What changed in this filing

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Item 1A. Risk Factors

2022-02-24 compared with 2021-02-25 · 130 added, 86 removed, 253 unchanged (46% of the section changed)

The following discussion identifies material factors that could (i) materially and adversely affect our business, financial condition, results of operations or prospects or (ii) cause our actual results to differ materially from our anticipated results, projections or other expectations.

The following information should be read in conjunction with the other portions of this report, including “Special Note Regarding Forward-Looking Statements”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes in Item 8.

All references to "Notes" in this Item 1A of Part I refer to the Notes to Consolidated Financial Statements included in Item 8 of Part II of this annual report.

The following information should be read in conjunction with the other portions of this annual report, including “Special Note Regarding Forward-Looking Statements”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and our consolidated financial statements and related notes in Item 8.

All references to "Notes" in this Item 1A of Part I refer to the Notes to Consolidated Financial Statements included in Item 8 of Part II of this report.

Please note the following discussion is not intended to comprehensively list all risks or uncertainties faced by us.

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Our customers expect us to create and maintain a global digital experience, including:

(i) automation and simplification of our offerings, (ii) customer self-service options, (iii) innovative solutions, and (iv) digital access to our products, services and customer support.

(i) automation and simplification of our offerings, (ii) customer self-service options and (iii) digital access to our products, services and customer support.

To do so, we must complete the digital transformation of our operations that is currently underway.

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We cannot assure you we will be able to effect the successful digital transformation necessary to develop or deliver a global digital experience expected by our customers.

If we are unable to do so, we could lose customers to our competitors or fail to attract new customers.

If we are unable to do so, we could lose existing customers or fail to attract new ones, either of which could prevent us from attaining our financial goals.

Challenges with integrating or modernizing our existing applications and systems could harm our performance.

To succeed, we need to integrate, upgrade and evolve our existing applications and systems, including many legacy systems from past acquisitions.

We cannot assure you we will be able to integrate our legacy IT systems, modernize our infrastructure or deploy a master data management platform.

We cannot assure you we will be able to integrate our legacy IT systems, modernize our infrastructure, timely retire aging systems or deploy a master data management platform.

These modernization efforts will require efficient allocation of resources, development capacity, access to subject-matter experts, development of a sustainable operating model and successful collaboration between legal, privacy and security personnel.

Any failure or delay in accomplishing these initiatives may negatively affect our (i) customer and employee experiences, (ii) ability to meet regulatory, legal or contractual obligations, (iii) network stability, (iv) ability to realize anticipated efficiencies or (v) ability to deliver value to our customers at required speed and scale.

Any failure to timely accomplish these initiatives may negatively affect our (i) customer and employee experiences, (ii) ability to meet regulatory, legal or contractual obligations, (iii) network stability, (iv) ability to realize anticipated efficiencies, (v) ability to timely repair infrastructure and respond to service outages or (vi) ability to deliver value to our customers at required speed and scale.

We operate in an intensely competitive industry and existing and future competitive pressures could harm our performance.

Each of our business and consumer offerings faces increasingly intense competition from a wide variety of sources under evolving market conditions.

Each of our business and mass market offerings faces increasingly intense competition, with increased pressure to be digitally integrated and quick to market, from a wide range of sources under evolving market conditions that have increased the number and variety of companies that compete with us.

Some of our current and potential competitors:

(i) offer products or services that are substitutes for our traditional wireline voice services, including wireless voice and non-voice communication services, (ii) offer a more comprehensive range of communications products and services, (iii) have greater marketing, engineering, research, development, technical, provisioning, customer relations, financial or other resources, (iv) conduct operations or raise capital at a lower cost than we do, (v) are subject to less regulation than we are, (vi) have stronger brand names, (vii) have deeper or more long-standing relationships with key customers, or (viii) have larger operations than ours, any of which may enable them to compete more successfully for customers, strategic partners and acquisitions.

(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) have greater marketing, engineering, research, development, technical, provisioning, customer relations, financial or other resources, (iv) conduct operations or raise capital at a lower cost than we do, (v) are subject to less regulation than we are, (vi) have stronger brand names, (vii) have deeper or more long-standing relationships with key customers, (viii) might be perceived as having an ESG profile more attractive to customers or employees, or (ix) have larger operations than ours, any of which may enable them to compete more successfully for customers, strategic partners and acquisitions.

Competitive pressures have lowered market prices for many of our products and services in recent years and continued competitive pressures will likely place further downward pressure on market pricing.

Our ability to successfully compete could be hampered if we fail to develop and market innovative technology solutions.

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 enabling an increasing variety of companies to compete with us.

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Increasingly, customers are demanding more technologically advanced products that suit their evolving needs.

To remain competitive, we will need to accurately predict, invest in and respond to changes in technology.

Also, we will need to continue developing products and services attractive to our customers.

To remain competitive, we will need to accurately predict and respond to changes in technology, to continue developing products and services attractive to our customers, to maintain and expand our network to enable it to support customer demands for greater transmission capacity and speeds, and to discontinue outdated products and services on a cost-effective basis.

