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Windstream (WIN) Gets Final Approval for EarthLink Buyout

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According to a FierceTelecom report, telecommunications and data service firm Windstream Holdings, Inc.WIN received all of the state and federal regulatory approvals required for its acquisition of EarthLink Holdings Corp.ELNK . So we can expect the deal to conclude in the first quarter of 2017.

The report states that both Windstream and EarthLink have scheduled special meetings with their respective stockholders, separately, in connection with the merger, on Feb 24, 2017.

Accordingly, Windstream also announced that it will report fourth-quarter and full-year 2016 earnings results on Mar 1, 2017.

On Jan 24, 2016, as per a telecompetitor report, the U.S. telecom regulator Federal Communications Commission (FCC) had approved the Windstream-EarthLink merger. This paved the way for EarthLink to become a wholly owned, indirect Windstream subsidiary.

Prior Announcement

On Nov 7, 2016, Windstream first announced a merger with its rival EarthLink Holdings Corp. for a total value of $1.1 billion. The companies reached an all stock deal wherein each shareholder of EarthLink would receive 0.818 shares of Windstream per share.

Windstream had decided to issue about 93 million shares for the deal which is valued at $673 million, while the total value including debt will tally to $1.1 billion. Shareholders of Windstream will control 51% of the combined company while the remaining portion will be owned by EarthLink shareholders.

Prospects

The deal will witness the entrance of 29,000 route miles from EarthLink, 16,000 of which will expand Windstream's footprint, bringing its total to 145,000 route miles. These routes are strategically located in Southeast and Northeast U.S. and are expected to boost Windstream's current network.

Well, network depth is not the only add-on that Windstream will enjoy from EarthLink.

EarthLink will also bolster Windstream's SD-WAN (software-defined wide area network) suite. EarthLink's own SD-WAN service, which enables the deployment of an enterprise WAN (wide area network) with SDN (software-defined networking) to determine the most effective way to route traffic to remote locations, bodes well. EarthLink will also bring with it a growing base of SD-WAN customers, including a 400-restaurant contract with national restaurant chain TGI Friday's.

Winding Up

The telecom industry has been witnessing a surge in consolidation among major players due to an intensely competitive environment. Small and Medium Business services is a highly growing revenue segment in the data communications industry. However, both Windstream and EarthLink are witnessing falling revenues, indicating that they have not been able to effectively capitalize on the growth opportunities present in the industry. Thus, a combined entity with a higher scale of operations is likely to change that scenario. Moreover, the merged entity is expected to save around $125 million in operating and capital expenses annually.

Amid deal approvals, shares of Windstream registered a loss of 2.63% in the past three months compared with the Zacks categorized Wireless National industry's growth of 6.97%.

Recent Approvals on Deals

On Feb 14, CenturyLink Inc.'s CTL proposed acquisition of Level 3 Communications Inc. LVLT also received the green signal from Ohio and Utah state regulators, as per a report by FierceTelecom. Thus, the company cleared one of several hurdles in its way of completing the multibillion-dollar deal on time. But it has to be seen whether smaller firms like Windstream can compete against larger counterparts even after the merger.

Windstream currently carries a Zacks Rank #2 (Buy) while EarthLink has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

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EarthLink Holdings Corp. (ELNK): Free Stock Analysis Report

Level 3 Communications, Inc. (LVLT): Free Stock Analysis Report

CenturyLink, Inc. (CTL): Free Stock Analysis Report

Windstream Holdings, Inc. (WIN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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