Welcome to Uniti Group Fourth Quarter 2017 Conference Call. My name is Michelle, and I'll be your operator for today. A webcast of this call will be available on the company's website, www.uniti.com, beginning March 01, 2018, and will remain available for 14 days. [Operator Instructions]. 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. Our remarks this afternoon will reference slides posted on our website and we encourage you to refer to those materials during the 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. The company will not be responding to questions regarding Windstreams’ current litigation during this conference call as Uniti Group is not a party to that litigation. I would now like to turn the call over to Uniti Group's Chief Executive Officer, Kenny Gunderman. Please go ahead, Mr. Gunderman.

Good afternoon, everyone, and thank you for joining. As we exit 2017 and begin a New Year, I’d like to briefly reflect on industry trends and how our strategies are positioning us well to have sustained success. I’ll begin my remarks focused on slide four of our website presentation. First, demand for fiber infrastructure continues to be at the top Telecom theme. While those carriers have intensified their densification plans and we expect the first 5G fixed wireless and mobility network deployments to be launched in select markets in 2018. We expect the market level trials and deployments will quickly lead the wireless carriers to a national 5G rollout similar to the pattern for 2G,3G and 4G technology changes. 5G requires and small cells and small cells require fiber and Uniti owns 1.1 million fiber strand miles of leaseable inventory. As we enter the year and expect inventory levels to grow organically and through acquisitions throughout the coming year. Second, the recent tax reform legislation, the elimination of the Sprint-T-Mobile merger overhang and Sprint’s recent announcement to increase investment in their network have generated a positive tailwind for wireless carrier capital spending that we expect will benefit both our fiber infrastructure and tower operating businesses and create opportunities for bundled offerings. Third, the continued expansion of the Red Compartida wholesale wireless network in Mexico and a 2018 ground breaking of the first network in the U.S. will create lease up and build to suite opportunities on both sides of the border for tower space and new towers. Our strong relationship with the national wireless carriers of both Mexico and U.S. should position us well to capitalize. Lastly, the telecom industry is embracing the idea of shared fiber infrastructure including now through innovative sale-leaseback transactions. Our announcement today of the sale…

Thanks, Kenny, good afternoon everyone. Please turn to slide five in the presentation; I’ll start with the review of our results for last year. Our consolidated operating performance for the fourth quarter was again in line with our expectations with consolidate d revenues of $246 million consolidated adjusted EBITDA of $198 million, AFFO attributable to common shares of 112 million and AFFO for diluted common share of $0.64. Net income attributable to common shares for the quarter after transaction and integration related cost was $20.5 million or $0.12 per diluted share. Net income for the quarter included several non-cash items which were excluded from both AFFO and adjusted EBITDA. These fourth quarter non-cash items included $1.6 million of non-cash expense for the change in fair value of contingent consideration agreements and $28 million of non-cash income tax benefits. The tax benefits included a $10 million release, a deferred tax valuation allowances resulting from an internal reorganization of our Uniti fiber entities into our combined structure and about $18 million of non-cash income from the impacted tax reform that allowed us to re-measure our key arrest net deferred tax liabilities at the new lower rates. Our Leasing segment revenues were $172.2 million with adjusted EBITDA of $171.8 million for the fourth quarter of 2017. Windstream made nearly $62 million of improvements during the quarter to our network with their capital on a cumulative basis since our spin-off we had benefited from over $450 million of tenant capital improvements completed by Windstream. Uniti Fiber reported revenues of $66.6 million and adjusted EBITDA of $31.5 achieving adjusted EBITDA margins of just over 47% for the quarter consistent with our prior guidance. These results include $2.5 million of realized cost savings during the quarter and we exited 2017 with annualized run rate cost savings…

Thanks Mark. Turning to slide 11 I’d like to review the sale lease pact transaction we announced this afternoon. TPx is a privately held managed service provider with fiber network and data centers in California, Nevada, Texas and Massachusetts. Over the last few years, TPx has made a strategic shift from our facilities based CLEC to an enhanced managed services provider. As a result they were interested in selling their fiber network to unlock the value of the excess fiber capacity and improve their leverage and credit profile. We acquired 45,100 Strand miles of fiber for $95 million and simultaneously entered into a 15-year triple net master lease that will pay Uniti $8.8 in annual rent plus the 1.5% annual escalator. We are well protected with a minimum rent coverage test and maximum leverage ratio covenance embedded in the lease and view TPx as a strong credit worthy tenant in the fast growing data center and managed services provider segment. This investment will generate cash yields starting at 9.3% and growing to over 10% over the initial lease term. The triple net lease structure will create adjusted EBITDA and underlying cash flow margins of 99%. Uniti has exclusive access to use in our Uniti fiber business or right to lease 7000 strand miles of unused fiber in five Texas metro markets that are adjacent to our Southern Unity fiber network. In addition, Uniti has entered into non-exclusive marketing agreement for sub-lease after 22,000 unused fiber strands in California and Massachusetts on behalf of TPx with revenues being shared. The combined impact of these provisions is to add approximately 29,000 fiber strand miles with inventory for future sales and leasing. The TPx transactions were accretive immediately and add $0.03 per share of AFFO during the first full year. Turning to slide…

Couple of things. First, I wonder if you can say again what’s that – I think you said 50% revenue diversification by summer of 2019?