Our ability to do so could be restricted by various factors, including limitations of our existing network, technology, capital or personnel.

If we fail at that, our competitors will likely provide our customers with more desirable products and services.

If we fail at that, we could lose customers or fail to attract new ones.

We may be unable to attract, develop and retain leaders and employees with the right skillsets and technical expertise.

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We operate with a limited pool of employees and there is competition for highly qualified personnel in certain growth markets.

Our competitors periodically target our employees with highly sought-after skills and will likely continue to do so in the future.

Further, the increased availability of remote working arrangements, largely driven by the COVID-19 pandemic, has expanded the pool of companies that can compete for our employees and employee candidates.

We believe some of our competitors with greater resources and fewer cost constraints than us have from time to time been able to offer compensation, benefits or accommodations in excess of what we are able to offer.

As a result, we may be unable to cost-effectively hire and retain employees with market-leading skills.

There is no assurance our efforts to recruit and retain qualified personnel will be successful.

If we are unable to do so, such failure could have a material adverse effect on our operations and financial condition.

The COVID-19 pandemic caused us to modify our workforce practices, including having the vast majority of our employees work from home.

We intend to reopen our offices in 2022 under a “hybrid” working environment, meaning that some of our employees will have the flexibility to work remotely at least some of the time, for the foreseeable future.

The hybrid working environment may impair our ability to maintain our collaborative and innovative culture, and may cause disruptions among our employees, including decreases in productivity, challenges in collaboration between on-site and off-site employees and, potentially, employee dissatisfaction and attrition.

If our attempts to safely reopen our offices and operate under a hybrid working environment are not successful, our business could be adversely impacted.

Additionally, any state or federal vaccine mandate that is upheld by the courts could make it more difficult to retain or attract employees who oppose vaccination mandates and are ineligible for an exemption.

The pandemic and other events over the past couple years have increased employees’ expectations regarding compensation, workplace flexibility and work-home balance.

These developments have intensified certain of our above-described challenges and made it relatively more difficult for us to attract and retain top talent.

We do not expect these developments to have a material adverse impact on us, but we can provide no assurances to this effect.

We could be harmed if our reputation is damaged.

We believe the Lumen brand name and our reputation are important corporate assets that help us attract and retain customers and talented employees.

However, our corporate reputation is susceptible to material damage by events such as disputes with customers or competitors, cyber-attacks or service outages, internal control deficiencies, delivery failures, compliance violations, 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.

We may also experience reputational damage if customers, vendors, employees, advocacy groups, regulators, investors, the media, social media influencers or others criticize our services, operations or public positions.

Our brand and reputation could be impacted by our public commitments to various corporate environmental, social and governance (ESG) initiatives, including our political contributions, our advocacy positions, and our goals for sustainability, inclusion and diversity.

Positions we take or do not take on ESG issues could negatively impact our ability to attract or retain customers and employees.

Similarly, any failure to achieve our ESG commitments could harm our reputation and adversely affect us.

There is a risk that negative or inaccurate information about Lumen, even if based on rumor or misunderstanding, could adversely affect our business.

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.

Our vulnerability to cyber-attacks is heightened by our (i) material reliance on our networks to conduct our operations, (ii) our transmission of large amounts of data over our systems and (iii) our processing and storage of sensitive customer data.

Our vulnerability to cyber-attacks is heightened by several features of our operations, including (i) our material reliance on our networks to conduct our operations, (ii) our transmission of large amounts of data over our systems and (iii) our processing and storage of sensitive customer data.

Cyber-attacks on our systems may stem from a variety of sources, including fraud, malice or sabotage on the part of foreign nations, third parties, vendors, or employees and attempts by outside parties to gain access to sensitive data that is stored in or transmitted across our network.

Cyber-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.

Cyber-attacks can put at risk personally identifiable customer data or protected health information, thereby implicating stringent domestic and foreign data protection laws.

These threats may also arise from failure or breaches of systems owned, operated or controlled by other unaffiliated operators to the extent we rely on such other systems to deliver services to our customers or to operate our business.

Various other factors could intensify these risks, including, (i) our maintenance of information in digital form stored on servers connected to the Internet, (ii) our use of open and software-defined networks, (iii) the complexity of our multi-continent network composed of legacy and acquired properties, (iv) growth in the size and sophistication of our customers and their service requirements, and (v) increased use of our network due to greater demand for data services.

Like other prominent technology and communications companies, we and our customers are constant targets of cyber-attacks of various kinds.

Although some of these attacks have resulted in security breaches, thus far none of these breaches has resulted in a material adverse effect on our operating results or financial condition.

You should be aware, however, that the risk of breaches is likely to continue to increase due to several factors, including

the increasing sophistication of cyber-attacks and the wider accessibility of cyber-attack tools.

These threats may also arise from failure or breaches of systems owned, operated or controlled by other unaffiliated operators to the extent we rely on them to operate our business.

