Q4 2019 Earnings Call
[music].
Today, a webcast of this call will be available on the company's website www Dot unity Dot com beginning March 12, 2020 and will be will remain available for 14 days at this time all participants are in listen only mode participants on this call will have the opportunity to ask questions. Following.
The company's prepared comments the company would like to remind you that today's remarks to include forward looking statements and actual results could differ materially from those projected in these statements factors that could cause actual results to differ are discussed in the company's filings with the FCC the companies.
Marks this afternoon will reference slides posted on its website and you are encouraged to refer to these materials. During this call discussions. During this call will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles reconciliation.
Non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the Companys current report on form 8-K, D. today I would now like to turn the call over to Unity group's Chief Executive Officer, Kenny Gunderman. Please. Please go ahead Mr. government.
Thank you.
Good afternoon, everyone. Thank you for joining.
Please turn to slide four in our presentation.
Before I review, our operational performance for fourth quarter and full year 2019, I'd like to first address our recently announced agreement with Windstream.
The agreement Impresslocal when Union Windstream has significant strategic value for unity as it positions our company with a true national fiber footprint.
Sure as further upgrade and expansion of and that work in the coming years with additional fiber deployments backed by our commitment to invest up to 1.75 billion of capital in unity own windstream waste assets, which will significantly enhance the value of our network today at renewal.
We look forward to working with all involved parties as we focus on enhancing windstreams competitive position.
Financial performance and the network Windstream leases from unity.
As we've repeatedly said for sometime now we were committed to reaching a mutually beneficial outcome for both unity in Windstream and we believe this agreement to change that.
We're also announcing today, we agreed to sell 486 of our 672 U.S. towers located across 32 stage and are simultaneously entering into a strategic arrangement with <unk> valued wireless infrastructure provider to continue to build towers and U.S.
This transaction similar to the Celebre, Latin American tower business, and U.S. Grammys portfolios and the sale of our unity fiber Midwest operations realizes substantial value for unity in our stock holders well recycling capital at a highly attractive valuation.
I'll provide more details on the Windstream agreement and the sell the U.S. towers later in my prepared remarks.
As we began 2020 I want to reiterate unities priorities that we laid out last quarter.
We continue to drive high margin low churn recurring revenue and all of our business units, while deemphasizing some existing operations that do not fit our core strategy.
Such as our non core non strategic construction business and our residential see like business called talk America.
All of which are non readable low margin volatile and largely nonrecurring businesses.
We're also continuing to transition revenue from short duration lit contracts to long duration, dark fiber agreements and pursuing sale leaseback, an opco propco opportunities.
I was substantially de risk our business.
Second.
We have now completed most of our existing dark fiber major dark fiber in small cell builds.
This year will be pivotal pivotal for uniti fiber as we position as we transition from building large anchor wireless networks to accelerating that lease up of that infrastructure with enterprise.
He rate and government customers at attractive cash flow yields and substantially less capex.
Our combined you any leasing and unity fiber networks are approximately only 30% utilized today and collectively represent substantial lease up potential.
Third what the volatility associated with the Windstream litigation now mostly behind US we can now prioritize again pursuing larger accretive opportunities in our proprietary M&A funnel.
Well, well, we will continue to source and execute on attractive bolt on acquisitions, we will again focused on transformative transactions with attractive cash flows that require very little to no incremental capital.
Lastly, we expect continued improvement in the quality and diversification of our revenues and cash flows as a result of the settlement agreement.
Windstream will be substantially.
We'll be a substantially healthier tenant along with the already high quality of our non wishing customer base.
Our $9 billion of revenue under contract and companywide churn of West end, 0.5% represents a solid base for a truer infrastructure valuation.
Turning now to our operational results.
You do fiber sales bookings in the fourth quarter were approximately point Ninemillion November or one of our highest levels of bookings activity ever.
Approximately 60% of our sales bookings in the quarter came from the four national wireless carriers, primarily reflecting the previously mentioned contract with a major wireless carrier to deploy 800, combined macro backhaul and small cell sites over the next three years across our southeast footprint.
