Windstream 2014 Annual Report Download - page 79

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We anticipate that the spin-off will occur in the first half of 2015. On or before March 1, 2015, we intend to convert Windstream
Corp. to Windstream Services, LLC. We plan to maintain our current dividend practice through the close of the transaction. If the
closing date of the spin-off is not on the record date of Windstream’s normal quarterly dividend, we intend to pay a pro rata dividend
to our shareholders based on the number of days elapsed in the quarter. Following the close of the spin-off transaction and the
effects of the 1-for-6 reverse stock split, Windstream expects to pay an annual dividend of $.60 per share and CS&L initially
expects to pay an annual dividend of $2.40 per share. See “Dividend Policy - Post Spin-Off” below for additional information
regarding Windstream’s expected dividend practice following completion of the spin-off and reverse stock split.
Completion of the proposed spin-off is contingent on the effectiveness of CS&L’s Form 10 registration statement, final approval
from our board of directors, execution of all definitive agreements, and satisfaction of other customary conditions. No assurances
can be given that such conditions will be satisfied or as to the timing of any regulatory action. We may, at any time and for any
reason until the proposed transaction is complete, abandon the spin-off or modify or change the terms of the spin-off.
OVERVIEW
Our vision is to be the premier enterprise communications and services provider in the United States while maintaining our strong,
stable consumer business. We provide advanced communications and technology solutions, including managed services and cloud
computing, to businesses nationwide. In addition to business services, we offer broadband, voice and video services to consumers
in primarily rural markets. We have operations in 48 states and the District of Columbia, a local and long-haul fiber network
spanning approximately 121,000 miles, a robust business sales division and 27 data centers.
Strategy
Our business strategy is focused on maximizing growth opportunities with our enterprise business customers while optimizing
our cost structure and maintaining the stability of our consumer and small business operations with the goal of generating solid
and sustainable cash flows over the long-term to build shareholder value. In implementing our strategy, we continue to invest in
capital initiatives designed to drive improvements in network performance and to enhance our ability to provide advanced solutions
to our business customers and increase broadband speeds and capacity in our consumer markets. During 2014, we continued to
transition revenue streams away from traditional consumer voice services to our strategic growth areas of business services and
consumer broadband. The diversification of our revenue streams is key to our success in accelerating revenue growth opportunities
as we combat the effects of revenue declines from consumer customer losses and wholesale revenue declines due to intercarrier
compensation reform.
The expansion of our fiber transport network through capital investment has enhanced our ability to provide wireless transport,
or backhaul services. As cellular customers consume more wireless data, wireless carriers need more bandwidth on the wireline
transport network. To accommodate wireless carriers’ additional bandwidth needs, we have made significant investments in our
network, including fiber-to-the-tower deployments designed to increase capacity and replace copper facilities servicing wireless
towers. We expect wireless data usage to continue to increase, which will drive the need for additional wireless backhaul capacity.
On the consumer front, we are continuing to make investments to increase broadband speeds and capacity throughout our territories.
Although new customer growth is slowing as the market becomes more heavily penetrated, we expect increases in real-time
streaming video and traditional Internet usage to motivate customers to upgrade to faster broadband speeds with a higher price.
As of December 31, 2014, we could deliver speeds up to 3 Megabits per second (“Mbps”) to all of our addressable lines, and
speeds up to 6 Mbps, 12 Mbps and 24 Mbps are available to approximately 80 percent, 54 percent and 18 percent of our addressable
lines, respectively. We also actively promote value-added Internet services, such as security and online back-up, to take advantage
of the broadband speeds we offer. During the third quarter of 2014, we launched Kinetic, a complete video entertainment offering
in our Lincoln, Nebraska market and expect to roll out this new service in eight additional markets during the next few years.
We have also expanded broadband services to unserved and underserved areas through a combination of our own investment and
grant funds received as a result of the American Recovery and Reinvestment Act of 2009 (“broadband stimulus”) and the Connect
America Fund (“CAF”). Under our existing grant agreements with the Rural Utilities Service (“RUS”), we will receive up to
$181.3 million in broadband stimulus funding and our share for funding these projects will total at least $60.4 million. CAF includes
both a short-term (“CAF Phase I”) and long-term (“CAF Phase II”) framework. Under CAF Phase I, we received $86.7 million
of incremental funding for the deployment of broadband service to unserved and underserved areas. CAF Phase II which will be
implemented in 2015 will provide us with the opportunity to receive additional funding to construct and maintain our broadband
network. While the FCC has not yet finalized CAF Phase II statewide funding, we anticipate the aggregate statewide offers made
available to Windstream may be up to $190.0 million annually.