Various other factors could intensify these risks, including, (i) our maintenance of information in digital form stored on servers connected to the Internet, (ii) our use of open and software-defined networks, (iii) the complexity of our multi-continent network composed of legacy and acquired properties, (iv) growth in the size and sophistication of our customers and their service requirements, (v) increased use of our network due to greater demand for data services and (vi) our increased incidence of employees working from remote locations.

Like other prominent technology and communications companies, we and our customers are constant targets of cyber-attacks.

Despite our efforts to prevent these events, some of these attacks have resulted in security breaches, although thus far none of these breaches has resulted in a material adverse effect on our operating results or financial condition.

You should be aware, however, that the risk of breaches is likely to continue to increase due to several factors, including the increasing sophistication of cyber-attacks and the wider accessibility of cyber-attack tools.

Known and newly discovered software and hardware vulnerabilities are constantly evolving, which increases the difficulty of detecting and successfully defending against them.

You should be further aware that defenses against cyber-attacks currently available to U.S.

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Although we maintain insurance coverage that may, subject to policy terms and conditions (including self-insured deductibles, coverage restrictions and monetary coverage caps), cover certain aspects of our cyber risks, such insurance coverage may be unavailable or insufficient to cover our losses.

Cyber-attacks could (i) disrupt the proper functioning of our networks and systems, which could in turn disrupt the operations of our customers, (ii) result in the destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, classified or otherwise valuable information of ours, our customers or our customers’ end users, (iii) require us to notify customers, regulatory agencies or the public of data breaches, (iv) require us to provide credits for future service to our customers or to offer expensive incentives to retain customers;

Cyber-attacks could (i) disrupt the proper functioning of our networks and systems, which could in turn disrupt the operations of our customers, (ii) result in the destruction, loss, theft, misappropriation or release of proprietary, confidential, sensitive, classified or otherwise valuable information of ours, our employees, our customers or our customers’ end users, (iii) require us to notify customers, regulatory agencies or the public of data breaches, (iv) require us to provide credits for future service to our customers or to offer expensive incentives to retain customers;

(v) subject us to claims by our customers or regulators for damages, fines, penalties, license or permit revocations or other remedies, (vi) damage our reputation or result in a loss of business, (vii) result in the loss of industry certifications or (viii) require significant management attention or financial resources to remedy the resulting damages or to change our systems.

Any or all of the foregoing developments could materially adversely impact us.

Any or all of the foregoing developments could have a material adverse impact on us.

We could be harmed by outages in our network or various platforms, or other failures of our services.

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These outages or other failures could result in several of the same adverse effects listed above for cyber-attacks, including the loss of customers, the issuance of credits or refunds, and regulatory fines.

This vulnerability may be increased by several factors, including aging network elements, human error, vulnerabilities in our vendors or supply chain, aberrant employees and hardware and software limitations.

This vulnerability may be increased by several factors, including aging network elements, human error, 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.

The process for remediating any interruptions, outages, delays or cessations of service could be more expensive, time-consuming, disruptive and resource intensive than planned.

From time to time in the ordinary course of our business we experience disruptions in our service.

We could experience more significant disruptions in the future.

Such disruptions could have a negative impact on our business, results of operations, financial condition and cash flows.

Delayed sales, lower margins, fines or lost customers resulting from such disruptions could have a negative impact on our business, reputation, results of operations, financial condition, cash flows and stock price.

Several of our services continue to experience declining revenue, and our efforts to offset these declines may not be successful.

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Our operations, financial performance and liquidity are materially reliant on key suppliers, vendors and other third parties.

Our ability to conduct our operations could be materially adversely affected if certain of our arrangements with third parties were terminated, including those further described below.

Our ability to conduct our operations could have a material adverse impact on us if certain of our arrangements with third parties were terminated, including those further described below.

Reliance on other communications providers .

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.

Our reliance on these supply or interconnection arrangements limits our control over the quality of our services.

Our reliance on these supply or interconnection arrangements limits our control over the delivery and quality of our services.

In addition, we are exposed to the risk that other carriers may be unwilling or unable to continue or renew these arrangements in the future.

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Additionally, certain of our operations carry a significant amount of voice or data traffic for other communications providers.

Their reliance on our services exposes us to the risk that they may

transfer all or a portion of this traffic from our network to alternative networks owned or leased by them, thereby reducing our revenue.

Their reliance on our services exposes us to the risk that they may transfer all or a portion of this traffic from our network to alternative networks owned or leased by them, thereby reducing our revenue.

Reliance on key suppliers and vendors .

We depend on a limited number of suppliers and vendors for equipment and services relating to our network infrastructure, including fiber optic cable, software, optronics, transmission electronics, digital switches and related components.

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.

We also rely on software and service vendors or other parties to assist us with operating, maintaining and administering our business, including billing, security, provisioning and general operations.

If any of these vendors experience interruptions, security breaches or other problems delivering their products or services on a timely basis, our operations could suffer significantly.

If any of these vendors experience business interruptions, security breaches, litigation or other issues that interfere with their ability to deliver their products or services on a timely basis, our operations could suffer significantly.

