Windstream’s acquisition strategy of picking up smaller service providers one at a time is apparently still in full swing. The newest candidate, NuVox, is a Greenville, SC based CLEC with over 90,000 customers across a sixteen state footprint. Windstream announced they are buying NuVox for $643 million.
This NuVox acquisition provides some level of diversification for Windstream because it is a business and enterprise focused CLEC. Windstream reports that after this acquisition, “Broadband and business revenues will represent more than half of Windstream’s total revenue…” It represents a significant hedge against declining revenue from residential wireline voice services.
“This transaction significantly advances our strategy to grow broadband and business revenues, which is important given the growth prospects in these areas,” said Jeff Gardner, president and CEO of Windstream. “NuVox has a strong performance record of growing revenues and improving margins and offers the potential for continued business growth. The transaction will be accretive to Windstream’s free cash flow in the first full year and lowers our dividend payout ratio, which is a key element of our acquisition philosophy.”
This Windstream acquisition illustrates a continuing consolidation trend among tier 2 telecom providers. Unlike its tier 2 telco brethren, Windstream, based in Little Rock, AR, is picking up smaller service providers, one at a time. They recently purchased D&E Communications of Pennsylvania and Lexcom of North Carolina. Companies like FairPoint and Frontier are choosing a different consolidation path, sometimes doubling their size or more, through RBOC rural territory acquisition. That strategy is seeing mixed success, with the recent FairPoint bankruptcy as a prime example. CenturyTel and Embarq decided their best consolidation strategy was to merge together, to create CenturyLink.