Uniti Group Inc. (UNIT) Q3 2018 Earnings Conference Call Transcript

Uniti Group Inc. (UNIT)
Q3 2018 Earnings Conference Call
Nov. 1, 2018, 4:15 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome to Uniti Group's third quarter 2018 conference call. My name is Michelle, and I will be your operator for today. A webcast of this call will be available on the company's website, www.unitigroup.com, beginning November 1, 2018, and will remain available for 14 days. At this time, all participants are in a listen-only mode. Participants on the 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 include forward-looking statements, and actual results could differ materially from those projected in these statements. The factors that could cause actual results to differ are discussed in the company's filings with the SEC. The company's remarks this afternoon will reference slides posted on its website and you are encouraged to refer to those materials during this call.

Discussions during the call will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the company's current report on Form 8-K dated today.

I would now like to turn the call over to Uniti Group's Chief Executive Officer, Kenny Gunderman. Please go ahead, Mr. Gunderman.

Kenny Gunderman -- President and Chief Executive Officer

Thank you. Good afternoon everyone, and thank you for joining. Today we are announcing two acquisitions within our Uniti Fiber segment. The first acquisition is Information Transport Solutions, a full-service provider, primarily to educational institutions, many of whom are already utilizing our fiber network. ITS will accelerate Uniti Fiber's product offerings and strengthen our relationship with new and existing e-rate customers. I'll speak more to the specifics of the ITS transaction later in the call.

The second transaction were are announcing today is M² Communications, a local fiber provider located in Eastern Alabama. This is a bolt-on acquisition, and is a strong, strategic fit with our existing Uniti Fiber network. At closing, we will be paying $6 million at a 12.8x pre-synergy multiple, which is consistent with our historical value range. We expect that range to continue with similar fiber acquisitions in our core footprint. The transaction is expected to close in the first quarter of 2019, and is subject to customary closing conditions.

Both of these acquisitions demonstrate the continued solid momentum we are experiencing within our business, as well as more mature M&A funnel that produces attractive asset and company acquisitions on a regular basis. Also, these transactions, like the ones we announced last quarter, were proprietary negotiated transactions, reinforcing one of Uniti's core competitive advantages in our M&A strategy. Lastly, both acquisitions reinforce our commitment to building a very strong operating presence in our Southeast region. Similar to our pattern of acquisitions, recently, we have a very robust funnel of additional opportunities which provide immediate scale and customer synergies.

We also continue to see strong interest in additional Uniti leasing transactions, including lease-up of existing fiber, new sale-leasebacks in OpCo/PropCo structures, and we are confident we'll see more of these transactions in the fourth quarter. As we mentioned last quarter, these structures allow Uniti to use our unique REIT platform to acquire valuable fiber infrastructure and obtain usage lease-up rights, while our opportunity partners continue to provide service to customers. We're currently working on four active OpCo/PropCo structures with financial and strategic partners.

Let me now provide an update on our operational results for the third quarter. Uniti Fiber sales bookings in the quarter were approximately $500,000 of MRR and MAR. I'll reiterate that our bookings will fluctuate somewhat quarter-to-quarter, as a big part of our business is pursuing large, anchor wireless backhaul and small-cell deals. For example, we are at or near the contract stage for three deals in one single market, totally roughly $600,000 of MRR. Not only do we continue to see healthy activity for small cells and backhaul from the wireless carriers in our markets, we're seeing increased demand from non-wireless customers as well.

For example, we were recently rewarded as an underlying provider a federal government dark fiber contract in Florida on a 20-year term. Also, we recently signed a 35-year dark fiber lease agreement with a large energy company based in the Southeast. Combined, both of these deals represent approximately $20 million of up-front payment to Uniti, and about $200,000 of additional annual revenue beginning in mid-2019. 54% of our sales bookings in the third quarter came from local enterprises, government and K-12 schools. 28% from four national wireless carriers, and 18% from wholesale.

