Windstream may have sold off the majority of its wireline assets to Communications Sales and Leasing (CS&L), but the service provider retained some properties it could potentially sell.
Bob Gunderman, CFO of Windstream, told investors during the recent Bank of America Merrill Lynch 2016 Media, Communications & Entertainment Conference that it can leverage the remaining assets for its own network needs or sell them to another service provider.
“In the original transaction when we spun out our copper and fiber lines we did retain a 20-25 percent of those assets, so that’s future flexibility if we ever chose to do something there,” Gunderman said. “We have pockets of markets where we have dark fiber available that could potentially be available for transactions over time.”
However, Gunderman did not provide any specific details on where it owns extra fiber assets, or any potential plans for them.
“There’s nothing I am prepared to discuss yet, but it is future flexibility we look at as possible ways to unlock value and maybe help with some of the deleveraging goals going forward,” Gunderman said. “We’ll have more to say about that as things play out, but we look at that, if you have a market where our five-year plan does not call for sales into that market or capacity needs, why not look at that through a dark fiber sale or another transaction?”
As it looks for ways to best leverage its existing assets, Windstream is also moving fast on a complementary initiative to reduce the wholesale costs it pays to third-party providers like AT&T and CenturyLink by installing more fiber in its network.
This includes building out a mix of long-haul and metro fiber while connecting fiber to key buildings that house its growing business customer base. By adding more on-net buildings to its network, Windstream can not only control costs, but also ensure quality of service since the company can then manage the circuit end to end itself.
“More and more of our strategy is to become more on-net over time and of course you don’t completely turn that in a year, but over time that will give us more opportunities to drive some of these costs on-net,” Gunderman said. “That will make us more competitive and improve the margin profile.”
Over the past year, the service provider has expanded its metro fiber network into several markets, including into areas in Virginia, North Carolina and elsewhere. The company is also planning additional fiber network expansions in Atlanta, Minneapolis, Chicago, Cleveland and Philadelphia this year.
While expanding its on-net footprint is a process that will continue for a number of years, the service provider is seeing its enterprise service revenues continue to rise. During the second quarter, Windstream’s enterprise revenues were $491 million, up 3 percent year-over-year. Windstream noted that the enterprise contribution margin was $80 million, or 15.7 percent, an increase of $32 million, or 68 percent, year-over-year, and an increase of $9 million, or 13 percent, sequentially.
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