WEBVTT - Lumen Technologies CEO Kate Johnson Talks Cryptocurrency, AI

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>One of the biggest winners of the AI boom this

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<v Speaker 2>year has been Lumen Technologies, the communications tech company recently

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<v Speaker 2>securing five billion dollars in new business. It will provide

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<v Speaker 2>fiber optic connectivity to some of the world's largest companies,

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<v Speaker 2>including Microsoft. The shares up one sixty four percent this year,

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<v Speaker 2>outpacing and video down fifteen percent. Twelve percent now today,

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<v Speaker 2>but very volatile. We're going to talk more about what's

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<v Speaker 2>happening under the surface with Kate Johnson, Luman Technology CEO,

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<v Speaker 2>with US now, and it's fascinating. You have investors really

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<v Speaker 2>scraping the world here trying to figure out the scope

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<v Speaker 2>here of the AI opportunity. From where you sit, what

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<v Speaker 2>do you tell investors that are a little bit worried

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<v Speaker 2>about how fast we're building into this fiber boom, this

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<v Speaker 2>data center boom that is made to support that AI boom.

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<v Speaker 3>We're seeing a once in a generation rise and demand

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<v Speaker 3>for terrestrial internet services. That's why we're expanding our internet

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<v Speaker 3>or our network to build the backbone for the AI economy.

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<v Speaker 3>We think it's ten twenty years build out for the

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<v Speaker 3>critical infrastructure required to support this massive spike in data workloads.

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<v Speaker 4>Why do you think we see the volatility in your

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<v Speaker 4>shares Kate, Because you've got a market cap of about

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<v Speaker 4>five billion dollars, that's pretty much exactly you know, the

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<v Speaker 4>business that you've got on your books. It doesn't make

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<v Speaker 4>sense to me that you would see you know, ten, fifteen,

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<v Speaker 4>twenty percent jumps and drops here because it's not a

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<v Speaker 4>business that's unreliable. You lock in contracts for equipment that

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<v Speaker 4>you then deliver.

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<v Speaker 1>Yeah, it's a good question.

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<v Speaker 3>So, first of all, super complex market right now, lots

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<v Speaker 3>of volatility in the markets. But to your question, we're

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<v Speaker 3>not at all so price that there are skeptics. What

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<v Speaker 3>we're doing at Lumen is really fundamentally different than anyone

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<v Speaker 3>else in the sector. We've got a world class network,

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<v Speaker 3>fiber network that covers the nation, unique routes, diversity, you know,

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<v Speaker 3>up to date fiber, which is differentiating. But what's more

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<v Speaker 3>is we're not taking cash and paying a dividend. We're

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<v Speaker 3>taking our cash and building a digital platform to drive

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<v Speaker 3>the best customer experience in networking right to make it secure,

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<v Speaker 3>effortless and quick.

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<v Speaker 2>I think what a lot of people don't understand is

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<v Speaker 2>how to build a digital platform. There are significant infrastructure

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<v Speaker 2>needs to do, so you, for example, just a couple

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<v Speaker 2>of weeks ago, announced in agreement with Corning to increase

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<v Speaker 2>that fiber optic cable capability here. How much when you

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<v Speaker 2>think about capex, how much do you have to invest

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<v Speaker 2>for that physical footprint?

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<v Speaker 1>How do you gave people.

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<v Speaker 2>A sense of just how much needs to be on

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<v Speaker 2>the ground.

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<v Speaker 3>We've been taking care of this network for decades. That's

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<v Speaker 3>why we're so well positioned to capitalize on this moment,

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<v Speaker 3>and we're continuing to do that with these partnerships. I

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<v Speaker 3>think when we got the five billion dollars of deals

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<v Speaker 3>coming in, we were anointed as the trusted network for

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<v Speaker 3>AI and the reason is because we've cared for that

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<v Speaker 3>network for a long time, and that's the physical component.

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<v Speaker 3>I think what's really differentiating is this digital platform that

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<v Speaker 3>we're building on top of it, which enables enterprises to

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<v Speaker 3>consume these services in a fundamentally different way. And I

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<v Speaker 3>think what we all learn in the digital era is

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<v Speaker 3>that the customer experience is the product. And when you

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<v Speaker 3>think about telcos and sort of the legacy customer experience,

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<v Speaker 3>it hasn't been great. That's why we're so well positioned

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<v Speaker 3>to win in the space.

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<v Speaker 2>What about your future revenue prospects here? It was really interesting.

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<v Speaker 2>Not only has your stock been volatile, so haves your

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<v Speaker 2>bonds and that can be pretty rare for many companies,

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<v Speaker 2>but certainly not that rare for companies that are kind

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<v Speaker 2>of on the cutting edge of this new technology. Credit

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<v Speaker 2>Sites has recently said that this new business is five

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<v Speaker 2>billion dollars that we've been talking about, could solve a

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<v Speaker 2>lot of liquidity needs for allumen, but that investor's debt.

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<v Speaker 2>Investors should be skeptical until revenue grows at a faster pace.

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<v Speaker 2>With revenue not expected to grow until twenty twenty seven,

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<v Speaker 2>how do you outline your revenue trajectory from here?

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<v Speaker 1>Can it grow faster? Look, there's three steps. The first

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<v Speaker 1>is free cash flow stability.

