Windstream Sees Growth in Broadband, Business Channels

Windstream Corp. of Little Rock reported fourth quarter and full-year earnings on Friday, with fourth-quarter profit down by 4 percent year-over-year to $72.4 million, or 15 cents per share. The company's total revenue for the quarter was up 30 percent to $981 million.

Windstream's fourth-quarter results under Generally Accepted Accounting Principles included $16 million in after-tax merger and integration costs and $4 million in after-tax restructuring charges. Those two factors lowered earnings per share by roughly 4 cents.

"Looking back, 2010 was an incredible year for Windstream, and I am very pleased with all that we accomplished," Jeff Gardner, president and CEO, told investors in an earnings call. "Our transformation is not complete but we are well on our way."

That means stabilizing the company's consumer business and continuing to grow its other channels, including business customers, providing backhaul for wireless carriers and data center services, he said.

Total access lines declined by 36,000 in the quarter as customers continued to abandon landlines. But Windstream added more than 12,000 new broadband customers in the quarter, bringing the total customer base to 1.3 million, up 6 percent year-over-year, said Brent Whittington, COO.

Business services revenue was up 2 percent in the quarter, Whittington said.

"We've made great strides in our business channel, which now represents roughly half of Windstream's total revenue and importantly, these revenues are growing," he said. "From a residential perspective, we continued to see growth in the broadband unit and complementary broadband features. This is stabilizing the consumer channel, which is an important part of our strategy to improve the top-line trend."

In the fourth quarter, Windstream completed its $310 million acquisition of Hosted Solutions, a data center and managed services provider based in Raleigh, N.C., and its $818 million Q-Comm Corp., a privately held regional fiber transport and competitive local exchange carrier based in Overland Park, Kan.

"In 2011, we will focus on completing the integration of Q-Comm and Hosted Solutions," Gardner said. "We plan to invest capital for growth though very promising success-based initiatives such as wireless backhaul and data center expansion.

"No one would have predicted that we would have this opportunity back in 2006, but that has always been our goal, both of our management team and our board," he said.

Gardner added that any opportunities for acquisitions will be also assessed against the company's plan to reduce its total leverage.

For 2011, "we expect to show improved year-over-year performance in the back half of the year, once we've completed our integration efforts, realized additional synergies and received some of the expected benefits from our success-based capital investments," said Tony Thomas, CFO.

"Based on those assumptions, we expect 2011 revenue to be within a range of $4.015 billion to $4.14 billion, which is a decline of 3 percent to flat, compared to our 2010 pro forma results," Thomas said.

Windstream's dividend payout ratio was 57 percent for the year, and the company expects that to be between 52 percent and 59 percent for 2011, Thomas said.