Through the first six months of this year, Windstream has deployed fiber to approximately 100,000 new locations to enable gigabit-capable services. Due to the network upgrades, Windstream has seen an influx of more than 40,000 net new subscribers in the first six months of 2020 for its Kinetic broadband service. Windstream said it had completed its ninth consecutive quarter of broadband subscriber growth.
Windstream CEO Tony Thomas said at the start of this year that his company would focus on building out fiber-based gigabit speeds for its residential and business customers. In the first quarter, Windstream added a record number of 18,000 new Kinetic broadband subscribers with 9,900 signing up in March alone. As Windstream invests in more fiber, Thomas said during the earnings call that there was a lot of headroom for Windstream to increase its broadband speeds and customer subscribers for tiers over 25 Mbps and 1-Gig.
In January, Windstream Wholesale teamed up with Infinera to add 1,000 miles of long-haul fiber for a route that serves the Pacific Northwest. Windstream has been using a combination of FTTP, DOCSIS, fixed wireless, and traditional xDSL to increase its broadband speeds.
As it competes against cable operators such as Charter Communications in its footprint, Windstream will be adding even more fiber going forward. As part of a lease re-negotiation, Uniti Group agreed in March to invest up to $1.75 billion in growth capital improvements, including "long-term fiber" and related assets in certain Windstream CLEC and ILEC properties.
Thomas previously said that Windstream would use some of that investment to deliver 1 Gig internet speed to approximately half of its Kinetic broadband footprint that serves consumers and small businesses.
Uniti will also pay Windstream approximately $490 million and buy certain unused and underutilized dark fiber assets from Windstream for an additional $285 million rights of use (IRU) rights of contract, which currently generate about $21 million in annual EBITDA, and its rights to use 1.8 million fiber strand miles currently leased by Windstream that are either unutilized or utilized for the dark fiber IRUs being transferred.
Windstream has operated under the cloud of Chapter 11 bankruptcy since February of last year after it lost a legal battle with New York hedge fund Aurelius Capital Management over whether Windstream had defaulted on bonds by spinning off the Uniti Group four years ago.
As part of that spinoff, Windstream transferred copper-based network assets to Uniti, which Windstream leased back from Uniti to serve its 1.4 million residential and business customers across its 18-state footprint. Windstream was paying $54 million per month to Uniti for access to Uniti's network assets.
The master lease with Uniti was set to expire in 2030, and had an annual rent of approximately $659 million. Windstream filed a complaint against Uniti on July 25 that sought to re-characterize its relationship with Uniti from a lease to a financing arrangement.
For months, Windstream and Uniti couldn't come to an agreement on the terms of the master lease and were headed to a court date earlier this year before agreeing to new terms in early March. Windstream's plan for ditching Chapter 11 received a boost in May when Judge Robert Drain, of the U.S. Bankruptcy Court for the Southern District of New York, approved Windstream's settlement agreement with Uniti Group.
The company's reorganization plan allows Windstream to trim its debt by more than $4 billion and reorganize its governance, which includes naming some of its creditors to seats on the company's new board of directors. The reorganization plan eliminated junior bondholders who were owed close to $2.4 billion, converted some senior debt to equity and made Elliott Management Windstream's largest shareholder.
Last month, Judge Drain confirmed Windstream's plan for reorganization after a two-day hearing. Windstream expects to complete the financial restructuring process and then emerge as a privately-held company in late August.