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What changed in QWEST CORP's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of QWEST CORP's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+382 added−432 removedSource: 10-K (2026-02-20) vs 10-K (2025-02-20)

Top changes in QWEST CORP's 2025 10-K

382 paragraphs added · 432 removed · 215 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

44 edited+24 added−45 removed10 unchanged
Biggest changeAt December 31, 2024, we reported our revenue derived from our operations serving our Mass Markets customers, primarily within the first three categories listed below, and our revenue derived from our operations servicing our Business customers, primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below: • Other Broadband , under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure; • Voice and Other, under which we derive revenues from (i) providing local and long-distance services, professional services, and other ancillary services, (ii) federal broadband and state support payments, and (iii) equipment, IT solutions and other services; • Fiber Broadband , under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure; • Grow, which includes products and services in which we are significantly investing, primarily including: ◦ Optical Services .
Biggest changeAs of December 31, 2025, we reported our revenue derived from our operations serving our Mass Markets customers, primarily within the first three categories listed below, and our revenue derived from our operations servicing our Business customers, primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below: • Other Broadband : Under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure; • Voice and Other : Under which we derive revenues from (i) providing local and long-distance services, professional services, and other ancillary services, (ii) federal broadband and state support payments, and (iii) equipment, IT solutions and other services; • Fiber Broadband : Under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure; • Grow : Includes products and services that we anticipate will grow, including: ◦ Optical Services : We deliver high bandwidth optical wavelength networks to customers requiring an end-to-end solution with ethernet technology for a scalable amount of bandwidth connecting sites or providing high-speed access to cloud computing resources. • Nurture : Includes our more mature offerings, such as: ◦ Ethernet : We deliver a robust array of networking services built on ethernet technology.
Certain federal and state agencies, including attorneys general, monitor and exercise oversight related to consumer protection issues. We are also subject to codes that regulate our trenching and construction operations or that require us to obtain permits, licenses or franchises to operate.
Certain federal and state agencies, including attorneys general, monitor and exercise oversight related to consumer protection issues. We are also subject to codes that regulate our trenching and construction activities that require us to obtain permits, licenses or franchises to operate.
Products and Services While most of our customized customer interactions involve multiple integrated technologies and services, we organize our products and services according to the core technologies that drive them.
Products and Services While most of our customized customer interactions involve multiple integrated technologies and services, we structure our products and services according to the core technologies that drive them.
Other Regulations Our networks and properties are subject to numerous federal, state, and local laws and regulations, including laws and regulations governing the use, storage and disposal of hazardous materials, the release of pollutants into the environment and the remediation of contamination. Our contingent liabilities under these laws are further described in Note 14—Commitments, Contingencies and Other Items.
Other Regulations Our networks and properties are subject to numerous federal, state, and local laws and regulations, including those governing the use, storage and disposal of hazardous materials, the release of pollutants into the environment and the remediation of contamination. Our contingent liabilities under these laws are further described in Note 15—Commitments, Contingencies and Other Items in Item 8.
Although either we or Lumen own most of our network, we lease a substantial portion of our fiber network from several other communication companies under arrangements that will periodically need to be renewed or replaced to support our current network operations.
Leased Network Assets Although either we, Lumen, or one of the Lumen's affiliates own most of our network, we lease a substantial portion of our fiber network from several other communication companies under arrangements that will periodically need to be renewed or replaced to support our current network operations.
Additionally, the FCC regulates several aspects of our business related to international communications services, privacy, public safety and network infrastructure, including (i) our access to and use of local telephone numbers, (ii) our provision of emergency 911 services and (iii) our use or removal (potentially on a reimbursable basis) of equipment produced by certain vendors deemed to cause potential national security risks.
The FCC also regulates several aspects of our business related to international communications services, privacy, public safety, and network infrastructure, including: • our access to and use of telephone numbers; • our provision of emergency 911 services; and • our use or removal (potentially on a reimbursable basis) of equipment from vendors deemed to cause potential national security risks.
In most states, switched and business data services and interconnection services are subject to price regulation, although the extent of regulation varies by type of service and geographic region. State agencies also regulate certain aspects of non-ILEC communications businesses, including determining carrier's eligibility to receive universal service fund support.
In some states, switched and business data services and interconnection services remain subject to price regulation, though the extent varies by service type and geographic region. State agencies also regulate certain aspects of non-ILEC communications businesses, including determining carrier eligibility for federal universal service fund support.
Employees At December 31, 2024, we had approximately 10,500 employees, of which approximately 42% are members of either the Communications Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW").
As of December 31, 2025, we had approximately 9,100 employees, of which approximately 43% are members of either the Communications Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW").
We offer our Business customers a complete portfolio of traditional Time Division Multiplexing voice services including Primary Rate Interface ("PRI") service, local inbound service, switched one-plus, toll free, long distance and international services; and ◦ Private Line. We deliver private line services, a direct circuit or channel specifically dedicated for connecting two or more organizational sites.
Our ethernet technology is also used by wireless service providers for data transmission via our fiber-optic cables connected to their towers. • Harvest: Includes our legacy services managed for cash flow, including: ◦ Voice Services : We offer our Business customers a complete portfolio of traditional Time Division Multiplexing voice services including Primary Rate Interface ("PRI") service, local inbound service, switched one-plus, toll free, long distance and international services; and 6 ◦ Private Line : We deliver private line services, a direct circuit or channel specifically dedicated for connecting two or more organizational sites.
Such regulations are enacted by municipalities, counties, state, federal, or other regional governmental bodies, and can vary widely from jurisdiction to jurisdiction as a result. Such regulations may also require us to pay substantial fees or impact network buildout initiatives. Seasonality Overall, our business is not materially impacted by seasonality.
These regulations are enacted by municipalities, counties, states, federal government, or other regional governmental bodies and can vary widely across jurisdictions. In some cases, such regulations may also require us to pay substantial fees or impose conditions that affect our network buildout initiatives. 12 Seasonality Overall, our business is not materially impacted by seasonality.
We continue to operate various incumbent local telephone carriers ("ILECs"), which are obligated under federal law to permit competitors to interconnect their facilities to the ILEC’s network and to take various other steps that are designed to promote competition, including obligations to (i) negotiate interconnection agreements in good faith, (ii) provide nondiscriminatory “unbundled” access to specific portions of the ILEC’s network and (iii) permit competitors to physically or virtually collocate their plant on the ILEC’s property.
Incumbent Local Exchange Carriers ("ILECs") We operate various ILECs that are required under federal law to allow competitors to interconnect their facilities to the ILEC's network and to take other various steps designed to promote competition including: • negotiating interconnection agreements in good faith; • providing nondiscriminatory “unbundled” access to portions of the ILEC’s network; and • permitting competitors to collocate facilities on the ILEC’s property either physically or virtually Consequently, our ILECs face competition from competitive local exchange carriers (“CLECs”).
State regulatory commissions generally continue to (i) set the rates that telecommunications companies charge each other for exchanging traffic, (ii) exercise some control over the rates telecommunications companies charge their customers for regulated services, (iii) require ILECs to provide voice service throughout their territories, particularly in areas where alternative voice service is not available, (iv) administer support programs designed to subsidize the provision of services to high-cost rural areas, (v) regulate the purchase and sale of ILECs, (vi) require ILECs to provide service under publicly-filed tariffs setting forth the terms, conditions and prices of regulated services, (vii) limit ILECs' ability to borrow and pledge their assets, (viii) regulate transactions between ILECs and their affiliates and (ix) impose various other service standards.
While most states have reduced regulation, state regulatory commissions generally continue to: • set rates for traffic exchanged between telecommunications companies; • exercise some control over rates charged to customers for regulated services; • require ILECs to provide voice service throughout their territories, especially where alternative voice services are unavailable; 11 • administer support programs subsidizing service in high-cost rural areas; • regulate the purchase and sale of ILECs; • require ILECs to provide service under publicly-filed tariffs outlining terms, conditions, and prices of regulated services; • regulate ILECs’ ability to borrow and pledge their assets; • regulate transactions between ILECs and their affiliates; and • impose various other service standards.
Data Privacy Laws and Regulations Various foreign, federal and state laws govern our storage, maintenance and use of customer data, including a wide range of consumer protection, data protection, privacy, intellectual property and similar laws. Data privacy regulations are complex and vary across jurisdictions.
Data Privacy Laws and Regulations We are subject to numerous foreign, federal, and state laws governing the storage, maintenance, and use of customer data, including consumer protection, data protection, privacy, intellectual property, and other similar laws. These requirements are complex and vary widely across jurisdictions.
These regulations require careful handling of personal and customer data and could have a significant impact on our business especially if we violate any of those regulations.
The application, interpretation, and enforcement of these laws are often uncertain, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction. These regulations require careful handling of personal and customer data and could have a significant impact on our business, especially if we violate any of those regulations.
We typically disclose material non-public information by disseminating press releases, making public filings with the SEC, or disclosing information during publicly accessible meetings or conference calls. Nonetheless, from time to time we have used, and intend to continue to use, our website and social media accounts to augment our disclosures.
Available Information We typically disclose material non-public information by disseminating press releases, making public filings with the SEC, or disclosing information during publicly accessible meetings or conference calls.
Additional information about competitive pressures is located under the heading "Risk Factors—Business Risks" in Item 1A of Part I of this report. Sales and Marketing Our enterprise sales and marketing approach focuses on solving complex customer problems with advanced technology and network solutions, striving to make core networks services compatible with digital tools.
See "Risk Factors— Business Risks" in Item 1A and Note 17—Labor Union Contracts in Item 8 for a discussion of risks relating to our labor relations and for additional information on the timing of certain contract expirations. 5 Sales and Marketing Our enterprise sales and marketing approach focuses on solving complex customer problems with advanced technology and network solutions, striving to make core networks services compatible with digital tools.
Our approach includes marketing our products and services primarily through direct sales representatives, inbound call centers, telemarketing and third parties, including retailers, satellite television providers, door to door sales agents and digital marketing firms. 9 Research, Development & Intellectual Property Due to the dynamic nature of our industry, we prioritize investing in developing new products, improving existing products, and licensing third party intellectual property rights to anticipate and meet our customers’ evolving needs.
Research, Development and Intellectual Property Due to the dynamic nature of our industry, we prioritize investing in developing new products, improving existing products, and licensing third-party intellectual property rights to anticipate and meet our customers’ evolving needs.
We compete to provide services to Business customers based on a variety of factors, including the comprehensiveness and reliability of our network, our data transmission speeds, price, the latency of our available network services, the scope of our integrated offerings, the reach and peering capacity of our IP network, digital ordering capabilities, ease of access and use, billing simplicity and customer service.
Business Customers We compete for enterprise and wholesale customers based on factors such as: • network reliability and comprehensive coverage; • data transmission speed and latency; • pricing and billing simplicity; • integrated service offerings; • IP network reach and peering capacity; • digital ordering capabilities and ease of use; and • customer service quality.
ITEM 1. BUSINESS Business Overview and Purpose We are a networking company with the goal of connecting people, data, and applications quickly, securely and effortlessly. We are unleashing the world's digital potential by providing a broad array of integrated products and services to our domestic and global Business customers and our domestic Mass Markets customers.
We are unleashing the world's digital potential by providing a broad array of integrated products and services to our domestic and global Business customers and our domestic Mass Markets customers. We operate one of the world’s most interconnected communications networks.
For additional information about these programs, see (i) Note 3—Revenue Recognition to our consolidated financial statements in Item 8 of Part II of this report and (ii) "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of Part II of this report.
For additional information about these programs, see Note 4—Revenue Recognition to our consolidated financial statements in Item 8 and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7. Broadband Regulation The regulatory environment for broadband internet access service (“BIAS”) has shifted significantly in recent years, creating uncertainty about future requirements.
For information on various litigation risks associated with owning and using intellectual property rights, see “Risk Factors—Business Risks” in Item 1A of Part I of this report, and Note 14—Commitments, Contingencies and Other Items to our consolidated financial statements in Item 8 of Part II of this report.
For information on various litigation risks associated with owning and using intellectual property rights, see “Risk Factors — Business Risks” in Item 1A and Note 15—Commitments, Contingencies and Other Items in Item 8. 9 Regulation of Our Business Our domestic operations are regulated by the Federal Communications Commission (the “FCC”), state regulatory commissions, and occasionally local agencies.
Federal officials have proposed changes to current programs and laws that could impact us, including proposals designed to increase broadband access, increase competition among broadband providers, lower broadband costs and re-adopt "net neutrality" rules similar to those adopted by a few states. In late 2021, the U.S.
With judicial and legislative proceedings still pending, the ultimate impact of legal challenges and reform proposals on our operations remains uncertain. 10 Other Federal Regulation Federal officials have proposed changes to current programs and laws that could impact us, including proposals designed to increase broadband access, increase competition among broadband providers, and lower broadband costs. In late 2021, the U.S.
As a critical infrastructure provider, we and our customers are a constant target of cyber-attacks from a wide range of intruders, including advanced persistent threat actors. From time to time in the ordinary course of our business we experience security incidents and disruption in our services.
Cybersecurity and Network Resilience As a critical infrastructure provider, we and our customers face ongoing cyber threats, including advanced persistent threat actors. We experience occasional security incidents and service disruptions in the ordinary course of business and maintain robust systems to mitigate these risks.
Any references to our website in this report or any other periodic reports that we file with the SEC are provided for convenience only, and are not intended to make any of our website information a part of this or such other reports.
Information on our website is provided for convenience only and is not part of this or any other SEC filing.
We must comply with various jurisdictional data privacy regulations, adopted by various jurisdictions in certain of our domestic markets. Domestically, the number of state privacy laws continues to increase. The application, interpretation and enforcement of these laws are often uncertain, and may be interpreted and applied inconsistently from jurisdiction to jurisdiction.
International Regulations As a global service provider, we must comply with various jurisdictional data privacy regulations, including the EU’s General Data Protection Regulation (“GDPR”) and similar data privacy laws adopted in other jurisdictions of our international markets. Domestic Regulations Domestically, the number of state privacy laws continues to increase.
The summary financial information appearing above should be read in conjunction with, and is qualified by reference to, our consolidated financial statements and notes thereto in Item 8 of Part II of this report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of this report. 6 Operations For the reasons noted in Note 1—Background and Summary of Significant Accounting Policies to our consolidated financial statements in Item 8 of Part II of this report, we believe we have one reportable segment.
Additional information regarding these arrangements is provided in Note 1—Background and Summary of Significant Accounting Policies in Item 8 under the heading "Affiliate Transactions." Reporting Segment For the reasons noted in Note 1—Background and Summary of Significant Accounting Policies to our consolidated financial statements in Item 8, we believe we have one reportable segment.
From time to time, we may change the categorization of our products and services. 7 Our Network Our and Lumen's network, through which we provide most of our products and services, consists of fiber-optic and copper cables, high-speed transport equipment, electronics, voice switches, data switches, routers, and various other equipment.
In addition, we provide our affiliates application development and support services, network support and technical services. From time to time, we may change the categorization of our products and services. Our Network We deliver most of our products and services through our network, together with Lumen's, which is primarily built on fiber-optic cables and supporting equipment.
Ethernet services include point-to-point and multi-point equipment configurations that facilitate data transmissions across metropolitan areas and larger enterprise-class wide area networks. Our ethernet technology is also used by wireless service providers for data transmission via our fiber-optic cables connected to their towers. • Harvest, which includes our legacy services managed for cash flow, including: ◦ Voice Services.
Ethernet services include point-to-point and multi-point equipment configurations that facilitate data transmissions across metropolitan areas and larger enterprise-class wide area networks.
