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Windstream Plans Ethernet Expansion

Zacks Equity Research

Windstream Corporation (WIN) – one of the largest U.S. rural local exchange carriers (:RLEC) revealed its plan to expand its Carrier Switched Ethernet services across the U.S. Windstream announced their plans at the COMPTEL PLUS convention and Exposition, held between Mar 10-13, 2013.

The Carrier Switched Ethernet undertakes wholesale carrier access to ILEC and CLEC exchanges. It offers economical multi-location data solutions with nationwide coverage, for service which will be available in key metropolitan areas like New York, Chicago Denver and Phoenix.

We appreciate Windstream’s focus on expanding its service offerings to businesses with VoIP services, data bundles, cloud and managed services; data center co-location; fiber transport as well as increasing distribution channels. Further, the company has teamed up with LifeSize Communications, a division of Logitech International SA (LOGI) to provide high definition (HD) video conferencing services to customers using Windstream's IP networking solutions.

With the acquisition of the leading broadband service provider PAETEC Holding Corp in December 2011, the company aims to gain significant momentum in its enterprise market with nationwide coverage of fiber network cables. The acquisition increased opportunities in cloud computing and managed services. It also attracted business customers across many locations. Windstream is also planning to introduce customized business solutions that will help improve its competitive position in the industry.

In the retail business, Windstream has re-branded its consumer offerings with advanced Internet and entertainment services that come with a Roku box, which includes several entertainment applications to enhance pay TV service. The company’s strategy of bundling consumer services with high-speed Internet service is advantageous for subscriber growth while reducing churn (the tendency of customers to switch providers).  

However, we remain on the sidelines after taking into account competitive pressures from other players like Frontier Communications (FTR) and Alaska Communications Systems (ALSK), a highly leveraged balance sheet as well as continued access-line erosion and diminishing wholesale business.

Currently, Windstream has a Zacks Rank #4 (Sell).

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