Welcome to Uniti Group's fourth quarter 2018 conference call. My name is Jimmy and I will be your operator for today. A webcast of this call will be available on the company's Web site www.uniti.com, beginning March 20, 2019 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 remarks. The company would like to remind you that today's remarks include forward-looking statements and actual results can 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 Web site, 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 these 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'd now like to turn the call over to Uniti Group's Chief Executive Officer, Kenny Gunderman. Please go ahead Mr. Gunderman.

Thank you. Good afternoon, everyone and thank you for joining. Before I review our operational performance for the quarter, I'd like to reflect on current industry trends and company milestones that we achieved in 2018. Just like last year demand for fiber infrastructure continued to be one of the top telecoms themes in 2018 and going into 2019. The preparation for a broader rollout of 5G wireless and fixed wireless services, our wireless carrier customers are looking to densify their networks with both additional macro towers, as well as small cell nodes. As the consumption increases and new technologies continue to evolve and develop, the need for low latency dense fiber will continue to increase. This densification will require tremendous amount of fiber, and we believe that both Uniti Fiber and Uniti Leasing are uniquely positioned to capture this demand with over 5 million strand miles of available owned fiber. At Uniti Fiber, we completed three dark fiber projects in 2018, and are currently in the process of completing the build out of several more dark fiber small cell projects, primarily in the southeast by the end of this year. In fact, we deployed our 1000th small cell during the fourth quarter. We currently have approximately 1,700 small cells in our backlog and expect to deploy over 1,350 in 2019. As we complete these projects, we will focus on leasing them up, not only with additional wireless opportunities but enterprise, E-Rate and government opportunities, all of which have attractive economics and incremental yields. We continue to see positive momentum in our tower business. In the U.S. we continue to expect to build between 200 and 300 towers on average annually over the next five years. With the backdrop of 5G densification, national wireless carriers continue to look for vendor diversity…

Thanks, Ken and good afternoon everyone. We reported strong fourth quarter results with all of our business units demonstrating solid momentum going into this year. Industry trends remain favorable as the multiyear investment cycle and communication infrastructure remains healthy. As the only diversified fiber centric REIT, Uniti is well positioned to provide a differentiated value proposition as we offer a full suite of products and services across all three of our distinct business units. I'll start with a brief overview of 2018 this afternoon, but want to devote most of my comments to our outlook this year as we have the opportunity to achieve several significant milestones. Turning to Slide 5, we reported consolidated revenues of $271 million, consolidated adjusted EBITDA of $210 million, AFFO attributable to common shares of $116 million and AFFO per diluted common share of $0.64. Net income attributable to common share for the quarter after transaction and integration related cost was $12.3 million or $0.05 per diluted share. Net income for the quarter included $5.4 million of transaction related costs, partially offset by approximately $3 million of income from changes in the fair value of contingent consideration. Moving to our leasing segment, 2018 and thus far in 2019, Uniti Leasing signed transactions that collectively play out will add over $45 million of annualized revenue. These transactions range in size from $30 million-$170 million with cumulative capital deployed expected to be over $320 million. That capital will earn attractive initial cash yields averaging over 10%. As important, each of these transactions has been structured with multiple growth drivers that have the potential to drive returns higher over the contractual lease term. Uniti Leasing represents a growing proprietary business strategy within communication infrastructure to position fiber networks for the most productive use. Overtime, we may well allocate…

Thanks Mark. I'll now cover more details of our Latin America tower portfolio. We've agreed to sell our tower portfolio on Latin America to PTF or approximately $100 million or 37.5 times 2018 adjusted EBITDA. The portfolio consists of approximately 500 towers located across Mexico, Columbia and Nicaragua. We believe this transaction realizes significant value for our shareholders as it represents an unlevered IRR of approximately 27% over a three year time period, as well as an economic gain of over $20 million. This transaction also allows Uniti to focus more on communications infrastructure growth opportunities in the U.S. as building towers continues to be a significant part of our overall strategy to provide a full suite of solutions to wireless carriers, as well as other customers. The transaction is subject to customary closing conditions and is expected to close by April 1, 2019. The communications infrastructure M&A environment remains very robust. Uniti is uniquely positioned to participate as both a buyer and a seller with very valuable assets, as well as with our proprietary tool kit, including OpCo/PropCo structures on both new and existing assets. We believe this flexibility will not only provide value enhancing liquidity alternatives, but also allows us to remain active with our diversification efforts during the duration of Windstream's bankruptcy proceedings. I would now like to discuss the recent events related to Windstream. As most of you are aware, Windstream recently received an unfavorable court ruling related to its various lawsuits. As a reminder, Uniti was not a party to this litigation and the validity of our master lease agreement was not challenged in the court ruling. Subsequently, on February 25th, Windstream commenced voluntary restructuring proceedings under Chapter 11 of the U.S. bankruptcy code. Obviously, we’re disappointed by this outcome that we've been contingency planning…

Thank you [Operator Instructions]. Our first question comes from Frank Wilton with Raymond James, your line is now open.