We continue to experience pricing pressure for several of our products and services due to a wide array of large communications companies and systems integrators providing high-speed fiber services to enterprise and wholesale business customers and other companies that market slower-speed non-fiber services typically at lower prices to more price-sensitive customers. 8 Competition to provide broadband services to our Mass Markets customers remains high.
Pricing pressure remains significant as large communications companies and system integrators deliver high-speed fiber services, while other companies target price-sensitive customers with lower-cost, slower-speed non-fiber alternatives. Mass Markets Customers Broadband Services Competition to provide broadband services to our Mass Markets customers remains high.
From time to time we may declare and pay dividends to Qwest Services Corporation ("QSC"), our direct parent, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances.
We may also periodically declare and pay dividends to our direct parent, Qwest Services Corporation ("QSC"), which can affect these balances.
Federal Regulation General The FCC regulates the interstate services we provide, including the business data service charges we bill for wholesale network transmission and intercarrier compensation, including the interstate access charges that we bill other communications companies in connection with the origination and termination of interstate phone calls.
The FCC regulates our interstate services, including business data service charges for wholesale network transmission and intercarrier compensation — such as interstate access charges billed to other communications companies for originating and terminating interstate phone calls and voice services, such as compliance with rules designed to protect consumers against unlawful automated calls or robocalls.
We routinely post important investor information in the "Investor Relations" section of our website at ir.lumen.com . The information contained on, or that may be accessed through, our website is not part of this quarterly report.
Website Access and Important Investor Information Lumen's and our website is www.lumen.com, and we routinely post important investor information in the “Investor” section of our website at ir.lumen.com . Our principal executive offices and telephone number are listed on the cover page of this report.
In addition, certain members of Congress and various consumer interest groups have advocated in favor of classifying BIAS as a Title II utility service. These developments make it difficult to predict the future degree of regulation of BIAS.
Several states have proposed or enacted laws or orders focused on state-specific Internet service regulation. Certain members of Congress and consumer interest groups continue to advocate for classifying BIAS as a Title II utility service. These developments create uncertainty regarding the future regulatory landscape for BIAS.
Depending on the applicable market and services, competition can be intense, especially if competitors in the market have network assets better suited to customer needs, offer faster transmission speeds, charge lower prices, or have a longer history of providing service in the market.
Competitive pressures are particularly strong when rivals have network assets better suited to customer needs, faster transmission speeds, lower prices, or a longer track record in the market.
For additional information regarding risks relating to our systems, network assets, network operations, capital expenditure requirements and reliance upon third parties, see "Risk Factors," in Item 1A of Part I of this report. Competition We compete in a dynamic and highly competitive market in which demand for high-speed, secure data services continues to grow.
The development, maintenance, and operation of these systems and programs require significant investments and continuous updates to address evolving threats. For additional information regarding our oversight of cybersecurity matters, see "Cybersecurity" in Item 1C, and regarding risks relating to our systems, network assets, network operations, capital expenditure requirements and reliance upon third parties, see "Risk Factors," in Item 1A.
In mid-2024, a federal appellate court rule that the FCC's universal service funding system, which for several years levied fees against us and other telecommunication companies, was unlawful. Due to pending judicial and legislative proceedings, it is unclear how this development may ultimately impact us.
In 2024, a federal appellate court ruled that the FCC's universal service funding system, which levied fees against us and other telecommunication companies, was unlawful. The Supreme Court reversed that ruling, but the parties challenging the USF program have filed a renewed challenge asserting additional arguments.
Any imposition of heightened regulation of our Internet operations could potentially hamper our ability to operate our data networks efficiently, restrict our ability to implement network management practices necessary to ensure quality service, increase the cost of operating, maintaining and upgrading our network, and otherwise negatively impact our current operations. 11 State Regulation of Domestic Operations Historically ILECs, including ours, have been regulated as “common carriers,” and state regulatory commissions have generally exercised jurisdiction over intrastate voice telecommunications services and their associated facilities.
Any increase in regulation could: • hinder our ability to operate our data networks efficiently; • restrict necessary network management practices to ensure quality service; and • increase the cost of operating, maintaining, and upgrading our network. Collectively, these developments and potential regulatory changes could materially impact our operations and increase compliance costs.
Our ability to compete hinges upon effectively enhancing and better integrating our existing products, introducing new products on a timely and cost-effective basis, meeting changing customer needs, providing high-quality information security to build customer confidence and combat cyber-attacks, extending our core technology into new applications and anticipating emerging technological and industry changes.
Intense competition is expected to continue across a wide range of industry participants amid the evolving market landscape. 7 Our Success Our ability to compete and succeed in this competitive environment depends on: • enhancing and integrating existing products; • introducing new offerings quickly and cost-effectively; • meeting changing customer needs; • delivering robust information security to build trust and mitigate cyber threats; • extending our core technologies into new applications; and • anticipating industry and technology shifts.
We operate part of our network with leased assets, and a substantial portion of our equipment with licensed software. We and Lumen view our network as one of our most critical assets.
Portions of our network use leased assets, and much of the equipment uses licensed software. Strategic Investments and Modernization We and Lumen view our network as one of our most critical assets. We and Lumen have devoted — and will continue to devote — significant resources to maintain, modernize, and expand it.
We expect continued intense competition from a wide variety of sources under these evolving market conditions. In addition to competition from large communications providers, we are facing competition from a growing number of sources, including, systems integrators, hyperscalers, cloud service providers, software networking companies, infrastructure companies, cable companies, wireless service providers, device providers, resellers and smaller niche providers.
Competition We compete in a dynamic and highly competitive market where demand for high-speed, secure data services continues to grow. Our competitors include global communications providers as well as systems integrators, hyperscalers, cloud service providers, software networking companies, infrastructure companies, cable companies, wireless service providers, device providers, resellers, and smaller niche providers.
Many of the FCC’s regulations adopted in recent years remain subject to judicial review and additional rule-makings, thus increasing the difficulty of determining the ultimate impact of these changes on us and our competitors. 10 Universal Service For several years, the federal government has instituted various funding programs to facilitate greater access to broadband services, including those noted below.
Failure to comply with FCC regulations can result in significant penalties. Many recently adopted FCC regulations remain under judicial review or subject to further rule-making, increasing the difficulty of determining the ultimate impact of these changes on us and our competitors.
In the third quarter of 2024, we relinquished rights to develop certain RDOF census blocks in four states, which resulted in (i) a reduction of our anticipated RDOF Phase I support payments and (ii) an expectation of payment to the federal government. These impacts are expected to be immaterial.
In the third quarter of 2024, we relinquished rights to deploy services in RDOF census blocks in certain states, and in the second quarter of 2025, we voluntarily relinquished the remainder of our RDOF awards.
Regulation of Our Business Our domestic operations are regulated by the Federal Communications Commission (the “FCC”), by various state regulatory commissions and occasionally by local agencies. Generally, we must obtain and maintain operating licenses from these bodies in most areas where we offer regulated services.
In most areas where we offer regulated services, we must obtain and maintain operating licenses from these bodies. Changes in the leadership or structure of these regulatory bodies can significantly affect our revenue, expenses, competitive position or prospects. Because such changes are often difficult to predict, long-term planning is challenging.
Market demand for our broadband services could be adversely affected by (i) advanced wireless data transmission technologies, including fixed wireless and low-earth-orbit satellite services, and (ii) continued enhancements to cable-based services, each of which generally provides faster average broadband transmission speeds than our copper-based infrastructure.
Market demand for our broadband services could be adversely affected by: • advanced wireless data transmission technologies (e.g., fixed wireless and low-earth-orbit satellites services); • continued enhancements to cable-based services; and • newly established fiber-based networks built by competitors or municipalities, often supported by government subsidies. 8 Following the recent sale of our Mass Markets Fiber-to-the-Home business, we expect that broadband services will be a significantly smaller portion of our go-forward strategy.
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We report our revenue derived from our operations serving our Mass Markets customers, primarily within the 'Other Broadband', 'Voice and Other' and 'Fiber Broadband' categories and our revenue derived from our operations servicing our Business customers, primarily within the 'Harvest', 'Nurture' and 'Grow' categories.
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ITEM 1. BUSINESS 4 Business Overview We are a leading digital networking services company, empowering enterprise businesses to fuel growth in a multi-cloud, AI-first marketplace by connecting people, data, and applications quickly, securely, and effortlessly.
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Our specific products and services are detailed below under the heading "Operations - Products and Services." Our ultimate parent company, Lumen Technologies, Inc., has cash management arrangements or loan arrangements with a majority of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends.
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Our platform empowers our customers to swiftly adjust digital programs to meet immediate demands, create efficiencies, accelerate market access, and reduce costs, which allows our customers to rapidly evolve their IT programs to address dynamic changes.
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As part of these cash management or loan arrangements, affiliates provide lines of credit to certain other affiliates. Amounts outstanding under these lines of credit and intercompany obligations vary from time to time. Under these arrangements, the majority of our cash balance is advanced on a daily basis for centralized management by Lumen's service company affiliate.
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Our specific products and services are detailed below under the heading “Products and Services.” On May 21, 2025, we and certain of our affiliates entered into a definitive agreement to sell our Mass Markets Fiber-to-the-Home business in 11 states (the "Territory") to AT&T.
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We report the balance of these transfers on our consolidated balance sheet as advances to affiliates. 5 We were incorporated under the laws of the State of Colorado in 1911. Our principal executive offices are located at 931 14th Street, Denver, Colorado 80202 and our telephone number is (318) 388-9000.
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On February 2, 2026, we completed our sale of our Mass Fiber-to-the-Home business in the Territory ("Mass Markets Fiber-to-the-Home business") to AT&T in exchange for gross cash proceeds of $5.75 billion, subject to post-closing adjustments (the "Mass Markets Fiber-to-the-Home divestiture").
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For a discussion of certain risks applicable to our business, see “Risk Factors” in Item 1A of Part I of this report.
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Cash Management and Intercompany Arrangements Our ultimate parent company, Lumen Technologies, Inc., maintains cash management and intercompany financing arrangements with many of its subsidiaries, including us. Under these arrangements, most of our cash is advanced daily to Lumen's service company affiliate for centralized management, with intercompany balances settled as needed.
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The summary financial information in this Item 1 should be read in conjunction with, and is qualified by reference to, our consolidated financial statements and notes thereto in Item 8 of Part II of this report and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of this report.
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Our Stakeholders We believe that regular communications with our stakeholders is a vital component of our success. Our "North Star" strategy focuses on the operating principles of teamwork, trust, and transparency and infuses clarity into the communications we have with all of our stakeholders, including our investors, employees, customers, vendors, partners, and our local communities.
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Financial Highlights The following table summarizes the results of our consolidated operations: Years Ended December 31, 2024 2023 (1) 2022 (Dollars in millions) Operating revenue $ 5,508 5,915 6,449 Operating expenses 3,457 6,110 3,694 Operating income (loss) $ 2,051 (195) 2,755 Net income (loss) $ 1,487 (831) 1,919 _______________________________________________________________________________ (1) During 2023 we recorded non-cash, non-tax-deductible goodwill impairment charge of $2.4 billion.
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Employees and Human Capital Resources To drive growth and success, we’ve strengthened our senior leadership team, modernized our business, and energized our culture. We strive to attract, develop, and retain a workforce that is inspired by strong leadership, engaged in meaningful work, and motivated by career growth opportunities.
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For additional information, see Note 2—Goodwill And Other Intangible Assets to our consolidated financial statements in Item 8 of Part II of this report.
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Our goal is to foster a culture where teamwork, trust, and transparency empower thriving employees to achieve both individual and collective success. We aim to attract broad talent to develop innovative ideas that transform industries worldwide.
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The following table summarizes certain selected financial information from our consolidated balance sheets: As of December 31, 2024 2023 (Dollars in millions) Total assets $ 17,362 16,337 Total long-term debt (1) 1,927 2,157 Total stockholder's equity 12,243 10,756 _______________________________________________________________________________ (1) Total long-term debt does not include note payable-affiliate.
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Key efforts include: • simplifying and modernizing our network and legacy systems; • retiring aging and obsolete infrastructure and systems; and • expanding our network to meet growing demand for enhanced and new products. We sold a portion of our network on February 2, 2026, as discussed in Note 2—Divestiture in Item 8.
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For additional information on our total long-term debt, see Note 6—Long-Term Debt and Note Payable - Affiliate to our consolidated financial statements in Item 8 of Part II of this report.
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Legacy Voice Services Our legacy voice services face significant competition from wireless voice, social networking, videoconferencing, and messaging platforms as customers shift to these alternatives. Additional sources of competition include non-carrier systems capable of partially or fully bypassing our local networks through various methods. Software innovations have enabled low-cost networking alternatives, further reducing reliance on legacy voice networks.
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For information on our total obligations, see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Future Contractual Obligations" in Item 7 of Part II of this report.
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We anticipate that all these trends will continue to decrease use of our voice network.
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Substantially all of our long-lived assets are located in the United States and substantially all of our total consolidated operating revenue is from customers located in the United States.
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These CLECs typically provide competing services through: • reselling an ILEC’s local services; • using an ILEC’s unbundled network elements; • operating their own facilities; or • utilizing hybrid approaches of the aforementioned. Additional information about competitive pressures is located under the heading "Risk Factors — Business Risks" in Item 1A.
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We deliver high bandwidth optical wavelength networks to customers requiring an end-to-end solution with ethernet technology for a scalable amount of bandwidth connecting sites or providing high-speed access to cloud computing resources. • Nurture, which includes our more mature offerings, such as: ◦ Ethernet. We deliver a robust array of networking services built on ethernet technology.
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This section highlights certain regulations affecting our operations, though additional regulations could have a significant impact. For additional information, see “Risk Factors” in Item 1A. Federal Regulation We are subject to extensive regulation by the FCC and state commissions, including obligations under the Universal Service Fund programs.
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In addition, we provide our affiliates application development and support services, network support and technical services.
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Universal Service Fund The federal government has introduced several programs to expand broadband access, including the Rural Digital Opportunity Fund (“RDOF”) program, an FCC initiative that provides federal financial support to fund broadband deployment in rural America. We were awarded RDOF funding in several of the states in which we operate and received payments for a period starting in 2022.
Removed
We and Lumen have devoted, and plan to continue to devote, substantial resources to (i) simplify and modernize our network and legacy systems (ii) retire aging or obsolete systems and plant and (iii) expand our and Lumen’s network to address demand for enhanced or new products. A key element of our network expansion plan is our Quantum Fiber buildout project.
Added
As a result, we will no longer receive funding through the RDOF program and recognized a reduction to revenue of $11 million in our consolidated statements of operations in the second quarter of 2025.
Removed
Under this project, we plan to construct additional fiber optic infrastructure over the next years to enable us to provide Quantum Fiber broadband services to several million additional urban and suburban locations in our ILEC markets.
Added
We also incurred fees of $12 million in connection therewith, which are reflected in our operating expenses within our consolidated statements of operations for the year ended December 31, 2025.
Removed
We develop and maintain systems and programs designed to protect against cyber-attacks and network outages. The development, maintenance and operation of these systems and programs is costly and requires ongoing monitoring and updating as technologies change and efforts to bypass security measures become more sophisticated and evolve rapidly.
Added
In January 2026, we paid the $23 million of revenue and fees summarized above, along with an additional $3 million relating to our 2024 relinquishment as repayment of funds previously received and remittance of the fees incurred.
Removed
In addition, several established or new communications companies, infrastructure companies or municipalities have built or are building new fiber-based networks to provide high-speed broadband services in existing or unserved markets, frequently with the support of governmental subsidies. Our network expansion and innovation strategy is focused largely on addressing these competitive pressures.
