Lumen Technologies Inc at UBS Global TMT Conference Transcript

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

Question: Batya Levi - UBS - Analyst : Great. So just given the time of the year, I wanted to start off with what you are mainly focused on as we head into '24.

Question: Batya Levi - UBS - Analyst : And a lot of news or attention is going towards the TSA. So maybe if you could just give us an update on where we are, what are the next steps as you complete the process?

Question: Batya Levi - UBS - Analyst : Right. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2023 / 4:15PM, LUMN.N - Lumen Technologies Inc at UBS Global TMT Conference

Question: Batya Levi - UBS - Analyst : Okay. Maybe just to dig into that a little bit. There was a little bit of confusion around it. If you can help us understand what drove it, why now. And as we get out of it, maybe sort of some goalpost that we should think about in terms of where -- how much incremental interest expense is going to need and --.

Question: Batya Levi - UBS - Analyst : Got it. And is it true -- I mean, my understanding is that group that sort of on the other side, you did not have any control over that. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2023 / 4:15PM, LUMN.N - Lumen Technologies Inc at UBS Global TMT Conference

Question: Batya Levi - UBS - Analyst : Do you expect it to close soon? Or could this drag on further?

Question: Batya Levi - UBS - Analyst : Would that give you enough time just to focus on their operations and you'll have enough funding and/or are you -- will you be more opportunistic with other forms of funding? And maybe how you think about the ABS opportunity?

Question: Batya Levi - UBS - Analyst : I do want to touch on that a little bit more. And you're right; on the enterprise side, the telecom companies are generally known as the connectivity provider and maybe just the dumb pipe. And the value creation goes to others, the tech side, the software side. How do you change that narrative? What should we track to see that you're actually gaining share there? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2023 / 4:15PM, LUMN.N - Lumen Technologies Inc at UBS Global TMT Conference

Question: Batya Levi - UBS - Analyst : Like you said, Kate has been on the CEO role just over a year. You're a little longer. But as you look at that transformation, say what inning are we? Do you still need to invest or spend time to put the pieces together? Are you -- or is that mostly done and now it's kind of going after that?

Question: Batya Levi - UBS - Analyst : Going back to the Analyst Day, you laid out some operational goals for each segment. You maintained generally your free cash flow targets, but that I guess the adjustment is made for interest. It should lower CapEx. But on the operational side, what are some of the changes that you're seeing right now? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2023 / 4:15PM, LUMN.N - Lumen Technologies Inc at UBS Global TMT Conference

Question: Batya Levi - UBS - Analyst : Maybe digging in a little bit with the enterprise segment, and stepping back, can you talk about what you're saying from a macro environment and some competition, maybe some pricing trends?

Question: Batya Levi - UBS - Analyst : There is a perception that as these services are rolled out, they have deflationary pricing. So how -- will the volumes make up for the difference that you expect that pool of revenue to continue to grow?

Question: Batya Levi - UBS - Analyst : As you go through these opportunities, you're partnering with potential providers as well. Maybe you were the anchor provider. How does the profitability of that partnership look for you?

Question: Batya Levi - UBS - Analyst : So when you look at near-term enterprise trends, they've been pretty stable actually on a sequential basis. Can we expect that to continue? Or are there any sort of drivers --? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. DECEMBER 05, 2023 / 4:15PM, LUMN.N - Lumen Technologies Inc at UBS Global TMT Conference

Question: Batya Levi - UBS - Analyst : In large enterprise, it's been delayed, but we're starting to pick up more and more wireless companies kind of talking about private 5G opportunities. Are you seeing that as a new competitor coming in?

Question: Batya Levi - UBS - Analyst : Okay. Maybe just one more on the sales funnel for enterprise. Is there any change? Is there a little bit more delays in decision-making?

Question: Batya Levi - UBS - Analyst : And maybe moving to the mid-markets, you mentioned that you added more logos. But when you just simply look at the revenue trends, still continuing to decline mid-single digits?

Question: Batya Levi - UBS - Analyst : Right. But specifically for the mid-market group, do you see more competition from cable or maybe tougher --?

Question: Batya Levi - UBS - Analyst : Okay. So last 10 minutes, and now we're shifting to quantum fiber.

Question: Batya Levi - UBS - Analyst : Do you expect the pace to continue? It seems like it's the dilemma. There is stranded costs kind of building the fiber. But once you build it, you can see some nice penetration and growth of that segment as well. So how do you think about the opportunity?

Question: Batya Levi - UBS - Analyst : Right. And is that view different for your fiber versus non-fiber?

Question: Batya Levi - UBS - Analyst : Right.

Question: Batya Levi - UBS - Analyst : The SME goes with -- SMB goes with the consumer business?

Question: Batya Levi - UBS - Analyst : Right. In the near term, until we sort of get a change in the business model, I think you had assumed that the mass market would start to stabilize from '25 beyond, but with a faster fiber build?

Question: Batya Levi - UBS - Analyst : And now that the build is slower, should we expect that stability is also --?

Question: Batya Levi - UBS - Analyst : Are you seeing any change in the competitive environment with fixed wireless maybe coming in a little bit faster?

Question: Batya Levi - UBS - Analyst : How quickly should we expect you to think about strategic options for this segment?

Question: Batya Levi - UBS - Analyst : Got it. In the meantime, for example, BEED opportunity is going to come in, which could fund some of these investments. Are you interested in tapping that?

Question: Batya Levi - UBS - Analyst : Okay. On the cost-cutting side, I think you laid out $300 million of opportunity. When do we get to that run rate? And then how do you think about it?

Question: Batya Levi - UBS - Analyst : One sort of still remaining question is that you laid out some financial targets back in June and there's been some developments, but you also pulled forward the tax on at around $900 million, but that doesn't necessarily show up in the numbers. So what is the near term? Where are we going to see the near-term pressure in terms of the financial model?

Question: Batya Levi - UBS - Analyst : Right. Okay. And maybe on the CapEx side, the reduction is mostly coming from the fiber side.

Question: Batya Levi - UBS - Analyst : And enterprise, how should we think about the trend for enterprise capital intensity? Is it sort of -- is there a lag in terms of trying to drive that revenue growth?

Question: Batya Levi - UBS - Analyst : Is that like three plus years out?

Question: Batya Levi - UBS - Analyst : Kind of like putting it all together as we -- you'll give us proper guidance sort of beginning of the year. But as we think about the moving parts and EBITDA decline kind of trending towards '24, should we expect to see similar trends continue until you start to see the benefits of the cost cutting?

Question: Batya Levi - UBS - Analyst : In terms of the leverage, I guess, should we expect you'd like to keep it sort of --?

Question: Batya Levi - UBS - Analyst : Okay, great. I think that's all we have time for. Thank you so much.