WINDSTREAM HOLDINGS, INC. (Form: 10-Q, Received: 05/08/2017 17:34:44)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934



Exact name of registrant as specified in its charter	State or other jurisdiction of incorporation or organization	Commission File Number	I.R.S. Employer Identification No.
Exact name of registrant as specified in its charter		Commission File Number	I.R.S. Employer Identification No.
Windstream Holdings, Inc.	Delaware	001-32422	46-2847717
Windstream Services, LLC	Delaware	001-36093	20-0792300




4001 Rodney Parham Road
Little Rock, Arkansas			72212
(Address of principal executive offices)			(Zip Code)

		(501) 748-7000
	(Registrants’ telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Windstream Holdings, Inc.	ý YES ¨ NO
Windstream Services, LLC	ý YES ¨ NO

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



Windstream Holdings, Inc.	ý YES ¨ NO
Windstream Services, LLC	ý YES ¨ NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act:



Windstream Holdings, Inc.	Large accelerated filer ý	Accelerated filer ¨
	Non-accelerated filer ¨	(Do not check if a smaller reporting company)
		Smaller reporting company ¨
		Emerging growth company ¨

Windstream Services, LLC	Large accelerated filer ¨	Accelerated filer ¨
	Non-accelerated filer ý	(Do not check if a smaller reporting company)
		Smaller reporting company ¨
		Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.



Windstream Holdings, Inc.	¨ YES ¨ NO
Windstream Services, LLC	¨ YES ¨ NO

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).



Windstream Holdings, Inc.	¨ YES ý NO
Windstream Services, LLC	¨ YES ý NO

As of May 4, 2017, 190,494,304 shares of common stock of Windstream Holdings, Inc.were outstanding. Windstream Holdings, Inc. holds a 100 percent interest in Windstream Services, LLC.

This Form 10-Q is a combined quarterly report being filed separately by two registrants: Windstream Holdings, Inc. and Windstream Services, LLC. Windstream Services, LLC is a direct, wholly-owned subsidiary of Windstream Holdings, Inc. Accordingly, Windstream Services, LLC meets the conditions set forth in general instruction H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the reduced disclosure format. Unless the context indicates otherwise, the use of the terms “Windstream,” “we,” “us” or “our” shall refer to Windstream Holdings, Inc. and its subsidiaries, including Windstream Services, LLC, and the term “Windstream Services” shall refer to Windstream Services, LLC and its subsidiaries.



The Exhibit Index is located on page 81 .

Table of Contents

WINDSTREAM HOLDINGS, INC.

WINDSTREAM SERVICES, LLC

FORM 10-Q

TABLE OF CONTENTS




		Page No.
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements
	Windstream Holdings, Inc. Consolidated Financial Statements
	Consolidated Statements of Operations (Unaudited)	2
	Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	3
	Consolidated Balance Sheets (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	5
	Consolidated Statement of Shareholders' Equity (Unaudited)	6
	Windstream Services, LLC Consolidated Financial Statements
	Consolidated Statements of Operations (Unaudited)	7
	Consolidated Statements of Comprehensive Income (Loss) (Unaudited)	8
	Consolidated Balance Sheets (Unaudited)	9
	Consolidated Statements of Cash Flows (Unaudited)	10
	Consolidated Statement of Member Equity (Unaudited)	11
	Notes to Unaudited Interim Consolidated Financial Statements	12
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	75
Item 4.	Controls and Procedures	76

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	78
Item 1A.	Risk Factors	78
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	*
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Mine Safety Disclosures	*
Item 5.	Other Information	79
Item 6.	Exhibits	79

_____________


*	No reportable information under this item.

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WINDSTREAM HOLDINGS, INC.

WINDSTREAM SERVICES, LLC

FORM 10-Q

PART I - FINANCIAL INFORMATION

Item 1 . Financial Statements

WINDSTREAM HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



	Three Months Ended March 31,
(Millions, except per share amounts)	2017			2016
Revenues and sales:
Service revenues	$	1,344.4		$	1,340.6
Product sales	21.3			32.8
Total revenues and sales	1,365.7			1,373.4
Costs and expenses:
Cost of services (exclusive of depreciation and amortization included below)	682.4			668.8
Cost of products sold	20.8			28.9
Selling, general and administrative	213.3			203.8
Depreciation and amortization	338.5			304.8
Merger, integration and other costs	57.3			5.0
Restructuring charges	7.4			4.4
Total costs and expenses	1,319.7			1,215.7
Operating income	46.0			157.7
Dividend income on Uniti common stock	—			17.6
Other income (expense), net	0.7			(1.2		)
Net loss on early extinguishment of debt	(3.2		)	(35.4		)
Other-than-temporary impairment loss on investment in Uniti common stock	—			(181.9		)
Interest expense	(211.8		)	(219.7		)
Loss before income taxes	(168.3		)	(262.9		)
Income tax benefit	(57.0		)	(31.0		)
Net loss	$	(111.3	)	$	(231.9	)
Basic and diluted loss per share:
Net loss		($.89	)		($2.52	)

See the accompanying notes to the unaudited interim consolidated financial statements.

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WINDSTREAM HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)



	Three Months Ended March 31,
(Millions)	2017			2016
Net loss	$	(111.3	)	$	(231.9	)
Other comprehensive income (loss):
Available-for-sale securities:
Unrealized holding gain arising during the period	—			104.6
Other-than-temporary impairment loss recognized in the period	—			181.9
Change in available-for-sale securities	—			286.5
Interest rate swaps:
Unrealized gain (loss) on designated interest rate swaps	3.4			(8.3		)
Amortization of net unrealized losses on de-designated interest rate swaps	1.5			1.2
Income tax (expense) benefit	(1.9		)	2.7
Change in interest rate swaps	3.0			(4.4		)
Postretirement and pension plans:
Plan curtailment	—			(5.5		)
Amounts included in net periodic benefit cost:
Amortization of net actuarial loss	—			0.1
Amortization of prior service credits	(0.2		)	(0.5		)
Income tax benefit	0.1			2.3
Change in postretirement and pension plans	(0.1		)	(3.6		)
Other comprehensive income	2.9			278.5
Comprehensive (loss) income	$	(108.4	)	$	46.6

See the accompanying notes to the unaudited interim consolidated financial statements.

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WINDSTREAM HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS (UNAUDITED)



(Millions, except par value)	March 31, 2017			December 31, 2016
Assets
Current Assets:
Cash and cash equivalents	$	51.5		$	59.1
Accounts receivable (less allowance for doubtful
accounts of $23.7 and $27.1, respectively)	654.8			618.6
Inventories	87.0			77.5
Prepaid expenses and other	169.8			111.7
Total current assets	963.1			866.9
Goodwill	4,690.2			4,213.6
Other intangibles, net	1,577.7			1,320.5
Net property, plant and equipment	5,575.6			5,283.5
Other assets	97.6			85.5
Total Assets	$	12,904.2		$	11,770.0
Liabilities and Shareholders’ Equity
Current Liabilities:
Current maturities of long-term debt	$	19.3		$	14.9
Current portion of long-term lease obligations	172.9			168.7
Accounts payable	335.8			390.2
Advance payments and customer deposits	215.1			178.1
Accrued taxes	80.9			78.0
Accrued interest	96.0			58.1
Other current liabilities	381.0			366.6
Total current liabilities	1,301.0			1,254.6
Long-term debt	5,459.8			4,848.7
Long-term lease obligations	4,787.1			4,831.9
Deferred income taxes	98.2			151.5
Other liabilities	535.7			513.3
Total liabilities	12,181.8			11,600.0
Commitments and Contingencies (See Note 15)
Shareholders’ Equity:
Common stock, $.0001 par value, 375.0 shares authorized,
190.4 and 96.3 shares issued and outstanding, respectively	—			—
Additional paid-in capital	1,220.5			559.7
Accumulated other comprehensive income	8.8			5.9
Accumulated deficit	(506.9		)	(395.6		)
Total shareholders’ equity	722.4			170.0
Total Liabilities and Shareholders’ Equity	$	12,904.2		$	11,770.0

See the accompanying notes to the unaudited interim consolidated financial statements.

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WINDSTREAM HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Three Months Ended March 31,
(Millions)	2017			2016
Cash Flows from Operating Activities:
Net loss	$	(111.3	)	$	(231.9	)
Adjustments to reconcile net loss to net cash provided from operations:
Depreciation and amortization	338.5			304.8
Provision for doubtful accounts	9.6			9.7
Share-based compensation expense	16.8			13.7
Deferred income taxes	(55.2		)	(27.5		)
Noncash portion of net loss on early extinguishment of debt	(15.1		)	(7.4		)
Other-than-temporary impairment loss on investment in Uniti common stock	—			181.9
Amortization of unrealized losses on de-designated interest rate swaps	1.5			1.2
Plan curtailment	—			(5.5		)
Other, net	0.7			(15.3		)
Changes in operating assets and liabilities, net
Accounts receivable	33.8			(2.0		)
Prepaid income taxes	(5.6		)	(5.8		)
Prepaid expenses and other	(30.5		)	(6.0		)
Accounts payable	(61.5		)	(100.2		)
Accrued interest	29.9			39.8
Accrued taxes	(2.3		)	(12.5		)
Other current liabilities	(5.3		)	4.2
Other liabilities	2.4			(10.0		)
Other, net	(13.9		)	(4.0		)
Net cash provided from operating activities	132.5			127.2
Cash Flows from Investing Activities:
Additions to property, plant and equipment	(243.4		)	(263.8		)
Proceeds from the sale of property	—			6.2
Cash acquired from EarthLink	5.0			—
Other, net	(2.5		)	—
Net cash used in investing activities	(240.9		)	(257.6		)
Cash Flows from Financing Activities:
Dividends paid to shareholders	(23.7		)	(14.9		)
Proceeds from issuance of stock	9.6			—
Repayments of debt and swaps	(1,133.4		)	(985.3		)
Proceeds of debt issuance	1,315.6			1,278.0
Debt issuance costs	(7.0		)	(10.7		)
Stock repurchases	—			(28.9		)
Payments under long-term lease obligations	(40.6		)	(36.8		)
Payments under capital lease obligations	(8.7		)	(19.8		)
Other, net	(11.0		)	(7.9		)
Net cash provided from financing activities	100.8			173.7
(Decrease) increase in cash and cash equivalents	(7.6		)	43.3
Cash and Cash Equivalents:
Beginning of period	59.1			31.3
End of period	$	51.5		$	74.6
Supplemental Cash Flow Disclosures:
Interest paid, net of interest capitalized	$	168.9		$	178.6
Income taxes (refunded) paid, net	$	(0.2	)	$	6.5

See the accompanying notes to the unaudited interim consolidated financial statements.

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WINDSTREAM HOLDINGS, INC.

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY (UNAUDITED)



(Millions, except per share amounts)	Common Stock and Additional Paid-In Capital			Accumulated Other Comprehensive Income			Accumulated Deficit			Total
Balance at December 31, 2016	$	559.7		$	5.9		$	(395.6	)	$	170.0
Net loss	—			—			(111.3		)	(111.3		)
Other comprehensive income (loss), net of tax:
Change in postretirement and pension plans	—			(0.1		)	—			(0.1		)
Amortization of unrealized losses on de-designated interest rate swaps	—			0.9			—			0.9
Change in designated interest rate swaps	—			2.1			—			2.1
Comprehensive income (loss)	—			2.9			(111.3		)	(108.4		)
Share-based compensation	10.7			—			—			10.7
Stock issued for pension contribution (See Note 7)	9.6			—			—			9.6
Stock issued to employee savings plan (See Note 7)	22.7			—			—			22.7
Stock issued in merger with EarthLink (See Note 2)	646.9			—			—			646.9
Taxes withheld on vested restricted stock and other	(8.8		)	—			—			(8.8		)
Dividends of $.15 per share declared to shareholders	(20.3		)	—			—			(20.3		)
Balance at March 31, 2017	$	1,220.5		$	8.8		$	(506.9	)	$	722.4

See the accompanying notes to the unaudited interim consolidated financial statements.

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WINDSTREAM SERVICES, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)



	Three Months Ended March 31,
(Millions)	2017			2016
Revenues and sales:
Service revenues	$	1,344.4		$	1,340.6
Product sales	21.3			32.8
Total revenues and sales	1,365.7			1,373.4
Costs and expenses:
Cost of services (exclusive of depreciation and amortization included below)	682.4			668.8
Cost of products sold	20.8			28.9
Selling, general and administrative	213.0			203.3
Depreciation and amortization	338.5			304.8
Merger, integration and other costs	57.3			5.0
Restructuring charges	7.4			4.4
Total costs and expenses	1,319.4			1,215.2
Operating income	46.3			158.2
Dividend income on Uniti common stock	—			17.6
Other income (expense), net	0.7			(1.2		)
Net loss on early extinguishment of debt	(3.2		)	(35.4		)
Other-than-temporary impairment loss on investment in Uniti common stock	—			(181.9		)
Interest expense	(211.8		)	(219.7		)
Loss before income taxes	(168.0		)	(262.4		)
Income tax benefit	(56.9		)	(30.8		)
Net loss	$	(111.1	)	$	(231.6	)

See the accompanying notes to the unaudited interim consolidated financial statements.

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WINDSTREAM SERVICES, LLC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)



	Three Months Ended March 31,
(Millions)	2017			2016
Net loss	$	(111.1	)	$	(231.6	)
Other comprehensive income (loss):
Available-for-sale securities:
Unrealized holding gain arising during the period	—			104.6
Other-than-temporary impairment loss recognized in the period	—			181.9
Change in available-for-sale securities	—			286.5
Interest rate swaps:
Unrealized gain (loss) on designated interest rate swaps	3.4			(8.3		)
Amortization of net unrealized losses on de-designated interest rate swaps	1.5			1.2
Income tax (expense) benefit	(1.9		)	2.7
Change in interest rate swaps	3.0			(4.4		)
Postretirement and pension plans:
Plan curtailment	—			(5.5		)
Amounts included in net periodic benefit cost:
Amortization of net actuarial loss	—			0.1
Amortization of prior service credits	(0.2		)	(0.5		)
Income tax benefit	0.1			2.3
Change in postretirement and pension plans	(0.1		)	(3.6		)
Other comprehensive income	2.9			278.5
Comprehensive (loss) income	$	(108.2	)	$	46.9

See the accompanying notes to the unaudited interim consolidated financial statements.

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WINDSTREAM SERVICES, LLC

CONSOLIDATED BALANCE SHEETS (UNAUDITED)



(Millions)	March 31, 2017			December 31, 2016
Assets
Current Assets:
Cash and cash equivalents	$	51.5		$	59.1
Accounts receivable (less allowance for doubtful
accounts of $23.7 and $27.1, respectively)	654.8			618.6
Inventories	87.0			77.5
Prepaid expenses and other	169.8			111.7
Total current assets	963.1			866.9
Goodwill	4,690.2			4,213.6
Other intangibles, net	1,577.7			1,320.5
Net property, plant and equipment	5,575.6			5,283.5
Other assets	97.6			85.5
Total Assets	$	12,904.2		$	11,770.0
Liabilities and Member Equity
Current Liabilities:
Current maturities of long-term debt	$	19.3		$	14.9
Current portion of long-term lease obligations	172.9			168.7
Accounts payable	335.8			390.2
Advance payments and customer deposits	215.1			178.1
Payable to Windstream Holdings, Inc.	11.3			15.0
Accrued taxes	80.9			78.0
Accrued interest	96.0			58.1
Other current liabilities	369.7			351.6
Total current liabilities	1,301.0			1,254.6
Long-term debt	5,459.8			4,848.7
Long-term lease obligations	4,787.1			4,831.9
Deferred income taxes	98.2			151.5
Other liabilities	535.7			513.3
Total liabilities	12,181.8			11,600.0
Commitments and Contingencies (See Note 15)
Member Equity:
Additional paid-in capital	1,216.7			556.1
Accumulated other comprehensive income	8.8			5.9
Accumulated deficit	(503.1		)	(392.0		)
Total member equity	722.4			170.0
Total Liabilities and Member Equity	$	12,904.2		$	11,770.0

See the accompanying notes to the unaudited interim consolidated financial statements.

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WINDSTREAM SERVICES, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)



	Three Months Ended March 31,
(Millions)	2017			2016
Cash Flows from Operating Activities:
Net loss	$	(111.1	)	$	(231.6	)
Adjustments to reconcile net loss to net cash provided from operations:
Depreciation and amortization	338.5			304.8
Provision for doubtful accounts	9.6			9.7
Share-based compensation expense	16.8			13.7
Deferred income taxes	(55.2		)	(27.5		)
Noncash portion of net loss on early extinguishment of debt	(15.1		)	(7.4		)
Other-than-temporary impairment loss on investment in Uniti common stock	—			181.9
Amortization of unrealized losses on de-designated interest rate swaps	1.5			1.2
Plan curtailment	—			(5.5		)
Other, net	0.7			(15.3		)
Changes in operating assets and liabilities, net
Accounts receivable	33.8			(2.0		)
Prepaid income taxes	(5.6		)	(5.8		)
Prepaid expenses and other	(30.5		)	(6.0		)
Accounts payable	(61.5		)	(100.2		)
Accrued interest	29.9			39.8
Accrued taxes	(2.3		)	(12.5		)
Other current liabilities	(6.1		)	4.2
Other liabilities	2.4			(10.0		)
Other, net	(13.9		)	(4.0		)
Net cash provided from operating activities	131.9			127.5
Cash Flows from Investing Activities:
Additions to property, plant and equipment	(243.4		)	(263.8		)
Proceeds from the sale of property	—			6.2
Cash acquired from EarthLink	5.0			—
Other, net	(2.5		)	—
Net cash used in investing activities	(240.9		)	(257.6		)
Cash Flows from Financing Activities:
Distributions to Windstream Holdings, Inc.	(24.3		)	(44.1		)
Contribution from Windstream Holdings, Inc.	9.6			—
Repayments of debt and swaps	(1,133.4		)	(985.3		)
Proceeds of debt issuance	1,315.6			1,278.0
Debt issuance costs	(7.0		)	(10.7		)
Payments under long-term lease obligations	(40.6		)	(36.8		)
Payments under capital lease obligations	(8.7		)	(19.8		)
Other, net	(9.8		)	(7.9		)
Net cash provided from financing activities	101.4			173.4
(Decrease) increase in cash and cash equivalents	(7.6		)	43.3
Cash and Cash Equivalents:
Beginning of period	59.1			31.3
End of period	$	51.5		$	74.6
Supplemental Cash Flow Disclosures:
Interest paid, net of interest capitalized	$	168.9		$	178.6
Income taxes (refunded) paid, net	$	(0.2	)	$	6.5

See the accompanying notes to the unaudited interim consolidated financial statements.

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WINDSTREAM SERVICES, LLC

CONSOLIDATED STATEMENT OF MEMBER EQUITY (UNAUDITED)



(Millions)	Additional Paid-In Capital			Accumulated Other Comprehensive Income			Accumulated Deficit			Total
Balance at December 31, 2016	$	556.1		$	5.9		$	(392.0	)	$	170.0
Net loss	—			—			(111.1		)	(111.1		)
Other comprehensive income (loss), net of tax:
Change in postretirement and pension plans	—			(0.1		)	—			(0.1		)
Amortization of unrealized losses on de-designated interest rate swaps	—			0.9			—			0.9
Change in designated interest rate swaps	—			2.1			—			2.1
Comprehensive income (loss)	—			2.9			(111.1		)	(108.2		)
Share-based compensation	10.7			—			—			10.7
Contributions from Windstream Holdings, Inc.:
Cash contribution to pension plan (See Note 7)	9.6			—			—			9.6
Stock contribution to employee savings plan (See Note 7)	22.7			—			—			22.7
Stock contribution for merger with EarthLink (See Note 2)	646.9			—			—			646.9
Taxes withheld on vested restricted stock and other	(8.8		)	—			—			(8.8		)
Distributions payable to Windstream Holdings, Inc.	(20.5		)	—			—			(20.5		)
Balance at March 31, 2017	$	1,216.7		$	8.8		$	(503.1	)	$	722.4

See the accompanying notes to the unaudited interim consolidated financial statements.

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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Preparation of Interim Financial Statements:

In these consolidated financial statements, unless the context requires otherwise, the use of the terms “Windstream,” “we,” “us” or “our” shall refer to Windstream Holdings, Inc. and its subsidiaries, including Windstream Services, LLC, and the term “Windstream Services” shall refer to Windstream Services, LLC and its subsidiaries.

Organizational Structure – Windstream Holdings, Inc. (“Windstream Holdings”) is a publicly traded holding company incorporated in the state of Delaware on May 23, 2013, and the parent of Windstream Services, LLC (“Windstream Services”), a Delaware limited liability company organized on March 1, 2004. Windstream Holdings common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the ticker symbol “WIN”. Windstream Holdings owns a 100 percent interest in Windstream Services. Windstream Services and its guarantor subsidiaries are the sole obligors of all outstanding debt obligations and, as a result also file periodic reports with the Securities and Exchange Commission (“SEC”). Windstream Holdings is not a guarantor of nor subject to the restrictive covenants included in any of Windstream Services’ debt agreements. The Windstream Holdings board of directors and officers oversee both companies.

Description of Business – We are a leading provider of advanced network communications and technology solutions for consumers, businesses, enterprise organizations and wholesale customers across the United States. We provide data, cloud solutions, unified communications and managed services to small business and enterprise clients. We also offer bundled services, including broadband, security solutions, voice and digital television to consumers. We supply core transport solutions on a local and long-haul fiber network spanning approximately 147,000 miles.

Consumer service revenues are generated from the provisioning of high-speed Internet, voice and video services to consumers. Business service revenues include revenues from integrated voice and data services, advanced data and traditional voice and long-distance services provided to enterprise and small business customers. Wholesale revenues include revenues from other communications services providers for special access circuits and fiber connections, voice and data transport services, and revenues from the reselling of our services. Regulatory revenues include switched access revenues, federal and state Universal Service Fund (“USF”) revenues and amounts received from Connect America Fund - Phase II. Other service revenues include revenues from USF surcharges and other miscellaneous services.

Basis of Presentation – The accompanying unaudited consolidated financial statements have been prepared based upon SEC rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet as of December 31, 2016 , was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. In our opinion, these financial statements reflect all adjustments that are necessary for a fair statement of results of operations and financial condition for the interim periods presented including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2016 , which was filed with the SEC on March 1, 2017 .

Windstream Holdings and its domestic subsidiaries, including Windstream Services, file a consolidated federal income tax return. As such, Windstream Services and its subsidiaries are not separate taxable entities for federal and certain state income tax purposes. In instances when Windstream Services does not file a separate return, income taxes as presented within the accompanying consolidated financial statements attribute current and deferred income taxes of Windstream Holdings to Windstream Services and its subsidiaries in a manner that is systematic, rational and consistent with the asset and liability method. Income tax provisions presented for Windstream Services and its subsidiaries are prepared under the “separate return method.” The separate return method represents a hypothetical computation assuming that the reported revenue and expenses of Windstream Services and its subsidiaries were incurred by separate taxable entities.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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1. Preparation of Interim Financial Statements, Continued:

The preparation of financial statements, in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements, and such differences could be material.

There are no significant differences between the consolidated results of operations, financial condition, and cash flows of Windstream Holdings and those of Windstream Services other than for certain expenses incurred directly by Windstream Holdings principally consisting of audit, legal and board of director fees, NASDAQ listing fees, other shareholder-related costs, income taxes, common stock activity, and payables from Windstream Services to Windstream Holdings. Earnings per share data has not been presented for Windstream Services, because that entity has not issued publicly held common stock as defined in accordance with U.S. GAAP. Unless otherwise indicated, the note disclosures included herein pertain to both Windstream Holdings and Windstream Services.

Change in Accounting Estimate – The calculation of depreciation and amortization expense is based on the estimated economic useful lives of the underlying property, plant and equipment and finite-lived intangible assets. We periodically obtain updated depreciation studies to evaluate whether certain useful lives remain appropriate in accordance with authoritative guidance. With the assistance of a third-party valuation advisor, we completed analyses of the depreciable lives of assets held for use of certain subsidiaries during 2016. Based on the results of the analyses, we implemented new depreciation rates in the fourth quarter of 2016, the effects of which resulted in an increase to depreciation expense. Additionally, in the fourth quarter of 2016, we reassessed the estimated useful lives of certain fiber assets, extending the useful life of such assets from 20 to 25 years. The net impact of these changes resulted in an increase to depreciation expense of $8.8 million and an increase in our reported net loss of $5.8 million or $.05 per share for the three month period ended March 31, 2017. We anticipate the net impact of these changes to increase depreciation expense by $26.5 million during the remainder of 2017.

Recently Adopted Accounting Standards

Valuation of Inventory – In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory (“ASU 2015-11”). The updated guidance requires that an entity should measure inventory valued using a first-in, first-out or average cost method at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 should be applied on a prospective basis and is effective for fiscal years, and interim periods within those years, beginning after December 15, 2016. As required, we adopted ASU 2015-11 in the first quarter of 2017. The adoption of ASU 2015-11 did not have a material impact to our consolidated results of operations, financial position or cash flows.

Derivatives and Hedging – In March 2016, the FASB issued ASU No. 2016-05, Derivatives and Hedging (Topic 815): Effect of Derivative Contract Novations on Existing Hedge Accounting Relationships (a consensus of the Emerging Issues Task Force) (“ASU 2016-05”). ASU 2016-05 clarifies that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require de-designation of that hedging relationship provided that all other hedge accounting criteria continue to be met. ASU 2016-05 is effective for fiscal years beginning after December 15, 2016. As required, we adopted ASU 2016-05 in the first quarter of 2017. The adoption of ASU 2016-05 did not have a material impact to our consolidated results of operations, financial position or cash flows.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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1. Preparation of Interim Financial Statements, Continued:

Employee Share-Based Payment Accountin g – In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”), which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the new guidance all excess tax benefits and tax deficiencies, including tax benefits of dividends on share-based payment awards, should be recognized as income tax expense or benefit in the income statement, eliminating the notion of the APIC pool. The excess tax benefits will be classified as operating activities along with other income tax cash flows rather than financing activities in the statement of cash flows. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. ASU 2016-09 also allows entities to elect to either estimate the total number of awards that are expected to vest or account for forfeitures when they occur. Additionally, ASU 2016-09 clarifies that cash payments to tax authorities in connection with shares withheld to meet statutory tax withholding requirements should be presented as a financing activity in the statement of cash flows. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016. We adopted this standard effective January 1, 2017 and maintained our past practice of estimating the total number of awards expected to vest. The adoption of ASU 2016-09 did not have a material impact to our consolidated results of operations, financial position or cash flows.

Goodwill Impairment – In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”) simplifying the subsequent measurement of goodwill by eliminating the second step from the goodwill impairment test. The second step requires the measurement of a goodwill impairment by comparing the implied value of a reporting unit’s goodwill and the goodwill’s carrying amount. Under the amendments, the goodwill impairment will be measured as the excess of the reporting unit’s carrying amount over its fair value. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. ASU 2017-04 also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform the second step of the goodwill impairment test. Therefore, the same impairment assessment applies to all reporting units. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. As permitted, we early adopted this standard effective January 1, 2017.

Recently Issued Authoritative Guidance

Revenue Recognition – In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). The standard outlines a single comprehensive revenue recognition model for entities to follow in accounting for revenue from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that an entity should recognize revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive for those goods or services. ASU 2014-09 also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs. ASU 2014-09 may be adopted by applying the provisions of the new standard on a retrospective basis to all periods presented in the financial statements or on a modified retrospective basis which would result in the recognition of a cumulative effect adjustment in the year of adoption. When issued, ASU 2014-09 was to be effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods. Early adoption was not permitted.

In July 2015, the FASB deferred the effective date of ASU 2014-09 by one year to December 15, 2017 for annual reporting periods beginning after that date, or January 1, 2018, for calendar companies like Windstream. Entities are permitted to early adopt the standard, but not before the original effective date of December 15, 2016.

In 2016, the FASB issued the following updates to the revenue recognition guidance:


•	ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net) to improve the operability and understandability of the implementation guidance on principal versus agent considerations.


•	ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing to provide more detailed guidance with respect to identifying performance obligations and accounting for licensing arrangements, including intellectual property licenses, royalties, license restrictions and renewals.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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1. Preparation of Interim Financial Statements, Continued:

•

ASU No. 2016-11, Revenue Recognition (Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting to rescind several SEC Staff announcements that are codified in Topic 605: Revenue Recognition, including, among other items, guidance relating to accounting for consideration given by a vendor to a customer, as well as accounting for shipping and handling fees and freight services.

•

ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients to provide clarification to Topic 606 on how to assess collectability, present sales tax, treat noncash consideration, and account for completed and modified contracts at the time of transition. This guidance also clarifies that an entity retrospectively applying the guidance in Topic 606 is not required to disclose the effect of the accounting change in the period of adoption.


•	ASU No. 2016-20, Technical Corrections and Improvements to Topic 606: Revenue from Contracts with Customers to provide additional clarification and guidance with respect to a number of issues including impairment testing for capitalized contract costs, losses on construction and production-type contracts, and disclosures of prior-period and remaining performance obligations.

The effective date and transition requirements for each of these amendments are the same as the effective date and transition requirements of ASU 2014-09.

We will adopt this standard effective January 1, 2018 utilizing the modified retrospective basis. We have established a cross-functional team to implement the standard and have identified and are in the process of implementing changes to our systems, processes and internal controls to meet the standard’s reporting and disclosure requirements. While we have not fully quantified the effects of the standard on our consolidated financial statements, we have determined that due to changes in the timing of recognition of certain installation services and discounts, promotional credits and price guarantees given to customers, we will recognize contract assets and liabilities in our consolidated balance sheets. In addition, the requirement to defer incremental contract acquisition costs, including sales commissions, and recognize such costs over the contract period or expected customer life will result in the recognition of a deferred charge within our consolidated balance sheets.

Leases – In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which will require that virtually all lease arrangements that do not meet the criteria of a short-term lease be presented on the lessee’s balance sheet by recording a right-of-use asset and a lease liability equal to the present value of the related future lease payments. The income statement impacts of the leases will depend on the nature of the leasing arrangement and will be similar to existing accounting for operating and capital leases. The new standard does not substantially change the accounting for lessors. The new standard will also require additional disclosures regarding an entity’s leasing arrangements and will be effective for the first interim reporting period within annual periods beginning after December 15, 2018, although early adoption is permitted. Lessees and lessors will be required to apply the new standard at the beginning of the earliest period presented in the financial statements in which they first apply the new guidance, using a modified retrospective transition method. We are currently assessing the timing of adoption and the impact the new standard will have on our consolidated financial statements.

Financial Instruments - Credit Losses – In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). This standard introduces a new forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses will require entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This new standard also expands the disclosure requirements to enable users of financial statements to understand the entity’s assumptions, models and methods for estimating expected credit losses. ASU 2016-13 is effective for annual and interim reporting periods beginning after December 15, 2019, and the guidance is to be applied using a modified retrospective transition approach. Early adoption is permitted for annual and interim reporting periods beginning after December 15, 2018. We are currently assessing the timing of adoption and the impact the new standard will have on our consolidated financial statements.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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1. Preparation of Interim Financial Statements, Continued:

Statement of Cash Flows –In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”). This standard provides guidance on how certain cash receipts and cash payments should be presented and classified in the statement of cash flows, including among others, debt prepayment and extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims and distributions received from equity method investees. The standard also clarifies that when cash receipts and cash payments have aspects of more than one class of cash flows and cannot be separated, classification will depend on the predominant source or use of the underlying cash flows. ASU 2016-15 is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. We will adopt this standard effective January 1, 2018. We are currently assessing the impact the new standard will have on our consolidated statement of cash flows.

Definition of a Business – In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805), Clarifying the Definition of a Business (“ASU 2017-01”). Under the new guidance an integrated set of activities must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output to be considered a business. ASU 2017-01 provides a framework to assist entities in evaluating whether both an input and a substantive process are present and removes the evaluation of whether a market participant could replace missing elements. Although outputs are not required for an integrated sets of activities to be a business, outputs generally are a key element of a business; therefore, the new guidance provides more stringent criteria for an integrated sets of activities without outputs. Furthermore, ASU 2017-01 narrows the definition of the term output so that it is consistent with how outputs are described in Topic 606. ASU 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual reporting periods. Early adoption is permitted. We are currently assessing the timing of adoption and the impact the new standard will have on our consolidated financial statements.

Presentation of Defined Benefit Retirement Costs – In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715) Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”). This standard changes the income statement presentation of defined benefit plan expense by requiring separation between operating expense (service cost component) and non-operating expense (all other components, including interest cost, amortization of prior service cost, actuarial gains and losses, curtailments and settlements). The operating expense component will be reported in the same income statement line item(s) as other employee compensation costs arising from services rendered during the period while the non-operating components will be reported in other income and expense. In addition, only the service cost component will be eligible for capitalization as part of an asset such as inventory or property, plant and equipment. Retrospective application of the change in income statement presentation is required, while the change in capitalized benefit cost is to be applied prospectively. The ASU is effective for fiscal years beginning after December 15, 2017. We are currently assessing the impact that adopting this new accounting standard will have on our consolidated financial statements.

2. Completion of Merger:

On February 27, 2017, Windstream Holdings completed its merger with EarthLink Holdings Corp. (“EarthLink”), pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”) dated November 5, 2016, whereby EarthLink merged into Europa Merger Sub, Inc., an wholly-owned subsidiary of Windstream Services, LLC, and survived, and immediately following, merged with Europa Merger Sub, LLC, a wholly-owned subsidiary of Windstream Services, LLC, with Merger Sub surviving and changing its name to EarthLink Holdings, LLC (the “Merger”). EarthLink Holdings, LLC is a direct, wholly-owned subsidiary of Windstream Services and provides data, voice and managed network services to retail and wholesale business customers and nationwide Internet access and related value-added services to residential customers. In the Merger, we added approximately 700,000 customers and approximately 16,000 incremental route fiber miles, which expanded our national footprint to approximately 147,000 fiber route miles and enhanced our ability to offer customers expanded products, services and enhanced enterprise solutions. We also expect to achieve operating expense and capital expenditure synergies in integrating the acquired operations. Pursuant to the terms of the Merger Agreement, each share of EarthLink common stock was exchanged for .818 of Windstream Holdings common stock. No fractional shares were issued in the Merger, with a cash payment being made in lieu of fractional shares. Employee restricted stock units issued by EarthLink that were outstanding as of the merger date were exchanged for an equivalent number of Windstream Holdings restricted stock units based on the same exchange ratio of EarthLink common stock to Windstream Holdings common stock of .818 per share. The replacement restricted stock units remain subject to the vesting and other terms and conditions prescribed by the EarthLink equity plans that were assumed by us in the Merger. In the aggregate, Windstream Holdings issued 87.8 million shares of its common stock and 5.2 million of replacement equity awards. Windstream also assumed $435.3 million aggregate principal amount of EarthLink’s long-term debt, which we refinanced, as further discussed in Note 4. The Merger qualifies as a tax-free reorganization for U.S. federal income tax purposes and is valued at approximately $1.1 billion .

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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2. Completion of Merger, Continued:

We accounted for the Merger using the acquisition method of accounting and accordingly, the cost of the acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values as of the merger date. The allocation of the purchase price is preliminary and subject to change based on the finalization of the third-party appraisals and obtaining information currently not available to us, primarily related to the tax basis of assets acquired. Any changes to the initial estimates of the fair value of the acquired assets and liabilities assumed will be recorded as adjustments to those asset and liabilities with the offset charged to goodwill. Goodwill associated with the Merger was primarily attributable to the EarthLink workforce and expected synergies. Approximately $54.8 million of goodwill associated with the acquisition of EarthLink is expected to be deductible for income tax purposes.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed for EarthLink.



(Millions)	Preliminary Allocation
Fair value of assets acquired:
Cash and other current assets	$	37.7
Accounts receivable	75.3
Property, plant and equipment	344.0
Goodwill	476.6
Customer lists (a)	275.0
Trade name, developed technology and software (b)	31.0
Other assets	0.3
Total assets acquired	1,239.9
Fair value of liabilities assumed:
Current liabilities	119.5
Long-term debt	449.1
Other liabilities	24.4
Total liabilities assumed	593.0
Common stock and replacement equity awards issued to EarthLink shareholders (c)	$	646.9


(a)	Customer lists are amortized using the sum-of-years digit methodology over a weighted average life of 5.5 years .


(b)	Trade name is amortized on a straight-line basis over an estimated useful life of 7 years . Internally developed technology and software are amortized on a straight-line basis over an estimated useful life of 3 years .


(c)	Total merger consideration of $646.9 million consisted of $631.4 million related to shares issued to EarthLink shareholders and $15.5 million related to replacement equity awards.

The preliminary fair values of the assets acquired and liabilities assumed were determined with the assistance of a third-party valuation firm using income, cost, and market approaches. The customer lists were valued based on the present value of future cash flows and the trade name was valued using the relief-from-royalty method, both of which are income approaches. Significant assumptions utilized in the income approach were based on our specific information and projections, which are not observable in the market and are thus considered Level 3 measurements as defined by authoritative guidance. The cost approach, which estimates value by determining the current cost of replacing an asset with another of equivalent economic utility, was used as appropriate for valuing internally developed technology and software and property, plant and equipment. The cost to replace a given asset reflects the estimated reproduction or replacement cost for the asset, less an allowance for loss in value due to depreciation. The fair value of the EarthLink credit facility was based on its redemption cost, while the remaining bonds were valued based on quoted market prices. Equity consideration was based on the opening price of our common stock on February 27, 2017. Consideration related to replacement restricted stock units was calculated based on the opening price of our common stock on February 27, 2017, net of the portion of the fair value attributable to future vesting requirements. The amount allocated to unearned compensation cost for awards subject to future service requirements was calculated based on the fair value of such awards at the acquisition date and will be recognized as compensation cost over the remaining future service period. The preliminary allocation of the purchase price, including the allocation of purchase price to acquired net operating losses, resulted in an estimated net deferred tax asset which was fully offset by a valuation allowance. We expect to adjust this preliminary net deferred tax asset and valuation allowance upon finalization of the third party-appraisal and upon receipt of additional information not currently available to us.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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2. Completion of Merger, Continued:

The results of EarthLink’s operations are included in our consolidated results of operations beginning on February 27, 2017. For the three months ended March 31, 2017, our consolidated results of operations include revenues and sales of $82.1 million and an operating loss of $2.8 million attributable to EarthLink. We incurred $53.1 million of merger and integration expenses during the first quarter of 2017 related to the completion of the Merger (see Note 9).

The following unaudited pro forma consolidated results of operations of Windstream for the three months ended March 31, 2017 and 2016 assume that the Merger occurred as of January 1, 2016:



	Three Months Ended March 31,
(Millions)	2017			2016
Revenues and sales	$	1,515.2		$	1,631.5
Operating income	$	96.8		$	92.5
Net loss	$	(82.3	)	$	(270.6	)
Loss per share		($.45	)		($1.53	)

The pro forma information presents our historical results of operations adjusted to include EarthLink, with the results prior to the merger closing date adjusted to include the pro forma effect of the elimination of transactions between Windstream and EarthLink, the adjustment to revenues and sales to change EarthLink’s reporting of USF fees billed to customers and the related payments from a net basis to a gross basis to conform to Windstream’s reporting of such customer billings, the adjustment to depreciation and amortization expense associated with the estimated acquired fair value of property, plant and equipment and intangible assets, the adjustment to interest expense to reflect the refinancing of EarthLink’s long-term debt obligations, the impact of merger and integration expenses related to the acquisition and the related income tax effects of the pro forma adjustments. The pro forma amounts for the three months ended March 31, 2017 and 2016 also include the effects of non-acquisition-related items, as more fully discussed in Notes 9 and 10.

The pro forma results are presented for illustrative purposes only and do not reflect either the realization of potential cost savings or any related integration costs. These pro forma results do not purport to be indicative of the results that would have been obtained if the Merger had occurred as of the date indicated, nor do the pro forma results intend to be a projection of results that may be obtained in the future.

3. Goodwill and Other Intangible Assets:

Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired through various business combinations. The cost of acquired entities at the date of the acquisition is allocated to identifiable assets, and the excess of the total purchase price over the amounts assigned to identifiable assets has been recorded as goodwill.

Changes in the carrying amount of goodwill were as follows:



(Millions)
Balance at December 31, 2016	$	4,213.6
Acquisition completed during the period - merger with EarthLink	476.6
Balance at March 31, 2017	$	4,690.2

Goodwill assigned to our four operating segments was as follows:



(Millions)	ILEC Consumer and Small Business		Wholesale		Enterprise		CLEC Consumer and Small Business		Total
Balance at December 31, 2016	$	2,321.2	$	1,176.4	$	598.0	$	118.0	$	4,213.6
Acquisition completed during the period - merger with EarthLink	—		127.0		227.8		121.8		476.6
Balance at March 31, 2017	$	2,321.2	$	1,303.4	$	825.8	$	239.8	$	4,690.2

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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3. Goodwill and Other Intangible Assets, Continued:

Intangible assets were as follows at:



	March 31, 2017							December 31, 2016
(Millions)	Gross Cost		Accumulated Amortization			Net Carrying Value		Gross Cost		Accumulated Amortization			Net Carrying Value
Franchise rights	$	1,285.1	$	(339.6	)	$	945.5	$	1,285.1	$	(328.9	)	$	956.2
Customer lists	2,066.7		(1,479.0		)	587.7		1,791.7		(1,442.4		)	349.3
Cable franchise rights	17.3		(8.3		)	9.0		17.3		(8.0		)	9.3
Trade name	8.0		(0.1		)	7.9		—		—			—
Developed technology and software	23.0		(0.4		)	22.6		—		—			—
Patents	10.6		(5.6		)	5.0		10.6		(4.9		)	5.7
Balance	$	3,410.7	$	(1,833.0	)	$	1,577.7	$	3,104.7	$	(1,784.2	)	$	1,320.5

Intangible asset amortization methodology and useful lives were as follows as of March 31, 2017:



Intangible Assets	Amortization Methodology	Estimated Useful Life
Franchise rights	straight-line	30 years
Customer lists	sum of years digits	5.5 - 15 years
Cable franchise rights	straight-line	15 years
Trade name	straight-line	7 years
Developed technology and software	straight-line	3 years
Patents	straight-line	3 years

Amortization expense for intangible assets subject to amortization was $48.8 million and $47.5 million for the three month periods ended March 31, 2017 and 2016, respectively. Amortization expense for intangible assets subject to amortization was estimated to be as follows for each of the years ended March 31:



Year	(Millions)
2018	$	238.3
2019	198.5
2020	158.1
2021	124.4
2022	90.9
Thereafter	767.5
Total	$	1,577.7

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

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4. Long-term Debt:

Windstream Holdings has no debt obligations. All debt, including the senior secured credit facility described below, have been incurred by Windstream Services and its subsidiaries. Windstream Holdings is neither a guarantor of nor subject to the restrictive covenants imposed by such debt.

Long-term debt was as follows at:



(Millions)	March 31, 2017			December 31, 2016
Issued by Windstream Services:
Senior secured credit facility, Tranche B5 – variable rates, due August 8, 2019	$	—		$	572.3
Senior secured credit facility, Tranche B6 – variable rates, due March 29, 2021 (a)	1,341.4			894.8
Senior secured credit facility, Tranche B7 – variable rates, due February 17, 2024	578.5			—
Senior secured credit facility, Revolving line of credit – variable rates, due April 24, 2020	648.0			475.0
Debentures and notes, without collateral:
2020 Notes – 7.750%, due October 15, 2020	700.0			700.0
2021 Notes – 7.750%, due October 1, 2021	809.3			809.3
2022 Notes – 7.500%, due June 1, 2022	441.2			441.2
2023 Notes – 7.500%, due April 1, 2023	343.5			343.5
2023 Notes – 6.375%, due August 1, 2023	585.7			585.7
Issued by subsidiaries of Windstream Services:
Windstream Holdings of the Midwest, Inc. – 6.75%, due April 1, 2028 (b)	100.0			100.0
Net discount on long-term debt (c)	(13.9		)	(7.2		)
Unamortized debt issuance costs (c)	(54.6		)	(51.0		)
	5,479.1			4,863.6
Less current maturities	(19.3		)	(14.9		)
Total long-term debt	$	5,459.8		$	4,848.7


(a)	If the maturity of the revolving line of credit is not extended prior to April 24, 2020, the maturity date of the Tranche B6 term loan will be April 24, 2020; provided further, if the 2020 Notes have not been repaid or refinanced prior to July 15, 2020 with indebtedness having a maturity date no earlier than March 29, 2021, the maturity date of the Tranche B6 term loan will be July 15, 2020.


(b)	These bonds are secured equally with the senior secured credit facility with respect to the assets of Windstream Holdings of the Midwest, Inc.


(c)	The net discount balance and unamortized debt issuance costs are amortized using the interest method over the life of the related debt instrument.

Senior Secured Credit Facility - The amended credit facility provides that Windstream Services may seek to obtain incremental revolving or term loans in an unlimited amount subject to maintaining a maximum secured leverage ratio and other customary conditions, including obtaining commitments and pro forma compliance with financial maintenance covenants consisting of a maximum debt to consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio and a minimum interest coverage ratio. In addition, Windstream Services may request extensions of the maturity date under any of its existing revolving or term loan facilities.

