Windstream stands alone

The separation of Alltel's wireless and wireline businesses as well as the merger between the landline business and Valor Communications was announced in December 2005. This week, Windstream Communications becomes the newest public company in telecom with former Alltel Chief Financial Officer Jeff Gardner as CEO.

If serendipity counts for anything, the new company will enter the game with the ticker symbol “WIN.” Provided all goes as planned, Windstream will begin trading under that symbol on July 18.

At launch, Windstream will have 3.4 million access lines across 16 states and annual revenue around $3.4 billion. It will have 8000 employees, but with $52 million worth of synergies to realize in the Valor merger, that number will likely change. Gardner said the company will announce personnel changes shortly after the closing, which is expected to occur this week.

As the largest rural provider by a factor of 50%, Windstream plans to be aggressive in its growth and revenue protection efforts.

“We don't have a legacy wireline management team,” Gardner said. “Many of [our team] have been in competitive businesses, including wireless. We are anxious to begin managing this business independently.”

The landline business had been the non-strategic part of Alltel for a long time as the company focused on its wireless business, Gardner said, “But the employees are full of energy and enthusiasm now that they are back at center stage.”

The business also has been losing access lines for the last 10 quarters, but Gardner said Windstream has had more broadband additions than access line losses and has realized a net gain in customers.

Part of Gardner's strategy will be to transform the voice business to more of a broadband entertainment business. “We have less cable and wireless competition in our market, so if we can aggressively drive broadband and satellite services into our customer base and protect the cash flow, it will allow us to pay substantial dividends to our shareholders.”

For now, Gardner said he struggles with the economics of a facilities-based video solution and will stick with Dish Network for TV services. “I don't think we lose anything with the satellite option. Dish has been great to work with,” he said.

Yankee analyst Vince Vittore said that for the moment, satellite is probably the best option Windstream has, given the geographical challenges posed by other options. “Besides, the Dish combination works well for time-to-market,” he said.

In addition to protecting and growing revenue through advanced services and the synergies realized from the merger with Valor, Windstream has another growth opportunity: acquisition.

Despite some restrictions, it could do another deal the size of Valor, but Gardner said the company would focus more on smaller deals.

“We'd have to be really focused on paying the right price for deals that are cash-accretive and focused on rural markets where we do better than we do in urban areas,” Gardner said.

Dispossessed of its wireless assets, Windstream is evaluating the mobile virtual network operator (MVNO) option and is talking to Alltel and other wireless operators.

“We think it will be very important over time to have a wireless option,” Gardner said.

Despite this wireless/wireline separation and others, including Sprint/Embarq and some smaller independent telcos, the industry is not moving away from convergence, said Steve Bamberger, vice president of communications, media and utilities for Oracle.

“For every one of these spinoffs, we see two or three examples where either organizationally or technologically, networks are coming together,” Bamberger said. He also said some companies, Cbeyond for instance, are successfully providing bundled services even though they are utilizing the MVNO model.