March 9, 2017 —
Communications Sales & Leasing (CS&L) announced that it has changed its corporate name to Uniti Group to align itself the brand names of its principal business units – Uniti Towers, Uniti Fiber and Uniti Leasing, during its fourth quarter 2016 earnings call. Uniti Group now trades under the symbol “UNIT” (NASDAQ: UNIT). The Company’s new website is www.uniti.com.
As of Jan. 31, 2017, Uniti owned 468 towers. Company CEO Kenny Gunderman said he is “cautiously optimistic” about the company’s towers, during the call. “The opportunity to build new macro towers and the United States that will be integral parts of the coming 5G investment cycle is not only an opportunity itself, but we believe will also feed additional fiber opportunities as front-haul and CRAN architectures become more prevalent through small cells and traditional backhaul,” Gunderman said.
Uniti Towers’ acquisition of the Network Management Services (NMS) tower portfolio (in Mexico, Nicaragua and Columbia) closed at the end of January for $62.6 million. At closing, the NMS portfolio included 366 operating towers and 105 towers under development, all of which we expect to be completed in 2017.
Uniti Towers projects revenue between $7 million to $8 million for full year 2017, principally from the NMS towers, with tower cash flow margins of 59 percent. Adjusted EBITDA in 2017 is expected to be near breakeven, as the company prepares for growth in the future.
“We expect Uniti Towers to win additional opportunities for build-to-suit towers in Mexico and in the United States this year,” Gunderman said. “Our Uniti Towers 2017 capital spend guidance is $25 million to $30 million, including $10 million related to the NMS development towers.”
Additionally, Uniti Towers expects $20 million of ground lease investments during 2017 at an average initial yield of 6 percent.
February 16, 2017 — Applauding Communications Sales & Leasing’s (CSAL) REIT structure, dividend yield and diversified growth strategy, Wells Fargo Securities announced today that it has commence coverage with an outperform rating.
“We expect CSAL to show nice organic growth in its fiber segment (Uniti Fiber),” wrote Jennifer Fritzsche, senior analyst. “By having many ‘tools’ in the tool box, the CSAL model should appeal as a new vendor of choice for wireless carriers as they move forward with their respective network densification initiatives.
Wells Fargo Securities believes CSAL will grow its tower portfolio network densification build-to-suit (BTS) contracts in concert with its fiber optic network buildout.
“Importantly, CSAL views towers as complementary to its fiber services and would expect any BTS opportunity to be linked to fiber contracts,” Fritzsche wrote. “We would expect CSAL will become more active in the tower sector throughout 2017 and beyond.”
CSAL acquires and constructs both wireless and wireline communications infrastructure. It currently owns 4.2 million fiber strand miles, 468 wireless towers and other communications real estate in the United States and Mexico.
“[CSAL’s] diversification is driven by opportunistic M&A,” Fritzsche wrote. “CSAL is focused on acquiring and constructing mission critical communications infrastructure, with priority being fiber (61 percent of pipeline), towers (22 percent), ground leases (13 percent), and consumer broadband (4 percent).
November 17, 2016 — CS&L announced on Monday that its U.S. and Latin American tower and tower real estate assets will operate under the brand of Uniti Towers. Including assets from the Network Management Holdings acquisition (see story above), Uniti Towers has nearly 600 macro towers and more than 1,000 ground lease or tower-ready locations.
“The Uniti Tower strategy is to acquire and construct tower and tower real estate in the United States and Latin America,” Kenny Gunderman, president and CEO of CS&L, said during the Q3 earnings call. “We will focus on markets with strong macroeconomic fundamentals, politically stable environments and strong underlying communications growth trends.
“Specifically, we will focus on competitive communications markets where numerous investment grade international wireless carriers operate and where there is strong communications infrastructure potential due to underpenetrated 4G or even 3G technology,” he added.
Uniti Tower’s strategy includes providing build-to-suit tower construction in both in the United States and Latin America.
“Particularly with the entrance of AT&T into Latin America, we believe that our strategy of focusing on fiber and towers in the United States and Latin America is highly synergistic and will drive incremental attractive growth opportunities,” Gunderman said.
Lawrence Gleason has been named president of Uniti Towers. He joined CS&L when it acquired Summit Infrastructure earlier this year. Before being CEO and founder of Summit Infrastructure, he was with a large tower company for 13 years where he managed over 20,000 towers.
“We’re pleased to have Lawrence in this role and look forward to growing the business under his leadership,” Gunderson said. “In a short period of time, we have already made great progress on our Uniti Towers strategy.”
November 17, 2016
CS&L has agreed to acquire privately-held Network Management Holdings, which owns and operates 359 wireless communications towers in Latin America with an additional 114 build to suit tower sites under development, for $65 million. CS&L’s tower business will now operate under the name Uniti Towers (see story below).
“This portfolio is a very attractive investment for our tower business with nearly 90 percent of the revenues from three investment grade major wireless carriers, and 60 percent from existing CS&L customers,” said Kenny Gunderman, president and CEO of CS&L. “All three of these customers have committed to growth and investment in substantial additional mission critical infrastructure. So we believe the opportunity to scale these relationships is material, not only in towers, but also fiber.”