Added
Key developments include: • FCC classified BIAS as a common carrier service under Title II of the Communications Act of 1934 and imposed net neutrality rules in 2015; • FCC repealed the Title II classification and most of the net neutrality mandates in 2017; • FCC adopted a new order reclassifying BIAS as a Title II utility service and re-imposing net neutrality rules in 2024; and • a federal appeals court vacated the FCC's 2024 order, concluding that Congress did not authorize Title II regulations of BIAS in 2025.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

86 edited+65 added−92 removed5 unchanged
Biggest changeOur significant levels of debt and related debt service obligations could adversely affect us in several respects, including: • requiring us to dedicate a substantial portion of our cash flow from operations to the payment of interest and principal on our debt, thereby reducing the funds available to us for other purposes, including acquisitions, capital expenditures, strategic initiatives and dividends to our direct parent company; • hindering our ability to capitalize on business opportunities and to plan for or react to changing market, industry, competitive or economic conditions; • making us more vulnerable to economic or industry downturns, including interest rate increases (especially with respect to our variable rate debt); • placing us at a competitive disadvantage compared to less leveraged companies; • adversely impacting other parties’ perception of Lumen, including but not limited to existing or potential customers, vendors, employees, creditors or investors; • making it more difficult or expensive for us to obtain any necessary future financing or refinancing, including the risk that this could force us to sell assets or take other less desirable actions to raise capital; and • increasing the risk that we may not meet the covenants contained in our debt agreements or timely make all required debt payments, either of which could result in the acceleration of some or all of our outstanding indebtedness.
Biggest changeWe carry significant levels of debt and related debt service obligations, which could adversely affect us in several ways, including: • requiring us to allocate a large portion of operating cash flow to interest and principal payments, reducing funds available for other purposes, including acquisitions, capital expenditures, strategic initiatives, and dividends to our ultimate parent company; • limiting our ability to capitalize on business opportunities or adequately respond to changing market, industry, or economic conditions; • increasing vulnerability to economic or industry downturns and interest rate fluctuations — particularly on variable-rate debt; • placing us at a competitive disadvantage compared to less leveraged companies; • negatively affecting perceptions of our company among customers, vendors, employees, creditors, and investors; 22 • making it more difficult or costly to obtain future financing or refinancing, potentially forcing asset sales or other unfavorable actions to raise capital; and • heightening the risk of covenant breaches or missed payments, which could trigger acceleration of some or all of our outstanding debt.
Our operations or actual results could also be similarly impacted by additional risks and uncertainties that are not currently known to us, that we currently deem to be immaterial, that arise in the future or that are not specific to us. In addition, certain of the risks described below apply only to a part or segment of our business.
Our operations or actual results could also be similarly impacted by additional risks and uncertainties that are not currently known to us, that we currently deem to be immaterial, that arise in the future or that are not specific to us. In addition, certain of the risks described below apply only to a part of our business.
Unfavorable general economic, societal, health or environmental conditions, including unstable economic and credit markets, or depressed economic activity caused by trade wars, epidemics, pandemics, wars, societal unrest, rioting, civic disturbances, natural disasters, terrorist attacks, environmental disasters, political instability or other factors, could negatively affect our business or operations in a variety of ways.
Unfavorable general economic, societal, health or environmental conditions, including unstable economic and credit markets, or depressed economic activity caused by trade wars, epidemics, pandemics, wars, societal unrest, rioting, civic disturbances, natural disasters, terrorist attacks, environmental disasters, government shutdowns, political instability or other factors, could negatively affect our business or operations in a variety of ways.
For these reasons, you are urged to review the risk factor disclosures contained in Item 1A of Lumen’s Annual Report on Form 10-K for the year ended December 31, 2024. We face other business risks.
For these reasons, you are urged to review the risk factor disclosures contained in Item 1A of Lumen’s Annual Report on Form 10-K for the year ended December 31, 2025. We face other business risks.
Lumen’s costs of maintaining our pension and healthcare plans, and the future funding requirements for these plans, are affected by several factors, including investment returns on funds held by our applicable plan trusts; changes in prevailing interest rates and discount rates or other factors used to calculate the funding status of our plans; increases in healthcare costs generally or claims submitted under our healthcare plans specifically; the longevity and payment elections of our plan participants; changes in plan benefits; and the impact of the continuing implementation and modification of current federal healthcare and pension funding laws and regulations promulgated thereunder.
The costs of maintaining these plans, and any future funding requirements, are influenced by several factors, including: • investment returns on funds held by our applicable plan trusts; • changes in prevailing interest rates and discount rates or other factors used to calculate the funding status of our plans; • increases in healthcare costs generally or claims submitted under our healthcare plans specifically; • the longevity and payment elections of our plan participants; • changes in plan benefits; and • the impact of the continuing implementation and modification of current federal healthcare and pension funding laws and related regulations.
Under our and our affiliates’ consolidated debt and financing arrangements, the issuer of the debt is subject to various covenants and restrictions, the most restrictive of which pertain to the debt of Lumen Technologies, Inc. and Level 3 Financing.
Under our and our affiliates' consolidated debt and financing arrangements, the issuer of the debt is subject to various covenants and restrictions, with the most restrictive applying to Lumen Technologies, Inc. and Level 3 Financing, Inc.
We rely on rights-of-way, colocation agreements, franchises, licenses and other authorizations granted by governmental bodies, railway companies, utilities, carriers and other third parties to locate a portion of our network equipment over, on or under their respective properties, or to conduct operations within their jurisdictions.
Reliance on landowners : We require rights-of-way, colocation agreements, franchises, licenses, and other authorizations from governmental bodies, railway companies, utilities, carriers, and other third-party landowners to locate a portion of our network equipment over, on or under their respective properties, or to conduct operations within their jurisdictions.
We maintain (i) disclosure controls and procedures designed to provide reasonable assurances regarding the accuracy and completeness of our SEC reports and (ii) internal control over financial reporting designed to provide reasonable assurance regarding the reliability of our financial statements and their compliance with U.S. generally accepted accounting principles (“GAAP”). We cannot assure you these measures will be effective.
We maintain disclosure controls and procedures designed to provide reasonable assurances regarding the accuracy and completeness of our SEC reports and internal control over financial reporting designed to provide reasonable assurance regarding the reliability of our financial statements and their compliance with GAAP. We cannot assure you these measures will be effective.
Due to substantial deductibles, coverage limits and exclusions, and limited availability, we have typically recovered only a portion of our losses through insurance. Our system redundancy and other measures we take to protect our infrastructure and operations from the impacts of such events may be ineffective or inadequate to sustain our operations following such events.
Due to substantial deductibles, coverage limits and exclusions, and limited availability, we have typically recovered only a portion of our losses through insurance. Our system redundancy and other measures we implement to protect infrastructure and maintain operations may prove inadequate to sustain our operations following such events.
Our consolidated operations constitute only a portion of the consolidated operations of our corporate parent, Lumen. We engage in various intercompany transactions with affiliates of Lumen that are not members of our consolidated group of companies.
Adverse developments impacting our non-consolidated affiliates could indirectly impact us. Our consolidated operations constitute only a portion of the consolidated operations of our corporate parent, Lumen. We engage in various intercompany transactions with affiliates of Lumen that are not members of our consolidated group of companies.
In connection with establishing our strategies, we have assumed that the continued development of AI will continue to drive robust demand for our products and services, which subjects us to the risk of misallocating our resources if AI-related demand fails to meet current expectations. 14 We operate in an intensely competitive industry and existing and future competitive pressures could harm our performance.
In connection with establishing our strategies, we have assumed that the continued development of AI will continue to drive robust demand for our products and services, which subjects us to the risk of misallocating our resources if AI-related demand fails to meet current expectations.
Our attempts to capitalize on emerging market opportunities may not be as successful as envisioned. Growth in AI products and other recent industry changes have fueled demand for higher transmission speeds, greater bandwidth, lower latency and more advanced networking services.
Our attempts to capitalize on emerging market opportunities — especially AI — may fall short. Growth in AI products and solutions, along with other recent industry changes have fueled demand for higher transmission speeds, greater bandwidth, lower latency and more advanced networking services.
For each of these reasons, any of the proceedings described in Note 14—Commitments, Contingencies and Other Items, as well as current litigation not described therein or future litigation, could have a material adverse effect on our business, reputation, financial position, operating results, the trading price of our securities and our ability to access the capital markets.
Any of the proceedings described in Note 15—Commitments, Contingencies and Other Items in Item 8, as well as other current or future litigation, could have a material adverse effect on our business, reputation, financial position, operating results, the market price of our debt securities, and our ability to access capital.
Shareholder or debtholder activism efforts could cause a material disruption to our business. While we always welcome constructive input from our stakeholders, activist shareholders at the Lumen level may from time to time engage in proxy solicitations, submit shareholder proposals or otherwise attempt to effect changes or acquire control over Lumen and its affiliates, including us.
Shareholder or debtholder activism efforts could cause a material disruption to our business. While we value constructive input from our stakeholders, activist shareholders at the Lumen level may at times pursue proxy solicitations, submit shareholder proposals, or otherwise seek to influence our strategy or gain control over Lumen and its affiliates, including us.
Such damage to our reputation could be difficult, expensive and time-consuming to repair and could negatively impact or business or the value of our securities . 22 Financial Risks Our significant debt levels expose us to a broad range of risks.
Reputational harm may be difficult, costly, and time-consuming to repair and could negatively affect our business and the value of our securities. Financial Risks Our significant debt levels expose us to a broad range of risks.
These restrictive covenants could have a material adverse impact on our and our affiliates' ability to operate or reconfigure our respective businesses, to issue additional priority debt, to pursue acquisitions, divestitures or strategic transactions, or to otherwise pursue our respective plans and strategies.
These restrictive covenants could have a material adverse impact on our ability to operate or reconfigure our business, to issue additional priority debt, to pursue acquisitions, divestitures or strategic transactions, or to otherwise pursue our plans and strategies. 23 We cannot assure you that we or our affiliates will be able to comply with these covenants.
From time to time in the ordinary course of our business, we experience outages in our network, hosting, cloud or IT platforms, or failures of our products or services (including basic and enhanced 911 emergency services) to perform in the manner anticipated.
Network, platform, or service failures could materially impact us. From time to time, we experience outages in our network, hosting, cloud, or IT platforms, or failures of our products and services — including basic and enhanced 911 emergency services — to perform as intended.
The recent increase in the activism of debt holders could increase the risk of claims being made under the debt agreements of us or our affiliates. 26 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, the recent rise in debtholders could increase the risk of claims under debt agreements. 26 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Any failure to make appropriate capital expenditures could adversely impact our financial performance or prospects. We will also continue to need substantial amounts of cash to meet our fixed commitments and other business objectives, including without limitation funding our debt repayments, interest expense, operating costs, maintenance expenses, debt repayments, tax obligations, periodic pension contributions and other benefits payments.
Failure to make necessary capital expenditures could adversely affect our financial performance and prospects. In addition, we will require significant cash to meet fixed commitments and other objectives, including debt repayments, interest expense, operating costs, maintenance expenses, tax obligations, pension contributions, and other benefit payments.
Media reports concerning our legacy infrastructure could expose us to governmental actions, removal costs, litigation, compliance costs, penalties or reputational damage. Media reports issued in mid-2023 alleged that certain lead-sheathed cables that are part of our copper-based network infrastructure pose public health and environmental risks.
Allegations regarding lead-sheathed cables could result in regulatory or governmental actions, litigation, significant costs, and reputational harm. Media reports in 2023 alleged that certain lead-sheathed cables in our copper-based network infrastructure pose public health and environmental risks. These allegations have led to regulatory inquiries and lawsuits and could result in legislative or regulatory actions, removal or compliance costs, or penalties.
Although Lumen periodically repays these advances to fund our cash requirements throughout the year, at any given point in time Lumen may owe us a substantial sum under this arrangement. Accordingly, developments that adversely impact Lumen could adversely impact our ability to collect these advances.
Under our cash management arrangement, we regularly transfer cash to Lumen, which we recognize on our consolidated balance sheets as advances to affiliates. Although Lumen periodically repays these advances to fund our cash requirements, at any given time Lumen may owe us a substantial amount. Accordingly, developments that adversely affect Lumen could adversely impact our ability to collect these advances.
The process for remediating any interruptions, outages, delays or cessations of service could be more expensive, time-consuming, disruptive and resource intensive than planned. Delayed sales, lower margins, fines or lost customers resulting from future disruptions could have a material adverse impact on our business, reputation, results of operations, financial condition, and cash flows.
Remediation efforts may be more costly, time-consuming, disruptive, and resource intensive than anticipated. Future disruptions could lead to delayed sales, lower margins, fines, or customer attrition, any of which could have a material adverse impact on our business, reputation, results of operations, financial condition, and cash flows.
As of December 31, 2024, we had a substantial number of active employees participating in a qualified pension plan sponsored by Lumen Technologies that has assumed the obligations under Qwest Communications International Inc.’s predecessor pension plan. As of such date, Lumen’s pension plans and our other post-retirement benefit plans were substantially underfunded from an accounting standpoint.
Funding obligations for employee benefit plans could negatively impact profitability A significant number of our active employees participate in a qualified pension plan sponsored by Lumen Technologies, which has assumed the obligations under Qwest Communications International Inc.’s predecessor pension plan. Lumen’s pension plans and other post-retirement benefit plans are significantly underfunded from an accounting perspective.
In addition, we intend to continue to distribute to our direct stockholder a substantial portion of our consolidated cash flow, thereby reducing our capital resources for debt repayments or other purposes.
In addition, we intend to continue distributing a substantial portion of our consolidated cash flow to our direct stockholder, thereby reducing our capital resources for debt repayment or other purposes. These and other risks related to investing in our debt securities are described in our disclosure documents distributed at the time of issuance.
Increased costs under these plans could reduce Lumen’s profitability and increase its funding commitments to its pension plans, which in turn could affect our liquidity. See Note 10—Employee Benefits for additional information regarding the funded status of Lumen's pension plans and Lumen's other post-retirement benefit plans.
Increased costs under these plans could reduce Lumen's profitability and increase its funding commitments to its pension plans, which in turn could affect our liquidity.
We face other business risks, including among others (i) the difficulties of managing and administering an organization that offers a complex set of products to a diverse range of customers across several states, (ii) the possibility that supply constraints, labor shortages, construction delays or other factors could hamper our ability to attain our infrastructure buildout plans, (iii) the risk that the continuation of high vacancy rates in the fiber on-net buildings we serve could reduce demand for our services and (iv) the risks and uncertainties inherent in acquiring or disposing of businesses, or engaging in other strategic transactions. 19 Legal and Regulatory Risks We are subject to an extensive, evolving regulatory framework that could create operational or compliance costs.
We face additional business risks, including: • challenges in managing a complex portfolio of products to a diverse customer base; • potential supply constraints, labor shortages, construction delays, or other factors that could impede our infrastructure buildout plans; • risk that sustained high vacancy rates in fiber on-net buildings we serve could reduce demand for our services; and • uncertainties and risks associated with acquiring or disposing of businesses or pursuing other strategic transactions. 19 Legal and Regulatory Risks Complex and evolving regulations could increase operational and compliance costs.
Each of our Business and Mass Market offerings faces increasingly intense competition from a wide range of sources under evolving market conditions that have increased the number and variety of companies that compete with us.
Our Business and Mass Market offerings face intense competition from a broad range of providers under evolving market conditions that have increased both the number and diversity of competitors.
Several of our services continue to experience declining revenue, and our efforts to offset these declines may not be successful. Primarily as a result of the competitive and technological changes discussed above, we have experienced a prolonged systemic decline in our local voice, long-distance voice, network access and private line revenues.
Primarily due to competitive and technological changes discussed throughout this report, we have experienced prolonged systemic declines in several of our legacy services, including local voice, long-distance voice, network access, and private line revenues.
