Lumen Technologies Overview: quantum internet, fiber optic and 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Lumen Technologies (NYSE: LUMN) - American telecom company. Until recently called CenturyLink. The company is in a state of transformation and at the same time paying huge dividends, but her debts and 5G risk ruining everything.

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What do they earn

Бизнес компании по большому счету крутится вокруг оптоволоконного интернета и смежных услуг. According to the company's annual report, ее выручка по видам товаров и услуг делится так:

  1. IP и данные — 30,76%. Все что связано с обеспечением работы сети и трансляции контента.
  2. Infrastructure - 24,08%. Setting up Internet communications, а также консультирование и управление ими.
  3. Голосовая связь — 17,48%.
  4. ИТ и услуги по управлению — 2,31%. IT Application Management Solutions, облачными вычислениями и другими.
  5. Широкополосный интернет для домохозяйств — 14,04%.
  6. Голосовая связь для потребительского сегмента — 7,83%.
  7. Participation in state programs for connecting remote households to the Internet — 2,96%.
  8. TV maintenance services for the consumer segment — 0,54%.

By type of customer, revenue is divided into the following segments.

Международные и глобальные клиенты — 16%. Goods and services for about 200 companies, ведущих операции по всему миру. Segment Adjusted EBITDA margin - 65,43% from its proceeds. By type of goods and services, segment revenue is divided as follows::

  1. IP и данные — 45,69%.
  2. Infrastructure - 37,15%.
  3. Голосовая связь — 10,8%.
  4. ИТ и услуги по управлению — 6,36%.

Services for businesses, а также правительственных ведомств и учреждений — 29%. Segment Adjusted EBITDA margin - 58,26% from its proceeds. By type of goods and services, segment revenue is divided as follows::

  1. IP и данные — 45,23%.
  2. Infrastructure - 28,1%.
  3. Голосовая связь — 24.88%.
  4. ИТ и услуги по управлению — 1,79%.

Малый и средний бизнес — 12%. Segment Adjusted EBITDA margin - 69,18% from its proceeds. By type of goods and services, segment revenue is divided as follows::

  1. IP и данные — 41,53%.
  2. Infrastructure - 13,76%.
  3. Голосовая связь — 42,94%.
  4. ИТ и услуги по управлению — 1,77%.

Wholesale segment — 18%. Here Lumen serves telecom companies. Segment Adjusted EBITDA margin - 85,27% from its proceeds. By type of goods and services, segment revenue is divided as follows::

  1. IP и данные — 33,88%.
  2. Infrastructure - 46,7%.
  3. Голосовая связь — 19,35%.
  4. ИТ и услуги по управлению — 0,07%.
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Consumer segment — 25%. These are services for individuals, а также непрофильные доходы: rent and sublease, участие в госпрограммах развития онлайн-коммуникаций в удаленных регионах и другие. Segment Adjusted EBITDA margin - 87,83% from its proceeds. By type of goods and services, segment revenue is divided as follows::

  1. Широкополосный интернет для домохозяйств — 55,39%.
  2. Голосовая связь для потребительского сегмента — 30,88%.
  3. Participation in state programs for connecting remote households to the Internet — 11,71%.
  4. Other - 2,02%.

More 90% the company's revenue is made in the USA, less 10% revenue - in unnamed other countries. The company has been profitable for the last three quarters.

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Arguments in favor of the company

Quantum ducks. The company faced stagnation of the core business. To steer the situation, Lumen is restructuring: in 2022, the Latin American business and part of the divisions in the segments "services for enterprises" and "wholesale segment" will be sold. The company is also actively developing the direction of "quantum fiber-optic Internet", in which the word "quantum" is purely for beauty. I think, the latter fact may make the quotes attractive in the eyes of retail investors, которые поведутся на слово «квантовый».

This business segment in the medium term can really move the company's financial results forward.. Not in the near future - probably, the first serious results will become noticeable in two years. Но для большинства розничных инвесторов это неважно: I think, they can pump up the quotes of the company right now. Moreover,, judging by the analysis of search queries in the US, they are hyperactive again.

