Lumen Technologies Inc at Bank of America Media, Communications and Entertainment Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: David Barden - BofA Securities, Inc. - Analyst : So okay, what are we going to talk about? So let's start with the mass markets because it's the smallest business at Lumen. But the one most in the news right now. Verizon just announced that they're going to buy frontier for $20 billion about and depending on who you are, let's say, [8.5 multiple]. It's a 50-50, roughly copper fiber business as they divided up. So let's just say that, that [8.5] is kind of 11 fiber multiple and a six copper multiple or something in that neighborhood. It's a first time we've had a real kind of metric out there that we could use. So in the context of that, tell us about Lumen's mass market business fully loaded, what is the EBITDA and how do you divide it up between copper and fiber?

Question: David Barden - BofA Securities, Inc. - Analyst : So remind us, how many homes are left in the Lumen mass market footprint? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:50PM, LUMN.N - Lumen Technologies Inc at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - BofA Securities, Inc. - Analyst : And so if it's $1 billion in EBITDA and it's 10% fiber and 90% copper essentially. So if we would kind of go do the math. So a six multiple on $900 million is about $5.5 billion and then an 11 multiple on the other 10% is another kind of $100 million or so $600 million, $700 million kind of number that we think you could maybe extract at the high?

Question: David Barden - BofA Securities, Inc. - Analyst : So I guess that's a good argument. So you could well say, it took Frontier a long time to get to where they got to the eight multiple. If you reverse that, it would have been a much higher multiple on what they had five years ago.

Question: David Barden - BofA Securities, Inc. - Analyst : Okay. That's worth thinking about. And just to your point, I think last year you said this and you say pretty regular that it's not a -- if it's a when, is that when here and now, because our view is the phone ringing -- yesterday I asked Frontier, of Verizon if they were to buy Frontier and they said no comment and then five hours later they are buying Frontier.

Question: David Barden - BofA Securities, Inc. - Analyst : I know exactly. Are you selling it today? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:50PM, LUMN.N - Lumen Technologies Inc at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - BofA Securities, Inc. - Analyst : So it's interesting. So I think that, maybe I'm wrong, but I feel like the language has changed a little bit because I think there was a time a year or two ago where the idea was that, investing in the mass market business was a good idea because the more investment you put in there, the more value you would be able to extract eventually when you sold the fiber part. Then you throttle that back from about 1 million homes past year down to about 0.5 million homes past year so that you could make these more important investments in enterprise, which is where you wanted to go. Now that you're seeing what's happening that all the interest and activity and values being subscribed to the fiber to the home side of information, does that change your mind about how you want to allocate these dollars, at least in the near term?

Question: David Barden - BofA Securities, Inc. - Analyst : I think when you and I first spoke, we talked about, you said that the Lumen equity story is really a credit story and you've spent most of your tenure addressing the credit side, the TSA was a huge part of it. I think it was either yesterday or the day before you guys announced an exchange offer. We'll get to the contract in the second, but could you talk a little bit about what the exchange offer is all about?

Question: David Barden - BofA Securities, Inc. - Analyst : So when we talk about the mass markets business and the enterprise business as being divisible, I think that, that makes a lot of sense to people. There seems to be this belief that somewhere inside the Lumen enterprise business is this super secret highly bankruptcy, remote Level 3 business and that its financials are available. Therefore, we can examine them. But it doesn't seem to me that Level 3 is, in fact, divisible. It can be accounted for differently. You can imagine that it could be in theory separated, but that can't actually happen, right?

Question: David Barden - BofA Securities, Inc. - Analyst : Creditor on creditor violence.

Question: David Barden - BofA Securities, Inc. - Analyst : But I want to get to the business and this is just something that your question is, you say that but the whole premise of the TSA was that somehow there was a group of people that believe that because the word Level 3 was associated with their bonds, it somehow had this magical pixie dust of security that none of the other bonds had. And yet if it ever came pushed to shove, you'd never be able to realize that.

Question: David Barden - BofA Securities, Inc. - Analyst : Everyone brings a Chief Accounting Officer who can meet me. I don't know what their deal is. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:50PM, LUMN.N - Lumen Technologies Inc at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - BofA Securities, Inc. - Analyst : So let's talk about the $5 billion contract announcement. So my understanding, I think you didn't say this to me, but I heard that you said that someone else is that, that's actually a kind of 10 contracts?

