Report: Windstream, EarthLink In Advanced Merger Talks

Telecom providers Windstream and EarthLink are in "advanced" merger discussions that would allow both companies to combine their network infrastructure to better compete in a crowded telecommunications market, according to a Reuters report.

The reported all-stock deal, which has not been finalized yet, would result in Windstream owning slightly more than half of the combined company, the Reuters report said, citing sources familiar with the matter.

The telecommunications market has been abuzz with merger and acquisition news over the past few weeks, with Dallas-based AT&T announcing its intent to buy media giant Time Warner, and fellow telecom provider CenturyLink revealing plans to buy service provider Level 3.

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The CenturyLink-Level 3 merger will help the two companies reach more business customers with a larger fiber footprint, and a possible Windstream-EarthLink partnership follows CenturyLink's lead, according to one Windstream partner that requested anonymity.

Telecom providers are struggling to find growth in a market where basic connectivity already reaches most businesses and consumers. Some providers have worked to differentiate themselves by adding software-defined networking to curb infrastructure costs and cloud-based services to turn software- and appliance-based products into recurring revenues. Others are aggressively working to expand their network infrastructure to reach more customers.

The reported partnership would bring together two providers with largely traditional telecommunication services portfolios, as well as networking services, the Windstream partner said.

"It's not terribly strategic," the executive said. "Both are a bit behind in the marketplace and are going hard to try to catch up."

Little Rock, Ark.-based Windstream also got out of the data center business in 2015 when it sold its data center and co-location business to St. Louis-based TierPoint for $575 million. CenturyLink, likewise, is selling its data center business in preparation for its merger with Level 3.

Both EarthLink and Windstream have seen declining revenues in recent years. The reported deal would help both companies achieve cost savings by combining their communications networks and infrastructure, the Reuters report said.

Windstream did not returned CRN's request for comment before publication time. EarthLink declined to comment on the story.

As of the market close on Thursday, Windstream was valued at $653 million, and Atlanta-based EarthLink was valued at about $572 million.

The Windstream-EarthLink merger could be formally announced during EarthLink's Q3 2016 earnings call, scheduled for Monday morning, the anonymous partner said.