2023-08-13 23:15:24 ET
Lumen Technologies, Inc. (LUMN)
TD Cowen 9th Annual Communications Infrastructure Summit Conference Call
August 8, 2023 17:40 ET
Company Participants
Andrew Dugan - Executive Vice President and Chief Technology Officer
Conference Call Participants
Greg Williams - TD Cowen
Presentation
Greg Williams
Let’s get started. Welcome everybody. It’s Greg Williams; I cover the telco wireless data and power sector at TD Cowen. I am joined this session by Andrew Dugan, the EVP and Chief Technology Officer of Lumen. Andrew, welcome and thank you.
Andrew Dugan
Yes. Thanks for having me.
Greg Williams
So, I just want to start with a brief introduction of your role at Lumen and where you are spending most of your time these days?
Andrew Dugan
Yes. So I have been at Lumen for 25 years. And so it’s been quite some time. And prior to that, I was with AT&T and MCI, which is now Verizon. So I’ve been in telecom for about 35 years. And as CTO for Lumen, I have responsibility for our network technology strategy. So my team takes a look at strategically, how do we want to build our network, how do we want to build our products and services? We evaluate technology and we introduce that technology to the company. You can sort of think of it as if our product team wants to build a product, they come to our organization and we make that product capability available within our infrastructure. So – and I have also got responsibility for corporate security as well.
Question-and-Answer Session
Q - Greg Williams
Okay, got it. And I want to talk about the buckets that you guys now sort of bifurcate or trifurcate grow harvest in managing? And maybe talk about some of the products in your [indiscernible], what are the largest opportunities that you think are there for Lumen and how the company is poised to win that space over time?
Andrew Dugan
Yes. So all of those products that you mentioned, we think there is good growth opportunity for us. But I will talk about a few of them. So three that I think represent big growth opportunity is our edge compute, our SD-WAN and SASE portfolio and security. And so if you take a look at the growth opportunity, where their edge has about a 25% CAGR associated with it, SD-WAN about 20%, and security about 15%. So, all material growth opportunity for us and there are areas where we feel that we have advantage in the market. So we think we can capture our fair share of that growth and hopefully more. When it comes to edge, our advantage is related to the fact that it’s put on top of our core network infrastructure. And that gives us couple of advantage. One is it gets us close to users and we placed our edge compute within 5 milliseconds with managed and for sure. SD-WAN and SASE, we have got a couple of advantages. One is we get to provide the underlay services as well as the overlay for those services. And we have taken some of the intelligence out of our Black Lotus Labs research team and have incorporated that into the technologies that we sell there. So we are differentiated. And in security, we have got that backed by our Black Lotus Labs research as well. So we got some good advantage.
Greg Williams
Maybe I will just dive into each of these maybe with Edge, you mentioned the other physical advantage, help us with a ramp in this space. When should we expect to see Edge proliferate and how is that going to look over time? It really started moving the needle for you and the rest of the telcos for that matter and yes, just interested in that?
Andrew Dugan
Yes. So that’s a changing market. I think it – and it’s a new market, it’s a nascent market. We have had customers that have been working with us for one Edge compute for 12 to 24 months in terms of testing what it’s capable of. And I think we need to sort of recognize where Edge is in terms of its development. And if you go back to cloud, cloud was talked about for a long time before really took off and I think Edge is in that same sort of situation.
Greg Williams
Right.
Andrew Dugan
It’s been around for a couple of years. And it’s really starting to ramp, where we see Edge starting to get some traction is used cases. Yes, so it’s really the used cases that take advantage of our advantage there, which is the latency advantage that Edge gives and the fact that our Edge sits on top of one of the largest networks in the world, so where you need significant network capacity, where you need low latency.
Greg Williams
Yes. What are the used cases maybe you can get more specific on low latency that you are seeing machine to machine control or robotics manufacturing, warehouse, IRP, again, just kind of – yes, what are the ones that are getting the most traction that you think that will help you?
Andrew Dugan
Yes. So where we see traction in the market, AI that would be one and that’s driven by data as well as data capacity as well as latency, gaming, kind of a latency play there, internet of things, which is a distributed architecture, content delivery applications that need that high capacity network connectivity. So those types of things and financial services, has also been an interesting place for us where we see traction.
