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Telecoms are often looked at for how much debt they carry. In my analysis below, I will show that, even though many leading telecoms have large debt loads, what is most important is how that debt is managed. Additionally, in order to stay competitive against the major telecoms, smaller regional carriers must stay focused on consumers in select markets through brand loyalty and local customer support.

Windstream (WIN) describes itself as a "leading provider of advanced network communications including cloud computing and managed services to businesses nationwide." In addition, the company provides broadband, phone and digital offerings to primarily rural areas in the U.S. Windstream is known more for being a regional carrier that specializes in servicing rural areas in the Southwest. Windstream has entered the cloud computing market to extend its reach to enterprise clients outside of the U.S.

Other regional carriers offer traditional land line services, broadband, cable wireless and internet to specified areas in the U.S. It is hard to imagine that regional carriers can compete with industry giants offering an expanded range of services, customer support and better prices. The market is dominated by AT&T (T), Verizon (VZ) and CenturyLink(CTL), all of which operate in all domestic markets and internationally.

For all of the expanded offerings these companies offer, there are regional carriers who have fostered the loyalty of consumers in select markets because of the brand loyalty, local customer support and speed of response to customer needs. Windstream has created a successful regional carrier that is now expanding its reach. Other regional carriers may be ready to either follow the Windstream example or become an acquisition target by a company like Windstream.

Windstream's common shares trade around $11.20, have a 52 week range of $13.57 and $10.76. The price earnings multiple is 34.04. The earnings per share are $0.33. The dividend yield is 8.80%. Windstream has total cash of $227 million and total debt of $9.27 billion. Its book value per share is $2.56. Market capitalization is $6.57 billion.

Windstream's fourth quarter 2011 showed a 0.7% increase in revenue over the same period in 2010. Revenues from business were up 2.5% from the fourth quarter 2010. Broadband revenues were up 7% from the same period in 2010. Business and consumer broadband accounted for approximately 67.4% of Windstream's revenues in the 2011 fourth quarter.

Windstream has recently announced that it is taking steps toward originating content for its Merge high speed internet and streaming entertainment service, featuring entertainment reporter Mark Steines. Merge lets customers have high speed access to their own programming choices from the internet directly to television screens. This content creation is a way of providing variety and new content for viewers.

Windstream has also announced that it released a cost effective multi-location data service called Carried Switched Ethernet. Carrier Switched Ethernet provides wholesale carriers access to 980 exchanges within the Windstream network. This service allows carriers to reach 90% more of the businesses in Windstream's footprint with Ethernet access. It also allows bandwidth speeds that can transfer high volume content, video and high resolution images for basic business services such as email documents. The Carrier Switched Ethernet service is customizable to every business need and requirement.

For its business clients, Windstream has introduced Disaster Recovery as a Service which offers the combination of replication on the cloud technologies and offers a hosted and managed disaster recovery solution. It simplifies the recovery process in order to speed recovery time. The service runs in the cloud at a far more cost effective price than the cost of duplicating the entire production environment. It will be offered initially to customers in Boston where Windstream has made a number of infrastructure improvements in the area.

Windstream's pursued acquisitions and business strategies to minimize costs and build on existing customer relationships. The acquisitions are meant to give the company a source of growth to offset the traditional land line business.

Windstream faces an increasingly competitive market place, and cable companies are now offering phone systems and technological advances that make wireless data services more popular than traditional cable and telephony offerings. The quality, speed and recovery process of wireless service is also improving.

Alaska Communications Group (ALSK) is a provider of high-speed wireless, mobile, broadband, internet, local long-distance and advanced data solutions for businesses and consumers in Alaska. Alaska's business plan is to remain competitive with the entry of Verizon into the marketplace and to cope with the decrease in subsidies and service funding reform. New retail revenues were the target for growth and Alaska brought in the new iPhone to address this target. The company focused on the delivery of service to its enterprise and wireless customers, as well as to its consumer business clients. Prior to last year, these segments were underserved.

Alaska reported net income of $125 million for the year 2011 and an increase in enterprise revenue of 8% over the prior year. Revenues increased 3.2% over the prior year with enterprise revenues increasing 8.1% over the prior year. Data products represented over 90% of Alaska's revenues in 2011. Wireless revenue increased 4.6% over the prior year which offset decreases in retail service and equipment revenue. Retail and wireline revenue were unchanged over the year. Wireless connections increased for the third consecutive quarter. Revenues from both internet subscription and retail access lines declined in 2011.

