Lumen Technologies Stock Plummets 16% Amid AT&T Acquisition Talks

Ladies and gentlemen, buckle up! We're diving headfirst into the whirlwind of telecom M&A madness as lumen technologies (NYSE:LUMN) stock takes a nosedive of 16% over the past month. Why? Because at&t is reportedly in talks to buy Lumen's consumer fiber business for a cool $5.5 billion. This is the most likely telecom M&A deal on the horizon, according to New Street Research. Let's break it down!



First things first, let's talk about the elephant in the room: the $5.5 billion price tag. Analysts at New Street Research think this is a steal for AT&T, but a disappointment for lumen. The value per fiber location at $5.5 billion is about $1,300, which is a far cry from other recent deals. Verizon's proposed takeover of Frontier Communications is valued at $20 billion, BCE's agreement for Ziply Fiber is $5 billion, and T-Mobile and KKR's pursuit of Metronet is also in the billions. This discrepancy suggests that the market may perceive Lumen's assets as less valuable compared to those of its competitors.

Now, let's talk about the potential strategic benefits for AT&T. This acquisition could allow AT&T to expand its fiber network, reaching more customers and potentially increasing its market share. Lumen has over 1,700 wire centers across its total network, with consumer fiber available in about 400 of them. This acquisition could help AT&T "bump fiber-passing goal to 50M and creates a landline phone replacement" (AT&T bumps fiber-passing goal to 50M and creates a landline phone replacement).

But here's the kicker: AT&T could use Lumen's assets to expand Gigapower, AT&T's wholesale open access network. AT&T launched Gigapower in 2023 as a joint venture with BlackRock to expand beyond its traditional footprint, but AT&T so far is the only Gigapower tenant. Teresa Mastrangelo noted on LinkedIn, "From a strategic perspective, the Lumen properties almost make more sense for Gigapower where they want to be the first fiber provider in markets they go after" (Read our recent coverage of Lumen: AT&T bumps fiber-passing goal to 50M and creates a landline phone replacement).



But wait, there's more! This acquisition could also help AT&T achieve cost savings and operational efficiencies. By acquiring Lumen's fiber assets, AT&T could simplify and consolidate its network, attaining projected cost savings. This could help AT&T increase its pricing power and reduce customer churn. Lumen CFO Chris Stansbury said, "Bundling of fiber-to-the-home and wireless gives large providers lower churn and more pricing strength" (AT&T Inc. is in talks to acquire Lumen Technologies Inc.’s consumer fiber operations).

So, what does this mean for Lumen Technologies stock? Well, it's been a rollercoaster ride, that's for sure. But with AT&T in the driver's seat, things could get interesting. Stay tuned, folks, because this is one deal you won't want to miss!

Ask Aime: How will Lumen's fiber deal with AT&T affect LUMN's long-term growth prospects?