Greg Williams
Right. And AI is really one of the top themes at this conference, probably other conferences these days, please help us understand the way Lumen would contribute and see revenue grow through AI, maybe both outside? And then just how the AI help you internally?
Andrew Dugan
Yes, I guess from outside first, one of the things that we have heard from those companies developing these AI technologies, in general, with AI, specifically, is that the amount of data that they need to exchange in order to train their algorithms and exchange it between data centers is just enormous. And so with our infrastructure capable of scaling both fiber wavelengths and our general network connectivity, we have got the advantage that we can help serve those needs for those generative AI companies.
Greg Williams
Right. Just maybe talk about waves connecting data centers with the opportunity as you go from the training centers?
Andrew Dugan
Yes, okay.
Greg Williams
And so maybe the waves connecting data centers in the – for AI use cases is probably…
Andrew Dugan
Yes, waves, dark fiber, anything that drives that the ability to transfer large amounts of data. So, that’s a revenue growth opportunity for us and we see it continuing to increase as AI continues to evolve.
Greg Williams
And then how about AI internally, how are you thinking about like Lumen and does that help you route faster or better or anything like that? Is there anything you can think about internally like customer care seems like an easy one?
Andrew Dugan
Yes. I would say it’s been really fun by the way to watch AI get used internally. It’s pretty powerful. But I would say a couple of areas maybe to focus on one is sales. So we have enabled our sales teams with some AI based tools, things like an AI-based e-mail platform that helps them target customers, create the right content, and reach out in scale to generate leads. We also have used AI based tools in managing our marketing information. So helping our sales team enter a customer profile into this tool, pull through all of our marketing information and generate targeted marketing information that they can take to the customer present to solve their business problems. We have also got dashboards that we have enabled the sales teams with that help them layout their work for the day, help them generate the materials they need to support that work, KPIs and help them generate next best action in their conversations with customers. So that’s – those types of tools we are seeing some benefit from.
Greg Williams
Got it. I wanted to talk about another exciting opportunity would be your new NAS offering or network as a service that was recently out there. We spoke to say, this afternoon today and they are dealing at NAS offerings, I think you guys seem to be ahead of that curve. Help us understand it seems like it could be a big deal in the next few years. And what’s the – what’s the offering, what’s its capabilities and why it matters? Some of us aren’t necessarily [indiscernible] finance folks and investors in trying to understand what that means?
Andrew Dugan
Yes. So I think NAS is our future. So NAS is network as a service. I should probably define what it means for us, because a lot of people use that term and it can mean different things. But for us, it really means cloudification of telecom. And probably the best analogy is, if you think about cloud services and the experience that’s been created there, it’s a good experience, because customers can – it’s a customer driven experience, all digital that can go in, get instant gratification by ordering, provisioning and using services on demand. We want to do that exact same thing with telecom services. So, a full digital experience end-to-end to buy, get, manage and their services and we are taking it as far as even changing the billing model. Our first product that we released within our NAS experience is internet on demand released it about 2 weeks ago and we are changing the billing model there to an hourly basea billing model.
Greg Williams
Okay, versus your typical like DIA, which you get a certain amount of capacity and a month circuit kind of thing.
Andrew Dugan
Yes, a normal telecom motion for selling internet or DIA services, you go to the customer, you get them to commit to a 3-year contract at a certain capacity and they use that capacity for 3 years. And then if they want to change it, they are going to come back to the buying process.
Greg Williams
Is there a worry that it cannibalizes your DIA if you – is it priced better or is your margin still the same or is this part of that catching your customer strategy where if they are going to migrate anyway throw them into the NAS?
Andrew Dugan
Yes. Our pricing are – I like to think of our pricing as fair and flexible. So if you take our hourly price for our DIA service and you run it out and use it for a full month, it’s about the same that you would pay for a 3-year contract? So the question is does that cannibalize revenue? Because customers can turn it up and turn it down. We are going to see what happens with this pricing model in the industry. The great thing is we built our platform to be flexible. We need to change our pricing model. That’s an easy change for us to make. I don’t think customers are going to be hyper optimizing their capacity by turning it up and down every 15 minutes, but you will see what they do.
Greg Williams
How about the margin profile on something like that versus the traditional DIA?
Andrew Dugan
Assuming that they use it for the full month, it’s the same type of margin. And so, yes, our margins on that services are very good. We wouldn’t expect that to change.
