Windstream and Frontier Cash in On Netflix-Verizon Spat

Windstream Holdings and Frontier Communications are apparently as good as Verizon in one important category.

Jun 12, 2014 at 3:30PM

Windstream Holdings (NASDAQ:WIN) and Frontier Communications (NASDAQ:FTR) rarely make headlines for their technological advances. They are telco providers that have emphasized underserved rural markets as a way to avoid locking horns with the industry's giants. This naturally isn't a hotbed of growth. Analysts see Windstream and Frontier posting modest declines in revenue through the next couple of years. 

However, Windstream and Frontier became the unlikely beneficiaries of Netflix's (NASDAQ:NFLX) ongoing dispute with Verizon (NYSE:VZ). The leading premium streaming video provider has been calling out Internet service companies for their transmission speeds on Netflix content. It's been putting out monthly charts spelling out the speeds that its streams are receiving across the country's broadband providers. 

Netflix and Verizon seemed to have made nice several weeks ago on a deal that would speed up transmissions, but that apparently didn't help matters much last month. Netflix's latest blog post shows Verizon's DSL service is last among the 16 providers singled out by Netflix. Verizon's speedier FiOS offering slipped two slots to 10 on the list. The two companies that passed Verizon were Windstream and Frontier. 

Technically speaking, all three clocked in at a rather unimpressive 1.9 megabits per second. However, Verizon FiOS dipped since April while Windstream and Frontier improved their rates. At the end of the day Windstream and Frontier still have bragging rights. When it comes to Netflix users their modest DSL platforms are not only faster than Verizon DSL, but they are just as good as Verizon FiOS.


Source: Netflix.

There's naturally more to this story than just the bragging rights. Windstream and Frontier are appealing to income investors given the generous payouts that they're currently dishing out. Frontier's yielding a healthy 7% on its stock, and Windstream is clocking in at a whopping 10.3%. Those yields -- particularly Windstream's disbursements -- won't be sustainable for long if earnings follow revenue lower.

Both telcos are trying. They're pushing online and business services to offset the evolutionary decline in landlines. It wouldn't hurt if their broadband platforms grew a little faster, and here is where they can use this Netflix data as a springboard to retain their subscribers and possibly attract new ones. Netflix is a pretty big deal in rural markets where movie theaters and now even Redbox kiosks are hard to come by. If Netflix's read on the data is correct about Windstream and Frontier holding up as well as both of Verizon's online offerings they should be shouting it from the rooftops.

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Rick Munarriz owns shares of Netflix. The Motley Fool recommends Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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