Lumen Inks Palantir Deal as Growth Strategy Takes Hold

Lumen Technologies is on track to restore revenue gains by 2030 by shifting to growth products and divesting noncore assets. Bloomberg Intelligence notes that the company recently announced the sale of the Mass Markets fiber unit to AT&T for $5.75 billion in cash. It's also building new fiber routes for hyper-scaler cloud providers and social-media companies for AI traffic between data centers. It aims to tap other high-growth segments like edge compute and security to restore top-line growth, though the enterprise segment could inflect earlier. Lumen is carefully managing capex and seeks to eliminate $1 billion in costs by year-end 2027 to maximize free cash flow.
Chris Stansbury, the company's Chief Financial Officer, breaks down Lumen's path back to growth also details the firm's recent $200 million deal to source AI software from Palantir Technologies. Chris speaks with Carol Massar, Tim Stenovec and Bloomberg News Senior Editor Nina Trentmann on Bloomberg Businessweek Daily.

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. You're listening to Bloomberg
Business Week with Carol Masser and Tim Stenoveek on Bloomberg Radio.
Sign for another edition of the CFO Briefing, and this
week we're joined by Chris Stansbury, the CFO and EVP
of the Louisiana based publicly traded global communication services company

(00:23):
Loomen Technologies. It's got a market cap of about nine
point seven billion dollars. Shares so far this year are
up around eighty percent, though shares today down just about
eleven and a half percent. Chris joins us once again
from Denver. Also with us Nina Treptman, Bloomberg new senior editor.
She writes the CFO Briefing newsletter. You can subscribe to
it at Bloomberg dot com slash Cfobriefing. Chris was featured

(00:44):
in the most recent edition of the newsletter. Chris, you
last joined us just about a month ago. In the
stock since any report earning since then? But the stock
since then has shot significantly higher and also come down
off of those highs of November three. What has changed
since we last spoke just about a month ago.

Speaker 2 (01:02):
Yeah, I really think the market is starting to understand
our role in the AI economy and they're rewarding us
for it. I mean, I think if you look back
over time, there was a cloud over Luhman's head which
really related to debt levels and the fact that we
were in a business that for a long long time

(01:22):
had been run in a very traditional legacy telecom way.
And over the last couple of years we've been re
engineering all of that. Our debt has come down significantly.
It'll come down again when we sell an asset to
AT and T and close on that in the first quarter,
so that cloud is gone. But more importantly, the growth

(01:44):
story is really starting to emerge and investors are starting
to reward us with that. So it's nice to see
the separation between us and our peers as we are
more attached to where the AI economy is going.

Speaker 3 (01:59):
Yeah, maybe good point to follow up here, Chris, Thanks
for joining us again. We've of course seen in recent
weeks concerns amongst investors about AI, whether there's a bubble
occurring in that space. You just recently struck a partnership
with Volunteer talk to us about that. And also then
these concerns on AI, like how serious should we take them.

Speaker 2 (02:19):
Yeah, we really don't see an AI bubble, especially you
know where we sit in that broader ecosystem. If you
go right back to basics, AI starts with the economics
of a GPU, right, those big computing tools that AI uses,
and for the economic investment in GPUs to make sense,

(02:43):
those GPUs have to run constantly and add capacity. And
what that means is in a world where companies are
keeping their data across multiple platforms, some of its internal,
a lot of its external, but then geographic, it's getting
more and more remote as these data centers are in

(03:04):
search of power. The reality is today's network does not
support that. It's too slow, doesn't have enough capacity, it's
inflexible to use, it's very static, and so what we're
seeing is a bandwidth reckoning, not a bubble. And so
the network architecture that we're bringing what we call cloud

(03:28):
two point zero, which is bigger pipes, faster on demand
access in the hands of the customer, are really what
takes us there. I mean, remember the Internet boom was
because demand wasn't there when the capacity was built. We
are all catching up to today's demand for AI. So
it's a very different scenario, and that's why we're convinced

(03:53):
that this is the right path as it relates to Pallanteer,
it's really one of many partnerships that you've announced. We've
talked about companies like Convault in partnerships with data center
companies as well, and really what that gets to is
is that we're not doing this alone. There's a broader
ecosystem in play here where tech companies are saying, hey,

(04:15):
wait a minute, my customer experience can be dramatically improved
if I'm using Luhman's network tools to access my technologies
and my solutions. So you know, think about real time
backup and recovery. That means real time, that means no latency,
that means being able to back up data that's everywhere.

(04:36):
And so as we continue to build that network out
with that kind of capacity and flexibility, we're seeing a
lot more tech partners come in and build APIs into
our network and turn will sell their product and they
will sell ours. So it's really exciting and it's frankly,

(04:56):
really disruptive to the enterprise telecom space.

Speaker 3 (05:00):
Just wondering about your recent results. You posted a bigger
net loss than the year before. Of course, the focus
is very much on growth that came across. But I'm
wondering sort of like, how much pressure are you usc
A fonder to narrow that net loss and get to
profitability at some point in time?