To the extent that proprietary technology of a supplier is an integral component of our network, we may have limited flexibility to purchase key network components from alternative suppliers.

The COVID-19 pandemic and other factors have led to a shortage of semiconductors and certain other supplies that we use in our business.

Thus far, the negative impact of these shortages on our financial results has not been significant.

If these shortages intensify, however, it could materially impact our financial results in a variety of ways, including by increasing our expenses, delaying our network expansion plans or interfering with our ability to deliver products and services.

Reliance on key licensors.

We rely on key technologies licensed from third parties to deliver certain of our products and services.

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.

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 .

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We cannot assure you we will be able to successfully extend these arrangements when their terms expire, or to enter into new arrangements that may be necessary to implement our network expansion opportunities.

We face risks from natural disasters and extreme weather, which can disrupt our operations and cause us to incur substantial additional capital and operating costs.

Climate change could disrupt our operations, cause us to incur substantial additional capital and operating costs or negatively affect our business.

A substantial number of our domestic facilities are located in coastal states, which subjects them to the risks associated with severe tropical storms, hurricanes and tornadoes, and many other of our facilities are subject to the risk of earthquakes, floods, fires, tornadoes or other similar casualty events.

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Due to substantial deductibles, coverage limits and exclusions, and limited availability, we have typically recovered only a portion of our losses through insurance.

Moreover, many climate experts predict an increase in extreme weather events in the future, which would increase our exposure to such risks.

For all these reasons, any future hazard-related costs and interruptions could adversely affect our operations and our financial condition.

Climate change 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.

Also, concern over climate change may result in new or increased legal and regulatory requirements to reduce or mitigate the effects of climate change, which could result in significant increased costs and require additional investments in facilities and equipment, thereby negatively affecting our business and operations.

In addition, any failure to achieve our goals or regulatory mandates with respect to reducing our impact on the environment could result in the adverse impacts noted above.

Any additional future acquisitions or strategic investments may not be available on attractive terms and would subject us to additional risks.

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Asset dispositions could have a detrimental impact on us or the holders of our securities.

In the past, we have disposed of assets or asset groups for a variety of reasons, and we may consider disposing of other assets or asset groups from time to time in the future.

If we agree to proceed with any such divestitures of assets, we may experience operational difficulties segregating them from our retained assets and operations, which could result in disruptions to our operations or claims for damages, among other things.

In the past, we have disposed of assets or asset groups for a variety of reasons, and currently expect to consummate later this year two pending divestitures discussed elsewhere in this section "Item 1A.

Risk Factors." In addition, we may dispose of other assets or asset groups from time to time in the future.

If we proceed with any such other divestitures of assets, we may experience operational difficulties segregating them from our retained assets and operations, which could result in disruptions to our operations or claims for damages, among other things.

Moreover, such dispositions could reduce our cash flows available to support our payment of dividends, capital expenditures, pension contributions, debt maturities or other commitments.

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An outbreak of disease or similar public health threat, such as the recent COVID-19 pandemic and its detrimental impact on the worldwide economy, could have a material adverse impact on our operating results and financial condition.

COVID-19 poses the risk that we or our employees, contractors, suppliers, customers and other business partners may be prevented from conducting business activities at expected levels through established processes for an indefinite period of time.

Variants of the COVID-19 virus pose the risk that we or our employees, contractors, suppliers, customers and other business partners may be prevented from conducting business activities at expected levels through established processes for an indefinite period of time.

Future events regarding the pandemic, which are unpredictable and beyond our control, will likely continue impacting our operations and results by its effects on demand for our products and services and network usage, on our customers’ ability to continue to pay us in a timely manner, on other third parties we rely on, on our workforce, on our performance under our contracts, and on our supply chains or distribution channels for our products and services.

If the pandemic intensifies or economic conditions further deteriorate, the pandemic’s adverse impact on us could become pronounced in the future and could have a material adverse impact on our operating results and financial condition.

In addition, many of our employees continue to face challenges due to pandemic-related financial, family and health burdens that may negatively impact their ability or willingness to remain employed or fully engaged.

If the pandemic intensifies or economic conditions deteriorate, the pandemic’s adverse impact on us could become pronounced in the future and could have a material adverse impact on our operating results and financial condition.

Moreover, to the extent any of these risks and uncertainties adversely impact us, they may also have the effect of heightening many of the other risks described in this section “Item 1A.

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We have taken certain precautions due to the uncertain and evolving situation relating to the spread of COVID-19 that could have a material adverse impact on us.

The precautionary measures described in this annual report we have taken to safeguard our employees and customers could make it more difficult to (i) timely and efficiently furnish products and services to our customers, (ii) devote sufficient resources to our ongoing network and product simplification projects, (iii) efficiently monitor and maintain our network, (iv) maintain effective internal controls, (v) mitigate information technology or cybersecurity related risks, and (vi) otherwise operate and administer our affairs.

