Windstream, EarthLink Pull Trigger on $1.1 Billion Merger

**Editor’s Note: Please click here for our latest recap of the biggest channel-impacting mergers.**

M&A activity in the telecom sector is at a frenzy.

The rumored merger of Windstream Holdings Inc. and EarthLink Holdings Corp. was confirmed Monday with the news of a $1.1 billion deal. This follows on the recent news of CenturyLink’s $34 billion acquisition of rival Level 3 and the Louisiana-based telco giant’s $2.15 billion sale of its data centers.

The combined Windstream-EarthLink will have increased scale and scope, giving it the ability to leverage best practices across a broader platform, and offer customers expanded products, services and enhanced enterprise solutions. The combination will result in an extensive national footprint spanning approximately 145,000 fiber route miles and provide advanced network connectivity, managed services, voice, internet and other value-added services. Customers will also benefit from combining Windstream’s scale in the enterprise segment and EarthLink’s successful launch of SD-WAN, Windstream stated.

“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, president and CEO at Windstream.{ad}

Upon completion of the deal, the Windstream company name will prevail for the combined organization, with headquarters in Little Rock, Arkansas. Additionally, Tony Thomas will continue to hold the title of president and CEO, as will Bob Gunderman continue to serve as CFO, once the deal, expected to close in the first half of 2017, is final.

EarthLink CEO and President Joe Eazor, also commented on the deal.

“We are pleased to join forces with a company that shares our core values and operating philosophies, and whose strategy complements our own,” stated Eazor. “In our work with Tony and his team, it’s become clear that we are two companies on parallel paths. We’ve both made significant progress as evidenced by our improving financial results and strengthening balance sheets. Now is the right time for us to come together. We look forward to working with the Windstream team to better serve our customers in a world that is becoming more network-centric every day.”

Karin Fields, CEO, COO and co-owner at MicroCorp, weighed in on the recent telecom M&A activity: “Both the acquisitions of Level 3 [by] CenturyLink and EarthLink [by] Windstream are going to significantly …

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… impact partners. Bringing two companies together always causes disruption and now we have two happening at the same time. Luckily there is a lot of good talent to hopefully ease the pain,” she said.

“Consolidation in our industry is inevitable, and picking up steam, added Andrew Pryfogle, senior vice president of cloud transformation, Intelisys, which itself is being acquired by ScanSource. “Forward-thinking sales partners need to make sure their revenue is in the safest harbor possible. … As with any merger, we anticipate short-term integration challenges; however, we’re excited about what the combined companies can accomplish.”

In a blog, fellow master agent Telarus identified four potential concerns about the merger — coming from its partner community: one less competitor in the market; a painful integration process; Windstream’s commitment to minimum account sizes of $1,500 per month; and channel consolidation for partners with direct agreements.

“We will do everything in our power to help the ‘new Windstream’ create channel-friendly policies, compensation structures and software tools that will enhance the experience that our partners have when selling,” wrote co-founders Adam Edwards and Patrick Oborn.{ad}

And PlanetOne CEO Ted Schuman had this to say about the state of the market: “Competition, consolidation and collaboration are increasing in both channels – telecom and IT – and creating opportunities and challenges for agents and MSPs. At the end of the day, channel partners must keep it all in check. My advice? Celebrate and build on the wins. Learn from and work to minimize the losses. No single vendor, partner or customer should define your value or be able to break the bank. Diversify. Have a “Plan B.” Your business, your brand, your value, needs to be yours and yours alone. The relationships you build, maintain and grow must serve to enhance the value and the customer experience you create.”

Both Windstream and EarthLink, separately released their third quarter financial results Monday. Windstream reported that both revenue and sales fell year over year, with total revenue and sales at $1.34 billion, compared to $1.50 billion in the year-ago quarter. Service sales were also down — $1.32 billion this year compared to $1.45 billion last year.

EarthLink’s third-quarter revenue was $235 million, down roughly 13 percent, from $271 million a year ago.