Bankrupt cable carrier slashes partner ranks while court orders Charter Communications to cease aggressive advertising
Bankrupt Windstream got a much needed win as a federal court ordered rival Charter Communications to cease its aggressive marketing described as “scare tactics.” At the same time, Windstream started cutting underperforming partners while simultaneously increasing compensation for loyal agents and resellers.
The Lowdown: Windstream went to court to halt Charter’s direct-mail campaign that implied customers would lose their Internet and cable television service due to the company going bankrupt and potentially liquidating. Charter made an offer to residential customers to switch service before liquidation causes disruptions. A federal judge in New York agreed the marketing campaign is deceptive and ordered it stopped.
The Charter marketing campaign didn’t result in Windstream’s decision to slash its partner ranks, but the issues are somewhat related. Since filing bankruptcy in February, a number of Windstream partners — particularly those not working with master agents — fell below their sales quota requirements. Speculation is that underperforming partners are switching allegiances to other carriers rather than trying to sell Windstream, which is tainted by the bankruptcy.
The Details: Windstream is notifying as many as 15% of its partners that they will no longer participate in the program. It’s unclear precisely how many partners will be affected or whether existing annuities from previously sold contracts will be zeroed. According to published reports, Windstream partners are concerned that the channel restructuring and bankruptcy could cause them to lose their recurring commission payments.
Reportedly, Windstream is increasing compensation for partners maintaining their performance status. Again, the precise compensation increase is unclear.
The Impact: Windstream is sending a clear message to partners that they need to continue to sell services and generate revenue during the bankruptcy period. Windstream, which transacts a significant volume of business through channel partners, particularly in rural states, needs cash for its restructuring and debt service. The cutting of partners and the increasing compensation for those remaining is a clear signal that Windstream is concerned about indirect revenue flow.
Background: Windstream filed for bankruptcy in February following the loss of a lawsuit with bondholder Aurelius Capital Management. The initial judgment of $310 million was significant, but technically pushed the cable carrier into default on its entire bond portfolio worth more than $5.6 billion. The default triggered the bankruptcy. Windstream secured more than $1 billion in funding to manage the bankruptcy process. The company has since been delisted from the NASDAQ stock exchange. Windstream says it will operate normally during the bankruptcy. There’s no telling how long the bankruptcy process will take to complete.
Channelnomics Point of View: Windstream cutting partners and potentially canceling commission payments is a real concern, but it’s not unexpected. Many agent contracts contain clauses that enable carriers and cable companies to unilaterally nullify annuity payments. The incentive to partners for continued compensation for previous sales is maintaining sales performance. The risk to Windstream and other carriers that take such action is a loss of partner trust, which can result in few partners willing to sell their products and services.