Thank you, everyone, for joining us, and welcome to the Bank of America 2025 Leveraged Finance Conference. I'm Ana Goshko. I cover high-yield telecom and technology, and we're thrilled to have Cogent with us this morning and David Schaeffer, the company's CEO. Thank you, David, for being here, as always. We appreciate you making the trek to Florida.
Thanks for hosting me. Thanks for being a great venue, and thank all the investors for taking time to hear a little bit about us.
Okay, great. I believe our audience here has a good background in Cogent. Now we kind of dive into some of the top questions.
Sure.
The first one is really the wavelengths business and the ability to scale the business and when we should expect to see a ramp. Just as a little bit of background, you've cited strong wavelength circuit connection demand. It still hasn't really showed up in the revenue. You've also said that you have a key customer that even though you've been installing circuits, they haven't been ready to accept the circuits. Just to put it in context, I think your 3Q wavelength revenue increased $1 million sequentially to $10 million. That's now $40 million annualized. The prior goal was to exit the year with about $100 million annualized.
If you can just provide us some context about what's been kind of dragging that down in terms of the ramp and when you expect to achieve that first goal of the $100 million or the $25 million kind of quarterly wavelength revenue.
Yeah, let me kind of step back. The first thing we had to do was convert the Sprint network into a wavelength network and then connect that to an initial target of 800 data centers. We laid out that goal in September of 2022 when we announced the deal. We began working on that in earnest in May of 2023. By December of 2024, we had wave-enabled 802 data centers. We've actually grown that footprint now to over 1,000 data centers where we can sell wavelengths. Those wavelengths can go from any data center to any data center. They can be provisioned in 30 days or less, and they can be delivered at 10, 100, or 400 gig speed. That gives us a unique footprint across the U.S., Canada, and Mexico that is larger than any other provider.
During that initial period when we were enabling the network, we initially targeted a subset of those 800 data centers, in fact, 65 of the largest data centers in North America, and started selling waves in that footprint. We actually did sell 1,000 waves before we had the entire footprint complete. Remember, the wave business is new to Cogent, and it did not exist inside of Sprint. It is a brand new business. It's being deployed on a brand new network. We had actually hoped to sell about three times as many waves in that core footprint as we did. Since the beginning of the year in the first nine months, we sold about another 800 waves, and we have gotten the quarterly revenue up to approximately $10 million. The revenue grew rapidly on a percentage basis, 93% year over year and 14% sequentially.
The wavelengths that we have sold came out of the backlog that we initially built during that development phase. Much of that backlog disappeared. We have rebuilt a new backlog in that we expect to continue to deploy an increasing number of waves each quarter. We have a goal of hitting $500 million in revenue for 25% market share by mid-year 2028, so call it two and a half years from now. In Q3 of 2025, we were at a $40 million run rate. It is a steep ramp to climb. We have been installing waves more quickly than customers could accept them. It is not just one customer. It is many customers. Our competitors typically sell wavelengths on a network that is a multi-purpose network. We took a very different approach to the market.
Our IP network, which is the largest in the world and carries 25% of the world's traffic, is completely independent of the wavelength network. It is entirely built on IRU fiber and stretches 92,000 inner city miles, excuse me, 32,000 route miles of metropolitan in 58 countries around the world. Our wavelength network, which is exclusively in North America, is predominantly built on owned fiber on different pairs of fibers. In terms of revenue growth, we had initially laid out a target to exit Q4 with a run rate of December times three of $20 million-$25 million. It is unlikely we will hit that target in that timeframe because some of the waves that we have installed have not yet been customer accepted. We do expect that distance or time between installation and acceptance to shrink. We have tried to change the customer's perception of the market.
For most customers, they are accustomed to a market where 50% of their wave orders never get fulfilled by the supplier. When they are fulfilled, it's generally a three to four-month installation window. The customer bears costs initially for space and power in the data center as well as across Connect, and they do not want to bear those costs before the service is ready. We have been able to demonstrate to about 200 customers and 500 data centers so far that we can meet that 30-day window. I think as we continue to build credibility, we will continue to see a larger portion of the wave market shown to us and see our wave revenues accelerate.
