While Uniti is facing a new transition as it prepares to merge with Windstream, the provider is hotly pursuing dark fiber solution sales to hyperscaler data center operators.
Speaking during the Bank of America Leveraged Finance Conference 2024, Paul Bullington, CFO of Uniti, said that its wholesale fiber services business opportunities are continuing to bubble up.
Proof of this was seen during the third quarter. Uniti reported consolidated bookings of nearly $1 million in monthly recurring revenue.
“We like diverse demand coming from all customer segments—wholesale, wireless, and direct-to-enterprise,” he said. “Now we’re seeing significant demand from hyperscalers, particularly with the investment in AI and cloud infrastructure.”
Hyperscalers drive dark fiber
While Uniti is seeing a growing demand for lit services like Ethernet and wavelengths, hyperscalers drive their dark fiber sales.
“What we’re seeing with the hyperscalers deploying AI is largely driving dark fiber demand,” Bullington said. “Those dark fiber deals are structured as classic IRUs and are a prepaid lease.”
Uniti offers various options on the dark fiber front, including lease and Indefeasible Rights of Use (IRU) options. Typically, IRU agreements span 20 to 30 years.
With these dark fiber IRUs, a recurring revenue stream will be associated with maintenance and collocation for 20 years. A large percentage of the cash would come up front and is recognized over those 20 years of the lease.
“This IRU structure can be nice because that upfront cash comes in, and it can offset capital requirements to deliver these networks, so the economics of these agreements generally works well with the lit recurring revenue model,” Bullington said.
He added there are other times when it could be a strategic sale where “the revenue would be recognized up front, and generally, that’s the accounting treatment, but would still be an IRU structure.”
Establishing hyperscaler anchor tenants
Uniti has used the hyperscaler customer base to establish anchor tenants in specific markets.
This process is paying off.
In October, Uniti won a 20-year contract award from a strategic hyperscale customer in Montgomery, Alabama, one of Uniti’s existing 30+ enterprise markets. With this hyperscaler contract award, Uniti will construct 90 route miles of new multi-conduit systems and high-strand count fiber cables.
This new route will connect key data center locations and points of presence in a ring configuration within the Montgomery metro area. Uniti expects to complete the fiber rings throughout late 2025 and into early 2026.
Uniti has established a sales force that can identify opportunities with hyperscaler customers and how to get them onto the customer list.
“We have a sales force to stay close to hyperscalers and understand how we can help serve them,” Bullington said. “We’re not waiting for these opportunities to land in our inbox.”
He added that the large hyperscalers continually evaluate the fiber options available in the markets where they are building new data centers.
“The hyperscalers are very knowledgeable about the landscape, know who the big players are, and know who has fiber where,” Bullington said. “When they have a project in a particular area, they are seeking out Uniti and are seeking us out, so the demand is being driven both ways.”
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Sean Buckley
Sean is responsible for establishing and executing the editorial strategies of Lightwave and Broadband Technology Report across their websites, email newsletters, events, and other information products.