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Item 1A. Risk Factors

2026-02-20 compared with 2025-02-20 · 373 added, 335 removed, 58 unchanged (92% of the section changed)

6 unchanged sentences

Business Risks

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

To attain our operational and strategic goals and our projected cost savings, we need to integrate, simplify, upgrade, and modernize our existing applications and systems, including many legacy systems from past acquisitions.

This process will require us to, among other things, timely retire aging or obsolete systems, deploy a master data management platform, and integrate various legacy IT systems into a new, simplified structure.

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.

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

We may not be able to create the global digital experience expected by customers.

Our customers expect us to create and maintain a global digital platform, including (i) automation and simplification of our offerings and (ii) digital self-service access to our products, services and customer support.

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

Effective digital transformation is a complex, dynamic process requiring efficient allocation and prioritization of resources, simplification of our product portfolio, faster product deployments, retirement of obsolete systems, migration of data, and corresponding transformations of our workforce and systems.

We cannot assure you we will be able to timely 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 existing customers or fail to attract new ones, either of which could prevent us from attaining our financial goals.

We may not realize the anticipated benefits of our strategic focus on selling PCF solutions.

During the second half of 2024, we announced that Lumen and its subsidiaries had recently sold several billion dollars of new PCF solutions.

Full payment for certain deals involving construction of new routes depends on fulfilling certain delivery obligations or other performance conditions, and revenue under our PCF agreements may be less than anticipated.

Our costs under these agreements may be greater than anticipated due to construction delays or cost overruns as a result of weather, supply chain, labor, permitting, or other unforeseen issues.

If demand for data center connectivity declines or customer needs or preferences change for any other reason, future demand for, and the profitability of, our PCF solutions could decline or cease.

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.

In response, we are endeavoring to build a digital networking services ecosystem that enables us to offer attractive products and services (including PCF solutions) that fulfill this market demand.

But, as indicated by other disclosures in this Item 1A, our success will be dependent on improving and integrating our systems and meeting evolving customer demands in a highly competitive industry experiencing rapid advances in technology.

For these reasons and others, our attempts to capitalize on emerging market opportunities may not be as successful as we currently envision.

Challenges with integrating, modernizing, and digitally transforming our systems could adversely affect our business and financial results.

To achieve our operational and strategic goals and projected cost savings, we must integrate and modernize legacy systems, retire aging or obsolete platforms, deploy master data management, and complete our digital transformation to deliver a global digital platform with automated offerings and digital self-service.

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.

Failure to execute could disrupt service delivery, delay repairs, reduce anticipated efficiencies, destabilize our network, and hinder compliance with regulatory or contractual obligations.

These outcomes could result in customer loss, inability to attract new customers, and failure to meet financial objectives, any of which could materially and adversely affect our business and results of operations.

We may not realize the anticipated benefits of our strategic focus on PCF solutions.

We have prioritized sales from our PCF solutions in recent periods.

PCF agreements involve delivery obligations and performance conditions that can affect timing and amounts of revenue recognition.

Construction delays or cost overruns — from weather, supply chain, labor, permitting or other issues — could raise costs.

Shifts in data center connectivity demand could reduce or even eliminate future PCF profitability.

If anticipated benefits do not materialize or costs increase, our financial results may be adversely impacted.

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.

We are building a digital networking services ecosystem designed to deliver compelling products and services, including PCF solutions, that address market demand.

Achieving this vision requires continuous system enhancements, seamless integration, and the ability to meet evolving customer needs amid rapid technological change and intense competition.

If AI-related demand proves weaker, slower, or materially different from our assumptions in strategic plans or guidance, we risk misallocating resources and failing to meet growth objectives.

In connection with establishing our strategies and earnings guidance, 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.

The use of AI in internal operations may create governance, operational, cybersecurity, privacy, and regulatory risks that could adversely affect the Company's business and results of operations.

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

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.

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.

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.

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.

Many of these technological changes are (i) displacing or reducing demand for certain of our services, (ii) enabling the development of competitive products or services, (iii) enabling customers to reduce or bypass use of our networks or (iv) reducing our profit margins.

For example, our competitors may overbuild in our markets and roll out high speed connectivity products.

Increasingly, customers are demanding higher transmission speeds and more technologically advanced products that suit their evolving needs, including traditional and generative AI services.

As we note below, several of our competitors have dedicated substantially more resources to developing such advanced services.

If we fail to develop competitive services, our business and financial performance could be adversely impacted.

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.

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, we could fail to retain customers or attract new ones.

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 to transform into a company that primarily serves Business customers requiring newer advanced products, we may be unable to attract and retain skilled and motivated leaders and employees who possess the technical, development, operational, sales or managerial expertise to execute our plans for transformation, innovation and strategic growth.

We operate in a highly competitive and expanding industry, where competition for highly skilled employees has grown increasingly intense and competitors have targeted hiring our employees.

The prevalence of remote working arrangements 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 or benefits in excess of what we are able to offer.

These risks to attracting and retaining key personnel may have been exacerbated by the impacts of the relatively low trading price of our common stock, which, as discussed below, has diminished the attractiveness of our equity incentive compensation programs.

Our failure to successfully attract and retain key personnel could materially adversely impact our business or financial performance.

Over half of our employees work fully from home, and a substantial portion of the remainder work partly from home under "hybrid" work schedules.

These work arrangements may impair our ability to maintain our collaborative and innovative culture, and may lower the productivity and collegiality of our workforce.

Uncertainty regarding our future prospects could adversely impact our ability to maintain satisfactory relations with our employees, customers, vendors and others.

For several years we have experienced declining revenues and high debt levels, which has created uncertainties regarding our future prospects and ability to discharge our obligations.

Despite the positive impacts of our 2024 PCF agreements and debt transactions, these uncertainties persist.

Concerns regarding our future prospects and ability to discharge our obligations, coupled with a relatively low stock trading price and recent reductions of our workforce, could adversely impact our ability to attract, retain and motivate our employees.

We grant equity-based incentive awards to key personnel, the value of which is tied to our stock price, our financial performance or both.

If recipients of those awards are concerned about our future stock price or financial performance, they may view less favorably the value of their equity awards and the competitiveness of their total compensation package.

Similarly, customers, vendors, landlords, banks or other third parties may be less willing to transact business with us if they believe our future is uncertain, any of which could adversely impact our business, financial performance, financial position or future prospects.

