Qwest Corporation
02/20/2026 | Press release | Distributed by Public on 02/20/2026 15:25
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") provides an overview of our financial performance, liquidity, and the business environment in which we operate. This discussion is intended to help readers understand our results and key factors influencing our operations. The MD&A should be read together with our audited consolidated financial statements and accompanying notes included in Item 8. All references to "Notes" in this section refer to the Notes to Consolidated Financial Statements in Item 8.
This section includes forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those expressed or implied. For a discussion of these risks, see "Special Note Regarding Forward-Looking Statements" immediately prior to Item 1 and "Risk Factors" in Item 1A.
The MD&A generally discusses results for the years ended December 31, 2025 and 2024, including year-over-year comparisons between these periods. For discussions of 2023 results and comparisons between 2024 and 2023 that are not in this document, refer to "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2024. We reclassified certain prior period amounts to conform to the current period presentation, including our revenue by product and service categories.
OVERVIEW
We are a leading digital networking services company, empowering enterprise businesses to fuel growth in a multi-cloud, AI-first marketplace by connecting people, data, and applications quickly, securely, and effortlessly. We operate in a rapidly evolving landscape with growing demand for secure, high-speed connectivity. Our strategy focuses on growing and transforming our network and business to deliver next-generation solutions that meet these needs and build the backbone of the AI economy.
As of December 31, 2025, we served approximately 1.2 million broadband subscribers. Our methodology for counting broadband subscribers may be different than the methodologies used by other companies.
Reporting Segment
For the reasons noted in Note 1-Background and Summary of Significant Accounting Policies, we have determined that we have one reportable segment.
2026 Divestiture
On May 21, 2025, we and certain of our affiliates entered into a definitive agreement to sell our Mass Markets Fiber-to-the-Home business in the Territory to AT&T (the "Mass Markets Fiber-to-the-Home divestiture"). On February 2, 2026, we completed the Mass Markets Fiber-to-the-Home divestiture in exchange for pre-tax cash proceeds of $5.75 billion, subject to post-closing adjustments. In connection with the sale, we have entered into a transition services agreement under which we will provide to AT&T various support services and certain long-term agreements under which we and AT&T will provide to each other various network and other commercial services.
Products and Services
As of December 31, 2025, our products and services are categorized according to the core technologies that drive them and customer focus.
•Mass Markets category: Revenue is reported under three product categories: Other Broadband, Voice and Other, and Fiber Broadband.
•Business category: Revenue is reported under three product categories: Grow, Nurture, and Harvest.
•Affiliates category: Revenue is reported under Affiliate Services.
From time to time, we may change the categorization of our products and services. Our specific products and services are detailed in Note 4-Revenue Recognition.
Cash Management and Intercompany Arrangements
Our ultimate parent company, Lumen Technologies, Inc., maintains cash management and financing arrangements with many of its subsidiaries, including us. These arrangements include lines of credit, affiliate obligations, capital contributions, and dividends, and allow affiliates to extend lines of credit to other affiliates.
Under these arrangements, most of our cash is advanced daily to Lumen's service company affiliate for centralized management. We report the resulting balances as advances to affiliates on our consolidated balance sheet. We may also declare and pay dividends to our direct parent, Qwest Services Corporation ("QSC"), using cash owed to us under these advances, which reduces the outstanding balance of these advances.
Current Business Environment and Macroeconomic Factors
The macroeconomic environment in which we operate remains dynamic and continues to affect our business. Key factors that have impacted us and our customers include:
•Revenue mix: Shifts in technology and economic conditions have driven us to continuously review our strategy and as such, we expect to see continued reduction in legacy voice, broadband, and other legacy services, while fueling growth in our strategic products.
•Inflationary pressures: Rising costs for labor, materials, and energy have increased operating expenses and capital expenditures, particularly for other network transformations.
•Supply constraints: Shortages of critical components and other materials have slowed certain network expansion efforts.
•Customer behavior: Certain customers have delayed purchasing decisions, which has occasionally impacted sales cycles.
To date, we do not believe these factors have materially impacted our financial performance or position. However, ongoing economic and geopolitical uncertainty, tariffs, inflation, and supply constraints could increase costs, reduce revenues, delay network expansion, or disrupt service delivery, which could materially impact our results. If these conditions persist, our projected cash flows and market capitalization could decline. For further information relating to these matters, see "- Trends Impacting Our Operations" below and "Risk Factors" in Item 1A.
