Why Boosting Broadband Speeds Is Important for Windstream



Competition from cable players in the broadband market

In the earlier parts of the series, we learned about the enhancements Windstream (WIN) is making in its broadband offering for the consumer and business ILEC (Incumbent local exchange carrier) segment customers. We also learned about the significant anticipated expansion of relatively higher broadband speed offerings in the telecom company’s footprint by the end of 2016 driven by the Project Excel initiative. Now let us look at how competitive is this broadband market for the telecom company.

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As you can see in the pie chart above, and as per the telecom company’s 3Q15 earnings presentation, Windstream competes with cable companies in a significant ~83% of its broadband footprint in the consumer and business ILEC space. Note that cable companies are capable of providing significantly higher speeds compared to DSL (digital subscriber line) services of wireline telecoms.

Time Warner Cable (TWC) is a key competitor of Windstream in this space. Windstream has ~24% overlapping market in this broadband space with Time Warner Cable. Additionally, if we take the footprint of the entity in the proposed merger between Charter (CHTR), Brighthouse, and Time Warner cable, this figure increases to ~31%.

The other significant players that have an overlapping network in this consumer and small business ILEC broadband coverage of Windstream include Comcast (CMCSA) (CMCSK), Cox, and Suddenlink.

Windstream’s key consumer and small business ILEC broadband markets

According to Windstream, among its top eight broadband markets in the consumer and small business ILEC space, Time Warner Cable is the primary competitor in five of these markets. Additionally, the company is offering a maximum Internet speed of 50 Mbps (megabits per second) in these markets.

In Windstream’s eight top markets, Comcast and Cable One are the key competitors in this space in Sugarland and Texarkana, respectively.

According to Windstream, Comcast is providing maximum Internet speeds of 250 Mbps in Sugarland in the broadband space. Additionally, Cable One is providing maximum Internet speeds of 200 Mbps in Texarkana in the broadband space.

For a diversified exposure to telecom companies in the US wireline space, you may consider investing in the Technology Select Sector SPDR ETF (XLK). XLK held ~10.2% in AT&T (T), Verizon (VZ), CenturyLink (CTL), Frontier Communications (FTR), and Level 3 Communications (LVLT) as of the end of October 2015.


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