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In an attempt to expand its line-up of data centers, U.S. telecom company Windstream Corporation (WIN - Analyst Report) will set up a new data center at the Franklin, Tennessee campus just outside Nashville.

The 21,000 square feet stand-alone data center will be at 311 Eddy Lane and is scheduled to open in 2013. The center – which serves as the technological base for the company’s Internet, cloud and managed IT services to businesses and customers – will be built with superior specifications and infrastructure.

The facility is being constructed to cope with the growing demand for data center and managed services from customers all over the nation. The unit will also lend support to Windstream Hosted Solutions to manage its huge network of cloud computing solution. This technology aids in improving the efficiency level and accessibility of IT resources and its applications in firms.

Windstream – which currently has 19 data centers across the U.S. – is putting in a lot of capital for the development of data center business.  

Headquartered in Little Rock, Arkansas, Windstream operates in rural communities in the southern and southwestern parts of the U.S. The company together with its various subsidiaries provides local and long distance phone service and high-speed Internet services to residential and business customers.  

We maintain our long-term Neutral recommendation on Windstream, supported by a Zacks #3 Rank (short-term Hold rating).

We expect Windstream’s strong operational performance to drive growth in business and consumer channels while enhancing its cost structure. In addition, Windstream’s several refinancing and deleveraging efforts will likely alleviate high debt levels. Other positives include growing demand for high-speed internet services, expansion of business via acquisition, increasing data center co-locations and investment in fiber-to-the-cell projects.

However, we remain on the sidelines due to competitive pressures from peers like Frontier Communications (FTR - Analyst Report), a highly leveraged balance sheet as well as continued access-line erosion and diminishing whole sale business.

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