Why Windstream Corporation (WIN) Is Worth a Closer Look

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Windstream Corporation (NASDAQ:WIN) doesn’t have a very long history, having been formed back in 2006 from the merger of the local telephone businesses of two companies, Alltel and Valor Communications. Although those predecessor companies claim legacies going back 70 years, Windstream started with a fairly modest scope, serving a total of 3.4 million access lines across 16 states. In six short years, however, the company has grown extensively, and it has become popular due to its extremely generous dividend payments. But as rural telecom companies face ever-increasing competition, Windstream is struggling to convince investors that it will be around for the long haul.

I’ve crafted a premium research report on Windstream that goes into more detail about the rural telecom company. In the excerpt below, I take a closer look at the investment opportunity that Windstream presents right now.

Windstream Corporation (NASDAQ:WIN)

The opportunity
Traditionally, telecom companies acted much like utilities. They provided basic phone service under heavy regulation, with rates calculated to help them recover the huge capital investments necessary to build and maintain an extensive network of telecommunications infrastructure across the country.

With technological advances, however, the telecom industry has changed dramatically from its traditional landline role. The largest telecom companies in the country, AT&T Inc. (NYSE:T) and Verizon Communications Inc. (NYSE:VZ) , have built impressive wireless networks to provide mobile access to customers, with coverage areas spanning the nation. Much of the growth in the telecom industry in recent years has come from the smartphone revolution, which has spurred escalating competition among wireless networks seeking to provide faster and more efficient service.

Yet despite the rapid evolution of the telecom industry toward mobile communications, millions of customers, especially in rural areas, continue to rely on regular landlines for their phone service yet also want broadband Internet and other related services. Because these rural networks had slower growth potential than their urban-area counterparts and were more costly to maintain, telecoms that were focusing on the high-end wireless market sought to divest themselves of their rural networks. At the same time, many of the smaller providers covering rural markets suffered from a lack of economies of scale, making the industry ripe for consolidation.

Along with fellow rural providers CenturyLink, Inc. (NYSE:CTL) and Frontier Communications Corp (NASDAQ:FTR), Windstream moved aggressively into the rural telecom market niche. Through numerous acquisitions of independent regional telecom providers such as CT Communications, D&E Communications, and Iowa Telecom, Windstream added to its customer count and expanded its geographical reach. Most recently, at the end of 2011, Windstream completed its acquisition of PAETEC, giving the combined company coverage across 46 states and helping to boost its fiber route network.

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