1

Windstream Prospective: The Future for CWA-represented

Employees

CWA Telecommunications

and Technologies Leadership

Conference

January 2017, San Juan, PR

The Communications Industry is Dynamic

Wireless data exploding – Growth of 1,013% 2011-13; Another 700% by 2020

2

Smartphone Usage

Texting/Email Internet

Camera/Video Social networking

Photo-sharing Music

Weather/News Internet of Things

Smart cities Self-driving cars

Environmental monitoring Home automation

Manufacturing innovation Health monitoring

Landline, however, is Shrinking

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

H1 2009 H2 2009 H1 2010 H2 2010H1 2011 H2 2011 H1 2012 H2 2012 H1 2013 H2 2013 H1 2014 H2 2014 H1 2015 H2 2015

Percentage of Adults Living in Households with/without Wireless and Landlines

Landline with Wireless

Wireless Only

Landline Only

Phoneless

Source: FCC Wireless Survey 2016

48%

3

Wireless Networks Demand Fiber Backhaul

Wireless and fiber complementary

– Backhaul = cable between towers and

central offices

5G will require order of magnitude

more backhaul

– VZ uses 30,000 towers for 4G

– It will need several million for 5G

Acquisitions

– VZ purchase of XO Communications (Feb.

2016)

– CenturyLink purchase offer of Level 3

(Nov. 2016)

– Windstream purchase offer of EarthLink

4

Will synergies between

landline and fiber lead to

mergers with T-Mobile / Sprint?

Landline Landscape

Consolidated Companies Landline Only Companies

AT&T Verizon CenturyLink Frontier

Windstream Fairpoint

Cable Companies Fiber-only Companies

Comcast Charter Level 3 Crown Castle

Cox Altice Zayo XO

Communications

Wireless-only Companies

T-Mobile Sprint 5

Landline Only Companies

Margins lower in landline than wireless

– Consolidated companies benefit from wireless

units

– Consolidated companies also moving into content

Task: pivot from POTS to fiber

Manage transition from analog to digital

Prepare for next stage of wired Internet

6

Windstream Growth, Part 1

2000: Valor Telecom formed to take over GTE assets purchased by

Verizon

2005: Private company went public as Valor Communications

Group (NYSE: VGC)

2006: Acquired Alltel wireline assets. Name changed to

Windstream Corp.(NASDAQ: WIN)

2007: Acquired wireline assets CT Communications (NC)

2007: Sold Windstream Yellow Pages

2009: Acquired D&E Communications (PA) (wireline assets)

2009: Acquired Iowa Telecom

7

Windstream Growth, Part 2

2010: Acquired NoVox Communications (local exchange

carrier in NC)

2010: Acquired Q-Comm Corporation (fiber in 22 states and

access lines in Evanston, IN)

2010: Acquired Hosted Solutions (cloud management)

2011: Acquired PAETEC Holding Company (fiber and local

exchange carrier)

2014: Acquired Business Only (business wireline in IL, NJ, NY,

WI)

2015: Spinoff of CLEC assets to Communications Sales and

Leasing (CS&L), a real estate investment trust (REIT)

2016: Purchase offer of Earthlink Holdings (fiber)

8

Windstream by the numbers

Operates in 29 states

12,326 employees

– 1,047 CWA-represented

– 1,022 CWA members

– 486 IBEW represented

EarthLink

– 2,138 employees, all

unrepresented

9

10,793

1,533

Windstream Union Presence

Organized

Employees

Unorganized

Employees

Financialization

Defined: The process of financial extraction from service or manufacturing companies at the expense of employees, customers, and communities for the benefit of shareholders. In public companies this takes place typically through dividends and stock buybacks.

2010-2015: Dividends distributed to shareholders have exceeded net income three-and-a-half-fold. The process has continued into 2016.

High level of debt. Windstream debt/EBITDA was x5.2 in 2015. At AT&T, debt/EBITDA was x2.8. At Verizon, debt/EBITDA was x2.2. Debt-driven growth squeezes all aspects of the company.

Result: less cash for employment, employee benefits, and higher prices for consumers

10

Financial Metrics

11

Windstream Communications

Financial Information

$ million 2011 2012 2013 2014 2015 1Q2016 2Q2016 3Q2016

Revenue $4,279.6 $6,139.5 $5,988.1 $5,829.5 $5,765.3 $1,373.4 $1,359.6 $1,344.9

EBITDA $1,881.5 $2,274.1 $2,389.3 $1,969.8 $1,991.6 $471.9 $471.3 $455.8

Net income $169.5 $168.0 $241.0 -$39.5 $27.4 -$231.9 $1.5 -$66.2

Total Debt $9,269.6 $9,086.0 $8,779.0 $8,722.2 $10,375.3 $10,618.5 $9,980.1 $9,965.8

Debt/EBITDA 4.9 4.0 3.7 4.4 5.2 5.6 5.3 5.5

Dividends $509.6 $588.0 $593.6 $602.2 $369.2 $14.9 $14.6 $14.6

Stock Buybacks $0.0 $0.0 $0.0 $0.0 $0.0 $28.9 $0.0 $0.0

Dividends +

Buybacks as

Percentage Net

Income 300.65% 350.00% 246.31% n/a 1347.45% n/a 973.33% n/a

CEO Pay

12

Windstream CEO Compensation

A B C D E F G H I

Performance Pay

CEO

Total Pay

Received

by CEO

(D+E+F+G+

H+I) Salary All other

Value

Realized on

Time-Vested

Stock

Non-equity

incentive

plan comp

Value

Realized on

Exercise of

Options

Value Realized

on

Performance-

Vested Stock

2015 A. Thomas $2,796,831 $1,000,000 $59,571 $243,630 $1,250,000 $0 $243,630

2014 A. Thomas $1,537,809 $538,461 $61,843 $405,053 $127,400 $0 $405,053

2013 J.R. Gardner $4,895,380 $1,000,000 $90,840 $311,862 $969,435 $0 $2,523,243

2012 J.R. Gardner $6,620,983 $998,615 $117,107 $471,929 $1,215,000 $0 $3,818,332

2011 J.R. Gardner $7,677,182 $991,000 $132,747 $529,671 $1,738,246 $0 $4,285,518

NOTE Gardner resigned December 2014 and was replaced by Thomas. He received $6,437,867 in compensation

in 2014. He received $3,000,000 severance in 2015

Shareholders Have Not Yet Benefited

13

240.42%

213.03%

100.17%

14.05%

-9.70% -15.59%

Verizon AT&T S&P 500 CTL WIN FTR

Change in Telecom Share Prices 1/1/10 to 1/17/17

Summing Up…

Landlines may be declining but telecom industry is

dynamic

Wireless data explosion dependent on fiber

deployment

Landline-only companies at competitive

disadvantage. Urge to build out fiber

Purchase offer of EarthLink extends fiber footprint

and portends move to business services

Windstream taking money out of company and

rewarding shareholders

14