In addition, a relatively low stock price could limit our ability to raise capital through the issuance of capital stock and could limit the number of financial analysts willing to publish reports about us.

We could be harmed if our reputation is damaged.

We believe our Lumen and other brand names 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, 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.

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.

For instance, we could be harmed if our customer experience scores, as measured by "NPS" (Net Promoter Score) and "CHS" (Customer Health Score), for our products and services are low or declining relative to our competitors.

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 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.

As a critical infrastructure service provider, we transmit large amounts of data over our systems, and process and store highly sensitive customer data.

Consequently we, our third-party service providers, and our customers are under constant threat of cyber attacks.

The number and sophistication of these attacks continues to increase.

Despite our efforts to prevent these events, some of these attacks could result in a material adverse impact to our operations due to distributed denial of service attacks, ransomware attacks, malware, virus, credential harvesting, man-in-the-middle attacks, or social engineering attacks.

As previously disclosed in our 2023 reports to the SEC and various 2024 media reports, (i) sophisticated threat actors accessed our internal information technology systems in 2023 and 2024 and (ii) we experienced a ransomware attack on a limited number of our servers in 2023.

The ransomware attack did not impact any operations or customer data.

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.

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.

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 challenges of operating and maintaining our complex multi-continent network composed of legacy and acquired properties, which is more difficult to safeguard than newer fully-integrated networks, (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, (vi) the large number of our employees working from remote locations, (vii) our IT support agreements with purchasers of businesses we have divested over the past few years and (viii) as further discussed below, the difficulty of defending against increasingly sophisticated attacks.

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 incidents, (iv) damage our reputation or result in a loss of business, (v) require us to provide credits for future service to our customers or to offer expensive incentives to retain customers, (vi) subject us to claims by our customers or regulators for damages, fines, penalties, license or permit revocations or other remedies, (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 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.

Moreover, the risk of incidents is likely to continue to increase due to several factors, including (i) the increasing use of machine learning, AI and other sophisticated techniques to initiate cyber and phishing attacks, (ii) the wider accessibility of cyber-attack tools that can circumvent security controls and evade detection, which can delay and limit our ability to accurately assess and fully remediate the impact of the attack, and (iii) growing threats from Chinese, Russian and other state actors due to heightened geopolitical tensions and rivalries, and the attendant increased possibility of cyber warfare targeting us in the event of a direct conflict.

It should also be noted that defenses against cyber-attacks currently available to us and others are unlikely to prevent intrusions by a highly-determined, highly-sophisticated threat actor.

Consequently, you should assume that we will continue to experience cyber incidents in the future.

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.

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.

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

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.

These disruptions expose us to several of the same risks listed above for cyber-attacks, including the loss of customers, the issuance of credits or refunds, and regulatory fines.

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.

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, 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.

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.

Consequently, we have experienced declining consolidated revenues (excluding acquisitions) for a prolonged period and have not been able to realize cost savings sufficient to fully offset the decline.

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.

In addition, most of our more recent product and service offerings generate lower profit margins and may have shorter lifespans than our traditional communication services, and some can be expected to experience slowing or no growth in the future.

Some of our new product offerings have reduced or displaced our sale of older higher-margin product offerings.

Accordingly, the operating and strategic plans that we have implemented to address these challenges may not succeed in attaining our goal of achieving future revenue growth in the time frames we project, or at all.

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

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.

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.

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;

• 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;

• maintain larger-scale operations.

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.

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.

These changes are reducing demand for certain services, enabling the development of competitive alternatives, allowing customers to bypass our networks, and compressing profit margins.

Customers increasingly expect higher transmission speeds and advanced offerings, including traditional and generative AI services.

Several competitors have committed substantial resources to developing these advanced services.

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;

• retire outdated services cost-effectively.

Our ability to achieve these objectives may be constrained by limitations in our network, technology, capital resources, or personnel.

Failure to successfully execute these initiatives could result in resource misallocation and an inability to retain existing customers or attract new ones, which may adversely affect our business, financial condition, and results of operations.

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Talent constraints and evolving work models could significantly impede our ability to attract, develop and retain qualified personnel and may impair execution of our transformation and strategic initiatives.

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.

Competitors with greater resources may offer compensation and benefits exceeding ours, and remote work arrangements have broadened the pool of employers competing for talent.

The relatively low trading price of our common stock has reduced the perceived value of our equity-based compensation programs, further hindering our ability to recruit and retain critical talent.

Moreover, our significant remote and hybrid workforce could impair collaboration, innovation, and productivity, and weaken the collegial relationships that support our corporate culture.

These factors could materially and adversely affect our ability to execute our strategic plans and achieve our business objectives.

Declining revenues and financial uncertainty could adversely affect our business.

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.

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.

Many of our newer offerings generate lower margins and may displace higher-margin legacy services, further impacting profitability.

These revenue declines or failure to hit our revenue growth goals, combined with elevated debt levels and a relatively low trading price for our common stock, may create uncertainty about our future prospects and ability to meet obligations.

Concerns about our financial condition may adversely affect employee morale and customers, vendors, landlords, lenders, and other third parties may be reluctant to transact with us or impose unfavorable terms if they believe our future is uncertain.

Our relatively low stock price may also restrict our ability to raise capital through equity offerings and reduce analyst coverage.

Any of these factors could materially and adversely affect our business, financial condition, results of operations, and prospects.

Damage to our reputation or brands could have a material adverse effect on our business.

Our Lumen and other brand names, together with our corporate reputation, are critical assets that support our ability to attract and retain customers and employees.

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.

Our reputation may further be impaired by criticism from customers, vendors, employees, advocacy groups, regulators, investors, the media, social media influencers, or others regarding our services, operations, or public positions.

For example, unfavorable trends in customer experience scores — such as Net Promoter Score (“NPS”) or Customer Health Score (“CHS”) — relative to competitors could adversely affect us.

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.

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.

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We could be materially impacted by cyber-attacks.

As a critical infrastructure provider, our operations rely heavily on a broad range of hardware, software, networks and other products and services that are owned and managed by us or by third parties, including systems used to transmit and store large volumes of sensitive data (collectively, “IT systems”).

We and our third-party partners and customers are frequent targets of increasingly sophisticated cyber-attacks, including distributed denial-of-service, ransomware, malware, viruses, credential harvesting, man-in-the-middle, software vulnerability exploitation, and social engineering.

