Windstream bought Earthlink in 2017 for $1.1 billion

After buying Earthlink less than two years ago for $1.1 billion, Windstream has jettisoned the consumer business, selling it to a private equity firm for $330 million.

This is Windstream’s third asset sale in a month, with the company selling dark fiber assets in Nebraska and Minnesota to Minnesota-based telecom provider Arvig Enterprises in two transactions.

Dallas-based Trive Capital purchased the Earthlink consumer business for $330 million in cash. When Windstream purchased Earthlink, it touted the transaction’s value mostly in terms of the combined network’s reach of 145,000 route-miles of fiber, Earthlink’s early launch of SD-WAN and expected annual cost synergies of $125 million. Earthlink serves about 600,000 U.S. customers with services ranging from internet access, email and online back-up, to managed web design, web hosting. But as Windstream spokesperson Chris King told Bloomberg, “People paid $5 to $10 a month for email. It was not a strategic asset for us.”

The Earthlink transaction “enables us to divest a non-core segment and focus exclusively on our two largest business units. In addition, it improves our credit profile and metrics in 2019 and beyond,” said Tony Thomas, president and CEO of Windstream, in a statement. Windstream’s two largest business segments by revenue are its enterprise/enterprise wholesale segment and its ILEC consumer and enterprise segment, according to the company’s most recent quarterly results. It also has a smaller wholesale segment and a consumer CLEC segment.

In terms of the recent fiber sales, the Minnesota dark fiber was sold for $49.5 million in cash and the Nebraska fiber was sold for $11.5 million, with Windstream establishing a fiber relationship with Arvig that will allow Windstream to continue to utilize the network to sell its products and services.

Bob Gunderman, CFO and treasurer for Windstream, said in a statement on those deals that they “monetize latent dark fiber assets in Minnesota and Nebraska, lower capital requirements in each state and allow us to focus on our core network offerings with minimal change to our operations going forward. The structure also sets a roadmap for future fiber monetization across our footprint.”

Windstream has been focusing on its enterprise and services portfolio, with recent moves including the expansion of its fixed wireless access network for businesses, expanding its wholesale fiber network and bolstering its cloud-based unified communications and software-defined WAN offerings. At the Bank of America Merrill Lynch 2018 Leveraged Finance Conference in early December, Gunderman noted that at the end of the third quarter, about 7% of the company’s enterprise revenue base was coming from SD-WAN and unified communications-as-a-service, up from about 3% in the previous year — a “very significant growth rate of about 71%,” Gunderman said. Windstream also announced in early December that it passed the milestone of serving 500,000 “seats” with its cloud-based UCaaS.

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