On February 17, 2017, Windstream Services issued an aggregate principal amount of $580.0 million in borrowings under Tranche B7 of its senior secured credit facility, the proceeds of which were used to pay down amounts outstanding under Tranche B5, including accrued interest, and to pay related fees and expenses. The incremental Tranche B7 term loan matures on February 17, 2024 and was issued at a price of 99.5 percent of the principal amount of the loan.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

4. Long-term Debt, Continued :

Interest rates applicable to the Tranche B7 term loan are, at Windstream Services’ option, equal to either a base rate plus a margin of 2.25 percent per annum or LIBOR plus a margin of 3.25 percent per annum. LIBOR for the Tranche B7 term loan shall at no time be less than 0.75 percent . The Tranche B7 term loan is subject to quarterly amortization payments in an aggregate amount equal to 0.25 percent of the initial principal amount of such term loans, with the remaining balance payable at maturity. At the time of repayment, unamortized debt issuance and discount related to Tranche B5 totaled $6.3 million , of which $1.2 million were included in the loss on debt extinguishment, while the remaining $5.1 million continue to be deferred and amortized to interest expense over the remaining life of Tranche B7 in accordance with debt modification accounting.

On the date of closing of the merger with EarthLink, Windstream Services amended its existing senior secured credit agreement to provide for the issuance of an aggregate principal amount of $450.0 million in incremental borrowings under Tranche B6, the proceeds of which were used to repay amounts outstanding under EarthLink’s credit facility and to redeem EarthLink’s outstanding 8.875 percent Senior Notes due 2019 and 7.375 percent Senior Secured Notes due 2020. The incremental loans were issued at a price of 99.0 percent of the principal amount of the loan. The incremental loans will be repayable at any time, subject to soft call protection for the first six months following incurrence.

During 2016, Windstream Services had executed incremental amendments to its existing senior secured credit facility to provide for the issuance of an aggregate principal amount $900.0 million term loan under Tranche B6 due March 29, 2021, the proceeds of which were used to repurchase $441.1 million of outstanding 7.875 percent notes due November 1, 2017 (the “2017 Notes”) pursuant to a tender offer and to repay other debt obligations of Windstream Services along with related fees and expenses. Interest on all incremental loans under Tranche B6 accrue at LIBOR plus a margin of 4.00 percent per annum, with LIBOR subject to a 0.75 percent floor. The incremental loans are subject to quarterly amortization in an aggregate amount of approximately 0.25 percent of the initial principal amount of the loans, with the remaining balance payable on March 29, 2021.

Revolving line of credit - Under the amended senior secured credit facility, Windstream Services may obtain revolving loans and may issue up to $30.0 million of letters of credit, which upon issuance reduce the amount available for other extensions of credit. Accordingly, the total amount outstanding under the letters of credit and the indebtedness incurred under the revolving line of credit may not exceed $1,250.0 million . Borrowings under the revolving line of credit may be used for permitted acquisitions, working capital and other general corporate purposes of Windstream Services and its subsidiaries. Windstream Services will pay a commitment fee on the unused portion of the commitments under the revolving credit facility that will range from 0.40 percent to 0.50 percent per annum, depending on the debt to consolidated EBITDA ratio of Windstream Services and its subsidiaries. Revolving loans made under the credit facility are not subject to interim amortization and such loans are not required to be repaid prior to April 24, 2020, other than to the extent the outstanding borrowings exceed the aggregate commitments under the revolving credit facility. Interest rates applicable to loans under the revolving line of credit are, at Windstream Services’ option, equal to either a base rate plus a margin ranging from 0.25 percent to 1.00 percent per annum or LIBOR plus a margin ranging from 1.25 percent to 2.00 percent per annum, based on the debt to consolidated EBITDA ratio of Windstream Services and its subsidiaries. The maturity date of the revolving line of credit is April 24, 2020.

During the first three months of 2017 , Windstream Services borrowed $293.0 million under the revolving line of credit in its senior secured credit facility and retired $120.0 million of these borrowings through March 31, 2017 . Considering letters of credit of $25.7 million , the amount available for borrowing under the revolving line of credit was $576.3 million at March 31, 2017 .

During the first three months of 2017 , the variable interest rate on the revolving line of credit ranged from 2.65 percent to 5.00 percent , and the weighted average rate on amounts outstanding was 2.83 percent during the period. Comparatively, the variable interest rate ranged from 2.25 percent to 4.50 percent during the first three months of 2016 , with a weighted average rate on amounts outstanding during the period of 2.52 percent .

Debentures and Notes Repaid in 2016

Tender Offer for 2017 Notes - On March 29, 2016, Windstream Services repurchased $441.1 million aggregate principal amount of the 2017 Notes for total consideration of $477.5 million , plus accrued interest, pursuant to a cash tender offer. Under the tender offer, Windstream Services paid total consideration of $1,082.50 per $1,000 principal amount of the 2017 Notes, which included a $30 early tender payment, plus accrued and unpaid interest. At the time of the repurchases, there was $4.6 million in unamortized net discount and debt issuance costs related to the repurchased notes. Proceeds from the issuance of the Tranche B6 term loan were used to fund the repurchase of the 2017 Notes under the tender offer.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

4. Long-term Debt, Continued:

Partial Repurchase of Senior Notes - Pursuant to the debt repurchase program authorized by Windstream Services’ board of directors, during the first three months of 2016, Windstream Services repurchased in the open market $154.2 million aggregate principal amount of its senior unsecured notes consisting of the following:


•	$93.5 million aggregate principal amount of 2017 Notes, at a repurchase price of $97.8 million , including accrued and unpaid interest;


•	$33.1 million aggregate principal amount of 7.750 percent senior unsecured notes due October 1, 2021 , (the “2021 Notes”), at a repurchase price of $26.0 million , including accrued and unpaid interest;


•	$17.0 million aggregate principal amount of 7.500 percent senior unsecured notes due June 1, 2022 , (the “2022 Notes”), at a repurchase price of $13.1 million , including accrued and unpaid interest; and


•	$10.6 million aggregate principal amount of 7.500 percent senior unsecured notes due April 1, 2023 , (the “2023 Notes”), at a repurchase price of $8.0 million , including accrued and unpaid interest, respectively.

At the time of repurchase, there was $1.6 million in unamortized premium and debt issuance costs related to the repurchased notes. The repurchases were funded utilizing available borrowings under the amended revolving line of credit.

The repurchases under the tender offer and the debt repurchase program were accounted for under the extinguishment method of accounting. Windstream Services recognized a net loss on the early extinguishment of these debt obligations, as presented in the table below.

Net Loss on Early Extinguishment of Debt

The net loss on early extinguishment of debt was as follows:



	Three Months Ended March 31,
(Millions)	2017			2016
EarthLink 2019 and 2020 Notes:
Premium on early redemption	$	(18.3	)	$	—
Unamortized premium recorded in the Merger	16.3			—
Loss on early extinguishment of EarthLink 2019 and 2020 Notes	(2.0		)	—
Senior secured credit facility:
Unamortized discount on original issuance	(0.3		)	—
Unamortized debt issuance costs on original issuance	(0.9		)	—
Loss on early extinguishment of senior secured credit facility	(1.2		)	—
2017 Notes:
Premium on repurchases	—			(40.6		)
Third-party fees for repurchases	—			(2.2		)
Unamortized discount on original issuance	—			(2.0		)
Unamortized debt issuance costs on original issuance	—			(3.7		)
Loss on early extinguishment of 2017 Notes	—			(48.5		)
Partial repurchases of 2021, 2022 and 2023 Notes:
Discount on repurchases	—			13.6
Unamortized premium on original issuance	—			0.3
Unamortized debt issuance costs on original issuance	—			(0.8		)
Gain on early extinguishment from partial repurchases of 2021, 2022 and 2023 Notes	—			13.1
Net loss on early extinguishment of debt	$	(3.2	)	$	(35.4	)

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

4. Long-term Debt, Continued:

Maturities for long-term debt outstanding as of March 31, 2017 , excluding $13.9 million of unamortized net discount and $54.6 million of unamortized debt issuance costs, were as follows:



Twelve month period ended:	(Millions)
March 31, 2018	$	19.3
March 31, 2019	19.3
March 31, 2020	19.3
March 31, 2021	2,654.7
March 31, 2022	815.1
Thereafter	2,019.9
Total	$	5,547.6

Interest Expense

Interest expense was as follows:



	Three Months Ended March 31,
(Millions)	2017			2016
Interest expense - long-term debt	$	85.9		$	91.5
Interest expense - long-term lease obligations:
Telecommunications network assets	122.8			126.9
Real estate contributed to pension plan	1.5			1.5
Impact of interest rate swaps	2.8			2.8
Interest on capital leases and other	1.1			0.6
Less capitalized interest expense	(2.3		)	(3.6		)
Total interest expense	$	211.8		$	219.7

Debt Compliance

The terms of Windstream Services’ credit facility and indentures include customary covenants that, among other things, require maintenance of certain financial ratios and restrict Windstream Services’ ability to incur additional indebtedness. These financial ratios include a maximum leverage ratio of 4.5 to 1.0 and a minimum interest coverage ratio of 2.75 to 1.0 . In addition, the covenants include restrictions on dividend and certain other types of payments. As of March 31, 2017 , Windstream Services was in compliance with all of these covenants.

In addition, certain of Windstream Services’ debt agreements contain various covenants and restrictions specific to the subsidiary that is the legal counterparty to the agreement. Under Windstream Services’ long-term debt agreements, acceleration of principal payments would occur upon payment default, violation of debt covenants not cured within 30 days, a change in control including a person or group obtaining 50 percent or more ownership interest in Windstream Services, or breach of certain other conditions set forth in the borrowing agreements. Windstream Services and its subsidiaries were in compliance with these covenants as of March 31, 2017 .

5. Derivatives:

Windstream Services enters into interest rate swap agreements to mitigate the interest rate risk inherent in its variable rate senior secured credit facility. Derivative instruments are accounted for in accordance with authoritative guidance for recognition, measurement and disclosures about derivative instruments and hedging activities, including when a derivative or other financial instrument can be designated as a hedge. This guidance requires recognition of all derivative instruments at fair value, and accounting for the changes in fair value depends on whether the derivative has been designated as, qualifies as and is effective as a hedge. Changes in fair value of the effective portions of cash flow hedges are recorded as a component of other comprehensive (loss) income in the current period. Any ineffective portion of the hedges is recognized in earnings in the current period.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

5. Derivatives, Continued:

As of December 31, 2016, Windstream Services was party to three pay fixed, receive variable interest rate swap agreements to serve as cash flow hedges of the interest rate risk inherent in its senior secured credit facility. The swaps have a notional value of $675.0 million and mature on October 17, 2021. The average fixed interest rate paid is 2.984 percent and includes a component which serves to settle the liability existing on Windstream Services swaps at the time of the transaction. Windstream Services also was a party to an additional pay fixed, receive variable interest rate swap agreement with a bank counterparty with a notional value of $200.0 million , fixed interest rate paid of 1.1275 percent and a maturity date of October 17, 2021. The variable rate received on these four swaps is based on one-month LIBOR and resets on the seventeenth day of each month. On February 27, 2017, Windstream Services entered into two new pay fixed, receive variable interest rate swap agreements with bank counterparties with a total notional value of $500.0 million and maturing on October 17, 2021. The fixed rate paid on the new swaps is 1.8812 percent . Similar to Windstream Services’ other four swaps, the variable rate received on the new swaps is the one-month LIBOR and resets on the seventeenth day of each month. Windstream Services has designated each of its six swaps as cash flow hedges of the interest rate risk inherent in borrowings outstanding under its senior secured credit facility due to changes in the LIBOR benchmark interest rate.

All of the swaps are hedging probable variable cash flows which extend up to one year beyond the maturity of certain components of Windstream Services’ variable rate debt. Consistent with past practice, Windstream Services expects to extend or otherwise replace these components of its debt with variable rate debt. The three renegotiated swaps are off-market swaps, meaning they contain an embedded financing element, which the swap counterparties recover through an incremental charge in the fixed rate over what would be charged for an at-market swap. As such, a portion of the cash payment on the swaps represents the rate that Windstream Services would pay on a hypothetical at-market interest rate swap and is recognized in interest expense. The remaining portion represents the repayment of the embedded financing element and reduces the initial swap liability.

As a result of refinancing transactions completed in 2013, 2015 and 2016, Windstream Services de-designated certain interest rate swaps and froze the accumulated net gains and losses in accumulated other comprehensive income related to those swaps. The frozen balance is amortized from accumulated other comprehensive income to interest expense over the remaining life of the original swaps.

All derivative instruments are recognized at fair value in the accompanying consolidated balance sheets as either assets or liabilities, depending on the rights or obligations under the related contracts.

Set forth below is information related to interest rate swap agreements:



(Millions, except for percentages)	March 31, 2017			December 31, 2016
Designated portion, measured at fair value:
Other assets	$	10.8		$	6.3
Other current liabilities	$	14.6		$	13.4
Other non-current liabilities	$	19.1		$	21.9
Accumulated other comprehensive income	$	25.7		$	22.3
De-designated portion, unamortized value:
Accumulated other comprehensive income	$	(9.2	)	$	(10.7	)
Weighted average fixed rate paid	1.37		%	1.82		%
Variable rate received	0.94		%	0.74		%

Derivatives are assessed for effectiveness each quarter and any ineffectiveness is recognized in other income (expense), net in our consolidated statements of operations. There was no ineffectiveness recognized on the cash flow hedges for the three month period ended March 31, 2017 . Ineffectiveness recognized on the cash flow hedges was $(0.5) million for the three month period ended March 31, 2016 .

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

5. Derivatives, Continued:

All or a portion of the change in fair value of Windstream Services’ interest rate swap agreements recorded in accumulated other comprehensive income may be recognized in earnings in certain situations. If Windstream Services extinguishes all of its variable rate debt, or a portion of its variable rate debt such that the variable rate interest received on the swaps exceeds the variable rate interest paid on its debt, all or a portion of the change in fair value of the swaps may be recognized in earnings. In addition, the change in fair value of the swaps may be recognized in earnings if Windstream Services determines it is no longer probable that it will have future variable rate cash flows to hedge against or if a swap agreement is terminated prior to maturity. Windstream Services has assessed the counterparty risk and determined that no substantial risk of default exists as of March 31, 2017 . Each counterparty is a bank with a current credit rating at or above A , as determined by Moody’s Investors Service, Standard & Poor’s Corporation and Fitch Ratings.

Windstream Services expects to recognize net losses of $5.2 million , net of taxes, in interest expense in the next twelve months related to the unamortized value of the de-designated portion of interest rate swap agreements and the interest settlements for these interest swap agreements at March 31, 2017 . Payments on the swaps are presented in the financing activities section of the accompanying consolidated statements of cash flows due to the embedded financing element discussed above.

Changes in derivative instruments were as follows for the three month periods ended March 31 :



(Millions)	2017		2016
Changes in fair value of effective portion, net of tax (a)	$	2.1	$	(5.1	)
Amortization of net unrealized losses on de-designated interest rate swaps, net of tax (a)	$	0.9	$	0.7


(a)	Included as a component of other comprehensive income and will be reclassified into earnings as the hedged transaction affects earnings.

The agreements with each of the derivative counterparties contain cross-default provisions, whereby if Windstream Services were to default on certain indebtedness, it could also be declared in default on its derivative obligations and may be required to net settle any outstanding derivative liability positions with its counterparties at the swap termination value of $32.9 million including accrued interest and excluding the credit valuation adjustment to measure non-performance risk. In addition, certain of the agreements with the counterparties contain provisions where if a specified event or condition, such as a merger, occurs that materially changes Windstream Services’ creditworthiness in an adverse manner, Windstream Services may be required to fully collateralize its derivative obligations. At March 31, 2017 , Windstream Services had not posted any collateral related to its interest rate swap agreements.

Balance Sheet Offsetting

Windstream Services is party to master netting arrangements, which are designed to reduce credit risk by permitting net settlement of transactions with counterparties. For financial statement presentation purposes, Windstream Services does not offset assets and liabilities under these arrangements.

The following tables presents the assets and liabilities subject to an enforceable master netting arrangement as of March 31, 2017 and December 31, 2016 . Information pertaining to derivative assets was as follows:



					Gross Amounts Not Offset in the Consolidated Balance Sheets
(Millions)	Gross Amount of Recognized Assets		Net Amount of Assets presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received		Net Amount
March 31, 2017:
Interest rate swaps	$	10.8	$	10.8	$	(2.7	)	$	—	$	8.1

December 31, 2016:
Interest rate swaps	$	6.3	$	6.3	$	—		$	—	$	6.3

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

5. Derivatives, Continued:

Information pertaining to derivative liabilities was as follows:



					Gross Amounts Not Offset in the Consolidated Balance Sheets
(Millions)	Gross Amount of Recognized Liabilities		Net Amount of Liabilities Presented in the Consolidated Balance Sheets		Financial Instruments			Cash Collateral Received		Net Amount
March 31, 2017:
Interest rate swaps	$	33.7	$	33.7	$	(2.7	)	$	—	$	31.0

December 31, 2016:
Interest rate swaps	$	35.3	$	35.3	$	—		$	—	$	35.3

6. Fair Value Measurements:

Fair value of financial and non-financial assets and liabilities is defined as an exit price, representing the amount that would be received to sell an asset or transfer a liability in an orderly transaction between market participants. Authoritative guidance defines the following three tier hierarchy for assessing the inputs used in fair value measurements:

Level 1 – Quoted prices in active markets for identical assets or liabilities

Level 2 – Observable inputs other than quoted prices in active markets for identical assets or liabilities

Level 3 – Unobservable inputs

The highest priority is given to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority is given to unobservable inputs (level 3 measurement). Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the determination of fair value of assets and liabilities and their placement within the fair value hierarchy levels.

Our non-financial assets and liabilities, including property, plant and equipment, goodwill, intangible assets and asset retirement obligations, are measured at fair value on a non-recurring basis. No event occurred during the three month period ended March 31, 2017 requiring our non-financial assets and liabilities to be subsequently recognized at fair value. Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, long-term debt and interest rate swaps. The carrying amount of cash, accounts receivable and accounts payable was estimated by management to approximate fair value due to the relatively short period of time to maturity for those instruments. Cash equivalents, long-term debt and interest rate swaps are measured at fair value on a recurring basis. Cash equivalents were not significant as of March 31, 2017 or December 31, 2016 .

The fair values of interest rate swaps and long-term debt were determined using the following inputs at:



(Millions)	March 31, 2017		December 31, 2016
Recorded at Fair Value in the Financial Statements:
Derivatives - Interest rate swap assets - Level 2	$	10.8	$	6.3
Derivatives - Interest rate swap liabilities - Level 2	$	33.7	$	35.3
Not Recorded at Fair Value in the Financial Statements: (a)
Long-term debt, including current maturities - Level 2	$	5,446.7	$	4,884.4


(a)	Recognized at carrying value of $5,533.7 million and $4,914.6 million in long-term debt, including current maturities, and excluding unamortized debt issuance costs, in the accompanying consolidated balance sheets as of March 31, 2017 and December 31, 2016 , respectively.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

6. Fair Value Measurements, Continued:

The fair values of interest rate swaps are determined based on the present value of expected future cash flows using observable, quoted LIBOR swap rates for the full term of the swaps and also incorporate credit valuation adjustments to appropriately reflect both Windstream Services’ own non-performance risk and non-performance risk of the respective counterparties. As of March 31, 2017 and December 31, 2016 , the fair values of the interest rate swaps were reduced by $1.8 million and $1.7 million , respectively, to reflect non-performance risk.

In calculating the fair value of Windstream Services’ long-term debt, the fair value of the debentures and notes was calculated based on quoted market prices of the specific issuances in an active market when available. The fair value of the other debt obligations was estimated based on appropriate market interest rates applied to the debt instruments. In calculating the fair value of the Windstream Holdings of the Midwest, Inc. notes, an appropriate market price of similar instruments in an active market considering credit quality, nonperformance risk and maturity of the instrument was used.

We do not have any assets or liabilities measured for purposes of the fair value hierarchy at fair value using significant unobservable inputs (Level 3). We recognize transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the fair value hierarchy during the three month period ended March 31, 2017 .

7. Employee Benefit Plans and Postretirement Benefits:

We maintain a non-contributory qualified defined benefit pension plan. Future benefit accruals for all eligible nonbargaining employees covered by the pension plan have ceased. We also maintain supplemental executive retirement plans that provide unfunded, non-qualified supplemental retirement benefits to a select group of management employees. Additionally, we provide postretirement healthcare and life insurance benefits for eligible employees. Employees share in, and we fund, the costs of these plans as benefits are paid.

The components of pension benefit income (including provision for executive retirement agreements) were as follows:



	Three Months Ended March 31,
(Millions)	2017			2016
Benefits earned during the period	$	2.1		$	2.2
Interest cost on benefit obligation	11.6			13.8
Amortization of prior service credit	(0.1		)	(0.1		)
Expected return on plan assets	(13.6		)	(16.2		)
Net periodic benefit income	$	—		$	(0.3	)

The expected employer contributions to the qualified pension plan to meet our 2017 annual funding requirements are $27.0 million . On January 12, 2017, we made our required quarterly employer contribution of $8.0 million in cash to the qualified pension plan. We intend to fund the remaining 2017 contributions using cash, our common stock, or a combination thereof. On March 2, 2017, we filed an effective shelf registration statement on Form S-3 (the “Registration Statement”) to offer and sell various securities from time to time. Under the Registration Statement, we established an at-the-market common stock offering program (the “ATM Program”) to sell shares of our common stock. We intend to utilize the ATM Program to facilitate contributions of cash to the qualified pension plan, if the price we can obtain for our common stock is no less than $6.00 per share. During the quarter ended March 31, 2017, we issued and sold 1.3 million shares of common stock under the ATM Program and received proceeds of approximately $9.6 million , net of commissions. At March 31, 2017, subject to the terms and conditions of the ATM Program, we may sell an additional $15.2 million aggregate offering price of shares of common stock under the ATM Program. On April 14, 2017, we made our required quarterly contribution of $8.9 million using proceeds from the ATM Program. The amount and timing of future contributions to the qualified pension plan are dependent upon a myriad of factors including future investment performance, changes in future discount rates and changes in the demographics of the population participating in the plan. We also expect to make cash contributions in 2017 totaling $0.9 million to fund the expected benefit payments of our unfunded supplemental executive retirement pension plans.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

7. Employee Benefit Plans and Postretirement Benefits, Continued:

The components of postretirement benefits expense (income) were as follows:



	Three Months Ended March 31,
(Millions)	2017			2016
Interest cost on benefit obligation	$	0.3		$	0.3
Amortization of net actuarial loss	—			0.1
Amortization of prior service credit	(0.1		)	(0.4		)
Plan curtailment	—			(5.5		)
Net periodic benefit expense (income)	$	0.2		$	(5.5	)

During the first quarter of 2016, we made changes to our postretirement medical plan, eliminating medical and prescription drug subsidies primarily for certain active participants effective March 14, 2016 . As a result, we remeasured the plan and recognized curtailment gains totaling $5.5 million , which was recognized in cost of services and selling, general and administrative expenses, with the offsetting effect recorded as a reduction in accumulated other comprehensive income.

We contributed $0.6 million to the postretirement plan during the three month period ended March 31, 2017 , and expect to contribute an additional $1.3 million for postretirement benefits throughout the remainder of 2017, excluding amounts that will be funded by participant contributions to the plan.

We also sponsor an employee savings plan under section 401(k) of the Internal Revenue Code, which covers substantially all salaried employees and certain bargaining unit employees. Windstream matches on an annual basis up to a maximum of 4.0 percent of employee pre-tax contributions to the plan for employees contributing up to 5.0 percent of their eligible pre-tax compensation. We recorded expenses of $6.8 million in the three month period ended March 31, 2017 , as compared to $6.5 million for the same period in 2016 related to our matching contribution under the employee savings plan, which was included in cost of services and selling, general and administrative expenses in our consolidated statements of operations. Expense related to our 2017 matching contribution expected to be made in Windstream Holdings common stock is included in share-based compensation expense in the accompanying consolidated statements of cash flow. In March 2017, we contributed 3.1 million shares of our common stock with a fair value of $22.7 million , as determined by the plan trustee, and $0.6 million in cash to the plan for the 2016 annual matching contribution. Additionally, we contributed 3.2 million shares of our common stock to the plan for the 2015 annual matching contribution during the three month period ended March 31, 2016 . At the time of this contribution, the shares had a fair value of approximately $24.0 million as determined by the plan trustee.

8. Share-Based Compensation Plans:

Under the Amended and Restated 2006 Equity Incentive Plan (the “Incentive Plan”), we may issue a maximum of 24.3 million equity stock awards in the form of restricted stock, restricted stock units, stock appreciation rights or stock options. As of March 31, 2017 , the Incentive Plan had remaining capacity of approximately 4.2 million awards. As of March 31, 2017 , we had additional remaining capacity of approximately 5.8 million awards from a similar equity incentive plan assumed in the merger with EarthLink.

Our Board of Directors approves grants of restricted stock and restricted stock units to officers, executives, non-employee directors and certain management employees. These grants include the standard annual grants to these employee and director groups as a key component of their annual incentive compensation plan and one-time grants. Grants may include time-based and performance-based awards. Time-based awards granted to employees vest over a service period of two or three years. Each recipient of the performance-based restricted stock units may vest in a number of shares from zero to 150.0 percent of their award based on attainment of certain operating targets, some of which are indexed to the performance of Standard & Poor’s 500 Stock Index, over a three-year period.

The 2016 annual and three-year operating targets for these performance based restricted stock units were approved by the Board of Directors in February 2017 and May 2017. All performance targets for replacement awards granted to EarthLink employees were met prior to the merger date. For equity awards that contain only service conditions for vesting, we calculate the fair value of the award based on Windstream Holdings’ closing price on the grant date determined in accordance with the applicable authoritative guidance.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

8. Share-Based Compensation Plans, Continued:

The vesting periods and grant date fair value for restricted stock and restricted stock units issued, including the EarthLink replacement awards, were as follows for the three month period ended March 31 , 2017 :



(Number of shares in thousands)
Service-based restricted stock and restricted units:
Vest variably over remaining service period, up to three years	2,858.7
Vest ratably over a three-year service period	1,068.7
Vest three years from date of grant, service based	33.8
Vest one year from date of grant, service based - granted to non-employee directors	9.4
Total granted	3,970.6
Grant date fair value (Dollars in millions)	$	28.8
Performance restricted units:
Vest variably over remaining required service period, up to three years	2,370.9
Vest contingently at the end of the respective performance period	1,139.3
Total granted	3,510.2
Grant date fair value (Dollars in millions)	$	27.0

Service-based restricted stock and restricted unit activity for the three month period ended March 31, 2017 was as follows:



	(Thousands) Underlying Number of Shares		Per Share Weighted Average Fair Value
Non-vested at December 31, 2016	3,283.8		$	10.27
Replacement grants related to merger with EarthLink	2,858.7		$	7.19
Granted	1,111.9		$	7.39
Vested	(2,034.4	)	$	9.95
Forfeited	(80.7	)	$	9.04
Non-vested at March 31, 2017	5,139.3		$	8.08

Performance restricted stock unit activity for the three month period ended March 31, 2017 was as follows:



	(Thousands) Underlying Number of Shares		Per Share Weighted Average Fair Value
Non-vested at December 31, 2016	1,206.3		$	5.64
Replacement grants related to merger with EarthLink	2,370.9		$	7.19
Granted	1,139.3		$	7.39
Vested	(1,375.3	)	$	7.93
Forfeited	(100.7	)	$	6.54
Non-vested at March 31, 2017	3,240.5		$	6.87

At March 31, 2017 , unrecognized compensation expense for restricted stock and restricted stock units totaled $40.9 million and is expected to be recognized over the weighted average vesting period of 2.0 years. Unrecognized compensation expense is included in additional paid-in capital in the accompanying consolidated balance sheets and statements of shareholders’ and member equity. The total fair value of shares vested was $31.1 million for the three month period ended March 31, 2017 , as compared to $20.7 million for the same period in 2016 . Share-based compensation expense for restricted stock and restricted stock units was $10.0 million for the three month period ended March 31, 2017 , as compared to $6.6 million for the same period in 2016 .

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

8. Share-Based Compensation Plans, Continued:

In addition to including amounts related to restricted stock and restricted units, share-based compensation expense presented in the accompanying consolidated statements of cash flow also includes amounts related to certain executive and management incentive compensation plans and the matching contribution to the employee savings plan for which payments to eligible participants are expected to be made in Windstream Holdings common stock.

A summary of share-based compensation expense was as follows:



	Three Months Ended March 31,
(Millions)	2017		2016
Restricted stock and restricted units and stock options	$	10.0	$	6.6
Employee savings plan (See Note 7)	6.8		6.5
Management incentive compensation plans	—		0.6
Share-based compensation expense	$	16.8	$	13.7

9. Merger, Integration and Other Costs and Restructuring Charges:

We incur costs to complete a merger or acquisition and integrate its operations into our business, which are presented as merger, integration and other costs in our consolidated results of operations. These costs include transaction costs, such as accounting, legal, consulting and broker fees; severance and related costs; IT and network conversion; rebranding; and contract termination fees. During 2017, we incurred investment banking fees, legal, accounting and other consulting fees and severance and employee benefit costs related to the merger with EarthLink. During the fourth quarter of 2015, we began a network optimization project designed to consolidate traffic onto network facilities operated by us and reduce the usage of other carriers’ networks in our acquired CLEC markets. In undertaking this initiative, we incurred costs to migrate traffic to lower cost circuits and to terminate existing contracts prior to their expiration. We will complete this project in 2017. Costs related to the network optimization project and our merger with EarthLink account for the merger, integration and other costs incurred in 2017.

Restructuring charges are primarily incurred as a result of evaluations of our operating structure. Among other things, these evaluations explore opportunities to provide greater flexibility in managing and financing existing and future strategic operations, for task automation and the balancing of our workforce based on the current needs of our customers. Severance, lease exit costs and other related charges are included in restructuring charges.

In the first quarter of 2017, we completed reductions in our workforce eliminating approximately 280 positions in our ILEC small business and enterprise segments as well as in our engineering, finance and information technology workgroups to more efficiently manage our operations. In completing these workforce reductions, we incurred severance and other employee benefit costs of $7.1 million . Restructuring charges in the first three months of 2016 principally consisted of $4.3 million of severance and other employee-related costs incurred in connection with completing several small workforce reductions.

A summary of the merger, integration and other costs and restructuring charges recorded was as follows:



	Three Months Ended March 31,
(Millions)	2017		2016
Merger, integration and other costs:
Information technology conversion costs	$	0.9	$	—
Costs related to merger with EarthLink (a)	53.1		—
Network optimization and contract termination costs	3.3		4.2
Consulting and other costs	—		0.8
Total merger, integration and other costs	57.3		5.0
Restructuring charges	7.4		4.4
Total merger, integration and other costs and restructuring charges	$	64.7	$	9.4

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

9. Merger, Integration and Other Costs and Restructuring Charges, Continued:

(a)

Includes investment banking, legal, accounting and other consulting fees of $23.4 million , severance and employee benefit costs for EarthLink employees terminated after the Merger of $24.5 million , share-based compensation expense of $4.4 million attributable to the accelerated vesting of replacement equity awards for terminated EarthLink employees and other miscellaneous expenses of $0.8 million .

After giving consideration to tax benefits on deductible items, merger, integration and other costs and restructuring charges increased our reported net loss $44.9 million for the three month period ended March 31, 2017 , as compared to $5.8 million for the same period in 2016.

The following is a summary of the activity related to the liabilities associated with merger, integration and other costs and restructuring charges at March 31 :



(Millions)	2017
Balance, beginning of period	$	5.8
Merger, integration and other costs and restructuring charges	64.7
Cash outlays during the period	(54.0		)
Balance, end of period	$	16.5

As of March 31, 2017 , unpaid merger, integration and other costs and restructuring liabilities consisted of $3.9 million associated with the restructuring initiatives and $12.6 million related to merger and integration activities. Payments of these liabilities will be funded through operating cash flows.

10. Other-Than-Temporary Impairment Loss on Investment in Uniti Common Stock:

On April 24, 2015, we completed the spin-off of certain telecommunications network assets, including our fiber and copper networks and other real estate, to Uniti Group, Inc. (“Uniti”) (formerly Communications Sales & Leasing, Inc.). As of the spin-off date, we retained a passive ownership interest in approximately 19.6 percent of the common stock of Uniti. Shares of Uniti retained by us following the spin-off were classified as available-for-sale and recorded at fair value with unrealized gains and losses reported in accumulated other comprehensive income. No deferred income taxes were recorded with respect to the unrealized gains and losses due to the tax-free qualification of the spin-off.

During the first quarter of 2016, we recorded an other-than-temporary impairment loss of $181.9 million for the difference between the fair value of the Uniti common stock as of March 31, 2016 and our cost basis, which had been based on the market value of the shares on the date of spin-off. We recorded the other-than-temporarily impairment due to the duration in which the Uniti shares had traded at a market price below our initial cost basis. Following the recognition of the other-than-temporary impairment loss, the cost basis of the Uniti shares was adjusted to equal the March 31, 2016 market value of $653.8 million . Subsequent changes in the market value of the Uniti shares were recorded in accumulated other comprehensive income. During the second quarter of 2016, we disposed of all of our shares of Uniti common stock.

11. Accumulated Other Comprehensive Income:

Accumulated other comprehensive income balances, net of tax, were as follows:



(Millions)	March 31, 2017			December 31, 2016
Pension and postretirement plans	$	(1.3	)	$	(1.2	)
Unrealized net gains on interest rate swaps:
Designated portion	15.8			13.7
De-designated portion	(5.7		)	(6.6		)
Accumulated other comprehensive income	$	8.8		$	5.9

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

11. Accumulated Other Comprehensive Income, Continued:

Changes in accumulated other comprehensive income balances, net of tax, were as follows:



(Millions)	Net Gains on Interest Rate Swaps		Pension and Postretirement Plans			Total
Balance at December 31, 2016	$	7.1	$	(1.2	)	$	5.9
Other comprehensive income before reclassifications	2.1		—			2.1
Amounts reclassified from other accumulated comprehensive income (a)	0.9		(0.1		)	0.8
Balance at March 31, 2017	$	10.1	$	(1.3	)	$	8.8


(a)	See separate table below for details about these reclassifications.

Reclassifications out of accumulated other comprehensive income were as follows:



	(Millions) Amount Reclassified from Accumulated Other Comprehensive Income
Details about Accumulated Other Comprehensive Income Components		Three Months Ended March 31,							Affected Line Item in the Consolidated Statements of Operations
		2017			2016
Available-for-sale securities:
Other-than-temporary impairment loss recognized in the period		$	—		$	181.9			Other-than-temporary impairment loss on investment in Uniti common stock
		—			181.9				Net loss
Interest rate swaps:
Amortization of net unrealized losses on de-designated interest rate swaps		1.5			1.2				Interest expense
		1.5			1.2				Loss before income taxes
		(0.6		)	(0.5		)		Income tax benefit
		0.9			0.7				Net loss
Pension and postretirement plans:
Plan curtailment		—			(5.5		)	(a)
Amortization of net actuarial loss		—			0.1			(a)
Amortization of prior service credits		(0.2		)	(0.5		)	(a)
		(0.2		)	(5.9		)		Loss before income taxes
		0.1			2.3				Income tax benefit
		(0.1		)	(3.6		)		Net loss
Total reclassifications for the period, net of tax		$	0.8		$	179.0			Net loss


(a)	These accumulated other comprehensive income components are included in the computation of net periodic benefit expense (income) (see Note 7).

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

12. Loss per Share:

We compute basic earnings (loss) per share by dividing net income (loss) applicable to common shares by the weighted average number of common shares outstanding during each period. Our non-vested restricted shares containing a non-forfeitable right to receive dividends on a one-to-one per share ratio to common shares are considered participating securities, and the impact is included in the computation of earnings (loss) per share pursuant to the two-class method. Calculations of earnings (loss) per share under the two-class method exclude from the numerator any dividends paid or owed on participating securities and any undistributed earnings considered to be attributable to participating securities. The related participating securities are similarly excluded from the denominator.

Diluted earnings (loss) per share is computed by dividing net income (loss) applicable to common shares by the weighted average number of common shares adjusted to include the effect of potentially dilutive securities. Potentially dilutive securities include incremental shares issuable upon exercise of outstanding stock options and warrants. Diluted earnings (loss) per share excludes all potentially dilutive securities if their effect is anti-dilutive.

We also issue performance-based restricted stock units as part of our share-based compensation plan. Certain of these restricted stock units contain a forfeitable right to receive dividends. Because dividends attributable to these shares are forfeited if the vesting provisions are not met, they are considered non-participating restricted shares and are not dilutive under the two-class method until the performance conditions have been satisfied. As of March 31, 2017 , the performance conditions for the outstanding restricted stock units have not yet been satisfied. Restricted stock units, stock options and warrants granted in conjunction with past acquisitions are included in the computation of dilutive earnings (loss) per share using the treasury stock method.

A reconciliation of net loss and number of shares used in computing basic and diluted loss per share was as follows:



	Three Months Ended March 31,
(Millions, except per share amounts)	2017			2016
Basic and diluted loss per share:
Numerator:
Net loss	$	(111.3	)	$	(231.9	)
Income allocable to participating securities	(0.6		)	(0.5		)
Net loss attributable to common shares	$	(111.9	)	$	(232.4	)

Denominator:
Basic and diluted shares outstanding
Weighted average shares outstanding	130.4			96.4
Weighted average participating securities	(4.3		)	(4.2		)
Weighted average basic and diluted shares outstanding	126.1			92.2
Basic and diluted loss per share:
Net loss		($.89	)		($2.52	)

We have excluded from the computation of diluted shares the effect of restricted stock units and options to purchase shares of our common stock because their inclusion would have an anti-dilutive effect due to our reported net loss for both the three months ended March 31, 2017 and 2016. We had 5.2 million restricted stock units and 0.2 million stock options outstanding as of March 31, 2017, compared to 1.5 million restricted stock units and 0.5 million stock options outstanding at March 31, 2016 .

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

13. Segment Information:

Our business unit organizational structure is focused on our core customer relationships. Enterprise customers consist of those relationships that have the propensity now or in the future to generate at least $1,500 or more in monthly recurring revenue. Business customers not meeting this criterion are classified as small business. In classifying our business customers, we consider the maximum potential revenue to be generated from the customer relationship for both our existing customer base and any new customers in determining which business unit can best support the customer. Accordingly, over time, we may prospectively change the classification of a particular business customer between enterprise and small business. Our consumer and small business customer base is further disaggregated between those customers located in service areas in which we are the incumbent local exchange carrier (“ILEC”) and provide services over network facilities operated by us and those customers located in service areas in which we are a competitive local exchange carrier (“CLEC”) and provide services over network facilities primarily leased from other carriers. Under our current organizational structure, we have combined our ILEC Consumer and Small Business operations into one segment and we have combined into a separate segment our CLEC Consumer and Small Business operations due to similarities with respect to product and service offerings, marketing strategies and customer service delivery.

Following the merger with EarthLink, we operate and report these four customer-based segments:

•

ILEC Consumer and Small Business - We manage as one business our residential and small business operations in those markets in which we are the ILEC due to the similarities with respect to service offerings, marketing strategies and customer service delivery. Products and services offered to customers include traditional local and long-distance voice services and high-speed Internet services, which are delivered primarily over network facilities operated by us. We offer consumer video services primarily through a relationship with Dish Network LLC and we also own and operate cable television franchises in some of our service areas. We offer Kinetic, a complete video entertainment offering in our Lincoln, Nebraska; Lexington, Kentucky; Sugar Land, Texas markets, as well as several communities in North Carolina.

Residential customers can bundle voice, high-speed Internet and video services, to provide one convenient billing solution and receive bundle discounts. Small Business - ILEC services offer a wide range of advanced Internet, voice, and web conferencing products. These services are equipped to deliver high-speed Internet with competitive speeds, value added services to enhance business productivity and options to bundle services for a global business solution to meet our small business customer needs.

•

Wholesale - Our wholesale operations are focused on providing products and services to other communications services providers. Our service offerings leverage Windstream’s extensive fiber network to provide wave transport services, carrier Ethernet services, fiber-to-tower connections to support backhaul services to wireless carriers, and high speed Internet access. We also offer traditional services including special access services and Time Division Multiplexing (“TDM”) private line transport. The combination of these services allow wholesale customers to provide voice and data services to their customers through the use of our network or in combination with their own networks.

•

Enterprise - Products and services offered by our enterprise operations include integrated voice and data services, which deliver voice and broadband services over a single Internet connection, multi-site networking services which provide a fast and private connection between business locations, as well as a variety of other data services, including cloud computing and collocation and managed services as an alternative to traditional information technology infrastructure.


•	CLEC Consumer and Small Business - Products and services offered to customers include integrated voice and data services, advanced data and traditional voice and long-distance services, as well as value added services including online backup, managed web design and web hosting, and various e-mail services.

We evaluate performance of the segments based on segment income, which is computed as segment revenues and sales less segment operating expenses. As further discussed below, certain operating revenues and expenses are not assigned to our segments.

Segment revenues are based upon each customer’s classification to an individual segment and include all services provided to that customer. Certain operating revenues are derived from activities that are centrally-managed by us and, accordingly, these revenues are not included in any of our four segments presented below. These other operating revenues include revenue from federal and state universal service funds, CAF Phase II support, and funds received from federal access recovery mechanisms. We also generate other service revenues from providing switched access services, which include usage-based revenues from long-distance companies and other carriers for access to our network to complete long-distance calls, as well as reciprocal compensation received from wireless and other local connecting carriers for the use of network facilities. Other operating revenues also include certain surcharges assessed to our customers, including billings for our required contributions to federal and state USF programs and product sales to contractors.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

13. Segment Information, Continued:

Segment expenses include specific expenses incurred as a direct result of providing services and products to segment customers; selling, general and administrative expenses that are directly associated with specific segment customers or activities; and certain allocated expenses which include network expenses, facilities expenses and other expenses, such as vehicle and real estate-related expenses. We do not assign depreciation and amortization expense, merger, integration and other costs, restructuring charges, share-based compensation and pension costs to our segments, because these expenses are centrally managed and are not monitored by or reported to the chief operating decision maker (“CODM”) by segment. Similarly, certain regulatory fees, cost of products sold to contractors, and centrally-managed administrative functions, such as accounting and finance, information technology, engineering, network management, legal and human resources, are not assigned to our segments. Interest expense and net loss on early extinguishment of debt have also been excluded from segment operating results because we manage our financing activities on a total company basis and have not assigned any long-term debt obligations to the segments. Amounts related to our investment in Uniti common stock consisting of dividend income and other-than-temporary impairment loss, as well as other (expense) income, net, and income tax benefit are not monitored as a part of our segment operations and, therefore, these items also have been excluded from our segment operating results.

Asset information by segment is not monitored or reported to the CODM and therefore has not been presented. All of our customers are located in the United States and we do not have any single customer that provides more than 10 percent of our total consolidated revenues and sales.

The following table summarizes our segment results:



	Three Months Ended March 31,
(Millions)	2017		2016
ILEC Consumer and Small Business:
Revenues and sales	$	391.0	$	397.2
Costs and expenses	169.3		169.1
Segment income	221.7		228.1
Wholesale:
Revenues	157.5		163.2
Costs and expenses	50.0		45.5
Segment income	107.5		117.7
Enterprise:
Revenues and sales	525.5		513.1
Costs and expenses	443.0		442.6
Segment income	82.5		70.5
CLEC Consumer and Small Business:
Revenues	140.3		128.7
Costs and expenses	91.5		87.4
Segment income	48.8		41.3
Total segment revenues and sales	1,214.3		1,202.2
Total segment costs and expenses	753.8		744.6
Total segment income	$	460.5	$	457.6

The following table reconciles total segment revenues and sales to total consolidated revenues and sales:



	Three Months Ended March 31,
(Millions)	2017		2016
Total segment revenues and sales	$	1,214.3	$	1,202.2
Regulatory and other operating revenues and sales	151.4		171.2
Total consolidated revenues and sales	$	1,365.7	$	1,373.4

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

13. Segment Information, Continued:

The following table reconciles segment income to consolidated net loss:



	Three Months Ended March 31,
(Millions)	2017			2016
Total segment income	$	460.5		$	457.6
Regulatory and other operating revenues and sales	151.4			171.2
Depreciation and amortization	(338.5		)	(304.8		)
Other unassigned operating expenses	(227.4		)	(166.3		)
Dividend income on Uniti common stock	—			17.6
Other income (expense), net	0.7			(1.2		)
Net loss on early extinguishment of debt	(3.2		)	(35.4		)
Other-than-temporary impairment loss on investment in Uniti common stock	—			(181.9		)
Interest expense	(211.8		)	(219.7		)
Income tax benefit	57.0			31.0
Net loss	$	(111.3	)	$	(231.9	)

14. Supplemental Guarantor Information:

Debentures and notes, without collateral, issued by Windstream Services, LLC

In connection with the issuance of the 7.750 percent senior notes due October 15, 2020, the 7.750 percent senior notes due October 1, 2021, the 7.500 percent senior notes due June 1, 2022, the 7.500 percent senior notes due April 1, 2023 and the 6.375 percent senior notes due August 1, 2023 (“the guaranteed notes”), certain of Windstream Services’ wholly-owned subsidiaries (the “Guarantors”), provide guarantees of those debentures. These guarantees are full and unconditional, subject to certain customary release provisions, as well as joint and several. All personal property assets and related operations of the Guarantors are pledged as collateral on the senior secured credit facility of Windstream Services. Certain Guarantors may be subject to restrictions on their ability to distribute earnings to Windstream Services. The remaining subsidiaries of Windstream Services (the “Non-Guarantors”) are not guarantors of the guaranteed notes. Windstream Holdings is not a guarantor of any Windstream Services debt instruments.

