Uniti will extend Windstream Kinetic’s FTTH footprint after merger closes
As Uniti moves forward with its merger with Windstream, which was initially launched in May, the service provider is eying ways to accelerate the fiber-to-the-home (FTTH) build.
The merger combines Uniti’s national wholesale-owned fiber network with Windstream’s Kinetic FTTH broadband business to create what it says will become an insurgent fiber provider.
As of the end of the third quarter, Windstream reported that it had connected about 1.6 million premises with FTTH service and added 136,000 new customer premises.
During the Bank of America Leveraged Finance Conference 2024, Paul Bullington, CFO of Uniti, said the provider is eager to expand its footprint further as it revisits the ILEC strategy.
“We’re going through a full evaluation of the opportunities there, particularly the fiber build plan and the expansion of that fiber build plan to get to more and more homes,” he said. “Windstream has been already moving in this business in this direction, but we’re going to lean into an insurgent approach that reflects the idea that many of the leaders at Uniti came from competitive fiber companies that earned our chops in the insurgent markets.”
While he advised that the Unit share additional details about its specific plans next year, he added that the insurgent approach will influence the go-to-market strategy, customer service, and the fiber building plan.
“As we evaluate the assets, we think there are an additional million homes above the 1.9 million locations in the base Kinetic build plan today, which makes good sense from a return sense to build,” Bullington said. “In the past, Windstream said a lot of those locations were left on the table because they did not have an incentive to not invest in the Uniti-owned markets.”
Retaining installation costs
As Uniti looks forward to its FTTH expansion plans, the next question is how it will maintain the cost structure for passing homes with fiber.
According to estimates, Windstream’s Kinetic spends about $600 per home passed for fiber today.
“How much it costs to pass a home with fiber is a key component of the investment thesis at Kinetic,” Bullington said.
The lower costs are driven by its existing fiber-to-the-node (FTTN) network and its in-house network construction crew, which builds out services to its communities. A high percentage of the fiber builds are being done by internal crews, enabling it to reduce costs that would be higher if it were to employ a third-party construction company.
Bullington said Windstream’s FTTN network is key. It allowed it to leverage its existing copper plant by deploying VDSL2 and bonding over an FTTN architecture.
“The fiber to the node investment they are leveraging is ubiquitous throughout what I would call those strategic markets,” he said. “These strategic opportunities are in the more developed areas, and we’ll continue to be able to leverage that to keep our costs low.”
However, as it seeks to deepen its presence in these markets, Uniti may need to hire outside installation crews, which could affect costs.
Another factor is the civil infrastructure. Markets that have more underground facilities versus aerial poles will be considered.
Nevertheless, Bullington maintains Uniti should be able to keep costs at a reasonable level.
“I would expect us to be able to achieve passings at a cost well below $1,000,” he said. “It might be a bit more than $600, but we’re going to continue to be very competitive with the efficiency of our cost per passing.”
Eying convergence opportunities
As Uniti brings the Windstream/Kinetic broadband platform into its fold, the company will continue to have opportunities to provide converged wireless/wireline services.
In September, Kinetic and AT&T announced a pact that allows consumers to bundle 5G wireless with fiber-based broadband service.
The pact offered savings for new and existing customers.
Existing AT&T Wireless customers could get Kinetic's high-speed Internet with a $20 monthly savings for two years. New Customers who switch to AT&T and Kinetic become eligible for a $20 monthly discount for two years on Kinetic High-Speed Internet service when bundled with AT&T wireless services.
While he did not rule out pushing the envelope further on convergence, Bullington said the pact with AT&T has various benefits for customers and the company overall.
“For our ongoing operations, it’s nice to have, but not a must-have in executing the Kinetic business plan of having a wireless offering,” he said. “Today, it’s a cross-sale relationship with AT&T, but it’s not a highly integrated offering.”
He added that the initial results of the AT&T Wireless relationship are positive.
“It’s a good thing for Kinetic and us because it helps in marketing and reduces customer churn,” Bullington said. “We’re off to a good start with that relationship, and Windstream chose that route versus an MVNO where they can get their wireless solution.”
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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.