Our efforts to implement sound information security and business continuity programs cannot ensure the integrity of our systems and successful attacks could materially disrupt operations, compromise data, damage our reputation, trigger regulatory investigations or litigation, or result in significant costs.

We have acquired and will continue to acquire companies that may have cybersecurity vulnerabilities or unsophisticated controls, which exposes us to significant risk.

We and certain of our third-party providers have previously experienced cyberattacks and security incidents.

Future attacks could have a material adverse effect on our business, operations, or financial results.

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.

These threats may also arise from failure or intrusions of unaffiliated third-party systems on which we materially rely to operate our business.

Risks are heightened by factors such as:

• our storage of digital information on Internet-connected servers;

• use of open and software-defined networks;

• complexity of our global network infrastructure, including harder-to-secure legacy systems;

• rising demand for data services;

• increasing customer scale and complexity of service requirements;

• our large remote workforce;

• our IT support obligations tied to divested businesses;

• escalating sophistication of threat actors.

Consequences of a successful attack could include operational disruption, data loss or exposure, regulatory penalties, reputational harm, customer attrition, service credits or costly retention incentives, costly remediation, litigation, and loss of certifications.

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.

Risks are amplified by AI-driven attacks, widely available evasion and anti-forensic tools that make it increasingly challenging to detect, respond to, and recover from cyber attacks.

Escalating geopolitical tensions and rivalries increase the likelihood of state-sponsored cyber-attacks against us.

No defenses can guarantee prevention.

Consequently, we expect to experience cyber incidents in the future.

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.

We continue to take steps designed to limit our cyber risks, and although we maintain cyber insurance, coverage may be limited by deductibles, exclusions, and caps, and may not fully offset losses.

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Moreover, as a contractor to the Department of Defense (“DoD”), we are contractually required to protect “controlled unclassified information” and comply with the DoD’s cybersecurity requirements, including the security controls specified in the National Institute of Standards and Technology Special Publication 800-171 (“NIST SP 800-171”).

The DoD has also begun phased implementation of the Cybersecurity Maturity Model Certification (“CMMC”) into its contracts.

CMMC incorporates the requirements of NIST SP 800-171 and will require all contractors to, depending on the level of security required, perform a self-assessment or receive specific third-party certifications.

If we are unable to protect controlled unclassified information or to achieve or maintain the required CMMC level, we may be deemed ineligible to bid on or perform certain government contracts.

Noncompliance could also result in contract termination, reduced revenue, reputational harm, and increased costs associated with remediation and reassessment, any of which could materially harm our business.

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.

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.

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.

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, cash flows, and stock price.

Our ability to conduct our operations is materially reliant on key suppliers, vendors, customers, and other third parties.

Our operations, financial performance, and liquidity rely significantly on key suppliers, vendors, licensors, customers, and other third parties.

Disruptions or terminations of these relationships could have a material adverse effect on our business, financial condition, or results of operations.

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 delivery, quality and quantity of these purchased services.

In addition, we are exposed to the risk that other companies may be unwilling or unable to continue or renew these arrangements in the future for several reasons, including bankruptcy.

Those risks are heightened when we contract with a competitor who may have incentives to act in ways unfavorable to us, including by terminating those contracts, imposing price increases or favoring their transmissions over ours.

Additionally, several companies rely on our network to transmit their data or voice traffic.

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.

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.

We face risks that these providers may decline to renew agreements, impose unfavorable terms, or experience financial distress, including bankruptcy, that could impair ability to provide services.

These risks are heightened when contracting with competitors, who may terminate agreements, increase prices, or prioritize their own traffic.

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.

Reliance on key suppliers and vendors :

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.

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.

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.

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 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, including if the third-party licensor violates, or is alleged to have violated, the intellectual property rights of others.

Moreover, if we incorporate licensed technology into our network, we may have limited flexibility to deploy different technologies from alternative licensors.

We license essential technologies from third parties to deliver certain products and services.

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.

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.

Moreover, we would be adversely impacted if we fail to renew major contracts upon their expiration.

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.

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Reliance on landowners :

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.

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.

Similarly, our buildout plans can be delayed if we cannot receive necessary landowner authorizations or governmental permits.

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.

Extreme weather conditions and climate changes 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 areas that subject them to the risks associated with severe tropical storms, hurricanes, tornadoes, earthquakes, floods, wildfires or other similar casualty events.

From time to time these events (including Hurricane Ian in 2022 in Florida) 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.

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.

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.

We cannot assure successful renewal or replacement of these arrangements.

Extreme weather and climate change could disrupt operations and increase costs.

Many of our domestic facilities are located in regions susceptible to severe weather and natural disasters, including tropical storms, hurricanes, tornadoes, earthquakes, floods, wildfires, or other casualty events.

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.

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.

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.

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.

Our reputation and brands could be impacted by our public environmental initiatives, including our environmental sustainability initiatives.

These initiatives, goals, or targets could be difficult to achieve and costly to implement.

To the extent that our required or voluntary disclosures about environmental initiatives increase, we could be criticized for their accuracy, adequacy, or completeness.

We could fail to achieve, or be perceived to fail to achieve, our environmental-related initiatives, goals, or targets.

Our actual or perceived failure to achieve our environmental-related initiatives, goals, targets, 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.

Conversely, we may fail to attract or retain customers, vendors, employees or other stakeholders who are opposed to our environmental-related initiatives, or may face claims from stakeholders who believe such initiatives harmed them or us.

Our system redundancy and other measures we implement to protect infrastructure and maintain operations may prove inadequate to sustain our operations following such events.

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.

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.

We are subject to evolving and sometimes conflicting, laws, regulations, policies, and investor and other stakeholder expectations concerning environmental, social, and governance matters, such as environmental sustainability and climate change, both in the United States and internationally.

Our environmental and sustainability initiatives, goals, and targets may be difficult to achieve and costly to implement.

Increased required or voluntary disclosures regarding these efforts could subject us to scrutiny or criticism concerning their accuracy, adequacy, or completeness.

In addition, in a climate where there are changing and increasingly divergent views on where our focus should be on these matters, our initiatives, goals, or commitments, or any revisions to them, are often criticized and the accuracy, adequacy, or completeness of such disclosures challenged.

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.

We face other business risks.

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 continents, (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.