Uniti Fiber installed $700,000 of MRR and MAR during the third quarter 2018 with 14% related to bandwidth upgrades and 21% relating to dark fiber backhaul projects. We continue to work with our customers and municipalities through the delays we discussed last quarter, and while we have seen steady improvement in these projects, as expected, we continue to anticipate further delays in the fourth quarter. Many of our large projects are located in Florida, which has been heavily impacted by Hurricane Michael, which I'll cover shortly.

However, as we previously mentioned, the vast majority of our existing dark fiber and small-cell construction projects will still be completed in 2019. Again, I want to emphasize that the $20 million of run rate revenue on a fully deployed basis associated with these projects are contractual and will be recognized in the near future.

Total churn for the quarter was $600,000, resulting in a monthly churn rate of 1%, which was slightly higher than our expected churn for the quarter. Churn was negatively impacted by the timing of wireless disconnects in our Houston Gulf Coast market. Most of these disconnects were originally forecasted to happen in late fourth quarter, but occurred in early third quarter instead, as we were able to deliver replacement dark fiber sites for existing lit sites sooner than originally forecasted. Also, churn was impacted by the rerating of existing e-rate services with a large school district. However, since we are a reseller of these services, there was a corresponding cost savings related to delivering these services, resulting in little impact to margin.

As we mentioned earlier this year, we had 100% retention with our existing e-rate customers, and expect e-rate to be a significant growth opportunity for the company going forward, especially with the addition of the ITS team.

I'd now like to talk briefly about Hurricane Michael. A few weeks ago, this storm brought damage to the communities along Florida's panhandle like we've never seen before, including in the 20-year history of our legacy companies. We redeployed our personnel away from their day-to-day duties toward hurricane preparation, as well as working with our wireless customers ahead of the storm. While we are still assessing the impact Hurricane Michael had on our network and customers, as recovery efforts are still under way, we expect that the financial impact from the storm will be modest net of insurance recoveries.

As I mentioned earlier, the hurricane is most likely to affect our construction projects and service order activations to some degree in the areas impacted by the storm. I expect we will see some impact to costs as well in the fourth quarter. I'm very proud and thankful for how our team has responded to this disaster, and we've received praise from our customers, as well for our preparation and quick response. In fact, we're already in the planning stages with our wireless customers and the Department of Defense, which is a large customer in that area, for new network builds to supplement our existing network.

We believe Panama City will become one of our most attractive markets. As an example, one of our customers recently announced intentions to make Panama City one of the first 5G markets. We're pleased with the trajectory of our progress at Uniti Fiber. We continue to work through some of the headwinds we outlined last quarter, but we are committed to our strategy of focusing on Tier 2 and 3 markets with attractive competitive dynamics.

Turning to towers. We completed 47 new towers in the U.S. during the quarter. We also added 32 towers in Mexico and one in Colombia, and our total tower count in the U.S. and Latin America combined now stands at 847 towers. We continue to see healthy lease-up activity on our tower portfolio in both the U.S. and Mexico. We continue to engage our wireless customers about furthering our existing partnerships, as they continue to look to diversify their existing vendor relationships. We believe the value of our multi-product infrastructure offering, including fiber, small cells, and macro towers uniquely positions Uniti to be competitive in the tower industry.

In Uniti Leasing, we continue to see strong demand for our fiber assets. We're focused on leasing up our existing portfolio and are actively engaged in leasing additional routes with customers all across out footprint, including with the largest web-scale providers, MSOs, and wireless carriers in the country. These discussions include network planning, including existing Uniti Leasing assets, but also identifying future needs for our customers, which allows us to target fiber portfolio acquisitions or even new fiber builds where we know demand is coming. With less than 9 months of development work, our current leasing sales funnel represents $18 million of annual revenue and over $350 million of contract value.

Finally, we recently announced that we closed both the second tranche of the TPX sale-leaseback transaction and the CableSouth sale-leaseback transaction. With that, I'll now the turn the call over to Mark.

