Completed Divestiture of the Latin American Business and Planned Divestiture of European, Middle Eastern and African Business

12 Months Ended

Dec. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]

Completed Divestiture of the Latin American Business and Planned Divestiture of European, Middle Eastern and African Business

Divestitures of the Latin American and EMEA Businesses

Latin American Business

On August 1, 2022, affiliates of Level 3 Parent, LLC sold its Latin American business pursuant to a definitive agreement dated July 25, 2021 for pre-tax cash proceeds of approximately $2.7 billion.

For the year ended December 31, 2022, we recorded a $123 million net pre-tax gain on disposal associated with the sale of our Latin American business. This gain is reflected as operating income within the consolidated statements of operations.

In connection with the sale, Lumen entered into a transition services agreement under which it provides to the purchaser various support services. In addition, Lumen and the purchaser entered into commercial agreements whereby they provide each other various network and other commercial services. Lumen also agreed to indemnify the purchaser for certain matters for which future cash payments by Lumen could be required. Lumen has estimated the fair value of these indemnifications to be $86 million, which is included in other long-term liabilities in our consolidated balance sheet and has reduced our gain on the sale accordingly.

The pre-tax net income of the Latin American business is estimated to be and reported as follows in the table below:

	Years Ended December 31,
	2022(1)		2021
	(Dollars in millions)
Latin American business pre-tax net income	$	197	214

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(1)The pre-tax net income includes operating results prior to the close of the sale of the Latin American business on August 1, 2022

The Latin American business was included in our continuing operations and classified as assets and liabilities held for sale on our consolidated balance sheets through the closing of the transaction on August 1, 2022. As a result of closing the transaction, we derecognized $2.4 billion of net assets, the principal components of which were as follows:

	August 1, 2022
	(Dollars in millions)
Assets held for sale
Cash and cash equivalents	$	40
Accounts receivable, less allowance of $3	105
Other current assets	86
Property, plant and equipment, net accumulated depreciation of $447	1,703
Goodwill (1)	719
Customer relationships and other intangibles, net	140
Other non-current assets	70
Total assets held for sale	$	2,863
Liabilities held for sale
Accounts payable	$	105
Income and other taxes	42
Other current liabilities	59
Deferred income taxes	154
Other non-current liabilities	122
Total liabilities held for sale	$	482

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(1)    The assignment of goodwill was based on the relative fair value of the disposal group and the portion of the remaining reporting unit.

EMEA Business

On November 1, 2023, affiliates of Level 3 Parent, LLC completed the sale of its operations in EMEA business to Colt Technology Services Group Limited, a portfolio company of Fidelity Investments, for pre-tax cash proceeds of $1.7 billion after certain closing adjustments and transaction costs. This consideration is further subject to other post-closing adjustments and indemnities set forth in the Purchase Agreement, as amended and supplemented to date. In connection with the sale, we entered into a transition services agreement under which we provide the purchaser various support services. In addition, Lumen and the purchaser entered into commercial agreements whereby they provide each other various network and other commercial services.

The pre-tax net income (loss) of the EMEA business is reported as follows in the table below:

	Years Ended December 31,
	2023(1)		2022	2021
	(Dollars in millions)
EMEA business pre-tax net income (loss)	$	145	(226)	(98)

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(1)The pre-tax net income includes operating results prior to the close of the sale of the EMEA business on November 1, 2023

The classification of the EMEA business as held for sale was considered an event or change in circumstance which required an assessment of our goodwill for impairment. We performed a pre-classification and post-classification goodwill impairment test as described further in Note 3—Goodwill, Customer Relationships and Other Intangible Assets. As a result of our impairment tests, we determined the EMEA business disposal group was impaired resulting in a non-cash, non-tax-deductible goodwill impairment charge of $224 million in the fourth quarter of 2022. As a result of our evaluation of the recoverability of the carrying value of the assets and liabilities held for sale relative to the agreed upon sales price, adjusted for costs to sell, we recorded an estimated loss on disposal of $616 million during the year ended December 31, 2022 in the consolidated statement of operations and a valuation allowance included in assets held for sale on the consolidated balance sheet. For the year ended December 31, 2023, we recorded a $104 million net loss on disposal associated with the sale of our EMEA business. This loss is reflected as operating expense within the consolidated statements of operations.

The EMEA business was included in our continuing operations and classified as assets and liabilities held for sale on our consolidated balance sheets through the closing of the transaction on November 1, 2023. As a result of closing the transaction, we derecognized $1.4 billion of net assets, the principal components of which were as follows:

	November 1, 2023
	EMEA Business
	(Dollars in millions)
Assets held for sale
Cash and cash equivalents	$	12
Accounts receivable, less allowance of $4	70
Other current assets	59
Property, plant and equipment, net accumulated depreciation of $1,019	1,957
Customer relationships and other intangible assets, net	107
Operating lease assets	208
Valuation allowance on assets held for sale(1)	(720)
Deferred tax assets	144
Other non-current assets	37
Total assets held for sale	$	1,874
Liabilities held for sale
Accounts payable	$	69
Salaries and benefits	20
Current portion of deferred revenue	25
Current operating lease liabilities	42
Other current liabilities	30
Deferred income taxes	60
Asset retirement obligations	32
Deferred revenue, non-current	102
Operating lease liabilities, non-current	93
Total liabilities held for sale	$	473

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(1)    Includes the impact of $350 million realized loss on foreign currency translation, net of tax, reclassified out of accumulated other comprehensive loss as of December 31, 2023 to the valuation allowance and loss on sale of the EMEA business.

We do not believe these divestitures represent a strategic shift for us. Therefore, the divested Latin American and EMEA businesses did not meet the criteria to be classified as discontinued operations. As a result, we continued to report our operating results for the Latin American and EMEA businesses in our consolidated operating results through the disposal dates of August 1, 2022 and November 1, 2023, respectively.