Okay, so I guess back to the original question, because of the kind of shortfall in being able to achieve the original year-end target, which was the $25 million a quarter exiting the year, are you setting a new target or at this point?
The target remains the same, which is we will be at a run rate of $500 million by mid-year 2028 in wavelengths.
Okay, and any interim guideposts?
No interim guideposts.
No interim guideposts. Okay. Okay, and then on what is considered the legacy business, though I do not want legacy to be pejorative, but the heritage, I would say the heritage Cogent business.
The majority of Cogent.
Which is the IP, the IP business. Just in terms of the trends there and the growth outlook, if I look at the corporate customers, the corporate customer connections in 3Q 2025 was actually lower than it was before you acquired the Sprint network, and you still had a decline in this last quarter. What is driving the decline and when do you expect that to inflect?
Cogent's core business had been selling internet connectivity and IP-based VPNs to corporate customers and to wholesale customers. That business had grown organically at the rate of about 10% a year for 17 years. When the pandemic hit, that growth rate in the corporate segment turned negative. Our growth rate went from positive 11% among our corporate customers to negative 9%. Today, the growth rate of corporate services is about 3% for organic Cogent. When we acquired Sprint, we acquired two customer bases. They were either corporate customers or enterprise. They were buying one of two services, MPLS-based VPNs or DIA. The Sprint business represented 40% of the combined company's revenue. It was declining pre-acquisition at an average rate of 10.6% per year.
We actually accelerated that rate of decline, and the business that we acquired from T-Mobile for the past nine quarters has declined at an annualized rate of 24.2%. The Cogent business, which is both transit to Netcentric customers and corporate, actually has accelerated slightly and has resulted in total top-line revenue declining at only 2.4%. To directly answer your corporate question, the corporate on-net portion of our business is growing. The corporate off-net portion of our business continues to decline primarily due to the intentional reduction in the number of Sprint off-net customers. Prior to the acquisition, Cogent's corporate base by revenue was 60% on-net, 40% off. By units, it was 80% on and 20% off. After the acquisition, even with the attrition in the Sprint customer base, at the end of last quarter, 51% of our corporate business by revenue was off-net and only 49% on.
It has been a combination of migrating some customers from off to on, but a much larger impact on that has been the rate of attrition in those off-net customers. Virtually all of the revenue decline in the last quarter came from the off-net corporate segment.
Okay. Staying on the topic of the classic corporate customer, do you have a geographic concentration with regard to your building footprint? Impacts that have potentially been a factor are things like weak return to office, actually DOGE, and then increasingly concerns about AI impacting either slowed hiring or actually kind of a new round of corporate layoffs. Like to what degree had you felt that your business is exposed to these factors, and is there like a geographic concentration that would make you more exposed?
Our model for corporate users has always been to build our network into the largest and most tenant-diverse buildings in the market. We are in approximately 1,870 buildings across North America, largest number of buildings in New York City, followed by Chicago, Toronto, LA, pretty much following the population base. The average building that Cogent connects to is 550,000 sq ft. Pre-pandemic, those buildings had an average of 51 discrete businesses. Today, the occupancy rate in those buildings has declined, and there are only 38 unique tenants within the building. The vacancy rate in our footprint increased from 4% to 18% at peak. Today, it is still at 17%. That absolutely presents a headwind to our corporate business, and our corporate on-net business growth rate is about one-third of what it was pre-pandemic. It had been growing at about 11% per year.
Now it's growing at about 3% per year.
Okay. I think you touched on some of this in your earlier comments, just to kind of crystallize it. On the Netcentric side of the classic Cogent business, the overall Netcentric customer connections did return to growth in 2Q and 3Q, and the ARPU has gone up as well. I think, and then your base right now, 3Q, the Netcentric revenue was $100 million in the quarter, and that was up about $3 million sequentially, $8 million year over year. I do think in that mix is the IPv4 leasing as well as the wavelengths are actually the biggest driver really of that Netcentric growth. What is the dynamic among sort of your classic customers in the Netcentric business right now?
