Windstream reports $1.8 billion fourth quarter loss, landline business loses ground

Windstream Holdings Inc. closed out a challenging year with reported losses of nearly $2 billion in the fourth quarter as the Little Rock telecom’s customers shed traditional landline phone service in lieu of wireless and other high-speed Internet options.

For the period ended Dec. 31, Windstream posted a net loss of $1.84 billion, or a loss of $10.26 per share, compared to a net loss of $87 million or a loss of 94-cents per share a year ago. The fourth quarter results include a $1.8 billion non-cash goodwill impairment charged related to the company’s local telephone service for residential, small businesses and wholesale consumers.

Excluding that one-time charge related to the company’s legacy phone service, the so-called incumbent local exchange carrier (ILEC) would have seen adjusted fourth quarter earnings of three cents per share on revenue of $1.5 billion. Fourth quarter revenue rose to $1.5 billion, up 14.5% from $1.31 billion in the same period of 2016.

Wall Street analysts had forecasted the Little Rock telecom to report fourth quarter earnings of 35 cents per share on revenue of $1.49 billion, according to Thomson Reuters.

For the full-year, Windstream reported a net loss of $2.1 billion, or $12.52 per share, compared to a net loss of $384 million, $4.11 per share, a year ago. Yearly revenue rose to $5.85 billion, up from nearly $5.4 billion in the 2016.

Despite the fourth quarter and yearly losses, company president and CEO Tony Thomas called 2017, which included the acquisitions of Atlanta-based Earthlink Holdings and Broadview Networks, “a productive year.”

“We delivered improved financial and operating results for almost all metrics across the business and positioned the company for growth. We continued to see growing demand for our SD-WAN service and strategic enterprise products, as well as increased customer adoption of faster broadband speeds as a result of our significant network investments.”

Windstream expects earnings to now be in the range of $1.95 billion to $2 billion for the year. Capital expenditure are expected to be between $750 million and $800 million, down from $839 million in 2017.

“For 2018, we are focused on advancing our industry-leading Enterprise and Wholesale service capabilities and launching faster, more cost-effective broadband deployment techniques,” Thomas said. “We will further simplify our business and transform customer-facing and internal tools and drive revenue improvements through enhanced sales and improved customer retention. We also will continue our work to optimize our balance sheet.”

Nearly a year ago, Windstream completed its $1.1 billion acquisition of former rival EarthLink Holdings Corp. of Atlanta on Feb. 27. The Little Rock telecom and broadband provider followed up that deal with the smaller purchase of upstate New York cloud solutions operator Broadview Networks Holdings Inc. in an all-cash deal worth $227.5 million.

Windstream has struggled to regain its financial footing after the two acquisitions, announcing in early August after reporting a second quarter loss of $68 million that the company was ending its quarterly dividend payout in favor of a new stock buyback program.

A few months later, Windstream fought off a bid by New York vulture fund Aurelius Capital Management to push the Little Rock telecom into bankruptcy in a legal spat over the spin off of the former Communications Sales & Leasing (CS&L) into a publicly-held real estate investment trust (REIT) now called Uniti Group.

The U.S. federal court decision in New York was rendered “moot” after Windstream announced in late 2017 it had completed early settlement of the previously announced debt swap offers due between 2020 and 2023 related to the Uniti deal.

On Nov. 3, Windstream’s shares traded just off a 52-week low after Moody’s Investors Service downgraded the corporate family rating of Windstream Services to B2 from B1 based on the company’s sustained weak operating trends. Windstream officials noted that the company has significantly improved its balance sheet in 2017 by pushing almost $2 billion in debt out an average of more than two years. The company has no meaningful debt maturities prior to 2020, officials said.

However, Windstream announced last month it was undergoing a workforce reduction that will cut nearly 54 jobs locally and an unknown number of workers in other areas across the U.S. The company has about 1,275 employees in Arkansas and about 13,000 nationwide at the end of the year, officials said.