Windstream, EarthLink merging in $1.1B deal

• Local jobs could be in the crosshairs as companies look for $125 million in cost-cutting or "synergies."
• All-stock deal also included debt and it expected to closed in the first half of next year.
• Churn in the telecom industry traces back to Rochester Telephone Corp.

Another big deal involving two large companies headquartered outside of Rochester could affect jobs in the Rochester area.

Windstream Holdings Inc. announced Monday a $1.1 billion merger with EarthLink Holdings Corp. in an all-stock deal, that includes the assumption of debt.

The merger has already been approved by the boards of both companies and is expected to be finalized in the first half of next year, subject to various regulatory approvals.

“With this transaction, we are combining two highly complementary organizations with closely aligned operating strategies and business unit structures,” Tony Thomas, president and chief executive officer of Windstream, said in a statement.

The companies said in a filing with the U.S. Securities and Exchange Commission that they would seek $125 million in annual synergies and tax benefits within three years after the deal closes.

The companies employ a combined 1,025 local workers, officials said.

"Synergy is (a) code word for folding operations together and doing the same with less expense," said George T. Conboy, chairman of Brighton Securities. "Not all of that expense will be headcount. Some of it will be facilities. Some of it will be equipment.

"But a meaningful part of those synergies are going to be people — not all of them in Rochester."

Spokesmen at both companies said on Monday that it was too early to comment on potential jobs, but added that a transition process will begin to bring the two firms together.

"Both companies will evaluate overall staffing needs and develop a detailed integration plan to provide a seamless transition for customers," said David Avery, a spokesman with Windstream.

Further details on cuts likely wouldn’t be released until internal teams have looked more closely at cost-cutting measures, possibly in sales, marketing and other operations they have in Rochester.

"A lot of this stuff gets folded together and you may not be able to do all of the operations in Rochester," Conboy said. "These are good jobs that pay good wages."

The two telecommunications companies have sizable operations in the Rochester area.

Windstream begins moving into downtown facility

Windstream occupies roughly 70,000 square feet of space near Main Street and Clinton Avenue in downtown Rochester where it houses a call center, sales, support customer care and other operations. It moved to Rochester after acquiring Perinton’s PAETEC Holding Corp. in 2011.

The Little Rock, Arkansas-based company employs roughly 650 people locally and about 12,000 overall.

EarthLink moved into a 80,000-square-foot space at the corner of Monroe Avenue and Alexander Street about five years ago.  The property owned by Buckingham Properties is known as Alexander Park.

At one point, the Atlanta, Georgia-based EarthLink employed roughly 550 people in the Rochester area, although layoffs in recent years have shrunk that number to about 375. It moved into the local market after acquiring One Communications, which was headquartered in Rochester, in 2010.

EarthLink employed 1,875 full-time equivalents on June 30 of this year, according to a federal filing. It reported having 2,314 a year earlier.

DEALS, AND ROCHESTER TELEPHONE

There have been other deals in recent days and years involving telecom companies, either merging or finding ways to tighten their belts.

CenturyLink said on Halloween that it would acquire Level 3 Communications. The combined firms expect to cash in on $1 billion of expected cost savings from sharing data lines and cutting overlapping jobs.

Company officials declined to comment on the number of people they employ locally or what the cuts mean for Rochester.

In 2015, then Fibertech CEO John Purcell, once an executive at Rochester Telephone Corp. sold his company for $1.9 billion to Lightower Fiber Networks. The firms were later renamed  Greenlight Networks, which has been continuing a slow build-up of Internet service in the Rochester area.

The Windstream deal for PAETEC Corp., involved Arunas Chesonis, who started his career at Rochester Telephone and later went on to head ACC Corp., which was bought by TCG/AT&T for about $1 billion in 1998.

Ownership of Rochester Telephone has also been passed on throughout the years, from Global Crossings in the later 1990s and a few years later to Citizens Utilities Corp. The headquarters of that company, now called Frontier Communications, are based in Norwalk, Connecticut.

Frontier cutting 1,000 jobs; local impact unclear

Frontier employs roughly 1,800 in the Rochester but said last week that it would cut 1,000 jobs in 29 states as part of a new restructuring effort.

Meanwhile, Verizon Communications has announced that it would close a Henrietta call center in January, cutting 648 local positions in the process.

"Consolidation in the industry is inevitable because there are a lot of competitors competing for space in a very tight industry and efficiency is going to be critical for all of them," Conboy said. "The interesting thing is so many of the players in these companies are alumni of Rochester Telephone ... those reverberations from the many mergers taking place are still being seen in the market today."

Verizon to close Henrietta call center; 600 jobs lost

WINDSTREAM-EARTHLINK

The combined Windstream-EarthLink are expected to result in roughly 145,000 miles of fiber lines allowing the company to offer a national network of Internet, voice and other services.

Windstream said it expects to issue about 93 million shares to complete the deal. It also intends to refinance EarthLink’s $436 million of debt. After the transaction closes, Windstream shareholders will own 51 percent of the combined company and EarthLink shareholders will own 49 percent.

Thomas will serve as president and CEO of the combined companies.

On Monday, Windstream and EarthLink reported third-quarter results.

Windstream said total revenues and sales were off 10 percent to $1.34 billion while reporting a net loss of $66.2 million for the quarter, compared to a 7.2 million loss a year earlier.

Also, EarthLink said sales were down 13 percent to $270.9 million in its latest quarter, reporting a loss of $10.5 million in its most-recent quarter compared to a $230,000 profit a year earlier.

"The combination with EarthLink further advances Windstream’s strategy by creating a stronger, more competitive business to serve our customers while increasing free cash flow and reducing leverage," he said, in a statement.

TCLAUSEN@Gannett.com

STOCK PRICES

WindStream (WIN): Down a penny or -0.14 percent to $7.23.

EarthLink (ELNK): Down 62 cents or -9.97 percent to $5.60.

*Prices are at close, Nov. 7