Our historical business was selling bulk internet connectivity and carrier-neutral data centers. As you pointed out, our wavelength business contributed $1 million of that $3 million of sequential revenue growth. The IPv4 leasing is 84% Netcentric, 15% corporate, and 1% enterprise. It also contributed about $400,000 of that incremental, but about $1.6 million sequentially was incremental IP transit sales. The primary driver of that revenue growth has been international. As traffic growth in the developed world has slowed, in the less developed markets, we've seen an acceleration in traffic growth. When Cogent was founded in 1999, 85% of all internet bits carried in the world originated and terminated in the U.S. Today, that number is under 30%. We operate in 58 countries around the world and have disproportionately gained traffic in some of the less developed markets where pricing per megabit is higher.
Okay. Switching to the overall outlook, the legacy Sprint non-core business and costs, since you acquired the Sprint wireline assets in early 2023, you've been pruning both the undesirable non-core Sprint revenue as well as the costs. Where are you on that journey with regard to what's left still to do?
We have taken about $220 million of direct costs out of that business between May of 2023 and September of 2025. We have about $20 million more to take out over the next year and a half or so. Secondly, we are still spending about $45 million annually on various integration projects as we continue to consolidate and optimize systems and personnel. We will expect those costs to also taper off and be completed by the end of 2026.
Okay. So putting this all together, the wavelengths, the heritage Cogent business, and the remaining cost saves. Right now, about a third of the reported adjusted EBITDA comes from the IP transit payments that you get from T-Mobile, which is effectively a subsidy. You get $100 million annualized. Right now, the EBITDA is about $300 million annualized. You have two more years on that. I think you have $224 million of contractual payments still to come mostly by the end of 2027. I think some of that might, a little tail of that might come in 2028. You basically have two years to make up $100 million of EBITDA that you will be losing in two years. When we think about the wavelengths, the growth in the heritage Cogent, and then the cost saves, what is the bridge?
What mix is going to get you to make up that $100 million?
Let's just remind investors. We have grown EBITDA for nine sequential quarters. We've grown quarterly underlying EBITDA without the subsidies from $3 million to $48 million in those nine quarters. We will continue to get benefits from continued cost savings and integration efforts, but we are also returning to top-line growth. We have busily pruned the non-core products. We also have accelerated the growth of on-net products. Those on-net products are Cogent's on-net corporate business as it's returned to that 3% growth rate. Cogent's transit business, which is growing at about 8%, the $1.6 million sequentially that you just referenced off of a base of $100 million. The growth in our IPv4 leasing, which is on-net, which is growing at nearly 20% per year. Our wavelength business, which today is small, but grew at 93% year over year.
We expect total top-line growth to get to between 6% and 8%. With that 6%-8% top-line growth, we will be able to see our EBITDA margins, absent the T-Mobile subsidies, expand by better than 200 basis points a year. Prior to the acquisition, Cogent saw its EBITDA margins organically grow from zero when we went public in 2005 to 40.5%. We then took a massive step down due to the acquisition of a money-losing business. Our margins were reduced to below 3% EBITDA margins. We have recovered to 20% today without the subsidy payments. As those subsidy payments roll off in Q1 of 2028, we do have $224 million, but that's actually discounted back. There's actually a little more than about $250 million in cash payments still due to us.
We will continue to grow the underlying EBITDA through the growth in those on-net services with very little to slightly negative growth in off-net services. We anticipate eventually growing at about 200 basis points a year from the 20% margins today to back up to the 40% that Cogent had pre-acquisition off of a larger base in the next 8-10 years. When those payments step off, we will have about a year in which reported EBITDA will be flat as the underlying growth will replace the $100 million that falls off on an LTM calculated basis.
Okay. Switching to just a credit conference here. The company recently cut or paused its dividend, which was pretty substantial, in order to focus on deleveraging. You have $750 million of unsecured notes due in 2027. What is the game plan for dealing with those notes? You have cash on the balance sheet. You're going to have cash flow that otherwise would have gone to the dividend. I know you obviously have some data centers. You recently said you had a non-binding letter of intent for a sale of two of them for $144 million. What is the game plan in terms of addressing those notes? Might you do it sooner rather than later if you have the cash and the cash flow and sort of kind of incurring the negative carry on just continuing to pay that interest expense?