Effective July 1, 2016, the guaranteed notes were amended to include a subsidiary as a Guarantor. Previously, this subsidiary was classified as a Non-Guarantor. As a result, information for the three months ended March 31, 2016 has been revised to reflect the change in the guarantor reporting structure. Following the Merger, the acquired legal entities of EarthLink have been designated as either Guarantors or Non-Guarantors. Accordingly, the financial information presented as of and for the three months ended March 31, 2017 includes the acquired EarthLink operations beginning on February 27, 2017.

The following information presents condensed consolidating and combined statements of comprehensive income (loss) for the three month periods ended March 31 , 2017 and 2016 , condensed consolidating and combined balance sheets as of March 31, 2017 and December 31, 2016 , and condensed consolidating and combined statements of cash flows for the three month periods ended March 31 , 2017 and 2016 of Windstream Services, the Guarantors and the Non-Guarantors. Investments consist of investments in net assets of subsidiaries held by Windstream Services and other subsidiaries, and have been presented using the equity method of accounting.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

14. Supplemental Guarantor Information, Continued:



	Condensed Consolidating Statement of Comprehensive Income (Loss) (Unaudited)
	Three Months Ended March 31, 2017
(Millions)	Windstream Services			Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues and sales:
Service revenues	$	—		$	266.9		$	1,096.3		$	(18.8	)	$	1,344.4
Product sales	—			19.6			1.7			—			21.3
Total revenues and sales	—			286.5			1,098.0			(18.8		)	1,365.7
Costs and expenses:
Cost of services	—			117.5			583.1			(18.2		)	682.4
Cost of products sold	—			18.7			2.1			—			20.8
Selling, general and administrative	—			38.4			175.2			(0.6		)	213.0
Depreciation and amortization	2.7			90.8			245.0			—			338.5
Merger, integration and other costs	—			2.8			54.5			—			57.3
Restructuring charges	—			1.3			6.1			—			7.4
Total costs and expenses	2.7			269.5			1,066.0			(18.8		)	1,319.4
Operating (loss) income	(2.7		)	17.0			32.0			—			46.3
Losses from consolidated subsidiaries	(70.8		)	(15.9		)	(7.2		)	93.9			—
Other income, net	0.2			0.2			0.3			—			0.7
Net loss on early extinguishment of debt	(1.2		)	(2.0		)	—			—			(3.2		)
Intercompany interest income (expense)	26.2			(11.7		)	(14.5		)	—			—
Interest expense	(84.8		)	(39.5		)	(87.5		)	—			(211.8		)
Loss before income taxes	(133.1		)	(51.9		)	(76.9		)	93.9			(168.0		)
Income tax benefit	(22.0		)	(13.8		)	(21.1		)	—			(56.9		)
Net loss	$	(111.1	)	$	(38.1	)	$	(55.8	)	$	93.9		$	(111.1	)
Comprehensive loss	$	(108.2	)	$	(38.1	)	$	(55.8	)	$	93.9		$	(108.2	)

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

14. Supplemental Guarantor Information, Continued:



	Condensed Consolidating Statement of Comprehensive Income (Loss) (Unaudited)
	Three Months Ended March 31, 2016
(Millions)	Windstream Services			Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues and sales:
Service revenues	$	—		$	255.8		$	1,091.0		$	(6.2	)	$	1,340.6
Product sales	—			28.6			4.2			—			32.8
Total revenues and sales	—			284.4			1,095.2			(6.2		)	1,373.4
Costs and expenses:
Cost of services	—			100.2			574.2			(5.6		)	668.8
Cost of products sold	—			25.9			3.0			—			28.9
Selling, general and administrative	—			39.4			164.5			(0.6		)	203.3
Depreciation and amortization	3.8			74.5			226.5			—			304.8
Merger, integration and other costs	—			—			5.0			—			5.0
Restructuring charges	—			0.8			3.6			—			4.4
Total costs and expenses	3.8			240.8			976.8			(6.2		)	1,215.2
Operating (loss) income	(3.8		)	43.6			118.4			—			158.2
Earnings (losses) from consolidated subsidiaries	5.4			(23.2		)	(7.4		)	25.2			—
Dividend income on Uniti common stock	17.6			—			—			—			17.6
Other expense, net	—			—			(1.2		)	—			(1.2		)
Net loss on early extinguishment of debt	(35.4		)	—			—			—			(35.4		)
Other-than-temporary impairment loss on investment in Uniti common stock	(181.9		)	—			—			—			(181.9		)
Intercompany interest income (expense)	24.8			(10.0		)	(14.8		)	—			—
Interest expense	(92.6		)	(37.4		)	(89.7		)	—			(219.7		)
(Loss) income before income taxes	(265.9		)	(27.0		)	5.3			25.2			(262.4		)
Income tax (benefit) expense	(34.3		)	(1.4		)	4.9			—			(30.8		)
Net (loss) income	$	(231.6	)	$	(25.6	)	$	0.4		$	25.2		$	(231.6	)
Comprehensive income (loss)	$	46.9		$	(25.6	)	$	0.4		$	25.2		$	46.9

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

14. Supplemental Guarantor Information, Continued:



	Condensed Consolidating Balance Sheet (Unaudited)
	As of March 31, 2017
(Millions)	Windstream Services			Guarantors			Non- Guarantors			Eliminations			Consolidated
Assets
Current Assets:
Cash and cash equivalents	$	—		$	5.9		$	45.6		$	—		$	51.5
Accounts receivable, net	—			181.2			473.6			—			654.8
Notes receivable - affiliate	—			4.9			—			(4.9		)	—
Affiliates receivable, net	—			773.7			1,489.6			(2,263.3		)	—
Inventories	—			63.4			23.6			—			87.0
Prepaid expenses and other	22.2			41.1			106.5			—			169.8
Total current assets	22.2			1,070.2			2,138.9			(2,268.2		)	963.1
Investments in consolidated subsidiaries	6,875.3			—			395.5			(7,270.8		)	—
Notes receivable - affiliate	—			309.6			—			(309.6		)	—
Goodwill	1,636.6			1,841.2			1,212.4			—			4,690.2
Other intangibles, net	506.0			551.4			520.3			—			1,577.7
Net property, plant and equipment	6.6			1,246.8			4,322.2			—			5,575.6
Deferred income taxes	—			318.3			116.7			(435.0		)	—
Other assets	24.2			16.3			57.1			—			97.6
Total Assets	$	9,070.9		$	5,353.8		$	8,763.1		$	(10,283.6	)	$	12,904.2
Liabilities and Equity
Current Liabilities:
Current maturities of long-term debt	$	19.3		$	—		$	—		$	—		$	19.3
Current portion of long-term lease obligations	—			50.7			122.2			—			172.9
Accounts payable	—			89.7			246.1			—			335.8
Affiliates payable, net	2,274.6			—			—			(2,263.3		)	11.3
Notes payable - affiliate	—			—			4.9			(4.9		)	—
Advance payments and customer deposits	—			44.8			170.3			—			215.1
Accrued taxes	0.2			23.1			57.6			—			80.9
Accrued interest	91.7			3.5			0.8			—			96.0
Other current liabilities	36.9			101.4			231.4			—			369.7
Total current liabilities	2,422.7			313.2			833.3			(2,268.2		)	1,301.0
Long-term debt	5,360.2			99.6			—			—			5,459.8
Long-term lease obligations	—			1,392.2			3,394.9			—			4,787.1
Accumulated losses in excess of investments	—			110.2			—			(110.2		)	—
Notes payable - affiliate	—			—			309.6			(309.6		)	—
Deferred income taxes	533.2			—			—			(435.0		)	98.2
Other liabilities	32.4			53.8			449.5			—			535.7
Total liabilities	8,348.5			1,969.0			4,987.3			(3,123.0		)	12,181.8
Commitments and Contingencies (See Note 15)
Equity:
Common stock	—			39.4			81.9			(121.3		)	—
Additional paid-in capital	1,216.7			3,788.3			825.3			(4,613.6		)	1,216.7
Accumulated other comprehensive income (loss)	8.8			—			(1.3		)	1.3			8.8
(Accumulated deficit) retained earnings	(503.1		)	(442.9		)	2,869.9			(2,427.0		)	(503.1		)
Total equity	722.4			3,384.8			3,775.8			(7,160.6		)	722.4
Total Liabilities and Equity	$	9,070.9		$	5,353.8		$	8,763.1		$	(10,283.6	)	$	12,904.2

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

14. Supplemental Guarantor Information, Continued:



	Condensed Consolidating Balance Sheet (Unaudited)
	As of December 31, 2016
(Millions)	Windstream Services			Guarantors			Non- Guarantors			Eliminations			Consolidated
Assets
Current Assets:
Cash and cash equivalents	$	—		$	2.2		$	56.9		$	—		$	59.1
Accounts receivable, net	—			178.9			439.7			—			618.6
Notes receivable - affiliate	—			4.8			—			(4.8		)	—
Affiliates receivable, net	—			531.9			2,106.8			(2,638.7		)	—
Inventories	—			65.9			11.6			—			77.5
Prepaid expenses and other	10.1			36.5			65.1			—			111.7
Total current assets	10.1			820.2			2,680.1			(2,643.5		)	866.9
Investments in consolidated subsidiaries	6,081.8			297.7			231.4			(6,610.9		)	—
Notes receivable - affiliate	—			310.5			—			(310.5		)	—
Goodwill	1,636.7			1,364.4			1,212.5			—			4,213.6
Other intangibles, net	515.2			258.8			546.5			—			1,320.5
Net property, plant and equipment	6.9			1,234.3			4,042.3			—			5,283.5
Deferred income taxes	—			320.2			102.5			(422.7		)	—
Other assets	19.5			16.0			50.0			—			85.5
Total Assets	$	8,270.2		$	4,622.1		$	8,865.3		$	(9,987.6	)	$	11,770.0
Liabilities and Equity
Current Liabilities:
Current maturities of long-term debt	$	14.9		$	—		$	—		$	—		$	14.9
Current portion of long-term lease obligations	—			49.5			119.2			—			168.7
Accounts payable	—			101.5			288.7			—			390.2
Affiliates payable, net	2,653.7			—			—			(2,638.7		)	15.0
Notes payable - affiliate	—			—			4.8			(4.8		)	—
Advance payments and customer deposits	—			40.9			137.2			—			178.1
Accrued taxes	—			21.3			56.7			—			78.0
Accrued interest	55.4			1.8			0.9			—			58.1
Other current liabilities	17.9			69.9			263.8			—			351.6
Total current liabilities	2,741.9			284.9			871.3			(2,643.5		)	1,254.6
Long-term debt	4,749.2			99.5			—			—			4,848.7
Long-term lease obligations	—			1,405.3			3,426.6			—			4,831.9
Notes payable - affiliate	—			—			310.5			(310.5		)	—
Deferred income taxes	574.2			—			—			(422.7		)	151.5
Other liabilities	34.9			53.2			425.2			—			513.3
Total liabilities	8,100.2			1,842.9			5,033.6			(3,376.7		)	11,600.0
Commitments and Contingencies (See Note 15)
Equity:
Common stock	—			39.4			81.9			(121.3		)	—
Additional paid-in capital	556.1			3,143.3			825.3			(3,968.6		)	556.1
Accumulated other comprehensive income (loss)	5.9			—			(1.2		)	1.2			5.9
(Accumulated deficit) retained earnings	(392.0		)	(403.5		)	2,925.7			(2,522.2		)	(392.0		)
Total equity	170.0			2,779.2			3,831.7			(6,610.9		)	170.0
Total Liabilities and Equity	$	8,270.2		$	4,622.1		$	8,865.3		$	(9,987.6	)	$	11,770.0

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

14. Supplemental Guarantor Information, Continued:



	Condensed Consolidating Statement of Cash Flows (Unaudited)
	Three Months Ended March 31, 2017
(Millions)	Windstream Services			Guarantors			Non- Guarantors			Eliminations		Consolidated
Cash Flows from Operating Activities:
Net cash (used in) provided from operating activities	$	(36.3	)	$	53.9		$	114.3		$	—	$	131.9
Cash Flows from Investing Activities:
Additions to property, plant and equipment	0.1			(39.9		)	(203.6		)	—		(243.4		)
Cash acquired from EarthLink	—			0.7			4.3			—		5.0
Other, net	—			—			(2.5		)	—		(2.5		)
Net cash provided from (used in) investing activities	0.1			(39.2		)	(201.8		)	—		(240.9		)
Cash Flows from Financing Activities:
Distributions to Windstream Holdings, Inc.	(24.3		)	—			—			—		(24.3		)
Contributions from Windstream Holdings, Inc.	9.6			—			—			—		9.6
Repayments of debt and swaps	(698.1		)	(435.3		)	—			—		(1,133.4		)
Proceeds of debt issuance	1,315.6			—			—			—		1,315.6
Debt issuance costs	(7.0		)	—			—			—		(7.0		)
Intercompany transactions, net	(549.8		)	441.8			108.0			—		—
Payments under long-term lease obligations	—			(11.9		)	(28.7		)	—		(40.6		)
Payments under capital lease obligations	—			(6.4		)	(2.3		)	—		(8.7		)
Other, net	(9.8		)	0.8			(0.8		)	—		(9.8		)
Net cash provided from (used in) financing activities	36.2			(11.0		)	76.2			—		101.4
Increase (decrease) in cash and cash equivalents	—			3.7			(11.3		)	—		(7.6		)
Cash and Cash Equivalents:
Beginning of period	—			2.2			56.9			—		59.1
End of period	$	—		$	5.9		$	45.6		$	—	$	51.5

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

14. Supplemental Guarantor Information, Continued:



	Condensed Consolidating Statement of Cash Flows (Unaudited)
	Three Months Ended March 31, 2016
(Millions)	Windstream Services			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash Flows from Operating Activities:
Net cash provided from (used in) operating activities	$	235.8		$	61.3		$	(169.6	)	$	—		$	127.5
Cash Flows from Investing Activities:
Additions to property, plant and equipment	(0.2		)	(60.4		)	(203.2		)	—			(263.8		)
Proceeds from sale of property	—			1.0			5.2			—			6.2
Net cash used in investing activities	(0.2		)	(59.4		)	(198.0		)	—			(257.6		)
Cash Flows from Financing Activities:
Distributions to Windstream Holdings, Inc.	(44.1		)	—			—			—			(44.1		)
Repayments of debt and swaps	(985.3		)	—			—			—			(985.3		)
Proceeds of debt issuance	1,278.0			—			—			—			1,278.0
Debt issuance costs	(10.7		)	—			—			—			(10.7		)
Intercompany transactions, net	(441.9		)	7.6			431.0			3.3			—
Payments under long-term lease obligations	—			(10.8		)	(26.0		)	—			(36.8		)
Payments under capital lease obligations	—			—			(19.8		)	—			(19.8		)
Other, net	(7.9		)	0.9			(0.9		)	—			(7.9		)
Net cash (used in) provided from financing activities	(211.9		)	(2.3		)	384.3			3.3			173.4
Increase (decrease) in cash and cash equivalents	23.7			(0.4		)	16.7			3.3			43.3
Cash and Cash Equivalents:
Beginning of period	—			1.1			33.5			(3.3		)	31.3
End of period	$	23.7		$	0.7		$	50.2		$	—		$	74.6

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

15. Commitments and Contingencies:

Lease Commitments

Minimum rental commitments for all non-cancellable operating leases, consisting principally of leases for network facilities, real estate, office space and office equipment were as follows for each of the years ended March 31:



Year	(Millions)
2018	$	157.0
2019	125.3
2020	99.4
2021	65.6
2022	51.8
Thereafter	118.8
Total	$	617.9

Rental expense totaled $40.0 million and $28.8 million for the three month periods ended March 31, 2017 and 2016, respectively.

Litigation

On February 9, 2015, a putative stockholder filed a Shareholder Class Action Complaint in the Delaware Court of Chancery (the “Court”), captioned Doppelt v. Windstream Holdings, Inc., et al. , C.A. No. 10629-VCN, against the Company and its Board of Directors. This complaint was accompanied by a motion for a preliminary injunction seeking to enjoin the spin-off. The Court, ruling from the bench on February 19, 2015 - the day before a special meeting of stockholders was scheduled to vote on a reverse stock split and amended governing documents (the “Proposals”) - denied plaintiff’s motion for a preliminary injunction, reasoning that much of the information sought by plaintiff had been disclosed in public filings available on the United States Securities and Exchange Commission’s website, the Windstream Holdings’ Board of Directors was in no way conflicted, and while approval of the Proposals would facilitate the spin-off, approval was not necessary to effect the spin-off. On March 16, 2015, plaintiff, joined by a second putative Windstream stockholder, filed an Amended Shareholder Class Action Complaint alleging breaches of fiduciary duty by the Company and its Board concerning Windstream’s disclosures and seeking to rescind the spin-off and unspecified monetary damages. On February 5, 2016, the Court dismissed Windstream as a named party and also dismissed the plaintiffs’ demand to rescind the spin-off, but otherwise denied Windstream’s motion to dismiss plaintiffs’ claims. On or about January 27, 2017, the plaintiffs filed a motion seeking class certification which the Court granted on April 17, 2017. A trial is scheduled to begin on June 20, 2018.

In addition, numerous copyright holders represented by RightsCorp, Inc. (“RightsCorp”) have sent notices and a letter to Windstream in which they have asserted that our customers have utilized our services to allegedly illegally download and share alleged copyrighted material via peer-to-peer or “filesharing” programs and threatened to file a lawsuit. These holders maintain that Windstream is responsible for alleged infringement because after notification, Windstream did not shut off service to customers alleged to be repeat infringers, and, further, that Windstream may not claim a safe harbor pursuant to the Digital Millennium Copyright Act of 1998. On June 27, 2016, Windstream filed a complaint for declaratory judgment in the United States District Court - Southern District of New York against RightsCorp and BMG Rights Management (US) LLC, a client of RightsCorp, seeking a declaration that it is not liable under applicable laws for any alleged copyright infringement and that the defendants are not entitled to any alleged damages from Windstream for alleged copyright infringement. On April 17, 2017, the court granted the motion to dismiss filed by RightsCorp and BMG Rights Management (US) LLC, finding Windstream’s complaint for declaratory judgment did not present a case or controversy. Windstream is evaluating its options, including an appeal of the ruling.

We believe that we have valid defenses to the allegations asserted in the class action lawsuit and by RightsCorp and its client(s), and we plan to vigorously defend the claims pursued against us in any legal proceeding. While the ultimate resolution of the matters is not currently predictable, if there are adverse rulings against Windstream in either of these two matters, either ruling could constitute a material adverse outcome on our future consolidated results of operations, cash flows, or financial condition.

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

____

15. Commitments and Contingencies, Continued:

We are party to various legal proceedings and the ultimate resolution of these legal proceedings cannot be determined at this time. However, based on current circumstances, management does not believe such proceedings, individually or in the aggregate, will have a material adverse effect on our future consolidated results of operations, cash flows or financial condition.

Finally, management is currently not aware of any environmental matters, individually or in the aggregate, that would have a material adverse effect on our consolidated financial condition or results of our operations.

Other Matters

Windstream and one of its Enterprise customers have an agreement pursuant to which Windstream provides communication services to several of the customer’s locations. The majority of funding for the services is administered by the Universal Service Administrative Company (“USAC”) pursuant to the Universal Service Rural Health Care Telecommunications Program that offers reduced rates for broadband and telecommunications services to rural health care facilities. In March 2017, USAC issued a funding denial to the customer on the basis that certain rules of the FCC were violated with the selection of Windstream as the service provider. Due to an alleged conflict of interest created by a third-party Windstream channel partner that acted as a consultant for the customer regarding the agreement, USAC asserted that Windstream’s selection was not based upon a fair and open competitive bidding process. USAC’s denial addressed accrued funding of approximately $16.6 million , as well as funding of approximately $6.0 million previously remitted to us. We plan to oppose the denial, and while the ultimate resolution is not currently predictable, if there is a future adverse legal ruling against Windstream, the ruling could constitute a material adverse outcome on our future consolidated results of operations, cash flows or financial condition.

16. Subsequent Event:

On April 12, 2017, Windstream Holdings entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Broadview Networks Holdings, Inc. (“Broadview”), and Beethoven Merger Subsidiary, Inc., (“Merger Sub”), providing for Broadview to be acquired by Windstream Holdings through a merger effected under Delaware law (the “Merger”). Subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Broadview, with Broadview continuing as the surviving corporation in the Merger and as an indirect wholly owned subsidiary of Windstream Holdings. Broadview is a leading provider of cloud-based unified communications solutions to small and medium-sized businesses and offers a broad suite of cloud-based services which will improve our competitiveness and ability to provide enhanced services to business customers. Upon completion of the Merger, Windstream will add approximately 20,000 small and medium-sized business and enterprise customers and approximately 3,000 incremental route fiber miles. Pursuant to the terms of the Merger Agreement, each share of Broadview’s common stock, par value $.01 per share that is issued and outstanding immediately prior to such effective time will be automatically converted into the right to receive cash consideration of $6.98 per share. Including Broadview’s debt obligations to be assumed by Windstream, the transaction is valued at approximately $227.5 million .

Consummation of the Merger is subject to certain conditions, including the receipt of regulatory approvals, including the approval of the FCC. The transaction is expected to close during the third quarter of 2017.

Table of Contents

WINDSTREAM HOLDINGS, INC.

WINDSTREAM SERVICES, LLC

FORM 10-Q

PART I - FINANCIAL INFORMATION

Item 2 . Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless the context indicates otherwise, the terms “Windstream,” “we,” “us” or “our” refer to Windstream Holdings, Inc. and its subsidiaries, including Windstream Services, LLC, and the term “Windstream Services” refers to Windstream Services, LLC and its subsidiaries.

The following sections provide an overview of our results of operations and highlight key trends and uncertainties in our business. Certain statements constitute forward-looking statements. See “Forward-Looking Statements” at the end of this discussion for additional factors relating to such statements, and see “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2016 , filed with the Securities and Exchange Commission (“SEC”) on March 1, 2017 , for a discussion of certain risk factors applicable to our business, financial condition and results of operations.

ORGANIZATIONAL STRUCTURE

Windstream Holdings, Inc. (“Windstream Holdings”) is a publicly traded holding company and the parent of Windstream Services, LLC (“Windstream Services”). Windstream Holdings common stock trades on the NASDAQ Global Select Market (“NASDAQ”) under the ticker symbol “WIN”. Windstream Holdings owns a 100 percent interest in Windstream Services. Windstream Services and its guarantor subsidiaries are the sole obligors of all outstanding debt obligations and, as a result, also file periodic reports with the SEC. Windstream Holdings is not a guarantor of nor subject to the restrictive covenants included in any of Windstream Services’ debt agreements. The Windstream Holdings board of directors and officers oversee both companies.

There are no significant differences between the consolidated results of operations, financial condition, and cash flows of Windstream Holdings and those of Windstream Services other than for certain expenses directly incurred by Windstream Holdings principally consisting of audit, legal and board of director fees, NASDAQ listing fees, other shareholder-related costs, income taxes, common stock activity, and payables from Windstream Services to Windstream Holdings. For the three month period ended March 31, 2017 , the amount of pretax expenses directly incurred by Windstream Holdings were approximately $0.3 million , compared to $0.5 million for the same period in 2016 . On an after-tax basis, expenses incurred directly by Windstream Holdings were approximately $0.2 million for the three month period ended March 31, 2017 compared to $0.3 million in 2016 . Unless otherwise indicated, the following discussion of our business strategy, trends and results of operations pertain to both Windstream Holdings and Windstream Services.

ACQUISITION OF EARTHLINK HOLDINGS CORP

On February 27, 2017, Windstream Holdings completed its merger with Earthlink Holdings Corp. (“EarthLink”), pursuant to the terms of the Agreement and Plan of Merger (the “Merger Agreement”) dated November 5, 2016,whereby EarthLink merged into Europa Merger Sub, Inc., an wholly-owned subsidiary of Windstream Services, LLC, and survived, and immediately following, merged with Europa Merger Sub, LLC, a wholly-owned subsidiary of Windstream Services, LLC, with Merger Sub surviving and changing its name to EarthLink Holdings, LLC (the “Merger”). Earthlink Holdings, LLC is a direct, wholly-owned subsidiary of Windstream Services and provides data, voice and managed network services to retail and wholesale business customers and nationwide Internet access and related value-added services to residential customers. As a result of the Merger, Windstream added approximately 700,000 customers and approximately 16,000 incremental route fiber miles. In the Merger, each share of EarthLink common stock was exchanged for 0.818 shares of Windstream Holdings common stock. In the aggregate, Windstream Holdings issued approximately 88 million shares of its common stock and assumed approximately $435 million of EarthLink’s long-term debt, in a transaction valued at approximately $1.1 billion . Upon closing of the Merger, Windstream Holdings’ stockholders own approximately fifty-one percent (51%) and EarthLink stockholders own approximately forty-nine percent (49%) of the combined company. As a result of the Merger, we have increased our operating scale and scope giving us the ability to offer customers expanded products, services and enhanced enterprise solutions over an extensive national footprint now spanning approximately 147,000 fiber route miles. We also expect to achieve operating and capital expense synergies in integrating EarthLink’s operations into our existing business segment structure. For additional information regarding the Merger, including our refinancing of EarthLink’s long-term debt, see Notes 2 and 4 to the consolidated financial statements.

OVERVIEW

We are a leading provider of advanced network communications and technology solutions for consumers, businesses, enterprise organizations and wholesale customers across the United States. We provide data, cloud solutions, unified communications and managed services to small business and enterprise clients. We also offer bundled services, including broadband, security solutions, voice and digital television to consumers. We supply core transport solutions on a local and long-haul fiber network spanning approximately 147,000 miles, including network assets acquired in the Merger.

Our vision is to provide a best-in-class customer experience through a world-class network. Our “network first” strategy entails leveraging our existing infrastructure and investing in the latest technologies to create significant value for both our customers and our shareholders. Following the completion of the Merger, our business unit organizational structure will be focused on the following four core customer groups: ILEC Consumer and Small Business, Wholesale, Enterprise, and CLEC Consumer and Small Business, as further defined below. This organizational structure aligns all aspects of the customer relationship (sales, service delivery, and customer service) to improve accountability to the customer and sharpen our operational focus.

We differentiate our business customers between enterprise and small business generally based on the monthly recurring revenue generated by the customer. Enterprise customers consist of those relationships that have the propensity now or in the future to generate at least $1,500 or more in monthly recurring revenue. Business customers not meeting this criterion are classified as small business. In classifying our business customers, we consider the maximum potential revenue to be generated from the customer relationship for both our existing customer base and any new customers in determining which business unit can best support the customer. Accordingly, over time, we may prospectively change the classification of a particular business customer between enterprise and small business. Our consumer and small business customer base is further disaggregated between those customers located in service areas in which we are the incumbent local exchange carrier (“ILEC”) and provide services over network facilities operated by us and those customers located in services areas in which we are a competitive local exchange carrier (“CLEC”) and provide services over network facilities primarily leased from other carriers. Under this organizational structure, we have combined our ILEC Consumer and Small Business operations into one segment and we have combined into a separate segment our CLEC Consumer and Small Business operations due to similarities with respect to product and service offerings, marketing strategies and customer service delivery.

With the completion of the Merger, we have a focused operational strategy for each business segment with the overall objective to generate strong financial returns for our investors by leveraging our existing network and grow adjusted OIBDA, which is defined as operating income plus depreciation and amortization, adjusted to exclude the impact of merger, integration and other costs, restructuring charges, pension expense and share-based compensation.

Our operational strategy for each of our business segments are as follows:

See “Segment Operating Results” for further discussion of our operating strategy, product and service offerings, sales and marketing efforts and the competitive landscape in which we operate.

EXECUTIVE SUMMARY

Our operational focus for 2017 is on integrating the operations of EarthLink to achieve our expected operating expense and capital expenditure synergies, improving ILEC consumer trends by capitalizing on our network investments that enable greater broadband speeds, increasing the profitability of our enterprise business, and leveraging our advanced technology to drive sales and improve the overall customer experience. During the first quarter of 2017 , we achieved the following related to these initiatives:


•	Grew our Enterprise contribution margin by approximately $12.0 million , or 17.0 percent , compared to the same period in 2016 , primarily due to the merger with EarthLink. Maintained stable contribution margins in our other businesses through disciplined expense management.


•	Continued to invest in our network to expand its capabilities by extending our fiber and fixed wireless footprints in key cities, building our long-haul express fiber transport network throughout the western United States, and expanding the availability of premium broadband speeds to our customers.


•	Improved our debt maturity profile through the completion of refinancing activities including debt assumed in the Merger. As a result, there are no significant maturities of long-term debt prior to April 2020.


•	Returned value to our shareholders through the payment of our quarterly dividend.

As further discussed in Note 16 to the consolidated financial statements, we announced an agreement to acquire Broadview Networks Holdings, Inc. (“Broadview”), in an all-cash transaction valued at approximately $227.5 million . Broadview is a leading provider of cloud-based unified communications solutions to small and medium-sized business. Broadview’s unified communications platforms are complementary to our existing Software Defined Wide Area Networking (“SDWAN”) product offering. In addition, Broadview has an experienced sales force and strong channel partner program, which we will leverage to sell unified communications services across our small business and mid-market enterprise customer bases.

Our consolidated operating results for the three month period ended March 31, 2017 were favorably impacted by revenue growth in ILEC consumer high-speed Internet and enterprise data and integrated services, primarily due to continued migration of customers to higher speeds and increased demand, respectively, as well as incremental revenues attributable to the acquisition of EarthLink. These increases were partially offset by reductions in small business, wholesale, and switched access revenues due to customer losses from business closures and competition, declining demand for copper-based circuits to towers and the adverse effects of inter-carrier compensation reform, respectively. When compared to the same period a year ago, operating results for the three month period ended March 31, 2017 were adversely impacted by higher depreciation and amortization expense of $33.7 million and increased merger, integration and other costs of $52.3 million , primarily attributable to the acquisition of EarthLink. Depreciation expense also increased year-over-year due to changes implemented in the fourth quarter 2016, the effects of which were to extend the useful lives of certain fiber assets from 20 to 25 years and to shorten the depreciable lives of assets used by certain of our subsidiaries.

CONSOLIDATED RESULTS OF OPERATIONS

The following table reflects the consolidated operating results of Windstream Holdings as of:



	Three Months Ended March 31,						Increase (Decrease)
(Millions)	2017			2016			Amount			%
Revenues and sales:
Service revenues	$	1,344.4		$	1,340.6		$	3.8		—
Product sales	21.3			32.8			(11.5		)	(35	)
Total revenues and sales	1,365.7			1,373.4			(7.7		)	(1	)
Costs and expenses:
Cost of services (a)	682.4			668.8			13.6			2
Cost of products sold	20.8			28.9			(8.1		)	(28	)
Selling, general and administrative	213.3			203.8			9.5			5
Depreciation and amortization	338.5			304.8			33.7			11
Merger, integration and other costs	57.3			5.0			52.3			*
Restructuring charges	7.4			4.4			3.0			68
Total costs and expenses	1,319.7			1,215.7			104.0			9
Operating income	46.0			157.7			(111.7		)	(71	)
Dividend income on Uniti common stock	—			17.6			(17.6		)	(100	)
Other income (expense), net	0.7			(1.2		)	1.9			*
Net loss on early extinguishment of debt	(3.2		)	(35.4		)	32.2			(91	)
Other-than-temporary impairment loss on investment in Uniti common stock (b)	—			(181.9		)	181.9			*
Interest expense	(211.8		)	(219.7		)	7.9			(4	)
Loss before income taxes	(168.3		)	(262.9		)	94.6			(36	)
Income tax benefit	(57.0		)	(31.0		)	(26.0		)	84
Net loss	$	(111.3	)	$	(231.9	)	$	120.6		(52	)

* Not meaningful


(a)	Excludes depreciation and amortization included below.


(b)	See Note 10 for further discussion of this impairment loss.

A detailed discussion and analysis of our consolidated operating results is presented below.

Service Revenues

The following table presents the primary drivers of the change in service revenues compared to the same period a year ago:



	Three Months Ended March 31, 2017
	Increase (Decrease)
(Millions)	Amount			%
Increase attributable to acquisition of EarthLink	$	82.0
Decrease in Enterprise revenues (a)	(10.2		)
Decrease in ILEC Consumer and Small Business revenues (b)	(6.0		)
Decrease in Wholesale revenues (c)	(17.5		)
Decrease in CLEC Consumer and Small Business revenues (d)	(24.2		)
Decrease in regulatory and other revenues (e)	(20.3		)
Net increase in service revenues	$	3.8		—


(a)	Decrease was primarily due to a reduction in traditional voice and long-distance revenues due to lower usage and the effects of competition.


(b)	Decrease was primarily from reductions in both Consumer and Small Business - ILEC voice-only revenues attributable to a decline in customers due to the impacts of competition. The decrease was partially offset by growth in high-speed Internet bundles due to the continued migration of customers to higher speeds and targeted price increases.


(c)	Decrease was primarily due to declining demand for dedicated copper-based circuits, as carriers continue to migrate traffic to fiber-based connections.


(d)	Decrease was primarily due to a decline in the number of customers served as a result of business closures and competition.

(e)

Regulatory revenues include switched access revenues, federal and state USF revenues, CAF Phase II support, and funds received from the access recovery mechanism (“ARM”). Switched access revenues include usage sensitive revenues from long-distance companies and other carriers for access to our network in connection with the completion of long-distance calls, as well as reciprocal compensation received from wireless and other local connecting carriers for the use of our network facilities. USF revenues are government subsidies designed to partially offset the cost of providing wireline services in high-cost areas. CAF Phase II funding is administered by the FCC for the purpose of expanding and supporting broadband service in rural areas and effectively replaces frozen USF support in those states in which we elected to receive the CAF Phase II funding. The ARM is additional federal universal service support available to help mitigate revenue losses from inter-carrier compensation reform not covered by the access recovery charge (“ARC”). See Regulatory Matters for further discussion.

Other service revenues include USF surcharge revenues, revenues from other miscellaneous services and wholesale reseller revenues generated from the master services agreement with Uniti.

The decrease in regulatory and other revenues during the three month period ended March 31, 2017 was primarily from reductions in switched access revenues, federal USF surcharges and ARM support due to the impacts of inter-carrier compensation reform and decreases in state USF revenues.

See “Segment Operating Results” for a further discussion of changes in Enterprise, ILEC Consumer and Small Business, Wholesale, and CLEC Consumer and Small Business revenues.

Product Sales

Product sales consist of sales of various types of communications equipment to our customers. We also sell network equipment to contractors on a wholesale basis. Enterprise product sales includes high-end data and communications equipment which facilitate the delivery of advanced data and voice services to our enterprise customers. Consumer product sales include high-speed Internet modems, home networking equipment, computers and phones. Sales of high-speed Internet modems to consumers have declined as a result of our implementation of a modem rental program.

The following table presents the primary drivers of the change in product sales compared to the same period a year ago:



	Three Months Ended March 31, 2017
	Increase (Decrease)
(Millions)	Amount			%
Increase in CLEC consumer and small business product sales	$	3.0
Decrease in ILEC consumer and small business product sales	(0.2		)
Decrease in contractor sales	(2.2		)
Decrease in enterprise product sales (a)	(12.1		)
Net decrease in product sales	$	(11.5	)	(35	)


(a)	Decrease was primarily due to our efforts to improve profitability by streamlining our product offerings and shifting our focus from product sales to offering high-value integrated solutions to our customers designed to produce higher margins and recurring revenue streams.

Cost of Services

Cost of services expense primarily consists of charges incurred for network operations, interconnection, bad debt and business taxes. Network operations charges include salaries and wages, materials, contractor costs, IT support and costs to lease certain network facilities. Interconnection consists of charges incurred to access the public switched network and transport traffic to the Internet, including charges paid to other carriers for access points where we do not own the primary network infrastructure. Other expenses consist of third-party costs for ancillary voice and data services, business and financial services, bad debt and business taxes. Other costs for the first quarter of 2017 also include a reserve for a potential penalty attributable to not meeting certain spend commitments under a circuit discount plan of approximately $6.0 million .

The following table presents the primary drivers of the change in cost of services compared to the same period a year ago:



	Three Months Ended March 31, 2017
	Increase (Decrease)
(Millions)	Amount			%
Increase attributable to acquisition of EarthLink	$	47.5
Increase in postretirement and pension (a)	4.3
Increase in network operations (b)	3.7
Increase in other expenses	1.6
Decrease in federal USF expense (c)	(7.3		)
Decrease in interconnection expense (d)	(36.2		)
Net increase in cost of services	$	13.6		2


(a)	Increase in postretirement and pension expense primarily resulted from a curtailment gain recognized during the three month period ended March 31, 2016 in the amount of $5.5 million , of which $4.5 million reduced cost of services, related to the elimination of medical and prescription subsidies for certain active employees. See Note 7 for additional information.


(b)	The increase in network operations was primarily due to contract labor and overtime costs incurred to deploy and support premium high-speed Internet service to our customers and higher leased network facilities costs attributable to expansion of our fiber transport network.


(c)	Decrease in federal USF contributions was primarily driven by a decrease in the USF contribution factor for the three month period ended March 31, 2017 , compared to the same period a year ago, and the overall reduction in revenues.

(d)

Decrease in interconnection expense was primarily attributable to rate reductions and costs improvements from the continuation of network efficiency projects, declining growth in customers, and lower long distance usage, partially offset by increased purchases of circuits due to the growth in data customers as well as higher capacity circuits to service existing customers and increase the transport capacity of our network.

Cost of Products Sold

Cost of products sold represents the cost of equipment sales to customers. The change in cost of products sold was generally consistent with the change in product sales.

The following table presents the primary drivers of the change in cost of products sold compared to the same period a year ago:



	Three Months Ended March 31, 2017
	Increase (Decrease)
(Millions)	Amount			%
Decrease in product sales to consumer and small business customers	$	(0.7	)
Decrease in sales to contractors	(2.3		)
Decrease in product sales to enterprise customers	(5.1		)
Net decrease in cost of products sold	$	(8.1	)	(28	)

Selling, General and Administrative (“SG&A”)

SG&A expenses result from sales and marketing efforts, advertising, IT support, costs associated with corporate and other support functions and professional fees. These expenses include salaries, wages and employee benefits not directly associated with the provisioning of services to our customers.

The following table presents the primary drivers of the change in SG&A expenses compared to the same period a year ago:



	Three Months Ended March 31, 2017
	Increase (Decrease)
(Millions)	Amount			%
Increase attributable to acquisition of EarthLink	$	18.3
Increase in postretirement and pension (a)	1.8
Decrease in sales and marketing expenses	(1.2		)
Decrease in salaries and other benefits (b)	(7.1		)
Decrease in other costs	(2.3		)
Net increase in SG&A	$	9.5		5


(a)	Increase in postretirement and pension expense primarily resulted from a curtailment gain recognized during the three month period ended March 31, 2016 in the amount of $5.5 million , of which $1.0 million reduced SG&A, related to the elimination of medical and prescription subsidies for certain active employees. See Note 7 for additional information.


(b)	Decrease was primarily due to reduced headcount in our Enterprise segment to increase operating efficiency and restructure our sales and customer service workforce to improve the overall customer experience.

Depreciation and Amortization Expense

Depreciation and amortization expense includes the depreciation of property, plant and equipment and the amortization of intangible assets. The following table presents the primary drivers of the change in depreciation and amortization expense compared to the same period a year ago:



	Three Months Ended March 31, 2017
	Increase (Decrease)
(Millions)	Amount			%
Increase in depreciation expense (a)	$	25.0
Increase attributable to acquisition of EarthLink	15.3
Decrease in amortization expense (b)	(6.6		)
Net increase in depreciation and amortization expense	$	33.7		11


(a)	Increase in depreciation expense was primarily due to the implementation of new depreciation rates that shortened the depreciable lives of assets used by certain of our subsidiaries partially offset by the effects of extending the useful lives of certain fiber assets from 20 to 25 years. See Note 1 to the consolidated financial statements for additional information.


(b)	Decrease in amortization expense reflected the use of the sum-of-the-years-digits method for customer lists. The effect of using an accelerated amortization method results in an incremental decline in expense each period as the intangible assets amortize.

Merger, Integration and Other Costs and Restructuring Costs

Set forth below is a summary of merger, integration and other costs and restructuring charges:



	Three Months Ended March 31,
(Millions)	2017		2016
Merger, integration and other costs:
Information technology conversion costs	$	0.9	$	—
Costs related to merger with EarthLink (a)	53.1		—
Network optimization and contract termination costs	3.3		4.2
Consulting and other costs	—		0.8
Total merger, integration and other costs	57.3		5.0
Restructuring charges	7.4		4.4
Total merger, integration and other costs and restructuring charges	$	64.7	$	9.4


(a)	Includes investment banking, legal, accounting and other consulting fees of $23.4 million , severance and employee benefit costs for EarthLink employees terminated after the Merger of $24.5 million , share-based compensation expense of $4.4 million attributable to the accelerated vesting of assumed equity awards for terminated EarthLink employees and other miscellaneous expenses of $0.8 million .

Summary of Liability Activity Related to Both Merger. Integration and Other Costs and Restructuring Charges

As of March 31, 2017 , we had unpaid merger, integration and other costs and restructuring liabilities totaling $16.5 million , which consisted of $3.9 million associated with restructuring initiatives and $12.6 million related to merger and integration activities, which are included in other current liabilities in the accompanying consolidated balance sheet. Payments of these liabilities will be funded through operating cash flows (see Note 9).

Operating Income

Operating income decreased $111.7 million , or 70.8 percent , during the three month period ended March 31, 2017 primarily due to higher depreciation and amortization expense of $33.7 million and increased merger, integration and other costs of $52.3 million , primarily attributable to the acquisition of EarthLink and reductions in small business, wholesale and switched access revenues due to customer losses from business closures and competition, declining demand for copper-based circuits to towers and the adverse effects of inter-carrier compensation reform, respectively.

Net loss on Early Extinguishment of Debt

The net loss on early extinguishment of debt was as follows:



	Three Months Ended March 31,
(Millions)	2017			2016
Loss on early extinguishment of EarthLink 2019 and 2020 Notes	$	(2.0	)	$	—
Loss on early extinguishment of senior secured credit facility	(1.2		)	—
Loss on early extinguishment of 2017 Notes	—			(48.5		)
Gain on early extinguishment from partial repurchase of 2021, 2022 and 2023 Notes	—			13.1
Net loss on early extinguishment of debt	$	(3.2	)	$	(35.4	)

During the first quarter of 2017, Windstream Services refinanced EarthLink’s long-term debt obligations that were assumed in the Merger. In repaying these debt obligations prior to their maturity, Windstream Services recognized a pre-tax loss of $(2.0) million . Windstream Services also repaid term loan Tranche B5 of its senior secured credit facility through the issuance of a new term loan under Tranche B7, which effectively extended the maturity of the term loan from 2019 to 2024. In completing this refinancing, Windstream recognized a pre-tax loss of $(1.2) million .

Comparatively, in the three-month period ended March 31, 2016, Windstream Services repurchased a portion of its 2017 Notes during the first quarter of 2016. The partial repurchase was accounted for as an extinguishment, and accordingly, Windstream Services recognized a pre-tax loss of $(48.5) million . Windstream Services also repurchased in the open market certain of its senior unsecured notes representing an aggregate principal amount of $154.2 million . The partial repurchase was accounted for under the extinguishment method of accounting, and as a result, Windstream Services recognized a pretax gain of $13.1 million .

Interest Expense

Set forth below is a summary of interest expense:



	Three Months Ended March 31,
(Millions)	2017			2016
Senior secured credit facility, Tranche B	$	22.7		$	6.0
Senior secured credit facility, revolving line of credit	5.2			4.7
Senior unsecured notes	54.1			79.1
Notes issued by subsidiaries	3.9			1.7
Interest expense - long-term lease obligations:
Telecommunications network assets	122.8			126.9
Real estate contributed to pension plan	1.5			1.5
Impacts of interest rate swaps	2.8			2.8
Interest on capital leases and other	1.1			0.6
Less capitalized interest expense	(2.3		)	(3.6		)
Total interest expense	$	211.8		$	219.7

Interest expense decreased $7.9 million , or 4 percent , for the three-month period ended March 31, 2017 as compared to the same period in 2016. The decrease was primarily due to reduced interest costs resulting from the retirement of the 2017 Notes and the partial repurchases of the 2021 Notes, 2022 Notes, and 2023 Notes completed in 2016 pursuant to a debt repurchase program authorized by Windstream Services’ board of directors. Interest expense associated with the long-term lease obligation under the master lease with Uniti also decreased $4.1 million due to a larger portion of the monthly lease payment being recorded as a reduction to the long-term lease obligation in applying the effective interest method over the initial term of the master lease. These decreases were partially offset by additional interest costs attributable to incremental term loans under Tranche B6 and B7 of the senior secured credit facility, the proceeds of which were primarily used to repurchase a portion of the 2017 Notes and to repay EarthLink’s assumed long-term debt obligations and amounts outstanding under Tranche B5.

