The posting of a multi-billion dollar charge will always leave red ink all over an earnings report. And that’s what happened at Windstream Holdings, the bankrupt carrier, which took a $2.3 billion charge related to its Chapter 11 reorganization. Nevertheless, Windstream did have some good news in its earnings report.
The Lowdown: Windstream reported first-quarter revenue of $1.32 billion, down from $1.45 billion from the same period in 2018. Windstream is seeing growth in certain segments, including consumer broadband and enterprise strategic services. The $2.3 billion loss is related to an accounting charge as the company continues to reorganize through the Chapter 11 bankruptcy process.
The Details: The slight decline in revenue is actually a good indicator for Windstream, which is battling to retain partners and customers as it wades through bankruptcy. Windstream notified its channel — mostly telephony agents — that it would no longer honor their evergreen contracts and revenue sharing unless partners agreed to a new consolidated contract and committed to revenue goals.
Partners bristled at the contract changes, with many saying they’re being penalized for Windstream’s financial and management missteps. Windstream coming close to matching its 2018 first-quarter number may indicate that it’s finding success in partner and customer retention.
The Impact: The potential for collateral damage at Uniti, the real estate investment trust spun off by Windstream, is increasing. Windstream noted that its lease agreements are too high and may see lower rates for copper lines when its contract comes up for renewal in 2020. The fact Windstream may see lease rate relief — by some estimates up to 80% off its current costs — sent stock prices tumbling at Uniti, which managed to eke out a slight profit in its first quarter.
Background: Windstream’s financial woes began in February when a court ruling over the handling of its Uniti spin-off forced it into bankruptcy. After a long litigation, a federal court ruled in favor of bondholders that Windstream improperly transferred assets to Uniti, effectively devaluing the investments. The single ruling in favor of a bondholder with $300 million in assets caused an immediate default in more than $5 billion in bonds.
The Buzz: “Windstream began the year with another solid quarter, demonstrating the company’s continued momentum in the marketplaces we serve. We stand alone among major U.S. telecom service providers with 14 consecutive months of consumer broadband subscriber growth through April, as well as our strongest quarterly broadband growth since 2011,” said Windstream CEO Tony Thomas. “We were pleased to deliver sequential revenue and ARPU growth in our consumer business as a result. We also continued to see strong customer adoption of our enterprise strategic products and services and remain the largest SD-WAN service provider in the country.”