September￿18,￿2020 Lumen￿Technologies￿Group Corporate￿Bond￿Research

INVESTMENT￿SUMMARY Rating: Sell We￿rate￿Lumen￿Technologies￿Group￿bonds￿a￿Sell.￿While￿we￿believe￿the￿company￿is￿well- equipped￿to￿meet￿its￿financial￿obligations￿in￿the￿near￿term,￿its￿long-term￿prospects￿are￿less Investment Classifications clear,￿given￿that￿its￿core￿business￿of￿wireline￿phone￿service￿continues￿to￿decline.￿We￿expect the￿company's￿revenues￿related￿to￿traditional￿wireline￿phone￿services￿to￿continue￿to￿erode Investment Category: Aggressive Income as￿customers￿substitute￿wireless￿and￿cable-company￿offerings.￿There￿had￿been￿optimism￿in the￿investment￿community￿that￿Lumen￿Technologies'￿acquisition￿of￿Level￿3￿Communications, Sector: Industrial which￿focused￿more￿on￿business￿customers,￿would￿halt￿the￿company's￿revenue￿declines. Recommended Sector Weight: 35% - 55% However,￿this￿has￿not￿been￿the￿case￿so￿far￿as￿the￿combined￿company￿continues￿to￿lose subscribers,￿a￿trend￿that￿we￿expect￿to￿continue.￿Additionally,￿the￿company￿took￿on￿substantial Entity Description debt￿to￿fund￿the￿purchase￿of￿Level￿3.￿We￿believe￿this￿additional￿debt,￿coupled￿with￿ongoing revenue￿declines,￿is￿likely￿to￿increase￿risks￿for￿bondholders,￿supporting￿our￿view￿that￿investors Lumen Technologies Group is the third- should￿sell￿Lumen￿Technologies￿bonds. largest wireline communications company in the U.S. The company provides a wide range of communications services, including local BOND￿OVERVIEW and long-distance voice, Internet access, Ongoing￿revenue￿declines,￿combined benefit￿plans￿that￿are￿underfunded￿by￿over and video (television service). Additionally, with￿high￿debt￿levels￿are￿concerning $4￿billion.￿We￿believe￿that￿reducing￿debt￿as the company owns fiber-based long-haul for￿bondholders,￿in￿our￿view.￿Lumen quickly￿as￿possible￿should￿be￿a￿top￿priority￿for networks that carry data, including Internet Technologies￿has￿been￿struggling￿for￿years the￿company.￿However,￿debt￿reduction￿has traffic, long distances. with￿the￿decline￿in￿demand￿for￿wireline been￿slow,￿and￿despite￿the￿company's￿new, telecom￿services,￿including￿traditional more￿balanced￿approach￿to￿capital￿allocation, Related Bonds landline￿phones￿and￿lower-speed￿internet we￿question￿whether￿the￿company￿started access￿lines.￿The￿company￿has￿been￿very the￿process￿of￿debt￿reduction￿too￿late.￿We￿will CenturyLink acquisitive￿through￿the￿years,￿including￿the continue￿to￿monitor￿the￿company's￿progress Qwest acquisition￿of￿Level￿3￿Communications￿in in￿improving￿its￿financial￿position￿via￿debt Embarq 2017.￿Because￿of￿Level￿3's￿higher￿exposure reduction. CenturyTel to￿business￿customers￿and￿its￿history￿of U.S. West modest￿revenue￿growth,￿there￿was￿optimism Wireline￿business￿lines￿operate￿in￿an Level 3 Communications among￿investors￿that￿the￿combined￿company environment￿of￿pricing￿pressure.￿The would￿be￿able￿to￿stabilize￿or￿even￿grow telecom￿industry￿is￿extremely￿competitive,￿and Credit Ratings revenue.￿However,￿this￿has￿not￿materialized. technological￿advances￿often￿lead￿to￿increased efficiency￿and￿pressure￿on￿the￿pricing￿of￿service Moody's B2 / Stable Revenue￿has￿continued￿to￿decline￿and￿at providers￿like￿Lumen￿Technologies.￿We￿believe S&P B+ / Stable a￿somewhat￿concerning￿pace,￿in￿our￿view. the￿company's￿limited￿pricing￿power￿for￿its Fitch BB / Stable Despite￿the￿acquisition￿of￿Level￿3,￿Lumen Technologies￿does￿not￿have￿a￿wireless services,￿coupled￿with￿the￿capital￿spending segment,￿a￿business￿that￿has￿delivered necessary￿to￿keep￿its￿networks￿competitive, growth￿across￿the￿telecom￿industry.￿In will￿place￿the￿company￿in￿a￿tough￿competitive addition,￿the￿company￿paid￿a￿significant position￿within￿the￿telecom￿market.￿If￿the premium￿to￿acquire￿Level￿3,￿and￿a￿large company￿had￿wireless￿assets,￿we￿would￿likely portion￿of￿the￿purchase￿price￿was￿financed view￿its￿business￿mix￿more￿favorably.￿We with￿additional￿debt.￿We￿believe￿high￿debt expect￿the￿company's￿cost￿of￿debt￿financing￿to levels￿and￿declining￿revenue￿trends￿will￿likely remain￿high,￿as￿the￿premium￿the￿company￿must ultimately￿increase￿risks￿for￿bond￿holders. pay￿to￿access￿the￿bond￿markets￿has￿risen￿in recent￿years￿as￿investors￿have￿become￿more Treatment￿of￿bondholders￿has￿improved concerned￿with￿its￿prospects. . recently.￿Lumen￿Technologies￿had historically￿been￿significantly￿more￿focused Valuation￿is￿based￿on￿our￿analysis￿of￿credit on￿returning￿cash￿to￿shareholders,￿via￿share spread￿–￿which￿can￿be￿described￿as￿excess repurchases￿and￿a￿substantial￿dividend,￿than yield￿-￿relative￿to￿bonds￿of￿comparable￿quality it￿had￿been￿on￿paying￿down￿debt.￿However, and￿term￿to￿maturity. in￿early￿2019,￿the￿company￿changed￿its direction￿by￿cutting￿its￿dividend￿by￿over KEY￿DEVELOPMENTS 50%￿and￿making￿debt￿reduction￿a￿higher 9/18/20￿-￿CenturyLink￿has￿changed￿its￿name￿to Analyst: Brian Therien, CFA priority.￿In￿the￿time￿since￿this￿change,￿the Lumen￿Technologies￿Group￿as￿of￿September company￿has￿shown￿some￿commitment￿to 18,￿2020. debt￿reduction￿but￿still￿has￿more￿than￿$34 billion￿of￿debt,￿plus￿pension￿and￿retirement

