Windstream 4Q Profit Rebounds; Net Income Reaches $10M

Windstream Corp. of Little Rock on Tuesday reported fourth-quarter net income of $10 million, or 2 cents per share, up from a net loss of $35 million, or 7 cents per share, during the same quarter in 2011.

The telecommunications company also reported quarterly revenue of $1.54 billion, up from sales of $1.21 billion last year, and operating income of $172 million, up from $96 million last year.

In a news release, the company touted growth in business and consumer broadband revenue, which now represent 70 percent of the company's total revenue.

"Windstream continues to produce substantial free cash flow that enables us to invest in our business and reduce our debt while continuing to pay our $1 annual dividend," Jeff Gardner, president and CEO, said in a news release. "Our management team and the board of directors unanimously support continuing the dividend at its current rate because we believe it is the best way to create value for our shareholders."

The company, which began as the wireline spinoff of wireless telecommunications company Alltel Corp., has increasing moved its business away from traditional landline services to broadband internet offerings.

During the quarter, business service revenue reached $917 million on a pro forma basis and $3.6 billion for the year, an increase of 3 percent year-over-year for both the fourth quarter and the year.

The company's wholesale service revenue, which includes traditional voice line customers, decreased 16.5 percent from $182 million to $169 million. Voice lines were down 4.5 percent year over year, and Windstream lost about 2,000 high-speed Internet customers over the quarter. 

Total enterprise customers, who generate $750 or more in revenue per month, grew 6 percent in the fourth quarter from the same time last year. Average service revenue per business customer per month was about $390, a 7 percent increase from the same period a year ago, the company said.

Savings From Organization

During a conference call with investors, Gardner noted that a companywide reorganization, which included, among other actions, closing 30 retail locations earlier this year, achieved about $110 million in run-rate savings.

Gardner also pointed out three goals for the company over the next year:

  • Completing the company's fiber-to-the-tower and broadband stimulus projects. The company has about 2,550 fiber sites, 1,850 are in progress and around 4,500 total are expected to be completed by the end of 2013. Once the company's broadband stimulus projects are complete, about 75,000 new households will be reached by new fiber lines. 
  • Increasing business services areas by building several new data centers and hiring more sales personnel. 
  • Improving the company's balance sheet. 

During the call, analysts expressed concerns about Windstream's maintaining its traditional dividend. The concern stemmed from competitor CenturyLink of Monroe, La., cutting its own dividend by 26 percent and subsequently being downgraded by analysts.

Gardner said Windstream wouldn't suffer the same fate because it was further along in transforming its primary business from voice lines to business services.

"We believe we're in a different position within the industry thanks to our transition path and our business mix," Gardner said.