The precautionary measures described in this annual report we have taken to safeguard our employees and customers could make it more difficult to (i) timely and efficiently furnish products and services to our customers, (ii) devote sufficient resources to our ongoing network and product simplification projects, (iii) efficiently monitor and maintain our network, (iv) maintain effective internal controls, (v) mitigate information technology or cybersecurity related risks, (vi) maintain a consistent culture and (vii) otherwise operate and administer our affairs.

As such, these measures ultimately could have a material adverse impact on our operating results and financial condition.

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We face other business risks, including among others:

• the risk that customer complaints, governmental investigations or other adverse publicity will adversely impact our brand and our business;

• the difficulties of managing and administering an organization that offers a complex set of products to a diverse range of customers across several continents;

• the adverse effects of terrorism, rioting, vandalism or social unrest.

Legal and Regulatory Risks

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On occasion, we have resolved such matters by entering into consent decrees, which are court orders that frequently bind us to specific conduct going forward.

These consent decrees expose us not only to contractual remedies, but also to judicial enforcement via contempt of court proceedings, any of which could have material adverse consequences.

If breached by us, these consent decrees expose us not only to contractual remedies, but also to judicial enforcement via contempt of court proceedings, any of which could have material adverse consequences.

Additionally, future investigations can potentially result in enforcement actions, litigation, fines, settlements or reputational harm, or could cause us to change our sales practices or operations.

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We provide products or services to various federal, state and local agencies.

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, 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.

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.

Moreover, certain governmental agencies frequently reserve the right to terminate their contracts for convenience or if funding is unavailable.

If our governmental contracts are terminated for any reason, or if we are suspended or debarred from governmental programs or contracts, our results of operations and financial condition would be materially adversely affected.

If our governmental contracts are terminated for any reason, or if we are suspended or debarred from governmental programs or contracts, it could have a material adverse impact on our results of operations and financial condition.

Adapting and responding to changing regulatory requirements has historically materially impacted our operations.

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We could also be materially affected if currently pending proposals to increase the regulation of internet service providers or to further strengthen data privacy laws are implemented.

In addition, federal and state agencies that dispense support program payments can, and from time to time do, reduce the amount of those payments to us and other carriers.

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.

The variability of these laws could also hamper the ability of us and our customers to plan for the future or establish long-term strategies.

Third-party content stored or transmitted on our networks could result in liability or otherwise damage our reputation.

While we disclaim any liability for third-party content in 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.

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.

Such claims could involve, among others, allegations of defamation, invasion of privacy, copyright infringement, or aiding and abetting restricted activities such as online gambling or pornography.

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Such third-party content could also result in adverse publicity and damage our reputation.

Moreover, as noted above, pending proposals to change the law could materially heighten our legal exposure.

Our pending legal proceedings could have a material adverse impact on us.

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We have been accused of infringing the intellectual property rights of others and will likely face similar accusations in the future.

We received a number of notices from third parties or have been named in lawsuits filed by third parties claiming we have infringed or are infringing their intellectual property rights.

We routinely receive notices from third parties or are named in lawsuits filed by third parties claiming we have infringed or are infringing their intellectual property rights.

We are currently responding to several of these notices and claims and expect this industry-wide trend will continue.

If these claims succeed, we could be required to pay significant monetary damages, to cease using the applicable technology or to make royalty payments to continue using the applicable technology.

If we are required to take one or more of these actions, our 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, which may adversely affect our business, results of operations, financial condition and cash flows.

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, which could have a material adverse impact on our business.

Similarly, from time to time, we may need to obtain the right to use certain patents or other intellectual property from third parties to be able to offer new products and services.

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laws and regulations regarding operations in international jurisdictions in which we provide services.

These numerous and sometimes conflicting laws and regulations include anti-corruption laws, anti-competition laws, trade restrictions, economic sanctions, tax laws, immigration laws, privacy laws and accounting requirements.

Many of these laws are complex and change frequently.

There is a risk that these laws or regulations may materially restrict our ability to deliver services in various international jurisdictions or expose us to the risk of fines, penalties or license revocations if we are determined to have violated applicable laws or regulations.

Additionally, these laws or regulations may potentially impact our customers and result in foregone business or penalties to us if we fail to comply with any applicable sanctions or restrictions on our activities.

Many non-U.S.

laws and regulations relating to communications services are more restrictive than U.S.

laws and regulations, particularly those relating to privacy rights and data retention.

laws and regulations.

We are subject to the GDPR of the European Union and the United Kingdom, as well as various other laws governing privacy rights, data protection and cybersecurity laws in other regions.

These laws and regulations continue to proliferate and evolve, are becoming more complex and increasingly conflict among the various countries in which we operate, which has resulted in greater compliance risk and cost for us.

Moreover, many countries are still in the early stages of providing for and adapting to a liberalized telecommunications market, which could make it more difficult for us to obtain licenses and conduct our operations.