Speaker 2 (05:18):
Yeah, our, I mean, obviously there's pressure there. But our
focus is really on three things, and in this order.
The first was coming out of the debt restructuring, and
we did not yet two years ago. I mean, it's
really been a remarkable turnaround since then. Is stabilizing and
generating free cash flow. We've done that, and a big
piece of that is the ten billion dollars of these

(05:39):
big PCF deals, these big pipes that we're building for
Hyperscalers and other large tech companies. But it's also the
fact that our total portfolio is really made up fifty
percent of it of stuff that's growing, so the legacy
stuff gets smaller and smaller. So cash flow first objective
in great shape there, and it only gets better with

(06:01):
the delivering because our interest expense will be about half
of what it was two years ago. The second is
inflecting EBITDAE and that will happen next year, and it's
happening next year even while revenue continues to decline a
bit because we're targeting a billion dollars in modernization and
simplification by the exit of twenty twenty seven, and we're

(06:22):
on track to do that. And then the third is
getting back to revenue inflection. As those things happen, the
net loss situation changes. But the focus really is those
three things in that order.

Speaker 3 (06:34):
Just thinking about your share price, Tim just pointed it out.
It's up over eighty percent this year. I know that
you got authorization from shareholders earlier this year to do
a reverse stock split. I'm wondering when should we expect
that and what do you think the result will be
in terms of impact on your stock?

Speaker 2 (06:51):
Yeah, I mean, ultimately we'd like to see the share
count lower. A billion shares is a lot of shares
to have outstanding. I would say that's not a priority.
It's something that we'll look at as we continue to
move along. We authorized that earlier on when the stock
price was a lot lower and we wanted to make
sure that the you know, the value of the stock

(07:14):
in the markets was high enough to be attractive, and
it would have been you know, a financial engineering scenario,
but we really don't have to do that now. So
it's on the list to eventually do, but it's not
something that has to be done now because again the
balance sheet pressures of the debt and the and the
cash flow pressures are behind us.

Speaker 4 (07:34):
One thing I'm curious about, Chris, and I just think
for people who might not be familiar with you guys,
I mean it sounds you know, you've been shifting right
to a more AI play, AI oriented play. So who
are your big customers or who are your customers? So
we've be an understanding of kind of where you fit
into this puzzle.

Speaker 2 (07:52):
Yeah, so today when you think about where AI is,
we're really starting to transition from AI training to inference
or a large enterprise starts to use it. And so
the initial big bills were really for the big hyperscalers
and the companies that we're developing these learning algorithms for

(08:17):
their own consumption. These were really big pipes so that
those algorithms could continue to learn. And that network is
still being deployed because I saw someone speak recently and
they said the capability of AI three years from it
will be ten thousand times what it is today. So
that continues. But what we're starting to see and where

(08:38):
you see a lot of messaging from us on additional
bandwidth capacity, but then digital tools to access the network.
Not people in trucks plugging things into other things that
takes months to enable, but digital access to that data
large enterprise is really starting to need, as is mid
market companies. And so the tools that we bring in

(09:00):
terms of access but also the ability to move data
around in an AI world and a very efficient blow
L low latency, high secure way are the tools that
we're bringing to market and candidly, no one else is
doing it. And we talk about dumb pipes, which is
just the connectivity. Yeah, it's got to be the connectivity

(09:22):
in that physical layer, but it's also how you access
and interact with your own data.

Speaker 4 (09:26):
So the success of your company and what you guys
are doing, does it matter whether it's on premise or
whether it's up in the cloud.

Speaker 3 (09:34):
No.

Speaker 2 (09:34):
In fact, one of our significant advantages is is that
in this AI multi cloud world, accessing the cloud data
has really been an achilles heel because the only way
to do that is to really go through neutral third
party carriers. Because the telecoms years ago when cloud developed
basically delegated that and said, yeah, somebody else can go

(09:55):
build it. The analogy would be it's like taking County
Road to go from New York to San Francisco. It's slow,
there's lots of stops along the way, it's expensive. We
have things like direct cloud on ramps with very high
capacity connectivity, where you will be able to go direct
as a large enterprise, say a bank into your cloud

(10:18):
environment through our network, and immediately start moving data around,
you know, at your own fingertip. So that's a real
competitive advantage that no one else has.

Speaker 3 (10:28):
Chris, just as we're wrapping up, we have about a
minute left, talk to us a little bit about your
investment plans for next year. The reason I'm asking is
the One Big Beautiful Bill Act, which reduces the text
liabilities that come with spending on capital infrastructure plants, but
also other assets that we're off How does that impact

(10:49):
how you think about spending next year.

Speaker 2 (10:52):
It's it's material. I mean. The reality is is that,
as we've talked about in the past, big infrastructure companies,
which tend to have higher leverage, were really penalized in
the twenty seventeen legislation because we lost things like interest
deductibility as an example, and accelerated depreciation. So by getting

(11:14):
those back, it really does incent that we stay ahead
as a nation in terms of AI, and we're committed
to that. We are continuing to roll out more rapid routes,
more of our metron metro area rings that support large
enterprise in their consumption of AI, and so all of

(11:35):
those things are being based into the next year's plan
as we go forward. So it's a huge win for
us and a huge win for the industry.

Speaker 4 (11:44):
Chris so appreciated. Chris Stansbury, CFO Lubin Technologies. Nina Trupman Our,
senior editor at Bloomberg News