Adding 6 million of annual EMR once all sides are delivered.
We also signed the contract during the quarter with one of our major wireless carriers to deploy dark fiber to approximately 55 backhaul to the tower sites over the next two years.
That will further densify one of our existing southeast markets.
This contract represents annual EMR of point, Fivemillion, and a total contract value of 10 million or.
Both of these opportunities are highly synergistic with our existing network ample will provide substantial lisa potential over the next several years.
The remaining 40% of our sales bookings during the quarter came from local enterprises government schools wholesale.
As we previously mentioned, we continue to expect non wireless bookings to comprise a substantial portion of our normal course bookings going forward as we continue to ramp the lease up of our fiber networks.
Unity fiber and saw a point 7 million a bit more ore during the fourth quarter.
Before for full year 2019, we installed 3 million of them are up 20% from 2018 levels.
During the fourth quarter, 50% of gross installs related to wireless.
With 40% of gross installs coming from dark fiber backhaul in small cell projects.
45% related to non wireless opportunities and 5% related to bandwidth upgrades.
We remain on track in the third quarter to deliver E rate services with a large metropolitan School district in Florida that will add over 100000 as or more or.
Total churn for the quarter was point 3 million, resulting in a monthly churn rate of 25% for Uniti fiber.
Disconnect term was 0.4% for the quarter, primarily driven by lit backhaul disconnects.
As we mentioned last quarter, we expected churn in the fourth quarter to be comparable to the third quarter due to churn from lift that call sites converting to dark fiber.
Most of the churn related to lit sites converting to dark fiber that was expected to occur in the fourth quarter is now expected to be realized in the first half 2020.
Due to delays and our customers disconnecting the lift size.
Coupled with several customers returning <unk> returning numerous sites with us at a discount we expect turned to be somewhat elevated for the first half of this year.
We expect turned to return to more normalized levels and the second half of 2020 with monthly churn averaging 1% for the full year.
Unity leasing we continue to build on the momentum, we exited 2019 with and pursuing additional lease up opportunities.
The utilize our existing fiber network as well as pursue larger scale sale leaseback, an opco propco transactions.
We continue to actively work several opportunities with a well diversified customer base customer base that includes wireless carriers national and regional cable providers and global content providers.
As an example, we recently signed a 20 year dark fiber argue with a large international carrier to deliver a customized and diverse long haul dark fiber solutions.
Utilizes both existing unity leasing fiber as well as unity owned Windstream lease fiber.
The initial deals before long haul dark fiber routes that will span over 2000 route miles represents a total contract value over $28 million.
We expect to deliver most of the initial routes by the end of the third quarter of this year.
We continue to add several new route orders with this customer over the next two years.
With that I'll now turn the call over to Mark Thanks, Kenny.
I'll focus my remarks. This afternoon in three areas first a brief review of our fourth quarter full year 2019 performance second an overview of our 2020 outlook on a consolidated basis cans for each business unit. There are a number of items affecting comparability of our year over year results I'll try to highlight the key items in my remark.
The last I'll comment on our balance sheet capital structure and path forward. Following the agreement in principle, we reach windstream.
Turning to slide five for the fourth quarter, we reported consolidated revenues of 269 million consolidated adjusted EBITDA of 203 million.
CFO attributable to common shares at 102 million in a AFFO per diluted common share of 48 cents.
Net loss attributable to common share for the quarter was 11 million or six cents per diluted share and included approximately $15 million and transaction related and other cost.
Starting with unity leasing our leasing segment revenues were 184 million with adjusted EBITDA of 182 million up 3% each respectively over the year ago period.
Windstream revenues and adjusted EBITDA were 11 million in $10 million, respectively are expected to represent a growing share of unity leasing revenues going forward.
Well the option to fund growth capital initiatives for Bluebird and other tenants on networks leased from us and we deployed just under $8 million of capital associated with growth capital investment initiatives.
During the fourth quarter at an initial yield of approximately 91 quarter percent.
