Bob Gunderman, the CFO of US telco and ISP Windstream (NASDAQ:WIN), has played down – but not denied – rumours of a data centre disposal.
Bob Gunderman, the Chief Financial Officer of US telco and ISP Windstream (NASDAQ:WIN), has played down – but not denied – rumours of a data centre disposal.
Speaking at a Bank of America Merrill Lynch conference in Los Angeles, Gunderman (pictured) declined to comment directly on recent reports that the company aimed to raise US$500m-US$750m from a sale of the business, Windstream Hosted Solutions.
He described Windstream’s cloud, managed and data centre services as “critical” to its core business, but emphasised that these could potentially be provided via third party partners.
“We can’t be a provider to these enterprises without having these capabilities,” he said. “Having said that, we do routinely, occasionally, look at our set of assets to assess valuation, whether there’s a disparity between the parts of our business relative to what other businesses alone might trade at. I think it’s incumbent on us to do that by paying attention to shareholder value.”
In late August, Bloomberg reported that Windstream had hired RBC Capital Markets to advise it on the potential sale. Possible suitors reportedly included private equity firms ABRY Partners and GI Partners.
At the conference, Gunderman added: “Whatever the outcome may be, whether we’re a long-term owner of our data centre business or in the future we decide to do something differently, we are comfortable operating under a structure where we can partner with others to bring services for the benefit of our customers,”
He noted that the data centre business already incorporates a number of third-party services.
Gunderman said that while the data centre business in a “great contributor” from a free cash flow perspective, it is capital intensive, adding that it will probably require US$30-US$35m of capital expenditure this year.
The Little Rock, Arkansas-based company reported revenues of US$1.4bn for the second quarter of 2015. Enterprise service revenues for the period were US$485m, up 3.5% year-on-year, which Windstream attributed to demand for IP-based solutions and next generation data. Data and integrated solution service revenues within the enterprise division also grew by about 7.3%.
Earlier this year, Windstream spun off its network business, CS&L, into a REIT. In an interview with TelecomFinance in June, Gunderman said the decision to create a REIT was inspired by tower spinoff deals, which create value and allow investment back into the business.
“We realised that copper and fibre are in fact real estate assets like, just like data centres and towers,” he said.
Gunderman said the spin off had enabled Windstream to pay down half its debt, unlock incremental cash flow and invest in itself.