Damage to our reputation could be difficult, expensive and time-consuming to repair. Damage to our reputation could also reduce the value and effectiveness of the Lumen brand name and could reduce investor confidence in us, having a material adverse impact on the value of our securities. We could be harmed by cyber-attacks.
Damage to our reputation or brands may be difficult, costly, and time-consuming to remediate. Any such harm could diminish the value and effectiveness of our brands, reduce investor confidence, and erode customer and employee loyalty, ultimately having a material adverse impact on the value of our securities. We could be materially impacted by cyber-attacks.
Congress amends or eliminates current federal law limitations on the liability of private network providers, such as us, against claims related to third-party content stored or transmitted on private networks, as currently proposed by certain governmental officials, legislative leaders and consumer interest groups.
Congress amends or repeals current federal limitations on the liability of private network providers, such as us, for third-party content stored or transmitted on private networks, as proposed by certain officials and consumer groups. We could also be significantly affected by initiatives to expand regulation of internet service providers or strengthen data privacy laws.
Most of the debt of Level 3 Financing, Inc. is (i) secured by a pledge of substantially all of its assets and (ii) guaranteed on a secured basis by certain of its affiliates.
For example, most of Level 3 Financing, Inc.’s debt is secured by substantially all of its assets and guaranteed on a secured basis by affiliates, while other portions are guaranteed on an unsecured basis. Certain subsidiaries of Qwest Communications International Inc. also carry debt.
Roughly three-quarters of the debt of Lumen Technologies, Inc. is guaranteed by certain of its principal domestic subsidiaries, some of which have pledged substantially all of their assets (including certain of their respective subsidiaries) to secure their guarantees. The remainder of the debt of Lumen Technologies, Inc. is neither guaranteed nor secured.
Lumen Technologies, Inc. and certain of its subsidiaries owe substantial amounts under various debt and financing arrangements, some of which are guaranteed or secured by principal domestic subsidiaries that have pledged substantially all of their assets. Other debt is neither secured nor guaranteed.
Responding to these actions can be costly and time-consuming and may disrupt Lumen’s and our operations and divert the attention of its Board of Directors and our management. These adverse impacts could be intensified if activist shareholders advocate actions that are not supported by other shareholders, Lumen’s Board or management.
Responding to such actions can be costly, time-consuming, and disruptive to operations of Lumen and us, diverting the attention of our Board of Directors and management from day-to-day operations. These impacts may be heightened if activist shareholders advocate actions that lack broad shareholder, Board, or management support.
However, our corporate reputation is susceptible to material damage by events such as disputes with customers or competitors, cyber-attacks, service outages, data breaches, internal control deficiencies, performance failures, compliance violations, employee misconduct, government investigations or legal proceedings. Similar events impacting one of our competitors could result in negative publicity for our entire industry that indirectly harms our business.
These assets are vulnerable to significant harm from events such as customer or competitor disputes, cyber-attacks, service outages, data breaches, internal control deficiencies, performance failures, compliance violations, employee misconduct, government investigations, or litigation. Similar incidents involving competitors could also generate negative publicity for the entire industry, indirectly impacting our business.
We depend on a limited number of suppliers and vendors to provide us, directly or through other suppliers, with equipment and services relating to our network infrastructure, including fiber optic cable, software, optronics, transmission electronics, digital switches, routing equipment, customer premise equipment, and related components.
Reliance on key suppliers and vendors : We rely on a limited number of suppliers and vendors for critical equipment and services, including fiber optic cable, software, optronics, transmission electronics, digital switches, routing equipment, customer premise equipment and components, and operational support to assist with operating, maintaining and administering our business, including billing, security, provisioning and general operations.
In addition, federal and state agencies that regulate the support program payments we receive or the fees that we charge for certain of our regulated services can, and from time to time do, reduce the amounts we receive or can charge.
Additionally, federal and state agencies that regulate support program payments and service fees may reduce the amounts we receive or can charge. Expanded regulation of 911 services is expected to increase costs and potential fines.
We may be unable to reach new agreements, and union employees may engage in strikes, work slowdowns or other labor actions, which could materially disrupt our ability to provide services and increase our costs. Even if we succeed in reaching new or replacement agreements, they may impose significant new costs on us that impair our competitive position.
While we maintain agreements with these unions, we cannot predict the outcome of future negotiations. Failure to reach new agreements could result in strikes, work slowdowns, or other labor actions that materially disrupt our services and increase costs. Even if new or replacement agreements are reached, they may impose significant additional costs that adversely affect our competitive position.
In addition, the reputational risk of unauthorized disclosure of confidential company or customer data could increase to the extent our employees inappropriately use social networking sites or other emerging technologies, such as generative AI tools. There is a risk that negative or inaccurate information about us, even if based on rumor or misunderstanding, could adversely affect our business.
Additionally, the risk of reputational harm associated with unauthorized disclosure of confidential information or customer data may increase if employees misuse social networking platforms or emerging technologies, including generative AI tools. Negative or inaccurate information about Lumen, even if based on rumor or misunderstanding, could also cause reputational harm.
To remain competitive, we will need to accurately predict and respond to changes in technology, to continue developing and offering products and services attractive to our customers, to migrate our customers from legacy to newer products and services, to timely provision our products and services, to maintain and expand our network to enable it to support customer demands for significantly greater transmission capacity and speeds, and to discontinue outdated products and services on a cost-effective basis.
To remain competitive, we must: • accurately predict and respond to technological developments; • develop and offer attractive products and services that meet evolving customer needs; • migrate customers from legacy offerings to newer products and services; • provision our products and services quickly and reliably; • maintain and expand our network to support significantly greater transmission capacity and speeds; and • retire outdated services cost-effectively.
We rely on various patents, copyrights, trade names, trademarks, service marks, trade secrets and other similar intellectual property rights, as well as confidentiality agreements and procedures, to establish and protect our proprietary rights. For a variety of reasons, however, these steps may not fully protect us, including due to inherent limitations on the ability to enforce these rights.
We cannot provide assurance regarding the ultimate impact of these matters. We may not be successful in protecting and enforcing our intellectual property rights. We rely on patents, copyrights, trade names, trademarks, service marks, trade secrets, and other intellectual property rights, as well as confidentiality agreements and procedures, to safeguard our proprietary assets.
Our ability to successfully compete could be hampered if we fail to timely develop and market innovative technology solutions that address changing customer demands. The technology and communications industry has been and continues to be impacted by significant technological changes, which are increasing demand for digitally-integrated products and enabling an increasing variety of companies to compete with us.
Our ability to compete could be diminished if we fail to innovate and deliver advanced solutions timely. The technology and communications industry is undergoing rapid technological change, increasing demand for digitally-integrated products and enabling an increasing variety of competitors to enter the market.
Finally, we expect that expanded regulation of 911 emergency services will increase our costs and exposure to fines for noncompliance. As a carrier of last resort for certain of our Mass Market customers, we could be required to provide services under circumstances that are economically disadvantageous or that divert resources from other business priorities.
Finally, as a carrier of last resort for certain Mass Market customers, we may be required to provide services under economically disadvantageous conditions, diverting resources from other business priorities. 20 We may face legal and reputational risks related to third-party content on our network.
Lumen Technologies, Inc.’s senior secured credit facilities and secured notes contain several significant limitations restricting the ability of it and its subsidiaries to, among other things, borrow additional money or issue guarantees; pay dividends or other distributions to shareholders; make loans; create liens on assets; sell assets; transact with its affiliates and engage in mergers, consolidations or other similar transactions.
These covenants limit the ability of Lumen and its subsidiaries to incur additional debt or guarantees, pay dividends or other distributions to equity holders, make loans, create liens, sell assets, transact with affiliates, or engage in mergers and other strategic transactions.
Even if successfully implemented, these transactions could be detrimental to our operations, financial performance or future prospects. 23 We are part of a highly complex debt structure, which could impact the rights of our investors.
However, our and our affiliates debt agreements and market conditions may restrict or limit our ability to implement these actions on favorable terms, or at all. Even if implemented, these measures could negatively affect our operations, financial performance, or future prospects. We have a highly complex debt structure, which could impact the rights of our investors.
From time to time these events have disrupted our operations, and similar future events could cause substantial damages, including downed transmission lines, flooded facilities, power outages, fuel shortages, network delays or failures, damaged or destroyed property and equipment, and business interruptions.
These events have disrupted operations in the past and may occur again, potentially causing significant damage such as downed transmission lines, flooded facilities, power outages, fuel shortages, network delays or failures, property and equipment loss, and business interruptions.
Climate changes could also require us to continue to increase our spending on network resilience initiatives, and could result in additional regulation impacting our operations or profitability. Our environmental programs and disclosures may expose us to reputational, legal and business risks.
Climate change could also require increased investment in network resilience and lead to additional regulatory requirements that may adversely affect our operations or financial results. Our environmental, social, and governance programs and disclosures may expose us to legal, operational, and reputational risks.
Our use of AI may give rise to risks related to harmful content, inaccurate output, bias, intellectual property infringement or misappropriation, defamation, privacy incidents, and cybersecurity vulnerabilities, among others. The United States, the European Union and other governmental bodies have taken initial steps to regulate AI, which could ultimately increase AI’s legal risks or decrease its usefulness.
Risks associated with our use of AI include harmful or inaccurate outputs, bias, intellectual property infringement or misappropriation, defamation, privacy incidents, and cybersecurity vulnerabilities. In addition, emerging regulations in the United States, the European Union, and other jurisdictions could increase legal exposure or limit AI’s utility.
We cannot assure you our future cash flows from operating activities will be sufficient to fund our capital investments, debt obligations or any other long-term cash requirements. Increases in costs for pension and healthcare benefits for our active and retired employees may have a material impact on us.
We cannot assure that future operating cash flows will be sufficient to fund capital investments, debt obligations, or other long-term cash requirements.
Some of our current and potential competitors: (i) offer products or services that are substitutes for our traditional wireline services, including wireless broadband, wireless voice and non-voice communication services, (ii) offer a more comprehensive range of communications products and services, (iii) operate systems that are newer, more integrated or more advanced, which enable them to provision services faster and more efficiently, (iv) have greater financial, provisioning, technical, engineering, research, development, marketing, customer relations or other resources, (v) conduct operations or raise capital at a lower cost, (vi) are subject to less regulation, (vii) have stronger brand names, (viii) have deeper or more long-standing relationships with key customers, or (ix) have larger operations than ours, any of which may enable them to compete more successfully for customers, strategic partners and acquisitions.
Many of these competitors: • offer products and services that substitute for our legacy wireline offerings, including wireless broadband and voice or non-voice communication services; • provide a more comprehensive portfolio of communications products and services; 14 • operate newer, more integrated, or more advanced systems that enable faster and more efficient service delivery; • possess greater financial, technical, engineering, research, development, marketing, and customer relationship resources; • conduct operations or raise capital at lower costs; • are subject to fewer regulatory constraints or costs; • benefit from stronger brand recognition and deeper, long-standing customer relationships; or • maintain larger-scale operations.
These capital requirements are driven by several factors, including (i) changes in customers’ service requirements; (ii) our need to continue to maintain aging or obsolete infrastructure until it can be replaced; (iii) our continuing need to expand and improve our network to remain competitive and meet customer demand; and (iv) our regulatory and contractual commitments.
We expect to maintain, upgrade, and expand our network infrastructure and product offerings. These capital needs are influenced by factors such as: • evolving customer service requirements; • the need to maintain aging or obsolete infrastructure until replacement; • ongoing investments to enhance our network to remain competitive and meet demand; and • regulatory and contractual commitments.
Our ability to arrange additional financing will depend on, among other factors, our financial position, performance, credit ratings, and debt covenants.
We expect to periodically seek financing to refinance existing indebtedness and fund other needs. Our ability to secure additional financing depends on factors such as our financial position, performance, credit ratings, and debt covenants, and market conditions.
For all these reasons, our use of AI could materially harm our business, operations or reputation. 21 We have been accused of infringing the intellectual property rights of others and will likely face similar accusations in the future.
For these reasons, our use of AI could materially harm our business, operations, or reputation. Intellectual property claims could result in significant costs and operational disruptions. We have in the past and may in the future receive notices or be named in lawsuits alleging infringement of third-party intellectual property rights.
Instability in the domestic or global financial markets has from time to time resulted in periodic volatility and disruptions in capital markets that have partially or severely limited the ability of leveraged companies like us to obtain debt financing.
Market conditions could be negatively affected by disruptions in global or domestic debt markets, geopolitical instability, trade restrictions, pandemics, weak economic conditions, or adverse developments in the communications industry. Periodic volatility and disruptions in capital markets have historically limited the ability of leveraged companies like ours to obtain debt financing.
Our operations could be adversely affected in the future if any of these vendors are unable or unwilling for any reason to continue to deliver their products or services on terms acceptable to us, including due to business interruptions, security incidents, litigation, financial distress, bankruptcy or changes in their operations or business strategies. Reliance on key licensors.
Our business could be adversely affected if these parties fail to deliver products or services on acceptable terms due to operational disruptions, increased pricing, security incidents, litigation, financial distress, bankruptcy, or strategic changes. Reliance on key licensors : We license essential technologies from third parties to deliver certain products and services.
Thus far, none of our past security incidents have had a material adverse effect on us, and we continue to take steps designed to limit our cyber risks. Nonetheless, we cannot assure you that future cyber incidents or events will not ultimately have a material adverse impact on our business, operations or financial results.
While past incidents have not had a material adverse effect on our business strategy, results of operations or financial condition, we cannot guarantee that material incidents will not occur in the future.
Any or all of the foregoing developments could have a material adverse impact on us. We believe the importance of our network to global internet data flows will continue to make it a target to a wide range of threat actors, including nation state actors and other advanced persistent threat actors.
Any of these outcomes could require us to notify customers, regulatory agencies or the public of data incidents and have a material adverse impact on our business, operations, or financial results. Our role in global internet traffic makes us a continuing target for advanced persistent threats, including nation-state actors and other sophisticated threat actors.
The amounts contributed by us through Lumen Technologies are not segregated or restricted and may be used to provide benefits to employees of Lumen’s other subsidiaries.
Contributions we make through Lumen Technologies are not segregated or restricted and may be applied to provide benefits to employees of Lumen’s other subsidiaries. Funding these pension and healthcare benefit plans for active and retired employees has a material impact on Lumen's profitability.
To offer certain services in certain of our markets, we must either purchase services or lease network capacity from, or interconnect our network with, the infrastructure of other communications carriers or cloud companies who typically compete against us in those markets.
Reliance on other communications providers : To deliver certain services within certain markets, we purchase services, lease network capacity, or interconnect with infrastructure owned by other communications carriers or cloud companies, some of which compete with us. These arrangements limit our control over service availability, delivery, and quality.
If we are unable to make required debt payments or refinance our debt, we would likely have to consider other options, such as selling assets, issuing additional securities, cutting or delaying costs or otherwise reducing our cash requirements, or negotiating with our lenders to restructure our applicable debt.
We cannot assure that additional financing will be available on acceptable terms, or at all. If we are unable to make required debt payments or refinance our debt, we may need to consider alternatives such as selling assets, issuing additional debt securities, reducing or delaying expenditures, or negotiating debt restructurings.
We may also experience reputational harm from negative assertions about the public health or environmental impact of our lead-sheathed cables, which could adversely affect our business, even if such allegations ultimately prove to be inaccurate.
Accordingly, we may incur substantial expenses that could materially adversely affect our financial condition or results of operations. In addition, negative assertions about the health or environmental impact of our lead-sheathed cables — even if ultimately unfounded — could damage our reputation.
More recently, wholesale pricing pressure and other factors have caused us to experience declines in revenue derived from a broader array of our products and services, including those marketed to our Business customers as our "nurture" and "harvest" offerings.