We face additional business risks, including:

• challenges in managing a global organization that offers 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;

• uncertainties and risks associated with acquiring or disposing of businesses or pursuing other strategic transactions.

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Legal and Regulatory Risks

We are subject to an extensive, evolving regulatory framework that could create operational or compliance costs.

As explained in greater detail elsewhere in this annual report, (i) our domestic operations are regulated by the FCC and other federal, state and local agencies and (ii) our international operations are regulated by a wide range of various foreign and international bodies.

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.

We are subject to numerous requirements and interpretations under various international, federal, state and local laws, rules and regulations, which are often quite detailed or unclear and are occasionally in conflict with each other.

Accordingly, we cannot ensure we will always be in compliance with all these requirements at any particular time.

Various governmental agencies, including state attorneys general with jurisdiction over our operations, have routinely in the past investigated our business practices either in response to customer complaints or on their own initiative, and are expected to continue to do the same in the future.

Certain of these investigations have resulted in substantial fines in the past.

On occasion, we have resolved such matters by entering into consent decrees, which are court orders that frequently restrict our future conduct.

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.

Our prior or current participation in certain of the FCC's buildout programs subjects us to certain financial risks.

For example, if we are not in compliance with FCC measures by the end of the CAF II or RDOF programs, we could incur substantial penalties or forfeitures, including but not limited to being suspended or disbarred from future governmental programs or contracts, which could have a material adverse impact on our financial condition.

From time to time, legislative or regulatory bodies create new subsidy programs designed to enhance the communications infrastructure in the U.S.

(such as Congress’s creation of a $65 billion broadband connectivity fund in 2021), which in the past have typically increased the number of companies offering competing products in certain of our markets.

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 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, it could have a material adverse impact on our results of operations and financial condition.

A variety of state, national, foreign and international laws and regulations apply to the collection, use, retention, protection, security, disclosure, transfer and other processing of personal and other data.

The European Union and other international regulators, as well as some state governments, have recently enacted or enhanced data privacy legal requirements, and other governments are considering establishing similar or stronger protections.

Many of these laws are complex and change frequently and often conflict with the laws in other jurisdictions.

Some of our customers impose similar requirements on us that are equally or more demanding.

If we fail to comply with any of these governmental or contractual requirements, we could incur potential substantial penalties and reputational damage.

For years, the laws governing our operations have been unsettled, which has impacted our ability to plan for the future.

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.

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.

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

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.

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.

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.

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.

Although we believe our liability for these types of claims is limited under current law, suits against other carriers have been successful and we cannot assure you that our defenses will prevail.

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 and potentially require us to implement changes to manage this exposure.

Complex and evolving regulations could increase operational and compliance costs.

As explained in greater detail elsewhere in this annual report, we are subject to numerous, often complex and occasionally conflicting laws and regulations at the international, federal, state, and local levels.

We cannot assure that we will successfully obtain or maintain all authorization licenses necessary to operate in our markets, and full compliance cannot be guaranteed at all times.

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.

These investigations have resulted in substantial fines and, in some cases, consent decrees that restrict future conduct and carry judicial enforcement risks.

Breaching a consent decree could subject us to contractual remedies and contempt of court proceedings, any of which could have material adverse consequences.

Future investigations could lead to litigation, penalties, operational changes, or reputational harm.

Our former or current participation in FCC buildout programs, such as RDOF, exposes us to significant financial risk.

Noncompliance could result in significant penalties, forfeitures, or disqualification from future programs, materially affecting our financial condition.

New subsidy programs, such as the $65 billion broadband fund established in 2021, may also increase competition in certain markets.

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 are subject to numerous data privacy and security laws, including recently enacted or strengthened requirements in the EU and certain U.S.

These laws are complex, frequently change, and often conflict across jurisdictions.

Customers may impose additional requirements.

Noncompliance could result in substantial penalties and reputational damage.

Due to the nature of our operations, we have been, and expect to continue to be impacted by regulatory developments related to climate change, including, for example, the direct regulation of greenhouse gas emissions or carbon policies that could result in a tax on such emissions.

In addition, policy-driven changes in the prices of fuel or energy in geographies in which we operate could make it more expensive for us to purchase energy to power our networks and data centers.

Laws governing our operations have long been unsettled, limiting our ability to plan effectively.

Regulatory uncertainty has increased following a 2024 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.

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.

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.

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.

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We may face legal and reputational risks related to third-party content on our network.

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.

While we believe our liability is limited under current law, similar claims against other carriers have succeeded, and we cannot assure that our defenses would prevail.

In addition, such content could result in negative publicity and harm our reputation.

Furthermore, proposed changes to applicable laws could significantly increase our exposure and require us to implement measures to mitigate these risks.

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

There are several potentially material proceedings pending against us, including several derivative and class action suits.

Results of these legal proceedings cannot be predicted with certainty.

As of any given date we could have exposure to losses under proceedings in excess of our accrued liability.

For each of these reasons, any of the proceedings described in Note 18—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.

We can give you no assurances as to the ultimate impact of these matters on us.

We are involved in several potentially material proceedings, including derivative and class action lawsuits.

The outcome of these matters is inherently uncertain, and we may incur losses that exceed our recorded liabilities or insurance coverage.

Any of the proceedings described in Note 17 — 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 securities, and our ability to access capital.

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 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.

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 the use of artificial intelligence (AI) could give rise to legal or regulatory actions, damage our reputation or otherwise materially harm our business.

We currently incorporate AI technology in certain of our products and services and in our business operations.

Due to the complexity of its design and algorithms, AI presents various risks and challenges, and its use could cause operational disruptions or have other unintended adverse consequences.

While we aim to use AI responsibly and attempt to identify and mitigate ethical and legal issues presented by its use, we may be unsuccessful in identifying or resolving issues before they arise.

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.

For all these reasons, our use of AI could materially harm our business, operations or reputation.

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

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 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.

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.

If we cannot obtain rights to use any required technology from a third party on reasonable terms, our ability to offer new products and services may be prohibited, restricted, made more costly or delayed.

Failure to extend or renegotiate our collective bargaining agreements or work stoppages could have a material impact on us.

As of December 31, 2024, approximately 21% of our employees were members of various bargaining units represented by labor unions.

Although we have agreements with these labor unions, we cannot predict the outcome of our future negotiations of these agreements.

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.

Our international operations expose us to various regulatory, currency, tax, legal and other risks.

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.

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.

