Part II: The right acquisitions

FierceTelecom: Although you're not making mega deals like your fellow ILEC colleagues CenturyLink and Frontier, Windstream has been on an ongoing M&A quest with a number of smaller deals. Talk about your M&A strategy and how it's helping to grow your residential and business service units?

Gardner: We're executing on our strategy. When we put Windstream together in 2006, we had a view that the future would be dependent on four things. First, it would be our ability to become a bigger player in the enterprise and broadband area (both business and residential). I think we have done that in a number of areas. We have been able to improve the diversity of our revenue. Over 55 percent of our revenue comes from broadband and business. We haven't been looking for just big deals, but rather at right deals that fit well with our view of the future.

Our residential business is still very important to us and we continue to put up good numbers there. In the last quarter, our 3.7 percent line loss was the new low for us since we have been a public company. Our organic business is running well. We're delivering best in class performance in our core businesses. With our acquisitions, we have the bulk of our integrations behind us and we have only one big billing conversion left, which is with Iowa Telecom. Because we're so far ahead on integrating our other business, we were able to execute on the KDL acquisition. We have had good opportunities because our balance sheet is strong. It's not a new focus, but we have been patient and looking for the right deals and feel like that's driving better performance.

FierceTelecom: Like all ILECs, Windstream has seen the traditional residential access line decline, but what are you doing these days to keep your residential customer base happy?

Gardner: The real key there has been aggressive marketing, and I think the ‘Price for Life" bundled offering has helped a great deal. That offer really resonates with our customers and really differentiates us from the cable companies in the market place. Whether we're selling a price for life bundle with data and voice or the triple play, we're having an impact. It's getting people to call us and we're seeing some good numbers there. We've also made big investments on the retention side of our business so if we ever get a call from a customer who is unhappy, we work hard to save that customer.

Some of the little things we're doing that are also making a difference include building new distribution channels and door to door selling in our most competitive markets. The other thing we're starting to see is our multi-dwelling unit (MDU) channel where we're selling the triple play to apartment complexes and condos that have been historically owned by the cable companies. We probably installed our first one two years ago, but now we're very good at this and we have 20 private local cable operations out there in the marketplace today. All of those things are really playing into the residential market and as you said earlier, the key there is bundling. The value is moving away from voice and into broadband and video. We have tried to design packages that provide that and push us towards the future business. This has contributed to the success of our Price for Life and our Greenstreak bundle, which is targeted more at the younger demographic that's looking for a wireless-only solution in the home. 

FierceTelecom: How has the MDU channel been playing out thus far?

Gardner: Remember, we're in smaller markets, but if you get into college towns like Lincoln, Neb. or Lexington, Ky., 25 percent of the residences could be MDUs. If you cede all of that to the cable company, you're at a big disadvantage. Getting active in that space is one of the drivers of the residential access line numbers.