Mark A. Wallace -- Executive Vice President, Chief Financial Officer & Treasurer

Thanks, Kenny. Good afternoon, everyone. Turning to Slide 5, we reported consolidated revenues of $252.6 million; consolidated adjusted EBITDA of $199.2 million, AFFO attributable to common shares at $110 million, and AFFO per diluted common share of $0.62. Net income attributable to common shares for the quarter after transaction and integration-related costs was $2.1 million, or $0.01 per diluted share.

Net income for the quarter included $2.3 million of transaction-related cost, and a $0.8 million gain on the settlement of escrow balances related to our acquisition of NMS, which are included within our other income on our consolidated statement of operations.

Our Uniti Leasing segment had revenues of $174.8 million, with adjusted EBITDA of $174.1 million for the third quarter of 2018. Windstream made nearly $32 million of capital improvements during the quarter to our network with their capital, bringing the cumulative amount since our spinoff to over $577 million of tenant capital improvements. During the quarter, we closed the California tranche of the sale-leaseback and fiber acquisition of TPX on September 19, and these results are included since closing date.

As previously announced, on October 9, we completed the sale-leaseback and fiber acquisition of CableSouth Media, and the impact of that transaction will be included in our fourth quarter results from the closing date to year end. Uniti Fiber reported revenues of $70.1 million and adjusted EBITDA of $28.5 million, achieving adjusted EBITDA margins of just under 41% for the quarter. These results include $3.5 million of realized cost savings, representing an annualized run rate of $14 million.

Uniti Fiber's third quarter were adversely impacted by $700,000 of service-level credits payable to one of our customers, of which approximately $500,000 in credits related to the first two quarters of this year. These credits were owed to the customer per the terms of our service level agreement as a result of not achieving certain network performance standards in our Northeast region. Uniti Fiber is currently evaluating various network hardening initiatives to mitigate these issues in the future. Third quarter results were also impacted by $1.1 million of higher-than-expected operational costs related to fiber locates and lit service transport cost. We expect these costs to decline over time, as more locates are performed by our in-house crews, and we eliminate certain lit service transport costs by moving circuits on-net from off-net.

During the third quarter, we continued to make progress on deploying sites related to most of our dark fiber and small cell projects, as we turned over 324 dark fiber and small cell sites, adding annualized revenues of $2 million.

Uniti Fiber net success-based CapEx was $33.6 million, of which approximately 40% was directed toward our major dark fiber and small cell deployment projects. We also incurred $2 million of integration CapEx during the quarter, which is related principally to our off-net savings initiatives. Maintenance CapEx for the quarter was $1 million or 1.5% of revenues.

Uniti Towers completed the construction of 47 towers in the U.S. and 10 in Mexico. In addition, we completed and closed on the acquisition of 23 NMS development towers in Mexico and Colombia during the third quarter for approximately $2.1 million, bringing total completions to 89 towers since we acquired NMS in January 2017. This concludes our tower development activities associated with the NMS acquisition.

CapEx was $24.5 million for the quarter, and includes the amount related to the NMS development activity. Uniti Towers had 352 completed towers in the U.S. and 495 towers in Latin America, for a total of 847 towers in service at quarter end, and approximately 252 towers in various stages of development. Uniti Towers represented revenues of $4.3 million and adjusted EBITDA of $1.2 million for the third quarter. These results include the favorable impact of $0.4 million of cost recoveries related to development projects that were canceled by our customers. We continue to work closely with our customers on potential sites that may fall out and become at risk so that future cancelled development costs can be mitigated.

During the quarter, we issued an aggregate 3.2 million shares of common stock off our at-the-market, our ATM program, at prices ranging from $20.14 to $21.04 per share. Including activities subsequent to quarter end through October 5th, we have issued an aggregate of 3.3 million shares at similar prices. As you'll recall, we funded approximately $200 million of acquisitions this year on our line of credit, as well as organic growth CapEx. Accordingly, the proceeds were used to repay amounts outstanding under our revolver to manage leverage within the target levels we previously established.

