Lumen Sells ILEC Assets in $7.5 Billion Deal; Apollo Launching Standalone Company

Lumen Technologies is doubling down on its “core enterprise business” by selling a large portion of its incumbent local exchange carrier (ILEC) operations to Apollo Global Management.

The private equity firm will buy the CenturyLink-branded assets, which primarily serve consumers and small businesses, for approximately $7.5 billion. Those assets include fiber and copper networks, tower site connectivity and central offices in 20 states. As a result, Apollo builds upon a goal of meeting “accelerating demand for high-bandwidth connectivity and fiber technology.”

“The team at Lumen has built a great business and we see an incredible opportunity to provide leading edge, fiber-to-the-home broadband technology to millions of its business and residential customers,” said Aaron Sobel, private equity partner at Apollo. “Our investment will help accelerate the upgrade to fiber optic technologies, and we are excited to have such a high-caliber management team ready to bring faster and more reliable internet service to many rural markets traditionally underserved by broadband providers.”

Caveats

Despite selling its ILEC operations in 20 states, Lumen will keep those operations in 16 states. According to Lumen’s website, the company will keep 687,000 fiber subscribers while Apollo gets 59,000. You can view the geographical breakdown in the graphic below.

Source: Lumen

Lumen will keep the competitive local exchange carrier network it operates in 36 U.S. states and its national fiber routes. An FAQ notes that Lumen can now accelerate its market offerings around digital products and services. That includes SD-WAN, cloud and security offerings.

Lumen’s Jeff Storey

“This transaction is an important step in our continued efforts to transform Lumen and drive future growth for our company,” Lumen president and CEO Jeff Storey said. “We are pleased with the attractive valuation we received for these assets, which highlights the overall value of Lumen’s extensive asset portfolio. Apollo Funds will receive a great business with a strong customer base, dedicated employees and a platform for future growth.”

The parties suggested that the deal will close in the second half of 2022 after getting regulatory approval.

Background

Rumors swirled last month that Apollo might buy Lumen’s consumer unit. Storey had told investors that Lumen was pursuing selling “non-core assets.”

However, at the the time pundits estimated the price tag at around $5 billion, not $7.5 billion.

A week ago Lumen announced its plans to sell its Latin American business to an investment firm for $2.7 billion. At around the same time, the company announced its plans to expand its fiber network in three European countries.

Lumen has been on a selling spree – @lumentechco to sell local incumbent carrier operations in 20 states to Apollo Funds for $7.5 billion. Transaction will sharpen Lumen’s enterprise focus, and drive growth on the Lumen Platform. https://t.co/3juZBaxSOC

— Blair Pleasant (@blairplez) August 3, 2021

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