The US telco operators like AT&T feel an awful lot like schoolchildren these days, hustling to hand in their homework before the final school bell of the year ushers in the summer, and the capstone project for this scholastic year is consolidation.

The recent announcement of its agreement to purchase Lumen’s Mass Markets fibre business for $5.75bn was AT&T’s turn in front of the class.

Consolidation is all the rage as US consumer services space converges

AT&T’s release on its Lumen consumer fibre M&A action hit the newswires on the heels of Charter and Cox’s announced $34.5bn mega-cable player tie-up the previous week.

Moreover, that Charter-Cox deal that was itself announced on the very same day that Verizon got signoff from the Federal Communications Commission on its planned $20bn acquisition of Frontier.

Meanwhile, T-Mobile has already knocked out its Lumos deal, regulatory approval for its acquisition of the UScellular operation is imminent, and the company will bring its Metronet joint venture (JV) action into the station shortly after that.

The fervor of consolidation activity is an offshoot of the increasing competitive crosswinds incumbent US operators are feeling.

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For cable operators, that would be the two-fold pressure caused by the steady creep of fibre overbuilders and the rapid incursion from 5G fixed wireless access.

On the flipside of that coin, the MVNO outfits at Charter and Comcast continue to lock down large chunks of the growth share in the US wireless space quarter after quarter. Consequently, as each camp’s go-to-market strategies adjusted to increased convergence positioning, both cable companies and telcos alike recognised the need grow the spaces where they can enjoy local market access tech superiority, insulating themselves somewhat as those crosswinds pick up gale-force speed.

The AT&T Lumen deal has a good price and interesting open-access wrinkles

The announced AT&T-Lumen deal, which comes with a price tag below the $6bn-to-$9bn asset valuation for Lumen’s consumer fibre business, will see AT&T pick up the operation currently selling under Lumen’s ‘Quantum Fiber’ brand.

That would entail around one million customers as well as more than four million total fibre passings across 11 US states, with Denver, Colorado; Las Vegas, Nevada; Minneapolis-St. Paul, Minnesota; Orlando, Florida; Phoenix, Arizona; Portland, Oregon; Salt Lake City, Utah; and Seattle, Washington among the most significant markets in the acquired fibre footprint. The operators have very little fibre overlap, and the transaction expands AT&T’s fibre coverage from 21 states to 30.

AT&T’s plan to house the acquired assets in a wholly owned subsidiary – with AT&T serving as its anchor tenant – shows the company looking to leverage the less capital-intensive approach to maximising its fibre deployment efforts afforded by the open-access fibre model. Furthermore, AT&T intends to recoup costs by finding an equity partner within a year of closing the transaction.

AT&T boasted a fibre subscriber penetration rate of 40% throughout 2024, and the company is confident in its ability to accelerate Lumen’s established penetration rate within the acquired footprint, which currently sits at 25%. Consequently, AT&T will find itself poised to accelerate on the rock-steady 200,000+ broadband net adds/quarter that the operator has reported for 21 consecutive quarters.

The deal aligns with the AT&T current playbook

Buying Lumen’s fibre construction capabilities and absorbing its existing infrastructure and customer base aligns seamlessly with AT&T’s main strategic objectives. By integrating its fibre assets with 5G wireless services, AT&T looks to enhance customer retention and foster more enduring, profitable business relationships. The company currently reports that four of every ten fibre households are converged with AT&T mobile; that could make for significant and fast uptake if AT&T has similar successes in Lumen’s non-converged footprint.

With the deal, A&T is also increasing its scale ambitions and raising its fibre target to 60 million locations across the US by 2030. The expanded footprint will eclipse Verizon’s eventual target of 35 to 40 million homes as well as T-Mobile’s goal of reaching an estimated 12 to 15 million locations by 2030.