Windstream-EarthLink Merger Will Continue Enterprise And Midmarket Channel Focus

The Windstream-EarthLink merger will give the combined company a larger network footprint and big enterprise customer base and its channel programs will continue on as before, the companies said.

Windstream and EarthLink revealed plans to merge in a $1.1 billion all-stock transaction announced on Monday morning.

Windstream and EarthLink, as one company, will boost its competitive position in the crowded telecommunications market by a combined fiber footprint that reaches more buildings and data centers. The footprint for the new company will include 145,000 route miles, including strategic routes located across the Southeast and Northeast U.S., the companies said.

[Related: Windstream, EarthLink To Join Forces In $1.1B Merger]

The two companies plan to use the soon-to-be-combined network to easily deliver enhanced services and solutions to enterprise customers, Windstream's Channel Chief Jason Dishon told CRN.

"Right now, it's business as usual until we look at both channel organizations to see how they run," Dishon said.

Both Windstream and EarthLink are actively working on integration planning activities for both companies' partner programs, Dishon said.

"The financial health and well-being of our channel partners is important to both Windstream and EarthLink, and we’re working on many of those details," Dishon said.

"I would expect our partners to benefit from opportunities created from our combined companies’ robust nationwide network … as well as from our expanded products and services. For example, we expect customers to be interested in combining Windstream’s scale in the enterprise and mid-market with EarthLink’s successful SD-WAN solution."

He's referring to as EarthLink's new SD-WAN offering in partnership with cloud-based SD-WAN vendor VeloCloud, an arrangement that helps EarthLink provide a value-added service in addition to the usual telecom connectivity.

Windstream shareholders will own approximately 51 percent, and EarthLink shareholders will own about 49 percent of the combined company once the transaction is complete, the two companies said in a joint statement.

Until the deal is closed, however, the two channel programs will operate as separate entities, Olen Scott, EarthLink's vice president of partner channels said in an email to CRN.

"All contractual commitments still stand for EarthLink and Windstream, and their customers and partners," Scott said.

The added scale will help the company compete with its larger rivals, including market heavyweights AT&T, Verizon and CenturyLink, who also announced merger plans with Level 3 last month. The deal, if approved, would expand CenturyLink's network by 200,000 miles of fiber.

Windstream and EarthLink shared their own revenue breakdowns during the joint call on Monday morning. Enterprise and midmarket customers account for 38 percent of Little Rock, Ark.-based Windstream's revenue, while small businesses make up about 24 percent of EarthLink's revenue.

Enterprise and midmarket also account for about 41 percent of EarthLink's revenue. Windstream has more than 1.6 million combined consumer and business customer relationships, and EarthLink has more than 700,000 relationships.

There are, though, some concerns about how the combined company's channel strategy will change down the road. EarthLink, for instance, appears to focus more intently on the small business market, where about one-quarter of its revenues originate. In February, Windstream gave the impression that it was pulling in the opposite direction as the provider announced it was raising the minimum accounts size for partners to $1,500 a month.

The merger appears to be more "synergistic," not strategic, according to one Windstream partner who requested anonymity. Of course, there's time for both companies to articulate more clearly how the combined channel approach will work.

For now, Dishon said that the channel strategies for both companies would remain in place for the time being, with Windstream's channel to continue to focus on enterprise sales.

Master agent Intelisys is a partner to both Windstream and EarthLink, two companies that have, individually, proven to be channel-friendly for years, according to Andrew Pryfogle, senior vice president of cloud transformation for Petaluma, Calif.-based Intelisys.

Consolidation is inevitable, and partners need to make sure their revenue is in the safest harbor possible, Pryfogle said.

"We go to great lengths to protect our sales partners in the event of mergers and acquisitions," he said. "As with any merger, we anticipate short-term integration challenges; however, we’re excited about what the combined companies can accomplish.’