Windstream sets business services on growth track as enterprise revenues rise to $498M

Windstream's decision to segment its business services into three areas -- SMB, enterprise and carrier -- appeared to pay off in the fourth quarter of 2015 as it reported that enterprise revenue climbed 4.6 percent year over year to $498 million, while its carrier services saw a sequential rise of $2 million to $171 million.

The provider's small to medium business (SMB) unit recorded declines, as Windstream continued to transition SMBs positioned in its CLEC footprint either to its ILEC-based consumer and SMB unit, or off its service entirely. Consumer and SMB ILEC revenues fell 2 percent in the quarter to $297 million while SMB CLEC revenues dropped steeply by 14 percent to $132 million.

But those CLEC-based SMB declines aren't a bad thing for Windstream: shifting that portion of its business customer base to its ILEC footprint will help it improve focus on its overall business, according to company executives. The Little Rock, Ark.-based service provider's plan for slow but sustained growth in these three newly segmented areas is part of a larger strategy by the company to reduce its debt load, currently at $5.2 billion.

"During the year, we made significant progress on our strategic objectives. We remain focused on stabilizing and improving Windstream's financial performance and advancing our network capabilities -- all of which position the company for long-term success and shareholder value creation," said Tony Thomas, president and CEO of Windstream.

Windstream has about 26,000 enterprise customers nationwide and is working to expand its business services footprint through its partnership with TierPoint to bring fiber into more buildings within its territories. For example, the company announced in mid-February that it would expand its fiber network in Charlotte, N.C., and is planning additional network builds in Tennessee and Virginia.

Windstream is employing several strategies to chip away at its debt. Its REIT spinoff into CS&L last summer reduced its debt load by $3.2 billion. In early February, Windstream completed a $75 million share repurchase plan, and it intends to continue improving its debt profile throughout 2016 through activities like continuing to monetize CS&L, which Thomas said would help the company realize about $504 million in debt reduction.

The provider expects to generate about $113 million in free cash flow in 2016, which it will use to further pay down debt, Thomas noted on the company's earnings call with investors.

For the full year, Windstream saw total revenues of $5.63 billion, a less than 1 percent decline year over year. For its fourth quarter Windstream brought in revenues of $1.4 billion, remaining essentially flat compared to the same period in 2014.

The provider kept its capital expenditures within its target levels, spending $227 million in the fourth quarter and $965 million for the full year 2015.

Windstream shares were down 3.78 percent in mid-morning trading on the Nasdaq, to about $6.36, following its earnings announcement.

For more:
- see the release
- listen to the webcast
- see this CRN article

Earnings Summary: From Adtran to Zayo: Tracking wireline telecom earnings in Q4 2015

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