Windstream's $250M Project Excel accelerates 100 Mbps, VDSL2 broadband push

With the sale of its data center business in motion, Windstream plans to dedicate $250 million to enhance its last mile network by installing VDSL2 network equipment to support up to 100 Mbps in more of its rural markets.

Funded entirely by proceeds from the upcoming sale of its data center business, the Project Excel program will accelerate its plans to further upgrade broadband speeds for both its residential and small business customers. The program upgrades its fiber-fed DSLAM infrastructure with VDSL2-capable equipment to deliver the higher speeds and a more robust backhaul network.

Speaking to investors during its third quarter 2015 call, Tony Thomas, CEO of Windstream, said the program will put it two years ahead of its broadband expansion goals.

"Project Excel is a $250 million program that's funded entirely by the proceeds of our data center sale," Thomas said. "This program allows us to accelerate our plans to upgrade and modernize our consumer and ILEC SMB broadband capabilities by year end 2016 -- two years ahead of our timeline."

When it completes Project Excel, Windstream will be able to deliver 25 Mbps to 54 percent and 50 Mbps to 30 percent of its rural markets.

"These higher speeds drive a greater customer experience, will drive higher ARPU and allow us to increase market share," Thomas said.

Expanding the availability of higher speed broadband has been a key priority for Windstream. Having already completed the rollout of 100 Mbps services in 250 initial markets in September, the service provider also plans to upgrade facilities in nearly 600 markets to support up to 100 Mbps for residential and business customers.

On a combined basis, the company will give nearly 1 million households and small businesses access to speeds up to 100 Mbps in its wireline territories.

Thomas said that Project Excel and the CAF-II program will enable it to stem losses it has seen in the broadband arena.

"We're going to expect to see improvement in the subscriber losses we saw in 2015 and make progress in 2016 and 2017 given the combination of the efforts we're making not only to improve speeds, but also expand our fiber network into more rural communities through CAF-I and CAF-II," Thomas said. "We probably won't get to broadband positive in 2016, but we will reduce the loss we saw in 2015."

But while this is an aggressive program, the service provider is taking an leverage and extend approach where it only has to upgrade the electronics in already fiber-fed remote terminals.

"These are network elements that we have today that already have fiber to them so all we're doing is updating the electronics, which is what makes this such a rate of return and opportunity," Thomas said. "We've already done the hard work of digging the ditch and laying the fiber and now we're placing the electronics there."

Having these new speed capabilities will enable Windstream to grow service revenue in its consumer and ILEC small business segments.

Consumer revenue service revenue rose sequentially in the third quarter to $314 million with high speed Internet bundles rising slightly to $259.9 million. Meanwhile ILEC small business revenues were $107 million in the third quarter, remaining steady as growth in integrated voice and data services mitigated customer disconnects.

Although new high-bandwidth optical wavelength sales and wireless Ethernet are gaining momentum, Carrier service revenues were $169 million, down from $172 million in the second quarter. Enterprise service revenues were $501 million in the third quarter, up $15 million sequentially and 5 percent year-over-year, while data and integrated service revenues grew 8.6 percent year-over-year. 

While CLEC small business service revenues remained flat sequentially at $146 million, Windstream said that was a "meaningful improvement from recent trends, aided by increased focus on customer retention and higher ARPU."

Total company revenue was $1.5 billion, up $80 million sequentially due to organic growth of $7 million and incremental CAF-II revenue of $73 million. 

For more:
- see the earnings release

Special report: Tracking wireline telecom earnings in Q3 2015

Related articles:
Verizon says Windstream, Incompas want to shift special construction costs to incumbent carriers
Windstream's data center sale allows it to focus on broadband, fiber networking strategy
Windstream revamps wholesale unit, promotes Scattareggia to SVP of carrier sales
Windstream to sell off data center business for $575M to TierPoint
Windstream says ILEC construction charges create barriers for CLECs, business customers

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