Greg Williams
And who is your competition on NAS platform and more specifically, internet on demand? I know it’s a tough sort of question, because you offer this as a broader solution or you actually sell this product in isolation? Just wondering how you know how you sell it and who is your competition?
Andrew Dugan
Yes. So our first product within our NAS portfolio is that internet on demand. And where it’s available today is we have integrated our internet network with data center fabrics and we have got two data centers that we are working with where we tied into their fabrics. And it’s also available for existing customers that buy a NAS enabled port from us and we have got a bunch of customers that are already enabled with this. And so who are the competitors? There is a number of people out there that are providing NAS based offers, this sort of digital experience of buying networking services. One thing to keep in there, so there is niche players out there. And they are targeting certain parts of the market. One thing to keep in mind with our NAS portfolio is this is the way we are going to offer all of our services.
Greg Williams
Right.
Andrew Dugan
And so when we talk about NAS for our internet product, it’s the way we are going to approach the entire internet market for Lumen customers over time. And so this isn’t a niche play for us, this is part of our blood portfolio. But there are companies out there that would have the types of products that we released just a couple of weeks ago, people like Megaport, PacketFabric, I met with the one of the investors of Console Connect today, those type of companies provide on-demand connectivity solutions. But we have some pretty significant advantages in the space, fact that we own and operate our own infrastructure
Greg Williams
Right.
Andrew Dugan
And we can control that infrastructure and it scales to very high levels.
Greg Williams
Right. This goes back to the physical asset.
Andrew Dugan
Yes.
Greg Williams
And having that, right. And the cost structure associated with that physical asset for us, it’s known as economics is much better contribution margin is huge.
Andrew Dugan
Yes.
Greg Williams
Are there any early learnings? It sounds like it’s a little early, but you have been trialing it on the upside, surprise or even downside surprise. It sounds like maybe pricing is one where you can sort of work that out and figure that out. But curious, what you have learned so far?
Andrew Dugan
We found that our customers want this type of capability. And we have gotten a lot of interest from customers, curious about it and partners that are curious about it. Because we really are solving a problem with the telecom industry here that telecom industry is difficult to work with. And that’s kind of an indictment of all of us, not Lumen specifically. And so customers are very interested in the capability and the opportunity to have a digital experience. So in terms of learnings we found a couple of things that we want to tweak within how the experience works and we are adjusting those. If we learned anything as our customers want us to move faster and make more capabilities available within the platform and have a broader footprint where it’s available.
Greg Williams
Right. And that’s a good question too is when is your initial availability, which was rather limited today kind of, I guess you mentioned is also oversubscribed. So there is demand there. When does it go to full commercial availability? Is it market by market and when do we finally get to a place where it’s across the U.S.?
Andrew Dugan
Yes.
Greg Williams
Both I guess, on just internet on demand and then of course like all the other products that you are going to put on it? So I guess two questions there.
Andrew Dugan
Yes. So alright, so what’s available today is the connectivity in those data centers that we have integrated it with. And it’s available today for customers that have bought one of these NAS enabled ports, which is part of our historically – our dynamic connections product set. So it’s available today, fully digital experience. So when is it going to be more – what are we doing with availability? There is two dimensions that we are expanding availability in. One is we are increasing the product set that’s available within the NAS offer. So we have that internet capability available today.
Greg Williams
What’s next, I guess, what’s the other product?
Andrew Dugan
Security, we are working on. But then we plan to expand it to our full product portfolio, so by the networking services, SD-WAN and SASE, eventually to our waves capability. So, UC&C. So it will become a digital experience around our full product set. That’s the first dimension of expansion features. Second dimension is footprint. So we’ll be making it available for new locations here relatively soon and then we will be looking at how we can enable certain capabilities through off-net providers over time.
Greg Williams
Okay. Okay. Well, actually, so you can just type two and bring it off-net and also offer them?
Andrew Dugan
Yes, now, the feature set maybe a little bit different on-net versus off-net.
Greg Williams
Sure. Okay.
Andrew Dugan
Because things like capacity expansion may not be available through all of our…
Greg Williams
Because your other networks might not have the capability obviously by themselves, but – okay, so do you launch the networks with the one product first or are you adding products – you mentioned two facets of the growth and do they both go in tandem?
