Windstream Partner Base To Be Slashed Following Bankruptcy Filing

Some Windstream partners can expect to be cut from the carrier's channel program as the company works to return to health after filing for bankruptcy in February.

Nearly two months after filing for bankruptcy protection, Windstream is evaluating and cutting contracts with channel partners who have fallen below the annual revenue threshold, solution providers told CRN.

"There's partners out there that are seeing Windstream's problems that just haven't tried selling Windstream lately because they don't want to sell potentially problematic services to your customers," the partner said, referring to the company's recent bankruptcy filing.

Many partners, as a result, have drifted off of compliance, the partner said.

Every Windstream contracted partner must produce a minimum of $5,000 in new business each year, according to one channel partner that spoke to CRN under the condition of anonymity. The carrier is currently going through each of its contracts to determine which partners are complying, which ones are not, and enforcing each contract.

"A lot of partners are getting nervous they'll stop being paid," said another solution provider that asked not to be named. The solution provider is one of the partners that expects to be cut from Windstream's program.

[Related: Windstream Lawsuit Says Charter Engaged In ‘Scare-Tactic Campaign’]

Little Rock, Ark.-based Windstream did not return CRN's request for comment prior to publication.

Windstream filed for Chapter 11 bankruptcy on Feb. 25, a move that the company called a "voluntary reorganization" after Windstream lost its court battle with U.S. hedge fund Aurelius Capital Management, a Windstream bond holder. A federal court in New York at the time ruled Windstream defaulted on its bonds in 2015 when it spun off some of its telecom assets into a company called Uniti Group. Windstream now must pay Aurelius $310 million.

Windstream also has more than 100,000 creditors, according to the carrier, including the U.S. Bank National Association that has a claim of more than $1 billion in bond debt; AT&T, which is claiming more than $49.55 million; Verizon, with a claim of $34.05 million; and CenturyLink, claiming more than $7 million is owed to the company. The bankruptcy filing is meant to allow the company to continue to operate while "reorganizing" its finances, it said.

Carriers typically have more control over paying their channel partners, but because Windstream is in bankruptcy, every dollar paid out is being scrutinized by a judge or third-party.

"There's careful oversight over making sure those dollars are going out in a way that can bring the company back to health," one of the partners said. "When you're not in bankruptcy, you can choose to pay people -- like partners that you don't legally have to pay -- because you think that you might get more business from them."

Windstream, however, doesn't have the leeway to make those decisions right now. Windstream channel partners are in the process of receiving letters from the carrier informing them of their compliance status. Solution providers that don't work through a master agent and have a direct relationship to the carrier are more vulnerable to the recent round of contract enforcement because they are subject to sales thresholds.

This isn't the first time Windstream has tried to trim payouts to its channel. In February 2016, the carrier told its partners and small to midsize (SMB) customers that accounts lower than $1,500 would be cut off by the first day of 2017. The customers falling below this threshold at the time had their rates increase or were given the option to find another carrier without facing termination fees.

Windstream made news earlier this month when it filed a lawsuit against Charter Communications, the third-largest cable provider in the country. Windstream accused its carrier rival of launching an all-out “scare-tactic campaign” and using "bait and switch" efforts to attract Windstream’s customers to Charter’s Spectrum brand in light of the carrier's recent bankruptcy filing.