More recently, pricing pressure and other factors have contributed to revenue declines across a broader array of products and services, including offerings marketed to our Business customers. Although we have implemented operating and strategic plans to address these challenges, we may not succeed in achieving future revenue growth within projected time frames, or at all.
Third-party content stored or transmitted on our networks could result in liability or otherwise damage our reputation. While we disclaim liability for third-party content in most of our service contracts, as a private network provider we potentially could be exposed to legal claims relating to third-party content stored or transmitted on our networks.
Although our service contracts generally disclaim liability for third-party content, as a private network provider we could be subject to claims arising from content stored or transmitted on our systems. These claims may include allegations of defamation, invasion of privacy, copyright infringement, or facilitating prohibited activities such as online gambling or pornography.
Our failure to comply with complex governmental regulations and laws applicable to these programs, or the terms of our governmental contracts, could result in us suffering substantial negative publicity or penalties, being suspended or debarred from future governmental programs or contracts for a significant period of time and in certain instances could lead to the revocation of our FCC licenses.
We provide services to various federal, state and local agencies. Failure to comply with complex regulations, laws, or contractual terms could result in penalties, negative publicity, suspension or debarment from future programs, or revocation of FCC licenses. Government agencies reserve the right to terminate contracts for convenience or lack of funding, which could materially impact our results of operations.
We expect regulatory uncertainty to increase following a 2024 U.S. Supreme Court decision reversing a prior ruling that required courts to defer to reasonable agency interpretations of ambiguous federal laws. New laws or court decisions could affect our services or expose us to burdensome requirements or liabilities. In particular, our business could be materially impacted if the U.S.
Supreme Court decision eliminating judicial deference to agency interpretations of ambiguous federal laws. Future legislation or court rulings could impose burdensome requirements or liabilities. For example, our business could be materially impacted if U.S.
We remain vulnerable to future disruptions due to several factors, including the challenges of maintaining and replacing aging or obsolete network elements, human error, continuous changes in our network, the introduction of new products or technologies, vulnerabilities in our vendors or supply chain, aberrant employees and hardware and software limitations.
These disruptions expose us to many of the same risks described above for cyber-attacks and may lead to lost revenue, issuance of customer credits or refunds, complete customer loss, regulatory fines, and reputational harm. 17 We remain vulnerable due to factors such as aging infrastructure, human error, continuous changes in our network, introduction of new products and technologies, vendor and supply chain weaknesses, rogue employees, and hardware or software limitations.
Any of these occurrences could result in lost revenues from business interruption, damage to our reputation and reduced profits. Climate changes may increase the frequency or severity of natural disasters and other extreme weather events in the future, which would increase our exposure to the above-cited risks and could disrupt our supply chain from our key suppliers and vendors.
Any such occurrence could result in lost revenue, litigation risks, reputational harm, and reduced profitability. In addition, climate change may increase the frequency or severity of these events, heightening our exposure to operational disruptions and supply chain risks.
Moreover, if we incorporate licensed technology into our network, we may have limited flexibility to deploy different technologies from alternative licensors. Reliance on key customer contracts. We have several complex high-value national and global customer contracts. These contracts are frequently impacted by a variety of factors that could reduce or eliminate the profitability of these contracts.
Reliance on key customer contracts : We maintain several complex, high-value contracts with national and global customers. These contracts are subject to factors that may reduce or eliminate profitability. Failure to renew significant contracts upon expiration would adversely affect our results.
A significant number of these authorizations are scheduled to lapse over the next five to 10 years, unless we are able to extend or renew them. Our operations could be adversely affected if any of these authorizations are cancelled, or otherwise terminate or lapse, or if the landowner requests price increases.
Many of these authorizations will expire within the next five to ten years unless renewed. Our operations could be adversely affected if authorizations lapse, are cancelled, terminated, allowed to expire, or become subject to material price increases. Network expansion may also be delayed if we cannot secure necessary permits or approvals.
These modernization efforts will require efficient allocation of resources, development capacity, greater use of artificial intelligence (“AI”) and other emerging technologies, access to subject-matter experts, development of a sustainable and resilient operating model, advanced project management capabilities, and successful collaboration among personnel with differing expertise. We cannot assure you these efforts will be successful.
These initiatives require efficient resource allocation, advanced project management, adoption of emerging technologies (including AI), access to subject-matter experts, and cross-functional collaboration. We cannot assure you these efforts will be completed on time, be within budget, or achieve intended benefits.
Our agreements with these licensors may expire or be terminated, and some of the licenses may not be available to us in the future on terms acceptable to us or at all, including if the third-party licensor violates, or is alleged to have violated, the intellectual property rights of others.
These agreements may expire or be terminated, and future licenses may not be available on acceptable terms or at all. If a licensor faces intellectual property disputes or other challenges, our ability to use licensed technology could be impaired. Incorporating licensed technology into our network may also limit flexibility to deploy different technologies from alternative licensors.
We cannot assure you we will be successful in obtaining or retaining all regulatory licenses necessary to carry out our business in our various markets. Even if we are, the prescribed service standards and conditions imposed on us under these licenses and related laws may increase our costs, limit our operational flexibility or result in third-party claims.
Even when authorizations are secured, the service standards and conditions imposed under these authorizations and related laws may increase costs, restrict operational flexibility, or expose us to third-party claims. Governmental agencies, including state attorneys general, have routinely investigated our business practices in the past and are expected to continue doing so.
As we continue to transform our organization, we may be unable to attract, develop and retain leaders and employees with the right skill sets and technical expertise.
As we continue transforming to primarily serve Business customers and deliver advanced products, we face intense competition for skilled leaders and employees and may be unable to attract and retain the technical, operational, sales, and managerial expertise needed to execute our strategy.
If we are unsuccessful in protecting or enforcing our intellectual property rights, our business, competitive position, results of operations and financial condition could be adversely affected. Issues related to our use of artificial intelligence (AI) could give rise to legal or regulatory actions, damage our reputation or otherwise materially harm our business.
However, these protections may not be fully effective, including due to legal limitations and enforcement challenges. If we are unable to protect or enforce our intellectual property rights, our business, competitive position, operating results, and financial condition could be adversely affected. Our use of AI technology may create operational, legal, and reputational risks.
In recent years, competitive pressures have commoditized pricing for some of our products and services and lowered market prices for many of our other products and services. Continued competitive pressures will likely place further downward pressure on market pricing.
These advantages may allow competitors to compete more successfully for customers, strategic partners, and acquisition opportunities. In recent years, competitive pressures have commoditized pricing for certain products and reduced market prices for many others. We expect these pressures to continue, which could place further downward pressure on pricing and adversely impact our profitability.
If we are required to take one or more of these actions, our revenues or profit margins may decline, our operations could be materially impaired or we may be required to stop selling or redesign one or more of our products or services, any of which could have a material adverse impact on our business.
These outcomes could reduce revenues or profit margins, impair operations, or require us to stop selling or redesign products or services, any of which could materially adversely affect our business. In addition, we may need to obtain rights to use third-party intellectual property to develop new products or services.
General Risk Factors Unfavorable general economic, societal, health or environmental conditions could negatively impact us.
In addition, any resulting negative sentiment toward the U.S. could further harm our operations, financial condition, or results of operations. Unfavorable general economic, societal, health, or environmental conditions could negatively impact us.
Our actual or perceived failure to achieve our environmental-related initiatives, goals, commitments, or to meet evolving stakeholder expectations or standards could adversely impact us by resulting in legal or regulatory proceedings against us, customer or employee attrition, reputational damage, or other negative impacts on our business.
Failure — or perceived failure — to meet our environmental commitments or evolving stakeholder expectations could result in regulatory or legal proceedings, loss of customers or employees, reputational harm, or other adverse impacts on our business. Conversely, we may lose stakeholders who oppose such initiatives or face claims alleging these efforts caused harm.
Cyber-attacks can put at risk personally identifiable information, customer data or protected health information, thereby implicating stringent domestic and foreign data protection laws. These threats may also arise from failure or intrusions of systems owned, operated or controlled by other unaffiliated third-party operators, upon whom we are materially reliant to operate our business.
These threats may also arise from failure or intrusions of unaffiliated third-party systems on which we materially rely to operate our business.
We do not believe these incidents had or are likely to have a material adverse impact on our ability to serve our customers or our business, operations or financial results. As further described in Item 1C of this annual report, cyber-attacks on our systems may stem from a variety of sources and take many forms.
Future attacks could have a material adverse effect on our business, operations, or financial results. 16 As further described in Item 1C “Cybersecurity” of this annual report, cyber-attacks originate from multiple sources and manifest in diverse ways, potentially exposing personally identifiable information, customer data, or protected health information, subjecting us to stringent domestic and foreign data protection laws.
Their reliance on our network exposes us to the risk that they may transfer all or a portion of this traffic from our network to alternative networks owned, constructed or leased by them, thereby reducing our revenue. For instance, certain of our hyperscaler customers have built infrastructure that has reduced their reliance on us. Reliance on key suppliers and vendors.
In addition, some communications providers rely on our network to transmit their data or voice traffic. If these companies shift all or part of this traffic to alternative networks they own, build, or lease, our revenue could decline. For example, certain hyperscaler customers have developed infrastructure that has reduced their reliance on our network.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeCyber-attacks can take many forms, including computer hackings, computer viruses, ransomware, worms or other destructive or disruptive software, denial of service attacks, or other malicious activities. To identify, assess and mitigate cybersecurity risk, we have implemented a global information security management program that includes administrative, technical, and physical safeguards.
Biggest changeTo identify, assess and mitigate cybersecurity risk, we have implemented a global information security management program that includes administrative, technical, and physical safeguards. This program seeks to identify, detect, protect against, and respond to threats to our information systems. Our security operations center provides advanced threat detection and response capabilities.
Lumen generally seeks to promote a company-wide awareness of cybersecurity risk through broad-based communications and educational initiatives, including regularly conducting phishing tests and holding employee trainings on our privacy, cybersecurity and information management policies, at least annually and more frequently when legal or other developments warrant. 28 • The Technology, Security, and Privacy Council, co-chaired by the CSO, the Chief Information Officer (CIO), and the Chief Privacy Officer (CPO), leverages the combined expertise of various security, IT, legal, internal audit, and operational leaders across the company.
Lumen generally seeks to promote a company-wide awareness of cybersecurity risk through broad-based communications and educational initiatives, including regularly conducting phishing tests and holding employee trainings on our privacy, cybersecurity and information management policies, at least annually and more frequently when legal or other developments warrant. • The Technology, Security, and Privacy Council, co-chaired by the CSO, the Chief Information Officer (CIO), and the Chief Privacy Officer (CPO), leverages the combined expertise of various security, IT, legal, internal audit, and operational leaders across the company.
With respect to cyber risks, the ROC's oversight function helps to ensure accountability, adequacy of resourcing, implementation of Company directives, and alignment of oversight provided by our Board of Directors and our senior leadership team. Some of the more significant risks discussed by the ROC are also reported to our Risk and Security Committee at least quarterly.
With respect to cyber risks, the ROC's oversight function helps to ensure accountability, adequacy of resourcing, implementation of Company directives, and alignment of oversight provided by the Board and senior leadership team. Some of the more significant risks discussed by the ROC are also reported to our Risk and Security Committee at least quarterly.
This council provides a forum for these cross-functional members of management of our leadership team to consider emerging technologies, such as artificial intelligence and emerging cybersecurity risks; review cybersecurity and privacy regulations; review and update policies and standards as appropriate; and promote cross-functional collaboration to manage cybersecurity and privacy risks across the enterprise.
This council provides a forum for these cross-functional members of management of our leadership team to consider emerging technologies, such as artificial intelligence and emerging cybersecurity risks; review cybersecurity and privacy regulations; review and update policies and standards as appropriate; and promote cross-functional 28 collaboration to manage cybersecurity and privacy risks across the enterprise.
Lumen's CSO has extensive experience working in the public and private sectors leading security organizations, managing risk management functions, and driving large information technology deployments. He has an Engineering degree, a Master of Business Administration, a Chief Information Security Officer Certification, and a Global Information Assurance Certification Security Leadership Certification.
Lumen's CSO has extensive experience working in the public and private sectors leading security organizations, managing risk functions, and driving large information technology deployments. He has an Engineering degree, a Master of Business Administration, a Chief Information Security Officer Certification, and a Global Information Assurance Certification Security Leadership Certification.
This playbook describes how we assess incidents and how our security team shares information about such incidents with others at Lumen, including senior leadership and, if warranted, with some or all members of its Board of Directors.
This playbook describes how we assess incidents and how our security team shares information about such incidents with others at Lumen, including senior leadership and, if warranted, with some or all members of its Board of Directors (the "Board").
Among other processes, this team reviews our programs and processes related to information security, third-party risk, vendor management, facilities, unplanned downtime, business disruption, business continuity and disaster recovery. Governance As part of our overall risk management approach, Lumen prioritizes the identification and management of cybersecurity risk at several levels, including Board oversight, executive commitment and employee training.
Among other processes, this team reviews our programs and processes related to information security, third-party risk, vendor management, facilities, unplanned downtime, business disruption, business continuity and disaster recovery. Governance As part of our overall risk management approach, Lumen prioritizes the identification and management of cybersecurity risk at several levels, including oversight by Lumen's Board, executive commitment, and employee training.
ITEM 1C. CYBERSECURITY Risk Management and Strategy As a technology and communications company that globally transmits large amounts of information over our networks, we recognize the critical importance of maintaining the security and integrity of information and systems under our control.
ITEM 1C. CYBERSECURITY Risk Management and Strategy As a technology and communications company that globally transmits large amounts of information over our networks, we recognize the critical importance of maintaining the confidentiality, integrity, and availability of information and systems under our control.
Lumen's Risk and Security Committee, comprised of independent directors from its Board, assists the Board in overseeing our cybersecurity and data privacy risk.
Lumen's Risk and Security Committee, comprising independent directors from its Board, assists the Board in overseeing our cybersecurity and data privacy risk.
Despite our efforts to prevent security incidents, (i) some of these attacks have resulted in security incidents (although thus far we do not believe that any of these incidents has resulted in a material adverse effect on our operating results or financial condition) and (ii) future security incidents are likely (some of which could have a material adverse effect on operating results or financial condition).
Despite our efforts to manage cybersecurity risks and prevent security incidents, (i) some of these attacks have resulted in security incidents (although thus far we do not believe that any of these incidents has resulted in or is reasonably likely to result in a material adverse effect on our business strategy, operating results, or financial condition) and (ii) future security incidents are likely (some of which could have a material adverse effect on our operating results or financial condition).
As a U.S. government contractor, we are required to comply with extensive governmental regulations and standards regarding cyber security. Lumen periodically engage both internal and external auditors and consultants to assess and enhance our program.
As a U.S. government contractor, we are required to comply with extensive governmental regulations and standards regarding cyber security. Lumen periodically engages both internal and external auditors and consultants to assess and enhance our program and to assist in responding to cybersecurity incidents.
See Item 1A “Risk Factors” for a further discussion of cybersecurity risks. 27 Lumen maintains an Incident Response Playbook that provides a set of guidelines for our stakeholders to follow when handling any data incident.
See “Risk Factors” in Item 1A for a further discussion of cybersecurity risks and how they have affected or may affect us. Lumen maintains an Incident Response Playbook that provides a set of guidelines for our stakeholders to follow when handling any data incident.
We also mutually exchange threat intelligence with government agencies, cyber analysis centers and cybersecurity associations. As noted elsewhere in this annual report, we are materially reliant on a variety of third-party service providers to operate our business, which exposes us to the risk of cyber incidents impacting those providers’ systems.
As noted elsewhere in this annual report, we are materially reliant on a variety of third-party service providers to operate our business, which exposes us to the risk of cyber incidents impacting those providers’ systems.
