​Jeff Kagan: Thoughts on Windstream Changes

Jeff Kagan |

When Windstream Holdings (WIN) CEO Tony Thomas spoke at the Wells Fargo (WFC) Securities Technology, Media and Telecom Conference in New York, I think his remarks took many by surprise. He spoke about a new plan for growth. How Windstream will focus on growing customer relationships and increasing sales and earnings during the next year. This is the first time in ages that I agree with their plan, but is this plan enough?

Let me say that while Windstream, based in Little Rock, is a good company with good people, its growth strategy has been based on yesterday, not tomorrow. I remember giving a speech to the Windstream Board of Directors several years ago. I told them that while I liked the company, the industry was heading in new and very different directions, and I didn’t get the sense they were doing the same.

Windstream Grew Through Acquisition

Back then, Windstream was growing through acquisition. While acquiring other companies does show growth, it is only short term growth. Windstream was still in the slower growing, and even declining segments of the industry. I warned that while this kind of growth was good in the short term, when that started to fade over the next few years, what was their plan for next steps?

It’s like comparing growth to cutting expenses. You can cut expenses all day, but growth is key to keeping the fire burning. They needed to find growth in the new and ever changing industry.

That’s where Windstream is today. During the third quarter of 2015, they posted a net loss. This was what I warned them about a few years ago. The good news is that it’s not too late. During the remarks by Tony Thomas, we may be seeing signs of real growth for the company going forward. Finally.

The Choice for Windstream

Thomas said that the Windstream customer typically spends very little every month. This is during an age when customers are paying more and more for newer, better and faster services - services that Windstream is not offering. However, that seems to be where Windstream is heading.

Increasing the amount your customer spends with you every month is a great place to start. CEO Thomas said they see lots of room for growth. Hallellujah!

Maybe...just maybe...Windstream is waking up to the changing industry and new opportunities, before it’s too late. They are doing so at a time when the rest of the industry is starting to go through enormous and fundamental changes.

Plenty of Growth Opportunities

There are plenty of new opportunities in high speed Internet, television, wireless and other areas both for consumers and business customers. And more opportunities keep popping up all the time.

Consider wireless. Yesterday, everyone had a wire line phone. However, today, wireless-only households have risen to roughly 48% of the marketplace. That’s huge. That shows the changes that are occurring. This is why AT&T (T) Mobility, Verizon Wireless (VZ), Sprint (S) and T-Mobile (TMUS) are growing.

Ultra-fast high speed Internet is also starting to change things on the wire line side of the industry. AT&T GigaPower is the leader in this space. Next is Google Fiber. There are also others who are dipping their toes in this water as well. Companies like Comcast Gigabit Pro, CenturyLink, even C-Spire Fiber to the Home and others.

Television is also changing. Yesterday was delivering programming to the home television. Tomorrow is about delivering it to smartphones and tablets over the wireless network, anywhere, anytime. That’s where growth will come from tomorrow .

So is Windstream Growth Waking Up?

These are real areas of transformation and growth, and solid opportunities to pursue. There are others as well, but these are areas which Windstream ignored in the past. That’s what created the black hole which is starting to suck the life out of the company. I believe the company can grow in one or more of these new segments.

Windstream says they are going to be testing a 1-gigabit Internet service this quarter. That’s music to the ears of investors and customers. Perhaps they have realized what they need to do in order to grow going forward. I hope so...

Is this a signal to the marketplace that they now realize the new path of the industry which they must take to grow going forward? And if so, do they realize this is just one step of many which they need to take for growth going forward?

Ignoring Wireless is Playing with Fire

Wireless is the center of tomorrow’s universe. There are many ways to deliver wireless wireless data and the IoT or Internet of Things. They don’t need to own a network. Windstream can go the MVNO route like Google (GOOG), Tracfone and countless others. Wireless is an important part of the puzzle going forward. Companies that ignore wireless are playing with fire. It’s that important.

This is the First of Many Steps Toward Growth

With all the changing and new opportunities in the industry, Windstream has only announced they will be testing this 1-gigabit Internet service. We have still heard no mention of wireless at all or television or anything else.

So while I applaud this new Windstream position for growth, I am still a little fuzzy about the details. Remember, this is a good company with workers, customers and investors. I hope they see the new opportunities surrounding them, and can transform themselves and begin to grow once again. If they do this right, rapid growth could be in their future. Could be. Let’s hope for the best.

Equities.com columnist Jeff Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst and consultant. He shares thoughts on the changing industry, which he's been following for 25 years. He follows what's hot, what's not, why and what's coming next. Email him at jeff@jeffKAGAN.com.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


Symbol Name Price Change % Volume
GOOG Alphabet Inc. 796.97 -4.59 -0.57 1,757,528
TMUS T-Mobile US Inc. 47.05 -0.27 -0.57 2,372,981
VZA Verizon Communications Inc. 5.90% Notes due 2054 27.87 0.00 0.00 20,771
WFC.P.V Wells Fargo & Company Depositary Shares each repre 26.09 -0.06 -0.23 191,693
WIN Windstream Holdings Inc. 8.36 -0.02 -0.24 1,405,597


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