Windstream (NASDAQ: WIN), headquartered in Little Rock, Arkansas, is a business on the move.
Founded in 2006, Windstream is “an S&P 500 communications and technology solutions provider with operations in 29 states and the District of Columbia and about $4 billion in annual revenues,” as it reported. (See “About Windstream.”)
According to Reuters, the consensus opinion of various investment analysts is that Windstream will “outperform” expectations in the coming fiscal year beginning January 1, 2012. Its shares have traded on NASDAQ since 2009 after a voluntary switch from the New York Stock Exchange, where it began trading its common stock in 2006.
The third quarter results, released by the company on November 4, 2011, revealed overall impressive performance. While total revenues for the quarter of $1.023 billion were down 1 percent from the year prior, key sectors the company prioritized—both the business service and consumer broadband sectors—were up 2 percent and 7 percent, with revenues of $498 million and $118 million, respectively.
Specifically, according to the third quarter release, “advanced data and integrated solutions” for businesses increased 1 percent and 9,300 new high-speed Internet customers were added, for a 4 percent increase, bringing the total number of customers to 1.35 million, representing almost 65 percent of primary residential lines. Additionally, “(t)he company ended the quarter with approximately 449,000 video customers, representing 4 percent growth from a year ago.”
As Jeff Gardner, Windstream’s president and CEO, said, “Our goal over the past few years was to transform our business to achieve revenue and cash flow growth. Given our shifting revenue mix, success-based capital investments and expected deal synergies, we are on the verge of showing growth in both of these areas.”
On December 1, Windstream announced it had “completed its acquisition of PAETEC Holding Corp. in a transaction valued at approximately $2.3 billion”—establishing Windstream as “a nationwide communications and technology solutions provider,” as stated in the company history timeline for 2011.
This is significant, especially for the corporation’s business services sector—and caught many by surprise. PAETEC, serving 86 of the top 100 Metropolitan Statistical Areas, has, as the company notes, a “core offerings portfolio” that “spans data, voice, and Internet communications services” and a “value-added solutions portfolio” that “encompasses data center solutions, communications management software, equipment, and software and equipment financing programs.”
Windstream, providing approximately 3.3 million access lines in 23 states, has a dynamic history, rooted in Allied Telephone Company of Little Rock, Arkansas, founded in 1943, which grew to serve rural communities in Arkansas, Oklahoma and Missouri.
Forty years later, in 1983, an era of mergers ensued—starting with the union of Allied and Mid-Continent Telephone Company of Ohio to form Alltel, thereby becoming the fifth largest telephone company nationwide with 842,000 customer lines.
In 1993, 50 years after Allied’s founding, Alltel acquired GTE’s service area in Georgia and 320,000 lines—plus its state directory publishing business. That same year, it began doing what Gardner’s explained to Tim McElligott “is so essential for successful companies to do: reinvent themselves every five years or so.”
In 2006, Windstream Corporation was formed from Alltel’s landline business that had merged into VALOR Communications Group in 2000, which, by then, was serving 3.4 million access lines in 16 states.
A year later, Windstream acquired CT Communications in North Carolina, doubling its business in the state; and in 2009, it acquired Lexcom, Inc. in North Carolina, as well as D&E Communications in Pennsylvania.
2009 was also the year Windstream added its 1 millionth high-speed Internet customer.
As the company entered the teens, it expanded into Iowa and Minnesota, with its acquisition of Iowa Telecommunications Services, Inc, and acquired NuVox Inc. gaining roughly 104,000 “data and integrated solution connections” in 16 states.
Windstream’s business plan of steady growth by reinventing itself, with capped corporate bonuses tied to performance, state-of-the-art technology, equipment and services, and a team of over 10,000 dedicated employees, are at the heart of its success.
According to WikiWealth—Windstream’s top competitors, and their investment ratings, are as follows:
· Consolidated Comm (CNSL), which offers services is only 3 states—rated a HOLD since it’s currently over valued by about a factor of 2.
· Alaska Communications (ALSK), which does business only in Alaska— rated a BUY since it is undervalued by about a factor of 2.
· Neutral Tandem, Inc., (TNDM) which offers “tandem interconnections services wireless, cable, broadband, and other carriers in the United States, allowing competitive carriers to exchange traffic between their networks without using an ILEC tandem or establishing direct connections”—rated a BUY since it is undervalued by about 2 ½ times.
· Century Telephone (CTL), which bought Embarq (EQ) in 2009, when, it produced more than $6 billion in revenues annually”—rated a HOLD.
These are formidable competitors, but as the 2006 McElligott interview revealed, once it split from Alltell, Windstream was only fighting with external competitors in the rough and tumble business world—for that all-important market share.
Windstream looks like a company poised for a big growth spurt, making it a potentially very solid investment opportunity—taking into account the usual caveats enumerated in the third-quarter results.