From the distressed debt dustbin to an AI darling, all in less than a year. Not long ago, US regional telecoms company Lumen Technologies was seen as a corpse that had been scavenged by Wall Street’s most vicious vulture funds. Now it is the toast of the AI party. Its shares have gained more than 700 per cent since the spring. With its market capitalisation approaching $10bn, suddenly its near $20bn debt load does not look so imposing.
New tech increasingly needs old pipes, and some previously moribund companies are trumpeting a revival. At Lumen, the rally is being driven by $8bn worth of contracts that it has signed with the likes Google, Amazon and Meta for so-called private connectivity fabric. Lumen, formed last decade through the combination of Level 3 and CenturyLink, is an internet backbone provider. AI hyperscalers and datacentres are buying the access to connect to its ultrafast fibre network.
Another supposedly stagnant legacy telecom may also be able to benefit from the renewed importance of old-school connectivity. It may help Frontier Communications to secure a sweeter buyout price from Verizon than the current $20bn on offer. The former’s shareholders believe dull infrastructure suddenly has more importance in a world where data loads are accelerating and Big Tech has the deep pockets to pay toll collectors to ensure their demands are met.