Yeah. Let me just remind investors. We had a dividend policy for 15 years that dividended out more than 100% of cash flow. By growing EBITDA at about 18% a year, we were taking that growth in EBITDA and levering it and remaining levered between three and a half and four times EBITDA during that entire period. Because of the capital expenditures associated with the integration of the T-Mobile assets and the negative cash flow that we acquired, we have seen our leverage peak at 6.6 times net leverage. As a result of that, we made the decision to dramatically reduce our dividend from $1 a share a quarter to $0.02 a quarter. We committed to keeping that dividend reduced until such time as we reach four times net leverage. We are very serious about continuing to delever, making that a priority.
We did pause our buyback program and then said we would retain the flexibility to execute up to $105 million of buybacks that have been authorized, but there are no immediate plans to necessarily do that. It's just a flexibility that we preserve. In terms of the current June 2027, $750 million unsecured, we have multiple paths that we can take to repay that debt. One, we have about $400 million of incremental capacity at our secured borrowing entity and could do an additional secured offering. Two, we have about $150 million available in our current ABS that we could tack onto if we elected to take the B and C tranches that we initially did not take when we did those offerings. Third, we could refinance in the unsecured market.
Fourth, we could look at an ABS structure for our fiber assets, which we have not done and has been in vogue with many other fiber providers. Finally, we have capacity. It would have an equity component at the whole code level with a convert now that we do not have a material dividend dragging down that conversion premium. You know, I think we are going to look at all of those options. I think we need to demonstrate to debt holders that we are serious about getting to that four times leverage target that we laid out. I think the asset sales coupled with the reduction in the dividend and the growth in EBITDA will prove that. We do have a little over a year and a half to go. In the past, we have gone as close to three months before maturity before we have refinanced.
I think it's unlikely we'll go that long, but I also don't think there should be an expectation that we're immediately going to refinance the 2027s sitting here in December of 2025.
Okay. So you're going to keep us guessing.
No, I'm going to keep our options open.
Okay. Okay. I think we're effectively out of time, but we could easily go another half hour. Thank you, Dave. All the best to you in 2026.
Thank you, Ana. Thank you all very much.
Thank you for interesting. Thank you.
Take care. Yes.
You both have your vest on. That's perfect. Okay. Great. Thanks, everyone, for joining us. Again, I'm Ana Goshko. I cover High Yield Technology and Telecom. Lumen is now a technology company, so it's appropriate, right? You have a background as a technology analyst as well, right? You've got a technology CEO and CFO now. Okay. Thanks to John Wiercinski, who's SVP, Treasurer, and Corporate Development. I think you started in the Corporate Development role. In a second, I'm going to ask you to talk about your background. Jim Breen, who is the SVP and Head of Investor Relations. Before we get started, it'd be great just to make sure everyone's on the same page to understand how long you've been with the company. I think you're both relatively new and what your backgrounds are and what you bring to your roles.
Sure. I started at Lumen about 18 months ago. Prior to that, I spent 25 years on the sell side, starting with High Yield in the late 1990s at Robertson Stephens, and then 10 years with Thomas Weisel Partners, 14 years at William Blair, kind of covering all the companies that actually make up Lumen today, as well as broader tech and telecom.
Okay. And.
I joined Lumen about a month after Jim did. I have been with the company 17 months, started, as Ana said, to run Corporate Development. About a year ago, I was asked to take over as Treasurer as well. Prior to Lumen, I had enjoyed a brief retirement, but then spent over two decades at a different investment bank, immediate telecom, M&A, and capital raising. Lumen and all the predecessor companies were former clients of mine.
Okay. Great. Okay. I think to start off, the two areas where investors are most focused is when can Lumen get to growth, right? I think you've, for a long time, have had a nearer-term EBITDA growth target. We'll talk about that in a few minutes, about what that bridge looks like. The revenue growth takes a little bit longer. Correct me if I'm wrong, but now I think you're saying 2028 is really the target for business revenue growth, and then 2029 is the target for overall growth. Is that?
