The first few weeks at Communication Sales & Leasing, the spinoff company formed by certain assets of Windstream Corp.’s portfolio, have been hectic, the company’s CEO said in a recent interview.
Kenny Gunderman, a former Stephens Inc. banker who was chosen to lead CS&L, said he had been focused on spinning off the company on schedule and assembling the right team. He said the company now has about 35 employees who are all focused on seeking out deals.
“I think the response from the investment community, the response from new potential clients has been positive,” Gunderman said in an interview in the company’s offices in the Benton Building in west Little Rock.
Gunderman said that for now, the spinoff and Windstream — which set up a leaseback arrangement with CS&L — are still intimately connected.
“They’re the vast majority of our revenue. I think that they’re going to be a big customer of ours for the foreseeable future. Our stated goal — and Windstream is in complete agreement with this — [is] we want to diversify away from just one customer. The pace at which that will happen is undefined, other than to say that we’re working very hard on it,” Gunderman said.
Gunderman acknowledged that there is pressure for the company to start making deals. But he said that with so many companies watching what happens next, CS&L also had to make the right first steps toward building a good reputation.
“What I would say is it’s important for us to do a deal, for us to do our first deal,” Gunderman said. “It’s important for us to show progress, but I think it’s equally important for us to do a good deal. So we have not talked publicly about deadlines. We haven’t even set goals in terms of timing, publicly, because we don’t want to lose our discipline around doing deals. But what I would say is we’re intensely focused on it.”
While the Windstream transaction that created CS&L was large, both in terms of total assets and money exchanged, Gunderman said he won’t be limiting himself to such deals. The CEO said there is also money to be made in putting together several smaller transactions.
“When you consider that the hundreds of privately owned companies out there in the country today — both copper and fiber — any of these companies are $50 million companies, $100 million companies or smaller and we do not want to ignore that customer base, so transactions of that size are ones that we would certainly consider,” Gunderman said.
Windstream CEO Tony Thomas has said that Gunderman was uniquely positioned to lead the REIT because of his experience as a banker dealing with telecommunications companies. Gunderman agreed that he was “not making a lot of cold calls” in his new job.
But Gunderman said that every employee of CS&L has some kind of experience and set of relationships that they brought to the table.
“We’re a service organization. We’re not building widgets here,” Gunderman said. “So we’re out interfacing with people, and in order to win business, to bring on new clients, you have to gain their trust, you have to gain their confidence, you have to make a personal connection. So having a strong team with a strong culture is critically important.”
Gunderman said that while his company is the first real-estate investment trust dedicated to wireline assets, the REIT structure is familiar to the telecom industry. He said the industry has used REITs for years to manage towers and other assets.
The key now will be to explain the value of applying those same principles to wireline.
“We can do so many different things to help carriers finance their businesses and so getting out there and telling that story and getting people to understand that has been a big task,” Gunderman said. “I think we’ve accomplished a lot of that, but there’s a lot more of that to do.”
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