The operator formerly known as CenturyLink performs U-turn as shares continue to fall
Lumen Technologies (formerly known as CenturyLink) has agreed to sell its business and assets in Europe, the Middle East and Africa to Colt Technology Services for $1.8 billion (€1.841 billion).
Assuming the deal lands the necessary approvals, Colt will own Lumen’s regional business, including its terrestrial and subsea networks, datacentres (in Belgium, France, Germany, the Netherlands and the UK), network equipment in the region, and “most” of its staff – whatever that means. The parties hope to conclude the deal by the end of next year
The business generated about $164 million in adjusted EBITDA in 2021, meaning the sale price is about 11x those earnings.
Colt’s CEO, Keri Gilder, commented, “This transaction would mark the next chapter in Colt’s exciting story of global growth and world-class innovation”.
She added, “This acquisition would strengthen and extend…connections across existing and new geographies, helping us to accelerate growth and bring the power of the digital universe closer to our customers,” she added.
Scale is the key
Lumen’s regional assets were mostly acquired from paying $24 billion for Level 3, which was announced in 2016 and completed in November the following year. As scale is the name of the game for service providers this looks like a good move for Colt, particularly as part of the proposed deal with Lumen is that the two will “establish a strategic relationship”.
Apparently this Colt “will enable Lumen to continue delivering a seamless experience for its multinational customers with needs in EMEA. The partnership will also allow Colt to continue serving the needs of the EMEA-based customers with service needs outside of EMEA.”
Snuffed out in Europe?
From the Lumen end, the sale to Colt looks like something of a change of heart and direction from a company that is struggling. As recently as July, the firm announced plans for edge computing services in Europe. The release said, “Today, Lumen Edge Computing Solutions can meet approximately 70% of enterprise demand within 5 milliseconds of latency in the UK, France, Germany, Belgium, and the Netherlands. Additional locations are planned by end of year.”
Adding, “In EMEA, the Lumen network is comprised of approximately 42,000 (67,000 km) route miles of fibre and connects to more than 2,500 on-net buildings and 540 public and private third-party data centres.”
Now it’s divesting those assets, having already sold its Latin American business to Stonepeak for $2.7 billion, and its incumbent local exchange carrier (ILEC) operations in the US in 20 states to Brightspeed, a subsidiary of Apollo Global Management.
Not a good Storey line?
The about-to-retire CEO of Lumen, Jeff Storey, said of the Colt deal, “We are continuing to execute on portfolio optimisation at Lumen, creating additional value for our shareholders by monetising non-strategic assets at accretive multiples. This transaction would enhance our focus so we can invest more efficiently in our most strategic opportunities – our key enterprise and quantum fibre initiatives – and partner with regional leaders, like Colt in Europe and Cirion in Latin America, to continue serving our multinational enterprise customers.”
His incoming replacement, Kate Johnson (former head of Microsoft in the US) might be considerably less fulsome in her summary of the situation. Lumen’s Q3 earnings report came hard on the heels of the Colt announcement and didn’t make cheerful reading for investors. The quarter’s revenues fell by 6% to $4.33 billion compared to the same period last year, but its share price dropped by just shy of 19% when the results were announced, meaning that this year the share price has more than halved.