Windstream’s $1.1-billion purchase comes just three weeks after its $643 million acquisition of another carrier, NuVox, and two weeks after it closed its acquisition of D&E Communications. Two months ago, the company acquired a small triple-play provider, Lexcom, for $141 million.
Iowa Telecom gives Windstream 256,000 access lines (a nearly 9% increase), 95,000 broadband customers and 26,000 digital TV customers in Iowa and Minnesota. Those two states represent a hole in Windstream’s current footprint that is just across the state line from its operations in Omaha and other Nebraska markets.
Taking into account other M&A activity from both companies (Iowa acquired two telcos late last year), Iowa’s $275 million in annual revenue would add nearly 7% to the roughly $4 billion in total annual revenue that Windstream will have with its D&E and NuVox purchases in-house. Iowa reported $188 million in revenue for the first nine months of this year, up 3% from last year. But its net income for that period dropped by nearly a third to about $12 million.
Like NuVox, Iowa Telecom will also further Windstream’s strategy of combining residential broadband in incumbent territories with competitive business services. Iowa’s competitive local exchange (CLEC) operations include 41,500 access lines, more than 16% of its total access lines. This month Iowa expanded that footprint by closing its $1-million acquisition of WH Comm, a CLEC serving 2,000 access lines and 700 DSL customers in the Western suburbs of Minneapolis.
Iowa’s 800 employees are likely to face the prospect of job cuts following the deal’s close in the middle of next year. Windstream is cutting 350 of its 7100 workers this quarter. And in an interview this morning, Windstream CEO Jeff Gardner said the $35 million in synergies from the Iowa deal will come from typical redundancies in corporate overhead, “where you have duplication of jobs.”
Even with the Iowa Telecom assets, Windstream remains about half the size of CenturyLink and Frontier Communications (including the latter’s pending purchase of Verizon access lines) but claims to be the largest “pure-play rural” carrier in the country.
Today’s deal doesn’t mean Windstream is done with M&A.
“There’s going to be more consolidation,” Gardner told Connected Planet today. “You never know on the timing of those things. We’re certainly focused on integrating the companies we have today but believe we will have opportunities going forward. We’re always going to be open to considering things.”