Windstream 2007 Annual Report Download - page 63

Windstream Corporation
Form 10-K, Part I
Item 1A. Risk Factors
Risks Relating to Windstream’s Business
We face intense competition in our businesses from many sources that could reduce our market share or adversely
affect our financial performance.
Substantial and increasing competition exists in the wireline communications industry. Our ILEC operations have
experienced, and will continue to experience, competition in their local service areas. Sources of competition to our
local service business include, but are not limited to, wireless communications providers, cable television companies,
resellers of local exchange services, interexchange carriers, satellite transmission service providers, competitive access
service providers, including, without limitation, those utilizing an Unbundled Network Elements-Platform or UNE-P,
VoIP providers, and providers using other emerging technologies.
Competition could adversely affect us in several ways, including (1) the loss of customers and resulting revenue and
market share, (2) the possibility of customers reducing their usage of our services or shifting to less profitable services,
(3) our need to lower prices or increase marketing expenses to remain competitive and (4) our inability to diversify by
successfully offering new products or services.
We may not be able to compete successfully with cable operators that are subject to less stringent industry
regulations.
We also face competition from cable television companies providing voice service offerings. Voice offerings of cable
operators are offered mainly under Competitive Local Exchange Carrier certificates obtained in states where they offer
services and therefore are subject to fewer service quality or service reporting requirements. In addition, the rates or
prices of the voice service offerings of cable companies are not subject to regulation. In contrast, our voice service
rates or prices, in our capacity as an ILEC, are subject to regulation by various state public service commissions.
Unlike cable operators, we are also subject to “carrier of last resort” obligations, which generally obligates us to
provide basic voice services to any person regardless of the profitability of such customer. As a result of these
disadvantages, we may not be able to compete successfully with cable companies in the offering of voice services.
Competition from wireless carriers is likely to continue to cause access line losses, which could adversely affect our
operating results and financial performance.
Wireless competition has contributed to a reduction in our access lines, and generally has caused pricing pressure in the
industry. As wireless carriers continue to expand and improve their network coverage while lowering their prices, some
customers choose to stop using traditional wireline phone service and instead rely solely on wireless service. We
anticipate that this trend toward solely using wireless services will continue, particularly if wireless prices continue to
decline and the quality of wireless services improves. Many wireless carriers are substantially larger than we are and
will have greater financial resources and superior brand recognition than we have. In the future, it is expected that the
number of access lines served by us will continue to be adversely affected by wireless substitution and that industry-
wide pricing pressure will continue. We may not be able to compete successfully with these wireless carriers.
We may not realize the anticipated synergies, cost savings and growth opportunities from acquisitions.
As part of our business strategy, we may pursue mergers and acquisitions from time to time with other companies as
opportunities may arise. For example, we completed the acquisition of CTC during 2007 and expect to realize
significant cost savings and other synergies from this transaction. The success of the CTC and other potential
transactions will depend, in part, on our ability to realize the anticipated synergies, cost savings and growth
opportunities through the successful integration of the businesses of acquired companies with those of Windstream.
Even if we are successful integrating the businesses of acquired companies, there can be no assurance that these
integrations will result in the realization of the full benefit of the anticipated synergies, cost savings or growth
opportunities or that these benefits will be realized within the expected time frames. For example, the elimination of
duplicative costs may not be possible or may take longer than anticipated, benefits from the transaction may be offset
by costs incurred in integrating the companies, and regulatory authorities may impose adverse conditions on the
combined business in connection with granting approval for the merger.
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