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<v Speaker 3>We're in the middle of a very significant turnaround and

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<v Speaker 3>these deals have given us the cash that we need

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<v Speaker 3>to self fund our transformation, which is amazing. It's a breakthrough,

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<v Speaker 3>and by the way, we're at the very tip of this.

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<v Speaker 3>This is the first step. We've got a whole lot

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<v Speaker 3>more business on the hill that we're going after, which

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<v Speaker 3>will continue to improve the story. But when it comes

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<v Speaker 3>to free cash flow stability, we're there.

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<v Speaker 1>We are there. The next step is using that cash

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<v Speaker 1>to do a couple of things. Number one, continuing to.

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<v Speaker 3>Care for and build out the world's best fiber network.

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<v Speaker 3>And the second thing, obviously, is to continue to invest

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<v Speaker 3>in this digital platform and pull out cost of the

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<v Speaker 3>legacy business to drive more and more efficiency. We announced

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<v Speaker 3>on earnings last week that we were going to drive

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<v Speaker 3>out more than a billion dollars in cost by the

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<v Speaker 3>end of twenty twenty seven.

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<v Speaker 1>So the story just keeps getting better.

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<v Speaker 3>Free cash flow first, EVA dostability second, then revenue growth.

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<v Speaker 4>You talk about the legacy telcos and I, you know,

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<v Speaker 4>lived through the dot com bubble and saw how much

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<v Speaker 4>we were paying to put fiber in the ground then

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<v Speaker 4>compared to how much it was worth after the pop.

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<v Speaker 4>Do you take any lessons from the experience of those

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<v Speaker 4>early kind of Internet pioneers as you attempt to, you know,

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<v Speaker 4>build something on this new revolutionary technology.

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<v Speaker 3>Yeah, it's all about penetration of the existing assets to

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<v Speaker 3>deliver the return that was originally intended. And that's what

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<v Speaker 3>we're seeing from a growth in these data workloads, is

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<v Speaker 3>that we can actually drive the penetration to get great

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<v Speaker 3>returns on the network, and we're super excited about that.

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<v Speaker 2>You know, it's interesting you have worked at major companies Microsoft,

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<v Speaker 2>Ge Oracle, and you kind of joined Lumen right before

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<v Speaker 2>a time where there was kind of an economic slowdown,

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<v Speaker 2>if you will, in the fiber industry. What have you

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<v Speaker 2>learned from all of that? I mean, when you think

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<v Speaker 2>about the concerns that are out there about maybe a

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<v Speaker 2>soft or even a hard landing, how does this AI

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<v Speaker 2>boom sustain itself through any potential slowdown?

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<v Speaker 3>So we're talking about building critical infrastructure for decades to come.

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<v Speaker 3>And I came to Lumen to help drive a turnaround

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<v Speaker 3>to take advantage of this once in a generation opportunity.

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<v Speaker 3>I didn't come to tidy up the legacy telco business.

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<v Speaker 1>Those customers they deserve more. And that's what we're doing,

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<v Speaker 1>is we're building the.

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<v Speaker 3>Future, the trusted network for AI so we can enable

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<v Speaker 3>all of these customers that frankly the Internet doesn't serve

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<v Speaker 3>today and move them to this new platform to allow

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<v Speaker 3>them to thrive in the AI economy. That's why I'm here,

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<v Speaker 3>That's what's happening. We're super excited by this momentum. That

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<v Speaker 3>we're seeing already, and we think it really rides out

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<v Speaker 3>any momentary volatility or any questions about the health of

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<v Speaker 3>the economy today or six months from now or twelve

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<v Speaker 3>months from now.

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<v Speaker 1>This is a multi decade story that we're writing.

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<v Speaker 2>Ok, there are a subset of people out there who

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<v Speaker 2>believe AI is the technology of the future. There's a

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<v Speaker 2>smaller subset that also believe that crypto is maybe even

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<v Speaker 2>equally as transformative of the Internet. They believe that AI

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<v Speaker 2>as it booms, that crypto could be more of a native,

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<v Speaker 2>native let's say, currency of the Internet. Do you believe

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<v Speaker 2>in the potential of crypto as well? And how does

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<v Speaker 2>dovetail with the needs of AI.

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<v Speaker 3>So, look, when I'm looking at things from the growth

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<v Speaker 3>of our business perspective, and AI drives massive spikes in

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<v Speaker 3>data workloads required, which drives massive spike in data center.

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<v Speaker 1>Growth, which drives a need for connectivity.

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<v Speaker 3>Crypto driving the same increase in demand for data falls

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<v Speaker 3>right into that storyline, and that's what we're interested in.

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<v Speaker 3>So building out these networks to connect data centers for

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<v Speaker 3>the largest companies in the world, hyperscalers, social platforms, cloud companies,

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<v Speaker 3>that's what we're in the process of doing, and it

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<v Speaker 3>actually doesn't matter what kind.

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<v Speaker 1>Of data's running across them.

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<v Speaker 3>It's about data volume and connectivity across the globe.

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<v Speaker 2>Kate, we thank you so very much for joining us.

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<v Speaker 2>That is Kate Johnson of Luman Technologies, of course, a

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<v Speaker 2>company a lot of people have their eyes on right now.