Uniti 3Q rebounds to profit of $7.5M

Firm announces Everstream deal

Uniti Group Inc. announced Monday that it generated a $7.5 million profit for the third quarter, turning the corner from losses the company has reported over the past year as it was weighed down by a lawsuit with Windstream Holdings Inc.

In addition, the company announced it will receive $135 million in cash by selling fiber assets to Everstream Solutions, which also agreed to pay another $3 million annually to Uniti to lease fiber.

Uniti reported net income of $7.5 million for the quarter ending Sept. 30 compared with a loss of $19.8 million in the same quarter last year. The company earned 4 cents per share compared with a loss of 10 cents per share in 2019.

Revenue was recorded at $258.8 million, down from $263.6 million last year.

“We had another successful quarter at Uniti with our fiber and leasing businesses both performing well,” President and Chief Executive Officer Kenny Gunderman told analysts on a conference call Monday.

The Little Rock company said the fiber assets in the Midwest and Northeast

sold to Everstream Solutions generate $24 million annually in revenue.

Uniti also has agreed to two, 20-year agreements to lease fiber in eight states to Everstream. The $3 million annual leasing arrangement includes 2% increases every year.

The fiber included in the Everstream transaction was part of assets Uniti acquired in its lawsuit settlement with Windstream. The Everstream deal “highlights the strategic value of this network to Uniti,” Gunderman told analysts on a conference call Monday.

“The demand for our fiber networks has never been higher as we continue to drive high margin, low churn, recurring revenue to provide mission-critical services,” Gunderman said.

The transaction is expected to close in the second quarter next year.

Everstream, based in Cleveland, designs and builds fiber networks that serve customers worldwide. It is owned by AMP Capital of Sydney, Australia.

“This deal reinforces the substantial value of our national network, including the fiber acquired in our settlement with Windstream,” Gunderman said.

Gunderman told analysts Monday afternoon that the company has an “expectation to pursue similar transactions in the future.”

Moreover, Gunderman said that Uniti is ideally positioned to continue investing capital to grow its operations and to seek additional mergers or acquisitions.

“The opportunity has never been better,” he said.

In May, Uniti and Windstream announced settlement of a long-running legal dispute over fiber assets Windstream was leasing from Uniti. Final approval was granted in September.

Under the settlement, Uniti agreed to invest up to $1.75 billion through 2030 to improve its network for use by Windstream. Uniti also agreed to pay Windstream about $490 million in cash and purchase fiber assets from Windstream for another $285 million.

Windstream, in turn, transferred fiber assets it owned to Uniti. Gunderman said Monday that Uniti’s leasable fiber network increased 90% because of assets it gained in the settlement.

On the pandemic front, Gunderman reported that the coronavirus has had no effect on the company’s operations. “We continue to see minimal disruptions in our businesses,” he told the analysts.

Uniti reported earnings after the stock market closed Monday. The shares fell 11 cents, or 1.15%, to close at $9.46.

Uniti, one of the nation’s largest independent fiber companies, has 124,000 miles of fiber in a network that spans 42 states.