Yes. That’s right, Phil.

And right now it's 30% on the done deal count?

By the end of the year with the deal it will be 33%.

Okay. So that’s a pretty huge acceleration from what we’ve seen for last couple of years. What’s happening in the pipeline that gives you that kind of confidence?

Yes. I don’t think it’s a huge acceleration, Phil, I mean, I think we didn’t really have any deal activity in 2015. We were developing the pipeline, putting the company together essentially and really in 2016 and 2017, so 18 months effectively we move the needle pretty dramatically to 30%, and so we’re really this year alone were already at 33% just through organic growth and the deal we’ve announced. So I think over the next 18 months we still feel that just based upon the regular pipeline work that we've developed and what's in the pipeline and how we think it’s going to play out, we still fill feel good about the target.

Good. And then if you could talk more about your tower business. Talk about the funnel of business, you said 25,000 in the next five years; you could even take 5%. What does that that sort of funnel look like right now? Thank you.

Yes. What I would say – I think the CapEx guidance for the year is probably a pretty good proxy for that. I think if you consider that tower is cost anywhere from 300,000 to 350,000 build you can back into to the number that Mark mentioned roughly 300 towers this year. I think we actually feel very confident that we can ramp that number up fairly dramatically if we choose too, based upon the dialogue that we’re having with our customers. So, I think the number that we’re targeting for this year, is reflective of what we’re comfortable with in terms of privatizing capital, but in terms of the 5% over the next several years feel very confident based on customer dialogue maybe we would achieve that number we chose to.

Okay. And one last one on the Windstream side, you talked about the coverage that you have and the guarantees. What about some level of negotiation, where they sort handed you assets and the right to market those assets. Is that something that sounds more feasible or is the current lease something that really stands in stone and you wouldn’t want to be able to that? Could be willing to change that?

Phil, I’m not sure if I’m completely following your question. Do you – are you talking about some of the unused fiber that exist?

Yes. I apologize. I’m trying to think of what we hear from investors is whether there's creative ways that that we can bring down the current lease pricing and I’m whether you’d be willing to do that in exchange for assets or something like that or does the current revenue for you coming in northeast is that still important that you wouldn’t be going to reduce that? Thanks.

Yes. Thank you for clarifying. So, we’re not interested in reducing a lease payment. We’ve said that before and continue to believe that, say that, but there are definitely ways that we and Windstream could work together to effectively monetize some of the unused fiber at Uniti leasing that could benefit both companies. So there’s actually some opportunities there that we’ll continue to pursue over time.

Good. Thanks guys.

Our next question comes from David Barden of Bank of America. Your line is open.

Hey, guys. Thanks for taking the questions. Just a few I guess. First, can you Mark, with respect to the TPx transaction, I guess two questions, one would be – there seem to be three parts to it. One is the sales lease back, one is the acquisition the fiber and one is marketing, right, so I just was wondering how you kind of thought about allocating value within that $95 million among those parts. The second question is, is this deal accretive to AFFO day 2? And if so what is the capital structure that you think supports that calculation. I guess, I get about 9.2% yields on the lease part of it. And then I guess two more questions, sorry. The third question was just. Over the last six or so while Windstreams being struggling, I think that there’s been a recognition, your capital structures has been under undue pressure, and I think Mark, you’ve talked about how maybe deferring some capital raises and waiting for this result that’s might be the better course of action. But now that we’re in this kind of rate hike environment, LIBOR spiking, T-Bonds are spiking, I was wondering if you kind of revisit how you think about the tradeoff between waiting for the Windstream resolution and dealing with the rate environment in terms of phasing of coming to term under its deal. Sorry, the last question is just on the fiber business. I just want to make sure, I understood. So fourth quarter fiber business was 31.5 million revenue, if it’s going at 10 that means you have to end next year at about 34.5 in the fourth quarter. If I ratably grow it, the guidance would be for the year somewhere closer to EBITDA, closer to the mid to high 130s, you’re guiding to 129, and I’m wondering if that because of all these upfront and kind of churn and investment things we were talking. If you could kind of walk us through that cadence it would be helpful?

