Windstream struggles with wholesale business, sees potential in long-haul express network

Windstream believes the ongoing buildout of its long-haul optical network will enable it to further offset the ongoing headwinds it faces in its wholesale and carrier business segments, particularly as more of its wireless carrier customers migrate off of TDM-based circuits to fiber and Ethernet.

That was the message from CFO Bob Gunderman, speaking to investors during the fourth-quarter 2014 earnings call. Despite the 6 percent decline in its carrier business, the company is seeing growing interest in its long-haul "express" network that offers a suite of low latency services.

"We did see success in showing our long-haul express network, which is an extensive national [and] regional fiber network that offers other carries and large enterprise customers low latency, high bandwidth network solutions," Gunderman said during the earnings call, according to a Seeking Alpha transcript. "We planned to expand this long-haul express network in 2015 by adding new routes in Tier 2 markets, which provide attractive sales opportunities. This revenue growth will help offset normal attrition and pricing pressures that occur in a carrier business."

Work on building its long-haul network has been ongoing since last year. In late September, Windstream began working on the second phase of its 100G long-haul optical network covering nearly 4,100 miles that's set to be completed by the end of the year.

The second phase of the 100G build will include five main routes linking major metro areas: Chicago to Omaha, Kansas City and St. Louis; Cleveland to Albany, N.Y.; Boston, New York City and Philadelphia; Atlanta to Charlotte and Ashburn, Va.; and Monroe, La., to Memphis.

For the initial phase that was announced in March, the long-haul route covered about 5,300 miles in Windstream's territory. 

Despite the future growth potential of the long-haul network, the service provider emphasized that it expects to continue to see revenue pressure from TDM-to-Ethernet migrations to continue throughout the year.

"As you look into 2015, we do expect the extension of some of the pressures around the carrier, TDM-to-Ethernet migrations to continue to pressure top line," Gunderman said. "We do think as the year plays out and as we get to the end of 2015, that pressure will subside, but we do think we have some more pressure to come there."

Looking forward, Gunderman said that in 2016 Windstream expects that Ethernet and fiber-to-the-tower expansion opportunities along with the long-haul network will create new revenue opportunities.

"As you get into 2016, we really think the opportunities for the carrier business start to be more about the progress in the pace that we are making both through the Ethernet, fiber-to-the-tower bandwidth expansion opportunities, which we'll continue, but also the extension of our winter state high-capacity low-latency network, and some of the regional network expansion that we started to deploy," Gunderman said. "We think those opportunities will start to be the drivers of the trends for the carrier business in the future. And we are very optimistic about our prospects there."

For more:
- hear the webcast (reg. req.)
- see the earnings transcript

Related articles:
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