Telco REITs

Windstream, a leading provider of advanced network communications, announced plans to spin off certain telecommunications network assets into an independent, publicly traded real estate investment trust (REIT). The transaction will enable Windstream to accelerate network investments, provide enhanced services to customers and maximize shareholder value. The transaction will allow the REIT, which will own Windstream’s existing fiber and copper network and other fixed real estate assets, to expand its network and diversify its assets through acquisitions.”
Windstream Press Release.

You may like to take a closer look at the link above. This is an interesting restructuring approach that other telcos are also looking into. The tax-free spinoff will enable Windstream to lower debt by approximately $3.2 billion and increasing free cash flow, allowing it to expedite plans to transform to its next-generation IP network.

Interestingly, it aligns with an earlier blog entry that compared the capital heavy business models of traditional telcos and the asset-lean models of more recent Internet-centric service providers.

The spin-off of real assets to release cash potentially offers a pathway for traditional telcos to migrate to more modern internet, communication, data and media business models.

In the case of Windstream, it will continue to operate and maintain the assets, which means that the OSS will stay with the Telco rather than the REIT (I presume). This seems like a logical separation. But if other telcos decide to hand over operational responsibility for their cable assets, then their OSS would need to split between inside plant and outside plant, which could cause some challenging demarcations/separation issues.

Thanks to Roland for alerting me to the Windstream restructure upon reading an earlier related blog post called “The Trillion-Dollar Treasure Chest” and spawning the concept for today’s post.

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