David, its Kenneth. I’ll start with your first then and we’ll try to hit the rest of your questions, but keep us honest if we miss one. With respect to the TPx field, I think you’re right, there’s roughly three components, the acquisitions of fiber, the lease back to TPx and then effectively the ability to monetize the rest of release ourselves whether its exclusive for the fiber in Texas or jointly with the fiber outside of Texas. No surprise. We looked at it as a combination. We looked at all those factors when we look at valuation and what we paid and also the lease rate. It was a combination of those things, plus our comfort in the credit of the company, the management of the company, the trajectory of the company, and ultimately we think, the vast majority of the value is what we’re paying for the fiber itself. We think this is viable fiber. It’s in attractive metro areas. And the lease rate while attractive on its own we think can definitely be improved over time with lease-up four using some of the fiber in the Texas market. So it was a combination of all those things. We didn’t attribute value specifically to the three buckets, but I would say, it was predominantly related to the fiber network itself.

Yes. So, David, I can take your question on the TPx financing. So on the 3% accretion at we – or increase in accretion that we showed, that’s based on financing the TPx and transaction on our revolver. And so as you know as I outlined on the outlook, our outlook is in that -- there are any additional M&A transactions or any additional capital market transactions either. And as you know that's due to the uncertainty in predicting when you’ll have successful outcomes and timing on deals as well as capital market conditions. So our outlook kind of inherently assumes that transactions including TPx are financed on our revolver. That said, I'd expect any additional capital market transactions or any equity issuance in the future to be done in connection with future M&A or other strategic transactions and those transactions at the time will be design for us to continue to be to meet our long terms of leverage targets, which is to be – to maintain our leverage about where it is today. So I expect – I do expect this maintenance leverage, an existing levels day. However as I’ve said previously leverage will fluctuate. As we take on transactions like TPx on our line and then put the permanent capital in place at the appropriate time.

And then, Mark just on the kind of tradeoffs between waiting for the Windstream situation resolved itself versus kind of what's happening in capital markets generally?

Yes. So I think we’re going to be very – we’re obviously very conscious about our cost of capital and we want to be very disciplined about accessing the markets when we think of the litigation that there's an overhang in terms of our security prices relative to sort of litigation at Windstream. So we don't – we’re not in a position until that we need to go to capital markets anytime soon. So I think we'll just be patient and prudent on when we go in the future based on market conditions.

And then just on the cadence and spacing of the fiber business kind of thinking about that 31.5 EBITDA, in the fourth question, growing 10% by 4Q next year, the guide would imply it only 129 versus a ratable maybe closer to 136 or that’s -- is that kind of talking about the pressures you’re going to be having in the first half maybe more of a flattish EBITDA in the fiber business and then kind of grow in the second half?

Yes. So that’s exactly right. Relative to the kind of the first half and the second half, so the EBITDA margins as I mentioned for the full year are 45% versus what we had 47% in the fourth quarter of 2017. But part of that is because we’ve had some of the elevated churn that we mentioned early in the first quarter of 2018, but it also reflective of adding costs as well which is there’s been some increased in some of the – there’s some increase in cost into our incentive compensation programs including new sales commission plans as well as the market expansion cost that Kenneth mentioned and probably some additional cost and healthcare cost increases as well. But as I said earlier, we do think that it will increase to 48% in the fourth quarter of this year.

Great. All right. Thanks guys. Those were my questions. Bye-bye.

Ladies and gentlemen, our next question comes from Frank Louthan of Raymond James. Your line is open.

Great. Just back to the fiber question, how much more of the lit fiber-to-tower, do you have at risk? I’ve seen some over builders come in and maybe take back over this contract. And then, talk to us little bit about some of the – give some more color on TelePacific. The sale-leasebacks been a little bit elusive and you started the company and any color around what’s you learned or a particular problem you saw for them that maybe you can replicate with some others and be able to do some more sale-leasebacks? Thanks.

Frank, its Kenneth. I’ll take those. On your first question, we don’t see any other major markets being lost to another carrier. In fact Atlanta and Dallas as I’ve mentioned in my remarks, we knew those were coming when we acquired both PEG and Tower Cloud. Those were factored into our underwriting model and were expected -- and we just – we don’t see any more of those types of events coming. With respect to your second question, look as I’ve said before we -- the first year, year and a half or so even two years was really spent out priming the market, educating the telecom, universe on our business model. What sale-leasebacks are and how they work educating the deal, community, bankers, private equity. And so we don't believe it was a lack of success or lack of interest so much as educating the market and really working through our options on who attractive counterparties are. And this particular transaction I think was a result of all that work. And I think the ones that are coming we believe including more this year are result of that work as well.

Okay, great. Thank you.

