Windstream (Nasdaq: WIN) may have acquired a number of service providers in recent years to enhance its presence in the business services market, but right now it is placing all of its effort on integrating Paetec—one of its largest deals to date—into its fold.
"Today, we're squarely focused on integrating Paetec," said Jeff Gardner, President and CEO of Windstream, during the Bank of America Merrill Lynch 2013 Media, Communications & Entertainment Conference. "We have no transaction in mind and that is where we are really focused."
Gardner added that Paetec "was a transformative deal for us and everything about our future is about integrating that right and delivering the kind of enterprise sales growth I know we're capable of."
Part of its growth strategy includes the creation of a holding company called Windstream Holdings, Inc., which will become a new publicly traded parent company of Windstream Corp. and its various operating subsidiaries.
Having this structure in place will give it greater financial and strategic flexibility in the future to possibly do other acquisitions.
Although it wanted to create a two-tier structured company when it was spun out from Alltel in 2006, it could not due to the spinoffs.
"We have been very involved in M&A activity and as we have acquired companies like Paetec and Hosted Solutions many had this two-tiered structure," Gardner said. "It's the kind of thing we had wanted to do since the beginning and we had an opportunity because we took a break from acquisitions after Paetec."
One of the biggest transitions that will take place during the rest of 2013 and throughout 2014 will be the conversion of three major billing systems, which Gardner says are "on track."
A large part of the $15 million in incremental synergies that it will deliver from the Paetec deal this year and in 2014 is related to its back-office systems conversion work.
"At the end of the day the billing systems will enable us to move to one back-office system, and that's where we really can increase the effectiveness and efficiency within the organization to make it easier for our sales people and our customers," Gardner said.
Unlike three years ago when it had to make various deals to get a larger piece of the business services market, 75 percent of Windstream is now built around broadband and enterprise.
"We have the opportunity to grow without acquisitions, but we have to execute," Gardner said. "As soon as we're pleased with the execution and with the constraints around our capital structure, we'd like to make investments in companies that are enterprise-related and accelerate our top line growth and help us build scale in that business."
Data centers, in particular, have become a key area of organic growth for Windstream. It has scaled its data center footprint initially from 4 to 26 and will be at 28 by the end of the year.
"It's very expensive to buy into the data center business, but organically we have a team that has built out a nice footprint and we're seeing mid-teens type growth," Gardner said. "It's still relatively small, but we have an opportunity to make that an even more important part of our product portfolio going forward."
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