Yeah. That's right. Yeah. Yeah. So 2028 business revenue growth in Flex, and then 2029 total revenue. The difference between those two is basically post the closing of the AT&T sale of our fiber at home is AT&T. The mass markets business or consumer business will be roughly 10% of our revenue. That's where the difference is between the 2028 and 2029.
Okay. We will get to that topic as well. I think what—and John, you were super involved in taking the lead in all of this—I think on the sale of the fiber assets to AT&T, you guys did not do a sale like Frontier did, which was selling the entire asset and the legacy telecom business to Verizon. Only sold basically the overbuilt fiber and the associated operations associated with the consumer fiber broadband. One of the reasons that the company has talked about, and Chris Stansbury has talked about, is that the heritage consumer telco business actually generates a lot of cash flow, and there is a long tail of cash flow.
You felt that keeping that EBITDA in cash flow, even though it's sort of declining over time, was a better NPV than selling it for kind of a valuation that probably didn't accurately reflect what you believe the real tail on that business is. As people look at revenue, that's one of the headwinds. The key headwind that you're facing is you've got this good stream of cash flow. It's all coming off that business, but it's going to be the headwind on the revenue side. Does that?
Yeah. No, I think in terms of if you're just looking at our enterprise business, today we look at it, there's sort of three segments: grow, nurture, and harvest. Nurture and harvest are declining. Grow is growing. As of the third quarter, about 50% of our revenue was in grow, and the other 50% was in nurture and harvest. That's shrinking. The stuff that's in grow that's growing, kind of mid to high single digits, is things like Waves and high-speed IP and security and Cloud Voice and all the things you would expect to grow. The things that are declining is Copper Voice, Private Line, right? Legacy technologies, Ethernet, VPN are effectively the four main things. It's really a business mix issue that we're seeing, right? The stuff that's growing today, that 50% of the enterprise revenue, was 30% of our enterprise revenue three years ago, right?
Over that time, we've sort of gained 20%. That's continuing to move in the right direction. Obviously, it's not growing as fast as the stuff that's declining. So 50/50 doesn't quite get you there. Maybe it needs to be 60/40. We feel confident about our ability to get that inflection point, reach that inflection point in 2028, in combination with some help from the large PCF deals, right? We said we'd be around $400 million-$500 million of revenue exiting in 2028 there.
There is $500 million-$600 million of revenue from what we view as digital, which is the network as a service platform, cloud on-ramps, as well as revenue from some of the ecosystem partnerships that we just announced this fall, where we are directly partnering with ultimately companies like Zscaler and Commvault and Palantir, etc., to effectively sell their products over our network in combination with each other, sort of sell-through, sell-with-motion. That is where that sort of feeds into that revenue inflection in 2028.
Okay. In terms of the digital services, a big one has really been NaaS, which you've talked a lot about on your calls and other sessions. Could you just maybe give us a mini tutorial on NaaS and how it works? I think you're probably like in inning one on where you're going to go with penetration.
Yeah. We launched the product about a year ago. There are a couple of smaller companies in the market. The only public one, Megaport, is out there. It is an Australian company that sort of does—it is effectively you are selling a similar type of technology, right? Whether it is internet on demand or Ethernet or VPN or it could be security, whatever, but you are just doing it in a different way, right? Your traditional telecom contracts would be a three-year contract for a fixed price. At the end of three years, the customer might take more volume, but the price per bit would go down, right? You would sort of work your way up over time.
Effectively, instead of having a revenue step function like this, it's a bit smoother, but around that growth rate is some variability because you're allowing customers to buy and sell capacity on demand. There's generally a base case in terms of capacity that a customer needs. The reason why the customers like it is from a network planning standpoint, you don't necessarily have to oversubscribe to your peaks, right? You can basically use it as you need to. What we found is that, generally speaking, it kind of evens out to roughly the same amount of revenue. Maybe it's a little bit lower from a customer standpoint, but if the customer experience is better, that means that the customer's happier. We've seen churn be better because of this experience. It's a new—it's a challenge. We're really focused on adoption right now.
