QWEST CORP

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; and

•capital contributions, advances, or loans from Lumen Technologies or its affiliates.

Key balances as of March 31, 2026 included:

•Cash and cash equivalents: $56 million

•Note receivable-affiliate: $1.5 billion

•Total consolidated indebtedness: $1.7 billion

We regularly review liquidity and capital allocation strategies with senior management and Lumen's 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 liquidity requirements and strategic investments for at least the next 12 months.

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. See Note 7—Affiliate Transactions for additional details.

Cash Flow Activities

The following table summarizes our consolidated cash flow activities:

Operating Activities

Net cash provided by operating activities decreased by $189 million in 2026. This was primarily as a result of:

•an increase in net loss adjusted for non-cash income and expenses; and

•an offsetting increase in cash allocated to operating activities received as part of the divestiture of our Mass Markets Fiber-to-the-Home business associated with the fair value of the contractual credits and commercial agreements described in Note 2—Divestiture.

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 by $192 million in 2026. This was primarily as a result of:

•an increase in advances to affiliates;

•a decrease in cash outflow related to an increase in our note receivable - affiliates as compared to the same period in 2025;

•a decrease in capital expenditures; and

•an offsetting increase of approximately $2.4 billion due to proceeds from the Mass Markets Fiber-to-the-Home divestiture discussed elsewhere herein.

Short-term Liquidity

As of March 31, 2026, we held cash and cash equivalents of $56 million, outstanding Notes receivable - affiliate of $1.5 billion, and we are permitted to borrow up to $2.0 billion under a revolving promissory note with our ultimate parent company. A significant component of our liquidity is dependent upon Lumen's ability to repay its obligation to us. See Note 7—Affiliate Transactions for details on terms and conditions of the credit facilities we extended to Lumen Technologies. These resources, together with cash generated from operating activities, represent our primary sources of liquidity for the next 12 months.

We expect to fund any of our short-term liquidity needs 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 liquidity requirements and strategic investments for at least the next 12 months.

For additional information on short-term liquidity needs, see “Future Contractual Obligations” below.

Long-term Liquidity

Our ability to access capital markets depends on our and Lumen's credit ratings and prevailing interest rates and market conditions, and we cannot assure favorable terms for future borrowings. We may also consider other sources of liquidity, such as 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 Mass Markets Fiber-to-the-Home divestiture, which closed February 2, 2026, generated significant cash proceeds to strengthen our financial position 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 $1.0 billion annually.

•Rural Digital Opportunity Fund ("RDOF") relinquishment: In January 2026, we paid $26 million for remittance of awards and associated fees related to the voluntary relinquishment of our RDOF awards. As a result, we will no longer receive funding through the RDOF program.

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 are intended to support the execution of our strategy and 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 and "Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2025.

Debt and Other Financing Arrangements

Debt Instruments

As of March 31, 2026, we had $1.7 billion aggregate outstanding indebtedness (excluding finance leases, unamortized premiums, net and unamortized debt issuance costs), none of which is due in the next 12 months. For additional information, see Note 5—Long-Term Debt.

2026 Debt Activity, to date

•Exchange Offers and Consent Solicitations — Second Quarter 2026: On April 20, 2026, we commenced offers to exchange (the "Exchange Offers") certain of our outstanding notes, consisting of $977.5 million aggregate principal amount of 6.500% Notes due 2056 and $660.0 million aggregate principal amount of 6.750% Notes due 2057 (collectively, the "Old Qwest Notes"), for newly issued 6.500% Notes due 2056 and 6.750% Notes due 2057 (collectively, the "New Qwest Notes") having the same aggregate principal amounts, interest rates, maturities and other key terms, but which will be fully and unconditionally guaranteed on an unsecured basis by Lumen. In connection with the Exchange Offers, we are also soliciting consents from holders of each series of Old Qwest Notes to certain proposed amendments to the indentures (“Old Qwest Indentures”) governing the Old Qwest Notes, which would, among other things, eliminate substantially all of the restrictive covenants in the applicable indenture. In connection with the Exchange Offers, we intend to delist the Old Qwest Notes from the New York Stock Exchange (the "NYSE") and deregister the Old Qwest Notes under the Exchange Act. On April 30, 2026, we filed a Notification of Removal from Listing on Form 25 with the SEC in connection with the delisting of the Old Qwest Notes from the NYSE. We intend to cease filing reports under the Exchange Act with respect to the New Qwest Notes, in reliance on Rule 12h-5 under the Exchange Act, subject to Lumen's periodic reports containing the disclosures required by Rule 13-01 of Regulation S-X. Lumen has applied to list the New Qwest Notes on the NYSE. As of the date of this filing, the Exchange Offers remain pending. For additional information, see Note 5—Long-Term Debt—Subsequent Events.

