telecom consulting service providersWindstream acquired Paetec today. August 1, 2011.

Windstream expects to issue seventy-three million new stock shares, worth approximately $891,000,000, to complete the purchase.  Windstream will also assume 1.4 billion of Paetec’s debt.  Paetec’s stockholders will own approximately thirteen percent of the combined company when the sale is approved.

The combined company services forty-six states and creates a network with approximately one hundred thousand nationwide fiber miles.  Their 6 billion in combined revenue rivals the combined revenues of CenturyLink – Qwest and Level 3 – Global Crossings.

The transaction should produce approximately 100 million dollars in operating cost synergies and 10 million in capital expenditure savings.

Jeff Gardner, CEO of Windstream, claims that the purchase of Paetec will help Windstream expand their focus on business and broadband services.

Arunas Chesonis, CEO of Paetec, believes the combined company will be able to compete and win against any other provider in the industry.

Windstream is a Fortune 500 company headquartered in Little Rock, Arkansas.  Windstream services both business and residential customers in 29 eastern states.

Paetec is a Fortune 1000 company headquartered in Fairport, New York.  Paetec provides mainly business service in 46 states and employs 5000 people.

The acquisition is expected to take six months to complete.

The Windtream – Paetec merger is the third such merger in the last year or so.   The three companies that will emerge from the combination of CenturyLink – Qwest, Level 3 – Global Crossings and Windstream – Paetec should provide even more competition to the big two, Verizon and AT&T.

Verizon and AT&T will have to continue to fight for the more profitable business telecom market against competitors that are getting larger and stronger, that carry less debt.

Residential phone service is less prevalent and expensive to service.  Local phone companies with a widespread customer base are burdened by this business and often use their business customer base to help subsidize it.  Providers that service only business customers don’t face these challenges and aren’t burdened by state and Federal regulators.

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