Good morning. As Lumen Technologies transforms from a legacy telecom company into an AI enterprise connectivity provider, it’s finding a new use for its old copper network: mining it.
“Copper is worth more to us mined than operated,” President and CFO Chris Stansbury said.
Lumen plans to turn off copper-based services in Iowa, Florida, Nevada and Utah, about 25% of its copper network, by the end of next year. At current copper prices, Lumen expects $1 billion to $1.5 billion in pretax net proceeds from copper recovery over the next five years, Stansbury said.
The benefits extend beyond the metal. Decommissioning will also cut the operating and capital costs of maintaining aging infrastructure, simplify operations, and free up resources for higher-return investments, he said.
“We’re now at the point in our transformation with legacy where the cash generation from revenue is actually not as good as what will be cash generation from mining the copper that’s in the ground,” Stansbury told me. “This industry is sitting on one of the largest copper mines in the world.”
Lumen plans to work with regulators and meet its service obligations as it stops marketing new copper services.
The strategy is part of a broader effort to reinvent Lumen, No. 354 on the Fortune 500, as an enterprise connectivity provider for the AI era. Lumen pairs its large fiber network with Alkira’s software, which works with any carrier. That lets companies connect and manage their data from one place, whether it sits on Lumen’s network, another provider’s network, in the cloud, or in data centers.
The company recently announced three initiatives involving intelligent networking, AI energy challenges, quantum connectivity, and emerging security threats.
There are signs of progress. Lumen reported third-quarter revenue of $2.72 billion, down 12.1% year over year, largely reflecting the sale of its consumer fiber business to AT&T. But adjusted EBITDA reached $715 million, and its adjusted loss of 14 cents per share was narrower than analysts expected.
More importantly, strategic revenue, higher-growth enterprise and fiber-based services, rose 10% to $1.28 billion, driven by AI demand and private connectivity deals. Lumen reaffirmed its full-year EBITDA and free cash flow guidance.
The challenge will be sustaining that growth while replacing the revenue and cash of its legacy business.
CEO Kate Johnson and Stansbury have worked on the transformation for about four years. Johnson envisioned making Lumen’s network easier for businesses to consume.
“What Kate came in, and saw was the ability to effectively cloudify the network, just like the hyperscalers had done with compute and storage,” Stansbury said.
The effort has also required a cultural shift and change management.
“I think the approach that you take in having those conversations and making those tough decisions is treating people with respect and empathy, and being transparent—telling them what you can, when you can,” Stansbury said.
He added: “I don’t want to say it makes those decisions easier, but I think it ultimately helps the organization transform from what was to what will be in a much better way.”
SherylEstrada
Sheryl.Estrada@fortune.com
Leaderboard
Mike Barna was named CFO of Advantive, a provider of software for specialty manufacturing and distribution businesses. Barna brings more than two decades of finance and operating leadership across software and data businesses, most recently as CFO of Lone Wolf Technologies. He has also held leadership roles at CoreLogic, Information Services Group and The Nielsen Company.
Adrian Bartella was named CFO of Medical Solutions, a health care workforce solutions company. Bartella brings more than 20 years of finance leadership experience, including serving as CFO of Upstream Rehabilitation, The Fresh Market and Hudson Group. His background spans financial strategy, mergers and acquisitions, capital management and business transformation.
Big Deal
Consumers are still spending, but they’re looking harder for bargains, according to a new Bank of America Institute report. The bank’s Spending Tier Composite, a measure built from its card data that tracks whether shoppers are moving between premium, standard and value-tier stores, fell to its lowest level since 2021.
The decline suggests more households are shifting spending to discount stores even as overall spending holds up and consumer confidence stays below pre-pandemic levels. Trading down is strongest in apparel, where tariff-related price increases are reaching shoppers, and in dining. Travel is the exception: the travel measure has risen, but the report says that may be because lower-budget travelers are skipping trips rather than becoming less price-conscious.
Millennials are leading the shift. They’ve traded down faster than Gen X or Baby Boomers since 2022, particularly in apparel and groceries.
Going deeper
Jensen Huang’s net worth dropped from just over $171 billion to $150.9 billion last week as AI and tech stocks lost an estimated $2.5 trillion, Fortune’s Eleanor Pringle reports. Then came the Nvidia CEO’s admission of an affair with an alleged Chinese spy. Deutsche Bank’s Jim Reid said concerns about the board’s investigation were “capping gains.” Read more here.
Overheard
“The United States still leads in chips, capital markets, talent, and open research. A slower, costlier buildout narrows the lead. It does not surrender it.”
—Mark Minevich, founder and president of Going Global Ventures, writes in a Fortune opinion piece titled “What the midterm results actually mean for the future of AI and data centers: prepare for the AI slowdown.” Minevich is also a senior advisor at AlixPartners focused on digital infrastructure.