Windstream also made $41 million of improvements to our network with their capital during the quarter, bringing the cumulative amount since our spin off to just over $770 million that tenant capital improvements.
Turning to Uniti fiber.
During the quarter, we turned over 490 dark fiber in small cell sites for wireless carriers, adding annualized revenues of 3.6 million.
For the full year 2019, we turned over approximately 1500 dark fiber in small cell sites across multiple markets, including Alabama, Florida, Georgia, Mississippi, representing annualized revenues of over $10 million.
35 reported revenues of $79 million and adjusted EBITDA of $29 million of cheap achieving adjusted EBITDA margins of 37% for the fourth quarter.
Core revenues and margins were consistent with our expectations.
When compared with the same quarter last year, it's important to remember that our fourth quarter 2019 result did not include revenue our adjusted EBITDA relating to our unity fiber Midwest operations as they were sold at Macquarie as part of the Bluebird transaction, which closed on August Thirtyth.
Non core revenues at Uniti fiber consists primarily of construction services and were lower than expected by approximately 7 million.
The decline was primarily attributable to timing delays associated with multiple construction projects.
As previously noted continued to deemphasize lower margin nonrecurring products and services that are not strategic to our fiber business.
Unity fiber net success based Capex was approximately 40 million into fourth quarter.
We have now completed 11 of our 14 dark fiber in small cell builds.
Completed with the completed projects achieving an aggregate initial anchor yield of 7%.
We also incurred when the in dollars of integration Capex in $2 billion of maintenance capex or about 2% of revenues.
30 towers reported revenues of just under $3 million in near breakeven adjusted EBITDA for the fourth quarter with $20 million, a capex spend and the completion of construction 44 towers.
For the full year 2019, we completed clarity, we towers and the acquisition of two towers in the us, bringing our completed and in service tower account at year end to 672 towers.
We currently have approximately 270 additional towers in various stages of development.
Please turn to slide six.
Turning now to our 2020 outlook our guidance excludes any impact from the announced agreement in principle with Windstream has the effective date and the accounting treatment are uncertain at this time.
Our outlook does include the announced sale at 486 of our U.S. towers with an expected closing date in early April and anticipates that the Windstream lease continues in full force effect and that Windstream continues to make all these payments on time.
Our current outlook excludes future acquisitions capital market transactions in future transaction related and other costs, specifically mentioned here in.
Actual results could differ materially from these forward looking statements a reconciliation of our 2020 outlook and full year 2019. Actual results are included in the presentation materials posted on our website today.
Our for your outlook for 2020 includes the following for each segment.
Starting with unity leasing.
We expect unity leasing revenues and adjusted EBITDA to be 739 million in 727 million respectively at the midpoint.
Representing adjusted EBITDA margins of approximately 98%.
As we continue to focus on lease up opportunities that will leverage our existing network. We have begun investing in and building out a national sales team that you'll be leasing resulting in slightly higher.
DNA expenses in 2020, when compared to 29 team.
Non windstream revenues and adjusted EBITDA are expected to be 45 million and $36 million, respectively up 58% and 46% from 2019 levels, resulting primarily from the full year impact of Bluebird.
UTI leasing sales funnel now represent $510 million of total contract value.
40% from the prior quarter.
In aggregate the sales funnel represents $23 million has annual revenue up about 35% from last quarter.
The cell phone affiliates comprised of a well diversified mix of both international and domestic carriers as well as content and cable providers.
This year unity leasing we're emphasizing both initial lease up on our existing network as well as produce pursuing additional sale lease back at Opco propco opportunities.
Our outlook assumes lease up.
Equity this year contributes $4.5 billion at annualized incremental revenue.
As I mentioned earlier in my remarks, we began deploying capital in the back half of last year associated with it related growth capital investment initiatives.
Our guidance anticipates that we deployed $28 million net success based capex at UTI leasing principally related to Bluebird.
That's going to the Bluebird network will earn and initial yield does not have not anyone quarter percent, resulting in incremental annualized initial cash rent over $2 million.
