QUOTE AND NEWS
Telecom Ramblings  Nov 21  Comment 
Windstream is sending out some cards just in time for the holiday season, but they aren't of the festive variety. The hybrid ILEC/CLEC is planning to slim down its workforce by 2.7% by December 1 in an effort to improve its cost structure and...
Cloud Computing  Nov 18  Comment 
SYS-CON Events announced today that Windstream, a leading provider of advanced network and cloud communications, has been named “Silver Sponsor” of SYS-CON's 16th International Cloud Expo®, which will take place on June 9–11, 2015, at the...
TheStreet.com  Nov 10  Comment 
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.  TheStreet Ratings quantitative algorithm...
Motley Fool  Nov 6  Comment 
Windstream's shares today fell back to prices last seen in June, as the focus of higher-quality business clients showed its dark side in the third quarter.
newratings.com  Nov 6  Comment 
SeekingAlpha  Nov 5  Comment 
Motley Fool  Oct 28  Comment 
Windstream Holdings is not a cheap stock, but maybe for good reason. Does the telecom deserve sky-high valuations thanks to its innovative REIT plans?
Motley Fool  Oct 20  Comment 
With Windstream going through a major restructuring, keep these two things in mind.




 
TOP CONTRIBUTORS

Windstream Corporation (NYSE:WIN) is a wireline telephone and DSL Internet provider that serves rural areas in the southern and southwestern U.S. As of December 31, 2009, the Company provided service to approximately 3.0 million access lines and 1.1 million high-speed Internet customers primarily located in rural areas in 16 states.[1] Based on the number of telephone lines it manages, it is the fifth largest local telephone company in the country. Like many other telecommunication and cable companies, Windstream has "bundled" a range of services that use its connection into a home, including local and long distance phone service, and Internet access to over 3.2 million rural households; it also offers cable television.

Traditional landline companies face stiff competition from a range of substitution technologies that could undermine its core landline telephone and Internet access businesses. In particular, voice-over-internet-protocol (or VoIP) and wireless are gaining as alternatives to long-distance calling. In addition, cable companies--including Comcast (CMCSA), Time Warner Cable (TWC), Charter Communications (CHTR)--are competing with telephone providers (that use DSL) to provide broadband Internet access (via cable). As a provider to mostly rural areas, which have lower adoption rates for these technologies, Windstream has been relatively sheltered from these trends.

In July 2006 Alltel spun off its fixed line division which then merged with Valor Communications Group, Inc to form Windstream. The company incurred around $5.5 billion of long-term debt due to the merger. Servicing this debt may become costly in the face of rising interest rates.

Business Overview

Windstream earns revenue primarily through its local wireline services and network access and interconnections, which include fees to connect to long distance providers and broadband and data services. A much smaller but increasing percentage of revenue comes from fees for its own long distance services and miscellaneous revenues from charges for advertising, equipment sales and rentals, billing services for long distance companies, and commissions from digital satellite TV service activations.

Business Financials

Windstream's 2009 revenue was $3.0 billion, a slight decline from the previous year's revenues of $3.2 billion.[2] This decline was primarily due to the decline in access lines and declines in product sales.[3] For the year ended December 31, 2009, Windstream had a net income of $334.5 million.

Trends and Forces

Triple-Play Bundling

Many cable provider companies like Comcast and Time Warner package a combination of cable services like cable television, phone access, and Internet access. Windstream and other wireline providers have moved towards similar offerings. This is significant since triple play requires some sort of broadband connection; normal phone lines are not enough. Approximately 80% of Windstream's customer's have triple play capability, making them attractive potential customers.

  • Broadband Growth: Similar to the importance of triple-play packages, the growth of broadband is another trend that could affect the future performance of Windstream. The company's $20.5 million growth in broadband revenue was driven mostly by an increased number of broadband customers, which growth also contributed to a 4% increased in average revenue per customer.
  • Fixed-line telecommunication: As wireless phones are gaining an increasingly larger share of the phone market, it becomes more important for wirelines to develop in other areas, such as data services and cable. Windstream already provides data services and broadband, but has barely moved into another potential area, cable television. As a relatively new company in this area, it will face stiff competition from existing larger companies like Verizon. However, it also serves as a potential growth area, since Windstream currently does not have a large cable clientele.
  • VoIP: Another aspect of fixed-line telecom that can affect Windstream is VoIP. Windstream acknowledges that one source of competition it will face will be in VoIP. The low cost of VoIP, as well as its offering in combination bundles, is a threat to the high prices that Windstream charges. However, it is also making plans to allow for VoIP support on their data lines to tap into a potential market.

Focus on rural penetration

Over 80% of Windstream's revenue comes from its wireline services. As such, it is highly susceptible to changes in demand for such services. Since Windstream operates in rural communities, it faces relatively fewer competitors but also historically lower adoption rates. The main source of competition for the company in rural areas come from cable companies like Time Warner, Charter Communications (CHTR) and Comcast (CMCSA) , as well as wireless phone providers.

Windstream's Coverage

Government Regulations

As a telecommunications company, Windstream has to follow national rules set by the FCC, as well as state regulations. Such rules affect prices and rates that Windstream can charge. This limits how easily Windstream can react to changing market conditions by preventing the company from changing its rates to optimally respond to such changes. Government regulations can also affect other returns that Windstream may have.

Competition

As a wireline phone and Internet access services company, Windstream competes with a range of telecommunication companies, including other mobile telephone services such as Verizon and cable companies such as Time Warner, Inc, its parent company Alltel, Verizon, and AT&T.

References

  1. WIN 10-K 2009 Item 1 Pg. 2
  2. WIN 10-K 2009 Item 8 F-29
  3. WIN 10-K 2009 Item 8 Pg. F-2
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