We incorporate AI technology into certain products, services, and business processes.

AI’s complexity and reliance on algorithms present risks that could lead to operational disruptions or other unintended consequences.

Although we strive to use AI responsibly and attempt to identify and mitigate ethical and legal concerns, we may not identify or resolve issues before they occur.

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.

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.

We have responded or will respond to these notices and claims when appropriate and expect this industry-wide trend to continue.

If any of these claims are successful, we could be required to pay substantial damages, discontinue use of certain technology, or pay royalties to continue using it.

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.

If we cannot secure these rights on reasonable terms, our ability to introduce new offerings could be restricted, delayed, or made more costly.

Any actual or perceived failure to comply with new or existing laws, regulations and other requirements relating to the privacy, security and processing of Personal Information could materially impact our business.

In connection with running our business, we receive, store, use and otherwise process information that relates to individuals or constitutes “personal information,” “personal data,” “personally identifiable information,” or similar terms under applicable data privacy laws (collectively, “Personal Information”).

We are therefore subject to a variety of federal, state and foreign laws, regulations and other requirements relating to the privacy, security and processing of Personal Information.

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The application and interpretation of such requirements are constantly evolving and are subject to change, creating a complex compliance environment.

In some cases, these requirements may be either unclear in their interpretation and application or they may have inconsistent or conflicting requirements with each other.

Further, there has been a substantial increase in legislative activity and regulatory focus on data privacy and security in the United States and elsewhere, including in relation to cybersecurity incidents.

In addition, some such requirements place restrictions on our ability to process Personal Information across our business or across country borders.

It is possible that new laws, regulations and other requirements, or amendments to or changes in interpretations of existing laws, regulations and other requirements, may require us to incur significant costs, implement new processes, or change our processing of information and business operations, which could ultimately hinder our ability to grow our business by extracting value from our data assets.

In addition, any failure or perceived failure by us to comply with laws, regulations and other requirements relating to the privacy, security and processing of information could result in legal claims or proceedings (including class actions), regulatory investigations or enforcement actions.

We could incur significant costs in investigating and defending such claims and, if found liable, pay significant damages or fines or be required to make changes to our business.

These proceedings and any subsequent adverse outcomes may subject us to significant negative publicity and an erosion of trust.

If any of these events were to occur, our business, results of operations, and financial condition could be materially adversely affected.

Labor disputes or failure to renew collective bargaining agreements could materially affect our operations.

Many of our employees are represented by labor unions under collective bargaining agreements.

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.

International operations expose us to regulatory, economic, and political risks.

Our international operations are subject to a wide range of U.S.

laws, regulations, treaties, tariffs and other directives governing our operations in international jurisdictions in which we provide services, either directly or indirectly through our contractual arrangements with other carriers.

Many of these laws or other directives are complex, change frequently and conflict with the laws in other jurisdictions to which we are bound.

There is a risk that these laws or other directives could materially restrict our ability to deliver services in various international jurisdictions or expose us to the risk of potential penalties, license revocations or contract terminations if we violate them.

In addition, if the U.S.

continues increasing its tariffs, we could incur additional expense we may be unable to recover from our customers.

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

laws, regulations, treaties, tariffs, and governing our operations in international jurisdictions, either directly or indirectly through our contractual arrangements with other carriers.

Many of these laws or directives are complex, frequently change, and may conflict across jurisdictions in which we provide services.

These requirements could materially restrict our ability to provide services internationally or expose us to penalties, license revocations, or contract terminations if violated.

In addition, increases in U.S.

tariffs could result in additional costs that we may not recover from customers.

Beyond regulatory risks, conducting business internationally involves other challenges, including:

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

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

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.

These allegations have resulted in regulatory inquiries and lawsuits, and could in the future subject us to legislative or regulatory actions, removal costs, compliance costs or penalties.

Accordingly, we may incur substantial expenses, which could have a material adverse impact on our financial results or condition.

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.

Such damage to our reputation could be difficult, expensive and time-consuming to repair, and could negatively impact our business or the value of our securities.

Any of these factors could materially adversely affect our operations and financial condition.

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.

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.

Reputational harm may be difficult, costly, and time-consuming to repair and could negatively affect our business and the value of our securities.

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Financial Risks

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

As of December 31, 2024, we had approximately $13.7 billion of outstanding consolidated secured indebtedness, $4.6 billion of outstanding consolidated unsecured indebtedness (excluding (i) finance lease obligations, (ii) unamortized premiums, net and (iii) unamortized debt issuance costs) and approximately $737 million of unused borrowing capacity under our revolving credit facilities.

Our 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 and strategic initiatives;

• 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);

We 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, and strategic initiatives;

• 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;

• 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;

• 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.

The effects of each of these factors could be intensified if we increase our borrowings or experience any downgrade in our credit ratings or those of our affiliates.

Subject to certain limitations and restrictions, the current terms of our debt instruments and our subsidiaries’ debt instruments permit us or them to incur additional indebtedness.

We expect to periodically require financing, and we cannot assure you we will be able to obtain such financing on terms that are acceptable to us, or at all.

We expect to periodically require financing in the future to refinance existing indebtedness and potentially for other purposes.

Our ability to arrange additional financing will depend on, among other factors, our financial position, performance, credit ratings, and debt covenants.

Our ability to obtain additional financing could also depend on prevailing market conditions, which could be adversely affected by (i) general market conditions, such as disruptions in domestic or overseas sovereign or corporate debt markets, geo-political instabilities, trade restrictions, pandemics, weak economic conditions or other similar adverse economic developments in the U.S.

or abroad, and (ii) specific conditions in the communications industry.

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.

For these and other reasons, we can give no assurance additional financing for any of these purposes will be available on terms acceptable to us, or at all.

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.

Our current and future debt instruments may restrict, or market or business conditions may limit, our ability to complete some of these actions on favorable terms, or at all.

For these and other reasons, we cannot assure you we could implement these steps in a sufficient or timely manner, or at all.

Even if successfully implemented, these transactions could be detrimental to our operations, financial performance or future prospects.

• negatively affecting perceptions of our company among customers, vendors, employees, creditors, and investors;

• making it more difficult or costly to obtain future financing or refinancing, potentially forcing asset sales or other unfavorable actions to raise capital;

• heightening the risk of covenant breaches or missed payments, which could trigger acceleration of some or all of our outstanding debt.

