Uniti Group Swings Back to Third-Quarter Profit

Uniti Group Swings Back to Third-Quarter Profit

Uniti Group Inc. of Little Rock swung back to a profit in the third quarter, reporting on Monday net income of $7.5 million, or 4 cents per diluted share.

The publicly traded real estate investment trust (Nasdaq: UNIT) reported a loss of $19.8 million, or 10 cents per diluted share, in the same quarter last year. 

Income for the third quarter of 2020 included a $22.9 million pre-tax gain from the $168 million sale of an ownership stake in the entity that controls Uniti's Midwest fiber network assets. The buyer was Macquarie Infrastructure Partners. Quarterly income also included $20.8 million in transaction-related and other costs. 

But the company’s total revenue decreased year-over-year, to $258.8 million from $263.6 million. Uniti Leasing reported revenue of $182.4 million for the third quarter, and Uniti Fiber contributed $76.4 million in revenue. 

Uniti sold its third business unit, its U.S. tower business, in June to Melody Investment Advisors LP for a total cash consideration of $220 million. So the company recorded no income from that unit this quarter, although it has retained an investment interest in the tower business through a Melody affiliate.

“Our fiber and leasing businesses continue to perform exceedingly well. Install activity during the quarter at Uniti Fiber remained robust reflecting the strong demand we continue to see for our wireless and non-wireless service offerings,” President and CEO Kenny Gunderman said in a news release. "At Uniti Leasing, we continue to drive additional lease up on our national fiber network. This was reflected in the Everstream transaction we are announcing today, reinforcing the substantial value of our national network, including the fiber Uniti acquired the rights to in its settlement with Windstream.”

Uniti announced on Monday that it will enter into two 20-year lease agreements with Everstream Solutions LLC of Cleveland, Ohio. Everstream, which is majority owned by AMP Capital of Sydney, Australia, will lease Uniti-owned fiber that spans eight states and covers over 10,000 route miles and 220,000 fiber strand miles for about $3 million per year.

In addition, Uniti will sell a portion of Uniti Fiber’s Northeast operations and certain dark fiber contracts acquired as part of the Windstream settlement to Everstream for total cash consideration of $135 million. The operations and contracts it acquired currently generate about $24 million of annual revenue.  

The deal is subject to regulatory and other approvals; it is expected to close in the second quarter of 2021.

Gunderman also said, “The demand for our fiber networks has never been higher as we continue to drive high margin, low churn, recurring revenue to provide mission critical services.”

Uniti is a separate company created when Windstream Holdings Inc. of Little Rock spun off its fiber and copper assets in 2015. In September, Windstream emerged from bankruptcy, officially restructured as a private company and with a court-approved settlement between the two companies.

Previously, Windstream had paid Uniti about $659 million per year for access to telecommunications infrastructure and other assets that power its business. Per the new settlement, Uniti will invest $1.75 billion in Windstream’s network so that Windstream can deliver 1-gigabit-per-second speeds to more than half its Kinetic footprint. Uniti will also pay Windstream about $490 million and purchase certain unused and underused dark fiber assets from Windstream for an additional $285 million.

During the quarter, Uniti Leasing deployed $30.5 million toward growth capital investment initiatives, including $29.1 million as part of the settlement.