Feeling a little disoriented today? No, I’m not talking politics but the cloud and telecom landscape, instead.
Earlier this week, Windstream (WIN) announced that it would acquire EarthLink (ELNK) for approximately $1.1 billion. The deal, of course, comes on the heels of CenturyLink’s $25 billion deal to acquire Level 3 Communications and AT&T’s (T) $85.4 billion deal to acquire Time Warner (TWX).
While each deal impacts the market in its own way, they share one thing in common: scale. In the case of Windstream, the company wants more fiber coverage that EarthLink provides. According to Windstream, “…(t)he combined company will have a robust nationwide network and deep footprint of 145,000 fiber route miles, especially strategic routes located in the Southeast and Northeast U.S.”
In addition to fiber, Windstream also wants more software-defined WAN (SD-WAN) capability, which EarthLink has in spades.
For a better understanding of what the deal will mean to VARs, MSPs, telecom agents and others, check out the “partner’s perspective” put together by Adam Edwards and Patrick Oborn, co-founders of master agent Telarus. Telarus represents both companies and has a significant stake in the outcome of the deal. (You can read their complete analysis, which is posted on the LinkedIn site of Edwards.)
Adam Edwards, CEO and Co-founder, Telarus
After talking with partners, Edwards and Oborn raise four important questions:
1) Does it matter that there will be one less competitor in the market?
We “believe there will continue to be choice in the marketplace as SD-WAN creates the ability to sell services across multiple networks using delivery such as wireless, broadband, and dedicated networks.”
2) Will partners be impacted during the integration process?
“The challenge before these two companies is to integrate operations without customers feeling pain, which consequently will cause partners to not feel pain and continue selling.”
3) What will happen to Windstream’s monthly minimums?
“When the two companies combine, we will be very interested to see if the ‘new Windstream’ will maintain the $1,500/month minimum or if it will liberalize, with the help of EarthLink, its standards and embrace SMB accounts.”
4) Will the acquisition lead to additional channel consolidation?
“As [the channels chiefs of the two companies] get together with their new team and figure out the optimum support structure for their combined channel, we expect to see them take advantage of this opportunity to slim down their channel even more.”
As commentators note on the blog post, change is inevitable in this market. And Edwards for one is eager to see how things play out. “We will do everything in our power to help the ‘new Windstream’ create channel-friendly policies, compensation structures, and software tools that will enhance the experience that our partners have when selling,” he writes.
For another perspective, consider what our friend and dealmaker extraordinaire Martin Wolf has to say on the deal, which he believes was motivated in part to combat growing price competition:
“Both EarthLink and Windstream also announced [on Nov. 7] their fiscal results for the third quarter of 2016. Windstream revenue declined approximately 10 percent year-over-year to $1.36 billion, while EarthLink revenue dropped approximately 13 percent year-over-year to $235 million,” he wrote. “On closing the acquisition, the new company is expected to relieve some of that pressure, achieving $125 million in cost synergies within three years.”
More to come on the deal for sure.