Windstream's business service ambition: A necessary and inevitable move

Sean Buckley, FierceTelecomWindstream (Nasdaq: WIN) has some grand ambitions for its business service unit: Become the most powerful No. 4 "enterprise-focused" telecom provider in the U.S.

As told in its new promotional video, the service provider is banking on its talk-of-the-town rural service roots to offer "personalized" service to large and small businesses. Windstream now has 110,000 fiber miles and serves over 450,000 business customers.   

Its efforts are paying off. In Q4 2011, Windstream reported that business service revenues rose 2.5 percent on a pro forma basis to $888 million.

Getting to this point has not come without some bold moves, including purchasing other companies to enhance its geographic service reach.

The telco took a bit of a different path than its number three competitor CenturyLink (NYSE: CTL). Unlike CenturyLink, a telco that gained immediate national and international traction by purchasing both Qwest and Savvis, Windstream instead focused on a number of smaller deals to build out not only its network reach but enhance its ability offer a set of managed and cloud services.

Over the past three years, Windstream made three key acquisitions of traditional CLECs to grow its business service empire, including NuVox, Q-Comm and PAETEC:

  • NuVox: By acquiring NuVox, it immediately gained 90,000 business customers leveraging IP-based services, with a particular focus on the SMB segment. 
  • Q-Comm: This acquisition not only expanded its CLEC power via the Norlight unit, but gave it more fiber to empower its wholesale Fiber to the Tower (FTTT) services for wireless operators through the Kentucky Data Link (KDL) subsidiary. With KDL, Windstream complemented its previously announced effort to upgrade and expand their fiber network in its own 16-state ILEC territory with an additional 30,000 fiber route miles. Meanwhile, the addition of Norlight expanded its SMB market reach with an additional 5,500 customers. 
  • PAETEC: Out of the $2.3 billion deal to purchase PAETEC that closed in December 2011, Windstream got over 36,000 miles of fiber, its far-reaching Ethernet over Copper (EoC) presence thanks to the latter's acquisition of Cavalier/Intellifiber and over 500 Department of Defense (DoD) customers in the public sector, not to mention seven data center facilities.

Now, the challenge for Windstream will be integrating PAETEC assets into its fold and creating a common message for the sales and marketing to take to their customers.

Besides obvious network and back office integration that will take Pat Herron, vice president of Enterprise Product Marketing for Windstream, said that the key in 2012 will be a two part integration effort.

In phase one, the goal is to ensure the PAETEC sales team works off the "playbook" of services and products, including everything from managed data services, Ethernet, data center, security, and fiber and transport services, to its growing business customer base under its smart solutions approach.

Since all customers' needs aren't the same, they need to also know how to package these services accordingly to solve a particular customer's issue with solutions that go beyond just saving money on the telephone bill.  

"We are trying to instill within medium and large business sales organization a whole solutions approach to how it is we go to market," Herron said. "In all of our four sales regions, we're spending our time talking about not just the breadth of the product portfolio that was substantially broader than either Windstream or PAETEC were able to bring previously, but also how we're building our message and training around business continuity, unified communications and disaster recovery."

Having a common sales plan focused on solving business problems will be a message that will get the attention of business customers that are looking for.

Still, Windstream has a dual challenge. As it continues to lose traditional voice access lines every quarter, it lacks a wireless revenue source to offset these losses.

What this means is that having a comprehensive set of business services is a necessary and inevitable move for Windstream to create new revenue streams from a customer base that's willing to pay the right price for services that help them advance their respective business.--Sean