Uniti Group’s Earnings Call: Fiber Growth & Strategic Moves

Uniti Group ((UNIT)) has held its Q3 earnings call. Read on for the main highlights of the call.

In the recent earnings call, Uniti Group conveyed a mixed sentiment, celebrating notable achievements while acknowledging some challenges. The company reported strong fiber revenue growth and a successful merger with Windstream, which has bolstered its position in the fiber market. However, it also faced hurdles such as permitting delays and a decline in legacy revenue, alongside high churn rates. Despite these challenges, Uniti remains focused on operational improvements and strategic initiatives to drive future growth.

Merger with Windstream

The successful merger with Windstream was a key highlight of the earnings call. This strategic move has significantly enhanced Uniti’s position as a leading fiber provider, expanding its national wholesale fiber footprint. The merger is expected to provide Uniti with a competitive edge in the market, enabling it to capture a larger share of the wholesale fiber market.

Strong Fiber Revenue Growth

Uniti achieved a remarkable 13% growth in fiber revenue, marking the highest number of fiber gross adds ever recorded. The company also reported the highest net adds in two years at Kinetic, demonstrating strong demand for its fiber services. This growth is a testament to Uniti’s successful execution of its fiber strategy.

Operational Improvements

The company has made significant strides in operational efficiency, recording the highest first call resolution ever at Kinetic and achieving the lowest transfer and dispatch rates in over two years. These improvements reflect Uniti’s commitment to enhancing customer experience and operational performance.

Recognition as Best Connectivity Provider

Uniti was named ‘The Best North American Connectivity Provider’ by Capacity Media, a recognition that underscores its leadership and excellence in the connectivity space. This accolade is a testament to Uniti’s dedication to providing top-tier connectivity solutions.

Increased Hyperscaler Activity

The hyperscaler funnel grew by approximately 13% since the second quarter, with numerous large deals being booked. This increase in activity highlights Uniti’s ability to capitalize on the growing demand for hyperscaler services, positioning it for further growth in this segment.

Financial Improvements

Uniti reported improved fiber penetration rates and a 10% year-over-year increase in fiber ARPU. The company also reduced its net leverage to between 5.5x and 6x by the end of the year, reflecting its focus on strengthening its financial position.

Delays in Permitting

The company faced delays in permits and locates, particularly in subsidized markets, which affected the pace of its fiber build. These delays pose a challenge to Uniti’s expansion plans, but the company is working to mitigate these issues.

Legacy Revenue Decline

Uniti experienced a decline in legacy revenue, with consolidated pro forma revenue down approximately 6% year-over-year. This decline was primarily driven by the reduction in legacy TDM services and Uniti Solutions, highlighting the ongoing transition from legacy to fiber services.

High Consumer Churn Rates

Higher than expected churn rates in fiber residential customers were noted, with losses mainly to cable competitors. This challenge underscores the competitive nature of the market and the need for Uniti to enhance its customer retention strategies.

Forward-Looking Guidance

Looking ahead, Uniti provided detailed guidance on its future strategy and performance metrics. The company aims to pass 3.5 million homes and reach 1.25 million fiber subscribers by 2029. It plans to significantly increase its third-party construction crews to 400 by Q2 2026, indicating a ramp-up in its fiber build strategy. Uniti also projects that consolidated fiber revenue will exceed 50% of total revenue by the end of 2026, with expectations for revenue and adjusted EBITDA growth starting in 2027.

In conclusion, Uniti Group’s earnings call reflected a balanced sentiment of optimism and caution. The company celebrated significant achievements, such as strong fiber revenue growth and a successful merger, while also acknowledging challenges like permitting delays and high churn rates. Uniti’s forward-looking guidance suggests a strategic focus on expanding its fiber footprint and improving financial performance, positioning it for future growth in the competitive fiber market.