Uniti Is Building High-Quality Assets, but Financial Risk Is High

Uniti's legacy Windstream telecom business, known as Kinetic, is rapidly converting its old copper-based networks to fiber, following the same path as other phone companies. Undertaking this capital-intensive effort with revenue in decline will cause the firm to burn cash, likely for at least the next couple of years, adding to its already sizable debt load. The new fiber network would be attractive to several larger telecom firms, but we suspect Uniti will need to stabilize revenue before it can command a premium for the business.