In addition to addressing our more significant cyber incidents, the CSWAT manages risks from matters related to business continuity, including risks posed by cybersecurity threats, and implements controls to mitigate such operational risks.
The CSWAT is comprised of senior IT, operations, risk, legal and compliance leaders across Lumen's business. In addition to addressing our more significant cyber incidents, the CSWAT manages risks from matters related to business continuity, including risks posed by cybersecurity threats, and implements controls to mitigate such operational risks.
These escalation provisions, together with Lumen's disclosure controls and procedures, are designed to ensure that appropriate representatives throughout the Company are available to assess how to respond to such incidents and make any necessary public notifications. The Cybersecurity Incident Response Team (“CIRT”) is responsible for detecting and coordinating responses to all security incidents.
These escalation provisions, together with Lumen's disclosure controls and procedures, are designed to facilitate appropriate representatives throughout the Company in their assessment of relevant incidents and any necessary public notifications. 27 Lumen's Cybersecurity Incident Response Team (“CIRT”) is responsible for detecting and coordinating responses to appropriate security incidents.
These independent external auditors and consultants are accredited under various information security standards, including those administered by the International Organization for Standardization and the PCI Security Standards Council. These engagements typically include penetration testing, third-party certifications, compliance assessments, audits, and assessments of vulnerabilities and emerging threats. We also periodically deploy our Internal Audit processes to conduct additional reviews and assessments.
Many of these independent external auditors and consultants are accredited under various information security standards, including those administered by the International Organization for Standardization and the PCI Security Standards Council. These engagements typically include penetration testing, third-party certifications, compliance assessments, audits, and assessments of vulnerabilities and emerging threats, as well as digital forensics and related work.
We have a vendor risk management program that assesses, manages and oversees risks associated with third-party service providers who have access to our data and systems. We maintain ongoing monitoring to ensure their compliance with our cybersecurity standards.
We have a vendor risk management program that assesses, manages and oversees risks associated with third-party service providers who have access to our data and systems. We engage in diligence, contracting or maintain ongoing monitoring for compliance with our cybersecurity standards, depending on our assessment of each provider's operational criticality and risk profile.
Our cybersecurity and privacy policies encompass information security, incident response procedures, and vendor management. Our risk management team works closely with our information technology, privacy, product, and operations departments to continuously evaluate emerging cyber risk.
Our risk management team works closely with our information technology, privacy, product, and operations departments to continuously evaluate emerging cyber risk as part of our overall risk management program.
He oversees the implementation and compliance of our information security standards and mitigation of information security related risks.
He oversees the implementation and compliance of our information security standards and is primarily responsible for managing our processes to assess and mitigate information security related risks.
This team regularly assesses its communication plan to confirm that its members can be alerted quickly in the event of an actual crisis and meet as a team to discuss response options. The CIRT also addresses each incident, unless it determines that an incident is sufficiently serious.
This team regularly assesses its internal communication plan and meet as a team to discuss response options. The CIRT also addresses each incident, unless it determines that an incident is sufficiently serious. In those instances, it notifies the Cyber Security Watch Team ("CSWAT"), which is responsible for addressing cybersecurity incidents that raise more significant risks.
This program seeks to identify, detect, protect and respond to threats to our information systems. Our security operations center provides advanced threat detection and response capabilities. Lumen maintains an insider threat program to detect, investigate and mitigate insider threat risks to Lumen assets, data, services and personnel globally.
Lumen maintains an insider threat program to detect, investigate and mitigate insider threat risks to Lumen assets, data, services and personnel globally. Our cybersecurity and privacy policies encompass information security, incident response procedures, and vendor management.
We view cybersecurity risk as one of our principal enterprise-wide risks, subject to control and monitoring at various levels of management throughout the Company. We dedicate significant resources towards programs designed to identify, assess, manage, mitigate and respond to cybersecurity threats.
Our cybersecurity risk management program is integrated into our overall enterprise risk management program, and shares common methodologies, reporting channels and governance processes that apply across the enterprise program to other key risk areas. We dedicate significant resources towards programs designed to identify, assess, manage, mitigate and respond to cybersecurity threats.
Removed
As described in Item 1A “Risk Factors,” several features of our operations heighten our susceptibility to cyber-attacks, including (i) our material reliance on systems owned, operated or controlled by unaffiliated third-party operators and (ii) our processing and storage of large amounts of sensitive customer data.
Added
We also periodically deploy our Internal Audit processes to conduct additional reviews and assessments. We also mutually exchange threat intelligence with government agencies, cyber analysis centers and cybersecurity associations.
Removed
Cyber-attacks on our systems may be initiated by a wide variety of intruders, including employees, cyber-criminals, nation state actors and other advanced persistent threat actors, and may include attempts by outside parties to gain access to sensitive data that is stored in or transmitted across our network.
Removed
In those instances, it will notify the Cyber Security Watch Team ("CSWAT"), which is responsible for addressing cybersecurity incidents that raise more significant risks. The CSWAT is comprised of senior IT, operations, risk, legal and compliance leaders across business segments.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeHowever, we also lease from third parties certain facilities, network capacity and equipment and software under various lease or other arrangements. We also own and lease administrative offices in major metropolitan locations primarily within our local service area.
Biggest changeWe own a substantial portion of our telecommunications equipment essential to our operations, but, we also lease certain facilities, network capacity, and equipment from third parties under various agreements. We also own or lease administrative offices in major metropolitan areas.
Substantially all of our network electronics equipment is located in buildings or on land that we own or lease within our local service area. Outside of our local service area, our assets are generally located on real property pursuant to an agreement with the property owner or another person with rights to the property.
Substantially all of our network electronics equipment is housed in buildings or on land we own or lease within our local service area. Outside our local service area, our assets are generally located on real property under agreements with the property owner or another person with rights to the property.
Our gross property, plant and equipment consisted of the following components as of the dates below: As of December 31, 2024 2023 Land 2 % 2 % Fiber, conduit and other outside plant (1) 46 % 42 % Central office and other network electronics (2) 33 % 32 % Support assets (3) 16 % 17 % Construction in progress (4) 3 % 7 % Gross property, plant and equipment 100 % 100 % _______________________________________________________________________________ (1) Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures.
Our gross property, plant and equipment consisted of the following components as of the dates below: December 31, 2025 (5) 2024 Land 2 % 2 % Fiber, conduit and other outside plant (1) 45 % 46 % Central office and other network electronics (2) 34 % 33 % Support assets (3) 18 % 16 % Construction in progress (4) 1 % 3 % Gross property, plant and equipment 100 % 100 % _______________________________________________________________________________ (1) Fiber, conduit and other outside plant consists of fiber and metallic cable, conduit, poles and other supporting structures.
For additional information, see Note 8—Property, Plant and Equipment to our consolidated financial statements in Item 8 of Part II of this report. We have entered into various agreements regarding our unused office and technical space to reduce our ongoing operating expenses regarding such space. 29
We have entered into various agreements regarding our unused office and technical space to reduce our ongoing operating expenses regarding such space.
(4) Construction in progress includes inventory held for construction and property of the aforementioned categories that is under construction and has not yet been placed in service. We own a substantial portion of our telecommunications equipment required for our business.
(4) Construction in progress includes inventory held for construction and property of the aforementioned categories that has not been placed in service as it is still under construction. (5) These values exclude assets classified as held for sale as of December 31, 2025.
Removed
It is possible that we may lose our rights under one or more of these agreements, due to their termination or expiration or in connection with legal challenges to our rights under such agreements. Our net property, plant and equipment was approximately $8.9 billion and $8.7 billion at December 31, 2024 and 2023, respectively.
Added
These agreements may expire, terminate, or be legally challenged, which could result in the loss of our rights. The carrying amount of our net property, plant and equipment was approximately $7.4 billion and $8.9 billion as of December 31, 2025 and 2024, respectively, excluding assets held for sale. For additional information, see Note 9—Property, Plant and Equipment in Item 8.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 30 PART II References in this report to "QC," "Qwest," "we," "us" and "our" refer to Qwest Corporation and its consolidated subsidiaries, unless the context otherwise requires. ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Not Applicable. ITEM 6. [Reserved]
Biggest changeITEM 4. MINE SAFETY DISCLOSURES Not applicable. 30 PART II References in this report to "QC," "Qwest," "we," "us" and "our" refer to Qwest Corporation and its consolidated subsidiaries, unless the context otherwise requires. ITEM 5.
Added
MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES We have one equity holder, whose equity interest is not publicly traded. ITEM 6. [Reserved]

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Biggest changeItem 6. [Reserved] 31 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Overview 31 Results of Operations 33 C ritical Accou nting P olici es and Estimates 38 Liquidity and Capital Res ources 40 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 44 Item 8.
Biggest changeItem 6. [Reserved] 31 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 31 Overview 31 Results of Operations 33 Liquidity and Capital Resources 38 Critical Accounting Estimates 44 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 47 Item 8.
Consolidated Financial Statements and Supplementary Data 45 Consolidated Statements of Operations 47 Consolidated Balance Sheets 48 Consolidated Statements of Cash Flows 49 Consolidated Statements of Stockholder's Equity 50 Notes to Consolidated Financial Statements 51
Consolidated Financial Statements and Supplementary Data 48 Consolidated Statements of Operations 51 Consolidated Balance Sheets 52 Consolidated Statements of Cash Flows 53 Consolidated Statements of Stockholder's Equity 54 Notes to Consolidated Financial Statements 55

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

54 edited+75 added−76 removed2 unchanged
Biggest changeWithin each revenue category, this decrease was primarily due to: • Decreases in Other Broadband of $179 million primarily due to fewer customers for our low speed broadband services; • Decreases in Voice and Other of $68 million due almost entirely to the continued loss of copper-based voice customers; • Decreases in Fiber Broadband by $96 million driven by fewer subscribers for our fiber services, primarily as a result of migrations to the Quantum Fiber services offered by Lumen (which bills customers for such services and pays us for use of our network in providing such services, as further described below); • Decreases in Harvest of $108 million primarily attributable to (i) declines in legacy voice services for Business customers of $57 million, (ii) lower unbundled network elements revenue of $21 million and (iii) a decrease in private line services of $12 million; • Decreases in Nurture of $36 million primarily due to declines in Ethernet services for Business customers; • Decreases in Grow of $10 million primarily due to declines in wavelengths services for Business customers; and • Increases in Affiliate Services of $90 million primarily due to a $43 million increase in fiber broadband and other direct telecommunication services provided to our affiliates, and $47 million of additional employee shared services expense allocated to our affiliates. 34 Operating Expenses The following table summarizes our consolidated operating expenses: Years Ended December 31, % Change 2024 2023 (Dollars in millions) Cost of services and products (exclusive of depreciation and amortization) $ 1,505 1,608 (6) % Selling, general and administrative 438 478 (8) % Operating expenses-affiliates 761 796 (4) % Depreciation and amortization 753 823 (9) % Goodwill impairment — 2,405 nm Total operating expenses $ 3,457 6,110 (43) % _______________________________________________________________________________ nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.
Biggest changeOperating Expenses The following table summarizes our consolidated operating expenses; however, these expense categories may not be comparable to those of other companies:: Years Ended December 31, % Change 2025 2024 (Dollars in millions) Cost of services and products (exclusive of depreciation and amortization) $ 1,449 1,505 (4) % Selling, general and administrative 456 438 4 % Net loss on disposal group held for sale 235 — nm Operating expenses-affiliates 920 761 21 % Depreciation and amortization 685 753 (9) % Goodwill impairment 2,012 — nm Total operating expenses $ 5,757 3,457 67 % _______________________________________________________________________________ nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.
You can find descriptions of these legal proceedings in Lumen's quarterly and annual reports filed with the SEC. Because we are not a party to any of the matters, we have not accrued any liabilities for these matters as of December 31, 2024.
You can find descriptions of these legal proceedings in Lumen's quarterly and annual reports filed with the SEC. Because we are not a party to any of the Lumen matters, we have not accrued any liabilities for these matters as of December 31, 2025.
Income Taxes We are included in the consolidated federal income tax return of Lumen Technologies. Lumen Technologies treats our consolidated results as if we were a separate taxpayer. We are required to pay our tax liabilities to Lumen Technologies based upon our separate return taxable income. We are also included in the combined state tax returns filed by Lumen Technologies.
Lumen Technologies treats our consolidated results as if we were a separate taxpayer. We are required to pay our tax liabilities to Lumen Technologies based upon our separate return taxable income. We are also included in the combined state tax returns filed by Lumen Technologies.
For additional information on our goodwill balances and results of our impairment analyses, see Note 2—Goodwill and Other Intangible Assets for additional information. Affiliate Transactions We recognize intercompany charges for the amounts billed to us by our affiliates and we recognize intercompany revenue for services we bill to our affiliates.
For additional information on our goodwill balances by segment and results of our impairment analyses, see Note 3—Goodwill and Intangible Assets in Item 8. Affiliate Transactions We recognized intercompany charges for the amounts billed to us by our affiliates and we recognized intercompany revenue for services we bill to our affiliates.
Other Matters We are subject to various legal proceedings and other contingent liabilities that individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. See Note 14—Commitments, Contingencies and Other Items for additional information.
Other Matters Legal Proceedings and Other Contingent Liabilities We are subject to various legal proceedings and other contingent liabilities that individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. See Note 15—Commitments, Contingencies and Other Items for additional information. 43 Our network includes a limited number of legacy lead-sheathed copper cables.
As of December 31, 2024, we had approximately $2.0 billion aggregate outstanding indebtedness (excluding finance leases, unamortized premiums, net, unamortized debt issuance costs, and Note Payable - Affiliate). $237 million of our outstanding debt is due in the next 12 months (excluding finance lease obligations).
Debt Instruments and Financing Arrangements Debt Instruments As of December 31, 2025, we had approximately $1.7 billion aggregate outstanding indebtedness (excluding finance leases, unamortized premiums, net, unamortized debt issuance costs, and Note Payable - Affiliate). None of our outstanding debt is due in the next 12 months (excluding finance lease obligations).
This is primarily due to the repricing of certain services to align with lower market rates including certain transport services, along with the termination of certain affiliate circuits that are no longer required to support services provided to our external customers. See Note 13—Affiliate Transactions for additional information.
This was primarily due to the 2024 repricing of certain services provided to our affiliates to align with lower market rates including certain transport services, along with the termination of certain affiliate circuits that we no longer required to provide services to our external customers. See Note 14—Affiliate Transactions in Item 8 for additional information.
These and other developments and trends impacting our operations are discussed elsewhere in Item 1A and this Item 7.
These and other developments and trends impacting our operations are discussed in "Risk Factors" in Item 1A and elsewhere throughout MD&A.
We amortize capitalized software using the straight-line method primarily over estimated lives ranging up to seven years. We annually review the estimated lives and methods used to amortize our other intangible assets. The amount of future amortization expense may differ materially from current amounts, depending on the results of our annual reviews.
We amortize finite-lived intangible assets using the straight-line method over the following estimated lives: • Capitalized software : 3 - 7 years The amount of future amortization expense may differ materially from current amounts, depending on the results of our annual reviews.
The impairment analyses of these assets are considered critical because of their significance to us and our segments and the subjective nature of certain assumptions used to estimate fair value. Intangible assets arising from business combinations, such as goodwill and capitalized software are initially recorded at estimated fair value.
The impairment analyses of these assets are considered critical because of their significance to us, the subjective nature of certain assumptions used to estimate fair value, and because it can materially impact reported results and future expense. 44 Amortization Intangible assets acquired in business combinations — such as goodwill and capitalized software — are recorded at estimated fair value at acquisition.
