Kate Johnson
President and Chief Executive Officer at Lumen Technologies
Thanks, Jim, and thanks to everybody for joining the call today.
I'll focus my remarks with a quick look-back on 2024 and then I'll set the vision for 2025 and beyond. In short, 2024 was a remarkable year for Lumen Technologies. We accomplished so much, way too much to share on this call, so I'll just focus on a few of the big things. We strengthened our financial position and restored market confidence in Lumen and it started with the debt restructuring that gives us ample time to execute our transformation. We lowered our debt load by $1.6 billion in '24 and recently sent redemption notices for another $200 million. And importantly, we drove material improvement in both our equity and debt trading values.
Next, we established Lumen as the trusted network for AI, inking $8.5 billion in closed sales with big tech companies like Microsoft, AWS, Google and Meta, among others. These deals helped us strengthen our free-cash flow and enable us to self-fund our transformation. We continue to be in deep discussions with several customers to build new routes and we're going to provide more detail on those deals as it makes sense to do so.
Throughout '24, we also made material progress transforming our corporate functions and some quick highlights include, in-service operations and assurance, we delivered materially better year-over-year customer SAT scores in all four enterprise segments all four quarters in a row. And we built an engine to deliver large complex private network projects on-budget and on-time with the delivery of the State of California's digital inclusion program as the latest proof point.
Our enterprise sales and customer success teams built a robust engine that delivered over 15% year-over-year sales growth in our North American enterprise channels with more than 13% sales growth in IP and ways and drove more than 500 new customers to adopt the Lumen Digital NAS platform. Our marketing team built new storytelling muscle, standing side-by-side on stage with big tech and great companies like Intel SAT, VSP Vision Care, Churchill Downs and the 12 to evangelize the criticality of fiber networking and reposition Lumen as a trusted network for AI. Our network engineering, IT and product teams delivered dozens of mission-critical programs for us.
And one breakthrough program is the delivery of Lumen's unified network architecture, enabling 85% of new Ethernet and IP data service sales in major metro markets. This is the long overdue integration of our four network architectures and has already started delivering benefits. The unified network not only enables NAS and other more advanced digital services, but in some cases, it reduces our average time to deliver by more than 12 days and reduces implementation costs by as much as 50%.
What's more, our HR team successfully embedded our play to win culture in every aspect of the company. We can feel it every day-in the work that we do and of course, we're proud of the external recognition we've received with more than 15 culture awards so-far. But most importantly, we're excited to see major improvements in our employee engagement scores borne out of this work because it really matters to our overall mission.
And finally, our mass Markets Quantum Fiber team delivered more than 500,000 enablements with greater than 90% year-over-year growth in fiber net-adds, while simultaneously reducing expenses year-over-year. In summary, our progress in '24 did a few things. It validated our mission, our vision, our strategy, our culture and especially the strength of our team and it showed that we have great execution muscle and set a strong foundation for accelerating our transformation work.
Okay. Let's shift gears and look at 2025. We have three clear priorities, driving operational excellence, building the backbone for AI and cloudifying telecom. And each of these priorities has detailed plans to deliver more customer, shareholder and employee value in '25 and beyond.
Starting with Lumen's financial goals, our 2025 guidance for EBITDA is between $3.2 billion and $3.4 billion and free-cash flow is between $700 million and $900 million. But the big takeaway is this, with a combination of improved revenue mix and cost takeout, we see Lumen returning to full-year EBITDA growth in 2026. I'm going to let Chris provide more detail on this shortly.
Next, we continue to drive operational excellence in everything we do, ensuring continuous improvement in sales execution and churn mitigation, simplifying our core business processes and leveraging modernized ERP, CRM, ops platforms and artificial intelligence to deliver improved employee, customer and partner experiences. We've already identified more than $1 billion of OpEx and a big chunk of network expense that we plan to eliminate by year-end '27 with this work. And we expect to exit 2025 with over $250 million of run-rate cost-benefit delivered.
Okay. Before I dig into our big two growth levers, I want to provide our view on the market given last week's events in the world of AI. Today, enterprise CIOs are faced with the expectation that they will continue to deliver warp speed innovation at an efficient cost and they have to push lots of data to the right users at the right places at the right time for the right cost. And the architectural landscape has never been more complex with apps and data sprinkled all over the place, on-prem at the edge and in multiple clouds.
High-speed, low-latency connectivity is table stakes, but it's not the end game. CIOs need digitally controlled higher bandwidth, higher-performing, higher reliability and higher security networks to navigate this complexity. And that's exactly what we're building at Lumen, a digital platform on-top of a rapidly expanding fiber network to help CIOs design, control, configure and consume network services in a multi-cloud AI-first world. So when a new global player in AI announces a disruptive breakthrough, we see that as a great thing.