Moving to slide seven we expect unity fiber to contribute $304 million revenue.
Hundred $17 million of adjusted EBITDA and achieve adjusted EBITDA margins of about 38% to full year at the midpoint of our outlook.
As a reminder, our 20 tweak our 2020 guidance does not include any revenue our adjusted EBITDA related to Uniti fibers Midwest operations, while prior year results reflect such revenue and adjusted EBITDA up to the closing of that transaction on August Thirtyth.
Also in the second quarter last year, we reported $6 million of income related to Hurricane Michael insurance recoveries that was reflected in our prior year adjusted EBITDA impact year over year comparability.
We expect Nexus net success based Capex for unity fiber this year to be about $90 million at the midpoint.
Of the three remaining large dark fiber in small cell projects.
We expect two of the projects to complete to be completed in the first half 2020 with the one remaining project completed by year end.
While lease up of our anchor wireless deals is a top priority for unique unity fiber. It's also important to keep in mind that it can take up to three years to start to realize the full lease up potential in larger markets.
We have already deployed 28 local enterprise sales personnel in seven markets with the sole focus of pursuing high margin recurring non wireless opportunities.
We expect to further deploy for local sales enterprise personnel one additional market.
We expect Uniti fibers net success based capital intensity to be about 30% this year.
Declining from 45% in the first half of 2022 about 12% in the second half of this year.
Going forward, we expect fibroids net success based capital intensive.
It tends to be in that 30% to 35% range or lower as we will continue to pursue a handful of greenfield dark fiber in small cell bills, but substantially managed down our capital intensity.
We expect integration and maintenance Capex this year of approximately $5 million and $7 million respectively.
We expect overall install activity levels this year to be consistent with 2019 at about $3 million of EMR.
We expect to see a pickup in churn in the first half in 2020 with monthly churn averaging approximately 1% for the year.
Almost half of the expected churn relates to lift sites disconnecting with a significant portion related to sites that utilize off net services and are located located outside our core southeast footprint.
One third of the churn relates to the sites or re terming with several customers and the balances associated with slides converting from lets dark fiber.
As Kelly mentioned earlier, most of the churn related to lit backhaul converting to dark fiber backhaul sites that was previously expected to incur to occur in the fourth quarter 2019 is not expected to occur in the first half a 2020 as a result, a customer delays.
As a reminder, while the dark fiber side, they're replacing the let backhaul sides are installed at a lower EMR that contract links on those dark fiber sites as approximately 20 years.
This is an average remaining term of approximately three years for lit backhaul sides, resulting in a net increase in total remaining contract value and substantially more predictable cash flows.
Turning to slide eight.
As we noted earlier, we had signed an agreement to sell 486 of our U.S. tower cash consideration of approximately $190 million are 30 times annualized tower cash flow.
The deal includes an off take agreement with the same party to continue to build towers in 2020 and sell those towered and an agreed upon price.
He retains the option to extend the off take agreement to 2021.
We expect the transaction to close in early April and it included operators all of that 486 towers to be sold in our 20 22020 guidance only up to the estimated closing date.
The expected a pre tax gain on the sale of the 486, you as towers of $30 million is expected to be reported as a gain on sale or real estate and accordingly will be excluded from our reported revenues adjusted EBITDA in a at that though.
For the full for the full year 2020, we expect Howard as revenues to be about $78 million with reported adjusted EBITDA of 4 million.
During 2020, we expect to sell approximately 170 newly completed towers through the offtake arrangement.
Proceeds realize from those sales will be recognized as revenue and the related margin included in adjusted EBITDA.
Towers construction for sale as part of the offtake agreements will not be reflective as capital expenditures, but rather we will be classified as inventory held for sale.
Turning to slide nine 420, 20, we expect full year FFO to range between $1.85 cents and $1.91 cents per diluted common share with the midpoint of one dollar in 88 cents per diluted share.
On a consolidated basis, we expect revenues to be 1.1 billion and adjusted EBITDA to be 818 million at the midpoint.
