Lumen Technologies grew its profit despite a 7% drop in revenue in Q1 2022, with sales sliding across all of its segments. But CFO Chris Stansbury said on an earnings call there’s a light at the end of the tunnel for its broadband business.
During the call, Stansbury highlighted Lumen’s progress on its Quantum Fiber expansion, noting it passed 160,000 new locations in the quarter. About 130,000 of those were in the 16-state footprint (RemainCo) it plans to retain once a deal to sell its ILEC assets in 20 states to Apollo Global Management closes later this year. All told, it ended Q1 with 2.67 million passings in its RemainCo territory.
Lumen added 27,000 Quantum Fiber customers in the quarter, bringing its overall total to 830,000 and its RemainCo tally to 762,000. It also had 3.6 million “other broadband” subscribers primarily on its copper-based CenturyLink service. While the overall fiber total was up from 720,000 the year prior, the other broadband figure was down from 4.0 million in Q1 2021.
Within its Mass Markets business, fiber revenue jumped nearly 18% year on year to $145 million. But despite the fiber gain, overall Mass Markets revenue was down 11.1% to $1.28 billion. Revenue for its Business segment also fell, dipping 5.4% to $3.4 billion. Net income, though, rose to $599 million, up from $475 million.
For the full year 2022, Lumen is targeting the addition of 1 million Quantum Fiber passings. As passings and net additions ramp, Stansbury said it expects to “achieve overall broadband revenue and subscriber growth within mass markets in the second half of 2023.”
“As of March 31, our penetration of legacy broadband subscribers in our retained 16 states was down to approximately 13%, highlighting the low risk of Quantum cannibalization and our significant share-taking opportunity as we accelerate the Quantum build,” he added. “In fact, roughly 90% of our 2021 fiber gross adds were new to Lumen.”
Stansbury also noted Quantum Fiber’s Net Promoter Score, a measure of customer satisfaction on a scale of -100 to +100, recently rose above 50. Additionally, he reiterated the company plans to launch multi-gigabit internet plans later this year, which could help boost average revenue per user.
CEO Jeff Storey said its Business segment is also gaining momentum, noting it recently won several large enterprise deals. These will ultimately be “good margin products” for the company, but Storey said it will take some time for the revenue from them to hit the books given “they have thousands of locations” which can take months to connect. Though its large enterprise segment is picking up steam, Storey acknowledged there’s still some work to do in the mid-market segment.