So Kate, you were at Microsoft before taking over as CEO of Lumen. And when you came into the company, it was and to some extent still is, it was viewed as a kind of traditional telecom company. It brought fiber to people's houses, to businesses. You're rearchitecting the company and arguably the architecture. Why is it why do you see the future not as a traditional telecom company really more as an AI infrastructure company?
Very important question. Telecom hasn't really innovated in a long time. Products are commoditized. Telecom in general seated innovation to the tech companies, to digital upstarts, to you know other other industries and really hunkered down on continuing to build out infrastructure but didn't really think about you know value added advanced services digitally on top of that. And right now the networks of yesterday, they don't serve enterprises who want to use AI to transform their business. Those networks are not big enough, they're not fast enough, they're not secure enough, they're not intelligent enough. But Lumen's got this, you know, incredible fiber network that's within a couple of milliseconds of 97% of the businesses in North America. And we saw huge opportunity to seize the day especially since AI is the fastest diffusing technology in the history of mankind.
Was there an aha moment for you internally where you're like okay we need to make a big switch.
I think to say there was an aha or that you know there was some sort of clairvoyance is just not really a thing. I think we've all been watching this story unfold. It's not you know quarterly or annually. It's daily. Right. And so, knowing that we had to transform the company that we were actually starting from, you know, not a great place a couple years ago, now we're in a fabulous place in large part because of some of the work that we've done. We kept learning and talking to our customers and to our ecosystem partners and we saw very clearly that the hyperscalers, the biggest technology companies on earth and the social platforms, they were going to make big bets on training their AI algorithms and AI needs data, data needs data centers and those data centers need to be connected and we were the best network you know of choice and so we saw huge demand and that's how we booked $8.5 billion dollars of connectivity deals with those hyperscalers last year alone.
When you were talking to your enterprise customers, were they saying to you, "We want to do X, Y, and Z with AI, but we can't. I mean, we we literally can't because it's not working because because the networks aren't serving us properly."
You know, I would say that there's a pretty significant segment of advanced digital companies that recognize the gap and then there's a lion share of enterprises that haven't used AI enough to really understand that gap. And so we're partnering with those more advanced companies, but we are one of them. So we had to use AI in order to transform our business. We are building self-healing networks. We're building intelligent sales, intelligent customer service, etc. All of that needs AI. You know, it started with
Guys, when you say intelligent sales, you mean bots.
I mean a combination of agents plus people. It's a it's a combination.
What does agent mean to you? I'm curious because I think almost everyone on the stage is going to have a different definition.
Okay. Agentive AI is is basically I think you can call it a bot but it's an agent that's in service of a certain functional outcome.
Why for you why did Lumen not decide to do both? In other words, continue to serve it it's consumer fiber to the home base and then also do enterprise AI be all things to all customers.
Why did we do a deal? Two weeks ago, we announced a deal with AT&T to sell our consumer fiber business to to AT&T for $5.75 billion. And it's just the fiber to the home piece. So we saw two things. Number one, AI, fastest diffusing technology in the history of mankind, needs fiber networking. And then the demand curves for fiber to the home and wireless are converging. And we're in a position where we can go big and have a right to win in the enterprise space providing fiber networks. And we didn't have the kind of scale where we could win like that in consumer, but AT&T did. So it was a better together story. So we we sold that business and now we are an enterprise digital networking company.
You still have a little bit of consumer stuff left though. For example, you've got the kyber ky copper based to the home. Is is the goal to eventually devest all the consumer parts of Lumen?
Well, I think that the the copper networks serve both enterprise and consumer and they're legacy products. They're the networks that aren't serving the AI economy. However, for Lumen, they throw an enormous amount of cash. So they're financially important to the company as we transform. And they also have, you know, I'll call it the secret sauce. The way that we're transforming the architecture and the way that we serve technically our enterprise customers has a lot to do with those copper networks and the assets that we could reuse.
I'm wondering since you announced the AT&T deal, now granted it's been basically a week at this point. The share price hasn't really moved up or down really. It's it's been relatively flat. Surprised? I mean given that what you said and and obviously you you had signaled earlier that you were probably going to do something like this but if this is the big transformation of the company what are investors missing?
Hey look so am I ever surprised by Wall Street? Heck no. The the job is not to you know it's like poker face sure what next. But the reality is that this is a complex space that not a lot of people understand critical infrastructure and the role that it plays not a lot of people understand the growth path that we see. We are transforming Lumen and using the new things that we're selling to enterprises in the way that technology companies have been doing for a long time in the way that me and my leadership team learned at various technology companies. We see it very clearly. We know that markets take a while to metabolize things. But we're really confident in our right to win in this space. The other thing is Dan, this is really important. Transformations don't happen overnight. And any given day, week, month, or quarter, the stock price is you you just can't get distracted by it. You got to focus on your customers. And we're focused on enterprise customers and what we know they will need to thrive in the AI economy and we're building that for them.
You you mentioned poker face. Let me ask you a poker question, which is the the the cliche is if you look around the table and you can't find the sucker, it's probably you. If Wall Street isn't buying this transformation necessarily, are you the sucker at the table?
Wow, that's a heck of a question. Hell no. And yeah. I basically see a very important need in working very closely with customers. We also see uptick in demand. We've improved our business results materially. Coming in at a quarter of the shrink rate on the legacy side of the house than the rest of the industry. We're turning the company around. Am I concerned about, you know, Wall Street's ability to metabolize all of the changes that we're doing? No. I they're they're pretty smart as well. And I think there are phases to a transformation. Step one, free cash flow. Boom. We got it. Step two, grow your EVA duh. Boom. We called the ball at the end of the year. Step three, grow your revenue. That's in the plan and that's what we're working on right now. So, I feel really good about it.
I'm wondering you talked earlier about connecting the data centers is lumen and maybe it's both but when you look at the business and the way you look at it is it to connect data centers primarily or is it to sometimes bypass them and to basically bypass the data centers and go straight to the enterprise customer.
