The channel community is bullish about Monday’s announcement that Windstream Corp., an ILEC based in Little Rock, Ark., intends to buy CLEC PAETEC Holding Corp., Fairport, N.Y., in a $2.3 billion deal, creating a $6 billion competitive service provider focused primarily on the business segment the channel targets. The transaction is expected to close within six months.
The combined company would have $6.1 billion in total revenue – about 63 percent of which would come from businesses. Alone, Windstream’s $4 billion in annual revenue is half (49 percent) from businesses; the ILEC also offers broadband, digital phone and high-definition TV services to residential customers. PAETEC’s annual revenue of $1.6 billion (2010) is primarily from businesses.
Both companies have strong indirect sales programs: PAETEC’s since its founding in 1998 and Windstream’s by acquisition of NuVox in 2009. PAETEC has 2,650 agents and has said in the past that about 30-35 percent of its retail revenue comes from the channel. Windstream has 1,100 partners; it did not disclose revenue from partners, but since 2009, it has expanded the acquired partner program throughout its ILEC territory. In addition, its channel chief, Dan Sterling, vice president of indirect sales for Windstream, was voted Channel Executive of the Year 2010 and a finalist for the same award in 2011 by readers of Channel Partners magazine.
“PAETEC has always been a strong advocate for the channel," said PAETEC chairman and CEO Arunas Chesonis in an interview with Channel Partners. “John Leach, who runs sales for Windstream, … has always been a strong advocate for the channel. I see us being very complementary there, and together we will be even stronger for the channel."
Leach, who is executive vice president of business sales for Windstream, joined the ILEC in September 2009 after having spent three years as the South Region president for PAETEC. During that time, he had a dual role as the channel chief for the CLEC as well.
“If nothing else, [my experience at PAETEC] gives me a step up on the integration because I understand and know a number of the players and I know and understand a number of their dealers and I’m really familiar with the structure of the company," said Leach in an interview with Channel Partners. “When you go into these deals typically you don’t have that insight and it makes it easier when you do."
Leach said he has been part of the Windstream team that has been evaluating the opportunity to acquire PAETEC. “I felt like from the beginning stages, it was a great fit for a number of reasons," Leach said. In addition to a broader footprint, Leach points to the increased fiber and data-center capabilities as a plus for agents.
Both Windstream and PAETEC have ramped up their fiber holdings over the past year. Last August, for example, Windstream bought Kentucky Data Link, or KDL, whose fiber networks span 22 states. A month later, PAETEC bought Cavalier’s Intellifiber subsidiary, with more than 37,000 fiber route miles. In addition, PAETEC’s seven data centers will be added to Windstream’s 14 (one pending) for a total of 21.