Windstream Holdings Corp. of Little Rock on Thursday reported second-quarter net income of $14 million, or 2 cents per share, down 65 percent from $40 million, or 6 cents per share, the same quarter last year.
Revenue for the telecommunications firm, which last week announced plans to spin off some assets into a separate company, dropped 2 percent to $1.47 million.
Analysts expected earnings of 8 cents per share and revenue of $1.48 million, according to Thomson Reuters.
“Overall results were solid and largely in-line with our expectations,” CEO Jeff Gardner said in a news release (PDF). “Importantly, the progress made during the first half of 2014 has positioned us well to reach our goals for the year. In addition, our plans to spin off certain assets will allow Windstream to accelerate network investments, provide enhanced services to customers and maximize shareholder value.”
Windstream, a spinoff company of Alltel Corp., has been steadily moving away from its wireline telecommunications business and toward a business-focused, enterprise communications services provider. In the news release, Gardner noted improved results in the company’s enterprise and small-business sales. Consumer broadband services revenue also increased from the same quarter last year.
“We are successfully executing on our key priorities this year to accelerate growth opportunities and strengthen our position as a leading provider of enterprise communications services,” Gardner said. “We have expanded our business marketing programs to strengthen sales and are seeing continued solid sales momentum and positive trends supporting our efforts to move up-market.”
The company reported enterprise and small-business service revenue of
Quarterly consumer broadband service revenue rose 0.4 percent to
The REIT
During a conference call with analysts to discuss earnings, Windstream also shed more light on plans, announced last week, to create a publicly traded real estate investment trust with some of its fiber and copper wire assets.
Windstream has billed the arrangement as a way for it to accelerate investments in its network, provide enhanced services to customers, pay off $3.2 billion in debt and maximize shareholder value.
Executives have said the new company, set to debut in the first quarter of next year, would seek to buy the copper and fiber assets of other telecommunications firms, growing the REIT and its earnings for investors.
On Thursday, Gardner said the REIT won’t be able to sell Windstream’s network assets. It said Windstream Holdings is paying the REIT for an exclusive lease of those assets.
“We simply have a lease payment to the REIT,” Gardner said. “The REIT does have opportunities to expand, but that will be with additional investments expanding our network or with other partners, and when we talk about other partners, those other partners will bring their own network to the transaction.”
Gardner said it was premature to talk about potential REIT partners but that finding partners “will be given a tremendous amount of focus as we move forward …” He compared it to how REITs made up of cell tower assets have worked for the wireless industry.
“Many wireless carriers have worked with the tower companies, but some have elected not to,” he said. “So when you think of the opportunities for the REIT, there’s going to be lots of opportunities for the REIT to work with other telecoms carriers, broadly defined, to find other opportunities to enhance their financial profile going forward.”
Gardner also said that while Windstream Holdings and the REIT companies will work together, they will remain independent.
“The structure going forward will be two independent companies both seeking to create maximum shareholder value for their customers,” he said. “So we announced on the call that Tony [Thomas, Windstream Holdings’ CFO] and one of our board members will be [joining the REIT]. They will be totally independent. There is every incentive for the two companies to work together, but we’ll do so with each having a view of creating value for our shareholders.”
Gardner also said he’s confident the REIT will clear the regulatory hurdles if faces in the states where Windstream operates.
“When you think about risks, we feel very comfortable with the regulatory approval process,” he said. “We’re doing some things I think will be attractive for our customers in terms of additional investment and really showing both improvements for our enterprise customers and our consumer customers as well.
“We’ve had preliminary discussions with some of the states out there and we said we needed approval enough from 10 states, and those have confirmed our confidence there, so we’re feeling good about that.”
(With reporting by Michelle Corbet.)
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