Report: Windstream, Uniti buys eyed

Fiber optic cable is shown inside what was then Alltel at Pinnacle Point in Rogers in this February 2003 file photo. Within a few years, Alltel would spin off its wireline business into Windstream Holdings. In 2015, Windstream spun off Uniti Group Inc. (Arkansas Democrat-Gazette file photo)
Fiber optic cable is shown inside what was then Alltel at Pinnacle Point in Rogers in this February 2003 file photo. Within a few years, Alltel would spin off its wireline business into Windstream Holdings. In 2015, Windstream spun off Uniti Group Inc. (Arkansas Democrat-Gazette file photo)

Windstream Holdings and Uniti Group Inc., both based in Little Rock, could be reunified if the plan of a private equity group goes through.

The Wall Street Journal reported Wednesday that Zayo Group LLC of Boulder, Colo., is trying to buy the companies. Citing unnamed sources, the newspaper said the talks began in June, with sale terms of about $3.5 billion, or $15 a share, being discussed initially, but that they have recently stalled.

The leaders of the Arkansas companies Thursday largely declined to comment.

Uniti is a real estate investment trust engaged principally in the acquisition and construction of infrastructure in the communications industry. It is publicly traded. Its stock closed Thursday at $14.40, up $1.39.

Uniti was once part of Windstream -- with both rising from Alltel Corp. -- but spun off into a separate company in 2015, with Windstream paying Uniti for access to its broadband infrastructure.

"Zayo's owners and Windstream believe bringing the two businesses back together would accelerate the build-out of broadband to as many as a million more households by redirecting the nearly $700 million Windstream spends each year on lease payments, some of the people said," according to the Journal. The newspaper put the companies' combined debt at about $7 billion.

The annual lease payments to Uniti actually are $655 million, a Windstream spokesman said Thursday.

Windstream emerged in September from a voluntary Chapter 11 bankruptcy filing in 2019. It sued Uniti in 2020, alleging the original lease agreement was overpriced and financially burdensome. A settlement in the lawsuit resulted in a new long-term lease for Windstream's access to Uniti's network infrastructure.

In emerging from bankruptcy, Windstream became privately held by hedge fund Elliott Management Corp. and other former creditors.

"Without commenting on any specific potential transactions, any plan that will allow us to accelerate and deepen our fiber build will be a positive for Windstream and its customers," Tony Thomas, Windstream's president and chief executive officer, said Thursday by phone.

"After discussing internally, we are going to offer no comment," Kenny Gunderman, Uniti's president and CEO, said in an email.

Windstream, which is based in west Little Rock, has 1,125 employees in the state, including 950 in Central Arkansas, and about 10,900 companywide, a Windstream spokesman said.

Uniti has about 750 employees across the country, with about 70 at its corporate headquarters in Little Rock's Riverdale neighborhood, a spokesman said. Uniti owns 123,000 route miles of fiber conduit and more than 7 million strand miles (route miles multiplied by the number of fiber strands), with more than 25,000 customer connections, according to its website.

Windstream has been buoyed in recent months by state and federal grants to expand broadband internet service to rural areas in a number of states, including Arkansas.

On Wednesday, the company received most of the $554 million in awards from the Federal Communications Commission's Rural Digital Opportunity Fund for broadband development. The FCC awarded Windstream $330 million for projects in 14 states, including about $57 million in Arkansas. The FCC listed 121 Windstream projects in Arkansas.

Windstream applications in four other states are pending, the company said.

"What our awards signify is Windstream's commitment to building fiber in rural America," Thomas said. "We were a very large recipient of RDOF [Rural Digital Opportunity Fund] funds, which we'll match with our own private investment dollars, to build broadband in rural America, including here in Arkansas."

Windstream also has been a regular recipient of the state's broadband grants, including a $10.8 million grant announced last month to expand service across Grant County, benefiting some 6,380 homes and businesses. Windstream will invest $7.2 million of its own. It also received grants at the time for broadband expansion in Carroll, Faulkner, Perry, Searcy, Sevier and Van Buren counties.

Those grants are from the state's share of the federal American Rescue Plan Act of 2021 and are administered by the Arkansas Rural Connect Broadband Program.

The company announced in May it will expand its own fiber-construction program in Arkansas and other states, creating 1,000 jobs.

Windstream also received nearly $5 million in Arkansas Rural Connect grants in 2020 that were funded through the federal Coronavirus Aid, Relief, and Economic Security Act. That enabled Windstream to expand broadband to about 1,600 households and small businesses in Cleburne, Dallas, Montgomery and White counties. Windstream contributed almost $1 million to the projects, which were completed this year.

In August, Uniti reported a slight profit in the year's second quarter after reporting a loss in the same quarter a year ago. Uniti reported net income of $48.6 million, or 20 cents per share, for the quarter, compared with a $588.2 million loss, or $3.06 per share, for the same period last year. Total revenue was up slightly to $268.2 million compared with $266.8 in the second quarter of 2020.

The real estate investment trust reported funds from operations of $106.7 million, or 41 cents per share.

Uniti also said it had closed on the sale of its Northeast fiber operations to Everstream Solutions of Cleveland, receiving $135 million in cash. The deal included two 20-year agreements for Uniti to lease fiber in eight states to Everstream.

Uniti will report its 2021 third-quarter results Nov. 4 before the markets open.

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