We are actively managing these challenges through disciplined capital allocation, cost optimization, and strategic investments in network infrastructure. We believe these actions position us to navigate current macroeconomic conditions while pursuing long-term growth opportunities.
We expect continued demand for high-capacity, low-latency connectivity solutions, supported by enterprise digital transformation and government broadband programs. While macroeconomic uncertainty and competitive pressures present risks, we believe our transformation initiatives position us to deliver long-term value.
Trends Impacting Our Operations
Our operations are shaped by evolving technology, customer expectations, and market dynamics. Key trends that impact us, and will continue to impact us, include:
•Automation and digital innovation: Growing demand for automated experiences and advanced technologies like AI requires ongoing investment in technology and infrastructure to enhance service quality and reduce costs.
•Legacy decline and margin pressure: Legacy wireline services continue to shrink, while newer offerings often deliver lower margins - especially those involving third-party connectivity - necessitating cost optimization and pricing discipline.
•Globalization and network expansion amid cost pressures: Distributed business models drive demand for high-capacity, low-latency networks. We are expanding our network capacity to capture growth, while managing vendor cost increases and dis-synergies from our recently completed divestiture.
•Monetizing network assets with execution risk: We aim to generate revenue through custom connectivity solutions, by leveraging excess conduit and fiber assets. These opportunities can be significant but depend on market demand, regulatory conditions, and timely execution.
These and other developments and trends impacting our operations are discussed in "Risk Factors" in Item 1A and elsewhere throughout MD&A.
RESULTS OF OPERATIONS
The following table summarizes the results of our consolidated operations for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Dollars in millions) | |||||||||||
| Operating revenue | $ | 4,748 | 5,508 | ||||||||
| Operating expenses | 5,757 | 3,457 | |||||||||
|
Operating (loss) income
|
(1,009) | 2,051 | |||||||||
|
Total other income (expense), net
|
34 | (37) | |||||||||
|
(Loss) income before income taxes
|
(975) | 2,014 | |||||||||
| Income tax expense | 352 | 527 | |||||||||
|
Net (loss) income
|
$ | (1,327) | 1,487 | ||||||||
Operating Revenue
The following table summarizes our consolidated operating revenue recorded under our revenue categories as described in Note 4-Revenue Recognition in Item 8:
| Years Ended December 31, | % Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Other Broadband | $ | 763 | 933 | (18) | % | ||||||||||||
| Voice and Other | 442 | 516 | (14) | % | |||||||||||||
| Fiber Broadband | 314 | 377 | (17) | % | |||||||||||||
| Harvest | 834 | 942 | (11) | % | |||||||||||||
| Nurture | 330 | 357 | (8) | % | |||||||||||||
| Grow | 130 | 134 | (3) | % | |||||||||||||
| Affiliate Services | 1,935 | 2,249 | (14) | % | |||||||||||||
| Total operating revenue | $ | 4,748 | 5,508 | (14) | % | ||||||||||||
Operating revenue decreased $760 million in 2025 compared to 2024. The following were the primary drivers within each revenue category:
•Other Broadbanddecreased $170 million in 2025. This was primarily as a result of:
◦fewer Mass Market customers for our low speed copper-based broadband services.
•Voice and Otherdecreased $74 million in 2025. This was primarily as a result of:
◦the continued loss of copper-based Mass Market voice customers; and
◦a decrease of $11 million due to the voluntary relinquishment of our funding received under the FCC's Rural Digital Opportunity Fund ("RDOF") in the second quarter of 2025. See the "Liquidity and Capital Resources-Federal Broadband Support Programs" below for more information.
•Fiber Broadbanddecreased $63 million in 2025. This was primarily as a result of:
◦fewer Mass Market subscribers for our fiber services, primarily resulting from customers migrating to the Quantum Fiber services offered by Lumen (which bills customers for such services and pays us for use of our network in providing such services, as further described below).
•Harvestdecreased $108 million in 2025. This was primarily as a result of:
◦a decrease of $64 million in legacy voice services for Business customers; and
◦a decrease of $39 million in legacy private line services.
•Nurturedecreased $27 million in 2025. This was primarily as a result of:
◦a decrease of $30 million in Ethernet services.
•Growdecreased $4 million in 2025, which was relatively flat period over period.
•Affiliate Servicesdecreased $314 million in 2025. This was primarily as a result of:
◦a decrease of $303 million in wavelengths services provided to our affiliates;
◦a decrease of $77 million in Ethernet services and other direct legacy telecommunication services provided to our affiliates; and
◦an offsetting increase of $67 million in fiber broadband services provided to our affiliates.