Income Taxes

During the first quarter of 2017 , we recognized an income tax benefit of $57.0 million as compared to an income tax benefit of $31.0 million for the same period in 2016 . The income tax benefit recorded in the first quarter of 2017 reflected the loss before taxes. This benefit was offset by discrete tax expense of $5.2 million for nondeductible transaction costs associated with the merger with EarthLink and discrete tax expense of $2.3 million associated with the vesting of restricted stock. Comparatively, the income tax benefit recorded for the three month period ended March 31, 2016 reflected the loss before taxes offset by discrete tax expense of $69.6 million related to our investment in Uniti common stock. Our effective tax rate was 33.9 percent for the three month period ended March 31, 2017 as compared to 11.8 percent in the same period in 2016. The effective rates for the three month periods ended March 31, 2017 and 2016 were impacted by the discrete items discussed above.

For 2017 , our annualized effective income tax rate is expected to range between 38.0 percent and 39.0 percent, excluding one-time discrete items. Changes in our relative profitability, as well as recent and proposed changes to federal and state tax laws may cause the rate to change from historical rates. In determining our quarterly provision for income taxes, we use an estimated annual effective tax rate, which is based on our expected annual income, statutory rates and tax planning opportunities. Significant or unusual items are separately recognized in the quarter in which they occur.

SEGMENT OPERATING RESULTS

Following the Merger, our business unit organizational structure consists of the following four core customer groups:

ILEC Consumer and Small Business - Products and services offered to customers include traditional local and long-distance voice services and high-speed Internet services, which are delivered primarily over network facilities operated by us. We offer consumer video services primarily through a relationship with Dish Network LLC and we also own and operate cable television franchises in some of our service areas. We offer Kinetic, a complete video entertainment offering in our Lincoln, Nebraska; Lexington, Kentucky; Sugar Land, Texas markets, as well as several communities in North Carolina.

CLEC Consumer and Small Business - Products and services offered to customers include integrated voice and data services, advanced data and traditional voice and long-distance services, as well as value added services including online backup, managed web design and web hosting, and various e-mail services.

Our segment operating results presented below are based on how we assess operating performance and internally report financial information. We evaluate performance of the segments based on segment income, which is computed as segment revenues and sales less segment operating expenses. Segment revenues are based upon each customer’s classification to an individual segment and include all services provided to that customer. Certain operating revenues are derived from activities that are centrally-managed by us and, accordingly, these revenues are not included in any of our four segments presented below. These other operating revenues include revenue from federal and state universal service funds, CAF Phase II support, and funds received from federal access recovery mechanisms. We also generate other service revenues from providing switched access services, which include usage-based revenues from long-distance companies and other carriers for access to our network to complete long-distance calls, as well as reciprocal compensation received from wireless and other local connecting carriers for the use of network facilities. Other operating revenues also include certain surcharges assessed to our customers, including billings for our required contributions to federal and state USF programs and product sales to contractors.

Segment expenses include specific expenses incurred as a direct result of providing services and products to segment customers; selling, general and administrative expenses that are directly associated with specific segment customers or activities; and certain allocated expenses which include network expenses, facilities expenses and other expenses, such as vehicle and real estate-related expenses. We do not assign depreciation and amortization expense, merger, integration and other costs, restructuring charges, share-based compensation and pension costs to our segments, because these expenses are centrally managed and are not monitored by or reported to the chief operating decision maker (“CODM”) by segment. Similarly, certain regulatory fees, cost of products sold to contractors and centrally-managed administrative functions, such as accounting and finance, information technology, engineering, network management, legal and human resources, are not assigned to our segments. Interest expense and net loss on early extinguishment of debt have also been excluded from segment operating results because we manage our financing activities on a total company basis and have not assigned any long-term debt obligations to the segments. Amounts related to our investment in Uniti common stock consisting of dividend income and other-than-temporary impairment loss, as well as other (expense) income, net, and income tax benefit are not monitored as a part of our segment operations and, therefore, these items also have been excluded from our segment operating

See Note 13 to the consolidated financial statements for a reconciliation of total segment revenues and sales to consolidated revenues and sales and segment income to consolidated net loss.

ILEC CONSUMER AND SMALL BUSINESS SEGMENT

As of March 31, 2017 , the ILEC Consumer and Small Business segment includes approximately 1.5 million residential and small business customers. This segment generated $391.0 million in revenue and $221.7 million in segment income, or contribution margin, during the first quarter of 2017.



	Strategy Within our ILEC Consumer and Small Business segment, we are focused on expanding and enhancing our broadband capabilities to provide a great customer experience, drive higher average revenue per customer and increase market share. We expect to grow revenue by continuing to increase broadband speeds and capacity throughout our territories. Project Excel, which began in late 2015, focused on upgrading our fiber-fed infrastructure with Very high-bit-rate Digital Subscriber Line Generation 2 (“VDSL2”) electronics to enable faster broadband speeds and enhances our backhaul capabilities to address future capacity demands and improve network reliability. As we approach the completion of this project , we will be able to provide 25 megabits per second (“Mbps”) speeds to 54 percent of our broadband footprint and 50 Mbps speeds to 30 percent; which are very competitive offerings in our rural markets. We believe these network upgrades will provide a great customer experience, which should help drive higher average revenue per customer per month and allow us to increase our market share.

We have increased Internet availability across all speed tiers and can now offer premium Internet speeds of 50 Mbps and higher to approximately 25 percent of our footprint. In addition, we have launched 1-Gigabit Internet service in four market areas to deliver faster speeds to more of our customer base. CAF funding will also support and expand our broadband capabilities.

We expect increases in real-time streaming video and traditional Internet usage to drive demand for faster broadband speeds and generate increased revenues as customers upgrade their services. We also sell value-added Internet services, such as security and online back-up, to leverage our broadband capabilities. Currently 89 percent of our existing customer base subscribes to Internet speeds of 25 Mbps or less. With the increased availability of premium broadband speeds, we have a significant opportunity to migrate customers to faster speeds which, we believe will reduce churn, improve the overall customer experience and drive higher average revenue per customer.

For 2017, we are focused on expanding and enhancing our broadband capabilities to provide a great customer experience, drive higher average revenue per customer and increase market share by continuing to increase broadband speeds and capacity throughout our territories.

ILEC Consumer and Small Business Segment Results of Operations

The following table reflects the ILEC Consumer and Small Business segment results of operations:



	Three Months Ended March 31,				Increase (Decrease)
(Millions)	2017		2016		Amount			%
Revenues and sales:
Service revenues:
High-speed Internet bundles (a)	$	266.1	$	261.1	$	5.0		2
Voice-only (b)	33.6		39.0		(5.4		)	(14	)
Video and miscellaneous	11.0		11.6		(0.6		)	(5	)
Total consumer	310.7		311.7		(1.0		)	—
ILEC small business (c)	80.1		85.1		(5.0		)	(6	)
Total service revenues	390.8		396.8		(6.0		)	(2	)
Product sales	0.2		0.4		(0.2		)	(50	)
Total revenues and sales	391.0		397.2		(6.2		)	(2	)
Costs and expenses (d)	169.3		169.1		0.2			—
Segment income	$	221.7	$	228.1	$	(6.4	)	(3	)


(a)	Increase was primarily due to the continued migration of customers to higher speeds and targeted price increases, partially offset by declines in high-speed Internet customers. Demand for faster broadband speeds are expected to favorably impact consumer high-speed Internet revenues, offsetting some of the decline in consumer voice revenues.


(b)	Decrease was primarily attributable to declines in households served due to the impacts of competition.


(c)	Decrease was primarily attributable to lower usage for voice-only services and declines in customers due to the impacts of competition.


(d)	The increase was primarily due to contract labor and overtime costs incurred to deploy and support premium high-speed Internet service to our customers offset by a reduction in interconnection expense, reflecting lower voice-only revenues due to the decline in households served.

The following table reflects the ILEC Consumer and Small Business segment operating metrics:



	March 31,		Increase (Decrease)
(Thousands)	2017	2016	Amount		%
ILEC Consumer Operating Metrics:
Households served (a)	1,337.5	1,430.7	(93.2	)	(7	)
High-speed Internet customers (b)	1,047.6	1,092.0	(44.4	)	(4	)
Digital television customers (c)	310.0	350.1	(40.1	)	(11	)
ILEC Small Business customers (d)	133.0	144.3	(11.3	)	(8	)


(a)	The decrease in the number of consumer households served was primarily attributable to the effects of competition from wireless carriers, cable companies and other providers using emerging technologies. For the three month period ended , March 31, 2017 , consumer households served decreased by 17,100 , compared to a decrease of 15,100 for the same period in 2016 .

(b)

The decrease in consumer high-speed Internet customers was primarily due to the effects of competition from other service providers and increased penetration in the marketplace, as the number of households without high-speed Internet service continues to shrink. As of March 31, 2017 , we provided high-speed Internet service to approximately 78 percent of our primary residential lines in service and approximately 77 percent of our total voice lines had high-speed Internet competition, primarily from cable service providers. For the three month period ended , March 31, 2017 , consumer high-speed Internet customers decreased by 3,500 , compared to a decrease of 3,100 for the same period in 2016 .


(c)	For the three month period ended , March 31, 2017 , digital television customers decreased by 11,000 , compared to a decrease of 9,200 for the same period in 2016 , primarily due to competition from other service providers.


(d)	The decrease in small business customers was primarily due to business closures and competition from cable companies. For the three month period ended , March 31, 2017 , small business customers decreased by 2,900 , compared to a decrease of 2,500 for the same period in 2016 .

We expect the number of consumer households, consumer high-speed Internet customers, digital television subscribers and small business customers in our ILEC footprint to continue to be impacted by the effects of competition.

WHOLESALE SEGMENT

The Wholesale segment leverages our nationwide network to provide 100 Gbps bandwidth and transport services to wholesale customers, including telecom companies, content providers, and cable and other network operators. The Wholesale business unit produced $157.5 million in revenue and $107.5 million in contribution margin for the first quarter of 2017.



	Strategy Our Wholesale strategy focuses on expanding our network in strategic, high-traffic locations to drive new sales through the connection of our long-haul network from carrier hotels, international landing stations and data centers to our high fiber density markets. Our fiber network connects common interconnection points in tier one locations to our tier two and three markets, enabling our customers to reach their end users through unique and diverse routes. Including network assets acquired in the Merger, our fiber network spans approximately 147,000 route miles of fiber. We have made significant investments in our network adding route miles and new access points to provide advanced Wave and Metro Ethernet Forum (“MEF”) Ethernet services. With further expansion of our fiber transport network through capital investment, we will provide our customers located on the West Coast with direct access to our network. Our sales team continues to target high growth areas including content, international and cable television providers.

To maintain our contribution margins in our Wholesale business, we will continue to invest in our network, offer advanced products and solutions, target our core customers and control costs through our disciplined approach to capital and expense management.

Wholesale Segment Results of Operations

The following table reflects the Wholesale segment results of operations:



	Three Months Ended March 31,				Increase (Decrease)
(Millions)	2017		2016		Amount			%
Revenues:
Core wholesale (a)	$	134.1	$	130.8	$	3.3		3
Resale (b)	17.6		19.7		(2.1		)	(11	)
Total core wholesale and resale	151.7		150.5		1.2			1
Wireless TDM (c)	5.8		12.7		(6.9		)	(54	)
Total revenues	157.5		163.2		(5.7		)	(3	)
Costs and expenses (d)	50.0		45.5		4.5			10
Segment income	$	107.5	$	117.7	$	(10.2	)	(9	)

(a)

Core wholesale revenues primarily include revenues from providing special access circuits, fiber connections, data transport and wireless backhaul services. The increase during the three month period March 31, 2017 was primarily attributable to incremental revenues of $11.8 million due to the acquisition of EarthLink, partially offset by lower usage for voice-only services and higher disconnect activity as a result of carriers migrating to fiber-based networks.


(b)	Revenues represent voice and data services sold to other communications services providers on a resale basis.


(c)	The decrease in these revenues was attributable to declines in special access charges for dedicated copper-based circuits as carriers migrate to fiber-based networks. We expect these revenues to be adversely impacted as wireless carriers continue to migrate traffic to fiber-based connections.


(d)	The increase was primarily related to additional interconnection expense of $5.1 million related to the acquisition of EarthLink partially offset by reductions in long-distance usage by our wholesale customers and rate reductions and costs improvements from the continuation of network efficiency projects.

ENTERPRISE SEGMENT

Our Enterprise segment provides advanced communications services to enterprise customers. During the first quarter of 2017, the Enterprise segment generated $525.5 million in revenue and $82.5 million in contribution margin.



	Strategy The strategy for our Enterprise business is to increase contribution margin by expanding our portfolio of next-generation products, expanding our metro fiber and fixed wireless network assets, reducing costs and improving the customer experience. As one of the country’s largest service providers, our nationwide network and broad portfolio of products, coupled with a highly responsive service model, provide customers with customized solutions. We target mid and large-size enterprise customers that consider their network and communication infrastructure as critical in operating their business. We support some of the most demanding IT organizations within the healthcare, financial services, retail, government and education sectors. We will continue to sharpen our focus on these markets in offering solutions tailored to meet their individual needs. We believe we can continue to drive meaningful improvements in our Enterprise margins by focusing on more profitable market segments and further leveraging

our own network facilities to reduce third-party network access costs. We will also continue to improve employee productivity with targeted system and process enhancements. We have made progress on this goal by increasing margins from 10 percent in the first quarter of 2015 to 16 percent in the first quarter of 2017 and we expect to further expand contribution margins to 20 percent by 2018.

To grow profitability, we are focused on leveraging the latest technology in offering next-generation products that deliver significant value to our customers while also generating strong incremental sales margins. SDWAN and Unified Communication as a Service (“UCaaS”) represent two examples of next-generation solutions where we are seeing significant market traction. In addition, we expect to improve operating efficiencies and enhance the customer experience by further integrating our internal processes in sales, service delivery, customer care and repair. Furthermore, we continue to follow an aggressive expense management and capital efficient strategy to drive reductions in network access costs, create on-network sales opportunities and improve our competitiveness in the market place.

Enterprise Service Revenues

The following table reflects the Enterprise segment results of operations:



	Three Months Ended March 31,				Increase (Decrease)
(Millions)	2017		2016		Amount			%
Revenues and sales:
Service revenues:
Voice and long-distance (a)	$	149.3	$	148.1	$	1.2		1
Data and integrated services (b)	336.3		317.3		19.0			6
Miscellaneous (c)	30.3		26.0		4.3			17
Total service revenues	515.9		491.4		24.5			5
Product sales (d)	9.6		21.7		(12.1		)	(56	)
Total revenues and sales	525.5		513.1		12.4			2
Costs and expenses (e)	443.0		442.6		0.4			—
Segment income	$	82.5	$	70.5	$	12.0		17


(a)	The increase during the three month period March 31, 2017 was primarily attributable to incremental revenues of $13.1 million as a result of the acquisition of EarthLink, partially offset by a decrease in traditional voice and long-distance service revenues due to lower usage and adverse effects of competition.


(b)	Increase in data and integrated services revenues was primarily due to incremental revenues of $17.5 million from the acquisition of EarthLink.


(c)	Increase in miscellaneous services revenues was primarily due to incremental revenues of $4.0 million from the acquisition of EarthLink.


(d)	Decrease was primarily due to our efforts to improve profitability by streamlining our product offerings and shifting our focus from product sales to offering high-value integrated solutions to our customers designed to produce higher margins and recurring revenue streams.


(e)	Increase was primarily due to incremental interconnection costs associated with the acquisition of EarthLink in the amount of $15.1 million partially offset by rate reductions and costs improvements from the continuation of network efficiency projects and declining growth in enterprise customers.

The following table reflects the Enterprise segment operating metrics:



	March 31,		Increase (Decrease)
(Thousands)	2017	2016	Amount	%
Enterprise customers	35.3	26.4	8.9	34

Enterprise customers consist of those relationships that we believe have the propensity now or in the future to generate at least $1,500 or more in monthly recurring revenue. Our enterprise customer base increased due to the acquisition of EarthLink. For the three month period ended , March 31, 2017 , Enterprise customers increased by 8,600 , compared to an increase of 100 for the same period in 2016 .

CLEC CONSUMER AND SMALL BUSINESS SEGMENT



	Our CLEC Consumer and Small Business segment now includes EarthLink’s consumer business and small business customers residing outside of our ILEC footprint. During the first quarter of 2017, this segment generated revenue of $140 million and contribution margin of $49 million. Our CLEC Consumer and Small Business strategy is focused on improving contribution margin trends by growing profitable customer relationships and managing costs. To moderate revenue and contribution margin declines and maximize profitability, we are focused on retaining our most profitable customers, selling incremental services and locations to existing customers, targeting new sales in select markets, and managing customer-level profit margins. Our ability to leverage our Enterprise infrastructure should help drive improved cost efficiency in this business. Products and services provided to our consumer and small business customers include integrated voice and data services, advanced data and traditional voice and long-distance services. We also offer on-line back-up, remote IT, managed web design, web hosting and various email services to small business customers.

Similar to our ILEC Consumer and Small Business operations, we experience competition from cable television companies and other communications services providers in areas served by our CLEC Consumer and Small Business segment.

CLEC Consumer and Small Business Service Revenues

The following table reflects the CLEC Consumer and Small Business segment results of operations:



	Three Months Ended March 31,				Increase (Decrease)
(Millions)	2017		2016		Amount			%
Revenues and sales:
Service revenues:
High-speed Internet	$	9.4	$	—	$	9.4		*
Dial-up, e-mail and miscellaneous	7.5		—		7.5			*
Total CLEC consumer (a)	16.9		—		16.9			*
CLEC small business (b)	120.4		128.7		(8.3		)	(6	)
Total service revenues	137.3		128.7		8.6			7
Product sales	3.0		—		3.0			*
Total revenues and sales	140.3		128.7		11.6			9
Cost and expenses (c)	91.5		87.4		4.1			5
Segment income	$	48.8	$	41.3	$	7.5		18


(a)	Increase in CLEC consumer service revenue was due to the acquisition of EarthLink.


(b)	Decrease was primarily attributable to reductions in voice, long-distance, and advanced data service revenues due to a declining customer base partially offset by incremental revenues of $15.9 million from the acquisition of EarthLink.


(c)	Increase was primarily attributable to the incremental costs associated with the acquisition of EarthLink in the amount of $17.9 million partially offset by reductions in voice services and network access costs directly related to the declining customer base.

The following table reflects the CLEC Consumer and Small Business segment operating metrics:



	March 31,		Increase (Decrease)
(Thousands)	2017	2016	Amount	%
CLEC Consumer customers	647.4	—	647.4	*
CLEC Small Business customers	95.5	86.4	9.1	11

Our CLEC consumer and small business customers have increased due to the acquisition of EarthLink. For the three month period ended , March 31, 2017 , small business customers increased by 23,400 , compared to a decrease of 4,800 for the same period in 2016 .

Regulatory Matters

We are subject to regulatory oversight by the FCC for particular interstate matters and state public utility commissions (“PUCs”) for certain intrastate matters. We are also subject to various federal and state statutes that direct such regulations. We actively monitor and participate in proceedings at the FCC and PUCs and engage federal and state legislatures on matters of importance to us.

From time to time federal and state legislation is introduced dealing with various matters that could affect our business. Most proposed legislation of this type never becomes law. Accordingly, it is difficult to predict what kind of legislation, if any, may be introduced and ultimately become law.

Federal Regulation and Legislation

Inter-carrier Compensation and USF Reform

In November 2011, the FCC released an order (“the Order”) that established a framework for reform of the inter-carrier compensation system and the federal USF. The Order included two primary provisions:


•	the elimination of terminating switched access rates and other per-minute terminating charges between service providers by 2018, through annual reductions in the rates, mitigated in some cases by two recovery mechanisms; and


•	the provision of USF support for voice and broadband services.

In reforming the USF, the Order established the CAF, which included a short-term (“CAF Phase I”) and a longer-term (“CAF Phase II”) framework. CAF Phase I provides for continued legacy USF funding frozen at 2011 levels as well as the opportunity for incremental broadband funding to a number of unserved and underserved locations. In Round 2 of CAF Phase 1 incremental support, we were authorized to receive an additional $86.7 million in support for upgrades and new deployments of broadband service. Of the total amount of $86.7 million made available to us, we received $60.7 million in December 2013 and the remaining $26.0 million in the first quarter of 2014. Pursuant to commitments we made while the FCC was considering the rules for Round 2, we matched, on at least a dollar-for-dollar basis, the total amount of Round 2 funding received. In July 2016, we reported to the FCC our compliance with its March 2016 deadline for broadband deployment to two-thirds of our required locations for Round 2. In July 2017, we will report to the FCC on our compliance with the March 2017 deadline for broadband deployment to 100 percent of our Round 2 locations. The portion of capital expenditures funded by us is included in our capital expenditure totals for each period presented in the accompanying consolidated statements of cash flow.

In August 2015, Windstream accepted CAF Phase II support offers for 17 of its 18 states where it is an incumbent provider, totaling approximately $175.0 million in annual funding compared to our previous annual funding of approximately $100.0 million . Support was retroactive to the beginning of 2015 and will continue for six additional years. Windstream is obligated to offer broadband service at 10/1 Mbps or better to approximately 400,000 eligible locations in high-cost areas in those 17 states. Windstream declined the statewide offer in just one state, New Mexico, where Windstream’s projected cost to comply with FCC deployment requirements greatly exceeded the funding offer. We will still be eligible to participate in a competitive bidding process for CAF Phase II support in New Mexico, along with other interested eligible competitors; however, the rules for the competitive bidding process are still under consideration by the FCC, and have not yet been finalized. We will continue to receive annual USF funding in New Mexico frozen at 2011 levels until the implementation of CAF Phase II competitive bidding is complete.

A summary of CAF Phase II and frozen USF support we have received or expect to receive is as follows:



(Millions)	2015		2016		2017		2018		2019 - 2021		Total
CAF Phase II support	$	174.9	$	174.9	$	174.9	$	174.9	$	524.7	$	1,224.3
Transitional Frozen USF support	18.0		14.3		7.7		2.8		—		42.8
New Mexico Frozen USF support	4.6		4.6		2.3		—		—		11.5
Total	$	197.5	$	193.8	$	184.9	$	177.7	$	524.7	$	1,278.6

The above payouts include transitional support through mid-2018 in the six states in which the CAF Phase II support allocated to and elected by us is less than the amount we received in legacy USF high-cost support. These amounts also assume that we will deploy to 100 percent of the required locations in each state. On December 31, 2015, we elected the flexibility to deploy to at least 95 percent but less than 100 percent in five of the states in which we accepted CAF Phase II support. We will be able to decide how much, if any, of the flexibility we use. If we avail ourselves of all of the flexibility, however, we would have to return a total of approximately $50 million by 2021. We expect the incremental CAF Phase II receipts to be sufficient to cover the program’s capital obligations and to provide significant opportunities for Windstream to enhance broadband services in our more rural markets.

As part of the Order’s reform of inter-carrier compensation, the FCC established two recovery mechanisms that mitigate the revenue reductions resulting from the reduction and ultimate elimination of terminating access rates. First, the FCC established the ARC, a fee which may be assessed to some of our retail customers. Second, the ARM is a form of additional federal universal service support designed to allow carriers to recover some of the revenue reductions that cannot be recovered through assessment of the ARC. Carriers are required to use ARM support to build and operate broadband networks in areas substantially unserved by an unsubsidized competitor offering fixed voice and broadband service. Our ARM support is expected to decrease incrementally from $36.4 million in 2015 to $15.8 million in 2017, with a portion of the decrease offset by increases in ARC revenues. Absent a change by the FCC to its current rules, the ARM will phase out annually in one-third increments, beginning in July 2017, and will be eliminated completely as of July 2019.

Set forth below is a summary of inter-carrier compensation revenue and federal USF and CAF Phase II support included in regulatory revenues within the consolidated statements of operations:



	Three Months Ended March 31,
(Millions)	2017		2016
Inter-carrier compensation revenue and ARM support	$	26.3	$	35.9
Federal universal service and CAF Phase II support	$	48.2	$	48.5

IntraMTA Switched Access Litigation

Several of our companies are defendants in approximately 25 lawsuits filed by Verizon and Sprint long-distance companies alleging that our companies may not bill them switched access charges for calls between wireline and wireless devices that originate and terminate within the same Major Trading Area. The complaints seek historical relief in the form of refunds and prospective relief concerning future billings. There are over 50 other such lawsuits against hundreds of defendants. All of the Verizon and Sprint suits were consolidated in a single federal district court in Texas, which dismissed Verizon and Sprint’s federal law claims on November 17, 2015. In March 2016, the plaintiffs were denied permission to appeal the dismissal, which permission was required given certain procedural issues. Verizon and Sprint’s state law claims, and the defendants’ counterclaims for return of all withholdings (including those involving Windstream), are continuing in federal district court, along with a number of new lawsuits recently filed against Level 3 (another long-distance company) and now part of the consolidated case (but not involving Windstream). Also, on September 19, 2016, fifty-five Windstream subsidiaries jointly filed a new lawsuit against Sprint in Kansas federal district court to collect late payment assessments on amounts Sprint previously withheld, and to ensure consistent application of any adjudication among the subsidiaries. That case was transferred to the consolidated court by an October 10, 2016 order. The scheduling order entered in the consolidated case required the parties to meet and confer in the fourth quarter of 2016 on the amounts in dispute and late payment charges. Just as the parties began exchanging information regarding the disputed charges and late payments, the court stayed all activity in the case so that it could rule on motions to dismiss filed by Level 3. The court recently denied Level 3’s motions to dismiss, so the parties expect that the court will lift the stay on the litigation soon. The parties expect to resume discussions regarding the disputed charges and late payments upon the court entering a new scheduling order within the second quarter of 2017. Additionally, the subject matter of all of the above suits in the consolidated case remains a topic of a

pending petition for declaratory ruling before the FCC. The outcome of the disputes is currently not predictable, given the uncertainty concerning the ultimate venue of the disputes and the amount of traffic being disputed.

Last-Mile Access

Windstream has actively engaged in policy advocacy in various FCC proceedings that address the rates, terms and conditions for access to the “last-mile” facilities we need to serve retail business data service (i.e., special access) customers through our competitive companies. In 2016, we incurred approximately $1.4 billion in interconnection expense and most of that was attributable to last-mile access. For the vast majority of our customers, last-mile facilities, the wires (“loops”) to a customer location from a central office, are not economic for Windstream to duplicate through its own investment and are not available from providers other than the incumbent carrier. Therefore, we often lease those connections from incumbent carriers as one of two distinct product types: either unbundled network elements (“UNEs”), which by law are not available in all areas but are subject to strict regulatory standards, or business data service (“BDS”) inputs, widely available from incumbents but subject to more flexible regulatory standards. Windstream’s purchase of business data service inputs may be subject to volume and term commitments and associated fees and penalties.

In April 2017, the FCC adopted comprehensive reforms to its BDS policies. We use BDS services to, among other things, connect our national and city-based fiber network with customers for whom we do not have our own facilities serving their locations. These leased services have been subject to price caps and other FCC regulation for decades to control for ILEC market power and historical advantages. Despite evidence to the contrary provided by Windstream and other carriers, the FCC found that the markets for packet-based services, and for TDM based last-mile inputs in the vast majority of areas, are competitive and prices need not be regulated. As a consequence of this reform, we expect our ILEC BDS suppliers will seek to raise prices.

Windstream has been pursuing a strategy to accelerate the transition of its customers from TDM to packet based services, which is consistent with the underlying goal of the FCC’s reform of business data services and current market trends. However, we believe the FCC’s order presents unnecessary risk of disruption to the market by not allowing an adequate transition period for its rules. We believe customers such as small businesses, schools and libraries are at greatest risk to this disruption, which could occur in the form of price increases for TDM services, the forced transition to purchase new packet-based communications equipment and systems, and the forced obsolescence and write-off of legacy TDM communication systems. Our strategy has been to position the company for this transition through investments to extend the reach of our metro fiber networks directly to more buildings using fiber and fixed wireless facilities, to enhance our scale as purchaser of business data services to give greater access to and purchasing power with access providers, and to develop next generation, value-added solutions such as SDWAN and UCaaS. At this time, we are unable to predict the impact of these reforms on Windstream, but the reform could negatively impact Windstream as a result of higher expense to purchase deregulated business data services, the need for greater capital investments to retain our competitiveness, and increased customer and revenue churn.

Rural Healthcare Funding

State Regulation and Legislation

State Universal Service

We recognize revenue from the receipt of state universal service funding in a limited number of states in which we operate. For the three month period ended , March 31, 2017 , we recognized $22.6 million in state USF revenue, which included approximately $12.3 million from the Texas USF. These payments are intended to provide support, apart from the federal USF receipts, for the high cost of operating in certain rural markets.

There are two high-cost programs of the Texas USF, one for large companies and another for small companies. In the three month period ended March 31, 2017 , we received $10.9 million from the large company program and $1.4 million from the small company program. The purpose of the Texas USF is to assist telecommunications carriers with providing basic local telecommunications services at reasonable rates to customers in high cost rural areas and to qualifying low-income and disabled customers.

By order of the Texas Public Utility Commission (“PUC”), the Texas USF distributes support to eligible carriers serving areas identified as high cost, on a per-line basis. Texas USF support payments are based on the number of actual lines in service and therefore are subject to reductions when customers discontinue service or migrate to a competitive carrier. All service providers of telecommunications services in Texas contribute to the Texas USF through the payment of a monthly surcharge collected from their customers.

Legislation adopted in Texas in 2013 requires reduction in USF support absent a demonstration of need for continued support through a two-step process which considers the level of competition and our expenses in the current supported exchanges. We have four operating companies in Texas - one company that is part of the large company fund, which would face reductions in support beginning in 2017 absent a demonstration of need, and three companies that are part of the small company fund that would face reductions in support beginning in 2018 absent a demonstration of need.

For the large company fund, we filed a “needs test petition” in December 2015 to retain $42.2 million in USF support for 153 exchanges served by one of our operating companies. The petition was granted in May 2016 and became final in June 2016. For the small company fund, we have three operating companies (Texas Windstream, Windstream Communications Kerrville, and Windstream Sugar Land) that serve 42 exchanges that received support of approximately $6.3 million in 2016 and will receive support of approximately $5.4 million in 2017. On December 27, 2016, we filed two petitions with the Texas PUC to preserve approximately $4.7 million in support from the Texas USF for the 34 exchanges served by Texas Windstream and Windstream Communications Kerrville. These petitions are similar to the 2016 petition for Windstream Southwest - in order to demonstrate that we satisfy the Commission’s needs test, we submitted evidence that there are no unsubsidized wireline carriers providing service in 75 percent of the square miles in each supported exchange and that the support we receive is less than 80 percent of our expenses in the supported exchanges. The Commission has 330 days from the date of filing to issue a final order on our petition. Any resulting reductions in support will occur in 2018.

We did not file a petition to preserve the current $1.7 million in support for the third Texas affiliate (Windstream Sugar Land) because our analysis showed that we would not pass the Commission’s needs test. If we had filed and failed the test, we would lose 100 percent of our support in the Sugar Land exchange, which accounts for the majority of support; instead, Windstream Sugar Land will be subject to a mandatory 25 percent reduction in support starting January 2018 (additional 25 percent reductions will occur in 2019 and 2020 with support leveling off at 25 percent in 2021).

In Nebraska, the Public Service Commission (“PSC”) confirmed that our 2017 high-cost Nebraska Universal Service Fund (“NUSF”) support for 2017 will be $5.5 million o f which 20 percent is allocated to ongoing maintenance and support and 80 percent is allocated to approved capital construction projects. In 2016, our support was approximately $5.0 million allocated 50 percent to ongoing maintenance and support and 50 percent to capital construction projects.

In the first quarter of 2017, New Mexico enacted a statute to reform the New Mexico State Universal Service Fund (“SRUSF”). Among other things, the legislation authorizes an annual broadband fund in addition to the access replacement fund from which we will continue to receive amount support. Beginning in 2018, the amount of support will be determined by adjusting the 2014 support amount by a carrier’s change in access line count and imputing the FCC’s residential rate benchmark. We will be required to use at least 60 percent of this support to deploy and maintain broadband service in rural areas of the state. A rulemaking proceeding to implement this legislation is underway. Our support for 2017 and 2018 is forecasted at $6.4 million and $4.3 million , respectively.

Annually, we receive $3.4 million from the Oklahoma high cost fund. In September 2016, the Oklahoma Corporation Commission (“OCC”) revived a 2012 proceeding aimed at discontinuing high cost fund support. Windstream and the other parties to the proceeding have engaged in discussions to shift from the high cost fund to the Oklahoma USF. The outcome of the discussions is currently unknown and the high cost fund may be discontinued at any time.

Universal service reform is also possible in Pennsylvania. Windstream currently receives $13.3 million from that fund and cannot estimate the financial impact that would result from changes, if any.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Capital Resources

We rely largely on operating cash flows and long-term debt to provide for our liquidity requirements. We expect cash flows from operations will be sufficient to fund our ongoing working capital requirements, planned capital expenditures, scheduled debt principal and interest payments, lease payments due under the master lease agreement with Uniti, and dividend payments. We also have access to capital markets and available borrowing capacity under our revolving credit agreement.

From time to time, we may seek transactions to optimize our capital structure, including entering into transactions to repurchase or redeem our outstanding indebtedness (including by means of open market purchases, privately negotiated repurchases, tender offers and/or redemptions pursuant to the debt’s terms), or seek to refinance our outstanding debt or may otherwise seek transactions to reduce interest expense. Our ability to consummate any such transaction will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. Any of these transactions could impact our financial results. We cannot assure you if or when we will consummate any such transactions or the terms of any such transaction.

We have evaluated and we continue to evaluate possible acquisition and disposition transactions on an on-going basis. At any time, we may be engaged in discussions or negotiations with respect to possible acquisitions and/or dispositions. We cannot assure you if or when we will consummate any such transaction or the terms of any such transaction.

The actual amount and timing of our future capital requirements may differ materially from our estimates depending on the demand for our services and new market developments and opportunities, and on other factors, including those described in Part I, “Item 1A. Risk Factors” in this annual report. If our plans or assumptions change or prove to be inaccurate, the foregoing sources of funds may prove to be insufficient. In addition, if we seek to acquire other businesses or to accelerate the expansion of our business, we may be required to seek material amounts of additional capital. Additional sources may include equity and debt financing. Further, if we believe we can obtain additional debt financing on advantageous terms, we may seek such financing at any time, to the extent that market conditions and other factors permit us to do so. The debt financing we may seek could be in the form of additional term loans under Windstream Services’ senior secured credit facility or additional debt securities having substantially the same terms as, or different terms from, Windstream Services’ outstanding senior notes.

Historical Cash Flows

The following table summarizes our cash flow activities for the three month periods ended March 31 :



(Millions)	2017			2016
Cash flows provided from (used in):
Operating activities	$	132.5		$	127.2
Investing activities	(240.9		)	(257.6		)
Financing activities	100.8			173.7
(Decrease) increase in cash and cash equivalents	$	(7.6	)	$	43.3

Our cash position decreased by $7.6 million to $51.5 million at March 31, 2017 , from $59.1 million at December 31, 2016 , as compared to an increase of $43.3 million during the same period in 2016 . Cash inflows in the three month period ended March 31, 2017 were primarily from operating activities and incremental debt proceeds. These inflows were offset by cash outflows for capital expenditures, repayments of debt and payments under our capital and long-term lease obligations.

Cash Flows - Operating Activities

Cash provided from operations is our primary source of funds. Cash flows from operating activities increased by $5.3 million in the three month period ended March 31, 2017 , as compared to the same period in 2016 . The increase was primarily due to favorable changes in working capital driven by improvement in the collection of trade receivables and timing differences in the payment of trade accounts payable. Lower cash interest payments of $9.7 million attributable to the retirement of the 2017 Notes and the partial repurchases of the 2021 Notes, 2022 Notes, and 2023 Notes completed in 2016 pursuant to our debt repurchase program also favorably impacted cash flows from operating activities during the first quarter of 2017. These increases were offset by adverse effects on our operating results from increased merger, integration and other costs of $52.3 million , primarily attributable to the merger with EarthLink and reductions in small business, wholesale and switched access revenues due to customer losses from business closures and competition, declining demand for copper-based circuits to towers and the adverse effects of inter-carrier compensation reform, respectively.

We are currently utilizing net operating loss carryforwards (“NOLs”) and other income tax initiatives to lower our cash income tax obligations during 2017. Accordingly, we expect cash income tax payments to be approximately $5.0 million in 2017.

Cash Flows - Investing Activities

Cash used in investing activities primarily includes investments in our network to upgrade and expand our service offerings as well as spending on strategic initiatives. Cash used in investing activities decreased $16.7 million in the three month period ended March 31, 2017 , as compared to the same period in 2016 , primarily due to a slight decrease in our capital spending. Capital expenditures were $243.4 million for the three month period ended March 31, 2017 compared to $263.8 million for the same period in 2016 , a decrease of $20.4 million . During the first three months of 2017, our capital spend was primarily directed toward fiber expansion and consumer broadband upgrades of our network. Capital expenditures for 2017 and 2016 included $23.6 million and $33.7 million , respectively, related to Project Excel, a capital program begun in late 2015 that accelerates our plans to upgrade our broadband network by early 2017 funded by a portion of the proceeds received from the sale of the data center business completed in December 2015. Capital expenditures for the first three months of 2017 also included $4.5 million of incremental spend related to our acquired EarthLink operations.

Excluding incremental capital spend related to the acquisition of EarthLink and in completing Project Excel, we expect total 2017 capital expenditures to range between $790.0 million to $840.0 million .

Cash Flows - Financing Activities

Cash provided from financing activities was $100.8 million for the three month period ended March 31, 2017 compared to $173.7 million for the same period in 2016 , a decrease of $72.9 million .

Proceeds from new issuances of long-term debt during the first three months of 2017 were $1,315.6 million which consisted of new and incremental borrowings totaling $1,022.6 million under Tranches B6 and B7 of Windstream Services’ senior secured credit facility, which were issued at a discount, and additional borrowings of $293.0 million under the revolving line of credit. Comparatively, proceeds from new issuances of long-term debt were $1,278.0 million during the first three months of 2016 and consisted of new borrowings of $600.0 million under Tranche B6 of Windstream Services’ senior secured credit facility, which were issued at a discount, the proceeds of which were used to repurchase the 2017 Notes and other Windstream Services’ debt obligations, and the incurrence of new borrowings of $693.0 million under the revolving line of credit.

Debt repayments for the three months ended March 31, 2017 totaled $1,133.4 million and primarily consisted of cash outlays of $574.3 million to repay amounts outstanding under Tranche B5 of Windstream Services’ senior secured credit facility and $435.3 million to repay amounts outstanding under EarthLink’s credit facility and to redeem EarthLink's outstanding 8.875 percent Senior Notes due 2019 and 7.375 percent Senior Secured Notes due 2020. During the first three months of 2017, Windstream Services also repaid $120.0 million of borrowings under its revolving line of credit. Comparatively, debt repayments for the three-month period ended March 31, 2016 were $985.3 million and primarily consisted of cash outlays totaling $573.8 million for the repurchase of $441.1 million of the 2017 Notes under a cash tender offer and open market repurchases of $154.2 million of aggregate principal amount of senior unsecured notes under the debt repurchase program previously discussed. During the first quarter of 2016, Windstream Services also repaid $405.0 million of borrowings under its revolving line of credit.

During the three months of 2017, dividends paid to shareholders were $23.7 million , which was an increase of $8.8 million , as compared to the same period in 2016, reflecting the payment of our regular quarterly dividend of $.15 per share plus a prorated dividend of $.095 paid on March 10, 2017. The prorated dividend was paid in connection with the EarthLink merger. The prorated dividend was calculated based on the number of days elapsed from the beginning of the first quarter on January 1, 2017, to February 26, 2017, the day immediately prior to the closing date of the Merger and was paid to Windstream stockholders of record as of February 24, 2017. The second prorated payment of $.055 was calculated based on the number of days elapsed from, and including, the closing date of the Merger through March 31, 2017, the end of the first quarter. The second prorated portion of the dividend was paid on April 17, 2017, to Windstream stockholders of record as of March 31, 2017. On May 2, 2017 , we declared a cash dividend of $.15 per share on our common stock which is payable on July 17, 2017 , to shareholders of record on June 30, 2017 .

Our dividend practice can be changed at any time at the discretion of our board of directors, and is subject to the restricted payment capacity under Windstream Services’ debt covenants as further discussed below. Accordingly, we cannot assure you we will continue paying dividends at the current quarterly rate of $.15 per share. See “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2016, for additional information concerning our dividend practice.

Pension and Employee Savings Plan Contributions

The expected employer contributions to the qualified pension plan to meet our 2017 annual funding requirements are $27.0 million. On January 12, 2017, we made our required quarterly employer contribution of $8.0 million in cash to the qualified pension plan. We intend to fund the remaining 2017 contributions using cash, our common stock, or a combination thereof. On March 2, 2017, we filed an effective shelf registration statement on Form S-3 (the “Registration Statement”) to offer and sell various securities from time to time. Under the Registration Statement, we established an at-the-market common stock offering program (the “ATM Program”) to sell shares of our common stock. We intend to utilize the ATM Program to facilitate contributions of cash to the qualified pension plan, if the price we can obtain for our common stock is no less than $6.00 per share. During the quarter ended March 31, 2017, we issued and sold 1.3 million shares of common stock under the ATM Program and received proceeds of approximately $9.6 million, net of commissions. At March 31, 2017, subject to the terms and conditions of the ATM Program, we may sell an additional $15.2 million aggregate offering price of shares of common stock under the ATM Program. On April 14, 2017, we made our required quarterly contribution of $8.9 million using proceeds from the ATM Program. The amount and timing of future contributions to the qualified pension plan are dependent upon a myriad of factors including future investment performance, changes in future discount rates and changes in the demographics of the population participating in the plan. We also expect to make cash contributions in 2017 totaling $0.9 million to fund the expected benefit payments of our unfunded supplemental executive retirement pension plans.

Shareholder Rights Plan

On May 12, 2016, our shareholders ratified a shareholder rights plan, previously adopted by Windstream Holdings’ board of directors. The plan is designed to protect our NOLs from the effect of limitations imposed by federal and state tax rules following a change in the ownership of our stock. This plan was designed to deter an “ownership change” (as defined in IRC Section 382) from occurring, and therefore protect our ability to utilize our federal and state net operating loss carry forwards in the future. A person or group of affiliated or associated persons may cause the rights under the plan to become exercisable if such person or group is or becomes the beneficial owner of 4.90 percent or more of the “outstanding shares” of Windstream Holdings common stock other than as a result of repurchases of stock by Windstream Holdings, dividends or distributions by Windstream Holdings or certain inadvertent actions by Windstream Holdings’ stockholders. For purposes of calculating percentage ownership under the plan, “outstanding shares” of common stock include all of the shares of common stock actually issued and outstanding. Beneficial ownership is determined as provided in the rights plan and generally includes, without limitation, any ownership of securities a person would be deemed to actually or constructively own for purposes of Section 382 of the IRC or the Treasury Regulations promulgated thereunder.

The plan is not meant to be an anti-takeover measure and our board of directors has established a procedure to consider requests to exempt the acquisition of Windstream Holdings common stock from the rights plan, if such acquisition would not limit or impair the availability of our NOLs. Such determination will be made in the sole and absolute discretion of the Windstream Holdings’ board of directors, upon request by any person prior to the date upon which such person would otherwise become the beneficial owner of 4.90 percent or more of the outstanding shares of Windstream Holdings common stock. In addition, if the Windstream Holdings’ board of directors determines in good faith that a person has inadvertently become the beneficial owner of 4.90 percent or more of the outstanding shares of Windstream Holdings common stock, and such person divests as promptly as practicable a sufficient number of shares of common stock so that such person beneficially owns less than 4.90 percent, then such person will not cause the rights under the plan to become exercisable. This summary description of the rights plan does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, dated as of September 17, 2015, by and between Windstream Holdings and Computershare Trust Company, N.A., as Rights Agent, filed as an exhibit to the Windstream Holdings’ Annual Report on Form 10-K for the year ended December 31, 2015.

Debt and Dividend Capacity

Windstream Holdings has no debt obligations. All of our debt, including the facility described below, has been incurred by our subsidiaries (primarily Windstream Services). Windstream Holdings is neither a guarantor of nor subject to the restrictive covenants imposed by such debt.

