Lumen Technologies, formerly CenturyLink, said Tuesday that it will cut 4 percent of its workforce at the same time as the telecom giant announced it would restructure $7 billion of existing debt.
Via the terms of the transaction, the company’s creditor group will provide $1.2 billion of new financing to help Lumen fund its plans for future growth through new long-term debt, President and CEO Kate Johnson told investors during Lumen’s Q3 2023 earnings call on Tuesday evening.
The new transaction support agreement is subject to the satisfaction of various closing conditions, the company said.
The company, which has struggled to gain strong financial footing in recent years, is also undergoing a “reorganization” that includes a round of layoffs as Lumen “right-sizes” the company for its future growth plans. The job cuts will impact 4 percent of Lumen’s workforce. The layoffs, along with the reorganization efforts, will save the company approximately $300 million, Johnson said on the call.
“As you might expect, this is a difficult, but necessary decision given the revenue pressure and noise in the market we felt regarding our creditor discussions, as well as global, macroeconomic pressures,” Johnson said.ADVERTISEMENT
Despite its weak financials in Q3 2023, Lumen is seeing early traction in the growth areas in which it is prioritizing, including in Network as a Service (NaaS) — the Lumen Internet on Demand offering — fiber, and Secure Access Service Edge (SASE), according to the company.
Johnson said the company will be prioritizing sales and marketing investments over enablement growth.
Lumen during its third fiscal quarter of 2023 saw a slight .89 percent increase in its “Grow” business product revenue category, a segment the company has been prioritizing in recent quarters. The Grow category, which includes next-generation networking services and unified communications, pulled in $1.13 billion during the quarter compared to $1.12 billion a year ago.
“We expect sustained strength in this area as we execute on our turnaround,” said Chris Stansbury, Lumen’s executive vice president and CFO. “Grow continues to represent approximately 39 percent of our business segment.”
Lumen’s large enterprise segment, which contributed to 32.5 percent of the company’s revenue during the quarter, dipped by 8.5 percent to $1.18 billion during Q3 compared with revenues of $1.29 billion a year ago. The midmarket enterprise segment declined 10.2 percent to $498 million in the first quarter compared to $555 million in Q3 2022. The service provider eliminated its SMB reporting segment last year. Enterprise Channels, a relatively new reporting segment for the service provider, fell 7.8 percent to $2.12 billion from $2.30 billion a year prior. Enterprise Channels represented 58.3 percent of Lumen’s Q3 2023 earnings.
Overall, Lumen’s total Business segment revenue, which accounted for 79.5 percent of the company’s revenue, slipped 7.2 percent, totaling $2.89 billion in the first quarter compared to $3.21 billion a year ago. The Mass Markets segment, which accounted for about 20.5 percent of Lumen’s business during the quarter, fell 15.8 percent to $774 million from $920 million in Q3 2022. Wholesale revenue slumped down 16.3 percent during the quarter to $770 million from $920 million in the year-ago quarter.
Lumen earlier this month sold off select Content Delivery Network (CDN) service contracts to Akamai Technologies as the company works toward exiting specific businesses so it can focus on more strategic IT services. Via the terms of the deal, Lumen and Akamai are operating under a transition services agreement for 90 days after which Lumen said it plans to “wind down” its content delivery services in 2024.
Lumen at the end of 2022 revealed an exclusive arrangement for the proposed sale of its EMEA business to Colt Technology Services for $1.8 billion. The deal is expected to close on November 1. The company plans to use the proceeds on debt reduction.
For the third quarter of 2023 that ended September 30, Lumen reported total revenue of $3.64 billion, beating Wall Street’s expectations, but representing a decline of 17.1 percent compared to $4.39 billion in the year-ago period. The company attributed about 73 percent of its revenue declines to post-closing commercial agreements and lingering results of its divestitures.
Gina Narcisi is a senior editor covering the networking and telecom markets for CRN.com. Prior to joining CRN, she covered the networking, unified communications and cloud space for TechTarget. She can be reached at [email protected].
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