Please turn to Slide 6, and I'll cover our updated 2018 guidance. We have updated our current 2018 outlook for the ITS transaction, the timing of closing of the CableSouth and TPX California fiber acquisition, and sale-leasebacks. In addition, the outlook has been adjusted for the impact relating to the timing of lease-up of certain assets, delays in the deployment of fiber solutions at Uniti Fiber, the impact of shares issued under our ATM program, and other factors. Our current outlook excludes any future acquisitions, future capital market transactions, adverse cost impacts from Hurricane Michael, and future transaction cost.

Furthermore, our outlook is subject to adjustment based on the finalization of purchase price allocations related to acquisitions. A reconciliation of our prior guidance to our current outlook is included in our earnings release and later in this presentation. Actual results could differ materially from these forward-looking statements.

Our current full-year outlook includes the following for each segment. Starting with Uniti Fiber, the acquisition of ITS on October 19th will add approximately $8.3 million of core revenues and $1.5 million of adjusted EBITDA for the fourth quarter. On a pro forma full-year basis, ITS would have contributed $42 million in revenue and $7 million of adjusted EBITDA. At the midpoint of our outlook range, our updated revenue guidance of $287 million represents a reported growth rate of 9% over 2017 adjusted levels.

Our annualized 4Q17 to annualized 4Q18 core organic revenue growth rate is expected to be approximately 4%, which is lower than our prior guidance of 8%, primarily due to the fiber and small cell deployment delays we mentioned earlier. Adjusted EBITDA should be approximately $120.5 million, with a margin of 42% for the full-year at the midpoint, down from our prior guidance of 44%. The decrease is primarily due to the fiber deployment delays and customer service credits that were discussed earlier, as well as somewhat higher-than-expected operational cost. Excluding the impact of ITS, Uniti Fiber margins are expected to be 43% for the fourth quarter.

We expect to realize aggregate cost savings of $13.8 million this year, and will exit 2018 at a fourth quarter annualized run rate cost savings of $16.1 million. We expect to invest $17 million in integration CapEx through 2019, including $12 million in 2018. Net success base CapEx for Uniti Fiber in 2018 should be about $130 million at the midpoint, of which about 38% will be directed toward dark fiber and small cell projects.

Turning to Slide 7, we expect towers revenues this year to be about $14 million, with reported adjusted EBITDA at break-even. We have recently seen a reduction in the number of site build opportunities, as our largest customer has slowed its capital deployment for new tower builds as it reevaluates it capital priorities for the remainder of 2018, which has impacted our full-year outlook. As a result, we expect to construct 100 fewer towers in the U.S. in 2018 than what we provided in our previous outlook.

We've completed our NMS development activity, completing and acquiring 89 of the 105 towers in development at the January 2017 acquisition date. As a result, we do not expect any further capital expenditures for NMS development towers. Our Uniti Towers 2018 capital spend guidance is $65 million to $70 million.

Turning now to Uniti Leasing on Slide 8, we expect Uniti Leasing 2018 revenues and adjusted EBITDA to be $700 million and $697 million, respectively, at the midpoint.

Turning to Slide 9, for 2018 we now expect full-year AFFO to range between $2.48 and $2.51 per diluted share, with a midpoint of $2.49 per diluted share. On a consolidated basis, we expect revenues to be just over $1 billion and adjusted EBITDA to be $798.5 million at the midpoint. Assuming that our recent M&A and fiber acquisitions close on January 1 of 2018, our pro forma AFFO would have increased $0.09 at the midpoint to $2.58 per diluted common share. Our guidance assumes weighted average common shares outstanding for the full year of 2018 of 177 million shares and 179 million shares for the fourth quarter of this year, reflecting the impact o the shares issues under our ATM program.