So on the dividend -- I assume the new $180 million that you talked about inclusive of $110 million that's paid that is down a bit from because of the incremental 200 basis points in the term loan, so that’s the run rate. And I apologize that sound broke up a little bit when you're going through that. Are you going to make up -- the current run rate doesn't quite hit that. So are you going to make that up at year-end?

We would expect to, yes.

And what decision process for paying any kind that you alluded to in the 10-K. How should we think about that?

So right now, Frank, we expect to pay the dividends all in cash. And that's what the guidance we gave includes cash payments in all dividends.

And then just one last question. What is your current cash position as of today, and have you paid the upfront fees to the creditors and would that be inclusive of net of that?

We have paid the upfront amendment fees to everybody, that's already been paid, yes. Our cash position, is that your question?

Yes.

So I think I said at the end of the year, we had about $150 million. Our cash position today is about a $120 million today. And just to extrapolate on what our plan is for this year. So the liquidity with what we outlined in guidance, the liquidity for our company built throughout the year so it continues to build during each quarter until we get to the date that we are expected to close the Bluebird in October. And in October, the Bluebird transaction is expected to consume about $170 million upon closing the liquidity builds until that point. The Bluebird transaction we currently expect to fund entirely with cash on hand. So, we have no plans this year in the guidance that we gave to access the debt capital markets. We have no plans to issue equity during the year at these depressed levels. And as I indicated earlier, we do expect to pay a dividend during the year.

Thank you.

Thank you. Our next question comes from Phil Cusick with JPMorgan. Your line is now open.

Given the restrictions, and I’m not willing to use equity. Kenny, how do you think about the pace of getting to the diversity away from Windstream? What should we think about this over the next year?

Obviously, I think we’re going to be slowed over the next several quarters. We are going to be continuing to focus on smaller transactions similar to what we've done in the past and certainly continue to grow our business organically. But until we see less volatility in our securities and just general cost of capital, we are likely to not be pursuing larger transactions, including some of the ones that we've been talking about, because as we mentioned last year and before when we were talking about the 50% target, we characterized it as a target but not a mandate. And so, given where the cost of capital is, I think it's fair to expect the pace of diversification will be slower until we have more clarity on the acceptance. And at the same time, Phil, we are remaining very engaged with the M&A market there we’re having conversations and we don't expect this to be a long-term situation by any means, we expect it to be temporary. So we don’t want to disengage from the M&A market.

Well, that’s a leasing to a different question. Is there a risk and what would be the argument be at this point, or Windstream bond holders are trying to come after you and collapse the whole structure? How do you address that with potential partners as you talk to them to maintain momentum through this process?

I don’t think that’s realistic. I think from what we -- well, let me first say. We've been -- contingency planning for all scenarios for the past year, so two years. And I would be hard pressed to come up with a scenario we haven’t thought about and frankly have a strategy for, including what you just mentioned. But what I would say is we find that extremely unlikely and what we have found so far in the process, the bankruptcy process, is basically what we would expect, which is that all parties, including Windstream from what we hear from creditors, regulators is that there is a very strong focus on maintaining operations, no disruption of service, continue to provide service to customers and meet the regulatory obligations, which is a rational point of view that’s what all parties should be focused on. And we think that’s going to continue throughout the process. And so when we engage with our customers and our vendors and our potential M&A counter parties and we talk about the facts related to the bankruptcy and what’s really going on, I think folks are reassured about the ultimate outcome, it's less a question of uncertainty at that point and more just a question of timing.

And you seem really constructive on the potential outcome and the partnership with Winstream being strengthened on the other side of this. But do you anticipate some re-characterization of the lease and the payments being substantially different than they are today, or is your base case that we go from the current payment structure and then maybe assets and payments change, but only on differences in the asset mix?