Please see important disclosures and certification on page 2 of the report. Page 1 of 2 e d w a r d j o n e s . c o m September 18, 2020 Required Research Disclosures The table lists the percent of corporate credits we follow globally in each of the September 18, 2020 BUY HOLD SELL equivalent rating categories. We do not assign a "Buy" rating to any corporate Corporate Credits 0% 67% 33% credits. Investment banking services indicate the percentage of those subject companies that have been investment banking clients within the last 12 months. Investment Banking 0% 0% 0% . Services

Appropriate￿for￿Income Appropriate￿for￿Aggressive￿Income Sell FYI Appropriate￿for￿Income￿–￿We￿consider￿bonds￿to￿be Appropriate￿for￿Aggressive￿Income￿–￿We Sell￿–￿We￿recommend￿investors￿sell￿these FYI￿-￿For￿informational￿purposes￿only;￿factual,￿no an￿appropriate￿holding￿for￿investors￿seeking￿Income consider￿bonds￿appropriate￿only￿as￿a￿small bonds.￿We￿believe￿these￿bonds￿are￿no￿longer opinion. within￿a￿well-diversified￿portfolio.￿Our￿time￿horizon￿is Aggressive￿Income￿portion￿within￿a￿well-diversified an￿appropriate￿fixed-income￿holding￿because,￿in 3-5￿years. portfolio.￿Bonds￿within￿this￿category￿are￿riskier,￿with our￿opinion,￿they￿offer￿an￿unattractive￿risk/reward a￿higher￿possibility￿of￿loss￿due￿to￿default,￿than￿bonds scenario￿at￿current￿prices.￿Our￿time￿horizon￿is￿3-5 classified￿as￿Income.￿Our￿time￿horizon￿is￿3-5￿years. years.

