AI buzz makes 400 percent jump in old land-line phone stock

Lumen Technologies, the parent company of old CenturyLink, Gasparilla Island’s landline telephone company, has had a major stock run-up this summer, due to speculator interest in demand for artificial intelligence-fueled connectivity, and the company’s fiber-optic network.

Lumen Technologies (NYSE: LUMN), through its CenturyLink subsidiary, provides telephone and internet services for Boca Grande.

As late as July, the debt-ridden stock had hit a $1.03 a share low, barely escaping penny stock status. But after a $5 billion jump in new business, driven by a July 24 partnership announcement with Microsoft in what they call a “Private Company Connectivity Fabric” the stock price is now trading over $5, a 400 percent increase.

“Our partners are turning to us because of our AI-ready infrastructure and expansive network. This is just the beginning of a significant opportunity for Lumen, one that will lead to one of the largest expansions of the internet ever,” said Kate Johnson, president and CEO of Lumen, in an August news release.

Lumen has about 32,200 fiber route miles in Florida and about 1,800 employees, wrote Danielle Spears of Lumen Corporate Communications in an email to the Beacon this week.

“We’ve been very busy expanding our ultra-fast Quantum Fiber in the area, adding about 30,000 new sites so far this year, and we’re committed to bringing Quantum Fiber to even more areas,” Spears said.

Boca Grande resident Steve Raville has worked on the island’s rebuilding of the cell tower as part of the Boca Grande Cell Tower Committee. He watches the industry from his work with one of the nation’s leading cellphone infrastructure providers.

“Lumen’s core business, which historically has included significant wireline revenue, continues to deteriorate,” said Raville. “In general, revenues in the wireline industry are declining rapidly as wireless technologies take the place of traditional wireline services. There are a number of regulatory requirements that continue to require continued wireline service in some underserved rural areas.”

Raville said that he suspects wireline services will not be available in many areas, including Boca Grande, at some point in the future. He said that the company still has substantial balance sheet debt and underfunded pensions.

At its peak, the stock was at a high of $6.63 on Wednesday, Aug. 7. As of press time it was at $5.38, trending downward in the past five days, due to several reports expressing doubt about the reality of the company’s turnaround.

The stock-recommendation firm Hedgeye on Tuesday, Sept. 3 advised investors to be cautious.

“Lumen’s financial position remains precarious, with high leverage (4.3x LTM Net Debt / Adjusted EBITDA), declining EBITDA margins, and limited free cash flow generation (i.e., not earning its cost of capital),” said Hedgeye analyst Andrew Freedman.

Another investment-management firm, Kerrisdale Capital, expressed similar concerns.

“To bolster liquidity, Lumen has agreed to lengthy, complex and capital-intensive projects, which will net the company much needed near-term cash, but do little to address declining recurring revenue and a daunting debt maturity profile,” according to the Aug. 27 report.

The first telephone line linking Gasparilla Island with the Mainland was installed in 1925, according to the Boca Grande Historical Society. It was originally known as United Telephone. Successor Lumen CenturyLink now owns the old telephone building and brings telecom services via a fiber optic cable that runs to the island. The new tower is run by Vertical Bridge, the largest operator of cell towers in the U.S.

While nationally many are dropping their landlines, they are still popular on Gasparilla Island, where the 964 exchange, formerly WO4, still has a cachet. The Boca Beacon publishes the annual 4-Digit Phone Book. Approximately one third of the people in the book still show their landline telephone in their listings. The island’s landlines became even more essential when the island’s cell tower came down during Hurricane Ian. The island is still dotted with Sprint or CenturyLink labeled telephone pedestals that house old telephone lines.

Nationally, recent cell outages with AT&T and others have also led some to reconsider giving up their landlines, though statistics show a rapid drop.

According to a 2022 survey by the U.S. Centers for Disease Control and Prevention, about 29 percent of American adults lived in a house with a landline, down from 90 percent in 2004.

Boca Phones

The island has had four local telephone company names since CenturyLink.

Local phone service was first provided by United Telephone of Florida, then Sprint Florida (1996-2006), Embarq Florida (2006-2009) and now CenturyLink.