As a reminder, our guidance ranges for key components of our current outlook are included in the appendix to our presentation. Turning to Slide 10, we have provided a reconciliation of our prior 2018 midpoint outlook to our current 2018 midpoint outlook. Most of the change in our outlook is due to the incorporation of ITS into our forecast, deployment delays, primarily dark fiber and small cells, customers service credits, and the earlier-than-expected disconnects, as well as the diluted impact of share issuances.

In closing, at quarter end we had approximately $328.5 million of combined unrestricted cash and cash equivalents and undrawn capacity under our revolving credit agreement. Our leverage ratio under our debt agreement at quarter end stood at 6x based on net debt to an annualized adjusted EBITDA. With that, I'll now turn the call back to Kenny.

Kenny Gunderman -- President and Chief Executive Officer

Thanks, Mark. As I mentioned earlier, Uniti acquired ITS for all cash consideration of $54 million or 7.7x expected 2018 adjusted EBITDA. ITS is a full-service provider of technology solutions, primarily to educational institutions in Alabama and Florida. Over 30% of ITS's total revenue is already on Uniti Fiber's network, and we expect on-net to grow substantially under Uniti Fiber's ownership. We're particularly excited about the ITS transaction, as we are in the early stages of the 2018-19 e-rate season. ITS has a history of excellent customer service, and their relationships as evidenced by their 0.3% average monthly churn over the last three years. We're pleased and excited to be working together with the ITS team and look forward to having a successful upcoming e-rate season.

We closed the transaction on October 19th, and pro forma, this transaction will take our revenue diversification from 67% to approximately 64%. We own a unique portfolio of assets in some of the fastest growing segments in telecommunications. We have significant lease pool capacity across all of our business units, and because the incremental cost of adding new tenants is relatively small, we can drive attractive incremental yields across all of our asset classes. We expect these strategic assets will position us well for sustained organic growth for many years.

In closing, we look forward to providing our 2019 outlook on our next conference call. Our 2019 planning cycle is well under way, and we're currently evaluating multiple strategies to create value for our shareholders. As usual, we'll be reviewing each business unit's performance and operating strategies, our capital structure and capital allocation policies, portfolio composition, M&A opportunities, and initiatives to advance our diversification goals.

As we stated in the past, the [inaudible] has caused us to be more conservative with opportunities this year. However, we continue to believe that Windstream will receive a favorable ruling and, in turn, that should allow us to execute on our strategic options more expeditiously in 2019 and beyond. We look forward to updating you more on our next call. Operator, we will not take questions.

Questions and Answers:

Operator

Ladies and gentlemen, if you would like to ask a question, please press * then 1. If your question has been answered and you'd like to remove yourself from the queue, you may press the # key. Once again, to ask a question, please press * then 1. Our first question comes from David Barden of Bank of America. Your line is open.

Josh -- Bank of America Merrill Lynch -- Analyst

Hey, guys. It's Josh in for Dave. Thanks for taking the questions. Kenny, just following up on the last comment you made on the Windstream ruling. Do you have a backlog of deals you can act on very quickly? And how dependent are these deals on improvement in your cost of capital? I guess lastly, how many deals do you think you could do if your cost of capital is going up in theory as the stock moves? Thanks.

Kenny Gunderman -- President and Chief Executive Officer

Hey, Josh. Yeah, so we definitely have opportunities in our funnel that we have not pushed forward more aggressively or expeditiously in anticipation of the ruling. I think as we mentioned even last August, September, we foreshadowed that we would probably be focusing on smaller transactions throughout the course of 2018 or until there was more clarity on the litigation. That's exactly what we've done really to make sure that we're not overextending ourselves from a balance sheet perspective.

So as a result of that, absolutely there's some opportunities in the funnel that we would be more aggressive on or will be more aggressive on once the ruling is behind us. Because we still do anticipate a favorable ruling. I'm very confident in that and believe it's coming. Having said that, there are also opportunities in the funnel which are accretive even at our current cost of capital. So when we look out, looking at a world where the cost of capital stays where it is, we still have opportunities to execute on transactions that are attractive to us, but we look forward to getting all this uncertainty behind us.