The challenge is that it's a new buying motion for the telecom buyer. It is about educating the market, getting them used to how the product works. It puts more control into the hands of the ultimate buyer, though, because they're able to control through single pane of glass. The fabric port in their customer prem allows them to turn on and turn off services as they need to and monitor services as they need to. That has been another part of it that we've gotten really good feedback from the customers on. I think we've gone—we said last quarter, we've got about 1,500 customers signed up now. That is over a course of a year. That is great adoption. I think if it was its own standalone company, people would be saying, "Oh, this is great," but it is kind of stuck in our broader Lumen portfolio.
We do think that over time, that's going to help drive revenue growth. We're seeing it today. It's just at a small base. When you think about the digital, that $500 million-$600 million of digital revenue exiting 2028, it's really kind of five things. It's the NAS revenue. It's cloud on-ramps. It's security, Cloud Voice, and then it's the ecosystem partnerships. We think that that will continue to—we're not sure exactly what that mix is going to look like in three or four years. We feel pretty confident that a number of those are going to grow. It's just going to be—we'll see what the mix looks like in terms of customer take rates.
Okay. Okay. Shifting to the PCF, which are basically the large hyperscale connectivity deals that you've done. You've gotten $10 billion of these deals announced to date. They're cash upfront deals. There's really only kind of a small percentage that ultimately is going to be recurring revenue. You're going to get the cash upfront, and the profitability piece for you is going to be front-loaded. When do you expect to see the revenue from these to start ramping? It's really going to be more revenue recognition, but that means it's going to be in operation, right? When is that ramp going to happen?
Yeah. The mechanics of it are, if you're talking about $10 billion that we signed today, which we talked about in the last quarter, roughly 90% of that $9 billion is the cash that we get upfront. We will receive, generally speaking, $9 billion in cash between the end of 2024, so end of last year, and probably early 2028. We've said that the cash EBITDA contribution margins on it is about 30%. Of that $9 billion we receive, it'll cost us roughly six to build that out. We get to keep the other three with pay taxes on that, obviously. We can use that for whatever purposes we want. All that cash as that comes in, the $9 billion goes to deferred revenue on the balance sheet.
As we hand over certain routes to the customers, we start to recognize the revenue. Very little revenue recognized to date. It will ramp up more in 2026 and 2027. We have talked about that $400 million-$500 million run rate exiting 2028 for that business. That is where we will be in three years. It will ramp up more. It will definitely help our growth declines in 2025, 2026, 2027, a little bit in 2025, 2026, 2027, and into 2028. Once you get to that 2028, 2029 timeframe, it sort of just flattens out for the remainder of the contract years, which is pretty serious.
That peak revenue based on the $10 billion is going to be.
If you just said $10 billion divided by 17 years left on the contracts once it's delivered, that you're 550 or something in that range. We've said 400-500 exiting 2028. Then 10% of that, that billion dollars, 10% of that is just cash revenue and EBITDA we get in year once it's delivered to the customer where we're actually operating and maintaining the network for them. That is everything we've talked about in terms of revenue inflection. Everything else is only based on that 10. If we happen to sign more, it could change the outlook to the positive. Everything's just based on the $10 billion today.
Okay. Lumen's competitive advantage, both from your standpoint, and I know other operators in the industry have backed this up, is that you really had empty conduit available for all these hyperscalers and for the most part are just pulling the fiber through the conduit, and you've got some optronics and sheds and so on.
That's really the conduit. It's the PVC. That's what's given us competitive advantage on these deals, right? I'm sure our competition would have loved to have signed $10 billion. The fact is that we just have a network that reaches coast to coast in all the major cities. Multiple conduits were put in 25 years ago. We were using a couple. It happened to be right place, right time around sort of the AI infrastructure build where the hyperscalers and our other customers needed massive amounts of fiber to be pulled in a short period of time. Ultimately, what we sold them, yes, we sold them, leased them, not sold. We're leasing them the conduit and the fiber. Really, we were giving them time, right?
If they were to try to go do this on their own and build new conduit, it would just take forever. It is a unique competitive advantage for us. It is just the network that was built and put in place 25 years ago.
Okay. How much opportunity is still left, either one with regard to utilizing existing conduit, but secondly, new build for the data center infrastructure?