Future Debt Transactions

Subject to market conditions, we expect to continue issuing debt securities as needed to refinance maturing obligations, consistent with our capital allocation strategies and covenants. Availability, interest rates, and other terms of new borrowings will depend on credit ratings and market conditions, among other factors.

As of the filing date of this report, the credit ratings for Qwest Corporation's senior unsecured debt were:

(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 of Part I of our Annual Report on Form 10-K for the year ended December 31, 2025.

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 upon 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 March 31, 2026, we had $1.5 billion due from Lumen Technologies under this promissory note. For more information, see Note 7—Affiliate Transactions.

Note Payable - Affiliate

We are permitted to borrow up to $2.0 billion from our ultimate parent company, Lumen Technologies, under a revolving promissory note. As of March 31, 2026, nothing was due to Lumen Technologies under this promissory note.

Pension and Post-retirement Benefit Obligations

Lumen Technologies maintains significant pension and post-retirement benefit plans that require ongoing cash outflows and may 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.

Funding and Contributions

Benefits paid by Lumen's qualified pension plan (the "Combined Pension Plan") are paid through a trust that holds the plan's assets. Based on current laws and circumstances, Lumen does not expect required contributions to their qualified pension plan during 2026.

Lumen Technologies occasionally makes voluntary contributions in excess of required amounts. During 2026, Lumen Technologies made a voluntary contribution of $101 million to the Combined Pension Plan trust.

Any additional contributions could reduce available cash and impact liquidity.

Settlements

The affiliate obligations, net in Other current liabilities and Other liabilities on our consolidated balance sheets primarily represents the cumulative allocation of expenses, net of payments, associated with Qwest Communications International Inc.'s ("QCII") pension plans and post-retirement benefits plans prior to the plan mergers. In 2015, we agreed to a plan to settle the outstanding pension and post-retirement affiliate obligations, net balance with QCII over a 30 year term through monthly payments.

For the three months ended March 31, 2026, we made net settlement payments of $11 million, and we expect to make aggregate settlement payments of $44 million to QCII during 2026.

Post-retirement Benefits

Substantially all of Lumen's post-retirement health care and life insurance benefits are unfunded and are paid by Lumen Technologies with available cash.

For additional information about Lumen's pension and post-retirement benefit arrangements, see Note 11—Employee Benefits in Item 8 of Part II in Lumen's Annual Report on Form 10-K for the year ended December 31, 2025.

Future Contractual Obligations

For information regarding our estimated future contractual obligations, see the MD&A discussion included in Item 7 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2025.

Dividends

We periodically pay dividends to QSC, our direct parent company, which reduce our capital resources for debt repayments and other purposes. For additional information, see Note 18—Stockholder's Equity in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2025.

Other Matters

Legal Proceedings and Other Contingent Liabilities

Our network includes some residual lead-sheathed copper cables installed years ago that constitute a small portion of our network. Media coverage of potential health and environmental risks associated with these cables has resulted in regulatory inquiries and lawsuits, and could subject us to legislative or regulatory actions, removal costs, compliance costs, or penalties. As of March 31, 2026, we have not accrued for any such potential costs and will only accrue when such costs are probable and reasonably estimable. For more information about related litigation and potential risks, see Note 8—Commitments, Contingencies and Other Items and “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2025.

We are also subject to various legal proceedings and other contingent liabilities that, individually or in the aggregate, could materially affect our financial position. See Note 8—Commitments, Contingencies and Other Items for additional information.

Lumen Technologies is involved in several legal proceedings to which we are not a party that, if resolved against it, could have a material adverse effect on its business and financial condition. As a wholly owned subsidiary of Lumen Technologies, our business and financial condition could be similarly affected. You can find descriptions of these legal proceedings in Lumen's quarterly and annual reports filed with the SEC. Because we are not a party to any of the matters, we have not accrued any liabilities for these matters as of March 31, 2026.

Tax Law Changes

In July 2025, the U.S. enacted H.R. 1, also known as the One, Big Beautiful Bill Act, which permanently allows 100% bonus depreciation, immediate expensing for domestic R&D, and favorable changes to interest expense limitations. These provisions are not expected to have a material impact on our 2026 effective tax rate but are expected to significantly reduce our federal income tax liability.

Critical Accounting Estimates

Our consolidated financial statements included in Item 1 of Part I of this report have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and judgments that affect our reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting estimates as compared to those described in “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 fiscal year ended December 31, 2025.