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Company View of Windstream Corporation

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A statement by Jeffery R Gardnerr, President and Chief Executive Officer of the board of Windstream Corporation is given below. The statement has been taken from the company’s 2006 annual report.
Windstream was formed July 17, 2006, through the spin off Alltel’s Landline business and merger with Valor Communications Group, creating the nations largest rural focus communications and entertainment company. Through this transaction, we gained new opportunities for growth, as well as a singular focus on serving our landline customers. The Valor merger gave us added scale and improved our competitive position through $40 million in targeted net annual synergies.
We entered the market place with 3.4 million access lines in 16 states, 8000 employees and a memorable new icon – The Green Truck. This fully restored classic pick up features a latest technology, making it the perfect symbol to evoke the spirit of our enterprise. Windstream is fresh new company but one with a proud history of serving rural America. We believe that with our new singular focus on the landline business and an aggressive non legacy approach to managing our assets, this team can drive industry leading results.

SOLID FINANCIAL DEBUT
I am pleased to report that Windstream delivered solid financial results for 2006 that met or exceeded the guidance we provided the investment community following the spin-off and merger.
Under Generally Accepted Accounting Principal (GAAP), Windstream achieved diluted earnings per share of $125, revenues of $3.0 billion and operating income of $899 million. Among the pro forma highlights for the year from current businesses, which include VALOR results fro all of 2006, revenues of $3.2 billion and operating income before depreciation and amortization (OIBDA) of $1.67 billion were relatively unchanged year-over-year.

RECORD BROADBAND GROWTH AND ACCELERATING DIGITAL TV SALES
Windstream enjoyed record broadband growth in our first year of operation. We increased our broadband customer base by 46 percent year-over-year, ending the year with 656,000 broadband customers or 21 percent of total 1lac access lines.
From a network perspective we continued to expand our broadband network and ended the year reaching our goal of 80 percent broadband addressability. In addition, we continued investing in our network to drive faster broadband speeds and now offers 3Mb speeds to 80 percent of broadband addressable lines, and 6Mb speeds to 22 percent of addressable lines. Moving forward, we will continue to make investments in our network in order to maintain growth.
With respect to digital TV, we made significant progress selling DISH satellite TV service throughout 2006. We are very pleased with our relationship with EchoStar and announced in December a multi-year extension of the existing agreement to offer DISH service, which supports our strategy to bundle services as a communications and entertainment company.
Our broadband and digital TV growth helped offset a 4.4 percent decline in access lines year-over-year. The access line loss resulted primarily from fixed-line competition and wireless substitution. At the end of the year, we estimate that incumbent cable providers offered voice services to approximately 40 percent of our access lines, and we expect that percentage to increases over time.
We implemented various sales and marketing initiatives to improve our overall competitiveness in our markets throughout the year, including expanding our distribution channels, focusing on bundled products and emphasizing the safety and reliability of our phone service.

STRATEGIC OPPORTUNITIES

During the fourth quarter of 2006, we made a decision to split off our directory publishing business, Windstream Yellow Pages, in a tax-free transaction to affiliates of Welsh, Carson, Anderson and Stowe, a private equity investment firm that holds approximately 4.1 percent of Windstream common stock.

The total value of the transaction was $525 million at the time of signing, or approximately $850 million on a taxable equivalent basis.This transaction will allow our management team to focus on core communications and entertainment business, while reducing debt and retiring outstanding equity in a tax-efficient manner.
From a balance sheet perspective, we ended the year with $387 million in cash and short-term investments, and our leverage ratio of net debt to OIBDA was 3.1 times pro forma OIBDA from current business.These metrics resulted from the strong cash flows our business generated in 2006. These cash flows allow us to return a significant dividend to our shareholders. We have ample flexibility to pursue strategic opportunities, should they arise, in a disciplined manner that favors rural properties with the potential to increase cash flows. We will also evaluate other potential uses of our cash including share repurchases and debt reduction.

LOOKING AHEAD
Windstream has made remarkable progress in our first year as a company. Going forward, we will continue to evaluate what we do every day, look fro new opportunities, and most importantly, excuse our strategy aggressively. As we move into our second year, we will focus on:
– promoting bundled phone broadband and digital TV offers to maximize average revenue per customer and deter access line loss.
– increasing the availability and speed of our broadband offerings and investigating new technologies.
– improving customer service and operating efficiency while aggressively managing operating expenses and capital expenditures.

Our success in 2006 provides the opportunity for a bright future. I appreciate the support of our stakeholders, and I thank all our associates for their enormous contributions. Although we are a new company, we have a great deal of momentum, and we all will build on that momentum- providing new and better ways fro our customers to connect to their world and generating solid financial results for our investors.