As of March 31, 2017 , we had $5,479.1 million in long-term debt outstanding, including current maturities (see Note 4). As of March 31, 2017 , the amount available for borrowing under Windstream Services’ revolving line of credit was $576.3 million . As of March 31, 2017 , Windstream Services had approximately $454.8 million of restricted payment capacity as governed by its senior secured credit facility. The restricted payment capacity may limit the amount of dividends Windstream Services may distribute to Windstream Holdings to fund future dividend payments to Windstream Holdings’ shareholders. Under terms of the credit facility, payments required under the master lease are deducted from operating income before depreciation and amortization (“OIBDA”). Windstream Services builds additional capacity through cash generated from operations while dividend distributions to Windstream Holdings, and other certain restricted investments reduce the available restricted payments capacity. Windstream Services will continue to consider free cash flow accretive initiatives.

Debt Covenants and Amendments

The terms of the credit facility and indentures issued by Windstream Services include customary covenants that, among other things, require Windstream Services to maintain certain financial ratios and restrict its ability to incur additional indebtedness. These financial ratios include a maximum leverage ratio of 4.5 to 1.0 and a minimum interest coverage ratio of 2.75 to 1.0 . In addition, the covenants include restrictions on dividend and certain other types of payments.

Certain of Windstream Services’ debt agreements contain various covenants and restrictions specific to the subsidiary that is the legal counterparty to the agreement. Under its long-term debt agreements, acceleration of principal payments would occur upon payment default, violation of debt covenants not cured within 30 days, a change in control including a person or group obtaining 50 percent or more of Windstream Services’ outstanding voting stock, or breach of certain other conditions set forth in the borrowing agreements. At March 31, 2017 , Windstream Services was in compliance with all debt covenants and restrictions.

Windstream Services’ senior secured credit facility include maintenance covenants derived from certain financial measures that are not calculated in accordance with accounting principles generally accepted in the United States (“non-GAAP financial measures”).

These non-GAAP financial measures are presented below for the sole purpose of demonstrating our compliance with Windstream Services’ debt covenants and were calculated as follows at March 31, 2017 :



(Millions, except ratios)
Gross leverage ratio:
Long term debt including current maturities	$	5,479.1
Capital leases, including current maturities	65.7
Total long term debt and capital leases	$	5,544.8
Operating income, last twelve months	$	405.2
Depreciation and amortization, last twelve months	1,297.2
Other expense adjustments required by the credit facility (a)	(276.5		)
Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”)	$	1,425.9
Leverage ratio (b)	3.89
Maximum gross leverage ratio allowed	4.50
Interest coverage ratio:
Adjusted EBITDA	$	1,425.9
Interest expense, last twelve months	$	852.7
Adjustments required by the credit facility (c)	(492.7		)
Adjusted interest expense	$	360.0
Interest coverage ratio (d)	3.96
Minimum interest coverage ratio allowed	2.75


(a)	Adjustments required by the credit facility primarily consist of the inclusion of the annual cash rental payment due under the master lease agreement with Uniti and the exclusion of pension and share-based compensation expense, and merger, integration and other costs and restructuring charges.


(b)	The gross leverage ratio is computed by dividing total debt by adjusted EBITDA.


(c)	Adjustments required by the credit facility primarily consist of the inclusion of capitalized interest and amortization of the discount on long-term debt, net of premiums, and the exclusion of the interest expense attributable to the long-term lease obligation under the master lease agreement with Uniti.


(d)	The interest coverage ratio is computed by dividing adjusted EBITDA by adjusted interest expense.

Credit Ratings

As of March 31, 2017 , Moody’s Investors Service, Standard & Poor’s (“S&P”) Corporation and Fitch Ratings had granted the following senior secured, senior unsecured and corporate credit ratings:



Description	Moody’s	S&P	Fitch
Senior secured credit rating (a)	B1	BB	BB+
Senior unsecured credit rating (a)	B2	B+	BB-
Corporate credit rating (b)	B1	B+	BB-
Outlook (b)	Negative	Stable	Stable


(a)	Ratings assigned to Windstream Services.


(b)	Corporate credit rating and outlook assigned to Windstream Services for Moody’s and Fitch, while S&P assigns corporate credit rating and outlook to Windstream Holdings, Inc.

Factors that could affect our short and long-term credit ratings would include, but are not limited to, a material decline in our operating results, increased debt levels relative to operating cash flows resulting from future acquisitions, increased capital expenditure requirements, or changes to our dividend policy. If our credit ratings were to be downgraded, we might incur higher interest costs on future borrowings, and our access to the public capital markets could be adversely affected.

Our exposure to interest risk is further discussed in the Market Risk section below. A downgrade in our current short or long-term credit ratings would not accelerate scheduled principal payments of our existing long-term debt.

Off-Balance Sheet Arrangements

We do not use securitization of trade receivables, affiliation with special purpose entities, variable interest entities or synthetic leases to finance our operations. Additionally, we have not entered into any arrangement requiring us to guarantee payment of third party debt or to fund losses of an unconsolidated special purpose entity.

Contractual Obligations and Commitments

Following the merger with EarthLink, our contractual obligations and commitments changed significantly from December 31, 2016 with respect to our long-term debt, operating leases, and purchase obligations. Set forth below is a summary as of March 31, 2017 of our material contractual obligations and commitments that changed from our 2016 fiscal year end:



	Obligations by Period
(Millions)	Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 years		Total
Long-term debt, including current maturities (a)	$	19.3	$	38.6	$	3,469.8	$	2,019.9	$	5,547.6
Interest payments on long-term debt obligations (b)	331.1		659.7		501.9		199.7		1,692.4
Operating leases (c)	157.0		224.7		117.4		118.8		617.9
Purchase obligations (d)	625.0		265.6		18.7		3.8		913.1
Total	$	1,132.4	$	1,188.6	$	4,107.8	$	2,342.2	$	8,771.0


(a)	Excludes $(13.9) million of unamortized net discounts and $54.6 million of unamortized debt issuance costs included in long-term debt at March 31, 2017 .


(b)	Variable rates on Tranche B6 and B7 of the senior secured credit facility are calculated in relation to one-month LIBOR, which was 0.94 percent at March 31, 2017 .


(c)	Operating leases include non-cancellable operating leases, consisting principally of leases for network facilities, real estate, office space and office equipment.


(d)	Purchase obligations include open purchase orders not yet receipted and amounts payable under non-cancellable contracts. The portion attributable to non-cancellable contracts primarily represents agreements for network capacity and software licensing.

Except for the amounts presented above, there have been no significant changes in our other contractual obligations and commitments since December 31, 2016 , as set forth in our Annual Report on Form 10-K.

Reconciliation of Non-GAAP Financial Measures

From time to time, we will reference certain non-GAAP measures in our filings. Management’s purpose for including these measures is to provide investors with measures of performance that management uses in evaluating the performance of the business. These non-GAAP measures should not be considered in isolation or as a substitute for measures of financial performance reported under GAAP. Following is a reconciliation of a non-GAAP financial measure titled OIBDA to the most closely related financial measure reported under GAAP referenced in this filing.



	Three Months Ended March 31,
(Millions)	2017		2016
Operating income	$	46.0	$	157.7
Depreciation and amortization	338.5		304.8
OIBDA (a)	$	384.5	$	462.5


(a)	OIBDA is defined as operating income plus depreciation and amortization expense. We believe this measure provides investors with insight into the true earnings capacity of providing telecommunications services to our customers.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. In Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2015, in our Annual Report on Form 10-K, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements. These critical accounting policies include evaluating the collectability of trade receivables, calculating depreciation and amortization expense, assessing goodwill for impairment, accounting for pension benefits, determining the fair values of derivative instruments, and accounting for deferred income taxes and related tax contingencies. There were no material changes to these critical accounting policies during the three month period ended March 31, 2017 .

Recently Issued Authoritative Guidance

The following authoritative guidance, together with our evaluation of the related impact to the consolidated financial statements, is more fully described in Note 1.


•	Revenue Recognition


•	Leases


•	Derivatives and Hedging


•	Financial Instruments - Credit Losses


•	Statement of Cash Flows


•	Definition of a Business


•	Goodwill Impairment


•	Presentation of Defined Benefit Retirement Costs

Forward-Looking Statements

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes, and future filings on Form 10-K, Form 10-Q and Form 8-K and future oral and written statements by us and our management may include, certain forward-looking statements. We claim the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for this Quarterly Report on Form 10-Q. Forward-looking statements are subject to uncertainties that could cause actual future events and results to differ materially from those expressed in the forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the anticipated benefits of the merger with EarthLink and the proposed merger with Broadview, including future financial and operating results, projected synergies in operating and capital expenditures and the timing of achieving the synergies reduction in net leverage, and improvement in our ability to compete; our expectation to return a portion of our cash flow to shareholders through our dividend; expectations regarding our network investments to improve financial performance and increase market share; expectations regarding revenue trends, sales opportunities, improving margins in, and the directional outlook of, our business segments; network cost optimization; stability and growth in adjusted OIBDA; expected levels of support from universal service funds or other government programs; expected rates of loss of consumer households served or inter-carrier compensation; expected increases in high-speed Internet and business data connections, including increasing availability of higher Internet speeds and services utilizing next generation technology for customers; expectations regarding expanding enhanced services related to Internet speeds, IPTV and 1 Gbps services to more locations and expanding our fiber network; our expected ability to fund operations; expected required contributions to our pension plan and our ability to make contributions utilizing our common stock; the completion and benefits from network investments related to the Connect America Fund to fund the deployment of broadband services and capital expenditure amounts related to these investments; anticipated benefits of Project Excel to improve network capabilities and offer premium Internet speeds; anticipated capital expenditures and certain debt maturities from cash flows from operations; improving our debt profile and reducing interest costs; and expected effective federal income tax rates. These and other forward-looking statements are based on estimates, projections, beliefs, and assumptions that we believe are reasonable but are not guarantees of future events and results. Actual future events and our results may differ materially from those expressed in these forward-looking statements as a result of a number of important factors.

Factors that could cause actual results to differ materially from those contemplated in our forward-looking statements include, among others:


•	the cost savings and expected synergies from the merger with EarthLink and the proposed merger with Broadview may not be fully realized or may take longer to realize than expected;


•	the integration of Windstream and EarthLink and proposed integration with Broadview may not be successful, may cause disruption in relationships with customers, vendors and suppliers and may divert attention of management and key personnel;


•	changes to our current dividend practice which is subject to our capital allocation policy and may be changed at any time at the discretion of our board of directors;


•	the potential impact of the Federal Communications Commission’s comprehensive business data services reforms that may result in greater capital investments and customer and revenue churn because of possible price increases by our ILEC suppliers for certain services we use to serve customer locations where we do not have facilities;


•	further adverse changes in economic conditions in the markets served by us;


•	the extent, timing and overall effect s of competition in the communications business;


•	our election to accept state-wide offers under the FCC’s Connect America Fund, Phase II, and the impact of such election on our future receipt of federal universal service funds and capital expenditures, and any return of support received pursuant to the program;


•	the potential for incumbent carriers to impose monetary penalties for failure to meet specific volume and term commitments under their special access pricing and tariff plans, which Windstream uses to lease last-mile connections to serve its retail business data service customers, without FCC action;


•	the impact of new, emerging or competing technologies and our ability to utilize these technologies to provide services to our customers;


•	for certain operations where we lease facilities from other carriers, adverse effect s on the availability, quality of service, price of facilities and services provided by other carriers on which our services depend;


•	unfavorable rulings by state public service commissions in current and further proceedings regarding universal service funds, inter-carrier compensation or other matters that could reduce revenues or increase expenses;


•	material changes in the communications industry that could adversely affect vendor relationships with equipment and network suppliers and customer relationships with wholesale customers;


•	our ability to make rent payments under the master lease to Uniti, which may be affected by results of operations, changes in our cash requirements, cash tax payment obligations, or overall financial position;


•	unanticipated increases or other changes in our future cash requirements, whether caused by unanticipated increases in capital expenditures, increases in pension funding requirements, or otherwise;


•	the availability and cost of financing in the corporate debt markets;


•	the potential for adverse changes in the ratings given to our debt securities by nationally accredited ratings organizations;


•	earnings on pension plan investments significantly below our expected long term rate of return for plan assets or a significant change in the discount rate or other actuarial assumptions;


•	unfavorable results of litigation or intellectual property infringement claims asserted against us;


•	the risks associated with non-compliance by us with regulations or statutes applicable to government programs under which we receive material amounts of end user revenue and government subsidies, or non-compliance by us, our partners, or our subcontractors with any terms of our government contracts;


•	the effect s of federal and state legislation, and rules and regulations, and changes thereto, governing the communications industry;


•	continued loss of consumer households served and consumer high-speed Internet customers;


•	the impact of equipment failure, natural disasters or terrorist acts;


•	the effect s of work stoppages by our employees or employees of other communications companies on whom we rely for service; and


•	those additional factors under “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2016 , and in subsequent filings with the Securities and Exchange Commission at www.sec.gov.

In addition to these factors, actual future performance, outcomes and results may differ materially because of more general factors including, among others, general industry and market conditions and growth rates, economic conditions, and governmental and public policy changes.

We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. The foregoing review of factors that could cause our actual results to differ materially from those contemplated in the forward-looking statements should be considered in connection with information regarding risks and uncertainties that may affect our future results included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations and in our other filings with the Securities and Exchange Commission at www.sec.gov.

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WINDSTREAM HOLDINGS, INC.

WINDSTREAM SERVICES, LLC

FORM 10-Q

PART I - FINANCIAL INFORMATION

Item 3 . Quantitative and Qualitative Disclosures About Market Risk

Market risk is comprised of three elements: interest rate risk, equity risk and foreign currency risk. Following the disposition of our investment in Uniti common stock, we no longer have exposure to changes in marketable equity security prices. We continue to have exposure to market risk from changes in interest rates. Because we do not operate in foreign countries denominated in foreign currencies, we are not exposed to foreign currency risk. We have estimated our market risk using sensitivity analysis. The results of the sensitivity analysis are further discussed below. Actual results may differ from our estimates.

Interest Rate Risk

We are exposed to market risk through changes in interest rates, primarily as it relates to the variable interest rates we are charged under Windstream Services’ senior secured credit facility. Under our current policy, Windstream Services enters into interest rate swap agreements to obtain a targeted mixture of variable and fixed interest rate debt such that the portion of debt subject to variable rates does not exceed 25 percent of our total debt outstanding.

We have established policies and procedures for risk assessment and the approval, reporting and monitoring of interest rate swap activity. We do not enter into interest rate swap agreements, or other derivative financial instruments, for trading or speculative purposes. Management periodically reviews our exposure to interest rate fluctuations and implements strategies to manage the exposure.

As of March 31, 2017 , Windstream Services has entered into six pay fixed, receive variable interest rate swap agreements designated as cash flow hedges of the benchmark LIBOR interest rate risk created by the variable cash flows paid on Windstream Services’ senior secured credit facility. The interest rate swaps mature on October 17, 2021. The hedging relationships are expected to be highly effective in mitigating cash flow risks resulting from changes in interest rates. For additional information regarding our interest rate swap agreements, see Note 5 to the consolidated financial statements.

As of March 31, 2017 and 2016 , the unhedged portion of Windstream Services’ variable rate senior secured credit facility was $1,192.9 million , and $1,089.7 million , or approximately 21.6 percent and 19.8 percent of Windstream Services’ total outstanding long-term debt excluding unamortized debt issuance costs, respectively. For variable rate debt instruments, market risk is defined as the potential change in earnings resulting from a hypothetical adverse change in interest rates. A hypothetical increase of 100.0 basis points in variable interest rates would have reduced annual pre-tax earnings by approximately $11.9 million and $10.9 million for the three month periods ended March 31 , 2017 and 2016 , respectively. Actual results may differ from this estimate.

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WINDSTREAM HOLDINGS, INC.

WINDSTREAM SERVICES, LLC

FORM 10-Q

PART I - FINANCIAL INFORMATION

Item 4 . Controls and Procedures

Controls and Procedures for Windstream Holdings, Inc .


(a)	Evaluation of disclosure controls and procedures.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Windstream Holdings’ disclosure controls and procedures as of the end of the period covered by these quarterly reports (the “Evaluation Date”). The term “disclosure controls and procedures” (defined in Exchange Act Rule 13a-15(e)) refers to the controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such disclosure controls and procedures were effective.


(b)	Changes in internal control over financial reporting.

On February 27, 2017, we completed our acquisition by merger of EarthLink Holding Corp. (“EarthLink”) as described elsewhere in this report. Revenues and sales of $81.2 million and net operating loss of $2.8 million attributable to EarthLink were included in the Consolidated Statements of Operations for the period from February 27, 2017 through March 31, 2017.

We continue to integrate policies, processes, people, technology, and operations relating to this transaction, and will continue to evaluate the impact of any related changes to our internal control over financial reporting. Except for any changes in our internal control over financial reporting related to the integration of EarthLink, there were no changes in our internal control over financial reporting during the first quarter of 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Controls and Procedures for Windstream Services, LLC.


(a)	Evaluation of disclosure controls and procedures.

Our management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of Windstream Services’ disclosure controls and procedures as of the end of the period covered by these quarterly reports (the “Evaluation Date”). The term “disclosure controls and procedures” (defined in Exchange Act Rule 13a-15(e)) refers to the controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such disclosure controls and procedures were effective.

Table of Contents


(b)	Changes in internal control over financial reporting.

On February 27, 2017, we completed our acquisition by merger of EarthLink as described elsewhere in this report. Revenues and sales of $81.2 million and net operating loss of $2.8 million attributable to EarthLink were included in the Consolidated Statements of Operations for the period from February 27, 2017 through March 31, 2017.

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WINDSTREAM HOLDINGS, INC.

WINDSTREAM SERVICES, LLC

FORM 10-Q

PART II - OTHER INFORMATION

Item 1 . Legal Proceedings

Item 1A . Risk Factors

There have been no material changes to the risk factors affecting our businesses that were discussed in “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2016 , filed with the SEC on March 1, 2017 .

Item 5 . Other Information

Effective May 3, 2017, Windstream expanded its business unit for ILEC Consumer and Small Business to include certain network and engineering operations, specifically broadband engineering, broadband project management and outside plant engineering, and appointed Mr. Jeffrey W. Small, age 41, as President - ILEC Consumer and SMB to oversee the business unit. Prior to this appointment, Mr. Small served as Executive Vice President - Engineering and was responsible for network engineering, architecture and capital management. Prior to rejoining Windstream in June 2016, Mr. Small served as Senior Vice President of Operations at Uniti Group Inc. (“Uniti”), the real estate investment trust spun off from Windstream in 2015. Mr. Small joined Uniti in August 2014 as Senior Vice President-REIT Corporate Development & Operations. From March 2007 until July 2014, Mr. Small held a number of management, accounting and finance leadership roles at Windstream, most recently serving as Vice President of Procurement and Carrier Service Delivery from July 2012 to July 2014 and Director of Financial Planning from September 2010 to July 2012. Prior to March 2007, he served as the controller for Ranger Boats, Inc., and was a senior auditor with Arthur Andersen LLP.

Also, effective May 3, 2017, Ms. Sarah E. Day no longer serves as President - ILEC Consumer and SMB, or as an executive officer of Windstream, based upon a mutual decision between Windstream and Ms. Day. To allow for an orderly transition, Ms. Day will serve as a consultant to the Chief Executive Officer until June 1, 2017 (the “Separation Date”). Ms. Day’s base salary will continue through the Separation Date, and her health and life insurance benefits will continue through June 30, 2017.

Pursuant to a Waiver and Release Agreement (the “Agreement”), and contingent upon Ms. Day’s compliance with all conditions and agreements in the Agreement, Ms. Day will receive from Windstream (i) $770,000 (an amount equal to one year of base salary and her target bonus under the Performance Incentive Compensation Plan (the “PICP”) for 2017) in 12 equal monthly installments, less legally required withholdings, and (ii) a portion of the annual incentive payment she would have been entitled to receive under the PICP, if any, based on actual performance during 2017 and pro-rated for actual time in position (34%), which will be paid, if at all, in a single lump sum at the time payments are made to other PICP participants in 2018. Windstream also amended Ms. Day’s unvested time-based restricted stock awards to provide that compliance with the non-disclosure, non-competition and non-interference obligations in the Change in Control Agreement dated January 1, 2016 between Ms. Day and the Company (the “Change in Control Agreement”) for the one-year period ending May 31, 2018 will satisfy the continued service and vesting requirements of such awards that vest on or before May 31, 2018 (33,635 unvested shares). Ms. Day’s remaining unvested time-based restricted stock awards (32,419 unvested shares) and all unvested performance based restricted stock units (61,737 unvested shares) will automatically be forfeited or cancelled without further action or notice as of the Separation Date. Ms. Day is also entitled to certain outplacement services and executive coaching services under the Agreement. In exchange for these benefits, Ms. Day agreed to waive and release all claims in favor of Windstream and comply with certain post-termination obligations, including confidentiality, non-disclosure, non-disparagement, non-competition and non-interference obligations.

The description of the Agreement contained herein is qualified in its entirety by reference to the full text of the Agreement, which is attached as Exhibit 10.39 to this Quarterly Report on Form 10-Q and incorporated in this Item 5 by reference.

Item 6 . Exhibits

See the exhibits specified on the Index of Exhibits located at Page 81.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, this registrants have duly caused this report to be signed on its behalf the undersigned, thereunto duly authorized.



WINDSTREAM HOLDINGS, INC.		WINDSTREAM SERVICES, LLC
(Registrant)		(Registrant)

/s/ Robert E. Gunderman		/s/ Robert E. Gunderman
Robert E. Gunderman Chief Financial Officer (Principal Financial Officer)		Robert E. Gunderman Chief Financial Officer (Principal Financial Officer)
May 8, 2017		May 8, 2017

WINDSTREAM HOLDINGS, INC. WINDSTREAM SERVICES, LLC FORM 10-Q INDEX OF EXHIBITS

Form 10-Q Exhibit No.	Description of Exhibits

10.37	Tranche B-7 Refinancing Amendment, dated as of February 17, 2017, to the Sixth Amended and Restated Credit Agreement originally dated as of July 17, 2006 and amended and restated as of April 24, 2015, among Windstream Services, LLC, a Delaware limited liability company, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the other agents party thereto.	(a)

10.38	Third Tranche B-6 Incremental Amendment dated as of February 27, 2017, to the Sixth Amended and Restated Credit Agreement originally dated as of July 17, 2006 and amended and restated as of April 24, 2015, among Windstream Services, LLC, a Delaware limited liability company, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, and the other agents party thereto.	(a)

10.39	Waiver and Release Agreement entered into by and between Sarah E. Day and Windstream Holdings, Inc.	(a)

21	Listing of Subsidiaries.	(a)

31(a)	Certifications of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	(a)

31(b)	Certifications of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	(a)

32(a)	Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	(a)

32(b)	Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	(a)

101.INS	XBRL Instance Document	(a)

101.SCH	XBRL Taxonomy Extension Schema Document	(a)

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	(a)

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	(a)

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	(a)

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	(a)



*	Incorporated herein by reference as indicated.
(a)	Filed herewith.

Exhibit 10.37

TRANCHE B-7 REFINANCING AMENDMENT (this “ Refinancing Amendment ”), dated as of February 17, 2017, to the Sixth Amended and Restated Credit Agreement originally dated as of July 17, 2006 and amended and restated as of April 24, 2015 (as further amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “ Credit Agreement ”) among Windstream Services, LLC, a Delaware limited liability company (the “ Borrower ”), the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (the “ Administrative Agent ”), and the other agents party thereto.

WHEREAS, pursuant to Section 2.19 of the Credit Agreement, the Borrower has requested Credit Agreement Refinancing Indebtedness in the form of Other Term Loans in an aggregate principal amount not exceeding $580,000,000, the proceeds of which shall be used to refinance in full (concurrently with the effectiveness of this Refinancing Amendment) the Tranche B-5 Term Loans outstanding under the Credit Agreement before giving effect to this Refinancing Amendment (the “ Existing Tranche B-5 Term Loans ”) and to pay related fees and expenses;

WHEREAS, in accordance with Section 2.19 of the Credit Agreement, (x) the Tranche B-7 Term Loans (as defined below) shall constitute a separate tranche of Term Loans in an aggregate principal amount not exceeding $580,000,000 and shall be secured on a pari passu basis with the existing Loans and shall have the other terms and conditions set forth herein and in the Credit Agreement as amended hereby and (y) this Refinancing Amendment shall not require the consent of any Lenders other than the Continuing Tranche B-7 Lenders and the Additional Tranche B-7 Lenders (each as defined below);

WHEREAS, each existing Tranche B-5 Lender (each, an “ Existing Tranche B-5 Lender ”) that executes and delivers a signature page to this Refinancing Amendment in the form of Annex I hereto (a “ Lender Addendum ”) will thereby (i) agree to the terms of this Refinancing Amendment and (ii) agree to continue the entire principal amount (or such lesser amount as the Lead Arranger (as defined below) may allocate) of its Existing Tranche B-5 Term Loans outstanding on the Amendment Effective Date (as defined below) as Tranche B-7 Term Loans (such continued Existing Tranche B-5 Term Loans, the “ Continued Tranche B-7 Term Loans ” and all such Lenders, collectively, the “ Continuing Tranche B-7 Lenders ”; the Existing Tranche B-5 Lenders that are not Continuing Tranche B-7 Lenders, collectively, the “ Non-Continuing Tranche B-5 Lenders ”);

WHEREAS, each Person (other than a Continuing Tranche B-7 Lender in its capacity as such) that agrees to make new Tranche B-7 Term Loans (collectively, the “ Additional Tranche B-7 Lenders ”) will make new Tranche B-7 Term Loans to the Borrower on the Amendment Effective Date (the “ Additional Tranche B-7 Term Loans ” and, together with the Continued Tranche B-7 Term Loans, collectively, the “ Tranche B-7 Term Loans ”) in an amount equal to its Additional Tranche B-7 Commitment (as defined below);

WHEREAS, the Continuing Tranche B-7 Lenders and the Additional Tranche B-7 Lenders (collectively, the “ Tranche B-7 Lenders ”) are severally willing to continue their Existing Tranche B-5 Term Loans as Tranche B-7 Term Loans and/or to make Additional

Tranche B-7 Term Loans, as the case may be, subject to the terms and conditions set forth in this Refinancing Amendment;

WHEREAS, on and after the Amendment Effective Date, the Tranche B-7 Term Loans shall be “Term Loans” for all purposes under the Credit Agreement as amended hereby; and

WHEREAS, the Borrower has engaged Credit Suisse Securities (USA) LLC and/or its designated affiliates to act as lead arranger and bookrunner in respect of the Tranche B-7 Term Loans (in such capacities, the “ Lead Arranger ”).

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

SECTION 1. Defined Terms. Capitalized terms used and not otherwise defined herein have the meanings assigned to them in the Credit Agreement as amended hereby.

SECTION 2. Tranche B-7 Term Loans.

(a) Subject to the terms and conditions set forth herein, each Continuing Tranche B-7 Lender (i) severally agrees to continue all (or such lesser amount as the Lead Arranger may allocate) of its Existing Tranche B-5 Term Loans as Tranche B-7 Term Loans in a principal amount equal to the principal amount of its Existing Tranche B-5 Term Loans (or such lesser amount as the Lead Arranger may allocate; any such principal amount of Existing Tranche B-5 Term Loans not allocated by the Lead Arranger to continue as Tranche B-7 Term Loans, the “ Non-Allocated Existing Term Loans ”) and (ii) shall be deemed for the purpose of the Credit Agreement as amended hereby to have made a Tranche B-7 Term Loan in an aggregate principal amount equal to the aggregate principal amount of its Existing Tranche B-5 Term Loans minus the principal amount of its Non-Allocated Existing Term Loans (if any) on the Amendment Effective Date.

(b) Subject to the terms and conditions set forth herein, each Additional Tranche B-7 Lender severally agrees to make a Tranche B-7 Term Loan to the Borrower on the Amendment Effective Date in a principal amount equal to its Additional Tranche B-7 Commitment, which amount shall be made available to the Administrative Agent in immediately available funds in accordance with the Credit Agreement. The “ Additional Tranche B-7 Commitment ” of any Additional Tranche B-7 Lender will be the amount set forth opposite such Additional Tranche B-7 Lender’s name on Schedule 1 hereto. On the Amendment Effective Date, the proceeds of the Additional Tranche B-7 Term Loans shall be applied to prepay (i) the Existing Tranche B-5 Term Loans of the Non-Continuing Tranche B-5 Lenders and (ii) the Non-Allocated Existing Term Loans of the Continuing Tranche B-7 Lenders and to pay related fees and expenses.

(c) The continuation of Continued Tranche B-7 Term Loans may be implemented pursuant to other procedures specified by the Lead Arranger and the Administrative Agent (in consultation with the Borrower), including by repayment of Continued Tranche B-7

Term Loans of a Continuing Tranche B-7 Lender from the proceeds of Additional Tranche B-7 Term Loans followed by a subsequent assignment to it of Tranche B-7 Term Loans in the same amount.

(d) On the Amendment Effective Date, (i) each Non-Continuing Tranche B-5 Lender shall have its Existing Tranche B-5 Term Loans prepaid in full, and the Borrower shall pay to each Non-Continuing Tranche B-5 Lender all accrued and unpaid interest on, and premiums and fees related to, such Non-Continuing Tranche B-5 Lender’s Existing Tranche B-5 Term Loans to, but not including, the Amendment Effective Date; and (ii) each Continuing Tranche B-7 Lender with Non-Allocated Existing Term Loans shall have its Non-Allocated Existing Term Loans prepaid in full, and the Borrower shall pay to each such Continuing Tranche B-7 Lender all accrued and unpaid interest on, and premiums and fees related to, such Continuing Tranche B-7 Lender’s Non-Allocated Existing Term Loans to, but not including, the Amendment Effective Date.

(e) For the avoidance of doubt, on and after the Amendment Effective Date, (i) the Tranche B-7 Term Loans shall constitute a single Class of Loans under the Credit Agreement; and (ii) the Tranche B-7 Lenders shall constitute a single Class of Lenders under the Credit Agreement.

SECTION 3. Amendments to the Credit Agreement. In accordance with Section 2.19 of the Credit Agreement and effective as of the Amendment Effective Date, the Credit Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the pages of the Credit Agreement attached as Annex II hereto.

SECTION 4. Representations and Warranties. To induce the other parties hereto to enter into this Refinancing Amendment, the Borrower represents and warrants that:

(a) As of the Amendment Effective Date, this Refinancing Amendment has been duly authorized, executed and delivered by it. This Refinancing Amendment and the Credit Agreement (in each case, as of the Amendment Effective Date) constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(b) The representations and warranties of each Loan Party set forth in the Loan Documents that are qualified by materiality are true and correct, and the representations and warranties that are not so qualified are true and correct in all material respects, in each case, as of the Amendment Effective Date (other than with respect to any representation and warranty that expressly relates to an earlier date, in which case such representation and warranty is true and correct or true and correct in all material respects, as applicable, as of such earlier date).

occurred and is continuing or shall result from this Refinancing Amendment or the consummation of the transactions contemplated hereby.

SECTION 5. Amendment Effective Date . This Refinancing Amendment shall become effective as of the first date (the “ Amendment Effective Date ”) on which each of the following conditions shall have been satisfied:

(a) The Lead Arranger and the Administrative Agent shall have received (i) a counterpart signature page of this Refinancing Amendment duly executed by each of the Borrower, the Administrative Agent and each Additional Tranche B-7 Lender and (ii) a Lender Addendum executed and delivered by each Continuing Tranche B-7 Lender.

(b) The conditions set forth in Sections 4.03(a) and (b) of the Credit Agreement shall be satisfied on and as of the Amendment Effective Date, and the Lead Arranger and the Administrative Agent shall have received a certificate (in form and substance reasonably acceptable to the Lead Arranger and the Administrative Agent), dated as of the Amendment Effective Date and signed by a Responsible Officer of the Borrower, to such effect.

(c) The representations and warranties set forth in Sections 4(b) and 4(c) of this Refinancing Amendment shall be true and correct in all respects on and as of the Amendment Effective Date, and the Lead Arranger and the Administrative Agent shall have received a certificate (in form and substance reasonably acceptable to the Lead Arranger Administrative Agent), dated as of the Amendment Effective Date and signed by a Financial Officer of the Borrower, certifying as to such representations and warranties.

(d) The Lead Arranger and the Administrative Agent shall have received the favorable legal opinions of (i) Freshfields Bruckhaus Deringer US LLP, New York counsel to the Loan Parties, and (ii) John P. Fletcher, Esq., general counsel of the Borrower, in each case addressed to the Tranche B-7 Lenders, the Administrative Agent and the Collateral Agent and dated the Amendment Effective Date, which opinions shall be in form and substance reasonably satisfactory to the Lead Arranger and the Administrative Agent. The Borrower hereby requests such counsel to deliver such opinions.

(e) The Lead Arranger and the Administrative Agent shall have received a Borrowing Request in respect of the Tranche B-7 Term Loans, which shall be in compliance with the notice requirements set forth in Section 2.03 of the Credit Agreement as amended hereby.

(f) The Lead Arranger and the Administrative Agent shall have received such documents and certificates as the Lead Arranger, the Administrative Agent or their counsel may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of execution, delivery and performance of this Refinancing Amendment, the performance of the Credit Agreement and each other applicable Loan Document and any other legal matters relating to the Wireline Companies or the Loan Documents, all in form and substance reasonably satisfactory to the Lead Arranger, the Administrative Agent and their counsel.

(g) Each Loan Party not a party hereto shall have entered into a reaffirmation agreement in form and substance reasonably satisfactory to the Lead Arranger and the Administrative Agent.

(h) The Borrower shall have paid (i) to the Administrative Agent for the account of each Tranche B-7 Lender an upfront fee (which fee may, at the election of the Lead Arranger, be structured as original issue discount) (the “ Upfront Fee ”) in an amount equal to 0.50% of the principal amount of Tranche B-7 Term Loans made or held by such Tranche B-7 Lender on the Amendment Effective Date immediately after giving effect to this Refinancing Amendment and the transactions contemplated hereby, which Upfront Fee shall be fully earned and due and payable on the Amendment Effective Date, and (ii) all other fees and amounts due and payable pursuant to this Refinancing Amendment and/or any letter agreements or fee letters by and between the Borrower and the Lead Arranger (collectively, “ Engagement Letter ”), including, to the extent invoiced, reimbursement or payment of documented and reasonable out-of-pocket expenses in connection with this Refinancing Amendment and any other out-of-pocket expenses of the Lead Arranger and the Administrative Agent required to be paid or reimbursed pursuant to the Credit Agreement or the Engagement Letter; provided that it is understood and agreed that the Additional Tranche B-7 Lenders may net the fees and expenses described in this paragraph from the proceeds of the Additional Tranche B-7 Term Loans prior to providing such proceeds to the Administrative Agent for distribution to the Borrower.

(i) The Tranche B-7 Lenders shall have received, no later than three Business Days prior to the Amendment Effective Date, all documentation and other information about the Borrower and the Guarantors as has been reasonably requested by the Lead Arranger, the Administrative Agent or any Tranche B-7 Lender that such Person reasonably determines is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the Act, that has been reasonably requested at least five Business Days in advance of the Amendment Effective Date.

(j) The prepayment of (i) the Existing Tranche B-5 Term Loans of the Non-Continuing Tranche B-5 Lenders and (ii) the Non-Allocated Existing Term Loans of the Continuing Tranche B-7 Lenders, in each case, shall have been consummated or, substantially concurrently with the incurrence (or continuation) of the Tranche B-7 Term Loans, shall be consummated.

The Administrative Agent shall notify the Borrower and the Tranche B-7 Lenders of the Amendment Effective Date and such notice shall be conclusive and binding.

SECTION 6. Effect of Refinancing Amendment.

(a) Except as expressly set forth herein, this Refinancing Amendment shall

not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or Agents under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of the Credit Agreement or of any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the

Borrower to a consent to, or a waiver, amendment, modification or other change of, any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other Loan Document in similar or different circumstances.

(b) From and after the Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import, and each reference to the “Credit Agreement” in any other Loan Document shall be deemed a reference to the Credit Agreement as amended hereby. This Refinancing Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.

SECTION 7. GOVERNING LAW. THIS REFINANCING AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SECTION 8. Costs and Expenses. The Borrower agrees to reimburse each of the Lead Arranger and the Administrative Agent, in each case, promptly after receipt of a written request for such Person’s documented and reasonable out-of-pocket expenses in connection with this Refinancing Amendment, including the reasonable fees, charges and disbursements of counsel for the Lead Arranger and the Administrative Agent.

SECTION 9. Counterparts. This Refinancing Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by facsimile or other electronic imaging means of an executed counterpart of a signature page to this Refinancing Amendment shall be effective as delivery of an original executed counterpart of this Refinancing Amendment.

SECTION 10. Headings. Section headings herein are included for convenience of reference only and shall not affect the interpretation of this Refinancing Amendment.

[ Remainder of page intentionally left blank ]

IN WITNESS WHEREOF, the parties hereto have caused this Incremental Amendment to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above.



WINDSTREAM SERVICES, LLC,
as the Borrower
By:	/s/Christie Grumbos
Name:	Christie Grumbos
Title:	SVP, Treasurer

[Signature page to Tranche B-7 Refinancing Amendment]



JPMORGAN CHASE BANK, N.A ., as
Administrative Agent
By:	/s/Davide Migliardi
Name:	Davide Migliardi
Title:	Vice President

[Signature page to Tranche B-7 Refinancing Amendment]



CREDIT SUISSE AG, CAYMAN ISLANDS
BRANCH,
as Additional Tranche B-7 Lender
By:	/s/Vipul Dhadda
Name:	Vipul Dhadda
Title:	Authorized Signatory



By:	/s/Joan Park
Name:	Joan Park
Title:	Authorized Signatory

[Signature page to Tranche B-7 Refinancing Amendment]

Lender Signature Pages on File with the Administrative Agent

ANNEX I

LENDER ADDENDUM TO

TRANCHE B-7 REFINANCING AMENDMENT

This Lender Addendum (this “ Lender Addendum ”) is referred to in, and is a signature page to, the Tranche B-7 Refinancing Amendment (the “ Refinancing Amendment ”) to the Sixth Amended and Restated Credit Agreement originally dated as of July 17, 2006 and amended and restated as of April 24, 2015 (as further amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”), among Windstream Services LLC, a Delaware limited liability company (the “ Borrower ”), JPMorgan Chase Bank, N.A., as administrative agent and collateral agent (in such capacity, the “ Administrative Agent ”), the lenders party thereto and the other agents parties thereto. Capitalized terms used but not defined in this Lender Addendum have the meanings assigned to such terms in the Refinancing Amendment.

By executing this Lender Addendum as a Continuing Tranche B-7 Lender, the undersigned institution agrees (A) to the terms of the Refinancing Amendment and the Credit Agreement as amended thereby and (B) on the terms and subject to the conditions set forth in the Refinancing Amendment and the Credit Agreement as amended thereby, to continue all of its Existing Tranche B-5 Term Loans (or such lesser amount as the Lead Arranger may allocate) as Continued Tranche B-7 Term Loans on the Amendment Effective Date. The undersigned institution hereby makes the election to (A) convert all of its Existing Tranche B-5 Term Loans (or such lesser amount as the Lead Arranger may allocate) into Continued Tranche B-7 Term Loans pursuant to a cashless conversion on the Amendment Effective Date or (B) have all of its Existing Tranche B-5 Term Loans (or such lesser amount as the Lead Arranger may allocate) repaid on the Amendment Effective Date and fund in or purchase for cash a like amount of Tranche B-7 Term Loans pursuant to procedures specified by the Administrative Agent.

¨ OPTION A - Cashless Conversion Election

¨ OPTION B - Cash Funding Election



		Principal Amount of Existing Tranche B-5 Term Loans held:
	$

Name of Institution:




Executing as a Continuing Tranche B-7 Lender
	By:

	Name:
	Title:

For any institution requiring a second signature line:

	By:

	Name:
	Title:

ANNEX II

AMENDMENTS TO CREDIT AGREEMENT

[Changed pages to Credit Agreement follow]

SIXTH AMENDED AND RESTATED CREDIT AGREEMENT

originally dated as of July 17, 2006

as amended and restated as of April 24, 2015

by and among

WINDSTREAM SERVICES, LLC,

formerly known as WINDSTREAM CORPORATION,

The Lenders Party Hereto

and

JPMORGAN CHASE BANK, N.A.,

as Administrative Agent and Collateral Agent,

and

BANK OF AMERICA, N.A.

BARCLAYS BANK PLC

BNP PARIBAS

CITIBANK, N.A.

COBANK, ACB

CREDIT SUISSE SECURITIES (USA) LLC

DEUTSCHE BANK SECURITIES INC.

GOLDMAN SACHS BANK USA

MORGAN STANLEY SENIOR FUNDING, INC.

MUFG UNION BANK, N.A.

ROYAL BANK OF CANADA

SUNTRUST BANK

WELLS FARGO BANK, N.A.,

as Co-Documentation Agents

J.P. MORGAN SECURITIES LLC

JPMORGAN CHASE BANK, N.A.

as Bookrunner and Lead Arranger

BARCLAYS BANK PLC

BNP PARIBAS SECURITIES CORP.

CITIGROUP GLOBAL MARKETS INC.

COBANK, ACB

CREDIT SUISSE SECURITIES (USA) LLC

DEUTSCHE BANK SECURITIES INC.

GOLDMAN SACHS BANK USA

MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED

MORGAN STANLEY SENIOR FUNDING, INC.

MUFG UNION BANK, N.A.

ROYAL BANK OF CANADA

SUNTRUST ROBINSON HUMPHREY, INC.

WELLS FARGO SECURITIES LLC

as Joint Bookrunners and Joint Arrangers

unit or line of business of, another Person, whether or not involving a merger or consolidation with such other Person. “ Acquire ” has a meaning correlative thereto.

“ Act ” has the meaning specified in Section 9.13.

“ Additional Lender ” means, at any time, any bank, other financial institution or institutional investor that, in any case, is not at the relevant time of determination an existing Lender and that agrees to provide any portion of any (a) Incremental Loans in accordance with Section 2.01(i) or (b) Credit Agreement Refinancing Indebtedness pursuant to a Refinancing Amendment in accordance with Section 2.19.

“ Additional Tranche B-7 Lender ” has the meaning assigned to such term in the Tranche B-7 Refinancing Amendment.

“ Adjusted LIBO Rate ” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum (rounded upwards, if necessary, to the next 1/100 of 1%) equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“ Administrative Agent ” means JPMorgan Chase Bank, N.A., in its capacity as administrative agent for the Lenders hereunder and under the other Loan Documents, and its permitted successors in such capacity as provided in Article 8.

“ Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“ Affiliate ” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“ Affiliated Assignee ” has the meaning specified in Section 9.04(b)(ii)(B).

“ Affiliated Revolving Lender ” has the meaning specified in Section 9.04(b)(ii)(B).

“ Agents ” means the Administrative Agent, the Collateral Agent, the Co-Documentation Agents, the Lead Arranger and the Joint Bookrunners and Arrangers.

“ Agreement ”, when used with reference to this Agreement, means this Amended Agreement, as amended by the Tranche B-6 Incremental Amendment, the Tranche B-6 Refinancing and Incremental Amendment and , the Second Tranche B-6 Incremental Amendment and the Tranche B-7 Refinancing Amendment and as further amended, restated, amended and restated, supplemented or otherwise modified from time to time.

“ All-in Yield ” means, as to any Indebtedness on any date of determination, the yield thereon, based on the interest rate applicable to such Indebtedness on such date, including margin, original issue discount, upfront fees (with original issue discount and upfront fees being equated to interest margins for purposes of determining the yield on any Indebtedness assuming a four-year weighted average life), or otherwise; provided that “All-in Yield” shall not include arrangement, underwriting, structuring or similar fees paid to arrangers or fees that are not paid ratably to the market for such Indebtedness.

“ Alternate Base Rate ” means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of

“ Applicable Net Proceeds ” has the meaning assigned to such term in Section 2.10(c)(ii).

“ Applicable Rate ” means, for any day and for any Loan, the following percentages per annum set forth opposite such Loans:



Class	Eurodollar Loans	ABR Loans
Revolving Loans	Applicable Leverage-Based Rate for Eurodollar Revolving Loans	Applicable Leverage-Based Rate for ABR Revolving Loans
Tranche B 5 Term	2.75%	1.75%
Loan
Tranche B-6 Term Loan	4.00%	3.00%
Tranche B-7 Term	3.25%	2.25%
Loan
Incremental Loan	Rate specified in the Incremental Facility Amendment

“ Applicable Transaction ” has the meaning specified in the definition of “Pro Forma Basis”.

“ Approved Counterparty ” means (a) any domestic financial holding company having capital and surplus in excess of $500,000,000 and the commercial paper of which is rated at least P-2 or the equivalent thereof by Moody’s or at least A-2 or the equivalent thereof by S&P or (b) any Affiliate of a Person meeting the requirements of clause (a) of this definition.

“ Approved Counterparty Offer ” has the meaning specified in Section 2.10(k)(ii).

