At a CLEC event yesterday, many regional CLEcs were asking me about EarthLink, Windstream, the Comcast-TWC merger and Cbeyond.
Will EarthLink get bought? It's a single billion dollar company that is slowly trying to become an MSP from years as a dial-up ISP. With the recent CEO (and other personnel chair shifting) and $1.2 billion in debt. Last year, they had trouble refinancing debt. They had big losses. The transformation to an IT shop is still in the early phases. It will be interesting to see if the new CEO is there to sell them off or turn them around.
And who would be a buyer for EarthLink? TDS? A merger with Cbeyond?
The other big question is about Windstream. The 25 cent dividend is in response to CNBC's Cramer, who spend 2012 beating up on Windstream and again recently. One source says that Windstream let go a lot of staff including salespeople in Tampa Bay. Another source is telling me that Windstream is still out dropping its pants on pricing to win deals -- even when they will be underwater in that deal. This CLEC needs to figure out what is profitable to sell and what is not -- and walk away from the unprofitable, while building a reputation for the profitable lines of service.
With $8.8 billion in debt and only $4 billion in revenue - how do they continue to pay debt, agents, dividends - all cash line items. I compare them now to Level3 -- they better have a magician of a CFO like Level3 does, who can just keep refinancing and keeping that wall of debt at bay. Or just pull a page out of the Fairpoint and Charter play book and go BK, wipe some debt and rebound.
If you are selling WIND or ELNK, diversify just to be safe.