And if you look beyond the speculative pumping of shares, then this high-speed Internet connection can be claimed by the growing segment of cloud computing. In this regard, the company's management rightly counts on its growth and benefit in the future..

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Inexpensive. If we project the results of the last three quarters into the future, then it will turn out, that the company's profit is approximately $ 2 billion a year. In this case, her P / E will be in the area 9. That's not a lot, especially against the backdrop of competitive Cisco c P / E above 20. P / S at Lumen in the area 0,75, while Cisco has 4,64. Это еще один аргумент в пользу того, that the company's shares will be pumped by investors, because they are cheap.

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Diversification. According to the annual report, none of the company's clients give her more 10% proceeds. It's good, потому что в случае ухода одного из клиентов отчетность не сильно испортится.

Dividends. Компания выплачивает 1 $ per share per year, what about the current share price 13,61 $ gives already 7,21%. По нынешним меркам это просто гигантская доходность. So that, I think, в акции могут набежать любители выплат, what, yet again, will allow you to pump up quotes.

Investor Expected Dividend Yield

Generally Excluding commodity companies
RF 6,9% 4,3%
United Kingdom 4,3% 3,7%
Australia 4,1% 3,6%
Eurozone 2,9% 2,8%
Japan 2,4% 2,4%
USA 1,4% 1,3%
Developing countries (MSCI index) 2,9% 2,6%
The whole world 1,9% 1,8%

Can buy. Lumen is second only to the two big players in fiber optic cable length among U.S. companies: AT&T и Verizon. Considering this, as well as the advantages mentioned above and the relative cheapness of Lumen, при капитализации около 14,19 млрд долларов ее вполне может купить один из телекоммуникационных гигантов.

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Activate it. At the moment, activist investors from the Southeastern Asset Management fund are actively campaigning against Lumen management., who own 6,4% companies. Фонд требует инвестировать в развитие высокомаржинальных проектов, sell low-margin and in general for all the good against all the bad. I guess, that the fund will help speed up these processes, and the very fact of such pressure can have a positive impact on quotes.

Also I think, that Southeastern will promote the idea of ​​selling the company, — это тоже будет позитивно влиять на котировки. May be, even they will come up with the idea to spin off "quantum fiber" into a separate company, whose quotes will grow significantly better, чем у основного бизнеса Lumen.

What can get in the way

Dividends. The company spends about half of its annual profit on dividends.. Basically, ratio is normal. But the company simply has a huge amount of debt - $ 47.12 billion, из которых в течение года надо закрывать 8,3 млрд. В ее распоряжении не так много денег, so you have to look for money to close the debts. Lumen also needs to invest in its own development - "quantum fiber" requires a lot of investment. And there is still a rise in interest rates and an increase in the cost of loans.. It seems to me, риски урезания дивидендов тут большие — и от такого урезания акции могут сильно упасть.

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5G и его восприятие. Развитие 5G-инфраструктуры в США и мире может привести к тому, that consumers will move away from fiber to 5G. Basically, компания хеджирует эти риски переходом на обслуживание сегмента облачных вычислений, where fiber will remain in demand for a long time.

But I wouldn't expect it, that Lumen's financial performance will grow. Quicker, vice versa: Lumen находится в состоянии управляемого упадка и трансформации. “Lumen of the future” with cloud computing as an engine of revenue growth and a guarantor of financial stability looks more interesting, than "Lumen of the present" with a bunch of different segments, which show mixed results.

Обзор Lumen Technologies: квантовый интернет, оптоволокно и 5G

Resume

Lumen — это интересная дивидендная история, in which you can invest with the expectation that, that activist investors will continue to put pressure on the management of the company for the common benefit of all shareholders. But huge debt creates risks of canceling dividends. А реструктуризация и перерождение компании займут еще как минимум пару лет. Так что перед тем как вложиться в компанию, consider all the risks.

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