“ Approved Counterparty Offer Conditions ” has the meaning specified in Section 2.10(k)(ii).

“ Approved Fund ” has the meaning assigned to such term in Section 9.04(b).

“ Asset Disposition ” means (a) any sale, lease, transfer or other disposition (including pursuant to a Sale and Leaseback Transaction) of any assets of any Wireline Company pursuant to Section 6.05 (h), (k), (n) (but, in the case of clause (n), only to the extent (i) such assets were acquired after the Sixth ARCA Effective Date (including via the acquisition by a Wireline Company of any Person owning such assets) (any such acquisition of assets, an “ Applicable Asset Acquisition ”) with the proceeds of Indebtedness (the “ Applicable Indebtedness ”) or (ii) the proceeds of the sale of such assets would be required to be applied to prepay, repay or repurchase (or to offer to prepay, repay or repurchase) any Restricted Indebtedness (other than the Applicable Indebtedness) (such disposition under clause (i) or clause (ii), an “ Applicable Asset Disposition ”)) or (o), (b) the issuance by any Subsidiary of any Equity Interest, or (c) the receipt by any Subsidiary of any capital contribution, other than (x) any such issuance of an Equity Interest to, or the receipt of any such capital contribution from, another Wireline Company and (y) directors’ qualifying shares and shares issued to foreign nationals to the extent required by applicable law; provided that, for purposes of Section 2.10(c), any single transaction or

(b) the first day on which a majority of the members of the board of directors of Holdco or the Borrower are not Continuing Directors; or

(c) Holdco ceases to be the Beneficial Owner, directly or indirectly, of 100% of the outstanding Equity Interests of the Borrower.

“ Charges ” has the meaning specified in Section 9.14.

“ Class ” (a) when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Tranche B- 5 T erm Loans, Tranche B 6 Term Loans , Tranche B-7 Term Loans, Incremental Loans, Other Revolving Loans or Other Term Loans, (b) when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, Tranche B-6 Commitment, Tranche B-7 Commitment, commitments in respect of any Incremental Facility, Other Revolving Commitments or Other Term Commitments and (c) when used in reference to any Lender, refers to whether such Lender is a Revolving Lender, Tranche B - 5 6 Lender, Tranche B- 6 7 Lender or Additional Lender.

“ CLO ” has the meaning specified in Section 9.04(b).

“ Co-Documentation Agents ” means (including with respect to the Tranche B-6 Term Loans made (or continued) on the Tranche B-6 Refinancing and Incremental Amendment Effective Date) Bank of America, N.A., Barclays Bank PLC, BNP Paribas, Citibank, N.A., CoBank, ACB, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc., MUFG Union Bank, N.A., Royal Bank of Canada, SunTrust Bank and (other than with respect to the Tranche B-6 Term Loans made (or continued) on the Tranche B-6 Refinancing and Incremental Amendment Effective Date) Wells Fargo Bank, N.A. In addition, and notwithstanding the foregoing, “ Co-Documentation Agents ” means, (i) with respect to the Tranche B-6 Term Loans made on the Second Tranche B-6 Incremental Amendment Effective Date, the institutions listed in the preceding sentence other than Goldman Sachs Bank USA and Wells Fargo Bank, N.A. and (ii) with respect to the Tranche B-7 Term Loans, (A) JPMorgan Chase Bank, N.A. and (B) the institutions listed in the preceding sentence other than Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA and Wells Fargo Bank, N.A.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time. “ Collateral ” means any and all “Collateral”, as defined in any applicable Security Document.

“ Collateral Agent ” means JPMorgan Chase Bank, N.A, in its capacity as collateral agent for the Secured Parties hereunder and under the other Loan Documents, and its permitted successors in such capacity as provided in Article 8.

“ Collateral and Guarantee Requirement ” means at any time the requirement that:

(a) the Collateral Agent shall have received from each Loan Party either (i) counterparts of the Guarantee Agreement and the Security Agreement, duly executed and delivered on behalf of such Loan Party, or (ii) in the case of any Person that becomes a Loan Party after the Sixth ARCA Effective Date, supplements to the Guarantee Agreement and the Security Agreement, in the form specified therein, duly executed and delivered on behalf of such Person (within the time frames required thereby);

(b) all outstanding Equity Interests in and all outstanding promissory notes issued by any Wireline Company owned by or on behalf of any Loan Party shall have been pledged pursuant to the

Security Agreement (except that (i) the Loan Parties shall not be required to pledge more than 66% of the outstanding voting Equity Interests in any Foreign Subsidiary or any Domestic Subsidiary substantially all of whose assets consist of Equity Interests in Foreign Subsidiaries, and (ii) no Equity Interests in any Person held by a Foreign Subsidiary shall be required to be pledged) and the Collateral Agent shall have received all certificates or other instruments representing such Equity Interests (except to the extent such Equity Interests are not represented by certificates or other instruments) and Indebtedness, together with undated stock powers or other instruments of transfer with respect thereto endorsed in blank;

(c) no (x) Foreign Subsidiary or (y) Domestic Subsidiary substantially all of whose assets consist of Equity Interests in Foreign Subsidiaries shall be required to guarantee or support any obligation of any Loan Party;

(d) no Lien or similar interest shall be granted, directly or indirectly, in the assets of any Foreign Subsidiary;

(e) except as otherwise provided in the Security Agreement, all documents and instruments, including Uniform Commercial Code financing statements, required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create the Liens intended to be created by the Security Documents and perfect or record such Liens to the extent, and with the priority, required by this Agreement and the Security Agreement, shall have been (or shall have made arrangements to provide for) filed, registered or recorded or delivered to the Collateral Agent for filing, registration or recording;

(f) each Loan Party shall have obtained all consents and approvals required to be obtained by it in connection with the execution and delivery of all Security Documents to which it is a party, the performance of its obligations thereunder and the granting of the Liens granted by it thereunder, in each case to the extent required by this Agreement and the Security Documents; and

(g) each Loan Party shall have taken all other action required to perfect, register and/or record the Liens granted by it thereunder, in each case to the extent required by this Agreement and the Security Documents.

“ Collateral Support Parties ” means (a) the Loan Parties and (b) each other Subsidiary (i) that is not required to Guarantee the Facility Obligations pursuant to the Loan Documents (other than any Insignificant Subsidiary) and (ii) all Equity Interests in which, and all Indebtedness owing to any Loan Party of which, shall have been pledged and delivered to the Collateral Agent in accordance with the Collateral and Guarantee Requirement.

“ Commitment ” means a Revolving Commitment, Tranche B-6 Commitment, Tranche B-7 Commitment, Other Revolving Commitment, Other Term Commitment or a commitment to make Incremental Loans (as the context may require). As of the Sixth ARCA Effective Date, no Commitments other than Revolving Commitments are in effect.

“ Commitment Fee Rate ” means, for any day, a rate per annum equal to (a) if the Leverage Ratio on the most recent determination date is 3.00 to 1.0 or higher, 0.50% and (b) otherwise, 0.40%. For purposes of this definition, (x) the Leverage Ratio shall be determined as of the end of each Fiscal Quarter based on the Borrower’s consolidated financial statements delivered pursuant to Section 5.01(a) or 5.01(b) and (y) each change in the Commitment Fee Rate resulting from a change in the Leverage Ratio shall be effective during the period from and including the day when the Administrative Agent receives the financial statements indicating such change to but excluding the effective date of the next such change; provided that, at the option of the Administrative Agent (or at the request of the Required

“ Consolidated Debt ” means, as of any date, the principal amount of Indebtedness of the Wireline Companies outstanding as of such date, determined on a consolidated basis; provided that, for purposes of this definition, the term “Indebtedness” will not include (i) contingent obligations of any Wireline Company as an account party or applicant in respect of any letter of credit or letter of guaranty, unless such letter of credit or letter of guaranty supports an obligation that constitutes Indebtedness of a Person other than a Wireline Company, (ii) any obligation constituting Indebtedness pursuant to clause (j) of the definition thereof, (iii) any Earn-out Obligation or obligation in respect of purchase price adjustment permitted pursuant to Section 6.01(a)(xvi) and (iv) any bonds or similar instruments in the nature of surety, performance, appeal or similar bonds.

“ Consolidated Secured Debt ” means, as of any date, the principal amount of Indebtedness of the Wireline Companies outstanding as of such date, determined on a consolidated basis, that is secured by a Lien on the assets of any such Wireline Company; provided that, for purposes of this definition, the term “Indebtedness” will not include (i) contingent obligations of any Wireline Company as an account party or applicant in respect of any letter of credit or letter of guaranty, unless such letter of credit or letter of guaranty supports an obligation that constitutes Indebtedness of a Person other than a Wireline Company, (ii) any obligation constituting Indebtedness pursuant to clause (j) of the definition thereof, (iii) any Earn-out Obligation or obligation in respect of purchase price adjustment permitted pursuant to Section 6.01(a)(xvi) and (iv) any bonds or similar instruments in the nature of surety, performance, appeal or similar bonds.

“ Continuing Directors ” means, as of any date of determination, any member of the board of directors of the Borrower who:

(a) was a member of such board or directors on the Sixth ARCA Effective Date; or

(b) was nominated for election or elected to such board of directors with the approval of a majority of the Continuing Directors who were members of such board of directors at the time of such nomination or election.

“ Continuing Tranche B-6 Lender ” has the meaning assigned to such term in the Tranche B-6 Refinancing and Incremental Amendment.

“ Continuing Tranche B-7 Lender ” has the meaning assigned to such term in the Tranche B-7 Refinancing Amendment.

“ Control ” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by agreement or otherwise. “ Controlling ” and “ Controlled ” have meanings correlative thereto.

“ Corresponding Commitment ” has the meaning specified in Section 9.04(b)(ii)(B).

“ Credit Agreement Refinancing Indebtedness ” shall mean Indebtedness constituting Other Revolving Commitments or Other Term Commitments incurred pursuant to a Refinancing Amendment, in each case, issued, incurred or otherwise obtained (including by means of the extension or renewal of existing Indebtedness) in exchange for, or to extend, refund, renew, replace or refinance, in whole or part, existing Term Loans, existing Revolving Loans or existing Revolving Commitments, (including any successive Credit Agreement Refinancing Indebtedness) (“ Refinanced Debt ”); provided that (i) such exchanging, extending, renewing, replacing or refinancing Indebtedness (including, if such Indebtedness includes any Other Revolving Commitments, the unused portion of such Other Revolving Commitments) is in an original aggregate principal amount (or accreted value, if applicable) not greater than the

“ Events of Default ” has the meaning assigned to such term in Article 7.

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules of the SEC thereunder.

“ Excluded RUS Grant Assets ” means any RUS Grant Funds, any RUS Pledged Deposit Account (as defined in the Security Agreement), any assets purchased with RUS Grant Funds and any proceeds of the foregoing.

“ Excluded Swap Obligations ” means, with respect to any Guarantor, any Swap Obligation if, and to the extent that, all or a portion of the Guarantee of such Guarantor of, or the grant by such Guarantor of a security interest to secure, such Swap Obligation (or any Guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Guarantor’s failure for any reason to constitute an “eligible contract participant” as defined in the Commodity Exchange Act and the regulations thereunder at the time the Guarantee of such Guarantor or the grant of such security interest becomes effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such Guarantee or security interest is or becomes illegal.

“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient: (a) Taxes imposed on or measured by net income (however denominated), franchise Taxes and branch profits Taxes, in each case, (i) imposed as a result of such Recipient’s being organized under the laws of, or having its principal office or, in the case of any Lender, its applicable lending office located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (ii) that are Other Connection Taxes, (b) in the case of a Lender (other than an assignee pursuant to a request by the Borrower under Section 2.18(b)), any U.S. federal withholding Tax that is imposed on amounts payable to such Lender pursuant to a law in effect at the time such Lender becomes a party to this Agreement (or designates a new lending office), except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from the Borrower with respect to such withholding Tax pursuant to Section 2.16, or (c) Taxes attributable to such Recipient’s failure to comply with Section 2.16(f) and (d) any U.S. federal withholding taxes imposed pursuant to FATCA.

“ Existing Incremental Loan Maturity Date ” has the meaning specified in Section 2.07(d)(i).

“ Existing Revolving Maturity Date ” has the meaning specified in Section 2.07(d)(i).

“ Existing Term Loan Maturity Date ” has the meaning specified in Section 2.07(d)(i).

“ Existing Tranche B-5 Term Loan ” has the meaning assigned to such term in the Tranche B-7 Refinancing Amendment.

“ Existing Tranche B-6 Term Loan ” has the meaning assigned to such term in the Tranche B-6 Refinancing and Incremental Amendment.

“ Extended Incremental Loan Maturity Date ” has the meaning specified in Section 2.07(d)(ii).

“ Extended Revolving Maturity Date ” has the meaning specified in Section 2.07(d)(ii).

(d) all dividends, whether paid or accrued and whether or not in cash, on any series of

Disqualified Stock of such Person, other than dividends on Equity Interests payable solely in Equity Interests (other than Disqualified Stock) of such Person or to such Person or to a subsidiary of such Person,

in each case determined on a consolidated basis in accordance with GAAP; provided , however , that any interest expense, commissions, discounts or fees incurred by a Special Purpose Receivables Subsidiary under a Permitted Receivables Financing shall not constitute Interest Expense for purposes of this Agreement.

“ Interest Payment Date ” means (a) with respect to any ABR Loan, the last day of each March, June, September and December and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

“ Interest Period ” means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing and ending on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter (or twelve months thereafter if, at the time of the relevant borrowing or conversion or continuation thereof, all Lenders participating therein agree to make an interest period of such duration available), as the Borrower may elect; provided that (i) if any Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless, in the case of a Eurodollar Borrowing only, such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any Interest Period pertaining to a Eurodollar Borrowing that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period, (iii) the initial Interest Period with respect to any Incremental Term Loans made following the Sixth ARCA Effective Date shall end on such date as agreed between the Borrower and the Administrative Agent and, (iv) the initial Interest Period with respect to the Tranche B-6 Term Loans made (or continued) on the Tranche B-6 Refinancing and Incremental Amendment Effective Date shall end on such date as agreed between the Borrower and the Administrative Agent and (v) the initial Interest Period with respect to the Tranche B-7 Term Loans made (or continued) on the Tranche B-7 Refinancing Amendment Effective Date shall end on such date as agreed between the Borrower and the Administrative Agent. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“ Interpolated Rate ” means, for any Interest Period, the rate per annum (rounded to the same number of decimal places as the LIBO Screen Rate) determined by the Administrative Agent (which determination shall be conclusive and binding absent manifest error) to be equal to the rate that results from interpolating on a linear basis between: (a) the LIBO Screen Rate for the longest period (for which the LIBO Screen Rate is available) that is shorter than the Impacted Interest Period; and (b) the LIBO Screen Rate for the shortest period (for which the LIBO Screen Rate is available) that exceeds the Impacted Interest Period, in each case, as of approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period.

“ Investment ” has the meaning set forth in Section 6.04.

“ Issuing Bank ” means, as the context may require, JPMorgan Chase Bank, N.A., or, at any time and from time to time, up to three other Revolving Lenders that are designated in writing by the Borrower, are reasonably acceptable to the Administrative Agent, and that agree to issue one or more Letters of Credit hereunder and to report in writing to the Administrative Agent all activity with respect to such Letters of Credit in a manner reasonably satisfactory to the Administrative Agent, in each case in its capacity as an issuer of Letters of Credit hereunder, and its successors in such capacity as provided in Section 2.04(i). Any Issuing Bank may, in its discretion, arrange for one or more Letters of Credit to be issued by Affiliates of such Issuing Bank, in which case the term “ Issuing Bank ” shall include any such Affiliate with respect to Letters of Credit issued by such Affiliate.

“ Joint Bookrunners and Arrangers ” means (including with respect to the Tranche B-6 Term Loans made (or continued) on the Tranche B-6 Refinancing and Incremental Amendment Effective Date) Barclays Bank PLC, BNP Paribas Securities Corp., Citigroup Global Markets Inc., CoBank, ACB, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley Senior Funding, Inc., MUFG Union Bank, N.A., Royal Bank of Canada, SunTrust Robinson Humphrey, Inc. and (other than with respect to the Tranche B-6 Term Loans made (or continued) on the Tranche B-6 Refinancing and Incremental Amendment Effective Date) Wells Fargo Securities LLC. In addition, and notwithstanding the foregoing, “ Joint Bookrunners and Arrangers ” means, (i) with respect to the Tranche B-6 Term Loans made on the Second Tranche B-6 Incremental Amendment Effective Date, the institutions listed in the preceding sentence other than Goldman Sachs Bank USA and Wells Fargo Securities LLC. and (ii) with respect to the Tranche B-7 Term Loans, (A) JPMorgan Chase Bank, N.A. and (B) the institutions listed in the preceding sentence other than Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA and Wells Fargo Securities LLC.

“ Knowledge ” means the actual knowledge of a Responsible Officer.

“ Landlord ” has the meaning given such term in the Master Lease.

“ Latest Maturity Date ” means, at any date of determination, the last to occur of (i) the latest stated final maturity date of any Term Loans, (ii) the stated final maturity date for any Other Term Loan or Other Revolving Commitment and (iii) the Revolving Maturity Date, in each case of clauses (i), (ii) and (iii), as extended for any Lender in accordance with this Agreement from time to time.

“ LC Disbursement ” means a payment made by an Issuing Bank pursuant to a Letter of Credit.

“ LC Exposure ” means, at any time, the sum of (a) the aggregate undrawn amount of all outstanding Letters of Credit at such time plus (b) the aggregate amount of all LC Reimbursement Obligations at such time. The LC Exposure of any Revolving Lender at any time shall be its Revolving Percentage of the total LC Exposure at such time.

“ LC Reimbursement Obligations ” means, at any time, all obligations of the Borrower to reimburse the Issuing Bank for amounts paid by it in respect of drawings under Letters of Credit, including any portion of such obligations to which Lenders have become subrogated by making payments to the Issuing Bank pursuant to Section 2.04(e).

“ Lead Arranger ” means J.P. Morgan(i) with respect to the Revolving Loans and the Tranche B-6 Term Loans, JPMorgan Chase Bank, N.A. and (ii) with respect to the Tranche B-7 Term Loans, Credit Suisse Securities (USA) LLC.

“ Lender Group ” has the meaning specified in Section 9.16.

“ Lender Group Member ” has the meaning specified in Section 9.16.

“ Lender Parties ” means the Lenders, the Issuing Banks and the Agents.

“ Lenders ” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party to this Agreement pursuant to an Assignment and Assumption and the terms and provisions in Section 9.04, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption and the terms and provisions in Section 9.04.

“ Letter of Credit ” means any letter of credit issued pursuant to this Agreement.

“ Leverage Ratio ” means, on any date of determination, the ratio of (a) Consolidated Debt as of such day to (b) Consolidated Adjusted EBITDA for the period of four consecutive Fiscal Quarters ended on such day (or, in the case of any calculation to be made on a Pro Forma Basis, if such day is not the last day of a Fiscal Quarter, ended on the last day of the Fiscal Quarter most recently ended for which financial statements have been delivered or were required to be delivered pursuant to Section 5.01(a) or (b) before such day).

“ LIBO Rate ” means, with respect to any Eurodollar Borrowing for any Interest Period, the London interbank offered rate as administered by ICE Benchmark Administration (or any other Person that takes over the administration of such rate) for U.S. Dollars for a period equal in length to such Interest Period as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as selected by the Administrative Agent in its reasonable discretion; in each case the “ LIBO Screen Rate ”) at approximately 11:00 a.m., London time, two Business Days prior to the commencement of such Interest Period; provided that if the LIBO Screen Rate shall be less than zero, such rate shall be deemed to be zero for the purposes of this Agreement; provided further that if the LIBO Screen Rate shall not be available at such time for such Interest Period (an “ Impacted Interest Period ”) then the LIBO Rate shall be the Interpolated Rate; provided that if any Interpolated Rate shall be less than zero, such rate shall be deemed to be zero for purposes of this Agreement. Notwithstanding the foregoing, the LIBO Rate with respect to the Tranche B- 5 6 Term Loans and the Tranche B- 6 7 Term Loans shall not be less than 0.75% per annum.

“ LIBO Screen Rate ” has the meaning specified in the definition of “LIBO Rate”.

“ Lien ” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

“ Loan Documents ” means this Agreement, the Sixth Amendment and Restatement Agreement, any Incremental Facility Amendment, any Refinancing Amendment and the Security Documents.

“ Loan Parties ” means the Borrower and the Guarantors.

“ Tenant ” has the meaning given such term in the Master Lease.

“ Term Lender ” means a Tranche B-56 Lender or a Tranche B-67 Lender.

“ Term Loan Extension Effective Date ” has the meaning specified in Section 2.07(d)(ii).

“ Term Loans ” means a Tranche B-56 Term Loan or a Tranche B-67 Term Loan.

“ Third Amendment and Restatement Agreement ” means the Amendment and Restatement Agreement dated as of February 23, 2012 among the Borrower and certain Agents and Lenders party thereto.

“ Third ARCA ” means the Third Amended and Restated Credit Agreement dated as of February 23,2012 in the form attached as Exhibit A to the Third Amendment and Restatement Agreement, as amended and as in effect from time to time before the Fourth ARCA Effective Date.

“ Third ARCA Effective Date ” has the meaning assigned thereto in Section 5 of the Third Amendment and Restatement Agreement.

“ Total Assets ” means the total assets of the Borrower and its Subsidiaries on a consolidated basis, as shown on the most recent balance sheet of the Borrower prepared in conformity with GAAP but excluding the value of any outstanding Investments made pursuant to Section 6.04(w).

“ Tranche B-5 Lender ” means a Lender with an outstanding Tranche B-5 Term Loan.

“ Tranche B-5 Maturity Date ” means August 8, 2019.

“ Tranche B-5 Term Loan ” means a Loan made pursuant to Section 2.01(g)(iii) of the Fifth ARCA.

“ Tranche B-6 Commitment ” means an Initial Tranche B-6 Commitment or a Second Tranche B-6 Commitment, as the case may be.

“ Tranche B-6 Incremental Amendment ” means the Tranche B-6 Incremental Amendment to this Agreement, dated as of March 29, 2016, among the Borrower, the Administrative Agent and the Tranche B-6 Lenders party thereto.

“ Tranche B-6 Lender ” means a Lender with a Tranche B-6 Commitment or an outstanding Tranche B-6 Term Loan.

“ Tranche B-6 Maturity Date ” means March 29, 2021; provided if the Revolving Commitments and Revolving Loans hereunder have not had their maturity extended (or been refinanced) prior to April 24,2020 such that the Revolving Maturity Date (or any comparable maturity date for replacement loans and commitments) is no earlier than March 29, 2021, the Tranche B-6 Maturity Date shall be April 24, 2020; provided , further , if the 2020 Notes have not been repaid or refinanced prior to July 15, 2020 with indebtedness having a maturity date no earlier than March 29, 2021, the Tranche B-6 Maturity Date shall be July 15, 2020.

“ Tranche B-6 Prepayment Fee ” has the meaning assigned to such term in Section 2.10(g)(i).

“ Tranche B-6 Refinancing and Incremental Amendment ” means the Tranche B-6 Refinancing and Incremental Amendment to this Agreement, dated as of September 30, 2016, among the Borrower, the Administrative Agent and the Tranche B-6 Lenders party thereto.

“ Tranche B-6 Refinancing and Incremental Amendment Effective Date ” has the meaning ascribed to “Amendment Effective Date” in the Tranche B-6 Refinancing and Incremental Amendment.

“ Tranche B-6 Repricing Transaction ” means (a) any prepayment or repayment of Tranche B-6 Term Loans with the proceeds of, or any conversion of Tranche B-6 Term Loans into, any new or replacement tranche of term loans having an All-in Yield less than the All-in Yield applicable to such Tranche B-6 Term Loans the primary purpose of which is to reduce the All-in Yield of such tranche of term loans relative to the Tranche B-6 Term Loans so prepaid, repaid, converted or replaced and (b) any amendment to the Tranche B-6 Term Loans the primary purpose of which is to reduce the All-in Yield applicable to such Tranche B-6 Term Loans.

“ Tranche B-6 Term Loan ” means a Loan made pursuant to Section 2.01(g)(i).

“ Tranche B-7 Commitment ” means, with respect to each Lender, the commitment of such Lender to make a Tranche B-7 Term Loan hereunder on the Tranche B-7 Refinancing Amendment Effective Date, (x) in the case of any Additional Tranche B-7 Lender, in an amount equal to the amount set forth opposite such Lender’s name on Schedule 1 to the Tranche B-7 Refinancing Amendment under the caption “Additional Tranche B-7 Commitment”, or (y) in the case of any Continuing Tranche B-7 Lender, in (I) the amount specified in such Lender’s Lender Addendum (as defined in the Tranche B-7 Refinancing Amendment) executed in connection with the Tranche B-7 Refinancing Amendment (less the principal amount of any Non-Allocated Existing Term Loans (as defined in the Tranche B-7 Refinancing Amendment) of such Continuing Tranche B-7 Lender or (II) if such Lender has entered into one or more Assignment and Assumptions, the amount set forth for such Lender at such time in the Register maintained by the Administrative Agent pursuant to Section 9.04(b) as such Lender’s Tranche B-7 Commitment, in each case as such amount may be reduced at or prior to such time pursuant to the terms hereof. The initial aggregate amount of the Lenders’ Tranche B-7 Commitments as of the Tranche B-7 Refinancing Amendment Effective Date is $580,000,000.

“ Tranche B-7 Lender ” means a Lender with a Tranche B-7 Commitment or an outstanding Tranche B-7 Term Loan.

“ Tranche B-7 Maturity Date ” means February 17, 2024.

“ Tranche B-7 Prepayment Fee ” has the meaning assigned to such term in Section 2.10(g)(ii).

“ Tranche B-7 Refinancing Amendment ” means the Tranche B-7 Refinancing Amendment to this Agreement, dated as of February 17, 2017, among the Borrower, the Administrative Agent and the Tranche B-7 Lenders party thereto.

“ Tranche B-7 Refinancing Amendment Effective Date ” has the meaning ascribed to “ Amendment Effective Date ” in the Tranche B-7 Refinancing Amendment.

“ Tranche B-7 Repricing Transaction ” means (a) any prepayment or repayment of Tranche B-7 Term Loans with the proceeds of, or any conversion of Tranche B-7 Term Loans into, any new or replacement tranche of term loans having an All-in Yield less than the All-in Yield applicable to such Tranche B-7 Term Loans the primary purpose of which is to reduce the All-in Yield of such tranche of term loans relative to the Tranche B-7 Term Loans so prepaid, repaid, converted or replaced and (b) any

amendment to the Tranche B-7 Term Loans the primary purpose of which is to reduce the All-in Yield applicable to such Tranche B-7 Term Loans.

“ Tranche B- 6 7 Term Loan ” means a Loan made pursuant to Section 2.01(g)(ii).

“ Transaction Liens ” means the Liens on Collateral granted by the Loan Parties under the Security Documents.

“ Transition Services Agreement ” means the Transition Services Agreement dated as of April 24, 2015, the form of which is an exhibit to the Form 10.

“ Type ”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“ United States ” means the United States of America.

“ Voting Stock ” of any Person as of any date means the Equity Interests in such Person that are ordinarily entitled to vote in the election of the board of directors of such Person.

“ Weighted Average Life to Maturity ” means, when applied to any Indebtedness at any date, the number of years obtained by dividing:

(a) the sum of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by

(b) the then outstanding principal amount of such Indebtedness.

“ Wholesale Master Services Agreement ” means the Wholesale Master Services Agreement dated as of April 24, 2015, the form of which is an exhibit to the Form 10.

“ Wholly-owned ” means, with respect to any subsidiary of any Person (the “ parent ”) at any date, that securities or other ownership interests representing 100% of the Equity Interests in such subsidiary (other than directors’ qualifying shares) are, as of such date, owned, controlled or held by the parent or one or more wholly-owned subsidiaries of the parent or by the parent and one or more wholly-owned subsidiaries of the parent.

“ Wireline Companies ” means the Borrower and the Subsidiaries.

“ Wireline Licenses ” has the meaning specified in Section 3.16(a).

“ Withdrawal Liability ” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“ Write-Down and Conversion Powers ” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the

of business or division occurs (including the Propco Transactions), calculations of the Leverage Ratio and the Interest Coverage Ratio with respect to such period shall be made on a Pro Forma Basis.

ARTICLE 2

T HE C REDITS

SECTION 2.01 . Loans. (a) Revolving Commitments; Revolving Loans. Subject to the terms and conditions set forth herein, each Revolving Lender agrees to make Revolving Loans to the Borrower from time to time during the Revolving Availability Period applicable to such Revolving Lender’s Revolving Commitment in an aggregate principal amount that will not result in such Lender’s Revolving Credit Exposure exceeding such Revolving Lender’s Revolving Commitment. All Revolving Loans will be made by all Revolving Lenders in accordance with their Revolving Percentages until the Revolving Maturity Date.

(b) The Borrower hereby acknowledges and agrees that, if at any time any Person holds Separated Revolving Loans without holding the Corresponding Commitment:

(i) for the avoidance of doubt, all Revolving Loans shall be funded solely by the holders of the Corresponding Commitment, subject to Section 2.01(b)(ii); and

(ii) f or purposes of the terms “Revolving Credit Exposure” and “Revolving Percentages” as used in Section 2.01(a), such Separated Revolving Loans shall be deemed held by the Person holding the Corresponding Commitment.

(d) [Reserved] .

(e) [Reserved] .

(f) [Reserved] .

(g) (i) Tranche B-56 Term Loans. All Tranche B 5 Term Loans outstanding under the Fifth ARCA on the Sixth ARCA Effective Date shall remain outstanding hereunder on the terms set forth herein.

(ii) Tranche B 6 Term Loans .

(A) Subject to the terms and conditions set forth herein and in the Tranche B-6 Refinancing and Incremental Amendment, each Tranche B-6 Lender agrees, severally and not jointly, to make a Tranche B-6 Term Loan (which Tranche B-6 Term Loan may be a continuation of an Existing Tranche B-6 Term Loan) to the Borrower on the Tranche B-6 Refinancing and Incremental Amendment Effective Date in a principal amount equal to its Tranche B-6 Commitment as of the Tranche B-6 Refinancing and Incremental Amendment Effective Date.

B-6 Incremental Amendment Effective Date in a principal amount equal to its Tranche B-6 Commitment as of the Second Tranche B-6 Incremental Amendment Effective Date.

(ii) Tranche B-7 Term Loans . Subject to the terms and conditions set forth herein and in the Tranche B-7 Refinancing Amendment, each Tranche B-7 Lender agrees, severally and not jointly, to make a Tranche B-7 Term Loan (which Tranche B-7 Term Loan may be a continuation of an Existing Tranche B-5 Term Loan) to the Borrower on the Tranche B-7 Refinancing Amendment Effective Date in a principal amount equal to its Tranche B-7 Commitment.

(h) Outstanding Letters of Credit. All Letters of Credit outstanding under the Fifth ARCA on the Sixth ARCA Effective Date shall remain outstanding hereunder on the terms set forth herein.

(i) Incremental Loan Facility . (i) At any time and from time to time, subject to the terms and conditions set forth herein, the Borrower may, by notice to the Administrative Agent (whereupon the Administrative Agent shall promptly deliver a copy to each of the Lenders), request to add one or more additional tranches of loans (“ Incremental Loans ” and each such tranche, an “ Incremental Facility ”), provided that at the time of each such request and upon the effectiveness of each Incremental Facility Amendment, (A) no Event of Default has occurred and is continuing or shall result therefrom, (B) the Borrower shall be in compliance on a Pro Forma Basis with the covenants contained in Sections 6.13 and 6.14 recomputed as of the last day of the most-recently ended Fiscal Quarter for which financial statements have been delivered pursuant to Section 5.01(a) or (b), (C) the Secured Leverage Ratio on a Pro Forma Basis computed as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered pursuant to Section 5.01(a) or (b) shall not exceed 2.25 to 1.0, and (D) the Borrower shall have delivered a certificate of a Financial Officer to the effect set forth in clauses (A), (B) and, if applicable, (C), above, together with reasonably detailed calculations demonstrating compliance with clauses (B) and, if applicable, (C), above. Each Incremental Facility shall be in an amount that is an integral multiple of $5,000,000 and not less than $50,000,000, provided that an Incremental Facility may be in any amount less than $50,000,000 if such amount represents all the remaining availability under the Incremental Facilities pursuant to the immediately preceding sentence.

(ii) The Incremental Loans shall rank pari passu (or at the Borrower’s option, junior) in right of payment in respect of the Collateral and with the obligations in respect of the Revolving Commitments, the Tranche B -5 Term Loans, the Tranche B 6 Term Loans, the Tranche B-7 Term Loans, Incremental Loans, Other Term Loans and Other Revolving Loans. In addition, (A) any Incremental Facility providing for term loans (“ Incremental Term Loans ”) shall (1) not have a final maturity date earlier than the Latest Maturity Date then in effect or a Weighted Average Life to Maturity that is shorter than the longest remaining Weighted Average Life to Maturity of any Term Loans then outstanding; provided that any Incremental Term Loans in the form of a “Term Loan A” shall not be subject to the restrictions set forth in this clause (1); provided further that, notwithstanding the preceding proviso, no Incremental Term Loans shall have (x) a final maturity date earlier than the Revolving Maturity Date then in effect or the stated final maturity date of the Tranche B -5 Term Loans or the Tranche B 6 Term Loans or the Tranche B-7 Term Loans or (y) a Weighted Average Life to Maturity that is shorter than the remaining Weighted Average Life to Maturity of the Tranche B- 5 6 Term Loans or the Tranche B- 6 7 Term Loans and (2) for purposes of prepayments, be treated substantially the same as (and in any event no more favorably than) the Tranche B- 5 6 Term Loans and the Tranche B- 6 7 Term Loans, (B) except with respect to pricing (subject to the following proviso) and scheduled amortization (subject to the preceding clause (A)(1)) or to the extent such term is effective only after the Tranche B -5 Maturity Date, such Incremental Term Loans shall have

terms that are no more favorable to the lenders providing such Incremental Term Loans than the terms applicable to the Tranche B 5 Term Loans, provided , that if the All in Yield of any Incremental Term Loans made on or prior to the date that is 18 months following the Refinancing Amendment No. 1 Effective Date exceeds the All in Yield of any Tranche B 5 Term Loans by more than 0.50%, the Applicable Rate relating to the Tranche B 5 Term Loans shall be adjusted so that the All in Yield of such Incremental Term Loans shall not exceed the All in Yield of the Tranche B 5 Term Loans by more than 0.50%, (C) except with respect to pricing (subject to the following proviso) and scheduled amortization (subject to the preceding clause (A)(1)) or to the extent such term is effective only after the Tranche B 6 Maturity Date, such Incremental Term Loans shall have terms that are no more favorable to the lenders providing such Incremental Term Loans than the terms applicable to the Tranche B-6 Term Loans, provided , that if the All-in Yield of any Incremental Term Loans made following the Tranche B- 6 Refinancing and Incremental Amendment Effective Date exceeds the All-in Yield of any Tranche B-6 Term Loans by more than 0.50%, the Applicable Rate relating to the Tranche B-6 Term Loans shall be adjusted so that the All-in Yield of such Incremental Term Loans shall not exceed the All-in Yield of the Tranche B-6 Term Loans by more than 0.50%, (C) except with respect to pricing (subject to the following proviso) and scheduled amortization (subject to the preceding clause (A)(1)) or to the extent such term is effective only after the Tranche B-7 Maturity Date, such Incremental Term Loans shall have terms that are no more favorable to the lenders providing such Incremental Term Loans than the terms applicable to the Tranche B-7 Term Loans, provided , that if the All-in Yield of any Incremental Term Loans made following the Tranche B-7 Refinancing Amendment Effective Date exceeds the All-in Yield of any Tranche B-7 Term Loans by more than 0.50%, the Applicable Rate relating to the Tranche B-7 Term Loans shall be adjusted so that the All-in Yield of such Incremental Term Loans shall not exceed the All-in Yield of the Tranche B-7 Term Loans by more than 0.50% and (D) any Incremental Facility providing for revolving loans (1) shall not have a final maturity date, or a commitment availability period that ends, earlier than the latest Revolving Maturity Date then applicable, (2) may be effected by increasing the Revolving Commitments then having a commitment availability period ending on the latest Revolving Maturity Date and (3) shall be subject to other terms that are similar to the terms then available in the bank financing market to companies having a credit quality similar to the Borrower as determined by a Financial Officer in good faith.

(iii) Each notice from the Borrower pursuant to this Section 2.01(i) shall set forth the requested amount and proposed terms of the relevant Incremental Facility. Such Incremental Facility may be provided by any existing Lender or Additional Lender which shall be reasonably satisfactory to the Borrower and (other than in the case of existing Lenders providing only term loans under such Incremental Facility) and the Administrative Agent; provided that no existing Lender shall be obligated to provide any Incremental Loans, unless it so agrees. Any Incremental Facility will be effected pursuant to an amendment (an “Incremental Facility Amendment”) to this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, the Additional Lenders providing such Incremental Facility (and no other Lenders) and the Administrative Agent. Upon the effectiveness of any Incremental Facility Amendment, each Additional Lender shall become a “Lender” under this Agreement with respect to its obligations under such Incremental Facility, and the commitments of the Additional Lenders in respect of such Incremental Facility shall become “Commitments” hereunder; and any Incremental Loans under such Incremental Facility shall, when made, constitute “Loans” under this Agreement. In addition, any Incremental Facility Amendment may, without the consent of any Lenders other than the Additional Lenders, effect such amendments to any Loan Documents as may be necessary or appropriate, in the opinion of the Administrative Agent, to effect the provisions of this Section 2.01(i) (including to provide for voting provisions applicable to the

Additional Lenders comparable to the provisions of clause (B) of the second proviso of Section 9.02(b)). The effectiveness of an Incremental Facility Amendment shall, unless otherwise agreed to by the Administrative Agent and the Additional Lenders, be subject to the satisfaction on the date thereof (an “ Incremental Facility Closing Date ”) of each of the conditions set forth in Section 4.03 (it being understood that all references to “the date of such Borrowing” in Section 4.03 shall be deemed to refer to the Incremental Facility Closing Date). The proceeds of Incremental Loans will be used only for working capital and other general corporate purposes (including to finance Permitted Acquisitions or Capital Expenditures, in each case to the extent otherwise permitted hereunder).

This Section 2.01(i) shall supersede any provisions in Section 2.17 or 9.02 to the contrary. Within the foregoing limits and subject to the terms and conditions set forth herein, the Borrower may borrow, prepay and reborrow Revolving Loans. Amounts repaid or prepaid in respect of Term Loans may not be reborrowed.

SECTION 2.02 . Loans and Borrowings. (a) Each Revolving Loan and Term Loan shall be made as part of a Borrowing consisting of Loans of the same Class and Type made by the Lenders ratably in accordance with their respective Commitments of the applicable Class. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

(b) Subject to Section 2.13, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement.

(c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $1,000,000; provided that an ABR Revolving Borrowing may be in an aggregate amount that is equal to the entire unused balance of the total Revolving Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(e). Borrowings of more than one Type and Class may be outstanding at the same time; provided that there shall not at any time be more than a total of 20 Eurodollar Borrowings outstanding (or, if any Incremental Loans are outstanding, 30).

(d) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitledto request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect to the applicable Loan would end after the Revolving Maturity Date, the Tranche B- 5 6 Maturity Date or the Tranche B- 6 7 Maturity Date, as applicable.

SECTION 2.03 . Requests for Borrowings. To request a Revolving Borrowing or a Tranche B 6 Term Loan Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing; provided that any such notice of an ABR Revolving Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(e) may be given not later than 12:00 noon, New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall

information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the relevant Class of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) If the Borrower fails to deliver a timely Interest Election Request with respect to a

Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower (or, in the case of an Event of Default of the type described in paragraph (i) or (j) of Article 7 with respect to the Borrower, automatically), then, so long as an Event of Default has occurred and is continuing, no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing having an Interest Period longer than one month; provided that, if (x) an Event of Default of the type described in paragraph (a), (b), (i) or (j) of Article 7 has occurred and is continuing and (y) other than in the case of an Event of Default of the type described in paragraph (i) or (j) of Article 7 with respect to the Borrower, the Required Lenders have so requested, then (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid prior to or at the end of the Interest Period then applicable thereto, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of such Interest Period.

SECTION 2.07 . Termination, Reduction and Extension of Commitments and Term Loans. (a) Unless previously terminated, (i) the Revolving Commitments shall terminate on the Revolving Maturity Date, (ii) the Initial Tranche B-6 Commitments shall terminate immediately after the Borrowing of Tranche B-6 Term Loans on the Tranche B-6 Refinancing and Incremental Amendment Effective Date and, (iii) the Second Tranche B-6 Commitments shall terminate immediately after the Borrowing of Tranche B-6 Term Loans on the Second Tranche B-6 Incremental Amendment Effective Date and (iv) the Tranche B-7 Commitments shall terminate immediately after the Borrowing of the Tranche B-7 Term Loans on the Tranche B-7 Refinancing Amendment Effective Date.

SECTION 2.08 . Repayment of Loans; Evidence of Debt. (a) The Borrower hereby unconditionally promises to pay to the Administrative Agent (i) for the account of each Revolving Lender the then unpaid principal amount of such Lender’s Revolving Loans on the Revolving Maturity Date and (ii) for the account of each Term Lender the then unpaid principal amount of such Lender’s Term Loans as provided in Section 2.09.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Class and Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be, absent manifest error, prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrower to repay the Loans in accordance with the terms of this Agreement.

(e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent; provided that, in order for any such promissory note to be delivered on the Sixth ARCA Effective Date, the Tranche B-6 Refinancing and Incremental Amendment Effective Date or, the Second Tranche B-6 Incremental Amendment Effective Date or the Tranche B-7 Refinancing Amendment Effective Date, the request therefor shall be delivered no later than two Business Days prior to the Sixth ARCA Effective Date, the Tranche B-6 Refinancing and Incremental Amendment Effective Date or, the Second Tranche B-6 Incremental Amendment Effective Date or the Tranche B-7 Refinancing Amendment Effective Date, as applicable. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory notes in such form payable to the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

SECTION 2.09 . Scheduled Amortization of Term Loans. (a) Subject to adjustment pursuant to Section 2.09(c), the Borrower shall repay (i) Tranche B -5 Term Loans (A) on the last day of each Fiscal Quarter ending on or after M arc h 31, 2014 and prior to the Tranche B 5 Maturity Date in an aggregate principal amount equal to 0.25% of the initial principal amount of Tranche B 5 Term Loans and (B) on the Tranche B 5 Maturity Date in an aggregate principal amount equal to the principal amount of Tranche B 5 Term Loans then outstanding and (ii) Tranche B 6 Term Loans (A) on the last day of each Fiscal Quarter ending on or after September 30, 2016 and prior to the Tranche B-6 Maturity Date in an aggregate principal amount equal to 0.25% of the aggregate principal amount of Tranche B-6 Term Loans outstanding on the Second Tranche B-6 Incremental Amendment Effective Date (after giving effect to the Second Tranche B-6 Incremental Amendment) and (B) on the Tranche B-6 Maturity Date in an aggregate principal amount equal to the principal amount of Tranche B-6 Term Loans then outstanding. and (ii) Tranche B-7 Term Loans (A) on the last day of each Fiscal Quarter ending on or after March 31, 2017 and prior to the Tranche B-7 Maturity Date in an aggregate principal

amount equal to 0.25% of the aggregate principal amount of Tranche B-7 Term Loans outstanding on the Tranche B-7 Refinancing Amendment Effective Date (after giving effect to the Tranche B-7 Refinancing Amendment) and (B) on the Tranche B-7 Maturity Date in an aggregate principal amount equal to the principal amount of Tranche B-7 Term Loans then outstanding.

(b) To the extent not previously paid, (i) all Tranche B-5 Term Loans shall be due and payable on the Tranche B 5 Maturity Date and (ii) all Tranche B 6 Term Loans shall be due and payable on the Tranche B-6 Maturity Date and (ii) all Tranche B-7 Term Loans shall be due and payable on the Tranche B-7 Maturity Date.

(c) Any prepayment of Term Loans of any Class will be applied to reduce the subsequent scheduled repayments of the Term Loans of such Class to be made pursuant to this Section, in the case of mandatory prepayments, in direct order of maturity, and in the case of voluntary prepayments, ratably.

(d) Before repaying any Term Loans of any Class pursuant to this Section, the Borrower shall select the Borrowing or Borrowings of the applicable Class to be repaid and shall notify the Administrative Agent by telephone (confirmed by telecopy) of such selection not later than 11:00 a.m., New York City time, three Business Days before the scheduled date of such repayment. Each such repayment of a Borrowing shall be applied ratably to the Loans included in such Borrowing and shall be accompanied by accrued interest on the amount repaid.

SECTION 2.10 . Optional and Mandatory Prepayment of Loans. (a) Optional Prepayments . The Borrower shall have the right at any time and from time to time to prepay any Borrowing in whole or in part without premium or penalty but subject to Section 2.15 and the requirements of this Section.

(a) [Reserved].

(b) Asset Dispositions .

