Windstream 2006 Annual Report Download - page 112

Weighted Average Common Shares Outstanding
The weighted average number of common shares outstanding increased 8 percent in 2006. The increase in 2006
primarily reflects a partial year impact of the additional 70.9 million common shares assumed through the merger with
Valor on July 17, 2006. Common shares in historical periods totaled 402.9 million and represented the shares issued to
Alltel shareholders pursuant to the spin-off of the Alltel wireline division.
RESULTS OF OPERATIONS BY BUSINESS SEGMENT
Wireline Operations
(Millions, access lines and long distance customers in thousands) 2006 2005 2004
Revenues and sales:
Local service $ 1,094.8 $1,081.5 $1,115.6
Network access and interconnection 1,137.6 1,034.1 1,038.3
Long distance 219.0 180.4 174.1
Miscellaneous 307.2 255.8 256.9
Total revenues and sales 2,758.6 2,551.8 2,584.9
Costs and expenses:
Cost of services 893.3 825.0 824.0
Cost of products sold 36.7 31.7 29.4
Selling, general, administrative and other 322.2 302.4 301.2
Depreciation and amortization 446.0 470.2 504.0
Royalty expense to Alltel 129.6 268.8 270.2
Total costs and expenses 1,827.8 1,898.1 1,928.8
Segment income $ 930.8 $ 653.7 $ 656.1
Access lines in service (excludes broadband lines) 3,242.9 2,885.7 3,009.4
Average access lines in service 3,053.3 2,950.0 3,061.5
Average revenue per customer per month (a) $ 75.29 $ 72.08 $ 70.36
Long distance customers 1,991.0 1,750.8 1,770.8
Notes:
(a) Average revenue per customer per month is calculated by dividing total wireline revenues by average access
lines in service for the period.
Wireline operations consists of the Company’s retail and wholesale telecommunications services, including local, long
distance, broadband, and network access. Wireline revenues and sales increased $206.8 million, or 8 percent, in 2006
and decreased $33.1 million or 1 percent in 2005. The acquisition of Valor accounted for a $222.3 million increase in
wireline revenues and sales in 2006. Customer access lines increased 12 percent in 2006, reflecting the addition of the
Valor operations, partially offset by declines in both primary and secondary access lines. The Company lost
approximately 138,000 and 124,000 access lines during 2006 and 2005, respectively, primarily resulting from the
effects of fixed line competition and wireless substitution, and the Company expects access lines to continue to be
impacted by these effects in 2007.
To slow the decline of revenue in 2007, we will continue to emphasize sales of enhanced services and bundling of our
various product offerings including broadband, voice and digital satellite television. Deployment of broadband service
is a strategic imperative for the Company, and as of December 31, 2006, approximately 77 percent of our addressable
lines were broadband-capable compared to approximately 73 percent for the same period in 2005. During 2006 and
2005, we added approximately 258,000 and 154,000 broadband customers, respectively, including 67,000 acquired
during 2006 from Valor, increasing our broadband customer base to over 656,000 customers, which represents a
penetration rate of 20 percent of access lines in service as of December 31, 2006. The growth in the Company’s
broadband customers more than offset the decline in customer access lines noted above. As a result and as further
discussed below, revenues generated from the sales of data services increased during 2006, which partially offset the
adverse effects on wireline revenues resulting from the loss of access lines. In addition, during the fourth quarter of
2005, we began offering DISH Network digital satellite television service to our residential customers as part of a
bundled product offering. Our partnership with DISH Network is also an important strategic initiative for the
Company, as it allows us to provide a full suite of telecommunications and entertainment services to our customers on
one integrated bill.
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