Windstream says SD-WAN, Office Suite combo will enhance SMB/ILEC, SMB/CLEC business revenues

Windstream says the advent of SD-WAN and Office Suite will enable it to breathe much-needed life into its SMB ILEC and SMB CLEC units, which have seen revenue struggles in recent years.

Tony Thomas, CEO of Windstream, told investors during the Goldman Sachs Communacopia conference this week that these products are enabling the service provider to reengage with customers.

Tony Thomas
Tony Thomas

“I think the ILEC/SMB business probably has been the one of the biggest disappointments for us in terms of performance just to be transparent,” Thomas said during the event, according to a Seeking Alpha transcript. “The combination of our broadband capability with SD-WAN and OfficeSuite will enable us to do much better.”

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Thomas added that “it’s a completely different conversation we'll have with customers about cloud solutions and connectivity.”

Windstream is taking a similar approach to its SMB CLEC business.

One of the key developments to make this shift happen was its Broadview acquisition. Following the acquisition, Windstream recently introduced a new SD-WAN/unified communications as a service (UCaaS) bundle as a way to bolster the IP adoption trend for business customers.

The service combines Broadview’s cloud-based unified communication (UC) services with Windstream’s SD-WAN solution.

Thomas said that his view of the SMB CLEC business has changed following its acquisition of Broadview, which will allow it to focus on being a cloud-based business.

“We're going to run a virtual network and people can bring their own broadband, but we're going to move in some ways and to just a complete cloud company on the SMB mid-market side,” Thomas said. “We’ll still sell access but it will be part of the cloud solutions we’re bringing, which were the virtualized networks solutions of SD-WAN in OfficeSuite.”

These two segments saw mixed results in the second quarter.

CLEC consumer and small business revenue was $189 million, a 51% increase year-over-year, and the contribution margin was $72 million compared to $41 million in the same period a year ago.

Meanwhile, the ILEC consumer and small business segment service revenue was $387 million, down 2% from the same period a year ago, and the contribution margin was $212 million compared to $221 million year-over-year.

Thomas said that Windstream has positioned itself to get these two segments on a revenue growth trajectory.

“I think the biggest surprise of the Windstream over the next three years will be the performance of our CLEC SMB business,” Thomas said.