FCC grants approval to Windstream to assume Earthlink assets, $1.1 billion deal still on schedule to close in half of 2017

The Federal Communications Commission has approved applications by Windstream Holdings Inc. and Earthlink Holdings Corp. to transfer control of the Atlanta-based Internet backbone firm’s international and U.S. assets to the Arkansas telecom giant.

The FCC’s approval removes the last major federal regulatory hurdle for Windstream to complete before moving forward with its $1.1 billion acquisition of Earthlink, first announced Nov. 7, 2016. Windstream spokesman David Avery said the company still has a few other pending approvals, but is on schedule to close in the first half of 2017.

“There are some state regulatory approvals still pending, as well as shareholder approvals,” Avery said. “As we said earlier, we expect to close the transaction in the first half of 2017, and our integration planning is targeting March 1.”

In a Dec. 23 letter to the FCC, attorneys representing Little Rock-based Windstream and Earthlink urged 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.

The FCC docket is the final step in the federal antitrust process for Windstream to gain regulatory approval of its acquisition of Earthlink. The companies earlier on Dec. 19 completed the required 30-day waiting period under the Hart-Scott-Rodino Act, the federal pre-merger 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 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 and businesses on any device at any time.

On Dec. 21, Windstream rival Centurylink asked the FCC to sign off on its proposed $34 billion stock-and-cash deal to acquire Level 3 Communications Inc. To date, the FCC has not granted Centurylink approval to take control of Level 3’s assets. Both those companies have nationwide data and fiber optic networks that criss-cross Arkansas.

Windstream has been steadily expanding its broadband and fiber optic grid in major markets across the U.S. Company officials say the Little Rock high speed, nationwide network now spans nearly 130,000 miles.