Operating Expenses
The following table summarizes our consolidated operating expenses; however, these expense categories may not be comparable to those of other companies::
| Years Ended December 31, | % Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| (Dollars in millions) | |||||||||||||||||
|
Cost of services and products (exclusive of depreciation and amortization)
|
$ | 1,449 | 1,505 | (4) | % | ||||||||||||
|
Selling, general and administrative
|
456 | 438 | 4 | % | |||||||||||||
| Net loss on disposal group held for sale | 235 | - | nm | ||||||||||||||
|
Operating expenses-affiliates
|
920 | 761 | 21 | % | |||||||||||||
|
Depreciation and amortization
|
685 | 753 | (9) | % | |||||||||||||
|
Goodwill impairment
|
2,012 | - | nm | ||||||||||||||
| Total operating expenses | $ | 5,757 | 3,457 | 67 | % | ||||||||||||
_______________________________________________________________________________
nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.
Cost of Services and Products (exclusive of depreciation and amortization)
Cost of services and products (exclusive of depreciation and amortization) decreased $56 million in 2025 compared to 2024. This was primarily as a result of:
•a decrease of $78 million in employee-related expenses; and
•an offsetting increase of $24 million in network expenses.
Selling, General and Administrative
Selling, general and administrative expenses increased $18 million in 2025 compared to 2024. This was primarily as a result of:
•an increase of $21 million from the sale of operating assets and associated gain recognized in the fourth quarter of 2024;
•an increase of $13 million in professional fees;
•an increase of $12 million in fees related to our voluntary relinquishment of FCC Rural Digital Opportunity Fund ("RDOF") funding in the second quarter of 2025; and
•an offsetting decrease of $11 million in bad debt expense.
Net Loss on Disposal Group Held for Sale
For a discussion of the loss on the disposal group held for sale that we recognized for the year ended December 31, 2025, see Note 2-Divestiture in Item 8.
Operating Expenses-Affiliates
Operating expenses - affiliates increased $159 million in 2025 compared to 2024. This was primarily as a result of:
•an increase of $166 million in allocated employee and corporate expense provided to us by our affiliates which includes the impact of (i) higher overall professional fees related to our recently completed divestiture and ongoing modernization and simplification strategies (ii) increased employee-related expenses and (iii) the impact of ongoing adjustments to the basis for allocations of cost shared amongst affiliates in normal course of business;
•an offsetting decrease of $9 million in direct telecommunication services provided to us by affiliates
Depreciation and Amortization
The following table provides detail of our depreciation and amortization expense:
| Years Ended December 31, | % Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Depreciation | $ | 652 | 712 | (8) | % | ||||||||||||
| Amortization | 33 | 41 | (20) | % | |||||||||||||
| Total depreciation and amortization | $ | 685 | 753 | (9) | % | ||||||||||||
Depreciation decreased $60 million in 2025 compared to 2024. This was primarily as a result of:
•a decrease of $69 million due to the discontinuation of the depreciation of the tangible assets of the Lumen Mass Markets Fiber-to-the-Home business held for sale during the second quarter of 2025; and
•an offsetting increase of $9 million in net growth in depreciable assets;
Amortization decreased $8 million in 2025 compared to 2024. This was primarily as a result of:
•a decrease in the net amount of amortizable assets.
Goodwill Impairments
We are required to perform impairment tests related to our goodwill annually, which we perform as of October 31, or sooner if an indicator of impairment occurs.
When we performed a qualitative impairment test during the fourth quarter of 2025, and concluded the estimated fair value of our equity was less than our carrying value of equity at October 31, 2025. As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge of $2.0 billion on October 31, 2025.
During the second quarter of 2025, we determined that the classification of the Lumen Mass Markets Fiber-to-the-Home business in the Territory as held for sale, as described in Note 2-Divestiture, was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of April 30, 2025. Based on our assessments performed, the estimated fair value of our equity exceeded our carrying value of equity and therefore concluded that we had no impairment as of our April 30, 2025 assessment date.
For a discussion of the goodwill impairment we recognized in 2025, see Note 3-Goodwill and Intangible Assets in Item 8.
Other Consolidated Results
The following table summarizes our total other expense, net and income tax expense:
| Years Ended December 31, | % Change | ||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Interest expense | $ | (91) | (62) | 47 | % | ||||||||||||
|
Interest income - affiliate, net
|
89 | 24 | nm | ||||||||||||||
|
Other income, net
|
36 | 1 | nm | ||||||||||||||
|
Total other income (expense), net
|
$ | 34 | (37) | nm | |||||||||||||
| Income tax expense | $ | 352 | 527 | (33) | % | ||||||||||||
_______________________________________________________________________________
nm Percentages greater than 200% and comparisons between positive and negative values or to/from zero values are considered not meaningful.
