Though further consolidation is needed in the rural telecom carrier space, it will probably have to wait until next year, when the credit environment improves, according to Jeff Gardner, CEO of Windstream, a large, rural telco.

“Smaller companies that were contemplating possibly selling their companies will pull that in and think about doing that next year as opposed to this year,” Gardner said at an investor conference this morning. “Because everybody’s focused on these leverage buyout deals that are going to market between now and the end of the year, so I think you’ll see a slowdown related to that. It’s going to be sellers determining there’s a better market environment for them to get the best price in 2008 versus now.”

Last month, shareholders of Alltel--which created Windstream by spinning out its wireline business—approved the sale of that company to GS Capital Partners, the private equity arm of Goldman Sachs.

“The high-yield market is not really there today,” Gardner said. “If it was, interest rates would be much higher than they were even six months ago.”

However, Windstream has been able to convince state regulators that taking on more debt in order to make acquisitions can yield benefits in terms of broadband penetration for those states’ residents.

“When we went in front of [public utilities commissions] and talked about leverage…they were initially focused on investment grade,” Gardner said. “We convinced them that there are many fine, good, quality companies generating great cash flows with double-D ratings. We were successful in convincing regulators we’d do a great job running these markets. They’re trying to get broadband to as many constituents as they can, and we’re trying to do the same thing.”

In June, Windstream said it would acquire another rural telco, CT Communications, for about $585 million.

“Consolidation still needs to take place,” Gardner said. “One of the biggest opportunities to create value in this space is to create synergies through acquisitions. That hasn’t changed. It may pause a little as we deal with this impending credit crisis.”