Windstream's Q4 earnings decline to $1.54 billion

Broadband, business services offset legacy losses
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Windstream (Nasdaq: WIN) reported on Tuesday that Q4 2012 revenues declined year-over-year to $1.54 billion as ongoing growth in consumer broadband and business service revenues offset declines in its legacy business lines.

For the year 2012, Windstream reported net income of $168 million, or 28 cents per share, on total revenues of $6.16 billion, down from $170 million, or 32 cents per share, on total revenues of $4.28 billion it reported for the year 2011.  

A key focus for Windstream in 2012 was its ongoing migration to become the fourth largest business service provider via a mix of its own assets and those it purchased from PAETEC. Capital expenditures in Q4 were $270 million, excluding $21 million in integration capital related to PAETEC network optimization opportunities. Excluding $51 million in integration capital related to PAETEC, adjusted capital expenditures were $1.05 billion for the year 2012.

Overall, business and consumer business and consumer broadband revenues represented approximately 70 percent of Windstream's total revenues and sales in Q4, growing collectively 2 percent year-over-year.

Here's a breakdown of the telco's key metrics:

  • Consumer Services: In the consumer segment, broadband was the main revenue driver. Fourth quarter consumer broadband service revenues rose 5 percent year-over-year to $116 million and $457 million for the year 2012. However, ongoing access line losses drove a 1.5 percent decline in overall Q4 consumer revenue and 3 percent for the year to $1.34 billion.
     
  • Business Services: Driven by the ongoing demand from businesses for IP-based services, data and integrated services revenues rose 9.5 percent over Q4 2011 to $398 million. Likewise, for the year 2012 total data and integrated services revenues rose 9 percent to $1.54 billion.
     
  • Wholesale Services: The growth of fiber-to-the-tower (FTTT) revenue drove up carrier service revenues 2 percent year-over-year to $165 million for Q4 2012 and up 4 percent year-over-year to $653 million for the year, respectively. During the Citi Global Internet, Media & Telecommunications Conference in Las Vegas held in January, Jeff Gardner, CEO and President of Windstream, said the ILEC will complete the majority of its FTTT build outs in both its traditional legacy regions and in new regions it entered through the various acquisitions it made in recent years. However, Q4 revenues declined 17 percent to $169 million from Q4 2011 due to what the service provider said was lower intrastate access rates as part of intercarrier compensation reform implemented in July 2012 and lower switched access revenue from declining consumer voice lines. For the year, wholesale revenues were $708 million, a decrease of 14 percent year-over-year.

Looking forward, Windstream is banking on the expected growth of business revenue and consistent consumer revenue. The company said growth in these two segments will offset declines in wholesale revenue "such that total revenue in 2013 is within a range of a 2 percent decline to a 1 percent increase as compared to 2012 total revenue." It also expects that capex will decline by more than $200 million in 2013 and be between $800 million and $850 million. 

Shares of Windstream were listed at $9.20, up 27 cents or 3.02 percent, in pre-market trading on the Nasdaq stock exchange.

For more:
- see the earnings release

Earnings roundup: Wireline telecom earnings in the fourth quarter of 2012

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