Divestiture and Acquisition |
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| Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Divestiture and Acquisition | Note 2—Divestiture and Acquisition Mass Markets Fiber-to-the-Home Divestiture On February 2, 2026, we and certain of our affiliates completed the sale of our 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 were subject to post-closing adjustments. During the nine months ended September 30, 2026, we recorded a $569 million net pre-tax gain on the disposal associated with the sale of our Mass Markets Fiber-to-the-Home business. This gain is reflected as 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. Lumen recorded $729 million of liabilities initially measured at fair value, with an offset to the net gain on disposal, for contractual credits and commercial agreements. We estimated the initial fair value of the commercial agreements in the amount of $497 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 $232 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 Lumen could be required. Lumen has estimated the fair value of these payments to be $36 million, which is included in Other liabilities on our consolidated balance sheet and has reduced our net gain on the sale accordingly. We determined that of the cash proceeds of $5.72 billion received, $729 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. These liabilities were recorded on our consolidated balance sheet at the fair value as of the transaction close date of February 2, 2026 as follows:
We do not believe this divestiture transaction represents a strategic shift for Lumen 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 $4.4 billion, primarily comprised of (i) property, plant and equipment, net of accumulated depreciation, of $2.9 billion, (ii) goodwill of $1.3 billion, and (iii) other net assets of $186 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. Alkira Acquisition On May 4, 2026, our wholly owned subsidiary, Level 3 Communications, LLC ("Level 3 Communications"), entered into an agreement and plan of merger to acquire Alkira, Inc. ("Alkira"), a provider of a cloud-native, carrier-agnostic networking platform that enables enterprises to design, deploy, and operate connectivity and network services across hybrid and multi-cloud environments. The transaction closed July 1, 2026, and pursuant to the merger agreement, Apollo Sub, Inc., a wholly owned subsidiary of Level 3 Communications, was merged with and into Alkira, with Alkira surviving the merger as a wholly-owned subsidiary of Level 3 Communications in exchange for $485 million cash which is subject to finalization of customary working capital and other post-closing adjustments. The financial results of Alkira have been included in our consolidated financial statements since the transaction closed. We allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. These fair values were based on estimates and assumptions made by management at the time of acquisition. The allocation of the purchase price was completed as of September 30, 2026. The major classes of assets and liabilities to which we allocated the purchase price follow:
Goodwill includes the acquired workforce and was primarily attributable to strategic benefits and anticipated synergies that are expected to be achieved from the integration of Alkira. None of the goodwill is expected to be deductible for income tax purposes. The purchase price allocated to identified intangible assets acquired follows:
Developed technology consists of a cloud networking platform that enables enterprises to design, deploy and manage connectivity across public clouds, data centers, branch locations and other on-premise environments, remote users and external networks. We utilized the replacement cost method to estimate the fair value of the developed technology, considering factors such as historical cost, market participant profit mark-up, obsolescence and opportunity cost. The economic useful life was determined based on the technology cycle. Customer relationships represent the fair value of future projected cash flows that will be derived from sales of products to existing customers of Alkira as of the transaction close. We estimated the fair value of customer relationships using the multi-period excess earnings method considering such factors as annual recurring revenue for existing customers, customer attrition, growth projections, margin attributable to existing customers, and contributory asset charges to reflect the use of other assets to sustain the customer relationships. The economic useful life was determined by evaluating factors such as the cash flows over the forecast period, term of contracts acquired, customer retention, and the economic lives of similar assets held by Lumen. As a part of the transaction, Lumen acquired the Alkira trade name which Lumen expects to retain until the technology integration is complete. We utilized the relief-from-royalty method to estimate the fair value of the Alkira trade name. The estimated useful life represents the period of use until integration is complete.
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| Divestiture and Acquisition | Note 2—Divestiture and Acquisition Mass Markets Fiber-to-the-Home Divestiture On February 2, 2026, we and certain of our affiliates completed the sale of our 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 were subject to post-closing adjustments. During the nine months ended September 30, 2026, we recorded a $569 million net pre-tax gain on the disposal associated with the sale of our Mass Markets Fiber-to-the-Home business. This gain is reflected as 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. Lumen recorded $729 million of liabilities initially measured at fair value, with an offset to the net gain on disposal, for contractual credits and commercial agreements. We estimated the initial fair value of the commercial agreements in the amount of $497 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 $232 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 Lumen could be required. Lumen has estimated the fair value of these payments to be $36 million, which is included in Other liabilities on our consolidated balance sheet and has reduced our net gain on the sale accordingly. We determined that of the cash proceeds of $5.72 billion received, $729 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. These liabilities were recorded on our consolidated balance sheet at the fair value as of the transaction close date of February 2, 2026 as follows:
We do not believe this divestiture transaction represents a strategic shift for Lumen 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 $4.4 billion, primarily comprised of (i) property, plant and equipment, net of accumulated depreciation, of $2.9 billion, (ii) goodwill of $1.3 billion, and (iii) other net assets of $186 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. Alkira Acquisition On May 4, 2026, our wholly owned subsidiary, Level 3 Communications, LLC ("Level 3 Communications"), entered into an agreement and plan of merger to acquire Alkira, Inc. ("Alkira"), a provider of a cloud-native, carrier-agnostic networking platform that enables enterprises to design, deploy, and operate connectivity and network services across hybrid and multi-cloud environments. The transaction closed July 1, 2026, and pursuant to the merger agreement, Apollo Sub, Inc., a wholly owned subsidiary of Level 3 Communications, was merged with and into Alkira, with Alkira surviving the merger as a wholly-owned subsidiary of Level 3 Communications in exchange for $485 million cash which is subject to finalization of customary working capital and other post-closing adjustments. The financial results of Alkira have been included in our consolidated financial statements since the transaction closed. We allocated the purchase price to tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. These fair values were based on estimates and assumptions made by management at the time of acquisition. The allocation of the purchase price was completed as of September 30, 2026. The major classes of assets and liabilities to which we allocated the purchase price follow:
Goodwill includes the acquired workforce and was primarily attributable to strategic benefits and anticipated synergies that are expected to be achieved from the integration of Alkira. None of the goodwill is expected to be deductible for income tax purposes. The purchase price allocated to identified intangible assets acquired follows:
Developed technology consists of a cloud networking platform that enables enterprises to design, deploy and manage connectivity across public clouds, data centers, branch locations and other on-premise environments, remote users and external networks. We utilized the replacement cost method to estimate the fair value of the developed technology, considering factors such as historical cost, market participant profit mark-up, obsolescence and opportunity cost. The economic useful life was determined based on the technology cycle. Customer relationships represent the fair value of future projected cash flows that will be derived from sales of products to existing customers of Alkira as of the transaction close. We estimated the fair value of customer relationships using the multi-period excess earnings method considering such factors as annual recurring revenue for existing customers, customer attrition, growth projections, margin attributable to existing customers, and contributory asset charges to reflect the use of other assets to sustain the customer relationships. The economic useful life was determined by evaluating factors such as the cash flows over the forecast period, term of contracts acquired, customer retention, and the economic lives of similar assets held by Lumen. As a part of the transaction, Lumen acquired the Alkira trade name which Lumen expects to retain until the technology integration is complete. We utilized the relief-from-royalty method to estimate the fair value of the Alkira trade name. The estimated useful life represents the period of use until integration is complete.
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