Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: One of the biggest winners of the AI boom this
Speaker 2: year has been Lumen Technologies, the communications tech company recently
Speaker 2: securing five billion dollars in new business. It will provide
Speaker 2: fiber optic connectivity to some of the world's largest companies,
Speaker 2: including Microsoft. The shares up one sixty four percent this year,
Speaker 2: outpacing and video down fifteen percent. Twelve percent now today,
Speaker 2: but very volatile. We're going to talk more about what's
Speaker 2: happening under the surface with Kate Johnson, Luman Technology CEO,
Speaker 2: with US now, and it's fascinating. You have investors really
Speaker 2: scraping the world here trying to figure out the scope
Speaker 2: here of the AI opportunity. From where you sit, what
Speaker 2: do you tell investors that are a little bit worried
Speaker 2: about how fast we're building into this fiber boom, this
Speaker 2: data center boom that is made to support that AI boom.
Speaker 3: We're seeing a once in a generation rise and demand
Speaker 3: for terrestrial internet services. That's why we're expanding our internet
Speaker 3: or our network to build the backbone for the AI economy.
Speaker 3: We think it's ten twenty years build out for the
Speaker 3: critical infrastructure required to support this massive spike in data workloads.
Speaker 4: Why do you think we see the volatility in your
Speaker 4: shares Kate, Because you've got a market cap of about
Speaker 4: five billion dollars, that's pretty much exactly you know, the
Speaker 4: business that you've got on your books. It doesn't make
Speaker 4: sense to me that you would see you know, ten, fifteen,
Speaker 4: twenty percent jumps and drops here because it's not a
Speaker 4: business that's unreliable. You lock in contracts for equipment that
Speaker 4: you then deliver.
Speaker 1: Yeah, it's a good question.
Speaker 3: So, first of all, super complex market right now, lots
Speaker 3: of volatility in the markets. But to your question, we're
Speaker 3: not at all so price that there are skeptics. What
Speaker 3: we're doing at Lumen is really fundamentally different than anyone
Speaker 3: else in the sector. We've got a world class network,
Speaker 3: fiber network that covers the nation, unique routes, diversity, you know,
Speaker 3: up to date fiber, which is differentiating. But what's more
Speaker 3: is we're not taking cash and paying a dividend. We're
Speaker 3: taking our cash and building a digital platform to drive
Speaker 3: the best customer experience in networking right to make it secure,
Speaker 3: effortless and quick.
Speaker 2: I think what a lot of people don't understand is
Speaker 2: how to build a digital platform. There are significant infrastructure
Speaker 2: needs to do, so you, for example, just a couple
Speaker 2: of weeks ago, announced in agreement with Corning to increase
Speaker 2: that fiber optic cable capability here. How much when you
Speaker 2: think about capex, how much do you have to invest
Speaker 2: for that physical footprint?
Speaker 1: How do you gave people.
Speaker 2: A sense of just how much needs to be on
Speaker 2: the ground.
Speaker 3: We've been taking care of this network for decades. That's
Speaker 3: why we're so well positioned to capitalize on this moment,
Speaker 3: and we're continuing to do that with these partnerships. I
Speaker 3: think when we got the five billion dollars of deals
Speaker 3: coming in, we were anointed as the trusted network for
Speaker 3: AI and the reason is because we've cared for that
Speaker 3: network for a long time, and that's the physical component.
Speaker 3: I think what's really differentiating is this digital platform that
Speaker 3: we're building on top of it, which enables enterprises to
Speaker 3: consume these services in a fundamentally different way. And I
Speaker 3: think what we all learn in the digital era is
Speaker 3: that the customer experience is the product. And when you
Speaker 3: think about telcos and sort of the legacy customer experience,
Speaker 3: it hasn't been great. That's why we're so well positioned
Speaker 3: to win in the space.
Speaker 2: What about your future revenue prospects here? It was really interesting.
Speaker 2: Not only has your stock been volatile, so haves your
Speaker 2: bonds and that can be pretty rare for many companies,
Speaker 2: but certainly not that rare for companies that are kind
Speaker 2: of on the cutting edge of this new technology. Credit
Speaker 2: Sites has recently said that this new business is five
Speaker 2: billion dollars that we've been talking about, could solve a
Speaker 2: lot of liquidity needs for allumen, but that investor's debt.
Speaker 2: Investors should be skeptical until revenue grows at a faster pace.
Speaker 2: With revenue not expected to grow until twenty twenty seven,
Speaker 2: how do you outline your revenue trajectory from here?
Speaker 1: Can it grow faster? Look, there's three steps. The first
Speaker 1: is free cash flow stability.