Gunderman said he sees opportunity in these markets because the penetration of 4G wireless technology at 6 percent for Mexico, 8 percent for Colombia and 0 percent in Nicaragua, while the average global 4G penetration is 29 percent.
“We believe investment is required in towers, fiber and other mission critical infrastructure to enhance 4G penetration,” Gunderman said. “For example, the average towers per subscriber in these markets collectively is 50 percent to 80 percent below the world average.”
The move continues the diversification of CS&L, which purchased regional fiber providers Tower Cloud and PEG Bandwidth and formed Uniti Fiber in September. Before that, in March, Windstream Holdings spun off its assets, including fiber and copper networks and other real estate, to CS&L, which Windstream leases back for $650 million a year. At the same time, CS&L purchased 81 towers and the rights to 1,000 properties from Windstream.
“We have a significant depth in our M&A pipeline, Uniti Towers is expanding its scope of operations and Uniti Fiber is positioned to capitalize on an increasing number of organic opportunities as well as synergies provided by the combined operations,” said Mark Wallace, CS&L EVP, CFO and treasurer.
The NMS portfolio spans three Latin America countries with 313 towers in Mexico, 55 in Nicaragua, and 105 in Colombia. The entire portfolio, when completed, is expected to generate approximately $7.9 million of annual revenue.
“We continue to expect Uniti Towers to invest about $1.5 million related to our tower builds in Mexico under our current awards, excluding NMS. Ten sites have been completed to date and we expect a total of 22 towers to be completed by the end of this year. The balance should be completed by mid-2017,” Wallace said.
October 13, 2016
In May of this year CS&L purchased PEG Bandwidth, and Tower Cloud was acquired on Aug. 31 by CS&L. Subsequently, the two fiber optics companies have been merged to become Uniti Fiber, a wholly owned subsidiary of CS&L. We sat down with George Townsend, SVP, strategic projects, Uniti Fiber, to get his take on the new ownership and merger of Tower Cloud and PEG Bandwidth.
What is the impact of the acquisition by CS&L and the subsequent merger on TowerCloud?
Townsend: We now have the funding behind us of CS&L, which was spun off from Windstream into a REIT. The REIT collects $650 million a year in annual rental payments from Windstream and they wanted to put that capital to use and grow it.
Tower Cloud was in four states, Florida, Georgia, Alabama and South Carolina. We were going deep and expanding, but PEG had a broader footprint in roughly 15 states, moving up the Northeast seaboard, Illinois and in the South Central United States. The combination of our footprints makes us a much stronger company.
Will you continue to grow?
Townsend: We have plans to expand to a nationwide network over time, so there will probably be more M&A activity as we go forward. Our scale will grow tremendously over the next two to three years. Our goal is to get as many infrastructure miles in terms of dark fiber, lit assets, number of building connections as we can to provide for the needs of our customers.
Who are your customers?
Townsend: Both PEG and Tower Cloud began as strictly fiber to the tower businesses and as our networks expanded we developed, over the past two to three years, additional verticals to sell into, such as large bandwidth wholesale and enterprise companies. We also provide much needed connectivity between rural markets and the larger metro areas. Today, towers account for approximately 80 percent of our revenue and wholesale/enterprise solutions account for 15 to 20 percent of the total. I think it will grow over time to a much larger percentage.
What does this merger mean to the tower companies?
Townsend: We are going to be able to provide more infrastructure, more customized solutions for them as they move from their current lit footprint to wanting dark fiber and C-RAN designs. We will have the capital at a lower cost to design more custom solutions, tie multiple markets together and provide a better over experience for them.
How excited are you about the growth of small cells and DAS?
Townsend: I think that is a huge upside opportunity for us and one that we are laser focused on. We have been looking at small cells for two years now. We built out a 22-node small cell system across the 22-acre Olympic Centennial Park in Atlanta for Verizon a couple of years ago. We just added the second tenant, AT&T, about a month ago.
How does the merger impact your small cell business?
Townsend: We are doing full turnkey small cell solutions for carriers today. We will continue to provide those solutions across these vast markets that we have now. And we think the denser footprint will allow us to be a better service provider for the wireless community. Our denser fiber footprint gives the RF teams more opportunities to design around the networks we have in place, or they can locate near enough to us that we can build to them.
Can you connect multiple carriers’ small cells on a single fiber optic run?
Townsend: It’s not uncommon for us to accommodate multiple carriers’ small cells on a fiber path, if we have enough fiber available or we overbuild it.
What is CS&L’s vision of the wireless future?
Townsend: I think CS&L’s leadership team is young, aggressive and well-funded. They are looking at acquiring ground leases and tower assets, and they are looking at us to provide our expertise in lit fiber networks serving both the wireless carriers and the wholesale and enterprise entities. We are looking at small cells as a key growth area for us. We are also looking at the internet of things, which is going to be a huge opportunity . With dense fiber assets and scale, we are going to be able to get to more and more locations as that technology develops. We are also connecting data centers to other data centers, as well as connecting wholesale and enterprise customers to data centers.