Lights out for Lumen in EMEA

UK-based Colt Technology Services this week agreed to pay $1.8bn for US counterpart Lumen’s Europe, Middle East and Africa business.

The deal will increase Colt’s already sizeable network footprint in the region, giving it a presence in more countries, and more European cities and data centres. It also strengthens Colt’s portfolio of solutions for enterprise, hyperscaler, government and wholesale customers.

“This transaction would mark the next chapter in Colt’s exciting story of global growth and world-class innovation,” said Colt CEO Keri Gilder, in a statement on Wednesday. “We’re deeply committed to building extraordinary connections for our people, customers and partners across our digital infrastructure. This acquisition would strengthen and extend these connections across existing and new geographies, helping us to accelerate growth and bring the power of the digital universe closer to our customers.”

For Lumen, the deal represents an 11x multiple on the EMEA operation’s estimated 2021 adjusted EBITDA. It said the sale will strengthen its balance sheet and give it more money to plough into its core enterprise solutions business. As part of the deal, Colt and Lumen have also entered into a strategic partnership that will enable the latter to continue to serve its EMEA customers. Furthermore, most of Lumen’s EMEA employees will join Colt after the transaction completes, which is expected to happen in late 2023, subject to the usual approvals and closing conditions.

“We are continuing to execute on portfolio optimisation at Lumen, creating additional value for our shareholders by monetising non-strategic assets at accretive multiples,” said Lumen president and CEO Jeff Storey. “This transaction would enhance our focus so we can invest more efficiently in our most strategic opportunities.”

Having already offloaded its LatAm operation last July for $2.7 billion, backing out of EMEA marks another step towards unwinding the position that Lumen established when it acquired Level 3 for $34 billion in October 2016. That deal, which closed in October 2017, gave the US-based fixed-line telco – which was trading as CenturyLink back then – a much bigger role on the global stage, turning it into an enterprise services giant more or less overnight.

In September 2020, CenturyLink announced it was sharpening its focus on enterprise solutions, repositioning itself as a network and services platform to support IoT, robotics, collaboration, automation and cloud services. In addition to renaming itself Lumen, this transition also included shedding what it saw as non-core assets, which included certain geographies. As well as exiting Latin America and now EMEA, Lumen also last year struck a $7.5 billion deal to sell its DSL operations in 20 US states to Apollo Capital Management.

Outside the US, Lumen still has its Asia Pacific business, and that looks like it’s staying put for now. In March this year it shuffled its senior management there, charging the newly-promoted managing director of APAC, Francis Thangasamy, with executing Lumen’s commercial strategy in the region.

Meanwhile, the sale of EMEA also marks the final act of outgoing Lumen CEO Jeff Storey. He will step down at the end of this week, and will retire altogether after a transition period that ends on 31 December. His replacement, Kate Johnson, was announced as Storey’s successor in September. She joins from Microsoft, where she most recently led the software giant’s US business, almost doubling its enterprise revenues during her four-year tenure.

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