• US network operator adopts Google Cloud AIOps
• The partnership aims to increase Lumen’s operational efficiencies by quickly resolving issues on its network before they affect customers
• Lumen also announces deal to provide Google Cloud with “dedicated access” to fibre on its network
• News of the Google Cloud tie-up coincides with the release of Lumen’s Q3 financials, which show how far the operator has to go to turn its fortunes around

US network operator Lumen Technologies has signed yet another deal with big tech, although this time it seems to be primarily as a customer, as opposed to its recent series of contract wins with hyperscalers where it’s been the provider of additional datacentre interconnect capacity to cope with an AI-fuelled explosion in traffic volumes.

In a new partnership with Google Cloud, Lumen is aiming to accelerate its own digital transformation and drive operational efficiencies. Specifically, Lumen says it will harness Google Cloud to power AIOps (AI for IT operations) and glean proactive data insights across its network along the way.

Lumen already has ‘digital twin’ network capabilities, but the addition of Google Cloud’s infrastructure and databases – including its BigQuery data and analytics platform – is seen as an important enhancement. By adding AIOps into the mix, Lumen says the harvesting of real-time data insights can be used “to quickly resolve network issues before they reach its customers”.

Lumen’s CTO, Dave Ward, a veteran of the data networking sector, stated: “Google Cloud’s expertise and AI technologies are key enablers for our company, allowing us to use our Lumen digital twin network technology to test new capabilities and improvements before we deploy them.”

The US network operator is adopting Google Cloud’s Vertex AI platform and Gemini models, which will apparently enable new AI-powered applications to assist Lumen technicians and customer support teams.

In addition to its AI partnership with Google Cloud, the network operator announced it will provide the US hyperscaler with extra fibre capacity using its ‘private connectivity fabric’, which will give Google Cloud “dedicated access” to existing fibre in the Lumen network. Lumen is also committed to installing new fibre for Google Cloud on existing and new routes.

Still some way from a fiscal turnaround

Despite the flurry of recent contract wins with big tech, including AWS, Meta and Microsoft, they have yet to make a positive impact on Lumen’s financials.  

For Q3 2024, ended 30 September, Lumen posted a decline in both revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortisation). The top line shrank by 12% year on year to $3.22bn, while adjusted EBITDA (excluding special items), fell by 14% over the same period to $899m.

Lumen CEO Kate Johnson, in the company’s Q3 earnings call with analysts and financial investors (as transcribed by Motley Fool), nonetheless painted a bullish financial picture for the longer term, saying that “material progress” had already been seen in building AI backbones and telco cloudification – the two main areas Lumen is now targeting.

“As expected, our financial performance still reflects headwinds on our legacy revenues,” she said. “We’re also investing heavily in transformation programmes while running the core business, which weighs heavily on our EBITDA results. We have fully recognised we have a long way to go on this journey, and we understand that our current financial results – coupled with the fact that telcos in the industry are not talking about a turnaround – makes it difficult to imagine long-term success for Lumen.”

That said, Johnson insisted that the Lumen management team sees a “clear path” to turn the company around. “We have a plan to take cost out, deleverage our balance sheet, and drive growth by using our assets and intellectual property to give enterprise customers new value in a multicloud hybrid architecture environment,” she said. “All of this will take time to execute, and it will take time to show up in our financials. But the path is real.”

There is also growing market confidence in Lumen on the back of it hoovering up major contracts with big tech. Over the past six months, Lumen’s share price has vaulted by nearly 480%, to $7.61, giving the operator a market valuation of $7.74bn. 

- Ken Wieland, Contributing Editor, TelecomTV