Windstream's Project Excel enables higher broadband speeds, but it still lost 15K subs in Q4

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Windstream is hot on the broadband expansion trail with plans to bring a series of speed tiers ranging from 50 to 100 Mbps to nearly 1 million locations this year, but in the near-term the service provider continues to be challenged by subscriber declines.

Tony Thomas, CEO of Windstream, told investors during the fourth quarter earnings call that its plans to deliver higher speeds to a greater portion of its residential and small to medium business (SMBs) customer base is on target to help get it back on a growth path.

"In 2016 we will benefit from the deployment of 50 meg, 75 meg, 100 meg premium speeds, which were rolled out during the fourth quarter of 2015 to approximately 1 million locations," Thomas said. "We will also continue to expand availability of premium speeds throughout 2016 via Project Excel, which enhances backhaul capabilities in the middle mile to support current and future capacity demands and greatly improves broadband speeds across all of our speed tiers."

By the end of the year, Thomas forecast that Windstream will have 25 Mbps service "to 54 percent of our broadband footprint, and 50 meg to 30 percent," which "are very competitive speeds in our rural markets."

Thomas added that it is "launching 1 gig service in four markets in the first half of 2016, and continue to expand the availability of our IPTV service."

Complementing Project Excel and other efforts, Windstream could see more of a subscriber uptick from its CAF-II investments, which will support and expand broadband services to another 470,000 locations.

"Collectively these programs significantly enhance our broadband capabilities, improve our competitiveness, and position us to grow Consumer and SMB ILEC revenue and contribution margins," Thomas said.

The service provider also hopes to use its Kinetic TV launch, which is already available in 100,000 households in Lincoln, Neb., and Lexington, Ky., to potentially increase its broadband subscriber base.

"What Kinetic has enabled us to do, not only do we sell the video product, but it's dramatically increasing our broadband market share," Thomas said.  'And that's really the real emphasis of bringing video along into our product sale on the Consumer side, was to make sure we got the broadband business along with it."

However compelling Windstream's plans are, the service provider continues to bleed broadband subscribers, a trend that continued into the fourth quarter.

Windstream lost a total of 14,500 subscribers, ending the period with a total of 1.095 million customers, down from the 1.13 million subscribers it had in the same period a year ago.

"The company now has ~1mn locations (out of roughly 4mn) capable of receiving speeds of 50-100Mbps, and expects to increase the location count by roughly 20% in 2016," said Scott Goldman, equity analyst for Jefferies, in a research note. "Nonetheless, Windstream continues to lose broadband subscribers, with a loss of 15k subs in 4Q15, double the loss we had expected. Though Project Excel should improve competitiveness, robust cable competition and already high penetration will likely result in continued subscriber attrition."

For more:
- see the Seeking Alpha earnings transcript

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