Instead of relying on the prevailing breeze to deliver its services, Windstream makes use of more tangible connections, such as fiber optics and copper wire. The company provides communications and technology services to business and residential customers in the US through a network of 115,000 miles of fiber and from more than 20 data centers. Business services include multi-site networking, Internet access, cloud computing, colocation, online backup, and other managed services. Along with Internet and voice for its residential customers, it also offers video services, mainly through an agreement with DISH Network. Call connection and backhaul services are offered to phone companies and wireless carriers.
Technology advances have made its consumer business prospects increasingly difficult, as wireless carriers have siphoned off wireline customers and cable companies have been able to effectively woo voice and Internet customers. The expanding need for data services from the enterprise customer side has become the company's new focus.
In 2011 Windstream planted a major stake in the ground towards that strategy with the acquisition of PAETEC Holding, based near Rochester, New York, for about $2.3 billion (giving PAETEC shareholders about 13% of Windstream) to further expand its Internet protocol (IP)-based communications services, cloud computing, and managed hosting services business. The deal extended Windstream's reach significantly, adding medium- and large-sized business customers in more than 20 states, about 37,000 miles of fiber to its network, and seven data centers. The combined company serves nearly half a million businesses, including most FORTUNE 500 companies.
The growth in its consumer segment was nominal and doesn't contradict Windstream's strategy shift, as the underlying numbers show double-digit declines in the area of concern: voice and long distance. And the nominal half-percent increase in the segment over 2010 is a notable drop from the 5% growth over 2009. All of that is reinforced by the change in growth for the new focus, its data and integrated services, which increased by about $54 million in 2011 compared to $7.6 million in 2010 -- and that's apart from acquisitions. Some of that was existing customers switching from fragmented services to integrated voice and data, but the overall trend is what Windstream sees as its future. Indeed, even now, its business service revenues have climbed to nearly 50% of total sales.
As its PAETEC merger might suggest, Windstream has fueled its growth through an aggressive acquisition strategy. In fact, 90% of its growth for 2010 and nearly 100% of the growth for 2011 came from acquisitions. In 2010 the company grew in a number of regional markets. Its $650 million purchase of South Carolina-based NuVox boosted its footprint in the Southeast and Midwest regions, and its $1.2 billion acquisition of Iowa Telecom added rural markets in Iowa and Minnesota. Additionally that year the company bought privately held local phone carrier and fiber transport services provider Q-Comm, based near Kansas City, for nearly $820 million. The purchase included Q-Comm's Kentucky Data Link (fiber services in 23 states) and Norlight (Midwest CLEC) subsidiaries, and approximately doubled Windstream's fiber network infrastructure. That deal bolstered its wholesale prospects, improving its capacity to provide signal transport services over landlines for wireless carriers.
Windstream also paid $310 million to buy hosted data, network, and application services provider Hosted Solutions from private equity firm ABRY Partners in late 2010. The deal significantly expanded the company's data center business, adding Hosted Solutions' five data centers in North Carolina and Boston. – less