EarthLink, a household name from its days as a dialup ISP back in the bubble, has finally finished its journey as an independent entity. Windstream has completed the merger announced three and a half months ago, with EarthLink exchanging 0.818 shares of common stock for each EarhLink share in a $1.1B deal.
Meanwhile, Windstream also raised its projections for the synergies it expects to achieve from the deal. They now anticipate finding $150M in annual opex and capex synergies, an additional $25M above what they had originally projected. There’s substantial overlap in the two companies’ infrastructure, especially where it comes to the former Deltacom and One Communications fiber network assets. But EarthLink also brings enterprise and SMB scale out west where Windstream is just beginning to add fiber to its diet, and will help with Windstream’s cloud services capabilities as well.
We’ve seen the country’s largest ILECs diverge a bit in the focus of their appetites lately. Those with wireless businesses (AT&T, Verizon) are to a greater and greater extent turning toward expanding their content businesses. Meanwhile, Windstream, CenturyLink, and Consolidated are adding fiber assets and taking aim at the enterprise opportunity.
Might Windstream be interested in further M&A from here? The integration of EarthLink will take some time of course, but wouldn’t prevent them from adding additional assets. Electric Lightwave might not be an option any longer but if EarthLink works, might not Broadview? Or perhaps even TelePacific? And who knows what Zayo’s plans are for the more CLEC-oriented piece of Electric Lightwave (and Allstream for that matter), they could decide to offload it along with some western dark fiber IRUs to Windstream if the price were right.
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