Alaska is the first company to introduce 4G wireless to Alaska and commenced selling the iPhone 4 on April 20, 2012. Alaska's ability to provide the iPhone 4 will strengthen the company's subscriber base in Alaska. U.S. wireless giant Verizon is aggressively entering Alaska's market and may have the wherewithal to take over Alaska's territory.

Alaska shares trade around $2.60, have a year high of $9.73 and a year low of $2.44. The Price earnings multiple is 256.0. Earnings per share are $0.01 and the dividend yield is 7.8%. The company has total cash of $20.49 million and total debt of $578.03 million. Almost 60% of the float is owned by institutions with 20.3% of the float short.

Cincinnati Bell is a local exchange and wireless provider to residential and business clients in Ohio, Kentucky and Indiana. It released its 2011 fourth quarter and full year numbers showing that full year revenues were $1.5 billion which exceeded the guidance of $1.4 billion. A goodwill impairment in the fourth quarter caused a decrease in operating income of 13% and in net income of 34% from the prior year. Its data centre and co-location revenue showed a 21% increase from 2010. The company increased its data center capacity space to 763,000 square feet during 2011. Wireline revenue only decreased 1% as a result of increased demand for the company's Fioptics products mitigated this loss somewhat.

Cincinnati Bell's common shares trade around $3.70. The year high is $4.20 and the year low is $2.72. The market capitalization is $718.3 million. The price earnings multiple is 9.75. It does not pay a dividend. The company has total cash of $1.46 billion and total debt of $785 million. It has a negative book value per share of -$4.32. The company's shares are 91% owned by institutions and almost 13% of the float is short in the market.

Frontier Communications (FTR) operates in 27 states. The stock trades around $4.05, has a year high of $8.97 and a year low of $3.81. The stock has a price earnings ratio of 28:47 and earnings per share of $0.15. The dividend yield is 9.90%. The market capitalization is $4.10 billion. The company has total cash of $326.09 million and total debt of $8.3 billion. The book value per share is $4.48.

In 2009, Frontier purchased all of Verizon's landline assets in 12 states and all of Verizon's fiber optic cable systems in six states. In a move made to improve customer service and retain market share, Frontier consolidated all of its wireline exchange acquisition assets into its legacy systems to reduce costs and to streamline systems and efficiencies.

The common denominator for Windstream, Cincinnati Bell, Frontier, Verizon and Alaska, is that they have all incurred heavy debt to finance acquisitions which is having a negative impact shareholder value at this time. The conventional wisdom is that as time goes by, the acquisition costs will be earned back and provide added value over time.

These companies also face the loss of services subsidies and access fees from other carriers as the result of declining subscriptions to land line services. Regulators continue to look to change the universal service subsidies and access fees that will continue to slash this revenue. These subsidies and access fees are a high margin revenue source and are not likely to be replaced by any of the new revenues streams.

With the exception of Cincinnati Bell, all of them offer good dividend yields. This might be viewed as the promise of a dividend making the management be more stringent and disciplined in all areas of business planning. While this may be the case, it may also be that these companies are trying to reward shareholders for loyalty or attract shareholders who will make investment decisions based on the safety and security of a dividend.

In rural markets telecom companies face less competition from cable and wireless than most urban telecom companies, mostly because of the geographic boundaries. Rural markets are intensely loyal to local carriers because of the service provided and because of the employment of locals by these carriers. It is a tough market to crack, although the service packages offered by companies such as Verizon are really difficult to compete with on a regional level.

All of these companies are potential takeover targets for Windstream. Frontier has a short position of 18.5% of its float with 46% owned by institutions. Most of the short position can be attributed to playing the ex-dividend period for higher yield, the same can be said for Alaska, which has a short position of 20.3% short position and is 60% owned by institutions. Cincinnati has a short position of 12.8% of its float and the shares are 90% owned by institutions. Cincinnati has a promising future, but right now, with a negative book value and no dividend, it is difficult to find a reason to be in this stock. The institutions who are large owners are very likely shopping this company for acquisition by a larger entity. Its business mix is better for Windstream, which can handle an acquisition of this size.

If Frontier was in better financial shape, this acquisition would augment its current holdings. Frontier is also a good target for Windstream if Frontier's debt can be efficiently rationalized. Alaska is functioning well and is also a likely acquisition for Windstream, but it makes more sense for a competitor such as Verizon, that already has a presence in Alaska, to make a play for its assets. My sense is that Cincinnati is more likely to be put in play in the near term, judging by its price and short position. I think the market agrees with me.

Source: 3 High-Yield Telecom Stocks To Buy For Gains In 2013