Our guidance contemplates consolidated interest expense for the full year at 421 million, excluding any deferred financing cost write offs that level represents an increase of 31 million from 2019 levels primarily related to the incremental interest from our recent senior secured notes offering.
Reported interest expense for 2020.
We'll include an additional $73 million write off a deferred financing costs in the first quarter. This year related to the payoff of our term loans.
We expect to wind down our consumers see like business talk America by the end of June with expected revenues of $1 million and adjusted EBITDA loss of $1 million for 2020.
Consolidated SG nay, excluding amounts allocated to our business segments should be approximately 38 million, including $9 billion stock based compensation expense.
We expect weighted average diluted common shares outstanding for the full year for the full year to be approximately 220 million shares as compared to 202 million shares in 2019.
As a reminder guidance ranges for key components of our outlook are included in our Pinnix are included in the appendix to our presentation.
Slide 10, we have provided a taboola reconciliation of full year 2019 results to our 2020 outlook, which summarizes some of my comments this afternoon.
Turning to our balance sheet on February 10th we close in an offering of $2.25 billion, it's evident in seven AIDS.
Senior secured notes due 2025.
Net proceeds when the offering were used to repay all of $2 billion of our outstanding borrowings under our term loan facility and $157 million, an outstanding borrowings under our revolver.
We also entered entered into an amendment and waiver with our lenders that waves any default relating to the Companys financial statements for 2019, including a going to sort of opinion.
The amendment and waiver became effective upon closing of the notes offering related payment and the related repayment borrowings.
At year end, we had approximately $144 million that combine unrestricted cash and cash equivalents and undrawn revolver revolver capacity.
Our leverage ratio at year end stood at 6.3 times based on net debt to annualized adjusted EBITDA.
Upon closing of the U.S. tower. So we expect to we currently expect to initially use the net proceeds to repay borrowings under our revolving credit facility, but ultimately reinvest the proceeds and tower fiber assets.
On February 28 of this year, our board declared a dividend 15 cents per share to stockholders of record on March 30, Onest payable April 15th.
Our tax year 2020 under our debt agreements dividends attributable to our capital stock are allowed to be approximately 140 million.
Or about 73 cents per common share, including the dividend declared on February 28.
This represents our this represents our estimate of 90% of taxable income for this year excluding capital gains.
We expect our board will continue to evaluate our dividend policy as key developments, windstreams reorganization occur and and or upper windstreams emergence from bankruptcy.
Hey decision to change our dividend policy will be made by our board board of directors at the appropriate time.
With that I'll now turn the call back over to getting.
Thanks, Mark Please turn to slide 11.
We agreed to sell 486 of our U.S. towers to prominent wireless infrastructure provider for approximately 90 million for 30 times annual tower cash flows assertions associated with those towers.
We believe this transaction realize a significant value for our stockholders as it represents an economic gain of approximately $23 million.
Although we are selling most of the towers, we own today were not exiting the tower business. Our focus will continue to be owning and operating a premier portfolio communications infrastructure assets, while providing a wide variety of solutions to our wireless carriers and other customers.
This carefully structured transaction affords us the opportunity to continue building macro towers uninterrupted.
But in a reduced capex manner at our choosing.
We continue to view do macro towers is an important part of unities unique full service fiveg offering to our wireless carrier customers.
This sale in addition to the sale of our Latin American Tower portfolio, you as ground lease business and sale of our unity fiber Midwest operations represents another tangible example of the inherent multiple arbitrage between our some of the parts valuation based on private market values versus our public trading values.
Sure.
Slide 12 provides a summary of the 20 year dark fiber are you deal with a large international carrier that I spoke about earlier.
I'd like to highlight that approximately 25% of the fiber sold in this deal.
Presents unity owned Windstream least fiber.
The full rights to which we are acquiring in our agreement in principle with Windstream.
This is a good leading indicator of the future lease up opportunities, especially since historically, we've not been able to proactively markets as fiber, including to this particular carrier.
Beginning on slide 13, I'll now provide a more detailed overview of our agreement with Windstream and the many long term benefits that provides for unity.
