challenges to getting that done? It’s enormously complex.
Chris Stansbury, CFO, Lumen: This is the largest, most tangled up plate of spaghetti that you could imagine. And I think that’s true for the industry, not just us. And inevitably, you never untangle a plate of spaghetti, you start cutting it and you just don’t know what’s going to happen on the other end, right? So you’ve got to be informed, you’ve got to be careful and and you’ve got to be willing to accept some risk because you’re never going to fully understand it before you. Yes, exactly.
Operator: Sounds like my ass. Okay. Okay. Just turn to Quantum Fiber a little bit. You guys built roughly 500,000 homes last year, so a really fast build.
Tell us a little bit
Chris Stansbury, CFO, Lumen: about the build engine and kind of what’s making that work for you. Yes. We’re really proud of that team. I mean, there’s no secret that after the debt negotiations, we pulled back on our build plans as our interest expense went up. And so we’ve constrained that group.
But the enablement in passing that they’ve built, the efficiency with which they’ve done that and the penetration they’ve driven is outstanding. They’ve faced some significant headwinds as we’ve dealt with things like Wi Fi seven and they’ve overcome that. So super proud of the team. And yes, we’re at about 4,100,000 enablements in what is a copper footprint of about 18,000,000 households. We only touch about 1,500,000 of those today, largely in rural areas.
But we’ve got great major metros largely West focused. It’s Minneapolis, Portland, Seattle, Denver, Salt Lake City, Las Vegas, Phoenix. So big NFL cities with the opportunity to really grow that footprint from $4,000,000 plus to $10,000,000 plus we think over time. So as we’ve said, let’s go there, that it’s a great asset, but it has a very different return profile than enterprise. It’s a much longer tail of returns.
And at the right time when the market started to consolidate, we wouldn’t be the consolidator. And that remains true. We’ve continued to invest in the asset and we will, but there’s been a lot of interest in the asset with all the consolidation activity that’s taken place. It’s the next largest asset in play. So there is interest in it.
And I think it’s great for that business. I think it’s great for that team. And for Lumen, it allows us to dramatically delever at time of closing. And then importantly, because of the investment requirements over time, it allows us to eliminate between $800,000,000 and $1,000,000,000 a year CapEx, which in turn, as we use all of that to delever, not only are reducing our interest expense because the debt balances are lower, we’ll continue to see strong ratings improvements and our cost of borrowing will go down. So it’s a tremendous opportunity for us to delever, to simplify the debt structure and to reduce our cost of capital.
Operator: Got you. And as you go from that 4% to 10%, how do you guys think about market selection?
Chris Stansbury, CFO, Lumen: So it’s really interesting. We and it’s true for a lot of the players in the space. As fiber started to get deployed years ago, a lot of people started where it was easiest, which was really aerial, off of poles. That got done quickly. And as we went forward, it was really about, okay, now how do we start to build out the rest of those major metros.
And if you look at our footprint today, here’s kind of how we think about it. We have over 1,700 wire centers across our total network today. Consumer fiber is in about 400 of those. And if you think about going from $4,000,000 plus to $10,000,000 plus, I don’t think it’s actually a dramatic expansion in the number of wire centers. It’s about densification.
Because if you look at any of those major metros, coverage is spotty and there’s a huge opportunity to densify that. And so that’s really how we see that play.
Operator: Got you. So moving from, I guess, Homes Pass to penetration, subscribers have been ramping. Tell us about the strategy, how that’s working and what your initiatives have been to kind of drive that
Chris Stansbury, CFO, Lumen: ramp up? A couple of things. So obviously, we’ll do some near term incentives to get people to switch to fiber. We’ve also been very aggressive where we do have copper in those metros. Again, there’s not a lot of it to forcibly move customers, so we can turn off those portions of the networks.
But a lot of it’s really just been a ground battle. We did last year start to increase advertising, and we’ve been able to measure that. It’s had a material impact. But let’s call it what it is. It’s a great brand.
It’s a great way to consume it. It’s a great digital interface for customers to scale up or down. There’s no long term contract. So it’s very easy to use and consume, but it’s not a household brand, right? And so if you think about if we were to continue to try to build that asset out, our limit was probably more like 8,000,000 households.
