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At Rotary, CEO Tony Thomas Talks 10 Years of Windstream

3 min read

Windstream Holdings Inc. of Little Rock, which has marked its 10th anniversary as a publicly traded company, will soon announce an expansion to the West Coast, CEO Tony Thomas told the Rotary Club of Little Rock on Tuesday.

The expansion will build out the company’s long-haul transport network for enterprise customers. The company has been building the network in other parts of the country since 2014.

Thomas promised a more detailed announcement later, and spent most of his speech talking about the history of the firm, its decision to spin off a publicly traded real estate investment trust and answering questions from club members.

The telecommunications firm (NYSE: WIN), which spun off from publicly traded wireless company Alltel Corp. of Little Rock in 2006, began with about 1,000 employees in Arkansas. Today, it has nearly 1,500 employees in the state, and its gross payroll increased from $95 million to $125 million, Thomas said.

The company provides telecommunications services to residential, small business and enterprise customers. In Arkansas, Windstream has invested $350 million to improve its telecommunications infrastructure, he said.

The company has 1.2 million broadband customers — most of them in rural America — and 25,000 enterprise customers who buy custom services that generate about $2 billion in annual revenue. Its wholesale business, which provides core data transport services for carriers, generates about $500 million in annual revenue. 

A spinoff itself, Windstream created its own spinoff in 2014. Thomas said the creation of publicly traded REIT Communications Sales & Leasing Inc. of Little Rock allowed Windstream to improve its balance sheet.

Windstream held a 20 percent stake in the REIT at first, but completed a debt-for-equity exchange for that stake to reduce its debt in June. The REIT includes Windstream’s fiber and copper infrastructure, which Windstream leases from CS&L. The arrangement has allowed Windstream to pay off $800 million in debt and improve its infrastructure. 

“The idea sounds a little crazy the first 12 times you hear it, but once you hear it the 13th, it’s a compelling way to create value for our shareholders but also our customers,” Thomas said. 

But there were challenges along the way. Thomas said CS&L and Windstream stock plummeted in 2015 — Windstream’s by 60 percent. Investors were panicked, but Thomas said he believed all would be okay because the company was “doing all the right things” by focusing on customer service.

“We kept true to our plan,” Thomas said, and this year, business improved. He said much of Windstream’s network has been upgraded to provide 1-gigabit service, and it has monetized its data center business.

Meanwhile, Thomas said the company is recruiting the best people, including 125 former Alltel workers who had been snatched up by AT&T and now work for Windstream. 

“If you see talent, they work for us,” Thomas said. “Whoever the best talent is, we’ve got to get them on the team.”

Thomas said there are two big technological shifts happening in telecom. The first: transitioning to a faster ethernet/IP infrastructure. The second is migration of data storage and services the cloud. 

“The exciting thing about telecom is wait around a day because something new is coming,” he said. “Something new is always coming.” 

A Rotarian asked for Thomas’ thoughts on the regulatory environment. Thomas answered that, while some regulations are needed, others are well-intentioned but have unintended consequences.

He said he is most concerned with capital formation because the amount of debt banks must hold onto has increased; that’s shrunk the number of loans available to businesses that need them.

Thomas also said new U.S. Department of Labor regulations about overtime will mean $2 million in annual costs Windstream had not anticipated and will have to adjust to. 

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