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Convergence Drives At&t Plan To Purchase Lumen Fiber Business
Convergence Drives AT&T Plan to Purchase Lumen Fiber Business
The news today that AT&T plans to purchase the Lumen Mass Markets Fiber Business illustrates just how important the bundle of mobile service and high-speed home internet has become.
“We know customers appreciate having both wireless and broadband services delivered by just one provider,” says AT&T CEO John Stankey in a video announcing the acquisition. “We’re eager to increase access to our world-class AT&T Fiber and 5G wireless service and the benefits they offer.”
An AT&T press release announcing the deal offers more context.
“Customers with both AT&T Fiber and the company’s wireless services are more likely to recommend AT&T, remain customers longer and provide the best returns,” the release states. “AT&T expects that its ability to offer 5G wireless and fiber broadband connectivity within Lumen’s Mass Markets fiber footprint will enable the company to grow its base of high-value converged customer relationships and drive gains in its Mobility business.”
Key Elements of the Deal
AT&T has agreed to pay Lumen $5.75 billion for Lumen’s mass markets fiber business, which includes one million customers in 11 states, with the potential to serve three million more customers that have Lumen fiber available to them.
AT&T highlighted several key markets that are part of the deal, including Denver, Las Vegas, Minneapolis-St. Paul, Orlando, Phoenix, Portland, Salt Lake City, and Seattle.
Lumen’s mass market business includes fiber assets, as well as residential and smaller business customers served by those assets. However, enterprise and copper-based customers and the assets supporting them are not part of the agreement.
AT&T does, however, get “long-term access to certain Lumen central offices, poles, and conduits.”
That access is important because AT&T plans to “accelerate the pace at which fiber is being built” in territories that it is acquiring.
Another important aspect of the deal is that AT&T plans to hold the acquired fiber network assets, including “certain fiber network deployment capabilities” in a new subsidiary. Initially, AT&T will be the sole owner of the subsidiary, but the company has set a goal of selling a portion of the business to an equity partner within 12 months of closing the transaction with Lumen.
The AT&T Lumen fiber transaction is expected to close in the first half of 2026.
Importantly, the new subsidiary will operate as a wholesale open access platform, with AT&T acting as the anchor tenant.
Telecompetitor’s Observations
Here’s a few observations about the deal.
It’s not surprising that Lumen is divesting its local service business. The company has been primarily enterprise-focused for several years and has been exploring strategic options, including divesting the mass markets business, for about two years. The company also lacks a mobile business and therefore can’t offer the new killer bundle.
It’s also not surprising to see AT&T seeking to expand its fiber business, considering the importance the company is now placing on that converged bundle.
The Lumen fiber numbers referenced in today’s announcement indicate that the company has an average take rate of 25% (one million customers and four million locations). That suggests AT&T has a good shot at achieving its goal of “increasing fiber customer penetration within the acquired footprint to levels more consistent with its current penetration of AT&T Fiber.”
What I’m most skeptical about is the open access approach that AT&T plans to take with the acquired assets. The company hasn’t had much success in signing up wholesale customers for Gigapower — its open access joint venture with BlackRock that is deploying fiber broadband outside AT&T’s traditional local service footprint.
There, too, AT&T is the anchor tenant. And the most successful open access networks tend to be those where the network owner is strictly a wholesale provider and doesn’t compete with retail providers that use the network.
I also wonder about the copper business that, to put it bluntly, Lumen is still stuck with. It will be interesting to see, what, if any network upgrades the company pursues in its remaining territories.