(i) Subject to Section 2.10(c)(iii) and Section 2.10(j), within five Business Days after any Net Proceeds are received by or on behalf of any Wireline Company in respect of any Asset Disposition other than an Applicable Asset Disposition, the Borrower shall prepay Term Borrowings in an aggregate amount equal to such Net Proceeds.

(ii) Subject to Section 2.10(c)(iii) and Section 2.10(j), within five Business Days after any Net Proceeds of an Applicable Asset Disposition (any such Net Proceeds, “ Applicable Net Proceeds ”) are received by or on behalf of any Wireline Company, the Borrower shall prepay Term Borrowings in an aggregate amount equal to (A) if and to the extent such Applicable Net Proceeds are otherwise required to be applied to prepay, repay or repurchase (or to offer to prepay, repay or repurchase) any Restricted Indebtedness (other than the Applicable Indebtedness), the amount of such Applicable Net Proceeds required to be so applied; and (B) without duplication of any amounts described in clause (A), an amount equal to the Financing Percentage times such Applicable Net Proceeds; provided that solely with respect to this Section 2.10(c)(ii)(B), the Wireline Companies may, not later than five Business Days following the receipt of such Applicable Net Proceeds, apply up to the Financing Percentage times such Applicable Net Proceeds to repay the Applicable Indebtedness incurred with respect to such Applicable Asset Disposition, and any amount of such Applicable Net Proceeds so applied shall not be required to be applied to the prepayment of Term Borrowings.

For purposes of this Section 2.10(c)(ii), the term “ Financing Percentage ” means, with respect to any Applicable Asset Acquisition, the percentage obtained by dividing (x) the amount of Applicable Indebtedness incurred with respect to such Applicable Asset Acquisition by (y) the total consideration paid by the Wireline Companies in such Applicable Asset Acquisition.

(iii) With respect to any Net Proceeds received by or on behalf of any Wireline

Company in respect of any Asset Disposition, if (A) the Wireline Companies intend to apply all or a portion of the Net Proceeds from such Asset Disposition within 12 months after receipt of such Net Proceeds (or, if the applicable Wireline Company enters into a legally binding commitment to apply all or a portion of such Net Proceeds within such 12-month period, within 18 months following the receipt of such Net Proceeds), to acquire Replacement Assets, (B) the property acquired in connection therewith will be included in the Collateral at least to the extent that the property disposed of was included therein or shall be property of a Collateral Support Party and (C) no Event of Default has occurred and is continuing, then no prepayment will be required pursuant to this Section 2.10(c) in respect of such Net Proceeds (or the portion of such Net Proceeds, if applicable); provided that if all or such portion of such Net Proceeds have not been so applied within such 12-month period (or, if the applicable Wireline Company has entered into a legally binding commitment to apply such Net Proceeds within such 12-month period, but has not applied such Net Proceeds within 18 months following such receipt) a prepayment will be required at that time (as applicable under Section 2.10(c)(i) or Section 2.10(c)(ii)) with respect to (A) the amount of such Net Proceeds that have not been so applied by the end of such 12-month period or (B) if such Net Proceeds were committed during such 12- month period to be applied but not so applied within 18 months following the receipt of such Net Proceeds, the amount of such Net Proceeds not so applied.

(d) Casualty Events . Within five Business Days after any Net Proceeds are received by or on behalf of any Wireline Company in respect of any Casualty Event, the Borrower shall (subject to Section 2.10(j)) prepay Term Borrowings in an aggregate amount equal to such Net Proceeds; provided that, if (i) the Wireline Companies intend to apply all or a portion of the Net Proceeds from such event, within 12 months after receipt of such Net Proceeds (or, if the applicable Wireline Company enters into a legally binding commitment to apply all or a portion of such Net Proceeds within such 12-month period, within 18 months following the receipt of such Net Proceeds), to repair, restore or replace the property with respect to which such Net Proceeds were received or to acquire Replacement Assets, and (ii) any property acquired in connection with such application (whether as replacement property or Replacement Assets) will be included in the Collateral at least to the extent that the property to be replaced was included therein or shall be property of a Collateral Support Party, then no prepayment will be required pursuant to this subsection in respect of such Net Proceeds (or the portion of such Net Proceeds, if applicable); provided , that if all or a portion of such Net Proceeds have not been so applied within such 12-month period (or, if the applicable Wireline Company has entered into a legally binding commitment to apply such Net Proceeds within such 12-month period, but has not applied such Net Proceeds within 18 months following such receipt), a prepayment will be required at that time in an amount equal to (A) the amount of such Net Proceeds that have not been so applied by the end of such 12-month period or (B) if such Net Proceeds were committed during such 12-month period to be applied but not so applied within 18 months following the receipt of such Net Proceeds, the amount of such Net Proceeds not so applied.

(a) Allocation of Prepayments, Right to Decline Tranche B- 5 6 and Tranche B- 6 7 Mandatory Prepayments . Before any optional or mandatory prepayment of Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (h) of this Section. Optional prepayments shall be applied to such Classes of Term Loans as directed by the Borrower in the notice of prepayment, provided that such

prepayments of any Class of Term Loan shall be applied in accordance with the second sentence of Section 2.10(i). In the event of any mandatory prepayment of Term Borrowings made at a time when Term Borrowings of more than one Class remain outstanding, the aggregate amount of such prepayment shall be allocated among the Term Borrowings of each Class pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class, provided however that any Tranche B-56 Lender and any Tranche B-67 Lender may elect, by notice to the Administrative Agent by telephone (confirmed by telecopy) at least one Business Day prior to the prepayment date, to decline all or any portion of any prepayment of its Tranche B-56 Term Loans or its Tranche B-67 Term Loans, as applicable, pursuant to this Section (other than an optional prepayment pursuant to paragraph (a) of this Section which may not be declined), in which case the aggregate amount of the prepayment that would have been applied to prepay Term Loans of any such Class but was so declined shall be applied to prepay Term Borrowings of the other Classes on a ratable basis (subject to the rights of the Tranche B-56 Lenders and the Tranche B-67 Lenders to decline such payments as set forth in this proviso) until no Term Borrowings of any other Class remain outstanding. All optional or mandatory prepayments of Revolving Borrowings made at a time when Revolving Borrowings of more than one Class remain outstanding shall be allocated among the Revolving Borrowings of each Class pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class. All optional or mandatory prepayments of a Revolving Borrowing shall be applied in accordance with the second sentence of Section 2.10(i).

(f) Accrued Interest . Each prepayment of a Borrowing shall be accompanied by accrued interest to the extent required by Section 2.12.

(g) Optional Prepayment of Tranche B-6 Term Loans .

(i) Upon any prepayment or repricing of the Tranche B-6 Term Loans as part of a Tranche B-6 Repricing Transaction prior to the date that is six months after the Second Tranche B-6 Incremental Amendment Effective Date, the Borrower shall pay a prepayment premium equal to 1.0% of the principal amount of the Tranche B-6 Term Loans prepaid or 1.0% of the principal repriced pursuant to such Tranche B-6 Repricing Transaction, as the case may be (the “ Tranche B-6 Prepayment Fee ”). Any such Tranche B-6 Prepayment Fee shall be paid to the Administrative Agent for the ratable benefit of the affected Lenders; provided that any Lender agreeing to such a Tranche B-6 Repricing Transaction may agree to waive any Tranche B-6 Prepayment Fee payable to it.

(ii) Upon any prepayment or repricing of the Tranche B-7 Term Loans as part of a Tranche B-7 Repricing Transaction prior to the date that is six months after the Tranche B-7 Refinancing Amendment Effective Date, the Borrower shall pay a prepayment premium equal to 1.0% of the principal amount of the Tranche B-7 Term Loans prepaid or 1.0% of the principal repriced pursuant to such Tranche B-7 Repricing Transaction, as the case may be (the “ Tranche B-7 Prepayment Fee ”). Any such Tranche B-7 Prepayment Fee shall be paid to the Administrative Agent for the ratable benefit of the affected Lenders; provided that any Lender agreeing to such a Tranche B-7 Repricing Transaction may agree to waive any Tranche B-7 Prepayment Fee payable to it.

(h) Notice of Prepayments . The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid and, in the case of a mandatory prepayment, a reasonably detailed calculation of the amount

fees and expenses. The proceeds of the Tranche B-7 Term Loans shall be utilized on the Tranche B-7 Refinancing Amendment Effective Date to refinance in full the Existing Tranche B-5 Term Loans and to pay related fees and expenses.

SECTION 5.10 . Additional Subsidiaries. If any additional Subsidiary, other than an Insignificant Subsidiary, a Notes SPV or a Special Purpose Receivables Subsidiary, is formed or acquired after the Sixth ARCA Effective Date, the Borrower will, within ten Business Days after such Subsidiary is formed or acquired, notify the Administrative Agent and the Collateral Agent thereof and cause the Collateral and Guarantee Requirement to be satisfied with respect to any Equity Interest in such Subsidiary held by a Loan Party and any Indebtedness of such Subsidiary owed to a Loan Party. If at any time any Subsidiary that is not then a Loan Party, other than (A) an Insignificant Subsidiary, (B) prior to the PAETEC Notes Redemption Date, a Qualified PAETEC Group Member, (C) a Notes SPV, (D) any Subsidiary listed on Schedule 5.10 or (E) a Special Purpose Receivables Subsidiary, (x) is a wholly-owned Domestic Subsidiary and is permitted by applicable law or regulation (without the need to obtain any Governmental Authorization) to Guarantee the Facility Obligations or (y) Guarantees any Loan Party’s obligations in respect of any AC Holdings Bonds or any other Indebtedness (other than Indebtedness created under the Loan Documents), the Borrower shall promptly cause (A) such Subsidiary to Guarantee the Facility Obligations pursuant to the Guarantee Agreement (in the case of any Subsidiary described in clause (y), on terms no less favorable to the Lenders than those applicable under such Guarantee of other Indebtedness) and (B) the other provisions of the Collateral and Guarantee Requirement to be satisfied with respect to such Subsidiary, whereupon such Subsidiary will become a “Guarantor” and “Lien Grantor” for purposes of the Loan Documents. The Borrower will not, and will not permit any of its Subsidiaries to, form or acquire any Subsidiary (other than Insignificant Subsidiaries and other than (i) any Notes SPV, (ii) prior to the PAETEC Notes Redemption Date, any Qualified PAETEC Group Member and (iii) any Special Purpose Receivables Subsidiary) after the Sixth ARCA Effective Date unless either (x) all of the Equity Interests in such Subsidiary shall be directly held by a Loan Party or (y) such Subsidiary shall have Guaranteed the Facility Obligations pursuant to the Guarantee Agreement and shall have satisfied the other provisions of the Collateral and Guarantee Requirement with respect to such Subsidiary. Prior to the PAETEC Notes Redemption Date, the Borrower will not permit any PAETEC Group Member to form or acquire any Subsidiary except for the purpose of reorganizing the organizational structure or form of organization of any of the PAETEC Group Members. For the avoidance of doubt, from and after the PAETEC Notes Redemption Date, any Qualified PAETEC Group Member not previously subject to the requirements set forth in this Section 5.10 shall be subject to the requirements set forth in this Section 5.10 as if such Qualified PAETEC Group Member became a Subsidiary on such date.

SECTION 5.11 . Further Assurances. (a) Each Loan Party will execute and deliver any and all further documents, financing statements, agreements and instruments, and take all such further actions (including the filing and recording of financing statements, fixture filings and other documents), that may be required under any applicable law, or that the Collateral Agent or the Required Lenders may reasonably request, to cause the Collateral and Guarantee Requirement to be and remain satisfied, all at the Borrower’s expense. The Borrower will provide to the Collateral Agent, from time to time upon any reasonable request from the Collateral Agent, evidence reasonably satisfactory to the Collateral Agent as to the perfection and priority of the Liens intended to be created by the Security Documents.

(b) If any material assets (other than (i) any real property or improvements thereto or any interest therein, (ii) any RUS Grant Funds, (iii) any asset purchased with RUS Grant Funds and any proceeds thereof or (iv) Notes Escrowed Proceeds) are acquired by any Loan Party after the Sixth ARCA Effective Date (other than assets constituting Collateral that become subject to Transaction Liens upon acquisition thereof), the Borrower will notify the Collateral Agent thereof, and, if requested by the Collateral Agent or the Required Lenders, will cause such assets to be subjected to a Transaction Lien

paragraph (b) of this Section being referred to as a “ Non-Consenting Lender ”), then, so long as the Lender that is acting as Administrative Agent is not a Non-Consenting Lender, the Borrower may, at its sole expense and effort, upon notice to such Non-Consenting Lender and the Administrative Agent, require each of the Non-Consenting Lenders to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in Section 9.04), all its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment), provided that (i) the Borrower shall have received the prior written consent of the Administrative Agent (and, if a Revolving Commitment is being assigned, the Issuing Bank), which consent(s) shall not unreasonably be withheld or delayed, (ii) each Non-Consenting Lender shall have received payment of an amount equal to the outstanding principal of its Loans and participations in LC Disbursements, accrued interest thereon, accrued fees and all other amounts payable to it hereunder from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts), (iii) the Borrower or such assignee shall have paid to the Administrative Agent the processing and recordation fee specified in Section 9.04(b)(ii)(C), (iv) [reserved] and (v) if the consent, amendment or waiver in question contemplates a Tranche B-6 Repricing Transaction in respect of any Tranche B-6 Term Loans held by such Non-Consenting Lender, the Borrower shall pay the prepayment feeTranche B-6 Prepayment Fee (if any) that would otherwise be payable hereunder as if such outstanding Tranche B-6 Term Loans of such Non-Consenting Lender were prepaid or repriced in their entirety in connection with such Tranche B-6 Repricing Transaction on the date of the consummation of such assignment and (v) if the consent, amendment or waiver in question contemplates a Tranche B-7 Repricing Transaction in respect of any Tranche B-7 Term Loans held by such Non-Consenting Lender, the Borrower shall pay the Tranche B-7 Prepayment Fee (if any) that would otherwise be payable hereunder as if such outstanding Tranche B-7 Term Loans of such Non-Consenting Lender were prepaid or repriced in their entirety in connection with such Tranche B-7 Repricing Transaction on the date of the consummation of such assignment. For the avoidance of doubt, any replacement of Lenders in connection with the extension of the maturity date of any Class of Loans shall be governed by Section 2.07(d).

(d) Further, notwithstanding anything to the contrary contained in this Section, if following the Sixth ARCA Effective Date, the Administrative Agent and the Borrower shall have jointly identified an obvious error or any error or omission of a technical or immaterial nature, in each case, in any provision of the Loan Documents then the Administrative Agent (acting in its sole discretion) and the Borrower shall be permitted to amend such provision and such amendment shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders within five Business Days following receipt of notice thereof.

SECTION 9.03 . Expenses; Indemnity; Damage Waiver. (a) The Borrower shall pay (i) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent, the Lead Arrangers and their Affiliates, including the reasonable fees, charges and disbursements of Davis Polk & Wardwell, special New York counsel, respectively, for the Administrative Agent, the Collateral Agent and the Lead Arrangers, in connection with the syndication of the Facilities and the preparation of the Loan Documents (whether or not the transactions contemplated hereby or thereby shall be consummated), (ii) all reasonable out-of-pocket expenses incurred by the Administrative Agent, the Collateral Agent, the Lead Arrangers and their Affiliates, including the reasonable fees, charges and disbursements of any counsel for the Administrative Agent, the Collateral Agent and the Lead Arrangers in connection with the administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), (iii) all reasonable out-of-pocket expenses incurred by the Issuing Banks in connection with the issuance, amendment, renewal or extension of any Letter of Credit by it or any demand for payment thereunder and (iv) all out-of-pocket expenses incurred by any Lender Party, including the fees,

SCHEDULE 1



Additional Tranche B-7 Lender	Additional Tranche B-7 Commitment

Credit Suisse AG, Cayman Islands Branch	$351,227,181.02
Total	$351,227,181.02

Exhibit 10.38

THIRD TRANCHE B-6 INCREMENTAL AMENDMENT (this “ Incremental Amendment ”) dated as of February 27, 2017, to the Sixth Amended and Restated Credit Agreement originally dated as of July 17, 2006 and amended and restated as of April 24, 2015 (as amended, restated, supplemented or otherwise modified from time to time prior to the date hereof, the “ Existing Credit Agreement ”; the Existing Credit Agreement as amended hereby, the “ Amended Credit Agreement ”) among Windstream Services, LLC, a Delaware limited liability company (the “ Borrower ”), the lenders party thereto, JPMorgan Chase Bank, N.A. (“ JPMCB ”), as administrative agent and collateral agent (in such capacities, the “ Administrative Agent ”), and the other agents party thereto.

WHEREAS, a subsidiary of the Borrower intends to merge (the “ Merger ”) with EarthLink Holdings Corp., a Delaware corporation (“ EarthLink ”) in accordance with that certain Agreement and Plan of Merger, dated as of November 5, 2016 (the “ Merger Agreement ”) among Windstream Holdings, Inc., a Delaware corporation (“ Holdco ”), Europa Merger Sub, Inc., a Delaware corporation, Europa Merger Sub, LLC, a Delaware limited liability company, and EarthLink;

WHEREAS, in connection with the Merger, it is expected that (i) all existing third-party debt for borrowed money of EarthLink under the Second Amended and Restated Credit Agreement, dated as of June 30, 2016 and as amended, restated, supplemented or otherwise modified from time to time, by and among EarthLink, the guarantors and lenders from time to time party thereto and Regions Bank, as administrative agent (the “ EarthLink Credit Agreement ”), will be repaid, redeemed, defeased, discharged or terminated, and the liens securing all such Indebtedness shall be released, and (ii) EarthLink or Holdco will satisfy and discharge the entire principal amount, together with interest thereon and the applicable premium, if any, of EarthLink’s or its subsidiaries’ 8.875% Senior Notes due 2019 and 7.375% Senior Secured Notes due 2020 (the transactions described in the foregoing clauses (i) and (ii), collectively, the “ Refinancing ”; the consummation of the Merger and the Refinancing, together with the incurrence of the Additional Tranche B-6 Term Loans (as defined below) and the application of the proceeds thereof, being referred to herein collectively as the “ Transactions ”);

WHEREAS, pursuant to Section 2.01(i) of the Credit Agreement, the Borrower has requested an additional tranche of Tranche B-6 Term Loans in the form of Incremental Loans pursuant to an Incremental Facility in an aggregate principal amount not exceeding $450,000,000 (such Incremental Loans, the “Additional Tranche B-6 Term Loans”), the proceeds of which shall be used to finance a portion of the Refinancing and to pay fees and expenses in connection therewith;

WHEREAS, in accordance with Section 2.01(i) of the Credit Agreement, (x) the Additional Tranche B-6 Term Loans established pursuant to this Incremental Amendment shall constitute an increase to the Tranche B-6 Term Loans currently outstanding on the date hereof, shall be secured on a pari passu basis with the existing Loans and shall have the other terms and conditions set forth herein and in the Amended Credit Agreement and (y) this Incremental Amendment shall not require the consent of any Lenders other than the Additional Tranche B-6 Lenders (as defined below) party hereto;

WHEREAS, the Borrower has requested that JPMCB and/or its designated affiliates act as the initial lender with respect to the Additional Tranche B-6 Term Loans (in such capacity, the “ Initial Additional Tranche B-6 Lender ”);

WHEREAS, each Person that agrees to make Additional Tranche B-6 Term Loans in accordance with this Incremental Amendment and the Amended Credit Agreement (such Persons, together with the Initial Additional Tranche B-6 Lender, collectively, the “ Additional Tranche B-6 Lenders ”) has agreed to make Tranche B-6 Term Loans to the Borrower on the Third Tranche B-6 Incremental Amendment Effective Date (as defined below) in an amount equal to its Tranche B-6 Commitment (as defined below), subject to the terms and conditions set forth in this Incremental Amendment and the Amended Credit Agreement; and

WHEREAS, on and after the Third Tranche B-6 Incremental Amendment Effective Date, the Additional Tranche B-6 Term Loans shall be deemed “Tranche B-6 Term Loans” for the purpose of the Amended Credit Agreement;

SECTION 1. Defined Terms. Capitalized terms used and not otherwise defined herein have the meanings assigned to them in the Amended Credit Agreement.

SECTION 2. Additional Tranche B-6 Term Loans. Subject to the terms and conditions set forth herein and in the Amended Credit Agreement, each Additional Tranche B-6 Lenders agrees to make Additional Tranche B-6 Term Loans to the Borrower on the Third Tranche B-6 Incremental Amendment Effective Date in a principal amount equal to its Additional Tranche B-6 Commitment, which amount shall be made available to the Administrative Agent in immediately available funds in accordance with the Amended Credit Agreement. The “ Additional Tranche B-6 Commitment ” of each Additional Tranche B-6 Lender will be the amount set forth opposite such Additional Tranche B-6 Lender’s name on Schedule 1 hereto.

SECTION 3. Amendments to the Credit Agreement. In accordance with Section 2.01(i) of the Credit Agreement and effective as of the Third Tranche B-6 Incremental Amendment Effective Date, (i) the Credit Agreement is hereby amended to delete the stricken text (indicated textually in the same manner as the following example: stricken text ) and to add the double-underlined text (indicated textually in the same manner as the following example: double-underlined text) as set forth in the pages of the Credit Agreement attached as Annex I hereto and (ii) Schedule 2.01 to the Credit Agreement is hereby amended to add the commitments set forth on Schedule 1 hereto to such Schedule 2.01, mutatis mutandis .

SECTION 4. Representations and Warranties. To induce the other parties hereto to enter into this Incremental Amendment, the Borrower represents and warrants that:

(a) As of the Third Tranche B-6 Incremental Amendment Effective Date, this Incremental Amendment has been duly authorized, executed and delivered by it. This

Incremental Amendment and the Credit Agreement (in each case, as of the Third Tranche B-6 Incremental Amendment Effective Date) constitute its legal, valid and binding obligation, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

(b) The representations and warranties of each Loan Party set forth in the Loan Documents that are qualified by materiality are true and correct in all respects, and the representations and warranties that are not so qualified are true and correct in all material respects, in each case on and as of the date hereof, including after giving effect to this Incremental Amendment and the transactions contemplated hereby (other than with respect to any representation and warranty that expressly relates to an earlier date, in which case such representation and warranty was true and correct in all material respects as of such earlier date).

(c) As of the Third Tranche B-6 Incremental Amendment Effective Date, (i) no Event of Default has occurred and is continuing or shall result from this Incremental Amendment or the transactions contemplated hereby, (ii) the Borrower is (and will remain, after giving effect to this Incremental Amendment and the transactions contemplated hereby) in compliance on a Pro Forma Basis with the covenants contained in Sections 6.13 and 6.14 of the Credit Agreement recomputed as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered pursuant to Section 5.01(a) or (b) of the Credit Agreement and (iii) the Secured Leverage Ratio on a Pro Forma Basis computed as of the last day of the most recently ended Fiscal Quarter for which financial statements have been delivered pursuant to Section 5.01(a) or (b) of the Credit Agreement does not (and will not, after giving effect to this Incremental Amendment and the transactions contemplated hereby) exceed 2.25 to 1.0.

SECTION 5. Third Tranche B-6 Incremental Amendment Effective Date . The obligation of the Additional Tranche B-6 Lenders to make Additional Tranche B-6 Term Loans pursuant to Section 2 hereof, and the amendments to the Credit Agreement set forth in Section 3 hereof, shall become effective as of the first date (the “ Thi r d Tranche B-6 Incremental Amendment Effective Date” ) on which each of the following conditions shall have been satisfied:

(a) The Administrative Agent shall have received a counterpart signature page to this Incremental Amendment duly executed by each of the Borrower, the Administrative Agent and each Additional Tranche B-6 Lender party hereto.

(b) The Merger shall have been consummated, or substantially simultaneously with the initial borrowing of the Additional Tranche B-6 Term Loans shall be consummated, in all respects in accordance with the terms of the Merger Agreement, without giving effect to any amendments, consents or waivers thereto that are materially adverse to the Additional Tranche B-6 Lenders or to JPMCB in its capacity as a lead arranger of the Additional Tranche B-6 Term Loans (in such capacity, the “ Lead Arranger ”), without the prior consent of the Lead Arranger (such consent not to be unreasonably withheld, delayed or conditioned) (it being understood that (i) any reduction in the purchase price of, or consideration for, the Merger shall be deemed to be materially adverse to the interests of the Additional Tranche B-6 Lenders or the Lead Arranger if

such reduction is greater than 10% of the purchase price and (ii) any amendment to the definition of “Material Adverse Effect” in the Merger Agreement shall be deemed to be materially adverse to the interests of the Additional Tranche B-6 Lenders and the Lead Arranger).

(c) The Refinancing shall have been consummated, or substantially simultaneously with the initial borrowing of the Additional Tranche B-6 Term Loans shall be consummated, and, after giving effect to the Transactions, the Borrower and its Subsidiaries (including, for the avoidance of doubt, EarthLink and its subsidiaries) shall have no outstanding Indebtedness for borrowed money other than (i) in the case of the Borrower and its Subsidiaries (other than EarthLink and its subsidiaries), Indebtedness outstanding under the Credit Agreement, other Indebtedness outstanding as of November 5, 2016 and other ordinary course of business working capital facilities, equipment financings and letters of credit facilities, (ii) in the case of EarthLink and its subsidiaries, any other Indebtedness permitted to remain outstanding under the Merger Agreement as in effect on November 5, 2016 and (iii) to the extent backstopped by a Letter of Credit, obligations in respect of any letter of credit issued under the EarthLink Credit Agreement and outstanding as of the Amendment Effective Date.

(d) The Administrative Agent and the Initial Additional Tranche B-6 Lender shall have received a certificate (in form and substance reasonably acceptable to the Administrative Agent), dated as of the Third Tranche B-6 Incremental Amendment Effective Date and signed by a Responsible Officer of the Borrower, certifying as to the satisfaction of the conditions set forth in paragraphs (b) and (c) above.

(e) The conditions set forth in Sections 4.03(a) and (b) of the Credit Agreement shall be satisfied on and as of the Third Tranche B-6 Incremental Amendment Effective Date, and the Administrative Agent and the Initial Additional Tranche B-6 Lender shall have received a certificate (in form and substance reasonably acceptable to the Administrative Agent and the Initial Additional Tranche B-6 Lender), dated as of the Third Tranche B-6 Incremental Amendment Effective Date and signed by a Responsible Officer of the Borrower, to such effect.

(f) The representations and warranties set forth in Section 4(c) of this Incremental Amendment shall be true and correct in all respects on and as of the Third Tranche B-6 Incremental Amendment Effective Date, and the Administrative Agent shall have received a certificate (in form and substance reasonably acceptable to the Administrative Agent), dated as of the Third Tranche B-6 Incremental Amendment Effective Date and signed by a Financial Officer of the Borrower, certifying as to such representations and warranties, together with reasonably detailed calculations demonstrating compliance with clauses (ii) and (iii) of such Section 4(c).

(g) The Administrative Agent and the Initial Additional Tranche B-6 Lender shall have received the favorable legal opinions of (i) Freshfields Bruckhaus Deringer US LLP, New York counsel to the Loan Parties, and (ii) John P. Fletcher, Esq., general counsel of the Borrower, in each case addressed to the Lenders, the Administrative Agent, the Collateral Agent and each Issuing Bank and dated the Third Tranche B-6 Incremental Amendment Effective Date, which opinions shall be in form and substance reasonably satisfactory to the Administrative

Agent and the Initial Additional Tranche B-6 Lender. The Borrower hereby requests such counsel to deliver such opinions.

(h) The Administrative Agent and the Initial Additional Tranche B-6 Lender shall have received (i) a request for the Additional Tranche B-6 Term Loans, which shall be in compliance with the notice requirements set forth in Section 2.01(i) of the Credit Agreement, and (ii) a Borrowing Request in respect of the Additional Tranche B-6 Term Loans, which shall be in compliance with the notice requirements set forth in Section 2.03 of the Credit Agreement.

(i) The Administrative Agent and the Initial Additional Tranche B-6 Lender shall have received such documents and certificates as the Administrative Agent or the Initial Additional Tranche B-6 Lender, or their counsel, may reasonably request relating to the organization, existence and good standing of each Loan Party, the authorization of execution, delivery and performance of this Incremental Amendment, the performance of the Credit Agreement and each other applicable Loan Document and any other legal matters relating to the Wireline Companies or the Loan Documents, all in form and substance reasonably satisfactory to the Administrative Agent and the Initial Additional Tranche B-6 Lender and their counsel.

(j) Each Loan Party not a party hereto shall have entered into a reaffirmation agreement in form and substance reasonably satisfactory to the Administrative Agent and the Initial Additional Tranche B-6 Lender.

(k) The Borrower shall have paid:

(i) to the Administrative Agent, for the account of the Additional Tranche B-6 Lenders, an upfront fee (which fee may, at the election of such Additional Tranche B-6 Lender, be structured as original issue discount) (the “ Upfront Fee ”) in an amount equal to 1.00% of the principal amount of Additional Tranche B-6 Term Loans made by such Additional Tranche B-6 Lender on the Third Tranche B-6 Incremental Amendment Effective Date, which Upfront Fee shall be fully earned and due and payable on the Third Tranche B-6 Incremental Amendment Effective Date; and

(ii) all other fees (including ticking fees) and amounts due and payable pursuant to this Incremental Amendment and any commitment letters, fee letters and other letter agreements entered into and between the Borrower and the Lead Arranger and/or any other lead arrangers, bookrunners, joint arrangers and/or joint bookrunners in respect of the Additional Tranche B-6 Term Loans (such persons, together with the Lead Arranger, collectively, the “ Arrangers ” and such commitment letters, fee letters and other letter agreements, collectively, the “ Letter Agreements ”), or as may have otherwise been separately agreed between the Borrower and the Lead Arranger, including, to the extent invoiced at least three (3) Business Days prior to the Third Tranche B-6 Incremental Amendment Effective Date, reimbursement or payment of documented and reasonable out-of-pocket expenses in connection with this Incremental Amendment and any other out-of-pocket expenses of the Administrative Agent, the Initial Additional

Tranche B-6 Lender and the Arrangers required to be paid or reimbursed pursuant to the Credit Agreement or such Letter Agreements;

provided that it is understood and agreed that the Additional Tranche B-6 Lenders may net the fees and expenses described in the foregoing clauses (i) and (ii) from the proceeds of the Additional Tranche B-6 Term Loans prior to providing such proceeds to the Administrative Agent for distribution to the Borrower.

(l) The Additional Tranche B-6 Lenders shall have received, no later than five (5) days prior to the Third Tranche B-6 Incremental Amendment Effective Date, all documentation and other information about the Borrower and the Guarantors as has been reasonably requested by the Administrative Agent or any Additional Tranche B-6 Lender that they reasonably determine is required by regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including without limitation the Act, that has been reasonably requested at least ten (10) days in advance of the Third Tranche B-6 Incremental Amendment Effective Date.

(m) (i) Since December 31, 2015 there shall have been no state of facts, change, development, event, effect, condition or occurrence that, individually or in the aggregate, has had a Material Adverse Effect (as defined in the Credit Agreement), (ii) since December 31, 2015 until November 5, 2016, other than the transactions contemplated by the Merger Agreement and as disclosed in EarthLink’s SEC filings, no Circumstance (as defined in the Merger Agreement as in effect on November 5, 2016) shall have occurred that has, or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (as defined in the Merger Agreement as in effect on November 5, 2016) on EarthLink and (iii) since November 5, 2016, no Circumstance (as defined in the Merger Agreement as in effect on November 5, 2016) shall have occurred that has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (as defined in the Merger Agreement as in effect on November 5, 2016) on EarthLink.

(n) The Initial Additional Tranche B-6 Lender shall have received a solvency certificate executed by a Financial Officer of the Borrower (in substantially the form previously agreed to by the Lead Arranger).

The Administrative Agent shall notify the Borrower and the Additional Tranche B-6 Lenders of the Third Tranche B-6 Incremental Amendment Effective Date, which notice shall be conclusive and binding.

SECTION 6. Effect of Incremental Amendment.

(a) Except as expressly set forth herein, this Incremental Amendment shall not by implication or otherwise limit, impair, constitute a waiver of or otherwise affect the rights and remedies of the Lenders or Agents under the Credit Agreement or any other Loan Document, and shall not alter, modify, amend or in any way affect any of the terms, conditions, obligations, covenants or agreements contained in the Credit Agreement or any other provision of the Credit Agreement or of any other Loan Document, all of which are ratified and affirmed in all respects and shall continue in full force and effect. Nothing herein shall be deemed to entitle the

(b) From and after the Third Tranche B-6 Incremental Amendment Effective Date, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”, or words of like import, and each reference to the “Credit Agreement” in any other Loan Document shall be deemed a reference to the Amended Credit Agreement. This Incremental Amendment shall constitute a “Loan Document” for all purposes of the Credit Agreement and the other Loan Documents.

(c) This Incremental Amendment shall be deemed to be an “Incremental Facility Amendment” as defined in the Credit Agreement and shall, for the avoidance of doubt, have the effect assigned thereto in Section 2.01(i)(iii) of the Credit Agreement.

SECTION 7. GOVERNING LAW. THIS INCREMENTAL AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SECTION 8. Costs and Expenses. The Borrower agrees to reimburse the Administrative Agent and the Lead Arranger promptly after receipt of a written request for its documented and reasonable out-of-pocket expenses in connection with this Incremental Amendment, including the reasonable fees, charges and disbursements of counsel for the Administrative Agent and the Lead Arranger.

SECTION 9. Counterparts. This Incremental Amendment may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Delivery by facsimile or other electronic imaging means of an executed counterpart of a signature page to this Incremental Amendment shall be effective as delivery of an original executed counterpart of this Incremental Amendment.

SECTION 10. Headings. Section headings herein are included for

convenience of reference only and shall not affect the interpretation of this Incremental Amendment.

[ Remainder of page intentionally left blank ]



WINDSTREAM SERVICES, LLC,
as the Borrower
By:	/s/Christie Grumbos
Name:	Christie Grumbos
Title:	SVP, Treasurer

[Signature page to Third Tranche B-6 Incremental Amendment]



JPMORGAN CHASE BANK, N.A ., as
Administrative Agent and as Initial
Additional Tranche B-6 lender
By:	/s/Davide Migliardi
Name:	Davide Migliardi
Title:	Vice President

[Signature page to Third Tranche B-6 Incremental Amendment]

ANNEX I

AMENDMENTS TO CREDIT AGREEMENT

[See attached]

TABLE OF CONTENTS



	PAGE
ARTICLE 1 DEFINITIONS

SECTION 1.01. Defined Terms	1
SECTION 1.02. Classification of Loans and Borrowings	46 48
SECTION 1.03. Terms Generally	46 48
SECTION 1.04. Accounting Terms; GAAP	47 49
SECTION 1.05. Pro Forma Calculations	47 49

ARTICLE 2 THE CREDITS
SECTION 2.01 . Loans	47 49
SECTION 2.02. Loans and Borrowings	50 52
SECTION 2.03. Requests for Borrowings	51 53
SECTION 2.04. Letters of Credit	51 53
SECTION 2.05. Funding of Borrowings	55 57
SECTION 2.06. Interest Elections	55 58
SECTION 2.07. Termination, Reduction and Extension of Commitments and
Term Loans	56 59
SECTION 2.08. Repayment of Loans; Evidence of Debt	60 62
SECTION 2.09. Scheduled Amortization of Term Loans	60 63
SECTION 2.10 . Optional and Mandatory Prepayment of Loans	61 63
SECTION 2.11. Fees	65 68
SECTION 2.12. Interest	66 69
SECTION 2.13. Alternate Rate of Interest	67 70
SECTION 2.14. Increased Costs	67 70
SECTION 2.15. Break Funding Payments	68 71
SECTION 2.16. Taxes	69 72
SECTION 2.17. Payments Generally; Pro Rata Treatment; Sharing of Set‑
offs	72 75
SECTION 2.18. Mitigation Obligations; Replacement of Lenders	74 77
SECTION 2.19. Refinancing Amendments	75 77

ARTICLE 3
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization; Powers	76 79
SECTION 3.02. Authorization; Enforceability	76 79
SECTION 3.03. Governmental Approvals; No Conflicts	76 79
SECTION 3.04. Financial Condition; No Material Adverse Change	77 79
SECTION 3.05. Properties	77 80
SECTION 3.06. Litigation and Environmental Matters	77 80
SECTION 3.07. Compliance with Laws and Agreements	77 80
SECTION 3.08. Investment Company Status	78 80
SECTION 3.09. Taxes	78 80
SECTION 3.10. ERISA	78 81



SECTION 3.11. Disclosure	78 81
SECTION 3.12. Subsidiaries	78 81
SECTION 3.13. Insurance	78 81
SECTION 3.14. Labor Matters.	78 81
SECTION 3.15. Solvency	79 81
SECTION 3.16. Licenses; Franchises	79 82
SECTION 3.17. Anti-Corruption Laws and Sanctions	80 82
SECTION 3.18. Master Lease; Recognition Agreement	80 83

ARTICLE 4 CONDITIONS
SECTION 4.01. Sixth ARCA Effective Date.	80 83
SECTION 4.02. [Reserved].	82 84
SECTION 4.03. Each Credit Event	82 84

ARTICLE 5
AFFIRMATIVE COVENANTS
SECTION 5.01. Financial Statements; Ratings Change and Other
Information	82 85
SECTION 5.02. Notices of Material Events	84 87
SECTION 5.03. Information Regarding Collateral	84 87
SECTION 5.04. Existence; Conduct of Business	85 88
SECTION 5.05. Payment of Obligations	85 88
SECTION 5.06. Maintenance of Properties; Insurance; Casualty and
Condemnation	85 88
SECTION 5.07. Books and Records; Inspection Rights	86 89
SECTION 5.08 . Compliance with Laws	86 89
SECTION 5.09. Use of Proceeds and Letters of Credit	86 89
SECTION 5.10. Additional Subsidiaries	87 90
SECTION 5.11. Further Assurances	87 90
SECTION 5.12. Rated Credit Facilities	88 91
SECTION 5.13. Windstream Communications	88 91

ARTICLE 6
NEGATIVE COVENANTS
SECTION 6.01. Indebtedness; Certain Equity Securities	88 91
SECTION 6.02. Liens	92 95
SECTION 6.03. Fundamental Changes	93 96
SECTION 6.04. Investments, Loans, Advances, Guarantees and Acquisitions	94 97
SECTION 6.05. Asset Sales	96 99
SECTION 6.06. Sale and Leaseback Transactions	97 100
SECTION 6.07. Swap Agreements	98 101
SECTION 6.08. Restricted Payments; Certain Payments of Debt	98 101
SECTION 6.09. Transactions with Affiliates	100 103
SECTION 6.10. Restrictive Agreements	100 103



SECTION 6.11. Amendment of Material Documents	102 105
SECTION 6.12. Change in Fiscal Year	102 105
SECTION 6.13. Interest Coverage Ratio	102 105
SECTION 6.14. Leverage Ratio	102 105

ARTICLE 7
EVENTS OF DEFAULT

ARTICLE 8
THE AGENTS

ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Notices	107 110
SECTION 9.02. Waivers; Amendments	108 111
SECTION 9.03. Expenses; Indemnity; Damage Waiver	110 113
SECTION 9.04. Successors and Assigns	111 114
SECTION 9.05. Survival	116 119
SECTION 9.06. Counterparts; Integration; Effectiveness	116 119
SECTION 9.07. Severability	116 119
SECTION 9.08. Right of Setoff	116 119
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service Of Process	117 120
SECTION 9.10. WAIVER OF JURY TRIAL	117 120
SECTION 9.11. Headings	118 121
SECTION 9.12. Confidentiality	118 121
SECTION 9.13. USA PATRIOT ACT	119 122
SECTION 9.14. Interest Rate Limitation	119 122
SECTION 9.15. Amendments to Security Documents	119 122
SECTION 9.16. No Fiduciary Duty	119 122

SCHEDULES:
Schedule 2.01 – Commitments
Schedule 3.05 – Real Properties
Schedule 3.06 – Disclosed Matters
Schedule 3.12 – Subsidiaries
Schedule 5.10 – Certain Regulated Subsidiaries
Schedule 6.01 – Existing Indebtedness
Schedule 6.02 – Existing Liens
Schedule 6.04 – Existing Investments
Schedule 6.09 – Transactions with Affiliates
Schedule 6.10 – Existing Restrictions

EXHIBITS:
Exhibit A – Form of Assignment and Assumption
Exhibit B – Form of Amended and Restated Guarantee Agreement
Exhibit C – Form of Amended and Restated Security Agreement

unit or line of business of, another Person, whether or not involving a merger or consolidation with such other Person. “ Acquire ” has a meaning correlative thereto.

“ Act ” has the meaning specified in Section 9.13.

“ Additional Tranche B-7 Lender ” has the meaning assigned to such term in the Tranche B-7 Refinancing Amendment.

“ Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“ Affiliated Assignee ” has the meaning specified in Section 9.04(b)(ii)(B).

“ Affiliated Revolving Lender ” has the meaning specified in Section 9.04(b)(ii)(B).

“ Agents ” means the Administrative Agent, the Collateral Agent, the Co-Documentation Agents, the Lead Arranger and the Joint Bookrunners and Arrangers.

“ Agreement ”, when used with reference to this Agreement, means this Amended Agreement, as amended by the Tranche B-6 Incremental Amendment, the Tranche B-6 Refinancing and Incremental Amendment, the Second Tranche B-6 Incremental Amendment and, the Tranche B-7 Refinancing Amendment and the Third Tranche B-6 Incremental Amendment and as further amended, restated, amended and restated, supplemented or otherwise modified from time to time.

(b) the first day on which a majority of the members of the board of directors of Holdco or the Borrower are not Continuing Directors; or

(c) Holdco ceases to be the Beneficial Owner, directly or indirectly, of 100% of the outstanding Equity Interests of the Borrower.

“ Charges ” has the meaning specified in Section 9.14.

“ Class ” (a) when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are Revolving Loans, Tranche B-6 Term Loans, Tranche B-7 Term Loans, Incremental Loans, Other Revolving Loans or Other Term Loans, (b) when used in reference to any Commitment, refers to whether such Commitment is a Revolving Commitment, Tranche B-6 Commitment, Tranche B-7 Commitment, commitments in respect of any Incremental Facility, Other Revolving Commitments or Other Term Commitments and (c) when used in reference to any Lender, refers to whether such Lender is a Revolving Lender, Tranche B-6 Lender, Tranche B-7 Lender or Additional Lender.

“ CLO ” has the meaning specified in Section 9.04(b).

“ Co-Documentation Agents ” means (including with respect to the Tranche B-6 Term Loans made (or continued) on the Tranche B-6 Refinancing and Incremental Amendment Effective Date) Bank of America, N.A., Barclays Bank PLC, BNP Paribas, Citibank, N.A., CoBank, ACB, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Morgan Stanley Senior Funding, Inc., MUFG Union Bank, N.A., Royal Bank of Canada, SunTrust Bank and (other than with respect to the Tranche B-6 Term Loans made (or continued) on the Tranche B-6 Refinancing and Incremental Amendment Effective Date) Wells Fargo Bank, N.A. In addition, and notwithstanding the foregoing, “ Co-Documentation Agents ” means (i) with respect to the Tranche B-6 Term Loans made on the Second Tranche B-6 Incremental Amendment Effective Date and the Third Tranche B-6 Incremental Amendment Effective Date, the institutions listed in the preceding sentence other than Goldman Sachs Bank USA and Wells Fargo Bank, N.A. and (ii) with respect to the Tranche B-7 Term Loans, (A) JPMorgan Chase Bank, N.A. and (B) the institutions listed in the preceding sentence other than Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA and Wells Fargo Bank, N.A.

“ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

“ Collateral ” means any and all “Collateral”, as defined in any applicable Security Document.

“ Collateral and Guarantee Requirement ” means at any time the requirement that:

(b) all outstanding Equity Interests in and all outstanding promissory notes issued by any Wireline Company owned by or on behalf of any Loan Party shall have been pledged pursuant to the

“ Dividend Suspension Period ” means any period (a) commencing on any day on which consolidated financial statements are delivered pursuant to Section 5.01(a) or 5.01(b) (or, if applicable, the last day of the most recently completed Dividend Suspension Period) if the Leverage Ratio as of the last day of the then most recently completed Fiscal Quarter covered thereby is greater than 4.50 to 1.0 and (b) ending on the first day thereafter on which a Financial Officer delivers consolidated financial statements pursuant to Section 5.01(a) or 5.01(b) and a certificate pursuant to Section 5.01(c), all demonstrating that the Leverage Ratio was equal to or less than 4.50 to 1.0 as of the last day of the then most recently completed Fiscal Quarter covered thereby.

“ dollars ” or “ $ ” refers to lawful money of the United States.

“ Domestic Subsidiary ” means any Subsidiary other than a Foreign Subsidiary.

“ Earn-out Obligation ” means any contingent consideration based on the future operating performance of an acquired entity or assets, or other purchase price adjustment or indemnification obligation, payable following the consummation of an acquisition (including pursuant to a merger or consolidation) based on criteria set forth in the documentation governing or relating to such acquisition.

