Can Multi-Acquisition Telcos Thrive Without Ever Consolidating Billing?

on Mar 3, 13 • by Edward Finegold • with No Comments

Windstream, the company originally formed from the spin-off of Alltel’s landline business, recently released its Q4 2012 results, reporting significant increases in both net income and operating income. Though the street cites declines in revenue and voice subscribers, it is also optimistic about Windstream’s...

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Windstream, the company originally formed from the spin-off of Alltel’s landline business, recently released its Q4 2012 results, reporting significant increases in both net income and operating income. Though the street cites declines in revenue and voice subscribers, it is also optimistic about Windstream’s ability to win more broadband customers, sell them more services, and operate efficiently. But sources with intimate knowledge of the company’s operations report that Windstream continues to operate disparate billing platforms in the wake of multiple acquisitions and does not plan to consolidate them. Windstream’s ultimate success or failure may tell us whether a company that derives 70 percent of its revenue from subscription-based broadband services can flourish by avoiding billing migration risks.

Aggressively Acquisitive

Between August 2007 and December 2011, Windstream completed nine significant acquisitions. Our insider sources report that Windstream’s core business in Little Rock, Ark. – the former Alltel group – is a Convergys shop (now NEC/NetCracker). The conventional wisdom in the BSS domain says that IT consolidation is essential to post-acquisition profitability. But our sources report that Windstream has not moved its acquired entities onto this billing platform. One source says Windstream CIO Cindy Nash has said in face-to-face meetings that because the acquired units are profitable, there’s just no reason to mess with how they bill.

Windstream’s latest and largest acquisition, that of PAETEC – completed in December of 2011, emphasizes this philosophy’s significance. PAETEC’s billing still runs on a now 14-year-old Daleen Technologies implementation.PAETEC acquired Daleen’s technology assets from FTS in December 2010, which had acquired them under the name Viziqor in 2005 (Daleen had merged with UK-based Protek in 2004 and re-branded). PAETEC’s acquisition was a defensive move. CIO Robert Moore was quoted at the time saying, “Acquiring the system and its loyal development and support teams …protects our supply chain.” Bottom line – PAETEC was highly committed to its aging, legacy billing environment, which plays right into Windstream’s migration-avoidance approach.

A Referendum on Billing Consolidation
Windstream’s preference to maintain the status quo is antithetical to almost everything we read about streamlining IT systems and operations in pursuit of increased profitability – especially in highly disparate, post-acquisition environments. It defies the business cases behind cloud-based centralization; managed services outsourcing; and large-scale BSS transformation. In doing so, however, it advocates for risk mitigation, avoiding customer disruption, and for keeping offerings relatively simple.

Windstream’s earnings release boldly states that “business and consumer broadband revenues now represent 70 percent of total revenues.” In other words, the vast majority of Windstream’s business comes from relatively simple subscription-based product models. So, if an operator has a simpler core offering, like subscription-based broadband, can it get by with a disparate and somewhat aged billing infrastructure? At what point do migration costs and risks – as well as the customer support costs that inevitably follow new billing formats – outweigh the benefits of a streamlined end-state?

Windstream will likely provide answers to these questions. So far, it is generating significant cash and profit, but is doing so in the face of declining revenue as its business shifts away from traditional voice to broadband and other services. Going forward, financial analysts are monitoring whether Windstream can increase revenue per unit by selling new services into its existing customer base. A key to its success will be whether its disparate, legacy billing infrastructure supports or undermines its efforts. Windstream’s success or failure on this front will provide a remarkable counter-example that either bolsters or partially debunks the business case for large scale billing consolidation.

Author’s Note: Windstream did not respond to formal requests to comment for this story.

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Edward Finegold
Ed is now Director, Strategy for NetCracker. Previously, for 15 years he was a reporter, analyst and consultant focused on the OSS/BSS industry and a regular contributor to BillingViews.

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