Windstream's enterprise, consumer gains help ease pain of declining legacy business losses

Windstream's ongoing move to establish a greater foothold in the medium-sized business market continues to bear fruit as the service provider reported in third-quarter 2014 earnings that enterprise and small business service revenues were $752 million, up slightly year-over-year.

Data and integrated services revenues grew 4 percent year-over-year to $423 million due to sales of IP-based solutions and next-gen data. Likewise, data center and managed services, which total about $32 million, rose 21 percent from the same period a year ago.

During the third quarter, Windstream said that enterprise customer locations grew 3.6 percent over the third quarter of 2013, while average revenue per business customer increased 10 percent year-over-year.

"We continued to see positive trends during the quarter supporting our efforts to move up-market, evidenced by our acceleration in enterprise customer growth and average revenue per customer," said Jeff Gardner, CEO of Windstream, in the earnings release.

However, the service provider continues to see struggles in the carrier market, where revenue declined 10 percent to $151 million due to wireless operator migrations from legacy TDM circuits to fiber-based Ethernet services.

The wholesale segment was a similar story. Windstream said wholesale segment revenues declined 11 percent over the same period a year ago due to rate reductions from intercarrier compensation reform.

Alternatively, consumer broadband revenues remained a bright spot, rising 1.4 percent year-over-year to $121 million. While overall consumer service revenues in the third quarter were $321 million, an increase of 1.4 percent sequentially, they declined slightly by 0.3 percent from the same period a year ago.

Traditionally one of the lone holdouts in the terrestrial TV market, Windstream announced during the quarter that it would begin rolling out its own Kinetic TV service to over 50,000 homes beginning in the first half of next year followed by select additional communities later in the year and into 2016. It has also installed fiber-to-the-premises (FTTP) services in select areas, including 500 Lincoln homes and expects to do more as housing developments arise. 

"We are making solid progress in the consumer channel with continued focus on selling bundled services and faster speeds. In addition, we are making progress on fiber backhaul upgrades, which enable enhanced services and provide an improved customer experience," Gardner said.

Windstream's overall revenues were $1.46 billion in the third quarter, down 2.9 percent from the same period a year ago due to legacy voice and TDM-based wholesale service declines.

Looking forward, the service provider reaffirmed its previous guidance for 2014. The service provider has forecast total revenues for the year within a range of a 2.5 percent decline to a 1 percent increase as compared to 2013 revenues, and adjusted free cash flow of $775 million to $885 million.

Shares of Windstream were listed at $9.84, down 65 cents or 6.24 percent, in late-morning trading on the Nasdaq stock exchange.  

For more:
- see the earnings release

Special report: Wireline telecom earnings in the third quarter of 2014

Related articles:
Windstream wants ILECs to price IP-based wholesale special access services fairly
Sprint's new CEO open to selling wireline business
Windstream takes shot at TV game with its Kinetic service
Windstream acquires Business Only Broadband, adds fixed wireless to service mix
Windstream names Bob Gunderman as interim CFO

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