SYDNEY: Uniti Group Limited announce the successful completion of its acquisition of certain fibre-to-the-premises (FTTP) assets owned by Telstra Corporation Ltd deployed to provide high speed broadband to the Telstra Velocity estates and South Brisbane Exchange regions.
Settlement of the acquisition occurred with the payment of upfront consideration of $85M to Telstra, funded through a significantly oversubscribed institutional placement and an increase of $50M in Uniti’s existing debt facilities.
The remaining $55M of deferred consideration, of the total $140M purchase consideration, will be funded from Uniti’s operating free cash flow and liquidity as and when future payments are due.
The majority of the deferred consideration is not payable until approximately 3 years from now. Uniti launched a SPP to shareholders yesterday to raise up to a further $10M at the lower of the placement price of $1.50, or a 2.0% discount to the 5-day VWAP of UWL shares up to and including the closing date (expected to be 20 January 2021).
Following completion of the acquisition, Uniti expects to maintain significant balance sheet flexibility with pro forma FY21 net leverage of approximately 2.2x, allowing for the expected receipt of up to $10 million of additional proceeds from the SPP.
The acquisition of Australia’s second largest private FTTP network (after Uniti’s FTTP network, including OptiComm) at an attractive valuation is highly strategic for Uniti and completes its transformation into the leading FTTP challenger.
This transaction is compelling with c. 13% EPS accretion in FY21 and providing a ~20% uplift in FY21 pro forma EBITDA.
Telstra has also committed to become a Retail Service Provider (RSP) on Uniti’s FTTP network. Securing Telstra as an RSP is expected to enhance developer relationships, deepen penetration of the FTTP greenfield market and increase utilisation rates in connected premises.
Finally, the acquisition is expected to have minimal impact on Uniti’s current operations and integration activities in light of customer migration and network refresh not expected to commence in earnest until mid-2022.
In the intervening period, Uniti will receive a license fee from Telstra of $21.6M per annum for its use of the Velocity assets.
Uniti CEO and Managing Director, Michael Simmons stated, “The acquisition of Velocity completes a transformative year for Uniti. It is consistent with the very core of our strategy to deliver high quality, high speed telecommunication services, at attractive margins, and strong cash generation.
“The acquisition of these assets and arrangements with Telstra further consolidate our market position. Importantly for our supportive shareholders, the acquisition of Velocity is expected to deliver strong and growing annuity earnings and positive cash flows to provide sustainable shareholder returns.”
Uniti Group (ASX: UWL) is a diversified provider of telecommunications services, with ‘three pillars’ of strategic growth; Wholesale & Infrastructure (W&I), Consumer & Business Enablement (CBE) and Specialty Services.