Uniti’s Gunderman: We’re well-positioned to win our share of small cell backhaul

Uniti, a real estate investment trust focused on the telecom industry, is seeing strong demand for small cell fiber-based backhaul from its wireless operator customers.

Kenny Gunderman, CEO and president of Uniti, told investors during its first-quarter earnings call that a large majority of its Uniti Fiber unit’s revenues are from small cell contract wins.  

“Uniti Fiber started the year with strong sales, with 88% of the bookings for small cell awards,” Gunderman said during the earnings call, according to a Seeking Alpha transcript. “All four of the national carriers are requesting proposals for small cells and we are in the early innings of this new wireless network architecture.”

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Gunderman added that the company foresees strong growth in small cells, particularly as wireless operators migrate to 5G, a technology that will require a denser network of wireless radio nodes to deliver service.

“We expect demand for small cells will grow exponentially in future years as the wireless carriers roll out 5G technology,” Gunderman said. “This fiber infrastructure is the critical component to meet small cell demand and we think we are well-positioned to win our share of this growing business.”

Unlimited driving backhaul speeds

But small cells are only one part of Uniti’s overall growth in the wireless backhaul segment.

The service provider is also seeing an uptick in backhaul bandwidth requests, particularly as wireless operators engage in their latest unlimited data usage plan wars.

AT&T, Sprint, T-Mobile and Verizon have all come out swinging with their own unlimited wireless data and voice usage plans, offering users an all you can eat package driven by video and social media interaction.

“Uniti Fiber is benefiting from an increase in wireless data usage as all four national carriers are now offering an unlimited data plan,” Gunderman said. “We’ve received bandwidth upgrade orders totaling 175,000 of incremental MRR during the beginning of the year.”

Gunderman said that he sees the potential to enhance the Uniti Fiber unit’s wireless backhaul revenues.  

“In the U.S., we continue to have fruitful, holistic infrastructure interactions with wireless carriers that we believe drive deeper relationships with our customers and greater opportunities for our fiber business,” Gunderman said.

Leasing, fiber remain in line

Uniti reported that its leasing and Uniti Fiber results were mainly in line with its expectations for the quarter.

Here’s a rundown of Uniti’s key metrics:

Leasing: Uniti said its leasing segment continues to provide reliable and predictable cash flows with virtually no capex or working capital requirements and over 99% adjusted EBITDA margins. Leasing segment revenues were $170.3 million, with adjusted EBITDA of $170.1 million for the first quarter 2017. The company said leasing segment benefited in the first quarter from nearly $34 million of improvements to its network made by Windstream with their capital.

Uniti Fiber: Uniti Fiber reported revenues of $34.8 million and adjusted EBITDA of $11.6 million this quarter. The company said these results were in line with its previous guidance and include over $1.2 million of realized cost savings during the quarter. Maintenance CapEx for the quarter was $0.5 million or 2% of revenues and net success-based CapEx was $11.7 million.

Uniti Fiber ended the quarter with $740 million of revenues under contract with a nearly six year duration. Uniti said Uniti Fiber is expected to report consolidated revenues this year of approximately $198 million and adjusted EBITDA of $84 million, at the midpoint of its guidance range.

Financials: Uniti’s consolidated operating results for the first quarter were again in line with its expectations, with consolidated revenues of $211.5 million and consolidated adjusted EBITDA of $177 million.