Windstream earnings: Increase in Q4capex signals more spending in 2011

After a busy 2010 during which it integrated a handful of acquisitions, independent telco Windstream Communications reported fourth quarter earnings that featured a rising capital spending for the quarter and an outlook for higher capex for 2011.

Windstream’s $143 million in capex during Q4 2010 was about 56 percent more than the company spent during Q4 2009, and heading into 2011, Windstream’s full-year capex outlook is $520 million to $580 million. That’s good news for the company’s vendors, although like other telcos it may be spending the money as it sees potentially flat revenue for 2011.

Windstream COO Brent Whittington said on the earnings call that broadband stimulus money is helping it increase network investment. “With the help of stimulus grants, we’re investing a significant amount to expand both the reach and the speed of our broadband network,” he said, adding, “That should provide incremental revenue opportunities because we are likely going to be the only wire provider in our areas with the ability to reach tens of thousands of new customers.”

Windstream added more than 12,000 new high-speed Internet customers during Q4 2010, about 6 percent more than the same period last year, and now has just over 1.3 million overall. Its video customer base grew about 8 percent to 434,000.

Total access lines declined by 36,000 to about 3.3 million. The telco has kept its line loss rate somewhat lower than other telcos by using a lifetime price offer for residential landline services, and increasing its investment in business services through efforts like its recent Q-Comm and Hosted Solutions . Whittington said on the Q4 earnings call, however, that while primary residential landline loss has slowed, the telco is losing secondary landlines at a faster rate.

In regard to financial details, Q4 net income for the telco was about $72 million, about 4 percent lower than Q4 2009. Revenue for the quarter was jumped 30 percent to $981 million, though on a pro-forma basis it was down 2 percent year-over-year to just over $1 billion. Windstream took an earnings hit for Q4 2010 from about $20 million worth of after-tax merger, integration and restructuring costs related to its Q-Comm, Hosted Solutions, Iowa Telecom and NuVox deals.