It’s 2016, and EarthLink sells “Unlimited 56K dial-up access”
for $25 per month.
Internet provider Windstream today announced that it will buy EarthLink for $673 million in an all-stock transaction. The merger is focused on creating a stronger network operator for business customers, but it also provides a reminder that after all these years, dial-up Internet is still being sold.
EarthLink was founded in 1994 to provide dial-up Internet service and had more than 1 million customers by the late 1990s. But while dial-up has long been overtaken by DSL, cable, and fiber network technologies, EarthLink is still offering its original Internet service and boasts, “We’re the dial-up Internet experts. It’s what we’ve been doing best since 1994.”
EarthLink dial-up costs $9.95 a month for the first three months and $24.95 a month thereafter (or $14.50 a month if you prepay for a year). For that price, you’ll get “Unlimited 56K dial-up access,” e-mail, and “10MB of webspace for your own website,” the company says. EarthLink also advertises DSL, cable, and satellite service through reseller agreements that allow EarthLink to sell the services without building the networks itself.
EarthLink today says it has 671,000 consumer subscribers, while Windstream (which advertises speeds up to 25Mbps) has about 1 million residential Internet subscribers. But the merger is really about business customers, tax benefits, and cost savings. The companies have identified $125 million in annual operating and capital expenses that can be cut within 36 months of closing. Recent operating losses can also be carried forward “to reduce future cash tax expenses.”
“The combination will result in an extensive national footprint spanning approximately 145,000 fiber route miles and provide advanced network connectivity, managed services, voice, internet and other value-added services,” the merger announcement said. “Customers will also benefit from combining Windstream’s scale in the Enterprise segment and EarthLink’s successful launch of SD-WAN.”
Windstream will take on $436 million of EarthLink debt, giving the entire transaction a value of about $1.1 billion. The merger requires approval by the Federal Communications Commission, and the companies say they expect it to close in the first half of 2017.
EarthLink revenue has gone up and down over the past decade as it shifted from residential service to a business-oriented model. In 2006, the company lost a court case that resulted in telcos being able to install fiber lines without leasing them to competitors.
EarthLink reported revenue of $1.3 billion and record net income of $142.8 million in fiscal year 2005. Revenue dropped quickly after that, bottoming out at $622.2 million in 2010, but rebounded to more than $1.3 billion in 2011 on the strength of acquisitions that boosted EarthLink’s business services offerings. EarthLink revenue rose again to $1.35 billion in 2012 before slight declines each year dropped the company to $1.1 billion in 2015.
Services for enterprises, small businesses, and carriers now provide nearly 80 percent of EarthLink’s revenue, with residential customers providing the rest. EarthLink’s revenue wasn’t enough to cover expenses in 2014 and 2015, with net losses of $72.8 million and $43.2 million, respectively. Full-year revenue is on pace to drop again in 2016, but the company reported profits of about $12.2 million in the first three quarters combined.
In the most recent quarter, Windstream reported $1.34 billion in revenue and a net loss of $66 million. Windstream’s full year results in 2015 were $5.77 billion in revenue and net income of $27 million.