It's funny to think back on the evolution of telecommunications, when landlines and dial-up modems were a technological breakthrough and when the first cell phones were absolutely astonishing. However, these advancements were accompanied by many associated issues: slow network speed, poor connection and pricey products, much of which led to the telecom industry being an unfavorable one on Wall Street in 2009. Now, at the height of the digital era, telecommunication services are on an aggressive rise, competing fiercely against each other with technological advances, new products, and lower prices.
Current trends in telecommunications include the usage of fiber optics, which provide enhanced quality, increased efficiency, and more reliability compared to the traditional services and landlines. Windstream (WIN) is one of the largest telecommunication companies to use a fiber optic network for its business services as well as its broadband, voice, and video services. Its business services include multisite networking, high-speed Internet access, data center services, special access services, and telephone services. The company also sells customized communications equipment systems to its business customers.
More important are the advances and enhancements in the services that Windstream provides pertaining to its fiber optic network. The benefit of this fiber optic network is that it delivers high-capacity capabilities and reliability for the advanced data, voice, and network services that are currently high in demand.
It is one of the first companies to heavily invest in and implement cloud computing: a service used for wirelessly and safely storing data, and also provides limitless communication connections. These are the types of technological advances that will give Windstream an advantage when going up against its biggest telecommunications competitors, AT&T (T), Verizon (VZ), and Sprint Nextel (S) -- all of which have also hopped on to the cloud band wagon, but at a much slower pace.
With its competitors already big in the game, Windstream acquired Q-Comm Corporation in 2010 for approximately $782 million, which also included subsidiaries Kentuck Data Link and Norlight. A few months later Windstream acquired Hosted Solutions, a managed hosting and cloud services provider. All of these names are among the top cloud computing contributing companies.
So what does cloud computing have to do with Windstream's future success? More and more landlines are being dropped as they become unnecessary in this tech-savvy world. Windstream holds the advantage as it looks toward the future with wireless data hosting capabilities, which will soon become an essential commodity.
A new competitor that has been coming in hot against Windstream, Verizon, and AT&T is CenturyLink (CTL), which just acquired Savvis, a global provider of cloud infrastructure and hosted IT solutions, last July. With this new hardware capability, CenturyLink and Windstream are setting up for a good competition in this growing network.
Last August, Windstream's Executive Vice President of Business Sales John Leach announced the $2.3 billion acquisition of PAETEC by Windstream, which is said to be a major win for the company and its customers. With plans to further the expansion of its fiber optic network, the transaction will significantly boost the process -- especially with PAETEC's dense nationwide fiber network and resources. Merging will expand Windstream's operations coast to coast, increasing from 29 states to nationwide with approximately 100,000 fiber route miles.
Not wasting any time at all, PAETEC announced early last week that it will be instituting an entire new area code in Maryland and will be laying down additional fiber-optic networks in New Mexico. This expansion of the network means that Windstream is aggressively ruling out the need for landlines as it offers fast, reliable, and affordable wireless services to rural areas.
At the time of writing, Windstream was trading at around $12 with an increase Tuesday of about 0.21%. When compared to its main competitors -- CenturyLink, recently trading around $39 with a 0.51% increase, AT&T trading around $32 with a 0.70% increase, and Verizon trading around $39 with a 0.60% loss -- Windstream shares seem as if they have some catching up to do, but the company still has positive estimates for an increase this year due to the rise in technology trends.
The problem AT&T, Verizon, and Sprint have is the continued heavy usage of landlines, which are being dropped rapidly and causing them to lose customers. Also, while these companies are using cloud computing, it is not being implemented in a way that will cause enough growth -- especially when up against rapidly moving and innovative companies like CenturyLink and Windstream.
It seems the most AT&T, Verizon, and Sprint are doing is constantly trying to improve their networks, come out with new products that don't stand a chance against the top sellers, and offer lower prices. The most AT&T has headlined in the news recently is in regard to the launch of it's new cell phone, the AT&T Nokia Lumia 900, set to launch April 8th for only $100. It is evident that AT&T is recognizing its need to rev up its innovation, as this will be the first major handset from Nokia under its partnership with Microsoft to build Windows Phone-based devices.
Sprint, which has just paired up with Cisco, has also recognized the importance of the cloud computing trend and will launch the first of several cloud-based services this year, hinting at a cost-friendly platform for voice over Internet protocol, streaming media, and SIP trunking.
Most important for these telecommunication companies is the prediction of technology trends for 2012. Pete Cashmore, founder and CEO of the popular blog Mashable, has made predictions for the top trends this year, all which will require cloud computing services for optimal use.
Some of the innovation Cashmore predicts we will see includes touch computing, a complete transition to tablet usage; social gestures, automatic posts to your profile depending on what you listen to or look at; near field communication and mobile payments; increased usage of voice control devices and services; spatial gestures, which can control devices; and flexible screens that zoom and scroll when you bend them.
Windstream's current stock trading value may not seem high enough to be considered a good investment in a telecom company; however, considering its rapid advancements in the right direction, I wouldn't doubt that the company will quickly start to take over -- especially at the rocket speed of technology innovations. Windstream has had an increase in revenues from $3.7 billion last year to $4.3 billion, a 15.59% increase.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
