Lumen CFO says Quantum Fiber strategy focused on 'quality, not quantity'

Lumen Technologies is chugging along on its Quantum Fiber build, despite citing hurdles like supply chain constraints and labor shortages. CFO Chris Stansbury noted on Thursday Lumen is geared towards quality over quantity when it comes to fiber deployment.

Speaking at a Wells Fargo investor conference, Stansbury said Lumen is being mindful of where it’s building out fiber, not just focusing on the number of enablements or cost per passing.

“We need to be focused on good enablements – enablements that allow us to generate solid penetration,” he said. “There’s no point in building fiber if a customer doesn’t want [it].”

Lumen in its third quarter earnings reported it now has a total of 813,000 fiber passings across its 16-state footprint, but pointed out its passings rollout rate isn’t as fast as the company would like. A couple of weeks ago, Lumen announced Quantum Fiber deployments are now underway in 14 states and over 30 markets.

Lumen previously stated plans to reach 1.5 million to 2 million passings annually. Stansbury said he doesn’t yet have a timeframe for when Lumen will get to those numbers – the company has historically added 400,000 locations in a typical year – but the goal is still on the horizon.

“I do think that the scaling of the factory is moving in the right direction, but it’s not going to be quick,” said Stansbury, noting slowness in areas like engineering and permitting.

He added Lumen’s fiber penetration is “ramping very nicely” with its target margin of 40% or greater. So, he doesn’t consider the current economic environment – with rising inflation and interest rates – a “limiting factor” in Lumen’s deployments.

“If we can do better than that, because again we’re building in a smarter way where customers want that product, then that will raise the level at which we can spend on the front end,” he said.

And as Quantum Fiber moves to new markets, Stansbury said Lumen isn’t too concerned about cable competitors in those areas.

“I’m sure we’re going to see activity at some point, but the reality is [cable can’t beat] the capabilities of that product,” Stansbury stated. “We’ve already announced a symmetrical 8-gig product, not because we think there’s huge demand for that today…it’s a statement about how future proof this network is.”

Stansbury didn’t comment on rumors suggesting Lumen is looking to divest additional assets across four states, but he talked about the motivation behind the $2.7 billion sale of Lumen’s Latin America business as well as the recent $1.8 billion deal to sell its EMEA assets to Colt Technology Services.

“The reason we did what we did around LATAM and EMEA, we got great valuation for it, but those businesses needed capital,” he said. “They needed capital to drive scale and in Lumen’s operations they were generating very little free cash flows…frankly it was a distraction given the task at hand on what we needed to do in North America.”

Lumen this fall also closed a $7.5 billion deal to sell ILEC assets in 20 states to Apollo Global Management. Those assets now belong to new fiber operator Brightspeed.