Interest Expense
Interest expense increased $29 million in 2025 compared to 2024. This was primarily as a result of:
•a decrease of $40 million decrease in capitalized interest;
•an offsetting decrease in average interest rate from 6.75% to 6.70%; and
•an offsetting decrease in average outstanding long-term debt of $150 million.
Interest Income - Affiliate, Net
Interest income - affiliate increased $65 million in 2025 compared to 2024. This was primarily as a result of:
•a higher average receivable from affiliate, inclusive of our note-receivable - affiliates.
See Note 14-Affiliate Transactions in Item 8 for more information on these facilities.
Income Tax Expense
For 2025 and 2024, our effective income tax rate was (36.1)% and 26.2%, respectively. The effective tax rate for 2025 includes $421 million of unfavorable impact due to a non-deductible goodwill impairment.
For additional information, see Note 13-Income Taxes in Item 8 and "Critical Accounting Estimates - Income Taxes" below.
LIQUIDITY AND CAPITAL RESOURCES
Overview of Sources and Uses of Cash
We are an indirectly wholly-owned subsidiary of Lumen Technologies, Inc. As such, factors relating to, or affecting, Lumen's liquidity and capital resources could have material impacts on us, including impacts on our credit ratings, our access to capital markets and changes in the financial market's perception of us.
Our primary sources of liquidity are:
•cash from operating activities;
•amounts due to us from Lumen Technologies,
•our ability to refinance our debt obligations; and
•capital contributions, advances, or loans from Lumen Technologies or its affiliates.
Key balances as of December 31, 2025 included:
•Cash and cash equivalents: $39 million
•Note receivable-affiliate: $937 million
•Total consolidated indebtedness: $1.7 billion
As of December 31, 2025, $35 million of our cash and cash equivalents were held in foreign bank accounts for funding our foreign operations. Due to various factors, our access to foreign cash is generally more restricted than our access to domestic cash.
We regularly review liquidity and capital allocation strategies with senior management and the Board of Directors, adjusting as strategies and conditions change.
Based on current assumptions, we believe our liquidity sources - operating cash flows, available cash, and credit capacity - will be sufficient to fund near-term requirements and strategic investments. For additional information on risks that could affect liquidity, see "Risk Factors - Financial Risks" in Item 1A.
Cash Management and Intercompany Arrangements
We participate in Lumen Technologies, Inc.'s centralized cash-management and intercompany financing arrangements, under which most of our cash held in U.S. banks is advanced daily to a Lumen service company affiliate for cash management. Under these arrangements affiliates may extend lines of credit to other affiliates. Intercompany lines of credit and other affiliate obligations cause our balances with Lumen and its affiliates to fluctuate.
From time to time, we may declare and pay dividends to QSC, including amounts in excess of current earnings when permitted by law, using cash owed to us under these advances, which reduces the outstanding balance. Our debt covenants do not currently restrict the amount of dividends we can pay to QSC.
A significant component of our liquidity consists of amounts due from Lumen under these arrangements; accordingly, our liquidity depends on Lumen's ability to repay its obligations to us.
Cash Flow Activities
The following table summarizes our consolidated cash flow activities:
| Years Ended December 31, |
$ Change
|
||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| (Dollars in millions) | |||||||||||||||||
|
Net cash provided by operating activities
|
$ | 1,762 | 2,194 | (432) | |||||||||||||
| Net cash used in investing activities | (1,512) | (1,891) | (379) | ||||||||||||||
|
Net cash used in financing activities
|
(238) | (287) | (49) | ||||||||||||||
Operating Activities
Net cash provided by operating activities decreased $432 million in 2025 compared to 2024. This was primarily as a result of:
•lower net income adjusted for non-cash income and expenses
Cash provided by operating activities is subject to variability period over period as a result of timing differences, including with respect to collection of receivables and payments of interest expense, accounts payable and bonuses.
For additional information about our operating results, see "Results of Operations" above.
Investing Activities
Net cash used in investing activities decreased $379 million in 2025 compared to 2024. This was primarily as a result of:
•a decrease in advances to affiliates;
•a decrease in capital expenditures; and
•an offsetting increase due to the issuance of a note receivable - affiliate.