In addition to these international regulatory risks, some of the other risks inherent in conducting business internationally include:

economic, social and political instability, with the attendant risks of terrorism, kidnapping, extortion, civic unrest and potential seizure or nationalization of assets;

economic, social and political instability, with the attendant risks of terrorism, kidnapping, extortion, civic unrest, potential seizure or nationalization of assets;

currency and exchange controls, repatriation restrictions and fluctuations in currency exchange rates, including, without limitation, the matters outlined in Note 1—Background and Summary of Significant Accounting Policies — Foreign Currency;

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and challenges in securing and maintaining the necessary physical and telecommunications infrastructure.

Changes in multilateral conventions, treaties, tariffs or other arrangements between or among sovereign nations could impact us.

Specifically, the United Kingdom recently exited the European Union ("Brexit”) subject to the negotiation of additional separation agreements with the European Union regarding data sharing, financial services and other matters.

Brexit could potentially impact our supply chains, logistics, and human resources, and subject us to additional regulatory complexities.

Additionally, Brexit and other changes in multilateral arrangements may more broadly adversely affect our operations and financial results.

Our operations and financial results could be impacted by changes in multilateral conventions, treaties, tariffs or other arrangements between or among sovereign nations, including most recently Brexit.

Financial Risks

Our significant debt levels expose us to a broad range of risks.

As of December 31, 2020, we had approximately $12.5 billion of outstanding consolidated secured indebtedness, $19.3 billion of outstanding consolidated unsecured indebtedness (excluding finance lease obligations, unamortized discounts, net and unamortized debt issuance costs) and $2.0 billion of unused borrowing capacity under our Revolving Credit Facility.

As of December 31, 2021, we had approximately $12.4 billion of outstanding consolidated secured indebtedness, $17.8 billion of outstanding consolidated unsecured indebtedness (including long-term debt reclassified as liabilities held for sale, excluding finance lease obligations, unamortized premiums, net and unamortized debt issuance costs) and $2.0 billion of unused borrowing capacity under our Revolving Credit Facility.

Our significant levels of debt and related debt service obligations could adversely affect us in several respects, including:

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• 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;

• 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;

• making it more difficult or expensive for us to obtain any necessary future financings or refinancings, including the risk that this could force us to sell assets or take other less desirable actions to raise capital;

• adversely impacting other parties’ perception of Lumen, including but not limited to existing or potential customers, vendors, employees or creditors;

• 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;

• increasing the risk that we may not meet the financial or non-financial 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.

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is not secured by any of its assets, but is guaranteed by certain of its affiliates.

Substantial amounts of debt are also owed by two direct or indirect subsidiaries of Qwest Communications International Inc.

As of the date of this annual report, substantial amounts of debt are also owed by two direct or indirect subsidiaries of Qwest Communications International Inc.

and by Embarq Corporation and one of its subsidiaries.

Most of the approximately 400 subsidiaries of Lumen Technologies, Inc.

Most of the nearly 400 subsidiaries of Lumen Technologies, Inc.

have neither borrowed money nor guaranteed any of the debt of Lumen Technologies, Inc.

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and Level 3 Financing, Inc.

Lumen Technologies, Inc.’s senior secured credit facilities and secured notes contain several significant limitations restricting Lumen Technologies, Inc.’s ability to, among other things, borrow additional money or issue guarantees;

Lumen Technologies, Inc.’s senior secured credit facilities and secured notes contain several significant limitations restricting its ability to, among other things, borrow additional money or issue guarantees;

pay dividends or other distributions to shareholders;

create liens on assets;

transact with our affiliates and engage in mergers or consolidations.

These restrictive covenants could materially adversely affect our ability to operate or reconfigure our business, to pursue acquisitions, divestitures or strategic transactions, or to otherwise pursue our plans and strategies.

transact with its affiliates and engage in mergers or consolidations.

These restrictive covenants could have a material adverse impact on our ability to operate or reconfigure our business, to pursue acquisitions, divestitures or strategic transactions, or to otherwise pursue our plans and strategies.

The debt and financing arrangements of Level 3 Financing, Inc.

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Our business is capital intensive.

We expect to continue to require significant cash to maintain, upgrade and expand our network infrastructure as a result of several factors, including (i) changes in customers’ service requirements;

(ii) our continuing need to expand and improve our network to remain competitive;

We expect to continue to require significant capital to pursue our Quantum Fiber buildout plans and to otherwise maintain, upgrade and expand our network infrastructure, based on several factors, including (i) changes in customers’ service requirements;

(ii) our continuing need to expand and improve our network to remain competitive and meet customer demand;

and (iii) our regulatory commitments.

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As discussed in greater detail elsewhere herein, restrictions imposed by credit instruments or other agreements applicable to Level 3 and certain of our other subsidiaries limit the amount of funds our subsidiaries are permitted to transfer to us, including the amount of dividends that may be paid to us.

Moreover, our rights to receive assets of any subsidiary upon its liquidation or reorganization will be effectively subordinated to the claims of creditors of that subsidiary, including trade creditors.

Moreover, our rights to receive assets of any subsidiary upon its liquidation or reorganization would be effectively subordinated to the claims of creditors of that subsidiary, including trade creditors.