Including making the master lease stronger.
Helping windstream become a healthier tenant.
And acquiring attractive fiber assets, while at the same time, making long term fiber investments that are value accretive to unity.
As it relates to making windstream a healthier tenant it's important to note that 90% of our capital is being used to acquire Bill mission critical fiber infrastructure at attractive yields to support our customer which is consistent with our strategy.
Further we fully expect this agreement will enable a reorganization of windstream and emerges from bankruptcy with ample liquidity.
Deliver de leveraged balance sheet at emergence, while positioning windstream for sustainable growth and margin expansion.
Turning to slide 14.
Our new employees with Windstream will be substantially enhance for unities benefit and a number of ways.
First our ability to add financial covenants to the lease as well as including both Windstream Holdings and Windstream services as tenants under lease provides enhanced security versus our existing lease.
Secondly, the annual aggregate rent will not change as we consistently stated before.
Finally, we believe bifurcated into mass release into two separate leases the government the I look and see like networks separately unlocks value and strategic Optionality.
For both unity and Windstream, while providing potential enhance diversification for unity windstreams, new owners decide to sell to see like or I like assets.
Slide 15 expands on the potential diversification opportunity for unity.
Based on the midpoint of our 2020 outlook Windstream represents 61% of our total revenue today.
However, if windstream were to sell it seems like business and transfer that leads to a third party and if you to layer in the approximately 30 million of incremental EBITDA from the dark fiber our U.S we're acquiring.
The revenue diversification shifts significantly to where windstream would represent less than half of our total revenue.
Which as you may recall was the goal we originally set out to achieve before Windstream entered restructuring.
Turning to slide 16.
We're acquiring 450000 fibers trend malls that are currently not owned by unity today.
As well is gaining rights to sell or lease to third parties 1.8 million fiber strand miles that are part of the unity own Windstream lease network.
Together these additional 2.2 million fiber strand miles increases our leasable fiber available to third parties by approximately 90%.
This national network, not only bring substantial lease up potential.
With also synergies with unity fiber annuity leasing.
Importantly, the expanded footprint also greatly enhances our opportunity set for additional opco propco and companywide acquisitions.
As a frame of reference on slide 17, we previously acquired a national network from Centurylink in 2018.
Which has contributed lease up of approximately 48 million of up front are you payments and $9 million of annual recurring revenue in a span of just two years.
Our newly acquired assets and rights equate to 2.2 million fiber strand miles or roughly 10 times the capacity of the Centurylink network.
And includes metro fiber in numerous tier one and two and three markets.
Abiding additional sale opportunities such as small cells fiber to the tower in enterprise services, all of which are not able to be sold on the on.
Utilizing the current Centurylink routes, which are long haul routes.
In addition, we're acquiring dark fiber are you contracts that currently generate approximately 30 million of revenue today and are comprised of a mix of well diversified customers as detailed on slide 18.
This is high quality revenue that is reasonable with a 100% of the customers on debt and approximately 75% of the acquired revenue from top 25 customers our existing customers of unity.
Similar to the existing lease up on our unity leasing network. This revenue is also near 100% EBITDA margins with little to no incremental capex required.
Slide 19 illustrates the benefits of GCA Capex program.
As part of its post emergence business plan Windstream has stated it intends to increase its fiber to the home footprint with a plan to bring one gig broadband service to over 50% of its homes passed by 2028.
This compares favorably to most other national Ilex today, which should enable windstream to be much more competitive than most of those markets.
Our gcs investments will enable the speeds and the assets will immediately become unity assets and come with an initial 8% yield.
Which also compares favorably to most of our existing unity leasing and Uniti fiber contracts as highlighted on slide 20.
In addition, we will have numerous additional lease up opportunities during the 10 year initial term.
Based upon our new contractual ability under the new Emily's the joint build new fiber with shared use to unity and Windstream has an anchor customer.
In summary, we're very pleased with the agreement in principle, we've reached Windstream.
Disagreement not only enables or restructured windstream to emerge at a much lower leverage thus removing the biggest overhang unity has had historically.
