Jeff Gardner, CEO and President of Windstream Communications (Nasdaq: WIN) is no longer content to just be the local telephone company offering just plain old voice service.
Speaking at the Goldman Sachs Communacopia XIX Conference, Gardner said that "we're transforming from a residential voice model to one that's much more focused on broadband and business, and the idea there is to get to a point where we can generate some top line revenue."
At the top of Windstream's list is the expansion of not only its core residential market base, but an increased focus on new core business and wholesale opportunities including IP-based services and wireless backhaul, which is being achieved through a carefully-targeted merger/acquisition strategy.
In addition to expanding its residential ILEC base through the acquisitions of D&E Communications, Lexcom and Iowa Telecom, the service provider has acquired the assets of CLEC NuVox and Q-Comm, which comes with both wholesale fiber provider KDL and CLEC Norlight Telecom.
While Windstream had been building up its own IP-based service base and its sales efforts on the business market, Gardner admits that NuVox was a bit more established. What's more, the NuVox deal along with the appointment of former PAETEC (Nasdaq: PAET) executive John Leach as SVP of Business Sales not only will advance its IP vision, but also is driving more business sales on its ILEC side.
"The timing of the NuVox deal came at a time when we were trying to expand our focus on the enterprise space and having our sales force focus more on IP and getting more aggressive on building our ILEC sales force," Gardner said. "What we saw in NuVox was the opportunity to accelerate that because they were ahead of us in terms of IP deployments in their network and had interesting technology around account management, and most importantly what we bought there was the sales capability of that asset."
Just as important to Windstream's IP and business transition strategy is its acquisition of Kentucky Data Light (KDL) via its pending purchase of Q-Comm.
"If you look at the footprint from the KDL deal, there's no fiber asset that will ever be such a match for Windstream," Gardner said. "KDL had fiber footprint in some of the less competitive markets in our footprint and goes a long way to pushing Windstream's network towards what I think is appropriate for the next-generation growth we're going to have where we are focused much more on IP."
Unlike its larger ILEC comrades, Windstream may not have a wireless subsidiary in place, an aspect that Gardner is fine with, but the continued wireless player's drive towards more enhanced wireless data plans creates a robust wireless backhaul opportunity for Windstream. Not surprisingly, the acquisition of KDL, along with its own $20 million fiber build out will help Windstream target those opportunities going forward.
"With KDL, which is competing with incumbent telcos for fiber to the cell site opportunities, is a new opportunity for us," Gardner said. "I really do think with the iPhone and Droid now, the data usage is driving wireless carriers to think a lot harder about fiber."
Windstream's M&A strategy may not be on finding the biggest deals, but ones that help it grow its IP and broadband business vision. "We continue to be interested in RLEC opportunities with slightly different criteria, but our bias to lines is continue to grow in the business and enterprise space if we can find well run businesses there that accelerate that part of our business and diversify away from residential," Gardner said.
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