Lumen CFO talks new fiber network partnership with Anthropic

00:00 Speaker A

Before we move on to the rest, I want to ask a quick question about Anthropic because your shares went up on investor day and then went down. And I read there that there might be some concerns about Anthropic due to its spats with the Pentagon over its current contract and possible knock-on effects for its supply chain. What can you tell us about this?

00:30 Chris

So when you really think about what Lumen does, we’re the trusted network for AI and our relationship with Anthropic is similar to our relationship with hyperscalers. They need our network so their products can work with their customers. This is where we interact with them. The discussions with the government are obviously multi-layered from where we stand. But I think what we’re really seeing now, what we’re seeing with the cloud and other things, is that as new technologies emerge, they’re disruptive, and it takes a while for policy and governance to catch up. And I think we’re seeing that game being played right now. So we’re not too worried about that. We’re really focused on continuing to provide the services we do for them and others.

01:21 Speaker A

Can you tell me a little bit about your revenue in terms of how dependent you are on individual customers?

01:31 Chris

Yes, so we have significant diversity in our customer base. Our $13 billion sale to neoclouds, hyperscalers like Anthropic, is part of how we turned the company around. And in fact, there is no concentration in any of them. And I think that’s actually a proof point for us as investors; It is proof that we are a reliable network for artificial intelligence. We are the only ones with the ability to do the things that AI needs to work. That’s why we sit in a truly special place as we turn to the future.

02:11 Speaker A

Okay then let’s talk about there. So you are a fiber optic company. As you said, you have changed the company significantly. For example, you sold the consumer business. Talk to me about the mesh as a surface because this is going to be a new concept for a lot of people. How does the business model work now?

02:35 Chris

So, let’s take a quick look at what the shortcomings of enterprise networking types are. And it was actually just point to point. Everything was very static. uh everything was slow to be delivered. I need to go from my location to my data center or a public cloud. And what we see as data is chasing energy. Data is truly the fuel everyone needs to consume to keep GPUs running. Um, this is proliferation and now you have to go from everywhere to everywhere. So it’s not just from where you are to a cloud. Cloud to cloud, DC to cloud. The network is a service on locks. So this is a gateway for our customers to gain access to a programmable network where they can move data from anywhere to anywhere on demand.

03:40 Speaker A

So they are not renting or buying a particular line from here to there. They just have the capacity to get where they need to get.

03:51 Chris

TRUE. TRUE. So, instead of a group of network engineers sitting in a lab downstairs waiting for petabytes of data to be downloaded, that data can then be moved elsewhere. We can give you an express route upon request where you can do this at very short notice. So it’s about big lines, it’s about low latency, but it’s about on-demand capability and programmability to get anywhere from anywhere. and we’re the only ones building it.

04:29 Speaker A

And it costs a lot to build this kind of infrastructure, and I know that you don’t expect to make a profit for a while while you’re building this here. So, what is the message to be given to investors on this issue?

04:45 Chris

So just a few things really. We will change EBIDA this year. EBIDA is truly the benchmark in the industry and we will see it start to grow. We are committed to doing this as part of our guidance. Revenue in our business segment is coming in a few years, in 2028, because we still have a legacy business that’s giving us great cash flow, but it’s declining. But what we’re seeing is that as customers adopt NAS, it’s really starting to accelerate.

05:22 Speaker A

NAS is network as a service.

05:23 Chris

NAS is network as a service. Yes. And we see growth of 30 percent on a quarterly basis, with the highest in the 20s. So in August we had about 1000 customers. Now we have reached 2000. And so the scale is still starting to be small, but we expect to see rapid adoption as customers realize they can consume on demand and truly their own way.

05:53 Speaker A

What do people need to know about the competition in this space? As you said, you are uniquely gravitating towards this model, but of course there are other fiber providers.

06:05 Chris

That’s what matters. There are other fiber providers, but they are mostly point-to-point. and a few things about it. There are fiber providers, there are service providers. But there is no fiber provider that has the network breath or the underlying capacity that we have, as well as the network-as-a-service capabilities, the ability to digitize the network. So we’re really in a unique spot where we have both, and that allows us to go much deeper with our customers in providing the level of service they need in the AI ​​world.

06:48 Speaker A

As I mentioned, the stock rose yesterday and then fell. It’s picking up a bit today. Do you think investors got the message yesterday or do you think Antropik was a distraction and what did they hear that they shouldn’t have heard or, you know, was there a misunderstanding?

07:07 Chris

No, that’s a great question. The feedback we received from yesterday’s event was amazing. because it really revealed how not only the business, but also the underlying economy of the business had changed. We are moving to the consumption model. This is more based on the price times quantity formula, now as customers sign up they bring a port, they can consume the services through the software. and so it’s a much more scalable model that people are really excited about. I think what we’re seeing more broadly as a company is that we’re now becoming more recognized in the AI ​​business. There’s a lot of volatility in the short term as people try to figure out what this all means. From our perspective, since we’re the only network that can do the things we do, there are going to be winners and losers in the large language model space, right? Whoever wins will need our network. And we’re really good at it.

08:24 Speaker A

I should leave it there, Chris. Thank you very much for coming.