With Lumos, T-Mobile to reach 3.5M homes with fiber by 2028

T-Mobile is officially jumping into the fiber game.

The company confirmed rumors that it will partner with private equity firm EQT to buy Lumos, a fiber network operator across the Mid-Atlantic. T-Mobile will invest $950 million for a 50% stake in the new joint venture with EQT. After that, T-Mobile said it will invest another $500 million into the JV between 2027 and 2028.

The companies' ultimate goal is to expand Lumos' fiber network from around 320,000 homes today to a total of 3.5 million US homes by the end of 2028.

"T-Mobile is already the fastest growing broadband internet provider with 5G Internet. And we've always felt that fiber would be a great complement to what we do, because the demand for reliable, low-latency connectivity is rapidly increasing," T-Mobile CEO Mike Sievert explained on social media. "We're excited to give customers and businesses even more of the Internet they need, from the network company that loves customers – T-Mobile!"

According to survey findings from Recon Analytics, more than half of all Americans, and roughly 70% of fixed wireless customers, have expressed interest in purchasing fiber from T-Mobile.

T-Mobile's new announcement comes roughly a month after German publication Handelsblatt reported that T-Mobile was in talks to invest up to $1 billion into Lumos.

T-Mobile's stock fell slightly on the news to around $162 per share. The company is scheduled to report its first quarter results later Thursday.

In the handful of US markets where it is already testing fiber services, T-Mobile offers three tiers of fiber service, starting at 500Mbit/s connections for $55 per month and ranging up to 2Gbit/s services for $110 per month, alongside a Wi-Fi 6 router. However, T-Mobile Fiber does not appear to be offering any discounts or bundles that combine its fiber services with its nationwide mobile offerings.

From FWA to fiber

T-Mobile first hinted at its desire to become an Internet service provider amid its efforts to acquire Sprint. After that $26 billion deal closed in 2020, T-Mobile embarked on a massive 5G network upgrade effort that ultimately created enough network capacity for T-Mobile to begin beaming fixed wireless access (FWA) Internet connections inside homes and offices.

Today, having recently passed Altice and its 4.5 million cable customers, T-Mobile is the nation's fifth largest Internet service provider with almost 4.8 million customers.

T-Mobile officials have said the company remains on track to grow its FWA customer base to 7-8 million by 2025. But they have also said the operator won't be able to expand beyond that figure without additional investments into either spectrum or infrastructure.

Indeed, T-Mobile recently warned that its FWA growth will slow from around 500,000 customers per quarter to around 400,000.

In its new Lumos announcement, T-Mobile said it has found demand that it "cannot meet through its fallow capacity fixed wireless product alone, and many customers want the speed and reliability that only fiber can provide."

T-Mobile's fiber adventures

T-Mobile has been toying with fiber for several years now.

The company launched its first fiber pilot in New York City in 2021. That offering essentially piggybacks on the network of Pilot Fiber, with T-Mobile selling services directly to consumers under its "T-Mobile Fiber" brand. In early 2023, T-Mobile expanded its fiber efforts into Pueblo and Northglenn, Colorado with network partner Intrepid Fiber.

Today, T-Mobile offers fiber services in a total of 16 markets. Aside from Pilot Fiber, all of the companies that T-Mobile is partnering with for fiber – Tillman FiberCo, Intrepid and SiFi Networks – operate under an "open access" model, whereby they operate the network but make money by selling wholesale access to other companies that then serve end users.

That appears to be the same model T-Mobile will pursue via its new deal for Lumos. The T-Mobile/EQT JV "will transition to a wholesale model with T-Mobile as the anchor tenant owning customer relationships and leveraging its brand to attract new subscribers. The JV will focus on market identification and selection, network engineering and design, network deployment and customer installation," T-Mobile said.

In that regard, T-Mobile's JV with EQT for Lumos closely mirrors AT&T's JV with BlackRock, called Gigapower, which is also pursuing an open access model.

Lumos to the future

"With the support of our private equity partner, EQT, and leveraging the strength of the T-Mobile brand and unrivaled customer experience, Lumos is set to expedite our network expansion," said Brian Stading, the CEO of Lumos, in T-Mobile's new release.

T-Mobile said that, after its transaction with EQT closes, Lumos will reach 320,000 households over 7,500 route miles with fiber. T-Mobile said it expects its deal with EQT to close in late 2024 or early 2025.

Lumos has not previously promoted itself as an open access fiber operator. Instead, the company currently provides Lumos-branded fiber services to around 250,000 homes and businesses across its North Carolina, Virginia and South Carolina footprint. The company previously hoped to grow that footprint to 1 million homes in the next five years. But now it's targeting up to 3.5 million homes via the new T-Mobile/EQT deal.

T-Mobile's new JV with EQT potentially positions Lumos to bid for subsidies in the US government's $42.5 billion Broadband Equity Access and Deployment (BEAD) program. Those funds are expected to be distributed by US states starting in 2025.

"It is tough to extract valuation metrics from what has been reported, given that T-Mobile is buying an equity stake and all the subscribers, and they know their capital is going towards building more locations," wrote the financial analysts at New Street Research in their analysis of T-Mobile's new JV with EQT. "We also don’t know whether EQT has committed further capital. Nevertheless, the $950 million for a 50% stake equates to an equity value of $1.9 billion. ... That equates to over $9,000 per existing [fiber] location. This suggests a very healthy outlook for fiber assets that have a strong growth trajectory."

For its part, Lumos traces its origins back more than a decade ago to a split with regional provider nTelos, which created Lumos Networks as a publicly traded company in 2011. In 2017, EQT took over Lumos and, since then, has combined it with other regional providers like Spirit Communications and NorthState.

EQT is one of several massive investment firms that has taken an interest in the telecom industry. For example, EQT was part of a group that acquired Zayo Group Holdings in 2020. It also acquired data center operator EdgeConneX in 2020.

Once and future fiber provider

T-Mobile's new deal for Lumos is noteworthy considering the operator recently shed Sprint's old fiber business. That operation managed around 19,000 long-haul route miles, 1,300 metro route miles, and some 16,800 route miles of leased dark fiber.

But T-Mobile sold Sprint's fiber transport network in 2022 to Cogent in a transaction valued at $1. T-Mobile also agreed to pay $700 million in transit services to Cogent for several years.

That deal came shortly after T-Mobile confirmed it was no longer relying on Sprint's legacy wireline network to carry its mobile network traffic.

To be clear, T-Mobile isn't the only company moving into the fiber market in the US. Indeed, just this week investment firm Grain Management said it purchased a majority interest in 123NET, which operates a 3,100 route mile fiber network across Michigan.

AT&T, for its part, remains on track to expand its own fiber network to 30 million locations by 2025. And company officials have suggested AT&T may well expand into another 10-15 million after that.

Meanwhile, Verizon has said it will continue to expand its Fios fiber network to roughly 400,000 new locations every year.