Windstream to merge with EarthLink in $673M deal

More consolidation and cost cutting in telco land.  Last week, it was Century Link and Level 3.  Today, Windstream and EarthLink.  Apparently, it’s all about scale. The $1.1 billion (€993.82 million) all-stock deal is a move designed to boost the network service providers ability to compete with larger rivals -both telco’s and MSOs/cablecos.

Under the terms of the deal, Earthlink shareholders will receive 0.818 shares of Windstream for each Earthlink share. The new entity, which will retain the Windstream name, plans to shed $125 million in costs while holding 145,000 route miles of fiber in the Northeast and Southeast.

Windstream serves 1.06 million residential broadband customers, 138,500 small businesses, and 26,600 larger enterprise customers.

“The combination with EarthLink further advances Windstream’s strategy by creating a stronger, more competitive business to serve our customers while increasing free cash flow and reducing leverage,” said Tony Thomas, CEO of Windstream, in a statement. “With this transaction, we are combining two highly complementary organisations with closely aligned operating strategies and business unit structures,” he added.

“We are pleased to join forces with a company that shares our core values and operating philosophies, and whose strategy complements our own,” said EarthLink chief executive Joe Eazor.  “In our work with Tony and his team, it’s become clear that we are two companies on parallel paths,” he said. “Now is the right time for us to come together.”

EarthLink currently operates two divisions:  Business and Consumer.

  • EarthLink Business sells communications, IT and virtualization, cloud computing, IT security, colocation, hosted applications and support services. The company owns and operates a U.S. network including 29,421 route miles of fiber, 90 metro fiber rings, and eight data centers. EarthLink Business has more than 150,000 customers.[4]
  • EarthLink’s Consumer division sells broadband (DSL/freestanding DSL, cable internet, 4G Internet, Satellite Internet) dial-up Internet, Web hosting and commerce, and related services. It also sells spamBlocker, Anti-virus and Online Back-up. Earthlink internet services claims to have over 1 million customers.

 

The merger is expected to generate annual synergies of $125 million within 36 months of the deal’s completion, which is expected to happen in the first half of 2017, subject to approval by the Federal Communications Commission (FCC), and customary closing conditions.

References:

https://www.earthlink.com/about-us/news-center/merger

http://www.reuters.com/article/us-earthlink-hldgs-m-a-windstream-hldgs-idUSKBN1321HF

http://www.totaltele.com/view.aspx?ID=495469

A joint presentation will be available at:

 www.windstream.com/investors and ir.earthlink.net

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