These risks could be exacerbated by changes in economic conditions, additional borrowings, or credit rating downgrades.

Subject to certain limitations, our existing debt agreements permit us and our subsidiaries to incur additional indebtedness.

Our ability to obtain future financing may be limited, and failure to refinance debt could adversely affect us.

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.

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.

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 securities, reducing or delaying expenditures, or negotiating debt restructurings.

However, our 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.

Lumen Technologies, Inc.

and various of its subsidiaries owe substantial sums pursuant to various debt and financing arrangements, certain of which are guaranteed by other principal subsidiaries.

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.

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.

The remainder of the debt of Level 3 Financing, Inc.

is not secured by any of its assets, but is guaranteed on an unsecured basis by certain of its affiliates.

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.

Most of the over 200 subsidiaries of Lumen Technologies, Inc.

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

or its affiliates.

As such, our investors should be aware that (i) determining the priority of the rights of holders of our consolidated debt instruments is a complex matter which is substantially dependent upon the assets and earning power of the entities that issued or guaranteed (if any) the applicable debt and (ii) such debt is structurally subordinated to all liabilities of the non-guarantor subsidiaries of Lumen Technologies, Inc.

to the extent of the value of those subsidiaries that are obligors.

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.

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.

Most of the subsidiaries of Lumen Technologies, Inc.

have neither borrowed funds nor guaranteed any of our debt.

As a result, determining the priority of rights among holders of our consolidated debt instruments is complex and depends on the assets and earnings of the issuing or guaranteeing entities.

In addition, our debt is structurally subordinated to all liabilities of non-guarantor subsidiaries to the extent of the value of those subsidiaries that are obligors.

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As disclosed in the periodic reports for our subsidiaries, Level 3 Parent, LLC and Qwest Corporation, Lumen Technologies Inc.

also enters into debt arrangements with its subsidiaries from time to time.

Any such intercompany transactions with its consolidated subsidiaries are eliminated in accordance with U.S.

generally accepted accounting principles (“GAAP") and, accordingly, are not reflected on the consolidated balance sheets of Lumen Technologies, Inc.

For instance, at December 31, 2024, Lumen Technologies, Inc.

owed approximately $2.7 billion to Level 3 Financing, Inc., (i) $1.2 billion of which was owed under a secured $1.2 billion revolving loan agreement and (ii) $1.5 billion of which was owed under an unsecured $1.825 billion revolving loan agreement.

Qwest Corporation is also currently permitted to borrow up to $2.0 billion from a subsidiary of Lumen Technologies, Inc.

under a revolving promissory note, but no amounts were outstanding thereunder at December 31, 2024.

Lumen Technologies, Inc.’s debt arrangements with its subsidiaries may be revised from time to time, including to increase or decrease the amount thereof.

Our various debt agreements include restrictions and covenants that could (i) limit our ability to conduct operations or borrow additional funds, (ii) restrict our ability to engage in inter-company transactions, and (iii) lead to the acceleration of our repayment obligations in certain instances .

Under our 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.

has intercompany debt arrangements with certain subsidiaries, including a revolving promissory note with Qwest Corporation that provides borrowing capacity up to a specified limit, and revolving loan agreements with Level 3 Financing, Inc., which include both secured and unsecured components.

These arrangements are eliminated in consolidation under U.S.

generally accepted accounting principles ("GAAP") and therefore do not appear on our consolidated balance sheet.

These intercompany arrangements may be revised over time, including changes to borrowing limits.

Restrictive covenants and potential defaults under our debt agreements could materially affect our operations and liquidity.

Under our 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.

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

pay dividends or other distributions to shareholders;

create liens on assets;

transact with its affiliates and engage in mergers, consolidations or other similar transactions.

These covenants limit our ability to incur additional debt or guarantees, pay dividends or other distributions to shareholders, make loans, create liens, sell assets, transact with affiliates, or engage in mergers and other strategic transactions.

These restrictions could materially impair our ability to operate, restructure our business, issue priority debt, or pursue acquisitions and other strategic initiatives.

Lumen Technologies, Inc.’s senior secured credit facilities and secured notes also include financial maintenance covenants, as described in Note 7 — Long-Term Debt and Credit Facilities in Item 8.

Level 3 Financing, Inc.’s agreements contain substantially similar limitations and treat it as a separate restricted group, which may significantly restrict transactions with Level 3 Parent, LLC, including cash transfers among affiliated entities.

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.

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

contain substantially similar limitations that restrict their operations on a standalone basis as a separate restricted group.

Consequently, certain of these covenants may significantly restrict our ability to engage in transactions with Level 3 Parent, LLC, including receiving cash from Level 3 Parent, LLC, or distributing cash from Level 3 Parent, LLC to other of our affiliated entities.

Lumen Technologies, Inc.’s senior secured credit facilities also contain financial maintenance covenants which are described further in Note 7—Long-Term Debt and Credit Facilities.

The failure of Lumen Technologies, Inc.

or any of its subsidiaries to comply with the above-described restrictive or financial covenants could result in an event of default, which, if not cured or waived, could accelerate our debt repayment obligations.

Any such acceleration of our debt could have materially adverse consequences, including reducing the possibility of obtaining financing and potentially forcing us to seek bankruptcy protection.

Certain of our debt instruments have cross-default or cross-acceleration provisions.

When present, these provisions could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument.

In 2023, holders of a substantial portion of our funded indebtedness asserted that we had violated certain of our debt covenants.

Other creditors could potentially seek to assert similar claims in the future, the risk of which is heightened by the complexity of our debt structure, debt covenants and operations.

Our recent debt transactions may not achieve their anticipated benefits.

During 2024, we engaged in a series of transactions designed to extend our debt maturities, enhance our access to revolving credit, and reduce our indebtedness.

In connection with announcing the closing of these transactions, we indicated that they would provide us with additional time to transform our operations and improve our financial performance.

In completing these transactions, we incurred substantial transaction expenses, agreed to pay higher levels of interest and committed to more restrictive debt covenants, which collectively could have important consequences, including the potentially adverse consequences of carrying significant debt or failing to comply with applicable debt covenants, each as specified elsewhere in this Item 1A.

For all these reasons and more, we may not realize some or all of the benefits we anticipate receiving from completing our 2024 debt transactions.

We cannot assure you that we will be able to comply with these covenants.

