Uniti's revenue from customer Windstream will drop to 50% by 2019

Uniti plans to continue M&A strategy to reduce its reliance on Windstream as its largest customer. (Image: Pixabay / geralt)

Now that Uniti has been operating as a separate company since 2015, the REIT expects that Windstream will continue to be a smaller part of its broader revenue stream as it diversifies its business lines via organic fiber builds and targeted acquisitions.  

Kenny Gunderman, CEO of Uniti, told investors during the Citi 2018 Global Property CEO Conference that it is on track to reduce its reliance on Windstream as its large customer by next year.  

Gunderman Uniti
Kenny Gunderman

“We set a marker, which we reiterated last week, that our ability to get Windstream below 50% of our revenue is achievable in 2019,” Gunderman said. “The cost of capital is a challenge, but we think it’s doable on the opportunity set that we have.”

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The company has several large and small fiber network targets it is currently pursuing.

Gunderman said that if the capital markets to fund further M&A remains challenging, Uniti has other sources it can use who are interested in making telecom infrastructure investments.

“We have a number of small and large deals in our pipeline,” Gunderman said. “Several of the larger transactions help us achieve the 50% target in one fell swoop and we also have a lot of interest in our story from private capital sources, sovereign funds in either direct investments or joint venture type structures.”

A key focus will continue to be on continuing to acquire fiber assets.

In its three short years as a separate company, Uniti has made four acquisitions—PEG Bandwidth, Hunt Telecom, Tower Cloud and Southern Light. These acquisitions have given Uniti a dense fiber network in the Southeast corridor from Texas to Florida.

“This is a region we’re excited about because it’s growing and there’s lots of economic development” Gunderman said. “There is a tremendous amount of investment being made by the wireless carriers in these areas, investments being made by the government, and lots of school E-Rate activity.”

More recently, Uniti signed a $95 million sale lease back deal with TPx. Under the terms of that deal, Uniti will gain 650 route miles of fiber assets in California, Massachusetts, Nevada and Texas.

“These are assets that are in attractive markets,” Gunderman said. “These are markets that not only do we think are essentially future proofed for whoever is using them whether it’s TPx or anyone else.

Gunderman added that the assets could also be a good fit for its own needs.

“These are markets where we can use the fiber ourselves, especially in Texas,” Gunderman said. “There are lot of really appealing things about TPx’s business, including the credit worthiness of the tenant.”