If the proposed recombination of Windstream and Uniti is completed, the combined company could win BEAD funding for fiber builds to 500,000 locations, company executives told MoffettNathanson Research analysts Nick Del Deo and William Hunt this week.
“Management is enthusiastic about the opportunity to expand Kinetic’s FTTH footprint by at least one million homes past the current 1.9 million target,” the analysts wrote in a research note. “Half of the one million homes are expected to be BEAD supported.”
Windstream has a strong focus on Tier 2 and Tier 3 markets, where locations are most likely to be eligible for BEAD funding. The company also may have a cost advantage in comparison with other companies that might want to bid for BEAD funding to serve the same locations.
The company has been touting its comparatively low average fiber deployment cost of $650 per passing. Windstream CFO Drew Smith told MoffetNathanson that the company achieves this, in part, because it already has pulled fiber to the node.
“Smith believes that Windstream’s cost to pass is 20-30% lower than it otherwise would be given its prior FTTN investments,” the analysts wrote.
Another cost advantage is that 95% of Windstream’s fiber markets are served by fiber backhaul, which the company already spent $500 million deploying.
Windstream/Uniti Recombination
It’s been 10 years since Windstream spun off some of its fiber and copper assets into a separate company, ultimately known as Uniti.
Uniti was set up as a real estate investment trust, creating certain tax advantages.
More recently, however, management of the two companies concluded that both companies would be better off if they were to recombine. In May the companies announced merger plans in a deal that is expected to close in the second half of 2025.
Management believes that the financial community will value the combined company higher than it currently values the two companies separately.
Another consideration is that the combined company would be in a better position to obtain financing for network investment via asset-backed securitiEs (ABS). In an ABS deal, fiber assets are put into a trust to secure financing at more favorable interest rates.
The AI Opportunity
Another big opportunity for the combined company potentially would involve artificial intelligence (AI).
As Telecompetitor has previously reported, AI is expected to rely heavily on data centers in Tier 2 and 3 markets. The reason is that AI applications will require more power in comparison with today’s data center applications, and Tier 2 and 3 markets are most likely to have ample, and competitively priced, power.
In his discussion with MoffettNathanson, however, Uniti CEO Kenny Gunderman emphasized that he sees this as “a broad hyperscale opportunity rather than a narrow AI one,” the analysts noted.
