Union members critical of Windstream over attempt to cut medical benefits for retirees

By Chuck Bartels, AP
Wednesday, May 5, 2010

Union members challenge Windstream at Ark. meeting

LITTLE ROCK, Ark. — Windstream Corp. reported lower earnings Wednesday but pledged to shareholders that the telephone and broadband company can grow, and also had to answer union critics upset over cuts to retiree benefits.

Chief Executive Jeffrey R. Gardner said Windstream has remade itself since its formation and that the telecom is poised to be a “next-generation” company by adding services and offering price guarantees.

“We can keep the cable company our of our customers’ homes and keep those customers for a long time,” Gardner told about 100 people gathered at the Capitol Hotel in Little Rock.

Windstream said after the stock market closed that it earned $74.1 million, or 17 cents per share, in the first quarter ending March 31. That’s a drop of 16 percent from $88.2 million, or 20 cents per share, a year earlier. Revenue for the quarter rose 12 percent to $847.9 million.

Shares in Windstream fell a penny to close at $11.

Windstream, which has operations in 21 states, was formed four years ago in a $4.9 billion deal in which Alltel Corp. spun off its wireline business. That business was then merged with Texas-based Valor Communications Group, where Communications Workers of America union members say their contract provided for health benefits for retirees.

Windstream says it can change health benefits at will; the union disagrees. The company wants retirees to pick up more costs, which the union claims can cost retired members $1,200 per month.

“That’s just a kick to us retirees and the union,” said Mark Slagle, who traveled from northeast Texas to be among several dozen union protesters. “I don’t think they (Windstream) listened at all. They think they have the right to do it.”

Little Rock-based Windstream has sued a number of workers who said in a mail survey from the company that they believe it cannot change the retiree health plan. Gardner said the suit wasn’t meant to be adversarial but a way to settle the dispute over how the collective bargaining agreement should be interpreted.

“We’ll get some clarity on that issue,” Gardner said. No trial date has been set for the suit, which he said was filed Feb. 1 in federal court.

Union members were also upset by Windstream’s attempt to recover legal fees for the lawsuit from any members who contest the action. Union member Jimmy Gurganus of Washington, D.C., said workers felt betrayed and intimidated when they were served with the suit.

Defendants can opt out by agreeing with the company that it can change retiree benefits.

Gardner said keeping costs under control, including legacy costs from Windstream’s acquisitions, enable the company to keep its free cash flow healthy.

With Windstream’s target customers in rural areas, Gardner said wireless competition isn’t as much of a threat because of inconsistent coverage.

He said Windstream is emphasizing its landline and data services to business customers.

“In businesses, people have (phone) handsets on their desks,” Gardner said. Once in the door, he said, Windstream can sell the companies data services as well.

Another part of Windstream’s business is to transmit calls for wireless companies. “They need someone like Windstream,” Gardner said, noting that wireless calls to land lines aren’t purely wireless.

For residential lines, Windstream is adding broadband customers and is offering a triple play combining phone, broadband and satellite TV, the latter through an agreement with Dish Network. The company is also offering a lifetime price guarantee of $49.99 per month for phone and broadband service.

In 2007, the company’s broadband segment brought in 38 percent of revenue. Now that figure is 52 percent. Residential business dropped from 34 percent in 2007 to 29 percent of revenue today.

“We don’t look like the telephone company that you saw five years ago,” Gardner said.

On the Net:

Windstream Corp.: www.windstream.com

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