Lumen Technologies Completes \$5.72 Billion Sale of Mass Markets Fiber-to-the-Home Business to AT&T Subsidiary

Key Highlights

• Transaction Overview: Lumen Technologies, Inc. (“Lumen”) finalized the sale of its Mass Markets fiber-to-the-home (“FttH”) business in 11 states to Forged Fiber 37, LLC, an indirect subsidiary of AT&T Inc., for \$5.75 billion in cash. After approximately \$30 million in closing adjustments and transaction costs, pre-tax cash proceeds were about \$5.72 billion. The deal may be subject to further post-closing adjustments and indemnities.
• States Involved: Arizona, Colorado, Florida, Idaho, Iowa, Minnesota, Nebraska, Nevada, Oregon, Utah, and Washington.
• Closing Date: The transaction closed on February 2, 2026.
• Financial Impact: Lumen’s assets and liabilities related to the FttH business were classified as held for sale. From February 2, 2026, the results from the divested business will no longer be included in Lumen’s consolidated financials.
• Pro Forma Financials: The unaudited pro forma consolidated financial statements show significant changes in Lumen’s balance sheet and income statement, reflecting the removal of the FttH business, associated assets and liabilities, and the addition of cash proceeds and debt adjustments.

Details Investors Need to Know

• Share Price Sensitivity: This divestiture is a transformative event for Lumen. The sale injects substantial liquidity, enabling large debt prepayments. This could materially impact Lumen’s leverage, risk profile, and future operational focus.
• Debt Reduction: Lumen applied approximately \$4.76 billion of the proceeds to voluntarily prepay multiple superpriority notes and loans, including:
  • \$439 million in 10% Superpriority Notes (maturing 2032)
  • \$808 million in 4.125% Superpriority Notes (maturing 2029-2030)
  • \$338 million for Term Loan A
  • \$3.18 billion for Term Loans B-1 and B-2 (full repayment)

  Debt reduction is a positive for Lumen’s creditworthiness and future cash flow.

• Earnings Impact: The pro forma statement shows a net loss widening by \$204 million (from \$(1.739) billion to \$(1.943) billion) for 2025 after removing the FttH business and accounting for transaction-related events. EPS declines from \$(1.75) to \$(1.95).
• Goodwill Impairment: Lumen recognized \$628 million in goodwill impairments for 2025, which is a significant accounting loss.
• Early Debt Retirement Costs: Lumen incurred \$740 million in losses from early debt retirements for 2025.
• Commercial Agreements with AT&T: Lumen and AT&T entered into multi-year Master Services Agreements. Lumen will provide network and communications services to AT&T and vice versa. These agreements are expected to generate about \$50 million in additional operating revenue and \$18 million in additional operating expenses for 2025, plus non-cash deferred revenue from purchase price allocations (\$29 million).
• Transition Services Agreement (TSA): Lumen will provide transition services to AT&T for six to twenty-four months post-sale, estimated at \$60 million revenue for the initial year, with potential for extension.
• Deferred Revenue and Credits: The pro forma balance sheet includes \$496 million in deferred revenue related to off-market components of the commercial agreements, and a \$250 million credit for services to be performed after the sale.
• Asset and Liability Removal: The pro forma statements eliminate assets and liabilities tied to the FttH business. Assets held for sale totaled \$4.271 billion, including \$2.841 billion in property, plant, and equipment and \$1.336 billion in goodwill. Liabilities held for sale were \$38 million.
• Tax Impact: Pro forma adjustments include estimated tax consequences of the sale, utilization of net operating losses, and the estimated book gain.

Potential Share Price Movers

• Liquidity Improvement: The influx of \$5.72 billion in cash and subsequent debt reduction improves Lumen’s financial flexibility, potentially making the stock more attractive to investors seeking deleveraged telecom plays.
• Operational Focus: Exiting the consumer FttH business in these 11 states allows Lumen to refocus on its remaining operations, possibly improving margins and strategic direction.
• Future Cash Flow: The removal of depreciating assets and related liabilities, plus new commercial agreements, could impact future earnings and cash flow, though pro forma results show continued losses for 2025.
• Nonrecurring and Recurring Items: The pro forma financials do not include potential dis-synergies or nonrecurring transaction/separation expenses, which could impact future results.
• Impairments and Losses: Large goodwill impairment and early debt retirement losses may weigh on investor sentiment in the near term.
• Deferred Revenue Recognition: Significant deferred revenue from commercial agreements will be recognized over several years.

Full Transaction Details

• Assets Sold: The FttH business in 11 states, including customer accounts, property, plant, equipment, goodwill, and associated assets.
• Proceeds: \$5.72 billion in pre-tax cash, subject to further post-closing adjustments and indemnities.
• Debt Paid Down: \$4.76 billion applied to superpriority notes and loans.
• Commercial Agreements: Master Services Agreements, Indefeasible Right to Use Agreement for fiber, TSA for transition services.
• Deferred Revenue: \$496 million from off-market agreement components, \$250 million service credit to AT&T.
• Tax Rate Used: 24.56% U.S. statutory and blended state rate for pro forma adjustments.
• Assets Held for Sale: \$4.271 billion (including \$2.841 billion property, \$1.336 billion goodwill, \$51 million other assets).
• Liabilities Held for Sale: \$38 million (including \$32 million current deferred revenue).
• Balance Sheet Effects: Total assets decrease from \$34.342 billion to \$31.026 billion post-transaction. Total liabilities and equity decrease accordingly.

Conclusion

The sale of Lumen’s Mass Markets FttH business to AT&T’s subsidiary marks a crucial turning point for the company, providing significant liquidity, enabling substantial debt reduction, and reshaping its operational footprint. Shareholders should note the impact on future earnings, the reduction in leverage, and new commercial agreements with AT&T, which together could influence Lumen’s share price and long-term strategic direction.

Disclaimer

This article is based on unaudited pro forma financial statements and management estimates provided by Lumen Technologies, Inc. Actual financial results may differ materially from the estimates and projections contained herein. Investors should consult Lumen’s official filings, including its Annual Report on Form 10-K and subsequent quarterly reports, for comprehensive and updated financial information. This article does not constitute investment advice.

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