Andrew Dugan
They go in tandem for sure. So we are going to have a steady cadence of rolling out new product capabilities within the NAS platform. And we are going to have a steady cadence of footprint expansion platform as well.
Greg Williams
And when do you – to your best guess envision that being out there in most NFL cities and all the product sets? Is that yours? Is that 1 year? I’m just trying to understand when that happens?
Andrew Dugan
Yes, so this is a – it’s a complicated question. Because when you take a look at footprint availability you’ve got – if I can step back and sort of give the big picture of why we’re doing this, and what we’re trying to enable. So – and then that’ll help me fill in sort of which parts of that picture fill in overtime. So I always like to step back to the fundamentals. So we’re here to support our Enterprise customers. Our enterprise customers are driven by their applications. And their applications run in lots of different places, they run in third-party data centers, centralized cloud, on premise, access through the internet. And increasingly, we think they’re going to run in Edge compute. And so that’s the ecosystem that we’re connecting together. So when we talk about footprint, we have to enable our on-net buildings, data centers, cloud, we already have the internet connectivity.
Greg Williams
And then your edge compute center?
Andrew Dugan
And then edge compute, yes. And so, those all follow kind of a different, a different cadence.
Greg Williams
Right. But – so your question when? When is the whole – when is Lumen going to transform the network? And as we know, the network today, because, a couple years from now sounds like the way we consume network getting radically revolutionized. And you’re one of the ones leading the way and when was that?
Andrew Dugan
My goal is we look back a year from now and we just say, but it’s going to be a continuous expansion between now and then.
Greg Williams
Maybe like the iPhone when it’s first came out, everyone is interesting. And then nowadays, like how to live without it. Yes. There’s another product that you guys mentioned on the call ExaSwitch, which was announced, actually, couple weeks before the call, I think it was in it’s a key part of your innovative growth strategy, or be innovative for growth? And can you explain, maybe in layman’s term, what ExaSwitch is and why it’s important, the opportunity there and maybe the competition?
Andrew Dugan
Yes. Yes, so what is it? It is an optical interconnection fabric that we deploy into a metropolitan area. So you can think of it as an optical switch that has endpoints in a number of partner data centers. And what happens is, we go out and install that equipment in those data centers. And once we install that equipment, the people that are on this fabric can go to a portal, as part of our NAS story, have a full digital experience. They can go to a portal and turn up capacity between each other. So this is something that we developed in conjunction with Google and Microsoft, and another hyperscalar. And we’ve turned that up in three markets. And so it’s a very high scale fabric. And so it supports 20 plus terabytes of capacity at a location. And you can turn them up in 400 gig increments, or you can consume them in 100 gig increments. So why is that important? It’s important because it establishes a new way for networks to interconnect and turn up capacity, very high amounts of capacity. On demand within minutes. And so now it’s strategically important for us because we want to position our infrastructure at the center of connectivity. And by having this fabric within our infrastructure, we’re enabling connections through our infrastructure between all these high-capacity locations.
Greg Williams
So instead of the interconnect, like in an [indiscernible] facility where you’re on a meet me room, you’re saying that you have equipment and a bunch of data centers that sort of can bypass that interconnect. Is that right?
Andrew Dugan
Yes. The interconnection happens in core of the network, you don’t need to go to a third-party data center.
Greg Williams
Do you need the gateway somewhere like go elsewhere?
Andrew Dugan
Those networks, so let’s say that we have a Lumen customer that would like to connect to the cloud provider. So we now have a direct connection to that cloud provider that we can turn up large amounts of capacity between us and the cloud provider. So we don’t have to go to a data center to do that. It happens at the core of the networks.
Greg Williams
Okay. Interesting. And then I guess that would save your customers on interconnect costs in turn.
Andrew Dugan
Yes, yes, it can. There’s a couple dynamics there in terms of cost benefit, we’re dealing with massive amounts of capacity. And so we’re turning up large amounts of capacity between us and cloud providers. And when you buy in that level of capacity, you get a lower aggregate cost. So that’s one thing. And then for selling that capacity, yes, we can do it without having to go to a data center.
Greg Williams
I wanted to move on to your waves business, more specifically, coach and centering waves business. And they’re also at this conference as well. And they noted, they bought [indiscernible] assets, so [indiscernible] bought it from T-Mobile. And with that, they’re doing a bunch of things. But one thing they’re doing is they want to enter the waves business. And their goals are ambitious, they said they can maybe get to $500 million, and in a $2 billion industry, obviously ambitious, and that seems like it would be a direct threat to who are the wave providers. Zayo, Lumen? So are you thinking about that? Are you concerned about that? It’s a big number, how are you differentiated? And how can you defend share there?
