Windstream 2007 Annual Report Download - page 93

considered to be due to various operating factors and are included in the quantification of the impact of those
factors from the Company’s other legacy operations.
(b) Results from wireline operations in 2007 include results from the former CTC operations following their
acquisition on August 31, 2007. In the discussion and analysis provided below regarding changes in wireline
revenues and expenses in 2007, the impact of the acquisition of CTC on these changes is considered to be the
revenues and expenses recognized by the former CTC operations from August 31, 2007 – December 31, 2007.
(c) As part of the integration of CTC, the Company reviewed its access line and long distance customer counting
methodology. As a result of this review, the Company changed its methodology and access lines and long distance
customers reported in historical periods have been revised to conform to the revised approach. This change
resulted in a reduction of Windstream’s reported access lines of approximately 25,000 and a reduction of
Windstream’s reported long distance customers of approximately 34,000.
(d) Wholesale units include unbundled network elements and pay stations.
(e) Average revenue per customer per month is calculated by dividing total wireline revenues and sales by average
access lines in service for the period.
Wireline revenues and sales increased $353.9 million, or 13 percent, and $206.8 million, or 8 percent, in 2007 and
2006, respectively. The acquisition of Valor accounted for $269.8 million and $222.3 million of the year-over-year
increases in wireline revenues and sales in 2007 and 2006, respectively. The acquisition of CTC accounted for
$51.5 million of the year-over-year increase in wireline revenues and sales in 2007.
Total access lines decreased by 0.5 percent in 2007, reflecting declines in both residential and wholesale lines, partially
offset by the addition of lines acquired from CTC. During the twelve months ended December 31, 2007, the
Company’s legacy operations lost approximately 128,000 access lines, as compared to approximately 123,000 access
lines lost in 2006. During the twelve months ended December 31 2007, the Company’s Valor operations lost
approximately 19,000 access lines, as compared to approximately 12,000 access lines lost in 2006 following the merger
on July 17th. These declines in access lines primarily reflect the effects of fixed line competition and wireless
substitution, and the effects of non-pay disconnects. The Company expects access lines to continue to be impacted by
these effects in 2008.
To slow the decline of revenue from access line loss in 2008, the Company will continue to emphasize sales of
additional services and bundling of its various product offerings, including voice, high-speed Internet, and digital
satellite television. Windstream’s Greenstreak program was launched across all markets in the first quarter of 2007 and
offers high-speed Internet along with measured local phone service that allows unlimited incoming calls, 911 access
and outgoing local calls for 10 cents a minute. Additionally, the Company announced in the first quarter of 2007 a
multi-year extension of an agreement with EchoStar Communications Corporation to offer DISH Network digital
satellite television service to residential customers as part of a bundled product offering. Digital television service
bundled with Windstream voice and high-speed Internet service offers added value and convenience for customers, and
is consistent with the Company’s strategy to bundle services as a communications and entertainment company. In an
effort to further develop enhanced services and bundled product offerings, the Company plans to continue to invest in
its network to offer faster speeds in its high-speed Internet offerings.
Deployment of high-speed Internet service is an important strategic initiative for the Company. As of December 31,
2007, 82 percent of its addressable lines were high-speed Internet-capable as compared to approximately 77 percent at
December 31, 2006. During 2007 and 2006, the Company added approximately 215,000 and 258,000 high-speed
Internet customers, respectively, including approximately 31,000 acquired from CTC in 2007 and 67,000 acquired
from Valor in 2006. This increased the Company’s high-speed Internet customer base to over 871,000 customers at
December 31, 2007, and represents a penetration rate of 27 percent of total access lines in service. The growth in the
Company’s high-speed Internet customers more than offset the decline in customer access lines noted above. Speeds of
up to 3Mb are currently offered to approximately 81 percent of high-speed Internet addressable lines, and speeds of up
to 6Mb are offered to approximately 30 percent of those addressable lines. In the first half of 2008, Windstream plans
to introduce high-speed Internet service in its largest markets at 10 to 12 Mb, which is two to six times faster than
current speeds.
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