Financing Activities
Net cash used in financing activities decreased $49 million in 2025 compared to 2024. This was primarily as a result of:
•a decrease resulting from the timing of repayments of advances from affiliates; and
•an offsetting increase due to higher repayments of debt in 2025 as compared to 2024.
Short-term Liquidity Needs
As of December 31, 2025, we held cash and cash equivalents of $39 million, which together with cash generated from operating activities. This, along with Lumen's outstanding obligations to us as described above, represent our primary sources of liquidity for the next 12 months. Additionally, we anticipate being assigned a portion of the proceeds from the recently completed Mass Markets Fiber-to-the-Home divestiture from Lumen through our cash management and intercompany arrangements previously described.
Based on our current capital allocation objectives, we project expenditures for the next 12 months to include, among others, the following:
•RDOF relinquishment: $26 million for remittance of awards and associated fees - see "Federal Broadband Support Programs" below for further details.
We expect to fund these expenditures primarily through operating cash flows, supplemented by available cash and borrowing capacity as needed. Based on current assumptions, we believe our liquidity sources will be sufficient to fund near-term requirements and strategic investments.
For additional information on short-term liquidity needs, see "Future Contractual Obligations" below.
Long-term Liquidity Needs
Beyond the next 12 months, we plan to refinance a substantial portion of maturing debt through future debt issuances, subject to market conditions and covenant restrictions. Our ability to access capital markets depends on credit ratings and prevailing interest rates, and we cannot assure favorable terms for future borrowings. We may also consider other sources of liquidity, such as equity offerings or asset dispositions, depending on market conditions.
For additional information on our credit ratings and factors that may affect our access to capital markets, see "- Future Debt Transactions" below.
For additional information on long-term liquidity needs, see "Future Contractual Obligations" below.
Impact of Strategic Transactions on Liquidity
Our liquidity and capital resources have been influenced by several strategic actions aimed at optimizing our financial position, enhancing flexibility, and supporting long-term transformation initiatives. Key actions include:
•Recent divestiture: The 2026 Mass Markets Fiber-to-the-Home divestiture generated significant cash proceeds but reduced recurring operating cash flows. The Mass Markets Fiber-to-the-Home divestiture is also expected to reduce Lumen's Mass Markets fiber-related capital expenditures by approximately $1 billion annually. While this transaction is expected to reduce recurring revenue and operating cash flows, we believe it will sharpen our focus on enterprise and fiber growth and deliver significant cash proceeds to strengthen our financial position.
We expect these and future transactions to influence cash flows, leverage, and investment capacity. While divestitures provide immediate liquidity and support network expansion, they also introduce variability in operating cash flows. We will continue to pursue opportunities aligned with our capital allocation priorities and market conditions.
Capital Expenditures
We regularly invest in capital projects to expand and improve services, enhance and modernize networks, and strengthen our competitive position. Discretionary projects are evaluated by us and Lumen Technologies based on strategic impact such as revenue growth, productivity, service levels, customer retention, and expected return on investment. Lumen's consolidated capital spending is influenced by demand, contractual and regulatory requirements, cash flow, and resource availability. We expect capital spending to be focused on:
•expanding our fiber network, including our other network capacity buildout plan;
•modernizing and enhancing network efficiency and reliability;
•developing new services; and
•replacing aging network assets.
These investments aim to improve service quality, drive innovation, and position us to meet future demand.
For additional details on our capital spending, see "Cash Flow Activities - Investing Activities" above, "Business" in Item 1, and "Risk Factors" in Item 1A.
Debt Instruments and Financing Arrangements
Debt Instruments
As of December 31, 2025, we had approximately $1.7 billion aggregate outstanding indebtedness (excluding finance leases, unamortized premiums, net, unamortized debt issuance costs, and Note Payable - Affiliate). None of our outstanding debt is due in the next 12 months (excluding finance lease obligations). See the details of our outstanding indebtedness as of December 31, 2025 in Note 7-Long-Term Debt and Note Payable - Affiliate of Item 8.
Future Debt Transactions
Subject to market conditions, and to the extent permitted under applicable debt covenants, Qwest Corporation may issue debt securities from time to time primarily to refinance a portion of our maturing debt. The availability, interest rate and other terms of any new borrowings will depend on the ratings assigned to Qwest Corporation by credit rating agencies, among other factors.