Andrew Dugan
Yes. Yes, I don’t disagree with your characterization. I think it is a pretty ambitious goal. And it’s a part of the market that we understand really well, it’s a part of the market that we have a significant amount of shear in the waves business. We offer some real value proposition to our customers. And we offer the fact that we’ve got a very fiber rich core network with a lot of diversity and a lot of routes in it. That network is built with the newest generation of fiber, we’ve been over pulling the core of our network with new fiber. And we continue to do that. And so we have very high performing fiber and why does that matter to customers, because when you have high performance fiber, you can light that fiber with very high capacity services, more cost effectively.
Greg Williams
Okay.
Andrew Dugan
It is lower loss. And that means it requires less electronics to be able to carry those high capacity signals long distances, fewer transponders and things like that. Fewer transponders, that’s where all the cost is and the waves business, by the way.
Greg Williams
And so that’s where all the cost of the transponder is?
Andrew Dugan
Yes. And so by reducing transponders, you are being able to deliver the services much more cost effective. So, we got a lot of diversity. We have a very cost effective new network. And we can go to customers and provide a full solution for them on their waves needs.
Greg Williams
Right, and provide additional solutions, whereas maybe the competition might be limited and the suite of services that you otherwise provide as well, then?
Andrew Dugan
Yes. And a lot of our customers want waves to the places where their data centers are. And yes, because we have been at this business for so long, our fiber goes a lot of places. It goes to all the data centers. It goes to all the cloud providers. It goes to a lot of enterprise locations. It’s not inexpensive to build fiber networks. And so we have the reach of our fiber footprint, right. So, you got the reach, you have got the diverse routes, you can do it cheaper, you get next gen fiber, and you have [indiscernible] to go with it.
Greg Williams
Okay. Yes. Kate also mentioned on the call, yourself installs and/or just your install rates, huge decreases, right, onboarding time was cut back 85%, sales cycle times by 80%. It seemed like staggering numbers to me, drastic improvements. Can you help me with examples of past installs versus present and what you are doing now and what your onboarding time looks like currently?
Andrew Dugan
Yes. I think that example was probably in the mid-market space in order to turn up services for customers. And so we are doing a couple things. As part of improving our customer experience, we are really focusing on the activation process. We are streamlining that process, making it more efficient, more friendly for customers. It’s ultimately a set of processes that we are going to automate through our NAS initiative. But we spend a lot of time focusing on streamlining that process. We have also reduced the number of products, it seems that our customer – that our sales teams can sell, which makes that conversation easier with customers. And we have also focused our sales teams on selling in areas where we can delight customers, because it’s easy for us to deliver services, for example, on-net locations. And so through a combination of all of those things, we have been able to drive down our activation intervals, considerably, right.
Greg Williams
And you mentioned NAS, again, and it seems like all roads lead to NAS and part of that is the cloudification of telco services. We wrote a report earlier this year on it and the issues we are having, this is happening more in the wireless world, but the core networks are being couldified, right. AT&T is going to – it has Microsoft Azure for operators. And of course everyone knows AWS and DISH. And the worry is the cloud is running core network services. Do you bring the cloud into your core network services, and is that bringing the fox into the henhouse? If they are doing some of the services, is there a worry that they could run other telco services going forward?
Andrew Dugan
Yes. So, we are in a world of a pretty drastic change, as I have mentioned, I have been in this industry for a little bit of time. And I will say that this time, right, now, we are seeing some of the more disruptive change that than I have seen in the time I have been in it. And so we are in a world where there is overlay networks, like SD-WAN and SASE. And there is underlay networks, which is the thing that actually moves the bits. We are pretty secure in our underlay network’s capability based on the assets that we have and the infrastructure that we have. So, I don’t see any way that we really get sort of disintermediated there, or have those services taken away from us.
Greg Williams
Then there is the overlay. And is there value that can be added by others in the overlay?
