Windstream urges FCC to speed up regulatory review, hopes to close soon on $1.1 billion Earthlink deal

Windstream Holdings Inc. has asked the Federal Communications Commission (FCC) to speed up review of the company’s $1.1 billion acquisition of Earthlink Holdings Corp. and transfer of control of the Atlanta-based Internet backbone firm’s international and U.S. assets.

In a Dec. 23 letter to the FCC, attorneys representing Little Rock-based Windstream and Earthlink urge federal regulators to “expeditiously” approve the companies’ pending applications to transfer control of various licenses and authorizations held by EarthLink’s wholly owned subsidiaries to Windstream, according to a notice filed in the open FCC docket.

“The record demonstrates the public interest benefits of the transaction, including offering a broader portfolio of services to current and future customers and bringing more customers on net where possible.  No party voiced any objection to the transaction (or even commented) in response to the public notice,” said the letter from Julie Veach and Tamar Finn, two Washington, D.C.-based attorneys for Windstream and Earthlink, respectively.

“There is no reason to delay approval. To the contrary, the sooner the transactions are approved, the sooner the applicants can bring about the public interest benefits identified in the applications,” the attorneys wrote.

The FCC docket is final step in the federal antitrust process for Windstream to gain regulatory approval of its acquisition of Earthlink, first announced on Nov. 7. The companies earlier on Dec. 19 completed the required 30-day waiting period under the Hard-Scott-Rodino Act, the federal premerger notification program that provides the Federal Trade Commission (FTC) and the Department of Justice with information about large mergers and acquisitions before they occur.

While Windstream and Earthlink can carry out due diligence and plan for post-merger integration, they may not take steps to integrate operations, such as an acquiring party obtaining operational control of the acquired party. Once FCC approval is received, Windstream can then move forward with customary closing activities.

According to company officials, the merged company will have increased scale and scope giving it the ability to leverage best practices across a broader platform, and offer residential and business customers expanded products and services. The combination will result in a national footprint spanning approximately 145,000 fiber route miles and provide advanced network connectivity, managed services, voice, internet and other value-added services.

The companies have identified more than $125 million in annual operating and capital expense synergies that are expected to be fully realized within 36 months of closing. Approximately $50 million of the synergies are expected to be achieved within 12 months of closing and an incremental $50 million are expected to be achieved within 24 months. The remaining $25 million are expected to be realized within 36 months. The $125 million of synergies has a net present value of $900 million, officials said.

Windstream spokesman David Avery said Wednesday (Dec. 28) the company has yet to receive a response from the FCC staff concerning the pending “change of control” applications. The Windstream-Earthlink deal also needs approval from the companies’ respective shareholders. The acquisition is expected to close in the first half of 2017, officials said.

Windstream and Earthlink are eager to close their deal in hopes of keeping pace with other telecoms and cable companies that are snapping up market share through a wave of acquisitions and mergers in the past two years. Wall Street analysts say industry companies – ranging from wireless and entertainment giants like AT&T and Verizon, cable conglomerates such as Comcast, Cox and Charter, and rural telecom providers like CenturyLink and Windstream – are engaged in a high stakes battle to be the first to bundle internet, wireless, home security, TV and streaming services to broadband-hungry consumers on any device at any time.

In October, AT&T announced plans to acquire cable giant Time Warner in a deal worth $85.4 billion. That deal follows AT&T’s $49 billion acquisition of DirecTV in 2015. According to AT&T Arkansas President Eddie Drilling, AT&T has invested more than $1 billion in upgrading its wired and wireless networks for the past five years.

Comcast, Arkansas’ largest cable provider, had previously attempted to purchase Time Warner in 2014, but that deal was called off in April 2015. A year later, privately-held Charter Communication acquired Time Warner for $55 billion, creating the nation’s second-largest cable provider behind Comcast.

France’s cable giant Altice NV has also made a bid to become a major U.S. player, closing on separate deals in 2016 to purchase New York-based Cablevision and Suddenlink of St. Louis to create a combined U.S. company with an enterprise value of more than $27 billion. Suddenlink has major operations in Arkansas, including offices in Jacksonville and Jonesboro.

Windstream’s larger rival, CenturyLink, also announced a blockbuster deal to acquire Denver, Colo.-based Level 3 in an all cash-and-stock deal worth $34 billion, including debt. Centurylink offers broadband Internet, TV and phone service to more than 45,000 commercial and residential customers in Arkansas.

Verizon Wireless, which employs more than 2,000 workers at its Little Rock call center, received approval from the FCC in November to complete its $1.8 billion purchase of XO Communications, which operates a 26,000 fiber optic network that stretches across most of the U.S.