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

Hey, guys. Thank you for taking the questions. Just two quick ones if I could. First on fiber, Uniti Fiber CapEx, I think Mark you have mentioned, after some of the bigger project you got going on an 2018 and maybe early 2019 capital intensity sort of trending back to average levels, but what to those sort of average normalized type capital intensity levels look like as we look past the near term? And then secondly, I think Kenneth just to follow-up on the prior question on subletting some of the unused capacity that Windstream isn't necessarily using. I know you mentioned you’d be open to – just curious if you can give any color on whether those discussions are being had at the present? Thanks.

Yes. I think normal levels means probably around the – about 40% capital intensity. Now it’s obviously going to depend about what contracts we win or when those schedule to deployed, but I’d say 30% would be what I would consider more of a normal level.

And on your second question I would just say we’re in regular dialogue with Windstream as we have been for the past several years about mutually beneficial ways to work together and I would put this particular opportunity in that category.

Got it. Thanks you.

Our next question comes from Michael Rollins of Citi Investment Research. Your line is open.

Hi. Thanks for taking the questions. Two if I could. Can you share with us – just going back to TelePacific, the credit ratings in slide 11, it’s cited as of April 3, 2017, do you have an update in terms of maybe what happen with the company financially with their net debt leverage over the last 12 month. And secondly, when you constructed the lease, can you share with us some of the protections that are in the lease in case they distress or worst scenarios that were to immerge in the future. Thanks.

Yes. This is Mark. I’ll start. We unfortunately cannot share specific financial information about TPx because of – just because they're a private company, have limitations on what we can share. I will tell you that since then their financials have improved and as we stated in the presentation, they intent to use the proceeds, partner proceeds here for debt pay down and they continue to invest in the network which we all view is very positive and we have extremely good lease coverage metrics on that as well. In terms of the protections that are in this lease in particular relative to Windstream, I’d kind of highlight a couple of things. One is as I’ve mentioned it several conferences, this lease is at a operating entity level which is different from our Windstream lease as suppose to being at the parent company. It does include a parent company guarantee. It does include guarantees from operating subsidiaries as well with the assets and regulatory approval [Indiscernible], so that’s one distinction. As we mentioned we do have a number of different financial covenants in the lease as well. And then second, we also have cross default provisions with debt at TPx, and then we have limitations in terms of some restricted payment in assets also – as well. So I think the lease here is very strong. I think it’s indicative of the type of lease structure that we’ve talked about doing on triple net lease transactions in the future. I think it’s probably a good template for transactions that we’ll continue to do.

And in the pipeline of future sale leaseback opportunities, is there weighted kind of tier or bifurcate the credit worthiness of the opportunities. So are you looking at some opportunities that have credit at a certain level versus maybe some of lesser credit?

Look, I think the credit is one key factor, but as I mentioned there’s a number of others. I mean there is the credit quality of the tenant. There’s also the structure to lease, meaning there’s a credit component to the lease itself. There’s also an important component as I mentioned is as I mentioned is the use of proceeds and whether or not that is it enhancing the companies both their financial position as well as perhaps their competitive position as well. So the tenant credit quality is very important in the analysis, but there are other components as well.

Thanks very much.

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

Hi. It’s Spencer for Simon. Thanks for taking the question. Couple of from me. First, a follow-up and a clarification on your diversification targets. I think you said previously that you won’t issue equity at these prices. So in order to get your 50% target by next year does that assumption assume any improvement in the stock pricing here? Or could you reach that target given where your stock rate is today?

Yes. So let me just maybe answer the question more directly about kind of our plan to issue equity and price level. So, let me start by saying we have no need to-date issue equity any time soon. We would expect as I said earlier, we would expect to issue any equity predominantly in support of future M&A and other strategic transactions. Sourcing of that equity may also include private capital sources that we’ve referenced – have a referenced and that might be structured if these are convertible instrument, part of another equity linked security. So there’s variety of different transaction structures and a variety of different private capital partners that we’re in discussion with and we’ll just see how those turn up.

Okay. And then second on the tower business, your outlook project something like 90 plus of cash burn issue, longer term when you think that business can get to breakeven from an cash flow standpoint?

Spencer, this is Kenneth. I think its depends how many towers we build and of course, the lease-up assumptions which we monitor very closely and so it’s – I wouldn’t want to give a specific target because it still moving around at this point depending upon how many towers we’re going to built. But ultimately, I think the economics that we’re operating under our the starting yield, the 5% to 12% like we mentioned with second tenants adding pretty dramatically to those starting yields and we can sort of do the math where once you get that second tenant you’re really looking at a pretty attractive investment from a cash flow perspective.

Okay, great. Thank you.

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

Thank you and 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.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program. And you may all disconnect. Everyone have a great day.