Andrew Dugan
I do think that there is. We can add value as well. And we have advantages there to be able to deliver on that. Being a core network operator, we don’t have to route packets to the cloud to deliver service, we can deliver service in the core of the network. And as services and applications become more performance sensitive, that latency advantage of just doing everything in the core, we think there is value there. When it comes to overlay networks, we can deliver the underlay and the overlay. We have field services technicians that can support enterprises at their locations. The reach of our fiber connectivity is more than the cloud providers can offer. So, it’s – we have so much to offer to enterprises that need to solve their business problems. That, I don’t think we need to be afraid of cooperating with cloud providers, cooperating with data center providers in helping to meet those needs.
Greg Williams
Right. And speaking of so much to offer, one of the other offers, we haven’t talked about security. Really, we touched on it, but help us understand your security offering with Black Lotus, and it seems like it’s more of a network based security model versus others? And then maybe talk about how do you migrate that to NAS? How does that really work?
Andrew Dugan
Security services?
Greg Williams
Yes.
Andrew Dugan
Yes. So – yes, so, we have a number of different security services, you mentioned Black Lotus labs. Black Lotus Labs, we feel gives us threat intelligence that others don’t have. And we add that to our security portfolio, but within our security portfolio that’s enhanced with that intelligence. We have our SD-WAN, SASE offer. We have got DDoS offers. We have got firewall offers. We have got managed services. We have got professional services to help our enterprises to solve whatever security problems they have, whether that’s in the core of the network or extends into their LAN and applications. We will go up-stack with them through that managed service and professional services offer. So, how does that integrate with NAS?
Greg Williams
Yes.
Andrew Dugan
Take the internet example of what we have released a couple of weeks ago.
Greg Williams
Right.
Andrew Dugan
What we are working on is through a simple click of a button to be able to add a DDoS service or a firewall service into that internet offer. And so it will be into the equipment that’s in the cloud, right, the software solutions into the equipment and into the cloud.
Greg Williams
Yes. So, it could be in the cloud and the cloud is our Edge Compute. So, going back to your advantage?
Andrew Dugan
Right, our advantage is that our Edge Compute is sort of in line with our customers’ data path. And so we don’t have to route it somewhere, to go provide that service. It’s sort of in line…
Greg Williams
Yes, I guess and that’s just the cloud, you put it into your Edge data centers and your regular data centers and even on-prem for them. I mean sure so by putting it anywhere.
Andrew Dugan
Yes.
Greg Williams
Okay.
Andrew Dugan
That’s right.
Greg Williams
Got it. And then you also mentioned in the call, actually you mentioned on Analyst Day, your big push into a partnership ecosystem. You are partnering with Huitt-Zollars. Just help us understand where you are working and relying on partners. Help us with examples of partnerships that are working like just the rev share model, like, how does that work?
Andrew Dugan
Yes. So, and partnerships show up all across our business. But let me talk about a couple of them. I will talk about the ecosystem partners of serving our enterprise customer needs. I mentioned that we are here to serve enterprises, we are serving their applications in reality, which sit in partner locations. The cloud is our partner, because we are connecting the cloud to the rest of the world. Data centers are our partner, because we connected data centers to the rest of the world. So, that’s a whole partner ecosystem that’s important to us. And we were in a lot of the partner programs of those cloud providers and are continuing to increase our data center relationships. So, that’s one set of partners within the ecosystem. And that’s more of a co-selling type of relationship. We mentioned, what was the business relationship.
Greg Williams
So, you lead the sales and then go to market strategy then or how does that work?
Greg Williams
It can be either way, right. If a cloud provider has a customer with network needs, that can go one way, if we got a customer that has enterprise locations that wants to connect into the cloud, it can go the other way. And so that’s one. Other types of partnerships are technology partnerships. Our UC&C offers are done through providers of those technologies. We consider our SD-WAN and SASE offers with our technology partners there Fortinet, VMware and Versa.
Greg Williams
And so – and you are white labeling it or are we going in with Fortinet?
Andrew Dugan
Yes, we go in with the technology brand of the provider. But we do also augment those capabilities with our own brand as well, Black Lotus Labs, specifically.
Greg Williams
Sure. Also at Investor Day, Lumen spoke about $100 million in run rate savings. And it’s going to be productivity and network improvements and some of it, and some decommissioning and consolidation into one platform. So, where are the ways you ended [indiscernible] in your shop, where are you doing the savings and where you are contributing to that?