In addition, the laws under which our subsidiaries were organized typically restrict the amount of dividends they may pay.

The ability of our subsidiaries to transfer funds could be further restricted under applicable tax laws or state regulatory orders or regulations.

The ability of our subsidiaries to transfer funds could be further restricted under applicable state or federal tax laws, regulatory orders or regulations.

For all these reasons, you should not assume our subsidiaries will be able in the future to generate and distribute to us cash in amounts sufficient to fund our cash requirements.

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Increases in costs for pension and healthcare benefits for our active and retired employees may have a material impact on us.

As of December 31, 2020, we had approximately 33,000 active employees participating in our company-sponsored benefit plans, approximately 63,000 active and retired employees and surviving spouses eligible for post-retirement healthcare benefits, approximately 65,000 pension retirees and approximately 10,000 former employees with vested pension benefits.

As of such date, our pension plans and our other post-retirement benefit plans were substantially underfunded from an accounting standpoint.

As of December 31, 2021, our company-sponsored benefit plans that cover our current and former U.S.-based employees had approximately 29,000 active employee participants, approximately 60,000 active and retired employees and surviving spouses eligible for post-retirement healthcare benefits, approximately 63,000 pension retirees and approximately 10,000 former employees with vested pension benefits.

As of such date, our domestic pension plans and our other domestic post-retirement benefit plans were substantially underfunded from an accounting standpoint.

We also maintain benefit plans for a much smaller base of our non-U.S.

The cost to fund the pension and healthcare benefit plans for our active and retired employees has a significant impact on our profitability.

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and the impact of the continuing implementation, modification or potential repeal of current federal healthcare and pension funding laws and regulations promulgated thereunder.

If interest rates remain depressed for sustained periods, our plan funding costs could substantially increase.

If interest rates remain at historically low levels for sustained periods, our plan funding costs could substantially increase.

Increased costs under these plans could reduce our profitability and increase our funding commitments to our pension plans.

See Note 10—Employee Benefits for additional information regarding the funded status of our pension plans and our other post-retirement benefit plans.

Reform of financing “benchmarks,” including London Inter-Bank Offered Rate ("LIBOR"), is ongoing and could have a material adverse effect on us.

LIBOR and other interest rate and other types of indices which are deemed to be financing “benchmarks” are the subject of ongoing international regulatory reform, with the initial phase of the non-publication of LIBOR data scheduled to begin on December 1, 2021.

Any changes announced by regulators or any other governance or oversight body, or future changes adopted thereby, regarding the continuing use or method of determining LIBOR rates may impact our interest costs.

Although we believe our variable rate indebtedness provides for alternative methods of calculating the interest rate payable on such indebtedness if LIBOR is not reported, uncertainty as to the extent and manner of future changes may adversely affect the value of our variable rate indebtedness.

In addition, uncertainty regarding the nature of these changes or alternative reference rates could cause market disruptions for variable-rate debt instruments or increase our cost of debt.

See Note 11—Employee Benefits to our consolidated financial statements in Item 8 of Part II of this report for additional information regarding the funded status of our pension plans and our other post-retirement benefit plans.

Lapses in our disclosure controls and procedures or internal control over financial reporting could materially and adversely affect us.

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We cannot assure you these measures will be effective.

Our management previously identified two material weaknesses that, while successfully remediated during 2019, caused us to request an extension in order to timely file our annual report on Form 10-K for the year ended December 31, 2018 and were costly to remediate.

Our management previously identified two material weaknesses that, while successfully remediated during 2019, were costly to remediate and caused us to request an extension in order to timely file our annual report on Form 10-K for the year ended December 31, 2018.

If we are required to record additional intangible asset impairments, we will be required to record a significant charge to earnings and reduce our stockholders' equity.

As of December 31, 2020, approximately 46% of our total consolidated assets reflected on the consolidated balance sheet included in this annual report consisted of goodwill, customer relationships and other intangible assets.

From time to time, including most recently in the fourth quarter of 2018, the first quarter of 2019 and the fourth quarter of 2020, we have recorded large non-cash charges to earnings in connection with required reductions of the value of our intangible assets.

As of December 31, 2021, approximately 45% of our total consolidated assets reflected on the consolidated balance sheet included in this annual report consisted of goodwill, customer relationships and other intangible assets (including goodwill and other intangible assets reclassified as assets held for sale).

From time to time, including most recently in the first quarter of 2019 and the fourth quarter of 2020, we have recorded large non-cash charges to earnings in connection with required reductions of the value of our intangible assets.

If our intangible assets are determined to be impaired in the future, we may be required to record additional significant, non-cash charges to earnings during the period in which the impairment is determined to have occurred.

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We face other financial risks.

We face other financial risks, including among others:

• the risk that downgrades in our credit ratings could adversely impact the liquidity or market prices of our outstanding debt or equity securities;

• the risk that a change of control of us or certain of our affiliates will accelerate a substantial portion of our outstanding indebtedness in an amount that we might not be able to repay, or could adversely impact our ability to continue periodic dividends on our capital stock at current rates, or at all.

