3 High-Yield Telecom Stocks To Buy For Gains In 2013

Windstream describes itself as a "leading provider of advanced network communications including cloud computing and managed services to businesses nationwide." Just in case, the company provides broadband, phone and digital offerings to primarily rural areas in the U.S. Windstream is known more for being a regional carrier that specializes in servicing rural areas in the Southwest. Windstream has entered the cloud computing market to extend its reach to enterprise customers outside of the U.S.

Other regional carriers offer traditional land line services, broadband, cable wireless and internet to specified areas in the U.S. It is hard to imagine that regional carriers can compete with industry giants offering an expanded range of services, customer support and better prices. The market is dominated by AT&T, Verizon and CenturyLink(CTL), all of which operate in all domestic markets and internationally.

Windstream's fourth quarter 2011 showed a 0.7% increase in revenue over the same period in 2010. Earnings from business were up 2.5% from the fourth quarter 2010. Broadband earnings were up 7% from the same period in 2010. Business and consumer broadband accounted for in broad outline 67.4% of Windstream's earnings in the 2011 fourth quarter.

Windstream has recently announced that it is taking steps toward originating content for its Merge high speed internet and streaming entertainment service, featuring entertainment reporter Mark Steines. Merge lets clients have high speed access to their own programming choices from the internet directly to television screens. This content creation is a way of providing variety and new content for viewers.

Windstream has as well announced that it released a cost effective multi-location data service called Carried Switched Ethernet. Carrier Switched Ethernet provides wholesale carriers access to 980 exchanges within the Windstream network. This service allows carriers to reach 90% more of the businesses in Windstream's footprint with Ethernet access. It as well allows bandwidth speeds that can transfer high volume content, video and high resolution images for basic business services just as email documents. The Carrier Switched Ethernet service is customizable to every business need and requirement.

For its business customers, Windstream has introduced Disaster Recovery as a Service which offers the combination of replication on the cloud technologies and offers a hosted and managed disaster recovery solution. It simplifies the recovery process in order to speed recovery time. The service runs in the cloud at a far more cost effective price than the cost of duplicating the entire production environment. It will be offered at first to clients in Boston where Windstream has made a number of infrastructure improvements in the area.

Windstream's pursued acquisitions and business strategies to minimize costs and build on existing customer relationships. The acquisitions are meant to give the company a source of growth to offset the traditional land line business.

Increasingly competitive market place

Windstream faces an increasingly competitive market place, and cable companies are now offering phone systems and technological advances that make wireless data services more popular than traditional cable and telephony offerings. The quality, speed and recovery process of wireless service is as well improving.

Alaska Communications Group is a provider of high-speed wireless, mobile, broadband, internet, local long-distance and advanced data solutions for businesses and consumers in Alaska. Alaska's business plan is to remain competitive with the entry of Verizon into the marketplace and to cope with the decrease in subsidies and service funding reform. New retail earnings were the target for growth and Alaska brought in the new iPhone to address this target. The company focused on the delivery of service to its enterprise and wireless clients, as then as to its consumer business customers. Prior to last year, these segments were underserved.

The year 2011

Alaska reported net income of $125 million for the year 2011 and an increase in enterprise revenue of 8% over the prior year. Earnings increased 3.2% over the prior year with enterprise earnings increasing 8.1% over the prior year. Data products represented over 90% of Alaska's earnings in 2011. Wireless revenue increased 4.6% over the prior year which offset decreases in retail service and equipment revenue. Retail and wireline revenue were unchanged over the year. Wireless connections increased for the third consecutive quarter. Revenues from both internet subscription and retail access lines declined in 2011.

Alaska is the first company to introduce 4G wireless to Alaska and commenced selling the iPhone 4 on April 20, 2012. Alaska's ability to provide the iPhone 4 will strengthen the company's subscriber base in Alaska. U.S. wireless giant Verizon is aggressively entering Alaska's market and may have the wherewithal to take over Alaska's territory.

Local exchange

Cincinnati Bell is a local exchange and wireless provider to residential and business customers in Ohio, Kentucky and Indiana. It released its 2011 fourth quarter and full year numbers showing that full year earnings were $1.5 billion which exceeded the guidance of $1.4 billion. A goodwill impairment in the fourth quarter caused a decrease in operating income of 13% and in net income of 34% from the prior year. Its data centre and co-location revenue showed a 21% increase from 2010. The company increased its data center capacity space to 763,000 square feet while 2011. Wireline revenue only decreased 1% as a result of increased demand for the company's Fioptics products mitigated this loss somewhat.

Frontier Communications operates in 27 states. The stock trades around $4.05, has a year high of $8.97 and a year low of $3.81. The stock has a price revenues ratio of 28:47 and revenues per share of $0.15. The dividend yield is 9.90%. The market capitalization is $4.10 billion. The company has total cash of $326.09 million and total debt of $8.3 billion. The book value per share is $4.48.

The loss of services subsidies

These companies as well face the loss of services subsidies and access fees from other carriers as the result of declining subscriptions to land line services. Regulators continue to look to change the universal service subsidies and access fees that will continue to slash this revenue. These subsidies and access fees are a high margin revenue source and are not likely to be replaced by any of the new earnings streams.

With the exception of Cincinnati Bell, all of them offer good dividend yields. This might be viewed as the promise of a dividend making the management be more stringent and disciplined in all areas of business planning. During this may be the case, it may as well be that these companies are trying to reward shareholders for loyalty or attract shareholders who will make investment decisions based on the safety and security of a dividend.

All of these companies are potential takeover targets for Windstream. Frontier has a short position of 18.5% of its float with 46% owned by institutions. Most of the short position can be attributed to playing the ex-dividend period for higher yield, the same can be said for Alaska, which has a short position of 20.3% short position and is 60% owned by institutions. Cincinnati has a short position of 12.8% of its float and the shares are 90% owned by institutions. Cincinnati has a promising future, nevertheless right now, with a negative book value and no dividend, it is difficult to find a reason to be in this stock. The institutions who are large owners are very likely shopping this company for acquisition by a larger entity. Its business mix is better for Windstream, which can handle an acquisition of this size.