Windstream (WIN) and EarthLink (ELNK) are merging in a network services deal valued at roughly $1.1 billion, the two companies confirmed this morning. Rumors about the deal surfaced last week. Among the potential opportunities ahead: Promoting EarthLink’s SD-WAN services to Windstream’s enterprise customers.
The combined company will be called Windstream, led by current Windstream CEO Tony Thomas. In other words, this is really about Windstream absorbing EarthLink — rather than a merger of equals. Certain members of the EarthLink management team will join the combined company, though specific names were not immediately disclosed.
The big question mark: Can Windstream and EarthLink grow together — or is this deal mainly about cost cutting though network services synergies? The combined company expects to have roughly 145,000 fiber route miles, while specializing in network connectivity, managed services, voice, internet and other value-added services.
SD-WAN Enterprise Market Opportunities
Among the wildcard opportunities: EarthLink’s SD-WAN (software defined-wide area network) business. An SD-WAN decouples network hardware from its control mechanism. In theory, that allows customers to build higher performance WANs using lower cost leased lines rather than expensive private WAN connections. Roughly 30 percent of enterprises are expected to deploy SD-WAN technology in their branches by 2019, Gartner predicts.
Still, much of the WindStream-EarthLink deal involves cost synergies — which typically means eliminating some redundant jobs or services. “These synergies will come primarily from the optimization of network and SG&A costs, the reduction of public company costs and the ability to leverage best practices and combined operating scale to drive efficiency,” the companies said.
Windstream and EarthLink both have evolved in recent years — even shedding assets to focus more on network services. Windstream, for instance, sold off its data center business and EarthLink exited its managed IT services business ahead of this deal.