Failure to do so may result in an event of default, which could lead to the acceleration of substantial indebtedness, severely constrain our liquidity, and potentially force us to seek bankruptcy protection.

Because certain instruments include cross-default and cross-acceleration provisions, a single default could trigger defaults across multiple agreements, significantly magnifying liquidity pressures.

Due to the complexity of our debt structure, covenants and operations, we have encountered, and may in the future encounter, disputes regarding our covenant compliance which, if not resolved in our favor, may cause a material adverse effect.

Our cash flows may not adequately fund all of our cash requirements.

Each segment of our business is very capital intensive.

We expect to continue to require significant capital to pursue our Quantum Fiber buildout plans, to perform our buildout obligations under certain of our PCF agreements, and to otherwise maintain, upgrade and expand our network infrastructure and product offerings.

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.

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, tax obligations, periodic pension contributions and other benefits payments.

Although our recent PCF agreements have significantly increased our near-term liquidity, 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.

As a holding company, we rely on payments from our operating companies to meet our obligations.

We expect to fulfill obligations under certain PCF agreements, and 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;

• regulatory and contractual commitments.

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.

While recent PCF agreements have improved near-term liquidity, we cannot assure that future operating cash flows will be sufficient to fund capital investments, debt obligations, or other long-term cash requirements.

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Our ability to meet our obligations depends on cash flows from our subsidiaries.

As a holding company, substantially all of our income and operating cash flow is dependent upon the earnings of our subsidiaries and their distribution of those earnings to us in the form of dividends, loans or other payments.

As a result, we rely upon our subsidiaries to generate cash flows in amounts sufficient to fund our obligations, including the payment of our long-term debt.

Our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts owed by us, except to the extent they have guaranteed such payments.

Similarly, subject to limited exceptions for tax or cash management purposes, our non-guarantor subsidiaries have no obligation to make any funds available to us to repay our obligations, whether by dividends, loans or other payments.

As discussed in greater detail elsewhere herein, restrictions imposed by credit instruments or other agreements applicable to Level 3 Parent, LLC or its subsidiaries 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 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 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.

Our subsidiaries are separate and distinct legal entities and, except where they have provided guarantees, have no obligation to pay amounts owed by us or to make funds available for our use.

Subject to limited exceptions for tax or cash management purposes, non-guarantor subsidiaries are not required to provide us with cash through dividends, loans, or other transfers.

As discussed in greater detail elsewhere herein, restrictions under credit agreements, other contractual arrangements, and applicable laws limit the ability of certain subsidiaries to transfer funds to us, including Level 3 Parent, LLC and others.

These restrictions include limitations on dividend payments.

In addition, our rights to receive assets upon a subsidiary’s liquidation or reorganization are effectively subordinated to the claims of that subsidiary’s creditors, including trade creditors.

Laws governing our subsidiaries generally restrict the amount of dividends they may pay, and future limitations could arise under tax laws, regulatory orders, or other regulations.

For these reasons, you should not assume that our subsidiaries will be able to generate and distribute sufficient cash to meet our obligations.

We may not be able to fully utilize our NOLs.

As of December 31, 2024, we had approximately $570 million of federal net operating loss carryforwards ("NOLs"), which remain subject to limitations under Section 382 of the Internal Revenue Code and related regulations ("Section 382").

These limitations could restrict our ability to use these NOLs in the amounts we project.

In an effort to safeguard our NOLs, we have maintained an NOL rights agreement which is scheduled to lapse in late 2026.

At December 31, 2024, we also had state NOLs which we believe are subject to legal and practical limitations on our ability to realize their full benefit.

We cannot assure you we will be able to utilize these NOLs as projected or at all.

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, 2024, our company-sponsored benefit plans that cover our current and former U.S.-based employees had approximately 21,000 active employee participants, approximately 52,000 active and retired employees and surviving spouses eligible for post-retirement healthcare benefits, approximately 21,000 pension retirees and approximately 7,000 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 have substantial federal and state net operating loss ("NOL") carryforwards.

Federal and state tax attributes, including NOLs, can be subject to annual limitations under the provisions of Section 382 of the Internal Revenue Code and similar state tax laws.

If a corporation undergoes an “ownership change” within the meaning of Section 382, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change taxable income may be limited.

We have experienced ownership changes in the past and we may experience ownership changes in the future as a result of future transactions in our common stock, some of which may be outside of our control.

In an effort to safeguard our NOLs, we have maintained a Section 382 Rights Agreement (discussed in more detail below) which is scheduled to lapse in late 2026.

Our state NOLs are subject to legal and practical limitations on our ability to realize their full benefit.

We cannot assure you we will be able to utilize our federal or state NOLs as projected or at all.

Funding obligations for employee benefit plans could negatively impact profitability

Our company-sponsored benefit plans cover current and former U.S.-based employees, including active employees, retirees, and surviving spouses eligible for post-retirement healthcare benefits, as well as pension retirees and former employees with vested pension benefits.

Currently, our domestic pension plans and other domestic post-retirement benefit plans are 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.

Our 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;

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

Our costs of maintaining these plans, and the future funding requirements, 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;

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• 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 impact of the continuing implementation and modification of current federal healthcare and pension funding laws and related regulations.

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

See Note 11—Employee Benefits for additional information regarding the funded status of our pension plans and our other post-retirement benefit plans.

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, 2024, approximately 20% 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 and second quarter of 2023 and in the fourth quarter of 2022, we have recorded large non-cash charges to earnings in connection with 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, which could have a material adverse effect on our results of operations or financial condition.

High inflation could continue to adversely impact us.

Although inflation has recently been declining, during the past several years our operations were impacted by the highest domestic inflation rates in decades.

If inflation rates remain elevated or increase, our operations will likely continue to be impacted.

Potential impacts of high inflation include (i) lower revenue if inflationary pressures cause our customers to defer or decrease their orders, (ii) lower profit margins, (iii) higher interest costs to the extent inflation places upwards pressure on prevailing interest rates and (iv) as noted above, potential difficulties retaining personnel if we do not match the salary increase expectations of our workforce.

See Note 11 — Employee Benefits in Item 8 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.

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 GAAP.

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.

Any failure or deficiency in these controls could result in inaccurate disclosures, financial reporting errors, or noncompliance with SEC requirements, which could materially and adversely affect our reputation, financial condition, or results of operations.

We face other financial risks.