We face other financial risks, including among others the risk that:

• downgrades in our credit ratings or unfavorable financial analyst reports regarding us or our industry could adversely impact the liquidity or market prices of our outstanding debt or equity securities;

• a change of control of us or certain of our affiliates will accelerate a substantial portion of our outstanding indebtedness in an amount that we might not be able to repay, or could adversely impact our ability to continue periodic dividends on our capital stock at current rates, or at all;

• ongoing attempts of the United States, various foreign countries and supranational or international organizations to reform taxes or identify new tax sources could materially impact our taxes, or that one or more of our ongoing tax audits or examinations could result in tax liabilities that differ materially from those we have recognized in our consolidated financial statements;

• current inflation could negatively impact (i) our margins if the higher cost of our labor and supplies cannot be offset by us raising our prices or reducing our other expenses;

(ii) our revenues if an inflationary environment causes our customers to defer or decrease their expenditures on our products or services;

or (iii) our interest costs by causing them to rise should inflation continue.

Pending Divestiture Risks

The completion of our pending divestitures are subject to several conditions.

As described further in Note 2—Planned Divestiture of the Latin American and ILEC Businesses to our consolidated financial statements in Item 8 of Part II of this report, we have agreed to divest our Latin American business and our incumbent local exchange (“ILEC”) business conducted within 20 Midwestern and Southern states.

The completion of the divestiture of our Latin American business is subject to the receipt of all requisite regulatory approvals in the U.S.

and certain countries where the Latin American business operates, as well as the satisfaction of various other closing conditions.

The completion of the divestiture of our 20-state ILEC business is subject to the receipt of approvals from the FCC, various states and certain other governmental entities, as well as the satisfaction of various other closing conditions.

We cannot assure you that these divestitures will be completed in the timeframes anticipated by us or at all.

The pendency of the divestitures could adversely affect our business.

The pendency of our divestitures could impact us in several ways, including (i) impacting relationships with our customers and vendors, (ii) restricting our operations due to certain specified operating covenants in the purchase agreements, (iii) diverting management’s attention from operating our business in the ordinary course, and (iv) diminishing our ability to retain or attract employees due to concerns over future job security or responsibilities.

We may be unable to successfully segregate the divested businesses from our retained business and realize the anticipated benefits of the divestitures.

Under each pending divestiture, we have agreed to (i) complete certain restructuring transactions to segregate the divested business from our retained business, (ii) provide certain post-closing transition and commercial services to the purchasers, and (iii) receive certain post-closing services from the purchasers designed to ensure the continuity of services to our retained customers.

We anticipate that it will be challenging and time-consuming to segregate the various businesses and provide transition services to the purchasers.

Even if we successfully complete both divestitures, we may incur or experience (i) greater tax or other costs or realize fewer benefits than anticipated under the purchase agreements and our post-closing commercial agreements with the purchasers, (ii) operational or commercial difficulties segregating the divested assets from our retained assets, (iii) disputes with the respective purchasers regarding the nature and sufficiency of the transition services we provide or the terms and conditions of our commercial agreements with each respective purchaser, (iv) potential disputes with creditors concerning the pending transactions or use of the proceeds therefrom, (v) higher vendor costs due to reduced economies of scale or other similar dis-synergies, (vi) lower productivity to the extent segregation of the divested businesses distracts or diverts personnel from operating our retained business, (vii) losses or increased inefficiencies from stranded or underutilized assets, (viii) the loss of any customers dissatisfied with our services post-closing, (ix) challenges in retaining and attracting personnel or (x) the loss of vendors or customers due to our inability to assign contracts with their consent.

The divestitures will reduce our future cash flows and sales of higher-margin ILEC services.

If our remaining business fails to perform as expected, the divestitures could exacerbate certain of the other financial risks specified in this Item 1A, including our ability to fund all of our current cash requirements.

General Risk Factors

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Unfavorable general economic, societal 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.

While it is difficult to predict the ultimate impact of these general economic, societal or environmental conditions, they could adversely affect demand for some of our products and services and could cause customers to shift to lower-priced products and services or to delay or forego purchases of our products and services.

Any one or more of these circumstances could continue to depress our revenue.

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These provisions (which are described further in our Registration Statement on Form 8-A/A filed with the SEC on March 2, 2015) could deprive our shareholders of any related takeover premium.

We face other general risks.

As a large multinational business with complex operations, we face various other general risks, including among others:

• the risk a perceived failure to meet evolving environmental, social and governance (“ESG”) practices or benchmarks could adversely impact our business, brand, stock price or cost of capital;

• the risk a challenge to our ESG statements could lead to reputational harm or lawsuits;

• the risk that statements, political donations, advocacy positions or similar actions attributable to us or our operations could harm our reputation, brand or business;

• the risk that one or more of our ongoing tax audits or examinations could result in tax liabilities that differ materially from those we have recognized in our consolidated financial statements.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors