& cplSiteName &

Is Windstream Boldly Setting a New Trend?

Carol Wilson
7/29/2014
50%
50%

Windstream's bold move Tuesday to separate its services business from the underlying physical network could be just the first of many such moves within telecom. (See Windstream Spins Network Assets Into a REIT.)

In fact, as Windstream Communications Inc. (Nasdaq: WIN) spins off its physical network assets –- namely its copper and fiber distribution networks –- into a real estate investment trust (REIT), the new company is expected to sign up other communications service providers as "tenants," company executives said today.

Wall Street cheered the move, lifting Windstream's stock by nearly 14% to $11.99, and even boosting other telecom stocks in anticipation of other similar deals.

The move puts the low-growth, capital-intensive part of a telecom operation -- the access networks -- into one business, while enabling the original parent company to focus on higher-growth strategic efforts in the enterprise space.

Windstream executives this morning were promoting the deal as a positive for all involved –- its investors, its customers, and the two resulting companies, each of which will have a sound strategy going forward.

The deal "unlocks significant shareholder value" for Windstream investors, who get shares in the new company commensurate with their existing shares, and will receive dividends from both companies, says Windstream CEO Jeff Gardner.

For Windstream, the advantages are a massive reduction in its net debt -- to the tune of $3.2 billion -- made possible by payments from the REIT, enabling the company to move ahead more quickly with broadband expansion, the transition to an all-IP network, and additional new services for the mid-sized enterprise market it is targeting, he adds.

For consumer customers, the move means better access to broadband. The company is promising to expand the reach of its 10 Mbit/s broadband to 80% of its customers, while delivering 24 Mbit/s to 30% of its footprint.

As importantly, Gardner says, the company will be able to respond more quickly to new service demand in the enterprise space, where Windstream's network and cloud services target mid-sized businesses and often serve Tier 2 cities. (See Windstream Makes Regional Cloud Play and Windstream Portal Integrates Cloud, Network.)

"It's about better aligning with where we'd like to take the business, and [delivering] more flexibility to meet our business goals," the CEO comments. Noting the fast pace of change and the impact of mergers and acquisitions in the cloud and business services space, Gardner says the new Windstream will be more nimble and better able to respond.


Our NFV & the Data Center event digs deeper into how telecom service providers are evolving their data center strategies. You can check it out here on Light Reading.


The REIT, meanwhile, will initially have Windstream as an anchor tenant, but will be able to grow independently by physical expansion into other markets and by obtaining other tenants.

The deal, which has U.S. Internal Revenue Service approval but still needs state regulatory acceptance, is complex but straightforward. The new REIT will take on about $2.2 billion in Windstream debt in a straight debt-for-debt exchange, and also provide $1.2 billion in cash, which Windstream will use as part of its debt reduction plans. Windstream's net debt reduction, after fees and expenses, will be $3.2 billion.

— Carol Wilson, Editor-at-Large, Light Reading

(20)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Page 1 / 2   >   >>
thebulk
50%
50%
thebulk,
User Rank: Light Sabre
7/31/2014 | 3:06:34 PM
Re: The rubber hits the road
FakeMitch, I see your point, but I am still skeptical. 
Mitch Wagner
50%
50%
Mitch Wagner,
User Rank: Lightning
7/31/2014 | 2:48:31 PM
Re: The rubber hits the road
thebulk - Simple regulations are better than complicated ones. The more complicated the regulation, the more susceptible it is to being thwarted by megabilliondollar companies with teams of high-priced lawyers. 

Separating pipes from service has the virtue of being nice and simple. Net neutrality proposals sound simple on the surface, but they get hairy the more they think about them. 
SachinEE
50%
50%
SachinEE,
User Rank: Light Sabre
7/31/2014 | 6:23:41 AM
Logic
Who wouldn't want to be 3.2 million dollars less in debt? Its just amazing how the thought process behind this was move came about, the move not only reduces losses but enables the company to move forward with broadband expansion and additional services, I hope it's a move that will be followed by the rest because no doubt, its going to be very successful.
SachinEE
50%
50%
SachinEE,
User Rank: Light Sabre
7/31/2014 | 6:14:53 AM
Why Windstream Has A Promising Future
This move by Windstream has quite a lot of benefits to both he members who act as executives, the employees and the customers who get their services from this company. The inventors get to get the shares from both the telecom and the windstream company which is very profitable to them. Customers will be able to get fast and efficient services as they will be quick service respond. The customers also are able to quickly access broadband. The windstream company certainly has a promising future seeing what telcom has been able to achieve over time.
mendyk
50%
50%
mendyk,
User Rank: Light Sabre
7/30/2014 | 8:50:02 AM
Re: Magic
If the aggregate share prices of the two separate entities is greater than the original share price used to be, then mission accomplished. If not, then this is a fail from the corporate perspective. Remember when Ziff spun out Key3 Media? Same principle here. Let's hope for Windstream's sake the result is different
thebulk
50%
50%
thebulk,
User Rank: Light Sabre
7/30/2014 | 5:28:59 AM
Re: The rubber hits the road
Is it really a possible solution or just a work around to Net Neutrality? I am skeptical... 
brooks7
50%
50%
brooks7,
User Rank: Light Sabre
7/29/2014 | 9:13:29 PM
Re: Magic
Marc,

It goes something like this....

Would you rather own an access network - which is NOT the pipes Mitch - or would you rather be RingCentral (as an example)?

The access network is an asset that is a depreciating physical plant that needs maintenance and upgrade.  It is a low to no growth business at best, a declining one more likely.  The good news is that its hard to replicate so won't have a lot of competition.  So possible cash flow, but not a rising share price.  On top of that, the note of people leasing the network is pretty funny.  Companies can already do that through UNE-L.  Why would they start now?

The services business has a lot of potential growth but a lot of competitors.  If you really want to be a Cloud Company, you should plan to have a solution that gets connected over the Public IP network.  If you are connected to data centers over Public IP networks, then essentially all bandwidth is created equal and is a commodity.  There are Enterprise Apps that need different connectivity, but things like Salesforce.com work quite nicely without owning a single customer network or requiring a VPN.

I have put forth for a long time that network providers have no advantage in building Cloud Apps and this is why.  It is not clear to me that integrating 3rd party products (like RingCentral) is a great model.  The SW development houses (Amazon, Google, IBM, Microsoft, Salesforce) are doing a LOT better than the deployment houses.  But for no plant, you can be in the voice business by buying a VoIP switch.  Rent some Data Center Space and poof you are Vonage.

seven
Mitch Wagner
50%
50%
Mitch Wagner,
User Rank: Lightning
7/29/2014 | 8:55:25 PM
Re: The rubber hits the road
This kind of thing is a potential solution to the net neutrality problem -- one company owns the pipes, other companies provide the service. 
Mitch Wagner
50%
50%
Mitch Wagner,
User Rank: Lightning
7/29/2014 | 8:53:09 PM
Re: Magic
If you stick feathers on a dog and call it a falcon, will it fly?

Don't think you're trying that on my dog, buster. 
MarkC73
50%
50%
MarkC73,
User Rank: Light Sabre
7/29/2014 | 7:18:41 PM
Re: Magic
I'm not sure if I'm on the camp of 2 halves are greater than a whole.  I guess I'll dig deeper in what the restructuring really means to both sides, or just wait and see what happens.  Because I don't really see the difference between 'tenants' of tomorrow and wholesale customers of today.  Financially, not burdening the two sides, smells of spin off opprotunity to me.
Page 1 / 2   >   >>
Featured Video
From The Founder
Light Reading is spending much of this year digging into the details of how automation technology will impact the comms market, but let's take a moment to also look at how automation is set to overturn the current world order by the middle of the century.
Flash Poll
Upcoming Live Events
November 30, 2017, The Westin Times Square
December 5-7, 2017, The Intercontinental Prague
March 20-22, 2018, Denver Marriott Tech Center
May 14-17, 2018, Austin Convention Center
All Upcoming Live Events
Infographics
SmartNICs aren't just about achieving scale. They also have a major impact in reducing CAPEX and OPEX requirements.
Hot Topics
When Will 6G Arrive? Hopefully Never, Says BT's McRae
Iain Morris, News Editor, 11/21/2017
Let's Talk About 5G Efficiency, Not Wacky Services
Iain Morris, News Editor, 11/21/2017
Top 5 Tech Turkeys 2017
Dan Jones, Mobile Editor, 11/22/2017
Wireless Could Arrive Soon in NYC Subway Tunnels
Dan Jones, Mobile Editor, 11/20/2017
Fed Watch: AT&T, Net Neutrality & More
Mari Silbey, Senior Editor, Cable/Video, 11/21/2017
Animals with Phones
Live Digital Audio

Understanding the full experience of women in technology requires starting at the collegiate level (or sooner) and studying the technologies women are involved with, company cultures they're part of and personal experiences of individuals.

During this WiC radio show, we will talk with Nicole Engelbert, the director of Research & Analysis for Ovum Technology and a 23-year telecom industry veteran, about her experiences and perspectives on women in tech. Engelbert covers infrastructure, applications and industries for Ovum, but she is also involved in the research firm's higher education team and has helped colleges and universities globally leverage technology as a strategy for improving recruitment, retention and graduation performance.

She will share her unique insight into the collegiate level, where women pursuing engineering and STEM-related degrees is dwindling. Engelbert will also reveal new, original Ovum research on the topics of artificial intelligence, the Internet of Things, security and augmented reality, as well as discuss what each of those technologies might mean for women in our field. As always, we'll also leave plenty of time to answer all your questions live on the air and chat board.

Like Us on Facebook
Twitter Feed
Partner Perspectives - content from our sponsors
The Mobile Broadband Road Ahead
By Kevin Taylor, for Huawei
All Partner Perspectives