It is also very strategic unity and substantially enhances our overall portfolio of assets and cash flows.
Turning to slide 21, the quality of our portfolio of almost 7 million strand miles of own fiber.
Over 2000 small cell locations either in service or in backlog.
And approximately 670 macro towers continues to be highly under appreciated.
We are one of the select few providers of these three critical components that are enabling the Fiveg revolution.
As a result, the opportunity so there's tremendous for sustainable growth for many years to come.
Our infrastructure provides substantial highly predictable revenue and cash flow material lease of potential at attractive margins.
When when compared to other publicly traded communications infrastructure reads as shown on slide 22.
Many of our characteristics continue to compare favorably and we believe that there is substantial valuation discount implied for unity as a result of Windstreams bankers.
The initiatives I described earlier, we'll continue to drive further improvement in many of these metrics.
With that operator, we're now ready to take questions.
Certainly ladies and gentlemen, if you have a question at this time. Please press Star then one on you touched on telephone. If your question has been answered if you'd like to move yourself from the Q. Please press the pound key.
First question comes on line of Greg.
When your question please.
Great. Thanks, guys for taking my questions, Kenny and Mark I just had a question bigger question about what's happened in the last few days I think the worry is that.
Equity markets, not being favorable, possibly the debt markets drying up youre means to access capital could be limited could you talk about.
Thats, a concern of yours and alternative means of accessing capital at its PE intra funds or the towers delegates is one way you alluded to it.
And then my second question is.
Just on the krona virus concerns in general.
Have you talk to your customers.
Your businesses about any concerns going Florida, that's leasing more fiber.
Delay of Fiveg thats sort of thing thanks.
Okay.
Yes. This is mark I'll start with the question. So in terms of the capital. So our guidance doesn't anticipate any capital raise and actually with the so the U.S. towers, we actually expect we know capital raise we would de lever.
Based on the guidance and again today.
Yes of course, the capital markets as you mentioned had been pretty level of volatile. The last few weeks, we obviously track those closely and stay in contact and have routine discussions with private capital sources as well. So we continue to monitor that those continue to have discussions any they way opportunities, but nothing nothing.
To announce at this time and nothing included in guidance.
Yes, Greg the I'd add to that is weve.
Last year year, and a half we've had.
Limited.
Need to access the capital markets anyway, and so we've managed to.
To do just fine and so as we look forward to another several quarters of potential volatility.
Or more we're certainly prepared for that that's nothing new for unity.
And we'll be just fine.
With respect to your question about the Corona buyers were very focused on that we've not seen any.
Impact with our customers, we've not seen any certainly not with our wireless customers or any of our big wholesale customers and we really haven't even seen any with any of our enterprise or small business customers, which if I work together, that's where I would expect to see.
Some impact.
But we've not seen any yet we're going to continue to monitor it closely.
And more importantly, or as importantly, we're very focused on making sure. We're doing the right things with our employee base and taken all the precautions that are that are necessary there.
Great. Thank you.
Thank you.
Your next question comes from the line of Phil Cusick from JP Morgan Your question. Please.
Philip you might have your phone on mute.
Thank you.
Thanks, Scott can you first expand on the strategic tower sale, what was the process like and what can you say about the buyer and then can you talk more about the structure of investment for building towers going forward. It sounds like there would be some at least co investment there.
Yeah, Phil so.
With respect to the process and the buyer were rather not comment too much on that at this point, we're actually in the middle of go shop on that process. So I don't want to comment too much other than to say that.
Our current buyer is a party that we know well have worked with in the past and it's one of the non traditional capital sources that we've talked about many times as being a good source of of not only capital, but potential partnership for us and so we're excited about that.
But with respect to the structure of the deal. It's important to reiterate were not exiting the tower business. We're really utilizing this sale as an opportunity to inject liquidity in a volatile capital market period.
This is a good good way to add liquidity versus issuing expensive securities and we're pleased to have the the the portfolio of assets in order to do that.
But this offtake arrangement gives us the ability to continue.