Andrew Dugan
I will say, through the efficiency that’s driven by and all digital experience, is one way, right. So, as we automate the delivery of our products and services, we are taking a lot of manual effort out of that. And so that’s one way specifically that my team is helping to contribute. Along with that comes automation of the underlying infrastructure and systems that keep our data clean, because in order to automate, you have to have clean data. And so that drives longer term efficiency, because the failures that occur because of that data, or the manual processes that we are automating due to the automated data integrity.
Greg Williams
No more Excel handoffs and sort of things like that just more automated data streams?
Andrew Dugan
Yes. That’s right. So, those are a couple of ways. But I will say my partners, leading other parts of the company are working hard as well. Our operations teams are driving more efficiency. Our IT teams are changing the way that our back office systems work to create more streamline processes for our customers, and simplifying our systems. So, there is a number of angles there.
Greg Williams
Got it. That’s helpful. I also want to know about this possible divestitures. As we think about the balance sheet, etcetera, but from where you sit, you sold off, obviously, some assets, you are closing on [indiscernible] so are there any other legacy or non-core assets from where you said that that could be carved out from your network?
Andrew Dugan
I would probably get in trouble if I commented on that. But I would say, there is nothing really planned right now. And so could something happen, potentially, but these things – how M&A and sales work. There is conversations that continue to happen across the industry continually. And when the time is right, they happen and when the time is not right, they don’t happen. So, nothing planned, but it’s hard to predict the future, right.
Greg Williams
I mean, Can you talk generally about the complication of some of these carve outs? How hard is it to carve out a piece of the enterprise business from this network at this point? I mean is it seems like, it seems like it’s impossible, not impossible, nothing is impossible. But like, figuring out which ports, who owns which port, who owns which cabinet, who owns this, in which data centers, it’s like, seems very complicated, and it would take a long time, much like we have seen a lot of carve outs, and the complexity behind that, if you can add some color to that.
Andrew Dugan
Yes. So, it’s worked, certainly. If you take a look at the assets that we have sold so far, right. We sold our Latin America assets and our subsea systems that go there. We are in the process of selling our European assets. And we have sold 20 states, I like assets to break speed. So, those have all been, I will say relatively clean.
Greg Williams
Those are geographically cleaner to you, right? Even the Ilex, you have mentioned, work overlapping and enterprise in a big way. So, you are now the next ones get a little tougher? Maybe Wyoming in the Dakota as well that the next sales via Illex in places you also have enterprise, right?
Andrew Dugan
Yes. Now, I have said – like I have said, there is nothing really planned right now. But, yes, I mean you could come up with some constructs of separation that would be more difficult.
Greg Williams
Okay.
Andrew Dugan
Yes. The ones we have done so far, you are right on they are geographically based, and that makes them easier, so. But yes, if you start to separate within a rack or within common equipment, then it gets more challenging. We haven’t done that. And I don’t know if we will.
Greg Williams
Sure. Last question is on fiber to the home, and that network, costs did come up over last year for you guys. But you also took your build count down and help us with the balance and the commitment to the fiber build? That seems like you are ready to hit a flywheel again, in terms of building more, or is it – where is the cadence going from here? And how do you think about build costs from here?
Andrew Dugan
Yes. So yes, we did bring down our build guidance last year. And last year, we were forecasting more for this year. We have sort of taken a different approach to how we are targeting, which homes we build to. We brought down our total guidance as well for the full network that’s where we were seeing $12 million before, now $8 million to $10 million. So, we are on a path right now where by 2027, we think we can get to about $7.5 million.
Greg Williams
Okay.
Andrew Dugan
And so that does require a ramp from where we are today. This year, our plans are to build 500,000 or more homes. And so we are on track today. And we are expecting that we will ramp next year and ramp the following year to get to that.
Greg Williams
And labor equipment, it’s all getting lined up for this and orchestrating it with sales teams and getting your platform ready?
Andrew Dugan
Yes. And we have certainly had learnings over the last year as we have tried to ramp our factory. And yes, we feel that we are getting into full motion now and we will be able to ramp it.
Greg Williams
Alright. Great. Thank you for time, Andrew.
Andrew Dugan
Yes. Thank you. Appreciate it.
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Lumen Technologies, Inc. (LUMN) Presents at TD Cowen 9th Annual Communications Infrastructure Summit Conference (Transcript)