I think other owners who have retail presence and wireless products and the ability to bundle and reduce churn, I think that’s what will take that number higher. So again, I think it’s I think the right asset in the right hands, it creates a bigger opportunity for that business.
Operator: Okay. You’ve touched upon the balance sheet in a couple of your observations. What’s your long term objective of vision for your balance sheet?
Chris Stansbury, CFO, Lumen: I really want our balance sheet to be boring. Exciting balance sheets aren’t that much fun, I can tell you from experience. And I think we’ve got the opportunity to do that. I mean, our maturity curve when I came in, it was a head scratcher and you know it. I mean, you’re familiar with it.
We had, after the Brightspeed transaction and the Latin America transaction, we had about $20,000,000,000 in debt and half of it was due in 2027. And, I mean, how does that happen, right? So we’ve been able to clean a lot of that up. We’ve created a path forward. But our leverage today with our 25 guide, we’re kind of in the high 4s.
With all the things we just discussed with where we’re going on enterprise, we see a path in the next two to three years for that to be at or below three times. So dramatic change. And in making those moves, it allows us to have a maturity curve that looks normal and normal way financing and at good rates and really nice and boring.
Operator: Great. Wish
Chris Stansbury, CFO, Lumen: you a boring future. I hope for a boring future on that front.
Operator: Exactly. ABS, how does that come into play? It’s obviously a very strong product out there.
Chris Stansbury, CFO, Lumen: Yes. It’s a really good question we get asked a lot. I mean, one of the challenges for us with ABS back to the consumer side is exactly what I just said, right? That very kind of spotty footprint, you got to identify the assets, doable, but a ton of work. Our view is it’s a tool.
And there’s other tools we get asked about like would you do a convert, would you do this, would you do that. I think all those things are on the menu. But again, our goal is to de lever and to simplify. And so right now, our focus needs to be on that. We don’t have infinite resources.
And ABS would only add complication, I think. And yes, there’s good rates out there, but in an environment where we can get to a same economic outcome by simplifying the structure and delevering. So let’s focus on the basics first, do that and then see how many of those options are out there. So it’s not a never, it’s just not right now.
Operator: Got you. Once you kind of reach the stronger balance sheet, how to phrase this, what’s on your wish list? What do you really want to do, organically, inorganically? If you had the flexibility, where would you spend the capital?
Chris Stansbury, CFO, Lumen: It’s really on continued transformation. I would like to free up more CapEx on really the R and D side of just how far can we push this cloudification journey. That may or may not include M and A if there’s a good tuck in that would allow us to accelerate that. And we’ve had some time to think about that. But again, really, as we’ve said throughout this conversation, it’s about focusing on the basics, getting the foundation right.
So we’re not quite there yet. But I think in the next few years, we’re going to start to open up some of those opportunities for ourselves. Okay.
Operator: So I’ll end with, we’ve seen some long only building broadly in the sector, particularly in wireless. Tell us in your view, what’s kind of the pitch for Moomin going forward? Why is it a great investment over time from an investor standpoint?
Chris Stansbury, CFO, Lumen: I mean, really, I would say there’s again, it’s a page turn. And on one side of the page is there is value to be extracted from the legacy core network through our modernization and simplification, the $1,000,000,000 through better execution around things like renewals. I mean, we didn’t say it here, but I’ve been asked what’s different in telecom. And the number one unwritten rule in telecom is that once a customer is on a legacy service, don’t ever talk to them again. And the reality is that is completely wrong.
There’s a subset of customers that’s true, but there’s another set of customers where if you come with innovation, they consume more, they don’t churn and cannibalizing yourself is a good thing. So we can do some things there. And then there’s whatever happens with asset sales. So there’s a tremendous near term opportunity that I think manifests itself in the equity of the company. The longer term piece as we turn the page is really about this cloudification journey.
And we’re not talking about something that’s revolutionary. It’s been done in multiple industries. We’re just the first ones and frankly the only ones who are focused on it in telecom. So that opportunity is enormous. And that’s the exciting part.
I think the unlock of value on the historical, it’s great. We’re going to do it. I’m very confident in that. But the real exciting part of the journey, it’s not the balance sheet. It’s that digital future.
And where that could take the company in terms of growth and valuation is an unknown, but I think there’s a lot of tailwinds.
Operator: Terrific. Okay. Thank you very much, Chris. Yes. Thanks a lot.
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