Josh -- Bank of America Merrill Lynch -- Analyst

Great. Thanks for taking the question.

Kenny Gunderman -- President and Chief Executive Officer

Sure.

Operator

Our next question comes from Simon Flannery of Morgan Stanley. Your line is open.

Simon Flannery -- Morgan Stanley & Co. -- Analyst

Okay, thanks very much. Just a clarification on the hurricane. Is that all related to the fiber business, or is some of that related to the Windstream side of things? Maybe you could go into a little bit more detail into the SLA credits, and is that something that might recur going forward? And any color you could provide on capital spending for next year, what's committed to satisfy your backlog? Thanks.

Kenny Gunderman -- President and Chief Executive Officer

Sure, Simon. I'll take the first two and Mark can take the third. But on Hurricane Michael, yeah, the impact is almost exclusively Uniti Fiber. We've not identified anything beyond that, so Uniti Towers nor Uniti Leasing at this point, so that's all Uniti Fiber. With respect to your question about the SLA, so there's really two things. One, and as a reminder, the companies that we've acquired were all private companies and, in some cases, smaller private companies.

The reporting capabilities around SLA credits historically was very manual. And these reports are complicated, they require a lot of scrutiny and discretion, particularly when you're interacting with the big wireless carriers. And so historically, we've not been very good at it, to be honest. We've now instituted a much more automated, streamlined process, which gives us the ability to produce these reports much more timely, and gives us the ability to interact with our customers much more real-time, and applying much more discretion.

So from that standpoint alone, I think our capabilities and sophistication around this is going to be much better going forward. Secondly, we have had some issues related to pockets of our network in the Northeast, in particular. We knew this earlier in the year, as Mark mentioned in his comments. We already have a plan in place to harden those portions of the network, roughly with $5 to $6 million of capital that was earmarked at the beginning of the year for things like replacing legacy equipment at the core with newer equipment, and also there are numerous rings where we had multiple towers on the rings, and we're reducing the number of towers on the rings to a much more manageable number.

So I think all that's to imply that going forward we don't see this as nearly the same level of issue that we've experienced.

Mark A. Wallace -- Executive Vice President, Chief Financial Officer & Treasurer

Then on your last question, in terms of CapEx spending for 2019, we're obviously not done with our planning cycle. But on the tower business, I'd say it's going to be in the range for this year to maybe plus $10 million. So probably $75 to $85 million next year, depending on obviously how many awards we win. I think on the fiber business, likely to be in the $130 million to $140 million range next year.

Simon Flannery -- Morgan Stanley & Co. -- Analyst

That's helpful. Thanks.

Mark A. Wallace -- Executive Vice President, Chief Financial Officer & Treasurer

On a net basis, net CapEx.

Simon Flannery -- Morgan Stanley & Co. -- Analyst

Thanks.

Operator

Our next question comes from Matthew Niknam of Deutsche Bank. Your line is open.

Matthew Niknam -- Deutsche Bank Securities -- Analyst

Hey, guys. Thank you for taking questions. Just two if I could. One on the tower business. If you can maybe shed some more light on, you mentioned I think there was a pullback from your largest customer. Can you clarify? Are they going elsewhere for new sites or is this capital just being redeployed elsewhere? Then secondly, on the equity issuance during the quarter, can you talk about the decision to issue equity through reduced borrowings under the credit facility? And I guess maybe more broadly, how should we think about the appetite for additional equity issuance? Is that just a function largely ex-M&A of wanting to keep leverage at or below 6x? Thanks.

Mark A. Wallace -- Executive Vice President, Chief Financial Officer & Treasurer

Matt, I'll go first on the ATM program. The ATM program, we put it in back in late-2016. It's an effective way to access the equity capital markets when you only need modest amount of capital. We have been reluctant to access our equity markets in size until the Windstream litigation, we get a ruling and a decision in that. So we wanted to access it in order to manage our leverage levels, as you alluded to, but we also wanted to access the markets in a relatively modest size. So that was the end decision.

