2 Comments

Summary:

Windstream Corp., a rural telecom operator, has agreed to acquire a fourth company in an effort to beat rivals, buy growth and avoid being telecom roadkill. Spending is only half the battle as consumers opt for wireless services.

windstreamtruck.jpg Windstream Corp., a Little Rock, Ark.-based local phone company focused on rural and smaller markets, said it’s agreed to buy a smaller rival, Iowa Telecom, for $530 million — $261 million in cash and $269 million in stock. In addition, it will take on about $598 million in debt. This is Windstream’s fourth acquisition in the past few months: It also bought D&E Communications ($169 million), Lexcom ($141 million) and NuVox ($463 million). Windstream is trying to become the consolidator of the smaller, rural telecoms, especially after two of its biggest rivals — CenturyTel and Embarq — merged their operations a year ago.

By way of background, in 2005, AllTel, a rural local phone company, spun out its landline business to instead bet its future on the fast-growing wireless industry. It merged the landline business with VALOR Telecom to form a new company called Windstream. AllTel itself ended up becoming part of Verizon, which bought it for $28.1 billion in June 2008.

Windstream is trying to fight the sands of time, which are against most landline companies. A consumer preference for wireless and better offerings from cable providers is only accelerating the loss of landlines for phone companies of all stripes. Verizon, for example, is focusing all its energies on mobile and its fiber-based efforts, and selling off its landline business wherever it can.

One bit of good news for Windstream: The company crossed the 1 million broadband subscribers-mark last quarter, adding 25,000 new subs to take the total to 1.05 million.

You’re subscribed! If you like, you can update your settings

By Om Malik

You're subscribed! If you like, you can update your settings

Related stories

  1. Windstream is pursuing a different strategy than its other tier 2 telco brethren – buying smaller strategic assets to grow scale, rather than huge single mergers or acquisitions, a la FairPoint, Frontier, and CenturyTel/Embarq.

    Given FairPoint’s recent troubles and the trouble Frontier is about to face with their Verizon asset acquisitions, maybe it’s the smarter move.

    1. The net net is that they are all realizing that they need to bulk up in order to stay in business. I think in the end, these and others will have to bet more on broadband to keep people signed on.

      From that perspective, Iowa Telecom was pretty good buy as it had some good broadband assets.

Comments have been disabled for this post