Windstream (WIN, Financial) has registered highly productive year in 2014 both operationally and strategically with 30 basis points improvement in growth rate both on sequential and year-over-year basis. Its consumer channel improved its revenue trends by 250 basis points on year-over-year basis by reducing the churn rate and introduction of competitive pricing in the second quarter. In addition, Windstream delivered $253 million of adjusted free cash flow and returned $151 million to its shareholders from the net amount.
Will the momentum continue?
However, Windstream witnessed pricing pressure in the telecom space, decreased product sales and significant decline in carrier transport services.
Windstream is witnessing sharp headwinds in the SMB space with higher competition. Therefore, the company is taking significant steps to enhance profitability, better its cost structure and increase operating efficiencies in the business.
Further, Windstream is continuously targeting and identifying superior margin business sales prospect by combining the managed services, data center, services and networks.
Windstream also plans to separate its business into two companies to bring in grater synergies and enhance shareholder value; by grouping some network assets to become an independent publicly traded REIT. Windstream is constantly focused on offering higher-grade communication services to businesses and these transactions well positions Windstream in accelerating growth and improving its competitive position, going forward.
Key moves
Windstream declared the acquisition of a new company called broad – Business Only Broadband. The latter enables higher bandwidth, constant wireless network offering managed services, private Ethernet and business-class Internet over microwave spectrum. It caters to enterprise customers and SMBs in four major metropolitan markets.
In the consumer channel, Windstream is releasing an IPTV service called Kinetic in some markets. Kinetic is expected to be a full video entertainment package offering having a range of features accessible to over 50,000 homes in Nebraska, Lincoln in mid-2015.
Windstream aimed at launching Kinetic in a few select markets for coming several years, focused on upgraded fiber markets using the present infrastructure for generating higher returns. Kinetic is estimated to offer Windstream with a new innovative customer offering for accelerating bundled sales and enhancing customer retention.
Windstream is successfully growing the enterprise market by keenly focusing on integrated solutions, combining its networking, voice and data transport capabilities and enhanced value offering like hosted and managed services.
Windstream is making continued progress in the consumer channel with major focus on bundled services sales, the expansion of bandwidth in vertical and broadband speed services leading to a 5% expansion of consumer broadband ARPU.
Moreover, Windstream is focused on upgrading the fiber backhaul within its ILEC coverage and thus allowing improved services and enabling customer experience.
Windstream is continuing this growth story by directing 60% of its entire capital expenditure totalling $194 million towards expanding its growth projects such as broadband expansion and fiber deployment opportunities. There are significant programs in progress to augment its broadband capabilities that include improving its cost structure, expansion of its fiber network to enhance its enterprise opportunities and reducing of loop lengths.
Additionally, Windstream has closed the first development phase of its 10 – 100-gig long-haul network for considerably enhancing its network capability. During the quarter, Windstream implemented fiber-based technology to 85 towers, making entire completed towers till-date to approximately 4,800 with 525 others under construction.
Conclusion
Looking at the impressive balance sheet of the company, Windstream delivered adjusted free cash flow of $253 million in the third quarter and returned more than $450 million to its shareholders through dividends. These results illustrate the company’s keen attention on delivering excellent shareholder value.