Kenny Gunderman -- President and Chief Executive Officer

And Matt, on your towers question, we definitely do not se those towers going to other providers, to other developers. It's really a capital allocation decision from our customer's perspective. As a result, we just see the backlog growing. So the opportunity is still there, it's just a question of timing from our perspective.

Matthew Niknam -- Deutsche Bank Securities -- Analyst

Got it. Thank you.

Kenny Gunderman -- President and Chief Executive Officer

Sure.

Operator

Our next question comes from Frank Louthan of Raymond James. Your line is open.

Frank Louthan IV -- Raymond James & Associates -- Analyst

Great. Thank you very much. Can you quantify the hurricane impact in Q4 a little bit more? Exactly how much is that factored into your advised guidance? Then what will the exposure to Windstream be once these deals you just announced, once they're finished?

Mark A. Wallace -- Executive Vice President, Chief Financial Officer & Treasurer

Frank, I'll take the one on the hurricane. I think the revenue impact, we've tried to incorporate the revenue impact of the hurricane into our fourth quarter results. I would say the thing that's really uncertain right now and that we have not incorporated into the fourth quarter guidance is the cost impact. There's a couple reasons for that. One is we simply don't know yet, so we're still in the restoration phase from the hurricane and will be for several more weeks.

Then some of the cost we're incurring, we don't know exactly how much of the cost will be expense versus capitalized and then we have another workstream ongoing to determine how much will be recoverable through our insurance coverage as well. So on the cost side, I don't know what the net cost impact will be quite yet, but I will say this. As we acquire companies, we do roll them into our insurance programs. I would say our insurance programs are as good as any in terms of what they cover.

Frank Louthan IV -- Raymond James & Associates -- Analyst

Got it.

Kenny Gunderman -- President and Chief Executive Officer

Frank, on your question about Windstream exposure. I think pro forma for the transactions that have been announced and closed, we think the revenue diversification is roughly 64%.

Frank Louthan IV -- Raymond James & Associates -- Analyst

Okay, great. Then just one quick follow-up. You mentioned the 100 towers that your largest customer didn't quite get to. Are those being pushed out into next year or is that turning into they're doing incrementally more small cells or rooftops, things like that? Or how should we think about that trend?

Kenny Gunderman -- President and Chief Executive Officer

Frank, good question. As you can imagine, we don't have perfect visibility into our customer's thinking, but we do have what I characterize as pretty good visibility, given that we do both small cells and macro towers and backhaul for the customer. Our best view is that they're really just getting pushed out. So not replaced with other things, but pushed out and so with respect to when those specific sites might come back, if it's 2019 or maybe 2020, we're not sure. But we do think it's probably near-term.

Frank Louthan IV -- Raymond James & Associates -- Analyst

Got it. Okay, great. Thank you very much.

Kenny Gunderman -- President and Chief Executive Officer

Thank you, Frank.

Operator

There are no further questions. I'd like to turn the call back over to Kenny Gunderman for any closing remarks.

Kenny Gunderman -- President and Chief Executive Officer

Thank you. I'd like to finish by again thanking our loyal employees who've been working tirelessly to restore our mission critical infrastructure in the wake of Hurricane Michael. In addition to advancing our customer relationships in the market, you've positioned us for many years of future success with the region's best fiber network. Thank you all for joining us today, and we appreciate your interest in Uniti Group, and we look forward to updating you on our progress next quarter.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may call disconnect.

Duration: 40 minutes

Call participants:

Kenny Gunderman -- President and Chief Executive Officer

Mark A. Wallace -- Executive Vice President, Chief Financial Officer & Treasurer

Josh -- Bank of America Merrill Lynch -- Analyst

Simon Flannery -- Morgan Stanley & Co. -- Analyst

Matthew Niknam -- Deutsche Bank Securities -- Analyst

Frank Louthan IV -- Raymond James & Associates -- Analyst

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