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Windstream Corp. (WIN) said Tuesday it agreed to acquire NuVox Inc. in a deal valued at $643 million, another illustration of the consolidation in the rural telecommunications industry.

Since May, Windstream has scooped up three smaller rural telcos in deals with a combined value of more than $1.1 billion. For privately held NuVox, Windstream will pay $280 million in cash, issue $183 million in stock and assume $180 million in debt. The company plans to use its existing cash and tap its revolving credit line to fund the deal.

Windstream and other rural telcos are scrambling to buy up each other to boost size and pass their sizeable capital expenditures across a wider base of customers and gain purchasing power when buying telco gear. The telcos continue to face pressure as cable providers poach customers with their own rival phone services, while other consumers cancel their lines to go solely with the cellphones. As such, Windstream Chief Executive Jeff Gardner told Dow Jones Newswires he expects consolidtion to continue in the industry.

Tuesday's deal for NuVox also brings a sizeable business presence for Windstream.

"We've been talking about focusing on the business and broadband space," Gardner said. "After the deal, over 50% of our mix will be in business and broadband. That goes a long way towards our strategy."

The deal, which is expected to close in the first half of next year, is expected to save $30 million in annual operating expenses and capital expenditures, the company said. It is expected to add free cash flow in the first full year of combined operation, as well as lower the company's dividend payout ratio. The boards of both companies have approved the deal.

NuVox brings to the table operations in 16 states and roughly 90,000 business customers. Windstream operates in 16 states and boasts 3 million access lines.

In May, Windstream entered into an agreement to buy D&E Communications Inc. (DECC) for $159 million in cash and stock, in addition to absorbing $171 million in debt. In September, the company agreed to buy Lexcom Inc. (LXCM) for $141 million in cash.

Despite the number of pending deals, Gardner said he wasn't concerned about any integration hiccups.

"This team has done a lot of deals," he said. "We've got a great history." -

Windstream shares were down 0.8% to $9.71 early Tuesday.

Windstream isn't the only telco in the M&A game. Frontier Communications Corp. (FTR), is in the middle of acquiring a swath non-essential wireline assets from Verizon Communications Inc. (VZ).

Earlier Tuesday, Frontier reported third-quarter net income of $52.2 million, or 17 cents a share, up from a year-earlier profit of $47 million, or 15 cents a share. Results included a one-cent charge related to acquisition costs.

Revenue, however, fell 6% to $526.8 million on continued access line declines.

Wall Street, on average, estimated earnings of 13 cents a share on $530 million in revenue.

"Despite a slight margin improvement, overall, results were generally disappointing," said J.P. Morgan analyst Mike McCormack.

There remains some concern over whether the telcos will be able to handle the added debt related to these deals after Fairpoint Communications Inc. (FRCMQ) filed for bankruptcy protection. The company was saddled with overwhelming debt after buying Verizon's New England wireline assets early last year.

Gardner, however, said the company's debt ratio actually improves after the NuVox deal.

"We're in a great shape from a balance sheet perspective," he said.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com

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