On February 2, 2026, we and certain of our affiliates, completed the sale of the Mass Markets Fiber-to-the-Home business in 11 states to AT&T in exchange for pre-tax cash proceeds of $5.72 billion, which are subject to post-closing adjustments. Of this amount, $2.88 billion was attributable to Qwest. During the three months ended March 31, 2026, we recorded a $242 million net pre-tax loss on the disposal associated with the sale of the Mass Markets Fiber-to-the-Home business. This loss is reflected in operating income within the consolidated statements of operations.

In connection with the sale, Lumen entered into a transition services agreement under which it will provide to the purchaser various support services. Lumen and the purchaser also executed long-term agreements under which Lumen and the purchaser will provide to each other various network and other commercial services. In certain of these arrangements Lumen identified contractual terms that are unfavorable compared to prevailing market terms. These agreements include an indefeasible right to use (“IRU”) arrangement under which Lumen granted the purchaser an IRU for specified Lumen retained fiber assets for an initial term of 20 years at no incremental charge.

We recorded $517 million of liabilities initially measured at fair value, with an offset to the net loss on disposal, for contractual credits and commercial agreements. We estimated the initial fair value of the commercial agreements in the amount of $399 million using the income approach that considered the differential in revenue attributable to contractual and market pricing assumptions. The resulting cash flows were calculated on an after-tax basis and discounted using an estimated weighted average cost of capital. We also recorded an initial fair value liability of $118 million for contractual credits based on the expected use and resulting discounted cash flows. In addition, we agreed to reimburse the purchaser for certain matters for which future cash payments by us or certain of our affiliates could be required. We have estimated the fair value of these payments to be $18 million, which is included in Other liabilities on our consolidated balance sheet and has increased the net loss on sale accordingly.

We determined that of the cash proceeds of $2.88 billion received, $517 million associated with the fair value of the contractual credits and commercial agreements described above should be classified as cash provided by operating activities within the consolidated statements of cash flows, based on the nature of those cash flows. The remaining proceeds are treated as cash flows from investing activities within the consolidated statements of cash flows.


Balance Sheet Classification	Initial Fair Value Liabilities
	(Dollars in millions)
Other current liabilities	$	29
Current portion of deferred revenue	52
Deferred revenue	406
Other liabilities	48
Total liabilities	$	535

We do not believe this divestiture transaction represents a strategic shift for us and therefore, does not meet the criteria to be classified as a discontinued operation. As a result, we continued to report our operating results for the Mass Markets Fiber-to-the-Home business in the Territory (the "disposal group") in our consolidated operating results through the disposal date. As a result of closing the transaction on February 2, 2026, we derecognized net assets of $2.6 billion, primarily comprised of (i) property, plant and equipment, net of accumulated depreciation, of $1.5 billion, (ii) goodwill of $1.1 billion, and (iii) other net assets of $40 million.

As of May 21, 2025, the assets and liabilities of the disposal group were classified as held for sale and measured at the lower of (i) the carrying value when we classified the disposal group as held for sale or (ii) the fair value of the disposal group, less costs to sell. Effective with the designation of the disposal group as held for sale on May 21, 2025, we suspended recording depreciation of property, plant and equipment while these assets were classified as held for sale. We estimate that we would have recorded an additional $9 million of depreciation for the three months ended March 31, 2026 if the disposal group did not meet the held for sale criteria.