Cash provided by operating activities is subject to variability period over period as a result of timing differences, including with respect to collection of receivables and payments of interest expense, accounts payable and bonuses. For additional information about our operating results, see "Results of Operations" above.
This was primarily as a result of: • lower net income adjusted for non-cash income and expenses Cash provided by operating activities is subject to variability period over period as a result of timing differences, including with respect to collection of receivables and payments of interest expense, accounts payable and bonuses.
Because of the significance of the services we provide to our affiliates and our other affiliate transactions, the results of operations, financial position and cash flows presented herein are not necessarily indicative of the results of operations, financial position and cash flows we would have achieved had we operated as a stand-alone entity during the periods presented.
Because of the significance of these transactions, our results of operations, financial position, and cash flows are not necessarily indicative of the amounts we would have achieved had we operated as a stand-alone entity. Regarding telecommunications services that we provide to our affiliates, we saw a reduction to affiliate revenue for the year ended December 31, 2025.
For additional information on these programs, see (i) Note 3—Revenue Recognition to our consolidated financial statements in Item 8 of Part II of this report, (ii)"Business—Regulation" in Item 1 of Part I of this report and (iii) "Risk Factors—Financial Risks" in Item 1A of Part I of this report.
For additional information on these programs, see Note 4—Revenue Recognition in Item 8, "Business—Regulation of Our Business" in Item 1, and "Risk Factors—Legal and Regulatory Risks" in Item 1A.
At December 31, 2024, we served approximately 1.6 million broadband subscribers. Our methodology for counting broadband subscribers may be different than the methodologies used by other companies.
Our methodology for counting broadband subscribers may be different than the methodologies used by other companies.
The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenue and expenses.
CRITICAL ACCOUNTING ESTIMATES The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenue, and expenses. Certain policies and estimates are considered critical because they involve significant judgments and assumptions and could materially impact our financial statements.
Our contributions are not segregated or restricted to pay amounts due to our employees and may be used to provide benefits to other employees of our affiliates. Prior to the pension plan merger, the above-noted employees participated in the QCII pension plan.
("QCII") pension plan and a pension plan of an affiliate were merged into the CenturyLink Retirement Plan, which is now named the Lumen Combined Pension Plan. Our contributions are not segregated or restricted to pay amounts due to our employees and may be used to provide benefits to other employees of our affiliates.
Results of Operations The following table summarizes the results of our consolidated operations for the years ended December 31, 2024 and 2023: Years Ended December 31, 2024 2023 (Dollars in millions) Operating revenue $ 5,508 5,915 Operating expenses 3,457 6,110 Operating income (loss) 2,051 (195) Total other expense, net (37) (75) Income (loss) before income taxes 2,014 (270) Income tax expense 527 561 Net income (loss) $ 1,487 (831) 33 Operating Revenue The following table summarizes our consolidated operating revenue recorded under our revenue categories described in Note 3—Revenue Recognition: Years Ended December 31, % Change 2024 2023 (Dollars in millions) Other Broadband $ 932 1,111 (16) % Voice and Other 521 589 (12) % Fiber Broadband 377 473 (20) % Harvest 939 1,047 (10) % Nurture 357 393 (9) % Grow 133 143 (7) % Affiliate Services 2,249 2,159 4 % Total operating revenue $ 5,508 5,915 (7) % Total operating revenue decreased by $407 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
RESULTS OF OPERATIONS The following table summarizes the results of our consolidated operations for the years ended December 31, 2025 and 2024: Years Ended December 31, 2025 2024 (Dollars in millions) Operating revenue $ 4,748 5,508 Operating expenses 5,757 3,457 Operating (loss) income (1,009) 2,051 Total other income (expense), net 34 (37) (Loss) income before income taxes (975) 2,014 Income tax expense 352 527 Net (loss) income $ (1,327) 1,487 33 Operating Revenue The following table summarizes our consolidated operating revenue recorded under our revenue categories as described in Note 4—Revenue Recognition in Item 8: Years Ended December 31, % Change 2025 2024 (Dollars in millions) Other Broadband $ 763 933 (18) % Voice and Other 442 516 (14) % Fiber Broadband 314 377 (17) % Harvest 834 942 (11) % Nurture 330 357 (8) % Grow 130 134 (3) % Affiliate Services 1,935 2,249 (14) % Total operating revenue $ 4,748 5,508 (14) % Operating revenue decreased $760 million in 2025 compared to 2024.
In 2015, we agreed to a plan to settle the outstanding pension and post-retirement affiliate obligations, net balance with QCII over a 30 year term. Under the plan, payments are scheduled to be made on a monthly basis. For the year ended December 31, 2024, we made net settlement payments of $52 million to QCII in accordance with the plan.
Under the plan, payments are scheduled to be made on a monthly basis. For the year ended December 31, 2025, we made net settlement payments of $48 million to QCII in accordance with the plan. For the year ended 2026, we expect to make aggregate settlement payments of $44 million to QCII under the plan.
Our goodwill was derived from Lumen's acquisition of us where the purchase price exceeded the fair value of the net assets acquired.
Goodwill and Intangible Assets We have a significant amount of goodwill, which was derived from Lumen's acquisition of us where the purchase price exceeded the fair value of the net assets acquired. Goodwill is assessed at least annually for impairment.
Deferred taxes are computed using enacted tax rates expected to apply in the year in which the differences are expected to affect taxable income.
Deferred tax assets and liabilities reflect future tax effects of: 46 • tax credit carryforwards, and • differences between financial statement carrying values of assets and liabilities and tax bases of those assets and liabilities. Deferred taxes are computed using enacted tax rates expected to apply in the year in which the temporary differences are expected to affect taxable income.
As of the filing date of this report, the credit ratings for Qwest Corporation's senior unsecured debt were as follows: Agency Credit Ratings Standard & Poor's B- Moody's Investors Service, Inc. Caa3 Fitch Ratings B+ Lumen's and Qwest Corporation's credit ratings are reviewed and adjusted from time to time by the rating agencies.
The availability, interest rate and other terms of any new borrowings will depend on the ratings assigned to Qwest Corporation by credit rating agencies, among other factors. As of the filing date of this report, the credit ratings for Qwest Corporation's senior unsecured debt were as follows: Agency Credit Ratings Moody's Investors Service, Inc.
Lumen Technologies occasionally makes voluntary contributions in addition to required contributions and reserves the right to do so in the future. Lumen made a voluntary contribution of $170 million to the trust for the Combined Pension Plan in 2024.
Lumen made a voluntary contribution to the trust for the Combined Pension Plan of $101 million in January 2026 and $170 million in 2024. Any required or voluntary contributions could reduce available cash and impact liquidity.
With respect to our analysis using the discounted cash flow method, the timing and amount of projected cash flows under these forecasts required estimates developed from our long-range plan, which is informed by wireline industry trends, the competitive landscape, product lifecycles, operational initiatives, capital allocation plans and other company-specific and external factors that influence our business.
Discounted Cash Flow Method • Cash flow projections : Derived from estimates developed from our long-range plan, informed by industry trends — including wireline-specific factors — competitive landscape, product lifecycles, operational initiatives, and capital allocation strategies.
See Note 6—Long-Term Debt and Note Payable - Affiliate to our consolidated financial statements in Item 8 of Part II of this report for additional information. 41 Note Payable - Affiliate We are permitted to borrow up to $2.0 billion from our parent Lumen Technologies under a revolving promissory note.
For more information, see Note 14—Affiliate Transactions. Note Payable - Affiliate We are permitted to borrow up to $2.0 billion from our ultimate parent Lumen Technologies under a revolving promissory note. As of December 31, 2025, nothing was due under this promissory note.
We believe that our estimates, judgments and assumptions made when accounting for the items described below were reasonable, based on information available at the time they were made. However, actual results may differ from those estimates, and these differences may be material.
These include: • goodwill and intangible assets; • affiliate transactions; and • income taxes. While we believe our estimates are reasonable based on information available at the time they were made, actual results may differ and could be material.
Goodwill Impairment We are required to perform impairment tests related to our goodwill annually, which we perform as of October 31, or sooner if an indicator of impairment occurs.
Goodwill Impairments We are required to perform impairment tests related to our goodwill annually, which we perform as of October 31, or sooner if an indicator of impairment occurs. 36 When we performed a qualitative impairment test during the fourth quarter of 2025, and concluded the estimated fair value of our equity was less than our carrying value of equity at October 31, 2025.
Any changes in our practices or judgments involved in the measurement of deferred tax assets and liabilities could materially impact our financial condition or results of operations. See Note 12—Income Taxes for additional information. Liquidity and Capital Resources Overview of Sources and Uses of Cash We are an indirectly wholly-owned subsidiary of Lumen Technologies, Inc.
For additional information, see Note 13—Income Taxes in Item 8 and "Critical Accounting Estimates — Income Taxes" below. 37 LIQUIDITY AND CAPITAL RESOURCES Overview of Sources and Uses of Cash We are an indirectly wholly-owned subsidiary of Lumen Technologies, Inc.
From time to time we may declare and pay dividends to QSC, our direct parent, sometimes in excess of our earnings to the extent permitted by applicable law, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances.
Intercompany lines of credit and other affiliate obligations cause our balances with Lumen and its affiliates to fluctuate. From time to time, we may declare and pay dividends to QSC, including amounts in excess of current earnings when permitted by law, using cash owed to us under these advances, which reduces the outstanding balance.
Amounts outstanding under these lines of credit and intercompany obligations vary from time to time. Under these arrangements, the majority of our cash balance is advanced on a daily basis for centralized management by Lumen's service company affiliate.
These arrangements include lines of credit, affiliate obligations, capital contributions, and dividends, and allow affiliates to extend lines of credit to other affiliates. Under these arrangements, most of our cash is advanced daily to Lumen's service company affiliate for centralized management. We report the resulting balances as advances to affiliates on our consolidated balance sheet.
A substantial portion of our active and retired employees participate in Lumen's qualified pension plan and post-retirement benefit plans. On December 31, 2014, the Qwest Communications International Inc. ("QCII") pension plan and a pension plan of an affiliate were merged into the CenturyLink Retirement Plan, which is now named the Lumen Combined Pension Plan.
These obligations are sensitive to market conditions and actuarial assumptions, and adverse changes could increase funding requirements and reduce cash available for other uses. A substantial portion of our active and retired employees participate in Lumen's qualified pension plan and post-retirement benefit plans. On December 31, 2014, the Qwest Communications International Inc.
From time to time we may declare and pay dividends to Qwest Services Corporation ("QSC"), our direct parent, using cash owed to us under these advances, which has the net effect of reducing the amount of these advances. We report the balance of these transfers on our consolidated balance sheet as advances to affiliates.
We may also declare and pay dividends to our direct parent, Qwest Services Corporation (“QSC”), using cash owed to us under these advances, which reduces the outstanding balance of these advances. Current Business Environment and Macroeconomic Factors The macroeconomic environment in which we operate remains dynamic and continues to affect our business.
Depending on the facts and circumstances, we typically estimated the fair value by considering either or both of (i) a discounted cash flow method, which was based on the present value of projected cash flows over a discrete projection period and a terminal value, which was based on the expected normalized cash flows following the discrete projection period, and (ii) a market approach, which included the use of multiples of publicly-traded companies whose services were comparable to ours.
Fair Value Estimation Depending on the facts and circumstances, we typically estimate the fair value of our reporting unit by considering either or both of (i) a discounted cash flow method and (ii) a market approach.
Other Consolidated Results The following table summarizes our total other expense, net and income tax expense: Years Ended December 31, % Change 2024 2023 (Dollars in millions) Interest expense $ (62) (95) (35) % Interest income - affiliate, net 24 15 60 % Other income, net 1 5 (80) % Total other expense, net $ (37) (75) (51) % Income tax expense $ 527 561 (6) % Interest Expense Interest expense decreased by $33 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023.
Other Consolidated Results The following table summarizes our total other expense, net and income tax expense: Years Ended December 31, % Change 2025 2024 (Dollars in millions) Interest expense $ (91) (62) 47 % Interest income - affiliate, net 89 24 nm Other income, net 36 1 nm Total other income (expense), net $ 34 (37) nm Income tax expense $ 352 527 (33) % _______________________________________________________________________________ nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.
Lumen Technologies and we evaluate capital expenditure projects based on a variety of factors, including expected strategic impacts (such as forecasted impact on revenue growth, productivity, expenses, service levels and customer retention) and the expected return on investment.
Capital Expenditures We regularly invest in capital projects to expand and improve services, enhance and modernize networks, and strengthen our competitive position. Discretionary projects are evaluated by us and Lumen Technologies based on strategic impact such as revenue growth, productivity, service levels, customer retention, and expected return on investment.
Our network includes some residual lead-sheathed copper cables installed years ago that constitute a small portion of our network. Recent media coverage of potential health and environmental risks associated with these cables has resulted in regulatory inquiries and lawsuits, and could subject us to legislative or regulatory actions, removal costs, compliance costs or penalties.
Previous media reports regarding potential health and environmental risks associated with these cables have led to regulatory inquiries and lawsuits, and may result in legislative or regulatory actions, removal costs, compliance costs, or penalties.
We performed sensitivity analyses that considered a range of discount rates and a range of EBITDA market multiples and we believe the estimates, judgments, assumptions and allocation methods used by us were reasonable. Nonetheless, changes in any of them can significantly affect whether we must incur impairment charges, as well as the size of such charges.
We perform sensitivity analyses using a range of discount rates and EBITDA multiples and believe our methods and assumptions are reasonable. However, any changes to these inputs can significantly impact whether impairment charges are required and the magnitude of those charges.
See Note 10—Employee Benefits to the consolidated financial statements in Item 8 of Part II of this report and Note 11—Employee Benefits to the consolidated financial statements in Item 8 of Part II of Lumen's annual report on Form 10-K for the year ended December 31, 2024 for additional information about our and Lumen's pension and post-retirement benefit arrangements.
For discussions of 2023 results and comparisons between 2024 and 2023 that are not in this document, refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2024.
Substantially all of Lumen's post-retirement health care and life insurance benefits plans are unfunded and are paid by Lumen Technologies with available cash. 42 The affiliate obligations, net in other within current liabilities and noncurrent liabilities on our consolidated balance sheets primarily represents the cumulative allocation of expenses, net of payments, associated with QCII's pension plans and post-retirement benefits plans prior to the plan mergers.
Post-Retirement Benefits Substantially all of Lumen's post-retirement health care and life insurance benefits plans are unfunded and are paid by Lumen Technologies with available cash. 42 Future Contractual Obligations We maintain obligations related to debt, leases, purchase commitments, and asset retirement.
Investing Activities Net cash used in investing activities increased by $1.4 billion for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to an increase in advances to affiliates, partially offset by a decrease in capital expenditures.
This was primarily as a result of: • a decrease in advances to affiliates; • a decrease in capital expenditures; and • an offsetting increase due to the issuance of a note receivable - affiliate. Financing Activities Net cash used in financing activities decreased $49 million in 2025 compared to 2024 .
Subject to market conditions, and to the extent permitted under applicable debt covenants, Qwest Corporation may issue debt securities from time to time primarily to refinance a portion of our maturing debt. The availability, interest rate and other terms of any new borrowings will depend on the ratings assigned to Qwest Corporation by credit rating agencies, among other factors.
See the details of our outstanding indebtedness as of December 31, 2025 in Note 7—Long-Term Debt and Note Payable - Affiliate of Item 8. Future Debt Transactions Subject to market conditions, and to the extent permitted under applicable debt covenants, Qwest Corporation may issue debt securities from time to time primarily to refinance a portion of our maturing debt.
As of December 31, 2024, we have not accrued for any such potential costs and will only accrue when such costs are probable and reasonably estimable.
