Apparently a tweet of mine upset some folks at Windstream (or more likely one little VP). [dateline Sept. 15, 2018]
So the USTelecom has a forbearance petition at the FCC to eliminate UNEs. Windstream was originally on the side of the CLECs and INCOMPAS. Then Windstream made a private sweetheart deal with the ILECs and switched sides. There is a chance that the Windstream deal will become the FCC’s response to the petition. There is also the chance that only Windstream will get that deal.
Windstream is an ILEC as well as a CLEC. They make more money from their CLEC.
Why was the tweet supposedly inflammatory? Because I said “I’d be out for myself too if I had a tiny market cap, huge debt and lawsuits chasing me down.” Windstream is in financial straits. It has been for a while. The spin off of the REIT CS&L (now called UNITI) was a stop gap measure to try to unburden from the debt. Windstream owes $5.8 Billion in debt. Revenue has been flat for more than a year.
Market cap as of today 9/17/2018: $215M <- yes, million… $215 million.
There are a number of lawsuits over the spin-off.
The VP said that the shareholder lawsuits were going away. It has been a couple of years and they are still hanging around.
The VP said that the EBITDA to debt ratio was better than any other LEC. That may be true but I complain about telecom debt all the time. How does Verizon or AT&T pay off $100B in debt EACH!
How does a LEC with flat (we’ll say flat as opposed to declining) revenue at $5.7B pay off $5.8B in debt? Kick the can down the road.
Many of my clients are CLECs. And CLECs will get clobbered by this UNE forbearance. The fact that Windstream would make a side deal after opposing the petition, it is disheartening. Hence my tweet.
The VP thinks that I should understand that a strong Windstream is good for the channel.
Is a strong Windstream good for the channel? Maybe. Personally, I have never sold any Windstream services. I sold some EarthLink but not Paetec or Broadview. I never understood the Windstream proposal. How could they possibly be less in price on network than the company they were buying it from?!!
Let’s do the math on that. Even with a sweet wholesale deal at say 30% off retail, Windstream still has to pay commission on this which would erase about 25%. There is also the cost of delivering the service and billing it, which even if efficient would be around 15%. Under water.
Sure, they get top line revenue but at a loss. This is an unsustainable business model. (Not to mention selling on price as your only value).
Then someone at Windstream realizes that they are underwater too often a couple of years ago. The result is a decision to wipe out customers and channel partners to right size it.
This isn’t ideal either. That Commission Line Item on the P&L is an attractive thing to the CFO when times are tight. Ask InterNAP or Windstream or any other company that right-sized and exited the channel. As it is the two remaining RBOCs – VZ and AT&T – flip-flop on the channel.
Is a strong Windstream good for the channel? When will we see a strong Windstream?
I am not certain Windstream will ever be a strong channel vendor. Everything they do is about lowering prices. And no one sings their praises on service deliver so….? Where’s the value?
Plus… what is their strategy? What are they good at?
UCaaS? MITEL, Avaya, Broadsoft and Broadview – pick one.
SD-WAN. Two years ago SD-WAN sales were practically zero. So if now you have $20 in SD-WAN revenue, guess what? SD-WAN sales are up!!!
For Windstream, I wonder how much growth in SD-WAN is post-Earthlink. By that I mean, when they acquired EarthLink they got some retail SD-WAN business. How much SD-WAN is NOT from that EarthLink acquisition? I wouldn’t care if that wasn’t the loudest drum they bang.
Both services that they hang their hat on require technical expertise and great service delivery.
Like many companies they just worry about Wall Street. The stock price, EBITDA (or in this case OBIDAR), the lawsuits, et all play factors in how the C-Suite makes decisions. No one looks long term. They look quarter to quarter. That’s why their are constant layoffs.
Cable isn’t a picnic. They have monopoly mindset and ancient processes. They also think that 30% service dissatisfaction is a B grade. But cable has demand. AND cable gets free money — every account they take in business is money from the ILEC. The ILECs took their eye off the ball in the early 2000s and haven’t caught up yet despite M&A, layoffs and massive telecom debt.
Windstream has a drain on the ILEC business (from cable and wireless) that the CLEC business has to make up for. Kind of like how AT&T and VZW make up lost revenue from the RBOC lines of business with cellular. Windstream NEEDS the channel.