Question: David Barden - BofA Securities, Inc. - Analyst : Over 10. So these contracts that you announced this $5 billion the day before your results, I'm guessing that it was maybe nine plus small contracts that you didn't have the press release, but then one big one that you felt you had to the day before you came out with the results?

Question: David Barden - BofA Securities, Inc. - Analyst : But they were no company names in that press release?

Question: David Barden - BofA Securities, Inc. - Analyst : So big picture, are these contracts are roughly similar in structure?

Question: David Barden - BofA Securities, Inc. - Analyst : Okay. And so if we look at the Microsoft relationship is emblematic of this structure. So one question, when we did all the math and I think we're in the right place, you said 10% of revenue was kind of the maintenance part and 90% was the kind of the construction part. And we did the math and we kind of came out with like roughly $800 million of cash related to the construction part. And you said in the release, it would be three to four years. Does the $800 million, that's yours? Let's just say that's the right number. Is that something that you get ratably over the four years? Or do you get paid your profit margin after everything's been completed?

Question: David Barden - BofA Securities, Inc. - Analyst : You can't leverage anything you've already put for the fiber, that's already -- ? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:50PM, LUMN.N - Lumen Technologies Inc at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - BofA Securities, Inc. - Analyst : So I guess two more questions on the construction part of it, which is are the places where you're going to be doing this exist like these training data centers?

Question: David Barden - BofA Securities, Inc. - Analyst : So if a lot of this is on routes that exist, why is it taking three to four years to do? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:50PM, LUMN.N - Lumen Technologies Inc at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - BofA Securities, Inc. - Analyst : Three or three to four?

Question: David Barden - BofA Securities, Inc. - Analyst : And so then more to the financing side of it or the financials, what is your liability if construction costs go way above expectations if you hit a lot of rock or something burns down? Like what is your exposure?

Question: David Barden - BofA Securities, Inc. - Analyst : So the $5 billion is maybe Microsoft has an anchor tenant and a couple of other bigger chunkier pieces to the $5 billion. So let's just say, two for Microsoft and two more unnamed $1 billion guidance and maybe $8 million or $9 million smaller, $100 million guidance kind of piecing it all together. When you talk about the line of sight to the next $7 billion, how far away is that line of sight and who are -- I think, I've heard you say it's more like enterprises and things like that?

Question: David Barden - BofA Securities, Inc. - Analyst : So --

Question: David Barden - BofA Securities, Inc. - Analyst : So the $5 billion deal again, if my math is roughly right, it's kind of $800 million of profit. You kind of siphon that profit out of the dollars that you get inbound to cover the cost of construction and stuff. So that kind of filters in over a four-year period over the course of the next year or two or REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:50PM, LUMN.N - Lumen Technologies Inc at Bank of America Media, Communications and Entertainment Conference three, there's another $7 billion of deals that they're roughly equivalent, that's $1 billion of cash flow that maybe it starts coming in next year and the year after that. So maybe, $200 million a year from the first set up starting next year and then $250 million year, I mean, $800 million over the next two, three, four years, another $1 billion over the next three, four, five, six years. I mean, it sounds great, $12 billion, but the cash dollars after taxes just really aren't that big. You've got $13 billion of revenue, $4 billion in EBITDA, you've got $3 billion in CapEx annually, you've got a $9 billion maturity tower in 2029. These deals don't really do a ton. They're fun to talk about, they make headlines, but they're not changing who you are. Your DNA of this business is not changing because of that.

Question: David Barden - BofA Securities, Inc. - Analyst : Fun demand?

Question: David Barden - BofA Securities, Inc. - Analyst : But you're talking about it for 20 years? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:50PM, LUMN.N - Lumen Technologies Inc at Bank of America Media, Communications and Entertainment Conference

Question: David Barden - BofA Securities, Inc. - Analyst : So on the path to up and to the right, you lowered your EBITDA guidance for 2024?

Question: David Barden - BofA Securities, Inc. - Analyst : And then you talked about bringing more downward pressure in 2025?

Question: David Barden - BofA Securities, Inc. - Analyst : And then it's going to go up right in 2026?

Question: David Barden - BofA Securities, Inc. - Analyst : Is it as you think about that, is it time for another Analyst Day?

Question: David Barden - BofA Securities, Inc. - Analyst : But I thought you were on the slide in the presentation you guys gave on IRU and that sort of stuff was helpful in terms of thinking and understanding. So look, that was great. Think, I wish I could spend another 40 minutes doing this, but thank you for coming. We appreciate you.