“ EarthLink ” means EarthLink Holdings Corp., a Delaware corporation.

“ EarthLink Merger ” means the merger of the Borrower with EarthLink in accordance with that certain Agreement and Plan of Merger, dated as of November 5, 2016, among Holdco, Europa Merger Sub, Inc., a Delaware corporation, Europa Merger Sub, LLC, a Delaware limited liability company, and EarthLink.

“ EarthLink Notes ” means, collectively, EarthLink’s or its subsidiaries’ 8.875% Senior Notes due 2019 and 7.375% Senior Secured Notes due 2020.

“ EarthLink Refinancing ” means, in connection with the Merger, (i) the repayment, redemption, defeasement, discharge or termination of all existing third-party debt for borrowed money of EarthLink under the Second Amended and Restated Credit Agreement, dated as of June 30, 2016 and as amended, restated, supplemented or otherwise modified from time to time, by and among EarthLink, the guarantors and lenders from time to time party thereto and Regions Bank, as administrative agent, and (ii) the satisfaction and discharge by EarthLink or Holdco of the entire principal amount, together with interest thereon and the applicable premium, if any, of the EarthLink Notes.

“ EEA Financial Institution ” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.

“ EEA Member Country ” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

“ EEA Resolution Authority ” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

Incremental Term Loans made following the Sixth ARCA Effective Date shall end on such date as agreed between the Borrower and the Administrative Agent, (iv) the initial Interest Period with respect to the Tranche B-6 Term Loans made (or continued) on the Tranche B-6 Refinancing and Incremental Amendment Effective Date shall end on such date as agreed between the Borrower and the Administrative Agent and (v) the initial Interest Period with respect to the Tranche B-7 Term Loans made (or continued) on the Tranche B-7 Refinancing Amendment Effective Date shall end on such date as agreed between the Borrower and the Administrative Agent. For purposes hereof, the date of a Borrowing initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing.

“ Investment ” has the meaning set forth in Section 6.04.

“ Joint Bookrunners and Arrangers ” means (including with respect to the Tranche B-6 Term Loans made (or continued) on the Tranche B-6 Refinancing and Incremental Amendment Effective Date) Barclays Bank PLC, BNP Paribas Securities Corp., Citigroup Global Markets Inc., CoBank, ACB, Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Goldman Sachs Bank USA, Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley Senior Funding, Inc., MUFG Union Bank, N.A., Royal Bank of Canada, SunTrust Robinson Humphrey, Inc. and (other than with respect to the Tranche B-6 Term Loans made (or continued) on the Tranche B-6 Refinancing and Incremental Amendment Effective Date) Wells Fargo Securities LLC. In addition, and notwithstanding the foregoing, “ Joint Bookrunners and Arrangers ” means (i) with respect to the Tranche B-6 Term Loans made on the Second Tranche B-6 Incremental Amendment Effective Date and the Third Tranche B-6 Incremental Amendment Effective Date, the institutions listed in the preceding sentence other than Goldman Sachs Bank USA and Wells Fargo Securities LLC and (ii) with respect to the Tranche B-7 Term Loans, (A) JPMorgan Chase Bank, N.A. and (B) the institutions listed in the preceding sentence other than Credit Suisse Securities (USA) LLC, Goldman Sachs Bank USA and Wells Fargo Securities LLC.

“ Knowledge ” means the actual knowledge of a Responsible Officer.

“ Landlord ” has the meaning given such term in the Master Lease.

“ Tax Matters Agreement ” means the “Tax Matters Agreement” as defined in the Propco Distribution Agreement.

“ Tax Sharing Agreement ” means the “Tax Sharing Agreement” as defined in the Agreement and Plan of Merger dated as of December 8, 2005 (as amended on May 18, 2006), among Alltel Corporation, the Borrower and Valor Communications Group, Inc., as filed with the SEC as Annex A to Valor Communications Group, Inc.’s Registration Statement on Form S-4 on February 28, 2006, as amended up to July 17, 2006.

“ Taxes ” means any and all present or future taxes, levies, imposts, duties, deductions, charges, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“ Tenant ” has the meaning given such term in the Master Lease.

“ Term Lender ” means a Tranche B-6 Lender or a Tranche B-7 Lender.

“ Term Loan Extension Effective Date ” has the meaning specified in Section 2.07(d)(ii).

“ Term Loans ” means a Tranche B-6 Term Loan or a Tranche B-7 Term Loan.

“ Third Amendment and Restatement Agreement ” means the Amendment and Restatement Agreement dated as of February 23, 2012 among the Borrower and certain Agents and Lenders party thereto.

“ Third ARCA ” means the Third Amended and Restated Credit Agreement dated as of February 23, 2012 in the form attached as Exhibit A to the Third Amendment and Restatement Agreement, as amended and as in effect from time to time before the Fourth ARCA Effective Date.

“ Third ARCA Effective Date ” has the meaning assigned thereto in Section 5 of the Third Amendment and Restatement Agreement.

“ Third Tranche B-6 Incremental Amendment ” means the Third Tranche B-6 Incremental Amendment to this Agreement, dated as of February 27, 2017, among the Borrower, the Administrative Agent and the Tranche B-6 Lenders party thereto.

“ Third Tranche B-6 Incremental Amendment Effective Date ” has the meaning assigned to such term in the Third Tranche B-6 Incremental Amendment.

“ Third Tranche B-6 Commitment ” means, with respect to each Lender, the commitment of such Lender to make a Tranche B-6 Term Loan hereunder on the Third Tranche B-6 Incremental Amendment Effective Date. The initial aggregate amount of the Lenders’ Third Tranche B-6 Commitments as of the Third Tranche B-6 Incremental Amendment Effective Date is $450,000,000.

“ Tranche B-6 Commitment ” means an Initial Tranche B-6 Commitment or, a Second Tranche B-6 Commitment or a Third Tranche B-6 Commitment, as the case may be.

(f) [Reserved] .

(g) (i) Tranche B-6 Term Loans.

(B) Subject to the terms and conditions set forth herein and in the Second Tranche B-6 Incremental Amendment, each Tranche B-6 Lender agrees, severally and not jointly, to make a Tranche B-6 Term Loan to the Borrower on the Second Tranche B-6 Incremental Amendment Effective Date in a principal amount equal to its Tranche B-6 Commitment as of the Second Tranche B-6 Incremental Amendment Effective Date.

(C) Subject to the terms and conditions set forth herein and in the Third Tranche B-6 Incremental Amendment, each Tranche B-6 Lender agrees, severally and not jointly, to make a Tranche B-6 Term Loan to the Borrower on the Third Tranche B-6 Incremental Amendment Effective Date in a principal amount equal to its Tranche B-6 Commitment as of the Third Tranche B-6 Incremental Amendment Effective Date.

(h) Outstanding Letters of Credit. All Letters of Credit outstanding under the Fifth ARCA

on the Sixth ARCA Effective Date shall remain outstanding hereunder on the terms set forth herein.

of the Interest Period then applicable thereto, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of such Interest Period.

SECTION 2.07 . Termination, Reduction and Extension of Commitments and Term Loans. (a) Unless previously terminated, (i) the Revolving Commitments shall terminate on the Revolving Maturity Date, (ii) the Initial Tranche B-6 Commitments shall terminate immediately after the Borrowing of Tranche B-6 Term Loans on the Tranche B-6 Refinancing and Incremental Amendment Effective Date, (iii) the Second Tranche B-6 Commitments shall terminate immediately after the Borrowing of Tranche B-6 Term Loans on the Second Tranche B-6 Incremental Amendment Effective Date and , (iv) the Tranche B-7 Commitments shall terminate immediately after the Borrowing of the Tranche B-7 Term Loans on the Tranche B-7 Refinancing Amendment Effective Date and (v) the Third Tranche B-6 Commitments shall terminate immediately after the Borrowing of Tranche B-6 Term Loans on the Third Tranche B-6 Incremental Amendment Effective Date.

(b) The Borrower may at any time, without premium or penalty, terminate, or from time to time reduce, the Commitments of any Class; provided that (i) each reduction of the Commitments of any Class shall be in an amount that is an integral multiple of $1,000,000 and not less than $1,000,000 and (ii) the Borrower shall not terminate or reduce the Revolving Commitments to the extent, after giving effect to any concurrent prepayment of the Revolving Loans in accordance with Section 2.10, the sum of the Revolving Credit Exposures would exceed the total Revolving Commitments.

(c) The Borrower shall notify the Administrative Agent of any election to terminate or reduce the Commitments under paragraph (b) of this Section at least three Business Days prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Promptly following receipt of any notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each notice delivered by the Borrower pursuant to this Section shall be irrevocable; provided that a notice of termination of the Revolving Commitments delivered by the Borrower may state that such notice is conditioned upon the occurrence or non-occurrence of any event specified therein (including the consummation of an acquisition, sale or other similar transaction, or the receipt of proceeds from the incurrence or issuance of Indebtedness or Equity Interests or the effectiveness of other credit facilities), in which case such notice may be revoked by the Borrower (by notice to the Administrative Agent on or prior to the specified effective date) if such condition is not satisfied. Any termination or reduction of the Commitments of any Class shall be permanent. Each reduction of the Commitments of any Class shall be made ratably among the Lenders in accordance with their respective Commitments of such Class.

(d) Extension of Maturity Date. (i) The Borrower may, upon notice to the Administrative Agent (which shall promptly notify the applicable Class of Lenders or Additional Lenders, as applicable), request one or more extensions of the maturity date applicable to the Revolving Commitments or Other Revolving Commitments, the maturity date applicable to any Class of Term Loans or Other Term Loans, or the maturity date applicable to any Incremental Loans, as applicable, then in effect (such existing maturity date applicable to any Revolving Commitments or Other Revolving Commitments being the “ Existing Revolving Maturity Date ”, such existing maturity date applicable to any Class of Term Loans or Other Term Loans being the “ Existing Term Loan Maturity Date ” and such existing maturity date applicable to any Incremental Loans being the “ Existing Incremental Loan Maturity Date ”) to a date specified in such notice. Within 15 Business Days of delivery of such notice (or such other period as the Borrower and the Administrative Agent shall mutually agree upon), each applicable Revolving Lender, Term Lender or Additional Lender, as the case may be, shall notify the Administrative Agent whether it consents to such extension (which consent may be given or withheld in such Revolving Lender’s, Term Lender’s or Additional Lender’s, as applicable, sole and absolute discretion). Any Revolving Lender, Term Lender or Additional Lender, as applicable, not responding

under subsection (ii) above) to enter into any amendments to this Agreement that the Administrative Agent believes are necessary to appropriately reflect, or provide for the integration of, any extension of a maturity date applicable to the Revolving Commitments, Other Revolving Commitments, the maturity date applicable to any Class of Term Loans or Other Term Loans or maturity date applicable to any Incremental Loans, as applicable, pursuant to this Section 2.07(d). In addition, with the consent of each Issuing Bank, participations in Letters of Credit expiring on or after the Existing Revolving Maturity Date shall be reallocated from Non-Extending Revolving Lenders to Extending Revolving Lenders in accordance with the terms of such amendment; provided , however , that such participation interests shall, upon receipt thereof by the Extending Revolving Lenders, be deemed to be participation interests in respect of such extended revolving commitments and the terms of such participation interests (including, without limitation, the commission applicable thereto) shall be adjusted accordingly.

(e) Any Lender may request that Loans of any Class made by it be evidenced by a promissory note. In such event, the Borrower shall prepare, execute and deliver to such Lender a promissory note payable to such Lender (or, if requested by such Lender, to such Lender and its registered assigns) and in a form approved by the Administrative Agent; provided that, in order for any such promissory note to be delivered on the Sixth ARCA Effective Date, the Tranche B-6 Refinancing and Incremental Amendment Effective Date, the Second Tranche B-6 Incremental Amendment Effective Date or, the Tranche B-7 Refinancing Amendment Effective Date or the Third Tranche B-6 Incremental Amendment Effective Date, the request therefor shall be delivered no later than two Business Days prior to the Sixth ARCA Effective Date, the Tranche B-6 Refinancing and Incremental Amendment Effective Date, the Second Tranche B-6 Incremental Amendment Effective Date or, the Tranche B-7 Refinancing Amendment Effective Date or the Third Tranche B-6 Incremental Amendment Effective Date, as applicable. Thereafter, the Loans evidenced by such promissory note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more promissory

notes in such form payable to the payee named therein (or, if such promissory note is a registered note, to such payee and its registered assigns).

SECTION 2.09 . Scheduled Amortization of Term Loans. (a) Subject to adjustment pursuant to Section 2.09(c), the Borrower shall repay (i) Tranche B-6 Term Loans (A) on the last day of each Fiscal Quarter ending on or after September 30, 2016 and prior to the Tranche B-6 Maturity Date in an aggregate principal amount equal to 0.250 .2506266% of the aggregate principal amount of Tranche B-6 Term Loans outstanding on the Second Third Tranche B-6 Incremental Amendment Effective Date (after giving effect to the Second Third Tranche B-6 Incremental Amendment) and (B) on the Tranche B-6 Maturity Date in an aggregate principal amount equal to the principal amount of Tranche B-6 Term Loans then outstanding and (ii) Tranche B-7 Term Loans (A) on the last day of each Fiscal Quarter ending on or after March 31, 2017 and prior to the Tranche B-7 Maturity Date in an aggregate principal amount equal to 0.25% of the aggregate principal amount of Tranche B-7 Term Loans outstanding on the Tranche B-7 Refinancing Amendment Effective Date (after giving effect to the Tranche B-7 Refinancing Amendment) and (B) on the Tranche B-7 Maturity Date in an aggregate principal amount equal to the principal amount of Tranche B-7 Term Loans then outstanding.

(b) To the extent not previously paid, (i) all Tranche B-6 Term Loans shall be due and payable on the Tranche B-6 Maturity Date and (ii) all Tranche B-7 Term Loans shall be due and payable on the Tranche B-7 Maturity Date.

(b) [Reserved].

the amount of such Net Proceeds that have not been so applied by the end of such 12-month period or (B) if such Net Proceeds were committed during such 12-month period to be applied but not so applied within 18 months following the receipt of such Net Proceeds, the amount of such Net Proceeds not so applied.

(e) Allocation of Prepayments, Right to Decline Tranche B-6 and Tranche B-7 Mandatory Prepayments . Before any optional or mandatory prepayment of Borrowings hereunder, the Borrower shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (h) of this Section. Optional prepayments shall be applied to such Classes of Term Loans as directed by the Borrower in the notice of prepayment, provided that such prepayments of any Class of Term Loan shall be applied in accordance with the second sentence of Section 2.10(i). In the event of any mandatory prepayment of Term Borrowings made at a time when Term Borrowings of more than one Class remain outstanding, the aggregate amount of such prepayment shall be allocated among the Term Borrowings of each Class pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class, provided however that any Tranche B-6 Lender and any Tranche B-7 Lender may elect, by notice to the Administrative Agent by telephone (confirmed by telecopy) at least one Business Day prior to the prepayment date, to decline all or any portion of any prepayment of its Tranche B-6 Term Loans or its Tranche B-7 Term Loans, as applicable, pursuant to this Section (other than an optional prepayment pursuant to paragraph (a) of this Section which may not be declined), in which case the aggregate amount of the prepayment that would have been applied to prepay Term Loans of any such Class but was so declined shall be applied to prepay Term Borrowings of the other Classes on a ratable basis (subject to the rights of the Tranche B-6 Lenders and the Tranche B-7 Lenders to decline such payments as set forth in this proviso) until no Term Borrowings of any other Class remain outstanding. All optional or mandatory prepayments of Revolving Borrowings made at a time when Revolving Borrowings of more than one Class remain outstanding shall be allocated among the Revolving Borrowings of each Class pro rata based on the aggregate principal amount of outstanding Borrowings of each such Class. All optional or mandatory prepayments of a Revolving Borrowing shall be applied in accordance with the second sentence of Section 2.10(i).

(f) Accrued Interest . Each prepayment of a Borrowing shall be accompanied by accrued interest to the extent required by Section 2.12.

(g) Optional Prepayment of Tranche B-6 Term Loans .

(i) Upon any prepayment or repricing of the Tranche B-6 Term Loans as part of a Tranche B-6 Repricing Transaction prior to the date that is six months after the Second Third Tranche B-6 Incremental Amendment Effective Date, the Borrower shall pay a prepayment premium equal to 1.0% of the principal amount of the Tranche B-6 Term Loans prepaid or 1.0% of the principal repriced pursuant to such Tranche B-6 Repricing Transaction, as the case may be (the “ Tranche B-6 Prepayment Fee ”). Any such Tranche B-6 Prepayment Fee shall be paid to the Administrative Agent for the ratable benefit of the affected Lenders; provided that any Lender agreeing to such a Tranche B-6 Repricing Transaction may agree to waive any Tranche B-6 Prepayment Fee payable to it.

(i) Upon any prepayment or repricing of the Tranche B-7 Term Loans as part of a Tranche B-7 Repricing Transaction prior to the date that is six months after the Tranche B-7 Refinancing Amendment Effective Date, the Borrower shall pay a prepayment premium equal to 1.0% of the principal amount of the Tranche B-7 Term Loans prepaid or 1.0% of the principal repriced pursuant to such Tranche B-7 Repricing Transaction, as the case may be (the “ Tranche B-7 Prepayment Fee ”). Any such Tranche B-7 Prepayment Fee shall be paid to the Administrative Agent for the ratable benefit of the affected Lenders; provided that any Lender Regulations T, U and X. Letters of Credit will be issued only to support general corporate obligations of the Wireline Companies. The proceeds of the Tranche B-6 Term Loans made on the Tranche B-6 Refinancing and Incremental Amendment Effective Date shall be utilized (i) to the extent constituting Other Term Loans, on the Tranche B-6 Refinancing and Incremental Amendment Effective Date, to refinance in full the Existing Tranche B-6 Term Loans and (ii) otherwise,

(A) to redeem all or a portion of the 2017 Notes and to pay related fees and expenses and (B) for general corporate purposes, including without limitation to refinance in full or in part any other series of outstanding notes of the Borrower or its subsidiaries and to pay related fees and expenses. The proceeds of the Tranche B-6 Term Loans made on the Second Tranche B-6 Incremental Amendment Effective Date shall be utilized for general corporate purposes, including without limitation to repay outstanding Revolving Loans and to pay related fees and expenses. The proceeds of the Tranche B-7 Term Loans shall be utilized on the Tranche B-7 Refinancing Amendment Effective Date to refinance in full the Existing Tranche B-5 Term Loans and to pay related fees and expenses. The proceeds of the Tranche B-6 Term Loans made on the Third Tranche B-6 Incremental Amendment Effective Date shall be utilized to finance a portion of the EarthLink Refinancing and to pay fees and expenses in connection therewith.

SCHEDULE 1



Additional Tranche B-6 Lender	Additional Tranche B-6 Commitment
JPMorgan Chase Bank, N.A.	$450,000,000
Total	$450,000,000

Exhibit 10.39

WAIVER AND RELEASE AGREEMENT

THIS WAIVER AND RELEASE AGREEMENT (“Waiver and Release”) is entered into by and between Sarah E. Day (“Executive”) and Windstream Holdings, Inc. (the “Company” or "Windstream") (collectively, the “Parties”).

WHEREAS , the Parties have entered into a Change in Control Agreement dated January 1, 2016 (the “Agreement”);

WHEREAS , Executive’s employment has been or will be terminated effective June 1, 2017 (“Termination Date”), in accordance with the Agreement;

WHEREAS , Executive is required to sign this Waiver and Release in order to receive the payment of certain separation benefits under the Agreement following termination of employment; and

WHEREAS , the Company has agreed to sign this Waiver and Release.

NOW, THEREFORE , in consideration of the promises and agreements contained herein and other good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, and intending to be legally bound, the Parties agree as follows:


1.	This Waiver and Release is effective on the date hereof and will continue in effect as provided herein.


2.	Company agrees that following the Executive’s execution of this Waiver and Release on or before May 5, 2017, contingent upon Executive’s compliance with all conditions and agreements in the Waiver and Release:


a.	Company will pay to Executive a total of $770,000.00 (equal to one year of base salary and target bonus), which will be divided by 12 and paid to Executive in 12 monthly installments;


b.	Company will pay to Executive an amount equal to a pro-rated portion (34%) of her annual incentive under the PICP for 2017 based on actual performance during the 2017 fiscal year. This amount will be paid in a single lump sum at the same time payments are made to other participants in the PICP for 2017;


c.	Company will amend Executive’s unvested time-based restricted stock awards to provide that Executive’s compliance with the non-disclosure, non-competition, and non-interference covenants in Section 9 of the Agreement for the one-year period ending on May 31, 2018, shall satisfy the continued service and vesting requirements of such awards that vest on or before May 31, 2018;


d.	Company will, at its sole expense as incurred, provide Executive with outplacement services from Challenger Gray & Christmas, the scope of which will be selected by Executive in her sole discretion, provided that (i) the cost shall not

exceed $25,000.00, and (ii) in no event shall the period during which the outplacement service expenses are incurred or the period during which the expenses are paid extend beyond June 1, 2018; and


e.	Company will continue the cost of Executive’s current executive coaching consultant, on terms consistent with the current engagement and at a cost not to exceed $15,000.00, until December 1, 2017.

Executive acknowledges and agrees that the payments described herein are in lieu of and replace amounts due under the Windstream Corporation Severance Plan, if any. Company shall have the right to deduct from all payments made under this Waiver and Release any federal, state, local, foreign or other taxes which are required to be withheld with respect to such payments. Notwithstanding the foregoing, Executive shall be solely responsible and liable for the satisfaction of all taxes, interest and penalties that may be imposed on Executive in connection with this Waiver and Release (including any taxes, interest and penalties under Code Section 409A), and neither Company nor any of its affiliates shall have any obligation to indemnify or otherwise hold Executive harmless from any or all of such taxes, interest or penalties.

In consideration of the payments to be made and the benefits to be received by Executive pursuant to Section 2 of the Waiver and Release (the “Separation Benefits”) which Executive acknowledges are in addition to payments and benefits to which Executive would be entitled but for the Agreement (except as otherwise provided in the Agreement), Executive, on behalf of herself, her heirs, representatives, agents and assigns by dower or otherwise hereby COVENANTS NOT TO SUE OR OTHERWISE VOLUNTARILY PARTICIPATE IN ANY LAWSUIT AGAINST, FULLY RELEASES, INDEMNIFIES, HOLDS HARMLESS and OTHERWISE FOREVER DISCHARGES (i) the Company, (ii) any companies controlled by, controlling or under common control with the Company, and any predecessors, successors or assigns to the foregoing (together with the Company, the “Windstream Group”) (iii) the Windstream Group’s compensation, benefit, incentive (including, but not limited to, individual incentive, project incentive, annual incentive, long-term incentive and annual bonus), pension, welfare and other plans and arrangements, and any predecessor or successor to any such plans and arrangements (including the sponsors, administrators and fiduciaries of any such plan and/or arrangements), and (iv) any of the Windstream Group’s current or former officers, directors, agents, executives, employees, attorneys, insurers, shareholders, predecessors, successors or assigns, from any and all actions, charges, claims, demands, damages or liabilities of any kind or character whatsoever, known or unknown, which Executive now has or may have had whether or not based on or arising out of Executive’s employment relationship with the Windstream Group or the termination of that employment relationship through the date of execution of this Waiver and Release, other than workers’ compensation claims filed prior to the date of execution of this Waiver and Release.

Executive acknowledges and understands that in the event Executive files a charge or complaint with the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and

Exchange Commission or any other federal, state or local governmental agency or commission ("Government Agencies"), Executive shall be entitled to no relief, reinstatement, remuneration, damages, back pay, front pay, or compensation whatsoever from the Windstream Group as a result of such charge or complaint. Employee further understands that neither the Agreement nor the Waiver and Release limits Executive’s ability to communicate with any Government Agencies or otherwise participate in any investigation or proceeding that may be conducted by any Government Agency, including providing documents or other information, without notice to the Company. Neither the Agreement nor this Waiver and Release limit Executive’s right to receive an award for information provided to any Government Agencies.

Executive understands and agrees that she is waiving and releasing any and all actions and causes of action, suits, debts, claims, complaints and demands of any kind whatsoever, in law or in equity, including, but not limited to, the following:

Those arising under any federal, state or local statute, ordinance or common law governing or relating to the Parties’ employment relationship including, but not limited to, (i) any claims on account of, arising out of or in any way connected with Executive’s hiring by the Windstream Group, employment with the Windstream Group or the termination of that employment; (ii) any claims alleged or which could have been alleged in any charge or complaint against the Windstream Group, including, but not limited to, those with the EEOC, TWCCRD, NMHRC, or other similar state agency, OSHA and the Secretary of Labor; (iii) any claims relating to the conduct, including action or inaction, of any executive, employee, officer, director, agent or other representative of the Windstream Group; (iv) any claims of discrimination, harassment or retaliation on any basis; (v) any claims arising from any legal restrictions on an employer’s right to separate its employees; (vi) any claims for personal injury, compensatory or punitive damages, front pay, back pay, liquidated damages, treble damages, legal and/or attorneys’ fees, expenses and litigation costs or other forms of relief; (vii) any claims for compensation and benefits; (viii) any cause of action or claim that could have been asserted in any litigation or other dispute resolution process, regardless of forum (judicial, arbitral or other), against any employee, officer, director, agent or other representative of the Windstream Group; (ix) any claim for, or right to, arbitration, and any claim alleged or which could have been alleged in any charge, complaint or request for arbitration against the Windstream Group; (x) any claim on account of, arising out of or in any way connected with any employment agreement between Executive and the Windstream Group; (xi) any claim on account of, arising out of or in any way connected with the alleged termination of Executive’s employment without “cause” or for “good reason”; (xii) any claim on account of, arising out of or in any way connected with medical, dental, life insurance or other welfare benefit plan coverage; and (xiii) all other causes of action sounding in contract, tort or other common law basis, including, but not limited to: (a) the breach of any alleged oral or written contract; (b) negligent or intentional misrepresentations; (c) wrongful discharge; (d) just cause dismissal; (e) defamation; (f) interference with contract or business relationship; (g) negligent or intentional infliction of emotional distress;


	promissory estoppel; (i) claims in equity or public policy; (j) assault; (k) battery; (l) breach of employee handbooks, manuals or other policies; (m) breach of fiduciary duty; (n) false imprisonment; (o) fraud; (p) invasion of privacy; (q) whistleblower claims; (r) negligence, negligent hiring, retention or supervision and (s) constructive discharge; and

Those arising under any law relating to sex, age, race, color, religion, handicap or disability, harassment, veteran status, sexual orientation, retaliation, or national origin discrimination including, without limitation, any rights or claims arising under Title VII of the Civil Rights Act of 1866 and 1964, as amended, 42 U.S.C. §§ 1981 and 2000(e), et seq.; the Civil Rights Act of 1991; the Age Discrimination in Employment Act of 1967, as amended, 29 U.S.C. §§ 621, et seq., as amended by the Older Workers Benefit Protection Act; the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. §§ 12,101, et seq.; Sections 806 and 1107 of the Sarbanes-Oxley Act of 2002; the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201, et seq.; the National Labor Relations Act, 29 U.S.C. §§ 151, et seq.; the Occupational Safety and Health Act, 29 U.S.C. §§ 651, et seq.; the Worker Adjustment and Retraining Notification Act, 29 U.S.C. §§ 2101, et seq.; the Texas Commission on Human Rights Act, Tex. Lab. Code. Ann. §§ 21.001, et seq.; Tex. Lab. Code. Ann. §§ 21.051; Tex. Lab. Code. Ann. §§ 21.055, Texas Workers’ Compensation Act; Texas Whistleblower Act, Arkansas Civil Rights Act, §§ 16‑123, et seq., the Arkansas Equal Pay Law § 11-4 et seq.; the New Mexico Human Rights Act, N.M. Stat. Ann. §§ 281-1-1, et seq., as such statutes may be amended from time to time; and


c.	Those arising out of Employee Retirement Income Security Act of 1974, as amended; and


d.	Those arising out of the Family and Medical Leave Act, 29 U.S.C. §§ 2601 et seq.; and


e.	Those arising under the civil rights, labor and employment laws of any state, municipality or local ordinance; and


f.	Any claim for reinstatement, compensatory damages, back pay, front pay, interest, punitive damages, special damages, legal and/or attorneys’ fees, expenses and litigation costs including expert fees; and


g.	Any other federal, state or local law that affords employees or individuals protection of any kind whatsoever.

Notwithstanding anything herein to the contrary, the sole matters to which the waiver and release in Section 3 do not apply are: (i) Executive’s rights of indemnification and/or directors and officers liability insurance coverage, if any, to which she was entitled immediately prior to May 3, 2017, with regard to her service as an officer or director of any member of the Windstream Group; (ii) Executive’s rights under the Indemnity Agreement dated January 1, 2016; (iii) Executive’s rights under any tax-qualified pension

or claims for accrued vested benefits under any other employee benefit plan, policy or arrangement (whether tax-qualified or not) maintained by the Windstream Group or under the Consolidated Omnibus Budget Reconciliation Act of 1985, including the deferred compensation plan and the Windstream 401(k) Plan; (iv) Executive’s rights as an equity vested shareholder; or (v) Executive’s rights under Sections 2, 3, and 4 of this Waiver and Release which are intended to survive termination of employment.

Executive specifically agrees and understands that the existence and terms of this Waiver and Release are strictly CONFIDENTIAL and that such confidentiality is a material term of this Waiver and Release. Accordingly, except as required by law or unless authorized to do so by the Company in writing, Executive agrees that she shall not communicate, display or otherwise reveal any of the contents of this Waiver and Release to anyone other than her spouse, attorney or financial advisor, provided , however , that they are first advised of the confidential nature of this Waiver and Release and Executive obtains their agreement to be bound by the same. Executive agrees to refrain from disparaging any member of the Windstream Group, its officers, Board of Directors, or other Releases in statements or releases to the media, or in verbal or written communications with Windstream customers, employees, or individuals or representatives of entities with whom Windstream has a current contractual relationship. The Company agrees that Executive may respond to legitimate inquiries regarding her employment with the Company by stating that the Parties terminated their relationship on an amicable basis and that the Parties have entered into a confidential Waiver and Release that prohibits her from further discussing the specifics of her separation. Nothing contained herein shall be construed to prevent Executive from discussing or otherwise advising subsequent employers of the existence of any obligations as set forth in this Waiver and Release. Further, nothing contained herein shall be construed to limit or otherwise restrict the Windstream Group’s ability to disclose the terms and conditions of this Waiver and Release as may be required by law or business necessity.

In the event that Executive breaches or threatens to breach any provision of this Waiver and Release, she agrees that the Windstream Group shall be entitled to seek any and all equitable and legal relief provided by law, specifically including immediate and permanent injunctive relief. Executive hereby waives any claim that the Windstream Group has an adequate remedy at law. In addition, and to the extent not prohibited by law, Executive agrees that the Windstream Group shall be entitled to an award of all costs and attorneys’ fees incurred by the Windstream Group in any successful effort to enforce the terms of this Waiver and Release. Executive agrees that the foregoing relief shall not be construed to limit or otherwise restrict the Windstream Group’s ability to pursue any other remedy provided by law, including the recovery of any actual, compensatory or punitive damages. Moreover, if Executive pursues any claims against the Company waived or released by Section 3 (and subject to the exclusions in Section 6), Executive agrees to immediately reimburse the Company for the value of all Separation Benefits received to the fullest extent permitted by law.


7.	The parties agree that the separation of employment provided for in this Waiver and Release shall mean a “Separation from Service” as such term is defined in Code Section 409A. It is the intent of the parties that the payments and benefits under this Waiver and

Release comply with or be exempt from the provisions of Code Section 409A. It is the further intent of the parties that this Waiver and Release be interpreted as necessary to comply with Code Section 409A.

The Parties acknowledge that this Waiver and Release is entered into solely for the purpose of ending their employment relationship on an amicable basis and shall not be construed as an admission of liability or wrongdoing by either Party and that both the Windstream Group and Executive have expressly denied any such liability or wrongdoing. Executive agrees that she is eligible for re-employment by Windstream Group only by mutual agreement and consent of the Parties.


9.	Each of the promises and obligations contained in this Waiver and Release shall be binding upon and shall inure to the benefit of the heirs, executors, administrators, assigns and successors in interest of each of the Parties.


10.	The Parties agree that each and every paragraph, sentence, clause, term and provision of this Waiver and Release is severable and that, if any portion of this Waiver and Release should be deemed not enforceable for any reason, such portion shall be stricken and the remaining portion or portions thereof should continue to be enforced to the fullest extent permitted by applicable law.


11.	This Waiver and Release shall be interpreted, enforced and governed under the laws of the State of Arkansas, without regard to any applicable state’s choice of law provisions.

12.

Executive represents and acknowledges that in signing this Waiver and Release she does not rely, and has not relied, upon any representation or statement made by the Windstream Group or by any of the Windstream Group’s employees, officers, agents, stockholders, directors or attorneys with regard to the subject matter, basis or effect of this Waiver and Release other than those specifically contained herein.

13.

This Waiver and Release represents the entire agreement between the Parties concerning the subject matter hereof, shall supersede any and all prior agreements which may otherwise exist between them concerning the subject matter hereof (specifically excluding, however, the post-termination obligations contained in the Change in Control Agreement dated January 1, 2016), and shall not be altered, amended, modified or otherwise changed except by a writing executed by both Parties. The post-termination obligations contained in the Change in Control Agreement dated January 1, 2016, specifically include, but are not limited to, the Section 9 prohibitions from competition, solicitation of Windstream customers, and solicitation of Windstream employees for a one-year period following the Termination Date.

14.

Each of the parties acknowledges that it or she has had the opportunity to consult with legal counsel of its or her choice prior to the execution of this Waiver and Release. Without limiting the generality of the foregoing, Executive acknowledges that she has had the opportunity to consult with her own independent legal counsel to review this Waiver and Release for purposes of compliance with the requirements of Code Section 409A or an

exemption therefrom, and that she is relying solely on the advice of her independent legal counsel for such purposes. Moreover, the parties acknowledge that they have participated jointly in the negotiation and drafting of this Waiver and Release. If any ambiguity or question of intent or interpretation arises, this Waiver and Release shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Waiver and Release.

PLEASE READ CAREFULLY. WITH RESPECT TO EXECUTIVE, THIS WAIVER AND RELEASE INCLUDES A COMPLETE RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.

IN WITNESS WHEREOF, the Parties have themselves signed, or caused a duly authorized agent thereof to sign, this Waiver and Release on their behalf and thereby acknowledge their intent to be bound by its terms and conditions.




EXECUTIVE		WINDSTREAM HOLDINGS, INC.


Signed:	/s/ Sarah Day	Signed:	/s/ John Fletcher
Print Name:	Sarah Day	Title:	Chief HR and Legal Officer
Date:	May 5, 2017	Date:	May 5, 2017

Exhibit 21

Windstream Holdings, Inc.

List of Subsidiaries

As of April 20, 2017



Name of Subsidiary	State of Organization
Allworx Corp. *	DE
Birmingham Data Link, LLC	AL
BOB, LLC *	IL
Boston Retail Partners LLC *	MA
Buffalo Valley Management Services, Inc. *	DE
Business Telecom of Virginia, Inc. *	VA
Business Telecom, LLC	NC
Cavalier IP TV, LLC *	DE
Cavalier Services, LLC *	DE
Cavalier Telephone Mid-Atlantic, L.L.C.	DE
Cavalier Telephone, L.L.C.*	VA
Choice One Communications of Connecticut Inc. *	DE
Choice One Communications of Maine Inc. *	DE
Choice One Communications of Massachusetts Inc. *	DE
Choice One Communications of New York Inc.	DE
Choice One Communications of Ohio Inc. *	DE
Choice One Communications of Pennsylvania Inc.	DE
Choice One Communications of Rhode Island Inc. *	DE
Choice One Communications Resale L.L.C.	DE
Choice One Communications Vermont Inc. *	DE
Choice One of New Hampshire, Inc. *	DE
Cinergy Communications Company of Virginia, LLC *	VA
Communications Sales & Leasing, Inc.	MD
Conestoga Enterprises, Inc. *	PA
Conestoga Management Services, Inc.*	DE
Conestoga Wireless Company	PA
Connecticut Broadband, LLC *	CT
Connecticut Telephone & Communication Systems, Inc. *	CT
Conversent Communications Long Distance, LLC *	NH
Conversent Communications of Connecticut, LLC *	CT
Conversent Communications of Maine, LLC *	ME
Conversent Communications of Massachusetts, Inc. *	MA
Conversent Communications of New Hampshire, LLC *	NH
Conversent Communications of New Jersey, LLC	NJ
Conversent Communications of New York, LLC	NY
Conversent Communications of Pennsylvania, LLC	PA
Conversent Communications of Rhode Island, LLC *	RI
Conversent Communications of Vermont, LLC *	VT
Conversent Communications Resale L.L.C.	DE
CTC Communications Corp.	MA
CTC Communications of Virginia, Inc. *	VA
D&E Communications, LLC *	DE
D&E Management Services, Inc. *	NV
D&E Networks, Inc. *	PA
D&E Wireless, Inc.	PA

*Guarantor to credit facility.



Deltacom, LLC	AL
Earthlink Business Holdings, LLC *	DE
Earthlink Business, LLC	DE
Earthlink Carrier, LLC	DE
Earthlink Holdings LLC *	DE
Earthlink Service LLC *	DE
Earthlink Shared Services, LLC *	DE
Earthlink, LLC. *	DE
Equity Leasing, Inc. *	NV
Georgia Windstream, LLC	DE
Heart of the Lakes Cable Systems, Inc. *	MN
Infocore, Inc.	PA
Intellifiber Networks, LLC	VA
Iowa Telecom Data Services, L.C. *	IA
Iowa Telecom Technologies, LLC *	IA
IWA Services, LLC *	IA
KDL Holdings, LLC *	DE
LDMI Telecommunications, LLC *	MI
Lightship Telecom, LLC	DE
McLeodUSA Information Services LLC *	DE
McLeodUSA Purchasing, LLC *	IA
McLeodUSA Telecommunications Services, L.L.C.	IA
MPX, Inc. *	DE
Nashville Data Link, LLC	TN
Network Telephone, LLC	FL
Norlight Telecommunications of Virginia, LLC *	VA
Oklahoma Windstream, LLC *	OK
PaeTec Communications of Virginia, LLC *	VA
PaeTec Communications, LLC	DE
PAETEC Holding, LLC *	DE
PAETEC iTEL, L.L.C. *	NC
PAETEC Realty LLC *	NY
PAETEC, LLC *	DE
PCS Licenses, Inc. *	NV
Progress Place Realty Holding Company, LLC *	NC
RevChain Solutions, LLC *	DE
SM Holdings, LLC *	DE
Southwest Enhanced Network Services, LLC *	DE
Talk America of Virginia, LLC *	VA
Talk America, LLC.	DE
Teleview, LLC *	GA
Texas Windstream, LLC *	TX
The Other Phone Company, LLC	FL
TriNet, LLC	GA
US LEC Communications LLC	NC
US LEC of Alabama LLC *	NC
US LEC of Florida LLC *	NC
US LEC of Georgia LLC	DE
US LEC of Maryland LLC	NC
US LEC of North Carolina LLC	NC

*Guarantor to credit facility.



US LEC of Pennsylvania LLC	NC
US LEC of South Carolina LLC *	DE
US LEC of Tennessee LLC *	DE
US LEC of Virginia LLC *	DE
US Xchange Inc. *	DE
US Xchange of Illinois, L.L.C. *	DE
US Xchange of Indiana, L.L.C.	DE
US Xchange of Michigan, L.L.C. *	DE
US Xchange of Wisconsin, L.L.C. *	DE
Valor Telecommunications of Texas, LLC *	DE
WaveTel NC License Corporation	DE
WIN Sales & Leasing, Inc. *	MN
Windstream Accucomm Networks, LLC	GA
Windstream Accucomm Telecommunications, LLC	GA
Windstream Alabama, LLC *	AL
Windstream Arkansas, LLC *	DE
Windstream Buffalo Valley, Inc.	PA
Windstream Cavalier, LLC *	DE
Windstream Communications Kerrville, LLC *	TX
Windstream Communications Telecom, LLC *	TX
Windstream Communications, LLC	DE
Windstream Concord Telephone, LLC	NC
Windstream Conestoga, Inc.	PA
Windstream CTC Internet Services, Inc. *	NC
Windstream D&E Systems, LLC	DE
Windstream D&E, Inc.	PA
Windstream Direct, LLC *	MN
Windstream EN-TEL, LLC *	MN
Windstream Finance Corp *	DE
Windstream Florida, LLC	FL
Windstream Georgia Communications, LLC	GA
Windstream Georgia Telephone, LLC	GA
Windstream Georgia, LLC	GA
Windstream Holding of the Midwest, Inc. *	NE
Windstream Iowa Communications, LLC *	DE
Windstream Iowa-Comm, LLC *	IA
Windstream IT-Comm, LLC	IA
Windstream KDL, LLC	KY
Windstream KDL-VA, LLC *	VA
Windstream Kentucky East, LLC	DE
Windstream Kentucky West, LLC	KY
Windstream Kerrville Long Distance, LLC *	TX
Windstream Lakedale Link, Inc. *	MN
Windstream Lakedale, Inc. *	MN
Windstream Leasing, LLC *	DE
Windstream Lexcom Communications, LLC	NC
Windstream Lexcom Entertainment, LLC *	NC
Windstream Lexcom Long Distance, LLC *	NC
Windstream Lexcom Wireless, LLC *	NC
Windstream Mississippi, LLC	DE

*Guarantor to credit facility.



Windstream Missouri, LLC	DE
Windstream Montezuma, LLC *	IA
Windstream Nebraska, Inc.	DE
Windstream Network Services of the Midwest, Inc. *	NE
Windstream New York, Inc.	NY
Windstream Norlight, LLC	KY
Windstream North Carolina, LLC	NC
Windstream NorthStar, LLC *	MN
Windstream NTI, LLC	WI
Windstream NuVox Arkansas, LLC *	DE
Windstream NuVox Illinois, LLC *	DE
Windstream NuVox Indiana, LLC *	DE
Windstream NuVox Kansas, LLC *	DE
Windstream NuVox Missouri, LLC	DE
Windstream NuVox Ohio, LLC	DE
Windstream NuVox Oklahoma, LLC *	DE
Windstream NuVox, LLC	DE
Windstream of the Midwest, Inc.	NE
Windstream Ohio, LLC	OH
Windstream Oklahoma, LLC *	DE
Windstream Pennsylvania, LLC	DE
Windstream Services, LLC	DE
Windstream SHAL Networks, Inc. *	MN
Windstream SHAL, LLC *	MN
Windstream South Carolina, LLC *	SC
Windstream Southwest Long Distance, LLC *	DE
Windstream Standard, LLC	GA
Windstream Sugar Land, LLC *	TX
Windstream Supply, LLC *	OH
Windstream Systems of the Midwest, Inc.	NE
Windstream Western Reserve, LLC	OH
Xeta Technologies, Inc. *	OK

*Guarantor to credit facility.

Exhibit 31(a)

CERTIFICATION

I, Anthony W. Thomas, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Windstream Holdings, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2017

/s/ Anthony W. Thomas

Anthony W. Thomas

President and Chief Executive Officer

Windstream Holdings, Inc.

CERTIFICATION

I, Anthony W. Thomas, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Windstream Services, LLC;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2017

/s/ Anthony W. Thomas

Anthony W. Thomas

President and Chief Executive Officer

Windstream Services, LLC

Exhibit 31(b)

CERTIFICATION

I, Robert E. Gunderman, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Windstream Holdings, Inc.;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2017

/s/ Robert E. Gunderman

Robert E. Gunderman

Chief Financial Officer

Windstream Holdings, Inc.

CERTIFICATION

I, Robert E. Gunderman, certify that:


1.	I have reviewed this quarterly report on Form 10-Q of Windstream Services, LLC;


2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;


3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;


4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:


(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;


(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and


(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and


5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):


(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and


(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 8, 2017

/s/ Robert E. Gunderman

Robert E. Gunderman

Chief Financial Officer

Windstream Services, LLC

Exhibit 32(a)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of Windstream Holdings, Inc. (the Company) on Form 10-Q for the period ending March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Anthony W. Thomas, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Anthony W. Thomas

Anthony W. Thomas

President and Chief Executive Officer

Windstream Holdings, Inc.

May 8, 2017

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of Windstream Services, LLC (the Company) on Form 10-Q for the period ending March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Anthony W. Thomas, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Anthony W. Thomas

Anthony W. Thomas

President and Chief Executive Officer

Windstream Services, LLC

May 8, 2017

Exhibit 32(b)

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of Windstream Holdings, Inc. (the Company) on Form 10-Q for the period ending March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert E. Gunderman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert E. Gunderman

Robert E. Gunderman

Chief Financial Officer

Windstream Holdings, Inc.

May 8, 2017

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the accompanying Quarterly Report of Windstream Services, LLC (the Company) on Form 10-Q for the period ending March 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Report), I, Robert E. Gunderman, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:


(1)	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert E. Gunderman

Robert E. Gunderman

Chief Financial Officer

Windstream Services, LLC

May 8, 2017