As of the filing date of this report, the credit ratings for Qwest Corporation's senior unsecured debt were as follows:
| Agency | Credit Ratings | ||||
|
Moody's Investors Service, Inc.
|
Caa1 | ||||
| Standard & Poor's | B | ||||
|
Fitch Ratings(1)
|
BB | ||||
(1) In February 2026, Moody's and Fitch upgraded our issuer default rating.
Future changes in these ratings - or Lumen's ratings - could impact our access to capital and borrowing costs. We cannot be certain that we will be able to borrow additional funds on favorable terms, or at all. See "Risk Factors-Financial Risks" in Item 1A.
Note Receivable - Affiliate
On March 31, 2025, we entered into an unsecured revolving promissory note with our ultimate parent company, Lumen Technologies. The note allows Lumen to borrow up to $3.0 billion from us at an annual interest rate of 8.3%. Borrowings are payable on demand and may be prepaid at any time, but no later than March 31, 2030. The note will automatically renew on the maturity date for successive 12-month periods unless we elect otherwise. The facility includes covenants and other limitations.
As of December 31, 2025, we had $937 million owed to us under this promissory note. For more information, see Note 14-Affiliate Transactions.
Note Payable - Affiliate
We are permitted to borrow up to $2.0 billion from our ultimate parent Lumen Technologies under a revolving promissory note. As of December 31, 2025, nothing was due under this promissory note. For more information, see Note 7-Long-Term Debt and Note Payable - Affiliate in Item 8.
Pension and Post-Retirement Benefit Obligations
Lumen Technologies maintains significant pension and post-retirement benefit plans that require ongoing cash outflows and could affect our liquidity and financial flexibility. These obligations are sensitive to market conditions and actuarial assumptions, and adverse changes could increase funding requirements and reduce cash available for other uses.
A substantial portion of our active and retired employees participate in Lumen's qualified pension plan and post-retirement benefit plans. On December 31, 2014, the Qwest Communications International Inc. ("QCII") pension plan and a pension plan of an affiliate were merged into the CenturyLink Retirement Plan, which is now named the Lumen Combined Pension Plan. Our contributions are not segregated or restricted to pay amounts due to our employees and may be used to provide benefits to other employees of our affiliates. Prior to the pension plan merger, the above-noted employees participated in the QCII pension plan.
Current Status
As of December 31, 2025, Lumen's unfunded obligations were:
•Pension plans: $588 million
•Post-retirement plans: $1.7 billion
The expected long-term rate of return on pension assets, net of administrative expenses, was 6.5% for 2025 and is 6.5% for 2026. Actual investment performance may differ substantially from these assumptions, which could influence future funding needs. Lower asset returns or interest rates could increase our obligations and may require
additional contributions, reducing cash available for other uses. For additional details, see "CRITICAL ACCOUNTING ESTIMATES - Pension and Post-retirement Benefits" in Item 7 and Note 11-Employee Benefits in Item 8 and the corresponding note in Lumen's 2025 Form 10-K.
Funding and Contributions
Benefits paid by Lumen's qualified pension plan are paid through a trust which holds all of the plan's assets. Based on current laws and circumstances, Lumen does not expect required contributions to their qualified pension plan during 2026. Future contribution requirements will depend on factors such as investment performance, interest rates, demographics, plan changes, and funding regulations.
Lumen makes voluntary contributions; none were made in 2025. Lumen made a voluntary contribution to the trust for the Combined Pension Plan of $101 million in January 2026 and $170 million in 2024. Any required or voluntary contributions could reduce available cash and impact liquidity.
Settlements
Our affiliate obligations primarily represent the cumulative allocation of pension and post-retirement expenses, net of payments, associated with the former QCII plans prior to their merger into the Lumen Combined Pension Plan in 2014. In 2015, we agreed to settle these obligations over a 30 year term through monthly payments. Under the plan, payments are scheduled to be made on a monthly basis. For the year ended December 31, 2025, we made net settlement payments of $48 million to QCII in accordance with the plan. For the year ended 2026, we expect to make aggregate settlement payments of $44 million to QCII under the plan.
Affiliate obligations, net are reflected in other within Current liabilities and Noncurrent liabilities on our consolidated balance sheets, while changes in the affiliate obligations are reflected in operating activities on our consolidated statements of cash flows.
Post-Retirement Benefits
Substantially all of Lumen's post-retirement health care and life insurance benefits plans are unfunded and are paid by Lumen Technologies with available cash.
Future Contractual Obligations
We maintain obligations related to debt, leases, purchase commitments, and asset retirement. Our estimated future obligations as of December 31, 2025 include:
Qwest Corporation published this content on February 20, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 20, 2026 at 21:25 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]