Windstream CEO Tony Thomas Discusses Keys To A Turnaround

When Windstream CEO Tony Thomas was a young boy in southern Illinois, he used to walk corn fields looking to rid the row crops of worthless weeds.

In his new role, the 43-year old telecom executive has a host of modern-day technology to help him monitor his business landscape – the fifth largest fiber network in the U.S., 1.1 million high-speed Internet customers, 600,000 business customer locations in 48 states, and a workforce of 13,500 employees.

It will be hard work – like walking those farm fields – but it will also be a joyride.

“The fun is in solving the problems for customers and making the network better,” Thomas tells Talk Business & Politics.

THE REARVIEW MIRROR
Windstream Holdings, Inc. (NASDAQ: WIN) had a bruising 2014 by anyone’s call.

The Little Rock-based telecommunications company had two rounds of layoffs that resulted in 750 workers being displaced.

Its long-time CEO Jeff Gardner left the company abruptly, although he stayed through a transition period. Revenues declined 2.2% to $5.647 billion. Net income slipped as one-time charges threw the company in the red for the year by nearly $40 million. Since the end of July, Windstream’s stock has fallen from a high of $11.83 to below $8 a share.

In the course of all that tumult, a plan was launched to spin off a huge chunk of the assets of Windstream into a real estate investment trust, a REIT as it is known.

Windstream’s CFO at the time, Thomas had been tabbed to lead the REIT spinoff. But when Gardner and the board split ways, Thomas was picked to helm the company.

“I just saw tremendous potential,” Thomas said of the opportunity to remain with Windstream in the CEO role.

He knows he’s in a turnaround position. With Windstream’s struggles, Thomas has quickly reorganized the business into three primary silos: Consumer/Small-to-medium business (SMB); Enterprise; and Carrier divisions.

Consumer and SMB business are customers with typically less than $750 in monthly billing, the Enterprise division is for larger business customers, and the Carrier division represents Windstream’s services to other telecom-related organizations.

“The revenue growth is going to come from all three of our business units over time,” he contends, but he doesn’t have a firm timeline on how quickly results might materialize.

“It’s probably premature to know how long it’s going to take. I’ll have a better sense of that in the first six months to see what kind of trajectory we’re on,” said Thomas.

He’s also brought in some veteran telecom help from the former Alltel Wireless, such as SVP of Process Development Kevin Halpin and CIO Lewis Langston.

CUSTOMER SERVICE, FRONT LINE FEEDBACK
By virtue of his age, Tony Thomas qualifies as a Generation Xer and working for a technology company doesn’t hurt his savvy to interact with employees.

Follow him on Twitter (@TonyThomasWIN) and you’re likely to see accolades to employees, industry news affecting the company, or a repost of an item from the company’s internal blog.

You also might see selfies with co-workers, a George Takei (Sulu on Star Trek) retweet, or a reference to a Simpsons cartoon episode.

Thomas says Twitter and Windstream’s internal communications platform, STREAM, allow him to daily interact with front line employees to better understand what’s happening in the field.

“There is a generation of employees that wants me to be visible and accessible on Twitter,” he says. “I see how employees love it. They feel connected. It drives that alignment that I need from the front line to my position as CEO. Twitter is just one way that I get that alignment.”

The communication allows him to gather anecdotal evidence of changes made or certain needs to be implemented to improve customer experiences.

“Windstream does have to do many things better and faster,” he argues.

Last year, the company downsized its workforce by 400 in February and 350 in November. Thomas thinks any major layoffs are over for now.

“I think from an overall staffing perspective, I do not expect any downsizings in 2015. Will there be potential for very, very modest adjustments here and there? Potentially. But I don’t expect any significant adjustments to the workforce in 2015,” he said.

THE REIT
The REIT, known for now as Communications Sales & Leasing (CS&L), was announced on July 29. It will own Windstream’s existing fiber and copper network and other fixed assets. In turn, Windstream will lease the network and those assets from the new company for $650 million annually.

The move is expected to reduce Windstream’s debt by as much as $4 billion, increase its cash flow, and position the company for potential acquisitions.

“It’s a very innovative transaction. It’s going to be the first telecommunications REIT. It probably won’t be the last, but it’s going to be the first,” he says.

Asked why the “unsexy” name of “Communications Sales and Leasing” was chosen for the REIT, Thomas shares a funny story.

Thomas was still in line to lead the spin-off when a regulatory filing was due. There was no formal name for the company yet, but a lawyer filing the paperwork said one had to be chosen. Thomas explains that with the difficulty and time needed to trademark a name – months, if not years – he decided to crawl through corporation names Windstream already owned from one of its previous acquisitions.

Within an hour, he had stumbled through a few and decided “Communications Sales and Leasing” would work in a pinch. Call it quick decision-making.

Thomas jokes that “branding now falls to Mr. Gunderman,” a nod to Kenny Gunderman, the Stephens Inc. investment banking veteran picked to lead CS&L. He worked on the spinoff deal so he knows a bit about the transaction. Gunderman also happens to be the brother of Windstream CFO Bob Gunderman, who accepted the role last year.

Thomas explains that Windstream will maintain control of its operational assets through the REIT. “It’s a 15-year lease with four five-year renewals,” in essence a 35-year lease.

He expects the partnership to pay big dividends and he knows that in the end, it has to lead to revenue and cash flow improvements for him to keep his job.

The best way he knows how to make that happen centers on those lessons learned as a kid walking the corn: weed out the bad stuff and take care of the front lines.

“As important as financial performance is – and it’s ultimately the measuring stick by which I will be evaluated – what I’m most focused on initially is driving the customer experience through our world class network. Frankly, that’s where I have my pulse,” he says.