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Windstream (WIN) Plans to Discontinue DSL Service for SMBs

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Telecommunications and data service firm Windstream Holdings, Inc. (WIN - Free Report) is planning to discontinue the DSL (digital subscriber line) service it offers to small and medium-sized businesses (SMB) and residential customers in CLEC (competitive local exchange carrier) territories across 25 states.

These states are Alabama, Arizona, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Michigan, Minnesota, Mississippi, Missouri, New Mexico, North Dakota, Ohio, Oregon, South Dakota, Tennessee, Texas, Utah, Washington and Wisconsin. Currently, 300 customers avails the service.

Outdated network equipment is the main reason for the service discontinuation. Moreover, the vendors that originally manufactured the equipment are no longer supporting the equipment. Further, replacement of the equipment will lead to high expenses.

All residential and SMB customers have been informed about the discontinuation through mail. Windstream will also take responsibility for any inconvenience caused by the service termination. Windstream plans to put an end to the service in three steps based on customer location and specific state level notification requirements.

Depending on market conditions, Windstream will begin a two-month discontinuation process in December which will continue till Feb 2017. Also, this is not the first time Windstream has sought permission to discontinue a legacy service in its CLEC markets over the past year. In Apr 2016, Windstream requested for U.S. telecom regulator FCC’s (Federal Communications Commission) permission for the discontinuation of its VoiceEclipse VoIP service. In Jun 2016, the company submitted a filing to end a number of operator-assisted services across its ILEC and CLEC territories in 18 states.

Recent Events

Recently, Windstream launched next-generation television service – Kinetic – in 13 North Carolina communities, which are Albemarle, Badin, China Grove, Concord, Harrisburg, Hemby Bridge, Indian Trail, Kannapolis, Matthews, Mooresville, Mt. Pleasant, New London and Oakboro. The company offers 100% fiber-backed network to more than 50,000 residents in the regions.

In Nov 2016, Windstream announced a merger with rival EarthLink Holdings Corp. for a total value of $1.1 billion to expand the former’s on-net fiber footprint.Shareholders of Windstream will control 51% of the combined company while the remaining portion will be owned by EarthLink shareholders.

However, taking the present competitive scenario into consideration, we believe the combined entity will enjoy benefits of increased scale which will help it brave competition from the likes of CenturyLink Inc. (CTL - Free Report) and AT&T Inc. (T - Free Report) . Moreover, the merged entity is expected to save around $125 million in operating and capital expenses annually.

Windstream currently carries 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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