Investing and building towers, but immediate effectively immediately selling those two our partner had at a premium and so we're locking in a return as we do that and we'll do that for sure through the through the 2020 period and then we'll have the option of extending that beyond 2020, if we choose so strategically that gives us the ability.
We fill to continue offering macro towers as an important part of our infrastructure offering to our particularly our wireless carriers.
But it also gives us the ability to do it into Capex light manner. If we if we choose to do so.
Got it thanks, and then how should investors think about your dividend going forward.
Yes, so I think I referenced earlier that were allowed to payout under the dividend restrictions that we currently have our debt agree and this $140 million. This year. So right now it sets are we just made a dividend 15 cents per share so.
It will announce a dividend going forward, but I would.
And that will pay out the 140 million.
During the year, so right now the dividend. This said at 15 cents per share based on the current outstanding shares is set to where we would actually pay a little bit higher dividend.
Declared in the fourth quarter paid in the first quarter next year is similar to what we did last year.
Sorry, I wasn't clear.
What about going beyond 2020, how should we think about the ins and outs of.
Your ability to pay versus your desire to pay a dividend and.
Rather than using that for for the tower investment for example.
Yes, so going forward I would expect that to me.
I expect that we'll continue to pay a dividend currently as I said earlier currently were limited what's were outside of the limitations our debt agreement I would expect that it would increase primarily at least for two reasons, primarily it would increase for any capital gains distribution.
It is.
It also increase for any of for the 10% of the taxable income with organic taxable income and we're not able to distribute currently whether what that means in addition to that what that means in the overall dividend policy will have to see.
We'll have to see see at the time, but generally I would say, yes, we'll continue to pay a dividend you think it would be reflected in the future of those at least those two items, if not more and I think we'll want to try to pay a dividend that is comparable to peer groups and also has a.
As a.
As a I'd say comparable payout ratio so something that.
Indicates a sustainable dividend and the ability to increase the dividend over time as Anthony Vogels.
Great. Thanks, guys.
Thank you.
Next question comes from line of Simon <unk> from Morgan Stanley. Your question. Please.
Great. Thanks, very much good afternoon on the tower transaction.
Why did you not sell the towers, what was kind of difference between the ones you're keeping on the ones you're selling.
And then how do we think about the cash flow in this whole take I understand it snows.
Running through as Capex, but what do you.
Incurring the cost of building the tower put it in inventory and then sell it so how long does not take and what might the working capital impact of that be thanks.
So Simon I'll, let mark answer the second part of your question, but with respect to the first part.
A couple of things one we size the the transaction to the amount of effectively amount of proceeds we wanted to raise.
And then secondly.
We have a.
As you might recall, we've got a portfolio of newly built towers ones that we've been constructing but also ones that we've acquired over to over the past several years either through direct transactions or as part of our bigger fiber transactions, where we just brought Watson towers.
Along with that.
And so what we really monetized here are some of the newly constructed towers, which have really one largely one customer and some additional lease up but largely one customer so.
It's a combination of those to those two things.
Yes, so regarding the working capital.
The contract is structures such that we will have.
Periodic closings throughout the year such that from time to completion to the time that we'll be able to sell the towers will be a relatively short short period of time.
So the working capital requirements will be reinvested and.
We'll be returned from existing towers, and we invested in and in new car construction fairly quickly.
Greg I'm, just one follow up what's your best guess of beat the final settlements here timing.
I think so good question, Simon I think where there's a.
The next hearing I think is in early April and we expect that that the settlement could be approved and at that point.
Yes, I believe its April threerd for the hearing to approve the but any 19 so.
Yes.
Thank you.
Thank you.
This does conclude the question and answer session of today's program I'd like to handle program back to Kenny Gunderman for any further remarks.
Thank you I'd like to close by expressing my sincere gratitude to everyone that was involved in achieving this mutually beneficial outcome with windstream both for their tireless efforts and hard work, including our employees and those of Windstream.
We appreciate your interest immunity group and look forward to updating you further on future calls.
Thank you.
Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
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