In a major bit of telecommunications M&A after the markets closed, Lumen has announced a significant transaction with Apollo Funds. Apollo will be acquiring Lumen’s ILEC business in 20 Midwest and Southeastern states for $7.5B, a sum which includes the assumption of $1.4B in debt.
Basically, Lumen is selling off much of the pre-Qwest CenturyLink incumbent footprint, while keeping the 16-state Qwest footprint plus Florida. Lumen will also be keeping all its CLEC and nextgen fiber networks that it was operating in those ILEC territories Apollo will take over, and obviously there will be an ongoing relationship within that overlap.
Lumen will be able to focus more directly on its Quantum Fiber consumer buildout within the remaining ILEC territory. Meanwhile, Apollo sees an opportunity to do some FTTH of its own in the acquired footprint. The economics have really shifted for the better for such projects over the last few years, and the money guys have certainly noticed.
The transaction will take some time on the regulatory front, and is expected to close in the second half of 2022. The price reflects a multiple of 5.5x 2020 adjusted EBITDA, which works out to 1.36B in EBITDA for those who don’t want to break out a calculator.
But on the trends front, I do have to wonder what other ‘non-core’ assets Lumen might be looking to unload? They sold off their Latin American businesses to Stonepeak just last week. Might Europe be next? Or do the Qwest ILEC territories just have a different buyer?
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