Speaker 3: We're in the middle of a very significant turnaround and
Speaker 3: these deals have given us the cash that we need
Speaker 3: to self fund our transformation, which is amazing. It's a breakthrough,
Speaker 3: and by the way, we're at the very tip of this.
Speaker 3: This is the first step. We've got a whole lot
Speaker 3: more business on the hill that we're going after, which
Speaker 3: will continue to improve the story. But when it comes
Speaker 3: to free cash flow stability, we're there.
Speaker 1: We are there. The next step is using that cash
Speaker 1: to do a couple of things. Number one, continuing to.
Speaker 3: Care for and build out the world's best fiber network.
Speaker 3: And the second thing, obviously, is to continue to invest
Speaker 3: in this digital platform and pull out cost of the
Speaker 3: legacy business to drive more and more efficiency. We announced
Speaker 3: on earnings last week that we were going to drive
Speaker 3: out more than a billion dollars in cost by the
Speaker 3: end of twenty twenty seven.
Speaker 1: So the story just keeps getting better.
Speaker 3: Free cash flow first, EVA dostability second, then revenue growth.
Speaker 4: You talk about the legacy telcos and I, you know,
Speaker 4: lived through the dot com bubble and saw how much
Speaker 4: we were paying to put fiber in the ground then
Speaker 4: compared to how much it was worth after the pop.
Speaker 4: Do you take any lessons from the experience of those
Speaker 4: early kind of Internet pioneers as you attempt to, you know,
Speaker 4: build something on this new revolutionary technology.
Speaker 3: Yeah, it's all about penetration of the existing assets to
Speaker 3: deliver the return that was originally intended. And that's what
Speaker 3: we're seeing from a growth in these data workloads, is
Speaker 3: that we can actually drive the penetration to get great
Speaker 3: returns on the network, and we're super excited about that.
Speaker 2: You know, it's interesting you have worked at major companies Microsoft,
Speaker 2: Ge Oracle, and you kind of joined Lumen right before
Speaker 2: a time where there was kind of an economic slowdown,
Speaker 2: if you will, in the fiber industry. What have you
Speaker 2: learned from all of that? I mean, when you think
Speaker 2: about the concerns that are out there about maybe a
Speaker 2: soft or even a hard landing, how does this AI
Speaker 2: boom sustain itself through any potential slowdown?
Speaker 3: So we're talking about building critical infrastructure for decades to come.
Speaker 3: And I came to Lumen to help drive a turnaround
Speaker 3: to take advantage of this once in a generation opportunity.
Speaker 3: I didn't come to tidy up the legacy telco business.
Speaker 1: Those customers they deserve more. And that's what we're doing,
Speaker 1: is we're building the.
Speaker 3: Future, the trusted network for AI so we can enable
Speaker 3: all of these customers that frankly the Internet doesn't serve
Speaker 3: today and move them to this new platform to allow
Speaker 3: them to thrive in the AI economy. That's why I'm here,
Speaker 3: That's what's happening. We're super excited by this momentum. That
Speaker 3: we're seeing already, and we think it really rides out
Speaker 3: any momentary volatility or any questions about the health of
Speaker 3: the economy today or six months from now or twelve
Speaker 3: months from now.
Speaker 1: This is a multi decade story that we're writing.
Speaker 2: Ok, there are a subset of people out there who
Speaker 2: believe AI is the technology of the future. There's a
Speaker 2: smaller subset that also believe that crypto is maybe even
Speaker 2: equally as transformative of the Internet. They believe that AI
Speaker 2: as it booms, that crypto could be more of a native,
Speaker 2: native let's say, currency of the Internet. Do you believe
Speaker 2: in the potential of crypto as well? And how does
Speaker 2: dovetail with the needs of AI.
Speaker 3: So, look, when I'm looking at things from the growth
Speaker 3: of our business perspective, and AI drives massive spikes in
Speaker 3: data workloads required, which drives massive spike in data center.
Speaker 1: Growth, which drives a need for connectivity.
Speaker 3: Crypto driving the same increase in demand for data falls
Speaker 3: right into that storyline, and that's what we're interested in.
Speaker 3: So building out these networks to connect data centers for
Speaker 3: the largest companies in the world, hyperscalers, social platforms, cloud companies,
Speaker 3: that's what we're in the process of doing, and it
Speaker 3: actually doesn't matter what kind.
Speaker 1: Of data's running across them.
Speaker 3: It's about data volume and connectivity across the globe.
Speaker 2: Kate, we thank you so very much for joining us.
Speaker 2: That is Kate Johnson of Luman Technologies, of course, a
Speaker 2: company a lot of people have their eyes on right now.