Yeah. A year ago, we announced the first $5.5 billion in August of 2024. We said, "We think there's kind of $12 billion that we can go after. Maybe the total market's $15 billion, but we think $12 billion is what we can go after." In that $12 billion, there's kind of, I think at the time we said like $9 billion of it was in our existing conduit and $3 billion of it was potentially new builds where maybe there's a little bit more competition for new builds. We kind of given up on that number, not in a bad way, in a good way, because I think even at that time, there were companies within the broader AI infrastructure space that neoclouds and things like that that people weren't even thinking about, even though it was only 18 months ago.
I think the addressable market's a bit bigger than what we thought. It might be a little bit of a fool's errand to try to put an exact size on it. Kate did say in the last call that we're at $10 billion today, and we see several billion more in the pipe. That would imply that the 12 number is bigger than what it was when we talked about that a year ago, a year and a half ago. You see that what's happening across the broader investment landscape too in terms of the data center builds and etc. All those things have to be connected.
I think there's a lot of future planning happening around areas where there's not a natural West Texas and Wyoming and places like that, where it's not a natural data center area, but there's cheap land, cheap power. We're just sort of working with our partners to figure out what their needs are in those areas.
Okay. I think one of the initial knocks from some when you started announcing these deals a little bit over a year ago was that it's really sort of a one-time sale. It's dark fiber. It's not a recurring revenue-type product. What Cogent has argued is that this provides an opportunity. It provides kind of an on-ramp to additional sources of revenue. What does that outlook look like right now and any kind of indication of that?
Sure. Yeah. I think there are three parts to this, right? I think first and foremost, the ability to get that cash upfront on these deals has significantly improved the balance sheet, right? You saw that the debt was trading at 60 cents of the dollar when I got here, and now it is a lot higher than that when John got here. I think it gave us that initial liquidity, right, and that initial kind of couple of billion dollars that is ours from these deals. I think the other part of it too is from a little bit longer-term capital spending perspective, the ability where someone is paying us to pull fiber in these locations. We have work crews there now. In areas where we want to improve our own footprint for Cogent's usage, we can do that in a much more efficient capital manner.
I think that helps your overall capital intensity as we move out over the next couple of years, right? The ability to go in and do that work today with the newest Corning fiber, who we have signed an agreement with Corning last summer or summer, a year and a half ago. I think that that's another part. It allowed us to expand our network in a much more capital-efficient way than otherwise would have. I think the last point was what you brought up is that now our network literally runs alongside the largest tech companies in the country. Our fiber's coming out of the ground in the same facilities as ours is.
That has led to us signing some pretty unique agreements with them around, and we have talked about this around Cloud Connect and cloud on-ramps and the ability to get our customers directly from our wire centers. If it is in New York City, 111 8th Avenue, 60 Hudson, directly to the core of Google's cloud or Amazon or Microsoft. I think we are engineering our network to work in conjunction with theirs, ultimately in the direction of what we think enterprise network is going in an AI world, which is different than where we were before, right? The need for speed, the need for latency are significantly different. The need to keep these GPUs running 100% full speed, 100% of the time to really get the investments, the return on the investment there.
That has allowed us, this build, what we are doing alongside of it and with these partners has allowed us to do that.
Okay. Great. Switching to the consumer business. You obviously have this deal pending to sell. I think it's like close to 95% of your fiber to the home connections and then the kind of associated fiber in those areas to AT&T. A couple of things. Interestingly, there was no FCC approval required for that deal because they're not regulated assets. You're actually retaining the regulated assets for the reasons I described earlier. What is left to do to close the deal with AT&T timing-wise? Yeah, timing-wise, I think you guys have said potentially in the early part of the year, but when do you think everything operationally and potentially from a state PUC perspective, will you be ready to close the deal?
Yeah. So it's a good question. When we announced the asset divestiture in May of this year, we said we expected to close by within the first half of 2026. Since then, AT&T and us have modified that and believe it's probably earlier in 2026 than kind of mid-2026. We believe we're on track for sort of a kind of sometime in the first quarter closing. There's a lot to do. The regulatory approval process is not as burdensome as some other transactions, so typical transaction, the FCC being one of them, even at each individual state PUC level. There are some discussions going on with a couple of states that we continue to make very good progress on. Probably the more challenging or time-consuming aspect is just setting the company up for success operationally. This is not a standalone company.
