Wanted Windy West Data Center

Windstream CEO Jeff Gardner stated during the Bank of America Merrill Lynch 2013 Leveraged Finance conference, “We’re really at a time where we can start looking out at acquisitions again to accelerate this transformation focused on the enterprise space obviously.” Despite having work to do on the PAETEC integration still, Windstream will be looking for assets to add to its national enterprise system. Likely, this will be a data center on the West Coast. That could prove expensive for the following reasons: data centers are a hot commodity that a number of other CLECs are also looking at for purchase; Windstream’s debt load is high and if it weren’t for the stock dividend it pays out, the stock would reflect it; and their revenue profile.

Let’s look at WIND revenue: 72% comes from broadband. If most of your revenue is from broadband, then shouldn’t you deliver a quality service? According to DSLR, Windstream is under investigation in Georgia for advertising DSL speeds from 6 to 24 Mbps but delivering 1 Mbps!!! Awesome! Luckily, there isn’t much competition for broadband in Windstream ILEC territories. They just experienced an outage on their long-distance network, too.

While business ARPU is right around $410 per month, it doesn’t account for a majority of the revenue. The CEO would like that to change. Without a cellular play, cloud seems to be the way carriers are turning. But there they don’t face cable competition, but a field of players from other CLEC’s like Megapath, Cbeyond and EarthLink to managed services providers like Netwolves and other MSP’s.

I look at AT&T’s shopping in Europe as a sign that the RBOCs have hit a ceiling in US revenue. Cellular is maxed out. U-Verse is the wireline growth right now, but Enterprise and cloud has become a street fight with VZ, ATT, L3, C-Link, and ELNK fighting it out for federal government contracts as well as Fortune 5000 business. Both of those sectors put the RBOCs and its carrier brethren in competition from HP, IBM, and other system integrators. How would Windstream play in that space?

Windstream is expecting CAF funds to add more homes passed for broadband, which will result in more broadband sales. It’s a dual strategy that the company is following: ILEC side and CLEC side – for consumer and for business. We’ll see if a west coast data center enters their portfolio or they do something bigger like buy Integra.

Some telecom M&A speculation at Y! Finance.

Tags: arpu, broadband, numbers, windstream
Related tags: windstream, revenue, broadband, business, enterprise, center