So Phil, it's probably closer to the latter than the formal for sure, but let me try to eliminate more. And I think in a nutshell what I would say is our view hasn’t changed from what it was before the filing, or before the Aurelius ruling, or a year ago or two year ago. And what I mean by that is we have always said that our network that we're leasing to Windstream is mission-critical, is mission-critical to their business. And the lease arrangement between the two of us is a master lease and is structured exclusively to anticipate a bankruptcy as a downsize scenario. And in that scenario, it has to be accepted or rejected in its entirety. We can't be forced to negotiate. And we've always said that we believe a scenario of rejection of the lease is remote, because of the significance of the network to their business. We've also said that we would be open to, Uniti would be open to mutually beneficial negotiations to enhance lease to benefit consensual negotiations. So you can take that as a backdrop, we still believe all of those things today. And when you consider the significance of the network to the operations of Windstream to the cash flow generation capability, to satisfy creditors, to the regulatory obligations, we just don't see a risk of rejection of the lease. And we do think that there are some opportunities to enhance it and those opportunities are similar to what we've talked about in the past, nothing new there. Your point about some of the -- what we would characterize as more frivolous claims of re-characterization or fraudulent conveyance and other things, we've heard of those types of claims over the past couple years or so. And as you would expect, we have a point of view on those and believe they are not grounded in strong basis. We believe we'd have a strong defense against any of those, and don't believe they would ever be successful. And so ultimately, we believe that the lease will be accepted in its current form, or accepted in some form that is changed to a mutually beneficial way and a mutually beneficial way for Uniti and for Windstream.

One more if I can, just you seem optimistic in terms of the timing of working to the Windstream bankruptcy and moving back to a normal way. What's your best guess in terms of how long this takes?

Phil, I would love to tell you what I really think, but probably should. I would tell you that we’re optimistic. One of the things that we've observed in the early stages of the proceedings is that all parties seem to want to move quickly through this and that again makes sense, avoid as much disruption as possible. So, we want to do what we can to help facilitate that. And there are some important dates, I think we've put those in our slide materials related to the lease and acceptance of the lease and extensions, which you can look at those but those are sometime over the next couple of quarters. So we think by third, fourth quarter, there should be more clarity on where we all stand.

Thank you. Our next question comes from David Barden with Bank of America. Your line is now open.

David, we can't hear you if you're speaking…

Our next question comes from Matt Niknam with Deutsche Bank. Your line is now open.

Just two if I could, one, is we think about the discretionary CapEx. Mark or Kenny, if you could just refresh us on how you're thinking about this? You mentioned there's a couple of fiber projects left into 2020. I was just wondering where we could see that go beyond 2019. And then on leverage, any parameters we should be thinking about in terms of where leverage can go this year, particularly as you think about more limited amount of M&A in the interim. Where you'd like leverage to be? Thanks.

So leverage this year, beginning of the year, the end of the year the guidance that we gave, I would say forecast leverage to be neutral from beginning of the year to the end of the year. So no change in our 5.9 times target, net target that I gave out earlier.

And Matt on your question about discretionary CapEx, we are not cutting back on CapEx throughout the course of the year. We're continuing to invest at similar pace finishing up the projects, the large projects that we have. As Mark mentioned and as we've been saying, once those projects begin to taper off, CapEx will naturally come down into 2020. So we won't get into specifics. But it should naturally come down as a percentage of revenue. But importantly, we're not cutting back on CapEx this year as a result of the proceedings, and plan to continue investing at similar pace.

Matt, just to add to that. I think I said in my prepared remarks in 2020, we think capital intensity at Uniti Fiber will come down to the mid 30 range.

Thank you. And our next question comes from Bora Lee with RBC Capital Markets. Your line is now open.

The presentation mentions that the lease must be assumed or rejected by June 25th. Can you layout the timeline of other milestones we should be looking at for past that point assuming an acceptance of the master lease?

I'm glad you pointed out that day and this ties back Phil to your question. So I think that's the date that's in the lease with respect to the first milestone for acceptance or rejection. There's been a 90 day extension beyond that that gets into September. So we don't know whether we'll hit the June state or not. We actually -- well, we don't know. So it could be extended until September.

And second one if I could. When you acquired Hunt Telecom, you mentioned opportunity to apply your learnings from Hunt to other parts of your network on the e-rate side. Can you provide an update on progress you’ve made with this effort?

We made some comments in our script related to our e-rate progress. And if you remember back, it’s a business that was largely focused on E-Rate, and so the parts of that business that we were most excited about spreading across the broader footprint was that e-rate business and there learnings. And in our first e-rate season, we didn’t really have a chance to do that, because the deal closed really closed in the summer and we just didn’t have enough lead time to really rebrand the business and really institute all those best practices, and we said that at the time. But we did say that this e-rate season would be different, because we'd have more lead times and we'd have more time to get out in front of schools, both existing schools and new ones to explain our new business and so far and you can refer back to our comments in the script. So far we've been very, very pleased with that and we will have a better update on that once e-rate season is over, and that will be -- we'll be able to report on that at our next earnings call. But we've been very pleased with the progress so far.

Thank you. And I’m showing no further questions in the queue at this time. I would like to turn the call back to Kenny Gunderman, CEO for any closing remarks.

Thank you. I would like to especially thank our loyal employees and customers. Uniti has a strong base of higher value assets in operations, as well as the ability to continue investing in our businesses during this temporary period of volatility. We appreciate your interest in Uniti Group and look forward to updating you further on future calls. Thank you for joining us today.

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