Uniti Group (UNIT) Nareit REIT Week: 2024 Investor Conference summary

Strategic transformation and merger rationale

• Uniti and Windstream are merging to form a leading fiber provider with approximately $4 billion in revenue and 217,000 fiber route miles across 47 states, targeting Tier II and III markets.

• The merger requires de-REITing and suspension of dividend due to insufficient REIT-eligible income and better capital allocation to fiber investments, while some REIT status may be retained at the fiber subsidiary level.

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

• The merger creates a fully funded business plan, with leverage initially around 4.8–5x, and aims for positive cash flow by 2026 after two years of planned cash burn.

• No significant regulatory hurdles are anticipated, with deal closure expected in the second half of 2025, pending shareholder and regulatory approvals.

Business model, market strategy, and growth drivers

• The combined company will have three business units: Kinetic (copper-to-fiber, ~50% EBITDA), fiber infrastructure (~30% EBITDA), and managed services (non-core, potential divestiture).

• Strategy centers on building fiber in tier 2 and 3 markets with low competition, aiming for early market entry and high initial penetration rates.

• Kinetic achieves industry-leading build costs and ARPU, benefiting from internal construction teams and prior investments in fiber-to-the-node.

• Federal and state subsidies, including BEAD and RDOF, are key to expanding rural fiber coverage, targeting up to 60% footprint coverage with incremental funding post-2026.

• Wireless carriers remain important wholesale customers, with fixed wireless seen as both a challenge and an opportunity for backhaul revenue.

Financial profile and capital allocation

• The combined business plan is fully funded with existing liquidity, and the company expects to be free cash flow positive by the end of 2026.

• Windstream shareholders will receive $425 million in cash, $575 million in preferred equity, and common shares, plus non-voting warrants for up to 6.9% of the combined company.

• The company will suspend its common dividend, with potential reinstatement considered in the future.

• Net leverage is projected to improve from 6.0x to 4.8x in 2023, with further improvement expected as growth and free cash flow increase.

• The merger is expected to deliver annual opex synergies of up to $100 million and capex synergies of $20–30 million.