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

• future intangible asset impairments could result in significant non-cash charges, reducing earnings and stockholders’ (deficit) equity and adversely affecting our financial condition;

• persistent or rising inflation could adversely affect our business, potentially leading to lower customer demand, reduced profit margins, increased interest costs, and challenges in retaining personnel if wage expectations are not met;

• 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;

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• a change of control of us or certain of our affiliates could accelerate a substantial portion of our outstanding indebtedness in an amount that we might not be able to repay;

• 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.

• ongoing attempts of the U.S.

Federal government, U.S.

state and local governments, various foreign countries, and supranational or international organizations to reform taxes or identify new tax sources could materially impact our tax positions, and one or more of our ongoing tax audits or examinations could result in tax liabilities that differ materially from those recognized in our consolidated financial statements.

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Divestiture Risks

We may be unable to realize the anticipated benefits of our 2022 and 2023 divestitures.

In connection with divesting our Latin American and EMEA businesses and a portion of our ILEC business in 2022 and 2023, we completed internal restructurings and entered into multi-year agreements with the purchasers to provide certain transitional services and to provide or receive certain commercial services.

It has been challenging and time-consuming to provide transition services to the purchasers of our divested operations, and we expect this will continue to be the case.

We may experience (i) disputes with the purchasers regarding the nature and sufficiency of the transition services we provide or the terms and conditions of our commercial agreements with the purchasers, (ii) greater tax or other costs or realize fewer benefits than anticipated under our post-closing agreements with the purchasers, (iii) higher vendor costs due to reduced economies of scale or other similar dis-synergies, (iv) weaker performance to the extent segregation and support of the divested businesses distracts personnel or diverts resources from the operation, digitization, and transformation of our retained business, (v) losses or increased inefficiencies from stranded or underutilized assets, (vi) the loss of any customers dissatisfied with our services post-closing, (vii) challenges in retaining and attracting personnel or (viii) operational or commercial difficulties segregating the divested assets from our retained assets.

The divestitures have reduced our cash flows.

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

We may not realize the anticipated benefits of prior completed divestitures, including the 2026 sale of our Mass Markets Fiber-to-the-Home business and our 2023 EMEA divestiture.

On May 21, 2025, we and certain of our affiliates agreed to sell our Mass Markets Fiber-to-the-Home business in the Territory.

The transaction closed on February 2, 2026.

In connection with the closing, we entered into various post-closing commercial agreements with the purchaser designed to ensure the continuity of customer services.

In connection with divesting our EMEA business in 2023, we completed internal restructurings and entered into multi-year agreements with the purchasers to provide certain transitional services and to provide or receive certain commercial services.

It can be and has been challenging and time-consuming to provide transition services, and we expect this will continue to be the case.

Consequently, we may:

• face disputes with purchasers regarding the scope or adequacy of transition services or the terms of our commercial agreements;

• incur greater costs or fewer benefits than anticipated under post-closing agreements, including tax or other expenses;

• experience increased vendor costs due to reduced economies of scale and other dis-synergies;

• encounter operational distractions as segregation and support of divested businesses divert resources from the operation, digitization, and transformation our retained business;

• sustain losses or inefficiencies from stranded or underutilized assets;

• lose customers dissatisfied with post-closing services;

• face talent challenges, including difficulty retaining or attracting personnel;

• experience operational challenges separating divested assets from retained assets.

Divestitures may not yield the expected benefits.

We could incur greater tax or other costs, realize fewer benefits under the purchase agreement and related post-closing arrangements, or face operational challenges separating divested assets from retained assets.

We may experience losses from stranded or underutilized assets, reduced future cash flows, and dis-synergies.

We may not realize the expected proceeds, cash flows, or strategic benefits on the anticipated timeline or in the amounts projected.

In addition, we remain subject to ongoing obligations and liabilities, including indemnification obligations, which could continue to divert resources and adversely affect our financial condition and results of operations.

These divestitures have reduced or will reduce our cash flows.

If our remaining business underperforms, these effects could exacerbate other financial risks described elsewhere in this section, including our ability to meet cash requirements.

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General Risks

Changes in government trade policies could adversely affect our business.

Changes in U.S.

or foreign government policies may result in modifications to existing trade agreements, the imposition of new tariffs, or significant increases in existing tariffs on goods imported into the U.S., as well as retaliatory measures by foreign governments.

presidential administration has implemented or increased tariffs and signaled its intent to impose additional tariffs, but future actions by U.S.

or foreign governments remain uncertain.

A trade war or other governmental actions related to tariffs or trade agreements, as well as changes in social, political, regulatory, or economic conditions or laws governing foreign trade, manufacturing, development, and investment in countries where we operate, could negatively impact our business.

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.

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.

We currently do not pay dividends to our common shareholders.

We discontinued paying dividends to our holders of common stock in the fourth quarter of 2022, and have no current plans to pay dividends in respect of our common stock for the foreseeable future.

We discontinued paying dividends to our holders of common stock in 2022 and have no current plans to pay dividends in respect of our common stock for the foreseeable future.

Not paying dividends could make the stock less attractive to certain investors, potentially impacting demand and share price.

Shareholder or debtholder activism efforts could cause a material disruption to our business.

While we always welcome constructive input from our shareholders and regularly engage in dialogue with our shareholders to that end, activist shareholders may from time to time engage in proxy solicitations, submit shareholder proposals or otherwise attempt to effect changes or acquire control over us.

Responding to these actions can be costly and time-consuming and may disrupt our operations and divert the attention of our Board of Directors and management.

These adverse impacts could be intensified if activist shareholders advocate actions that are not supported by other shareholders, our Board or management.

The recent increase in the activism of debtholders could increase the risk of claims being made under our debt agreements.

Our agreements and organizational documents and applicable law could similarly limit another party’s ability to acquire us.

While we value constructive input and regularly engage with our shareholders, activist shareholders may at times pursue proxy solicitations, submit shareholder proposals, or otherwise seek to influence our strategy or gain control over us.

Responding to such actions can be costly, time-consuming, and disruptive to operations, 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.

In addition, the recent rise in debtholders could increase the risk of claims under our debt agreements.

Our agreements, organizational documents, and applicable law could restrict another party’s ability to acquire us.

A number of provisions in our organizational documents and various provisions of applicable law or our Section 382 Rights Agreement may delay, defer or prevent a future takeover of us unless the takeover is approved by our Board of Directors.

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.

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Item 1A. Risk Factors