The News: Lumen has announced that it will sell its European, Middle East, and Africa (EMEA) assets and operations to Colt for $1.8B. The deal includes the EMEA business, data centers, terrestrial and subsea cabling, and other regional network equipment. The deal is expected to be closed in late 2023. Read the full Press Release from Lumen here.
Lumen Sells EMEA Assets to Colt for $1.8B — The Driver Behind That Move and a Look at What’s Ahead for the Company Now
Analyst Take: Lumen’s sale of its EMEA assets to Colt for $1.8 billion didn’t come as a surprise. For several years now, it has been clear that Lumen didn’t like being categorized as a carrier or even simply a network provider, and in July of 2021, the company sold their LATAM business and network assets to Stonepeak for $2.7 billion and made the point very clear. They’ve reiterated their point now by selling their EMEA business (except the CDN and Vyvx products) and network assets to Colt for $1.8 billion.
This sale includes roughly 100,000 km of fiber-optic cable, including 39,200 km of subsea cabling, spread across 30+ countries. This transaction will involve the rehoming of almost 1,400 employees, and any customer contracted in EMEA. These network assets will provide a substantial expansion to the Colt network. The two companies expect to strike an even tighter strategic arrangement in the coming months to make this transition as seamless as possible and help both companies manage their multi-national customers.
In return for all of this, Lumen receives 1.8 billion dollars; a reported 11x EBITDA multiple on the valuation of that business. They intend to put this money to work, continuing their mission to be a technology company focusing on next-gen apps and services that, yes, run on networks, but that doesn’t mean they have to own them.
The traditional capital model of a telco or network provider is incredibly capital-intensive, requiring massive upfront investments that won’t pay off for a decade or more. When compared to the hot and fast capital cycles in a software and services technology company with higher multiples and less capital-intensive investments, the boardroom attraction of a, yes, smaller but higher margin business becomes very clear.
So, what’s ahead for Lumen? I expect that this bit of financial engineering will pay off nicely for the company. They’ve created a $4.5 billion war chest from the two recent sales to help them push forward on their mission to provide excellent customer experiences that live on top of network, cloud, and security platforms — and that’s no small undertaking. Lumen has proven a nimble and capable provider of UC solutions. I look forward to watching the company continue iterate and evolve as this deal closes and they can accomplish their move away from the carrier/network provider brand identity. I think we’ll see some good things ahead.
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