It's not like someone can just take an IT stack and plug it into the existing IT stack. You have to ask AT&T, but this is not going into the AT&T ecosystem 100%, right? They're going to stand up an infrastructure company as part of this. They've made it very clear, just like what they have with Gigapower. We are working side by side with them to create this new venture. It's making sure there's all of the TSAs in place, the commercial agreements, because it's not just short-term commercial relationships that we're going to need. It's long-term because we're retaining the middle-mile fiber. We're retaining the central offices. There's space, colo, power transactions or agreements that are going to be in place for multiple years. All of those things are going according to plan.
As we've got more visibility in terms of the regulatory oversight and everything, we actually are working very closely with them to pull in the closing timeline. All of it is going pretty well.
Okay. Near and dear to everyone's hearts, you're going to use that cash to pay down debt. I think what you've said is you're going to pay down what's considered first priority, but it's really all the first-line debt at the $4.8 billion at the Lumen inherent, which is really going to leave the company with most of the debt really at the Level 3 issuer entity. It's kind of become the de facto debt issuer for the company. Once you are able to kind of pay down all of that Lumen first-line debt, what's your vision for just further simplifying the debt structure in particular as your leverage comes down?
Yeah. I think our vision, long-term vision, is very consistent with how we operate the business. We think of the business as the enterprise or business side of things and mass markets. We believe the assets should be together. Longer term, we'll have about $1.4 billion of debt at Lumen. We'll have just about $1.75 billion or so of debt at Qwest. We don't talk about the business as Level three , Qwest, and Lumen. We talk about it as enterprise and mass market. Having the assets together, there's some regulatory considerations in terms of some of those assets are PUC and are carrier of last resort. You can't just push a button and move entities underneath or combine them together. Having three filers and SEC filers doesn't make any sense.
It's confusing externally for everyone, and it takes a lot of time internally for us to go through the affiliate relationships and making sure we have arm's length agreements between the different silos. Longer term, we would like to get to a position where the assets are kind of in an opco. There'll probably still be some debt up at the parent at Lumen just because the 2039 and 2042 indentures are legacy investment-grade structure, and it'd be expensive to take those out. You could argue the same thing with the Qwest retail notes, the 56 and 57. They're attractive price pieces of paper. Why take those out?
Okay. Yes. What I'm hearing is you're trying to move, evolve towards a situation where Level 3 either becomes kind of the mid-co that oversees all of the EBITDA or somehow becomes part of a broader sort of kind of debt issuer so that all of the pieces of EBITDA, because right now you've got Level 3, which is 80% of the EBITDA once you kind of sell over time. Then you've got these dribs and drabs of Qwest and some other enterprise stuff that kind of fall outside the Level 3 box. It's really trying to get everything all into kind of one debt issuer umbrella. Is that?
Yeah. I do not know if yes. We think of it as sort of opco, holdco. It is a simple kind of traditional structure rather than have assets over here with a separate borrowing group and assets over there with a separate borrowing group and just be longer term. We would like to have it all together.
Okay. Great. With that, we're out of time. Usually, you like to leave a minute if you have any kind of closing comments or something that we haven't hit upon that you think is important to leave the audience with.
No. I think that we've got a pretty good plan in place. The first step in the process was fixing the balance sheet, which I think we're a long way toward doing that now. It's a little bit more work left to do, but I think we feel great about where we are. The second part in the strategy when I got here a year and a half ago was inflecting to EBITDA growth and cash flow, generating cash flow. We're well on our way there. The last part's revenue. That's going to be sort of the last part of that to happen in 2029. We're moving in the right direction, which is great.
I think we're making the right decisions relative to the industry, certainly being helped by the fact that there's demand out there around some of the technologies around AI, etc., which is great for us. It gives us the ability to take advantage of some assets that have been in the ground and underutilized for a long time.
Okay. Great. Okay. Jim and John, thank you so much for being with us and for taking all the time to meet with all the investors today.
No problem.
Yeah. Thanks.
Thanks, John.
Thank you.