“What exactly is it that you guys do, anyway?”
That question — or some variant of it — is something with which Tony Thomas has become very familiar during his six years as president and CEO of Windstream Communications, and to which he takes no umbrage.
After all, the pace of technological change and the attendant complexities of the telecommunications business has evolved the Little Rock-based company considerably from its founding in 2006.
“If you look at Windstream here in 2020, we’ve morphed from being only a communications company to being a communications and software company,” he said. “We’re a technology leader. We’re big believers that you have to be able to lead in technology, and leading in technology means having great software capabilities.
“We are much different than we were two years ago, and that’s predominantly because of the things we started four or five years ago, in terms of building out new digital capabilities. That was our organic path. We laid down roots to be a software company, to make software a cornerstone in terms of matching the importance of building our network. We believe the combination of those two is where market differentiation happens.”
Windstream leverages this technological prowess along two market segments. One, providing residential broadband services under the moniker Kinetic by Windstream, bringing high-speed bandwidth to customers in mostly rural areas.
Second, the company serves corporate clients through its enterprise business unit, delivering next-generation, cloud-based technologies such as SD-WAN and unified communications-as-a-service (UCaaS) for a host of applications such as network connectivity and resiliency, telephony and video services. It’s the company’s boom sector, a relatively new suite of services that has quickly taken root.
“SD-WAN/UCaaS is a $350 million-dollar annualized business. It’s grown substantially over the last few years,” Thomas said. “We just initiated this in 2017, and it’s the future of the company.”
The cutting-edge technology that underpins Windstream’s core products, or any telecom for that matter, stands in sharp contrast to the decidedly unsexy infrastructural backbone it takes to deliver said services to the end user. Burying fiber optic cable and improving network performance don’t make for thrilling headlines but are critical to customer satisfaction and loyalty. Thus, Windstream regularly spends a king’s ransom to help ensure robust and reliable service.
“Where we’re building out residential broadband, we just launched a $1.75 billion program across our 18-state footprint, including here in Arkansas,” Thomas said.
“And then, we’re building fiber optics. That is another labor-intensive process; there’s no shortcut to putting fiber in the ditch or streaming it from a telephone pole. That just simply takes time.”
All of this activity, plus providing just under 1,000 in-state jobs and generating $5 billion in annual revenues, should make Windstream one of the more high-profile companies on the Arkansas business landscape. But outside of its client base, such is not the case. Thomas said this is in part due to the targeted strategy by which the company markets itself.
“If you’re in one of the communities we serve, you’ll see our trucks, you’ll see our people, and you’ll see our ads. We advertise aggressively in our residential business,” he said. “But when it comes to marketing and advertising to B-to-B, mid-sized enterprise customers, you’re not going to succeed there through mass marketing. That’s not an efficient way to gain market share.
“The way to gain market share is through targeted digital campaigns. We invest a lot in next-generation marketing capabilities, making sure we reach the customers and prospects where we think we’re best positioned to succeed. We’re targeting the chief information officers, the VP’s of infrastructure or network. That’s who we interact with, and I’ll tell you, those people do know Windstream.”
In fact, if the average Arkansan has heard anything of Windstream over the last 36 months, it’s likely had more to do with court filings than streaming speeds. In 2017, the company was sued by New York hedge fund Aurelius Capital Management LP, which claimed Windstream had defaulted on certain bond agreements, an eye-glazingly complicated dispute that came to a head in February 2019. In that decision, U.S. District Judge Jesse Furman found in favor of the plaintiff, ordering Windstream to pay $310.5 million plus interest from and after July 23, 2018.
The judgment drove Windstream into Chapter 11 bankruptcy, where it spent more than a year restructuring, a central element of which was negotiating a settlement with fellow Little Rock company Uniti Group over a squabble concerning access to Uniti’s network assets. Once achieved and having slashed its debt, Windstream emerged from Chapter 11 this fall stronger and better positioned for growth, Thomas said, despite misconceptions to the contrary.
“Folks hear the words ‘restructuring’ and ‘lawsuit,’ and they don’t think businesses can move forward,” he said. “In fact, that 18-month restructuring was a great outcome for our customers. Our debt is significantly reduced. We just launched a nearly $2 billion capital-investment program. We never took our eye off the ball. Our team stayed absolutely focused on our customers and investing for the future.
“Before the restructuring, Windstream was on this path of investing in network infrastructure and building next-generation software capabilities. I think it’s a compliment to our board and to our employees that we stayed focused on that mission. We grew our SD-WAN UCaaS business by over $100 million during the restructuring. Our residential broadband business is now in the process of setting record growth numbers.”
Still, living and working under the cloud of litigation and bankruptcy was not an easy thing to manage. Predictably, Windstream’s stock price tumbled, and while Thomas said there was never a feeling among upper management of an existential threat, the experience drew out new dimensions of leadership both individually and collectively, especially with the dawn of COVID-19.
“My belief — the belief of the team, overall — was that we will get through this, and we will come out in a better position,” he said. “Now, we all knew the process of going through the restructuring itself and the litigation would be a difficult process and a lengthy one. But we knew if we stayed focused that we would get a good end result at the end of restructuring. That’s what was accomplished. I think it was really just about having some perseverance and staying focused on your goal.
“Personally, I learned you have to be vulnerable as a leader. You have to tell people what you’re thinking and why you’re thinking it, even emotionally. It’s OK to communicate that was a gut punch how the litigation came down. But, at the same time, point people towards the mission vision that we have and point out the successes along the way. Over those 18 months, the team just kept having these small wins and some big wins along the way. Frankly, it was really motivating to the rest of the organization as we communicated those success stories.
“Say what you will, everyone likes winning. When you start winning in the marketplace like we have, even during the restructuring period, that’s motivational.”
Through COVID-19, litigation and restructuring, Thomas insists that the company has emerged with abundant growth opportunities, and what’s more, is better positioned to take advantage of those opportunities than at any time in its history.
“Windstream’s size is a strategic advantage. We aren’t the size of an AT&T or a Verizon or any of those companies that Arkansans are familiar with, but we’re much larger than a small competitor that might not be able to make the same investments,” he said. “Windstream invested over a billion dollars this year in building network and software capabilities. We have scale, but we also have the agility that comes from being smaller. Decisions get made quickly. We focus exclusively on our customers. We know what segments we want to win.
“We do see the opportunity. Windstream is going to have its most successful residential broadband year in 2020. Over 60,000 residential broadband customers will join Windstream this year, which will be our largest growth ever, in the history of the company. At the same time, COVID has highlighted that there still is a digital divide where rural America still needs more investment to match and have parity with urban America. We believe Windstream can be part of that solution.”