Lumen closes EMEA deal but cuts staff at home

Lumen Technologies closed the sale of its EMEA operations to UK-based Colt Technology Services, but the news was a high point in a week that brought hefty job losses and dismal Q3 results.

Colt agreed to pay US$1.8 billion for Lumen’s Europe, Middle East and Africa business, almost exactly a year ago, a deal that for Lumen was about strengthening its balance sheet and enabling it to focus on its core enterprise solutions business. The transaction, which represents an 11x EBITDA multiple for the business in question, seems to have closed with no major changes to the T&Cs.

“We’re excited about what this transaction does for our customers and for Lumen,” said Kate Johnson, Lumen chief executive. “Our focus on building deep relationships with strategic partners allows us to simplify our business while delivering a seamless networking experience for our multinational customers. Through our strong relationship with Colt, both companies are well positioned for future growth.”

That comment must feel more than a little hollow to the many Lumen staff whose jobs are under threat, coming as it did just one day after the operator announced plans to cut as many as 1,200 positions.

The move forms part of a refocusing of the company, which also includes a balance sheet restructuring; Lumen announced an agreement with creditors holding around $7 billion of the outstanding indebtedness of the company that, amongst other things, includes the provision of $1.2 billion in financing to the company through long-term debt.

“In addition to restructuring the balance sheet, we’ve made the difficult decision to reshape and rightsize Lumen for growth,” said Johnson during Lumen’s third quarter results presentation. “We’re taking immediate actions which will result in about 4% fewer people inside the company. This reorg, along with additional optimization initiatives, will generate annualized savings of approximately $300 million.”

Lumen’s Q3 report shows it employed, in its words, approximately 30,000 people as of the end of September.

“As you might expect, this is a difficult, but necessary, decision given the revenue pressure we felt from the noise in the market regarding our creditor discussions as well as global macroeconomic pressures. These proactive steps to address our balance sheet and lower our cost base will reduce the noise, it will improve our agility and efficiency, and it will enable us to better compete in the markets we serve,” Johnson said.

Lumen’s numbers paint a fairly gloomy picture of its performance to date, with Q3 revenue falling by 17% year-on-year to $3.64 billion and adjusted EBITDA more than halving to $914 million, while it turned a fairly healthy profit into a $78 million net loss.

This is a period of flux for Lumen though, which just last month agreed to sell its content delivery network customers to Akamai as it withdraws from the CDN business, another decision that will help it focus on its core operations. And just last week it trumpeted the award of a $400 million contract from the State of California Department of Technology for middle mile connectivity.

There are reasons to be optimistic. But Lumen’s numbers will be scrutinised closely over the coming quarters.

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