Asset sales take Lumen down a peg in VSG global Ethernet leaderboard

Lumen Technologies slipped to the bottom of Vertical Systems Group’s 2022 Global Provider Carrier Ethernet Leaderboard, a fall the research firm attributed to the divestiture of its Latin America assets last year. Rosemary Cochran, principal of Vertical Systems Group, told Fierce it’s watching closely to see what impact the pending sale of Lumen’s European assets to Colt Technology Services will have on the standings in 2023.

The 2022 Global Provider Carrier Ethernet Leaderboard includes seven companies total, with the top four ranked operators – Orange Business, Colt, Verizon and AT&T – unchanged from 2021. Lumen, which sat in the number five spot last year, dropped to number seven, allowing BT Global Services and NTT to move up to the fifth and sixth spots.

The companies on the leaderboard are those which hold a 4% or greater share of billable retail ports outside of their respective home countries. Cochran explained that this specific definition allows Vertical Systems Group to zero in on those companies which have the ability to manage multi-national global networks.

She noted Lumen’s rank has slipped in recent years, falling from number three in 2019 to number four in 2020 and number five in 2021. She said the slide in 2020 was due to the impacts of the pandemic. But this year’s slide is due to the LatAm sale.

Cochran added the sale to Colt could impact the 2023 leaderboard significantly in part because even without the deal “there is a very slim margin in terms of the share differentials” among the market leaders.

Lumen already lost the top seat in the latest U.S. Carrier Ethernet Leaderboard thanks to the sale of its ILEC assets in 20 states to Brightspeed. And the LatAm deal not only saw it slip to the bottom of the 2022 global ranking but also propelled Cirion – the company Stonepeak created using the LatAm assets it bought from Lumen – into the Challenger Tier. Thus, it doesn’t seem like a stretch that the expected close of its Colt deal later this year could either see it fall off the 2023 leaderboard entirely or perhaps push Colt into the number one seat.

The Challenger Tier is made up of those with a 2% to 4% share. Besides Cirion, those in the Challenger Tier included Cogent, Global Cloud Xchange, GTT, SingTel, T-Systems, Tata communications, elefonica and Vodafone. Cirion was the only new addition to the Challenger list.

Market dynamics

According to Cochran, there are two main drivers in the Carrier Ethernet market right now: SD-WAN and fiber expansions. On the former front, she explained that ethernet – specifically dedicated internet access – is a key ingredient for hybrid SD-WAN setups which may also include a broadband, 4G, 5G or satellite component. The benefits of using ethernet for wide area networking include its scalable bandwidth, lower bandwidth costs, efficient application transport and simplified network management.

On the fiber front, Cochran noted fiber is integral for ethernet transport and most ethernet access connections are delivered over direct optical fiber. Thus, the ethernet market benefits from the fiber expansion efforts that are underway across the globe.

But there are also headwinds blowing against the fiber momentum. Specifically, Cochran pointed to geopolitical problems and supply chain issues as well as more intense market competition.

“There are a lot of companies that are aiming at this space that are service providers,” she concluded. “It’s really a question of being able to address the scope of those [global] networks.”