Uniti exec praises Windstream deal
Uniti Group Inc. is “very enthusiastic” about its settlement agreement with Windstream Holdings Inc., with Uniti’s chief financial officer noting the agreement opens the door for internal growth and expansion through acquisitions.
The two Little Rock companies avoided a trial scheduled for this week by announcing Monday that they have agreed to restructure a long-term arrangement outlining Windstream’s leasing of fiber and copper lines from Uniti.
That settlement “creates a very good long-term partnership for us going forward with Windstream,” Uniti’s chief financial officer, Mark Wallace, said Tuesday evening at an investment banking conference in San Francisco.
Uniti will have more ability to expand by diversifying its customer base and gain more freedom to pursue potential acquisitions, Wallace said.
Wallace’s comments were the first Uniti has made since the deal was announced and ends an extended no-comment period since the company began settlement discussions with Windstream late last year. Windstream sued Uniti in July to change the terms of the lease, which calls on Windstream to pay about $650 million annually to Uniti.
“The agreement that we’ve reached could be a real game changer for both companies going forward,” Wallace said. “We think it creates a strategic partnership for both of us.”
For now, the primary goal is to move the agreement through the approval process, which includes bankruptcy court and gaining the backing
of Windstream’s creditors. Windstream has been operating under bankruptcy protection since February 2019.
Wallace said Windstream could gain approvals and emerge from bankruptcy by August. “The sooner this could happen from our standpoint, the better,” he said.
Wallace was joined by Bill DiTullio, Uniti’s vice president of finance and investor relations, at the Morgan Stanley 2020 Technology, Media and Telecom Conference.
Once the agreement is approved, Wallace said Uniti will be better positioned for long-term growth and for “reengaging” in potential acquisitions that were being considered before the Windstream issues developed.
The agreement calls on Uniti to invest $1.75 billion over the next 10 years to improve the fiber network that Windstream leases. “We’re investing capital in new fiber builds,” Wallace said. “Those are designed to be built in markets that will be a benefit to Windstream to improve [broadband] speeds and to improve their competitive position.”
In addition, Windstream will turn over 1.8 million fiber-strand miles to Uniti, which also will acquire another 450,000 fiber-strand miles owned by Windstream. That gives Uniti ability to generate new revenue and diversify its customer base.
Regarding the $1.75 billion it will invest in fiber infrastructure, Wallace said Uniti will turn to the capital markets to raise the money and also could approach private organizations such as private equity and wealth funds.
“I’m confident we’ll be able to raise the funds,” Wallace said. “I’ve gotten a lot of good feedback.”
Uniti is scheduled to announce its fourth-quarter 2019 earnings on March 12 after the stock market closes. In a regulatory filing related to the Windstream settlement, the company said that it expects to report revenue of $1.06 billion for the year, compared with $1.02 billion in 2018.
The company expects to report net income of about $8.4 million for the year that ended Dec. 31, compared with $8 million in 2018, the filing said.
The company’s board approved a quarterly cash dividend on Friday of 15 cents per share, payable to stockholders of record on March 31. Uniti’s stock has improved slightly since the settlement agreement was announced Monday, but closed down 6 cents at $10.34 on Wednesday.