Competition increases velocity and decreases cost and basically accelerates the democratization of technology. So in short, the disruption we saw in the market last week will likely make AI more accessible to companies. And that just means that our total available market for network fabric just got a lot bigger. That's why we're confident in our two big bets.
So let me crack into them. Starting with the first one, building the backlog for the AI economy, we've begun construction on the backlog of work generated from the $8.5 billion in PCF sales and it's going really well. I want to share more on our thinking about how we leverage our network for maximum shareholder returns. We are increasing two variables at the same time, capacity and utilization. You should be able to see a high-level model on the chart in the webcast right now.
And I'll start with capacity on the left-side of the page. Because we see a significant increase in-demand for our network infrastructure across both the hyperscaler and enterprise market segments, we're driving network expansion in several ways. We're building new routes funded by our customers, often multi-tenant with great economics. We're partnering with Corning to use their latest fiber innovations, allowing us to get as much as four times more capacity from existing and new routes and we're leveraging photonics innovation for up to two times greater fiber efficiency. If you add all that up, our total network capacity has the potential to go from 12 million total inter-city fiber miles in '22 to 47 million miles by '28, giving us unmatched room for growth for network services. And I'm not even including our 22 million metro miles in that number.
The second aspect of our plan to drive improved shareholder return is all about utilization of our assets. On the right-side of the chart, you'll see that from '22 to '28, we simultaneously increase -- increase overall network capacity as I just described. But we're also going to increase the overall utilization of our network from 57% to 70%. This is because the hyperscalers are leasing once empty conduit and they're funding new-builds, while enterprises are upgrading their networks dramatically. In fact, we saw a nearly 50% increase in 100 and 400 gig wave sales across large enterprise and mid-markets in 2024 alone. We're closely monitoring customer demand signals and we'll continue to make important capital investments in key major metros to capture this traffic growth.
Additionally, we'll continue to examine our utilization and capacity planning business rules for maximum shareholder return, adjusting as market dynamics dictate. In summary, the growth lever of building the backbone for AI represents a huge accretive opportunity for this company. We're not only driving the strongest utilization of our network assets in the history of the company, we have unmatched capacity for growth at exactly the right time.
Moving on to our second growth vector, disrupting the market by cloudifying telecom. Simply put, we're building a digital layer on-top of our physical network to help us deliver friction-free high-performing digital network experiences. So long dumb pipes, hello intelligent digital network fabric that enables CIOs to be successful in a multi-cloud AI-first world. As I shared earlier, enterprise CIOs need to move workloads between locations, on-prem, at the edge and multi-cloud and it needs to be cost-efficient and friction-free.
But it's not and it's not for two reasons. First, legacy networks were not built for a multi-cloud world. So enterprises were forced to use carrier-neutral facilities to access the cloud connectivity market, driving growth in costly and inefficient cross-connects. Second, most traditional telecom companies aren't building a platform for digital dynamic frictionless customer experiences. Now Lumen is fixing all of that using ourselves as customer one.
I'll share a specific example with a supporting graphic on the webcast that you should see right now. To enable our Quantum Fibers quote to cache process, for example, we utilize multiple cloud and SaaS providers. Order processing workloads are hosted on one public-cloud, leveraging its native capabilities for seamless flow-through provisioning. But once it's processed, that data required for business operations and financial reporting is then transferred to our corporate data warehouse, which is hosted in a completely different public-cloud, using our own Lumen network fabric, which is now directly connected to three big public clouds in a virtual networking ecosystem.
Our Quantum Fiber quota cash network architecture bypasses carrier-neutral facilities and eliminates physical cross-connects and their fees as well as reduces overall port usage. The outcome is a modern multi-cloud network architecture at lower-cost than traditional architectures with improved network speed, security and reliability. We plan to bring this lower-cost, higher-performing architecture to our customers in late 2025.
And look, the point is this, how we cloudify ourselves to operate efficiency -- efficiently in a multi-cloud hybrid architecture world is informing how we innovate and commercialize our product and services portfolio for our customers. We're creating an innovative networking ecosystem that will bring new value to enterprise CIOs in today's multi-cloud AI first world. And this will give Lumen access to a net-new total available market that we estimate to be at least $15 billion.
We have the right assets, the right vision, the right team at exactly the right time. And that's why we're bullish on our pivot to growth.
And with that, I'll turn it over to Chris.