Initiated Coverage (Sell) 4/1/14

Analyst Certification • I certify that the views expressed in this research report accurately reflect my personal views about the subject securities and issuers; and no part of my compensation was, is, or will be directly or indirectly related to the specific recommendations or views contained in the research report. Brian Therien, CFA • Analysts receive compensation that is derived from revenues of the firm as a whole which include, but are not limited to, investment banking, sales, and trading revenues. • Edward Jones trades as principal in the debt securities that are the subject of this research report. Other Disclosures • Edward Jones publishes research reports on both this issuer's bonds and common stock. These reports are authored by different research analysts. Further, Edward Jones utilizes different analysis techniques in analyzing bonds and common stock investments. While bond and common stock research reports about the same issuer may appear inconsistent or contradictory, the separate reports should be reviewed independent from one another. • This report does not take into account your particular investment profile and is not intended as an express recommendation to purchase, hold or sell particular securities, financial instruments or strategies. You should contact your Edward Jones Financial Advisor before acting upon this report. • This report is a product of the Edward Jones Securities Research Department. • All investment decisions need to take into consideration individuals’ unique circumstances such as risk tolerance, taxes, asset allocation and diversification. • Before investing in bonds, you should understand the risks involved, including interest rate risk, credit risk and market risk. Bond investments are subject to interest rate risk such that when interest rates rise, the prices of bonds can decrease, and the investor can lose principal value if the investment is sold prior to maturity. • Edward Jones limits inventory positions for fixed income securities. This security may currently be subject to these internal limits; however, this should not be considered contrary to our current recommendation. • This opinion is based on information believed reliable but not guaranteed. The foregoing is for INFORMATION ONLY. Additional information is available on request. Past performance is no guarantee of future results. • This issuer may have issued bonds in both large and small offering sizes. Bonds which are part of small offerings are generally less liquid, which may cause the price you receive in the secondary market to be lower than prices received by investors in large issues of the same issuer's bonds. • If you sell this security prior to maturity, you may receive more, less, or the same dollar amount you originally invested because the security's market value may fluctuate over time due to various market factors (e.g., interest rates). • Information about research distribution is available through the Investments and Services link on www.edwardjones.com. • For U.S. clients only: Member SIPC --- For Canadian clients only: Member - Canadian Investor Protection Fund • Diversification does not guarantee a profit or protect against loss in declining markets. • In general, Edward Jones analysts do not view the material operations of the issuer. • Credit ratings generally represent the rating company's opinion of the bond's ability to meet its ongoing contractual obligations. These ratings are estimates and should be one of many factors considered in evaluating fixed income investments. These ratings do not address suitability or future performance. N/A indicates no rating available. • When investing in issuers incorporated outside your own country of residence, you should consider all other material risks such as currency risk, political risk, liquidity risk and accounting rules differences, which can adversely affect the value of your investment. Please consult your Financial Advisor for more information. • Ratings from Standard & Poor's ("S&P"), Moody's and Fitch may be shown for certain securities. S&P requires we inform you: (1) Ratings are NOT recommendations to buy, hold, sell or make any investment decisions and DO NOT address suitability or future performance; (2) S&P DOES NOT guarantee the accuracy, completeness, or availability of any ratings and is NOT responsible for results obtained from the use of any ratings. Certain disclaimers related to its ratings are more specifically stated at http://www.standardandpoors.com/disclaimers.

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