As of December 31, 2025, we have not recorded any accruals for such costs and will only accrue such costs when they become probable and reasonably estimable. For more information on related litigation and risks, see Note 15—Commitments, Contingencies and Other Items in Item 8 and “Risk Factors” in Item 1A.
Amounts outstanding under these lines of credit and intercompany obligations vary from time to time. Under these arrangements, the majority of our cash balance is advanced on a daily basis for centralized management by Lumen's service company affiliate.
Cash Management and Intercompany Arrangements We participate in Lumen Technologies, Inc.’s centralized cash‑management and intercompany financing arrangements, under which most of our cash held in U.S. banks is advanced daily to a Lumen service company affiliate for cash management. Under these arrangements affiliates may extend lines of credit to other affiliates.
In addition, in 2021 the Organization for Economic Co-operation and Development ("OECD") has issued Pillar Two model rules introducing a new global minimum corporate tax of 15% and the OECD and the majority of its participating countries continue to work toward the enactment of such tax.
These provisions did not have a material impact on our 2025 effective tax rate but are expected to significantly reduce our federal income tax liability. The Organization for Economic Co-operation and Development ("OECD") has issued Pillar Two model rules introducing a new global minimum corporate tax of 15% for tax years effective after December 31, 2023.
Any future changes in the senior unsecured or secured debt ratings of us or our subsidiaries could impact our access to capital or borrowing costs. We cannot provide any assurances that we will be able to borrow additional funds on favorable terms, or at all. See "Risk Factors—Financial Risks" in Item 1A of Part I of this report.
Caa1 Standard & Poor's B Fitch Ratings (1) BB _______________________________________________________________________________ (1) In February 2026, Moody's and Fitch upgraded our issuer default rating. Future changes in these ratings — or Lumen's ratings — could impact our access to capital and borrowing costs. We cannot be certain that we will be able to borrow additional funds on favorable terms, or at all.
Cash Flow Activities The following table summarizes our consolidated cash flow activities: Years Ended December 31, $ Change 2024 2023 (Dollars in millions) Net cash provided by operating activities $ 2,194 2,389 (195) Net cash used in investing activities (1,891) (466) 1,425 Net cash used in financing activities (287) (1,921) (1,634) 43 Operating Activities Net cash provided by operating activities decreased by $195 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to net income adjusted for non-cash items and partially offset by increases related to changes in working capital.
A significant component of our liquidity consists of amounts due from Lumen under these arrangements; accordingly, our liquidity depends on Lumen’s ability to repay its obligations to us. 38 Cash Flow Activities The following table summarizes our consolidated cash flow activities: Years Ended December 31, $ Change 2025 2024 (Dollars in millions) Net cash provided by operating activities $ 1,762 2,194 (432) Net cash used in investing activities (1,512) (1,891) (379) Net cash used in financing activities (238) (287) (49) Operating Activities Net cash provided by operating activities decreased $432 million in 2025 compared to 2024.
Interest Income - Affiliate, Net Interest income - affiliate, net increased by $9 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023. The increase in interest income - affiliate, net was primarily due to a higher average receivable from affiliate.
Interest Income - Affiliate, Net Interest income - affiliate increased $65 million in 2025 compared to 2024. This was primarily as a result of: • a higher average receivable from affiliate, inclusive of our note-receivable - affiliates. See Note 14—Affiliate Transactions in Item 8 for more information on these facilities.
These projected cash flows considered recent historical results and are consistent with the Company's short-term financial forecasts and long-term business strategies. Due to inherent uncertainties, actual cash flows could vary significantly from our projected cash flows.
These projections consider recent historical results and are consistent with our short-term financial forecasts and long-term business strategies. • Discount rate : Determined using a weighted average cost of capital, reflecting market participant assumptions for cost of equity and after-tax cost of debt, and incorporating risks inherent in the projections. • Terminal value : Represents expected normalized cash flows beyond the discrete projection period. • Uncertainty : Actual cash flows may differ significantly from projections due to inherent uncertainties.
We anticipate that our future liquidity needs will be met through (i) our cash provided by our operating activities, (ii) amounts due to us from Lumen Technologies, (iii) our ability to refinance QC's debt securities to the extent permitted under applicable debt covenants, and (iv) capital contributions, advances or loans from Lumen Technologies or its affiliates if and to the extent they have available funds or access to available funds that they are willing and able to contribute, advance or loan.
Our primary sources of liquidity are: • cash from operating activities; • amounts due to us from Lumen Technologies, • our ability to refinance our debt obligations; and • capital contributions, advances, or loans from Lumen Technologies or its affiliates.
Our deferred tax assets and liabilities reflect our assessment that tax positions taken in filed tax returns and the resulting tax basis are more likely than not to be sustained if they are audited by taxing authorities.
Changes in tax rates impacting deferred income tax assets and liabilities are recognized in earnings in the period of enactment. The measurement of deferred taxes requires significant judgment related to the realization of tax basis. We evaluate whether tax positions taken in filed returns are more likely than not to be sustained upon audit.
Cost of services and products (exclusive of depreciation and amortization) decreased by $103 million for the year ended December 31, 2024 as compared to the year ended December 31, 2023 primarily due to lower employee-related expenses of $71 million and lower facilities costs of $35 million.
Cost of Services and Products (exclusive of depreciation and amortization) Cost of services and products (exclusive of depreciation and amortization) decreased $56 million in 2025 compared to 2024. This was primarily as a result of: • a decrease of $78 million in employee-related expenses; and • an offsetting increase of $24 million in network expenses.
The decrease was primarily due to a decrease of $18 million in direct telecommunication services charged to us by affiliates and a decrease of $17 million of lower allocated employee and professional services provided to us by our affiliates.
This was primarily as a result of: ◦ a decrease of $303 million in wavelengths services provided to our affiliates; ◦ a decrease of $77 million in Ethernet services and other direct legacy telecommunication services provided to our affiliates; and ◦ an offsetting increase of $67 million in fiber broadband services provided to our affiliates.
Additionally, the average interest rate increased from 5.07% for the year ended December 31, 2023 to 5.36% to the year ended December 31, 2024. Income Tax Expense For the years ended December 31, 2024 and 2023, our effective income tax rate was 26.2% and (207.8)%, respectively.
Income Tax Expense For 2025 and 2024, our effective income tax rate was (36.1)% and 26.2%, respectively. The effective tax rate for 2025 includes $421 million of unfavorable impact due to a non-deductible goodwill impairment.
Changes in the affiliate obligations, net are reflected in operating activities on our consolidated statements of cash flows. For the year ended 2025, we expect to make aggregate settlement payments of $48 million to QCII under the plan. For 2024, Lumen's expected annual long-term rate of return on pension plan assets, net of administrative expenses was 6.5%.
Prior to the pension plan merger, the above-noted employees participated in the QCII pension plan. Current Status As of December 31, 2025, Lumen's unfunded obligations were: • Pension plans : $588 million • Post-retirement plans : $1.7 billion The expected long-term rate of return on pension assets, net of administrative expenses, was 6.5% for 2025 and is 6.5% for 2026.
Benefits paid by Lumen's qualified pension plan are paid through a trust that holds all of the plan's assets. Based on current laws and circumstances, Lumen Technologies does not expect any contributions to be required for their qualified pension plan during 2025.
For additional details, see “CRITICAL ACCOUNTING ESTIMATES — Pension and Post-retirement Benefits” in Item 7 and Note 11—Employee Benefits in Item 8 and the corresponding note in Lumen’s 2025 Form 10‑K. Funding and Contributions Benefits paid by Lumen's qualified pension plan are paid through a trust which holds all of the plan's assets.
Removed
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS All references to "Notes" in this Item 7 of Part II refer to the Notes to Consolidated Financial Statements included in Item 8 of Part II of this report. Certain statements in this report constitute forward-looking statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides an overview of our financial performance, liquidity, and the business environment in which we operate. This discussion is intended to help readers understand our results and key factors influencing our operations.
Removed
See "Special Note Regarding Forward-Looking Statements" immediately prior to Item 1 of Part I of this report for factors relating to these statements and "Risk Factors" in Item 1A of Part I of this report for a discussion of certain risk factors applicable to our business, financial condition, results of operations, liquidity and prospects.
Added
The MD&A should be read together with our audited consolidated financial statements and accompanying notes included in Item 8. All references to “Notes” in this section refer to the Notes to Consolidated Financial Statements in Item 8. This section includes forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those expressed or implied.
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Overview We are a networking company with the goal of connecting people, data, and applications quickly, securely and effortlessly. We are unleashing the world's digital potential by providing a broad array of integrated products and services to our domestic and global Business customers and our domestic Mass Markets customers.
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For a discussion of these risks, see “Special Note Regarding Forward-Looking Statements” immediately prior to Item 1 and “Risk Factors” in Item 1A. The MD&A generally discusses results for the years ended December 31, 2025 and 2024, including year-over-year comparisons between these periods.
Removed
Our specific products and services are detailed in Note 3—Revenue Recognition and below under the heading "Operations - Products and Services" in Item 1 of Part I of this report.
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We reclassified certain prior period amounts to conform to the current period presentation, including our revenue by product and service categories. OVERVIEW We are a leading digital networking services company, empowering enterprise businesses to fuel growth in a multi-cloud, AI-first marketplace by connecting people, data, and applications quickly, securely, and effortlessly.
Removed
Our ultimate parent company, Lumen Technologies, Inc., has cash management arrangements or loan arrangements with a majority of its subsidiaries that include lines of credit, affiliate obligations, capital contributions and dividends. As part of these cash management or loan arrangements, affiliates provide lines of credit to certain other affiliates.
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We operate in a rapidly evolving landscape with growing demand for secure, high-speed connectivity. Our strategy focuses on growing and transforming our network and business to deliver next-generation solutions that meet these needs and build the backbone of the AI economy. As of December 31, 2025, we served approximately 1.2 million broadband subscribers.
Removed
For the reasons noted in Note 1—Background and Summary of Significant Accounting Policies we have determined that we have one reportable segment. 31 Products, Services and Revenue We reported our revenue derived from our operations serving our Mass Markets customers, primarily within the first three categories listed below, and our revenue derived from our operations servicing our Business customers, primarily in the 'Harvest', 'Nurture' and 'Grow' categories listed below: • Other Broadband , under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure; • Voice and Other, under which we derive revenues from (i) providing local and long-distance services, professional services, and other ancillary services, (ii) federal broadband and state support payments, and (iii) equipment, IT solutions and other services; • Fiber Broadband , under which we provide high speed broadband services to residential and small business customers utilizing our fiber-based network infrastructure; • Harvest , which includes our legacy services managed for cash flow, including Time Division Multiplexing voice and private line services; • Nurture , which includes our more mature offerings, including primarily ethernet; • Grow , which includes existing and emerging products and services in which we are significantly investing, including our dark fiber and wavelengths services; and • Affiliate Services , which are (i) communications services that we provide to our affiliates and also provide to external customers and (ii) application development and support services that we provide to our affiliates, as described further in Note 14—Affiliate Transactions.
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Reporting Segment For the reasons noted in Note 1—Background and Summary of Significant Accounting Policies, we have determined that we have one reportable segment. 2026 Divestiture On May 21, 2025, we and certain of our affiliates entered into a definitive agreement to sell our Mass Markets Fiber-to-the-Home business in the Territory to AT&T (the "Mass Markets Fiber-to-the-Home divestiture").
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From time to time, we may change the categorization of our products and services. Macroeconomic Changes Over the past few years, macroeconomic changes have impacted us and our customers in several ways.
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On February 2, 2026, we completed the Mass Markets Fiber-to-the-Home divestiture in exchange for pre-tax cash proceeds of $5.75 billion, subject to post-closing adjustments.
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We believe macroeconomic changes over the past few years have resulted in (i) increases in certain revenue streams and decreases in others, (ii) operational challenges resulting from inflation and shortages of certain components and other supplies that we use in our business, (iii) delays in our cost transformation initiatives and (iv) delayed decision-making by certain of our customers.
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In connection with the sale, we have entered into a transition services agreement under which we will provide to AT&T various support services and certain long-term agreements under which we and AT&T will provide to each other various network and other commercial services. 31 Products and Services As of December 31, 2025, our products and services are categorized according to the core technologies that drive them and customer focus. • Mass Markets category : Revenue is reported under three product categories: Other Broadband, Voice and Other, and Fiber Broadband. • Business category : Revenue is reported under three product categories: Grow, Nurture, and Harvest. • Affiliates category : Revenue is reported under Affiliate Services.
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None of these effects, individually or in the aggregate, have to date materially impacted our financial performance or financial position. Industry developments over the past few years have increased fiber construction demand from customers. The resulting increase in construction labor rates increased the cost of enabling units to be capable of receiving our Quantum Fiber broadband services.
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From time to time, we may change the categorization of our products and services. Our specific products and services are detailed in Note 4—Revenue Recognition. Cash Management and Intercompany Arrangements Our ultimate parent company, Lumen Technologies, Inc., maintains cash management and financing arrangements with many of its subsidiaries, including us.
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We believe these factors also occasionally contributed to a delay in attaining our Quantum Fiber buildout targets.
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Key factors that have impacted us and our customers include: • Revenue mix : Shifts in technology and economic conditions have driven us to continuously review our strategy and as such, we expect to see continued reduction in legacy voice, broadband, and other legacy services, while fueling growth in our strategic products. • Inflationary pressures : Rising costs for labor, materials, and energy have increased operating expenses and capital expenditures, particularly for other network transformations. • Supply constraints : Shortages of critical components and other materials have slowed certain network expansion efforts. • Customer behavior : Certain customers have delayed purchasing decisions, which has occasionally impacted sales cycles.
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Continued business uncertainty, supply constraints or inflationary pressures could materially impact our financial results in a variety of ways, including by increasing our expenses, decreasing our revenues, further delaying our network expansion plans or otherwise interfering with our ability to deliver products and services.
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To date, we do not believe these factors have materially impacted our financial performance or position. However, ongoing economic and geopolitical uncertainty, tariffs, inflation, and supply constraints could increase costs, reduce revenues, delay network expansion, or disrupt service delivery, which could materially impact our results. If these conditions persist, our projected cash flows and market capitalization could decline.
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Trends Impacting Our Operations In addition to the above-described impact of macroeconomic and industry pressures, our consolidated operations have been, and will continue to be, impacted by the following trends: • Customers' demand for automated products and services and competitive pressures will require that we continue to invest in new technologies and automated processes to improve our customers' experience and reduce our operating expenses. 32 • The increased use of digital applications, video streaming, gaming, robotics, quantum computing and artificial intelligence has substantially increased demand for robust, scalable network services.
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For further information relating to these matters, see “— Trends Impacting Our Operations” below and "Risk Factors" in Item 1A. We are actively managing these challenges through disciplined capital allocation, cost optimization, and strategic investments in network infrastructure. We believe these actions position us to navigate current macroeconomic conditions while pursuing long-term growth opportunities.
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We are continuing to enhance our product and service offerings and taking other steps to enable customers to have access to greater bandwidth and capacity. • Businesses continue to adopt distributed, global operating models.
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We expect continued demand for high-capacity, low-latency connectivity solutions, supported by enterprise digital transformation and government broadband programs. While macroeconomic uncertainty and competitive pressures present risks, we believe our transformation initiatives position us to deliver long-term value. 32 Trends Impacting Our Operations Our operations are shaped by evolving technology, customer expectations, and market dynamics.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of December 31, 2024, we were not exposed to any significant market risk from changes in interest rates, as we did not have variable rate long-term debt obligations, and we have immaterial exposure to fluctuations in certain foreign currencies. 44
Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of December 31, 2025, we were not exposed to any significant market risk from changes in interest rates, as we did not have variable rate long-term debt obligations, and we have immaterial exposure to fluctuations in certain foreign currencies. 47

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