Uniti Group (UNIT) BofA Securities 2024 Media, Communications and Entertainment Conference summary

Industry Trends and Consolidation

• Fiber-to-the-home is expected to consolidate into a few major owners, with convergence as a key theme, especially as new entrants like T-Mobile spur activity.

• Rumors of Verizon in advanced talks to acquire Frontier highlight ongoing industry consolidation.

Merger Overview and Strategic Rationale

• Uniti and Windstream are merging to form a leading fiber provider with ~$4 billion in revenue and 236,000 fiber route miles across 47 states, targeting Tier II and III markets.

• Existing Uniti shareholders will own ~62% and Windstream shareholders ~38% of the combined equity, with key Windstream investors rolling most of their holdings into the new entity.

• The merger aims to accelerate growth, improve competitiveness, and unlock synergies, with a focus on digital infrastructure services.

• The new entity will retain the Uniti name, be headquartered in Little Rock, Arkansas, and be led by Uniti’s management with board representation from both companies and Elliott.

• The combined company will suspend its common dividend, with potential reinstatement in the future, and expects to close the transaction in the second half of 2025.

Financial Profile and Growth Outlook

• The combined company reported $2.0 billion in total revenue and $916 million in adjusted EBITDA for the first half of 2024, with core fiber revenue growing 2.8% year-over-year.

• The business plan is fully funded, with cumulative free cash flow burn for 2024-2025 expected to be covered by available liquidity, and free cash flow positivity targeted by end of 2026.

• Revenue CAGR is projected at 2.1% and adjusted EBITDA CAGR at 2.3% from 2023 to 2028, with leverage expected to improve from 4.8x to ~4.5x.

• The company targets annual opex synergies of up to $100 million and capex synergies of $20-30 million post-merger.

• Recent financing and industry transactions support the company’s intrinsic value, with fiber-related EBITDA multiples ranging from 8.0x to 12.0x.