Uniti Group Inc. (UNIT) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to today's conference call to discuss Uniti's Third Quarter 2026 Earnings Results. My name is Jonathan, and I will be your operator for today. Today's call is being recorded, and a webcast will be available on the company's Investor Relations website, investor.uniti.com, beginning today and will remain available for 365 days. [Operator Instructions] It is now my pleasure to introduce Bill DiTullio, Uniti's Senior Vice President of Investor Relations and Treasury. Please begin.

Thank you, Jonathan. Good morning, everyone, and thank you for joining today's conference call to discuss Uniti's third quarter 2026 results. Speaking on the call today will be Kenny Gunderman, our CEO; and Paul Bullington, Uniti's CFO. John Harrobin, President of Kinetic, will also be joining us this morning during Q&A. Before we get started, I would like to quickly cover our safe harbor statement. Please note that today's remarks may contain forward-looking statements. These statements include, but are not limited to, statements regarding Uniti's fiber build strategy, the business' growth potential, our 2026 outlook and other statements that are not historical facts. Numerous factors could cause actual results to differ materially from those described in the forward-looking statements. For more information on those factors, please see the section titled Safe Harbor Statement in the accompanying presentation and the Risk Factors sections in our filings with the United States Securities and Exchange Commission. With that, I would now like to turn the call over to Kenny.

Thanks, Bill. Good morning, everyone, and thank you for joining. Uniti posted another solid quarter of performance, having met or exceeded our expectations on virtually all major KPIs. Where we are making investments in our fiber businesses, we're seeing tangible positive results, including 22% year-over-year consumer fiber revenue growth at Kinetic with 15% plus IRRs and mid-single-digit revenue growth at fiber infrastructure, generating 37% cumulative free cash flow yields and 36% IRRs on our large hyperscaler builds. Importantly, we're building fiber-first or early and future-proofing our business, and our outlook remains positive. Last quarter, we raised guidance for the full year, and we're reiterating that guidance this quarter with the exception of slightly higher revenue expectations, largely driven by strength in our fiber infrastructure business. Although revenue for the quarter was right at the midpoint of our guidance, adjusted EBITDA is down this quarter due to three reasons, including a negotiated deal with a wholesale customer to replace near-term TDM with longer-term strategic revenue. One of our large hyperscaler deals moved to the fourth quarter. And at Kinetic, we took additional retention actions to fortify our base of subscribers. With that said, the continued outperformance in our hyperscaler business will offset these items in the fourth quarter, and we will be in line with our previous guidance. Turning to fiber infrastructure on slide five. We had another terrific quarter of new bookings. In the second quarter, we posted an all-time record of new bookings with a balanced mix of lit and dark fiber services and strong diversification across all existing and new customer segments. Those same trends continued in the third quarter with another near record quarter of bookings and exactly the mix of products and customers that we want to see. 45% came from large strategic wave sales, 35% from other lit services and 17% from dark fiber. In terms of customer mix, 40% of new bookings came from traditional enterprise and wholesale customers and 12% from wireless and fiber-to-the-home carriers. The remaining roughly 50% is coming from a group of customers that are largely new to fiber providers in the past 24 months, including 30% from superscalers, 12% from hyperscalers and 6% from neoclouds. We could not be more excited about the continued strength in this part of our business, and I still do not think we found the ceiling. To that end, we're increasing our previous guidance related to the generative AI opportunity. Slide six compares our previous estimate to our most current view. And as you can see, the expected gross CapEx during this build phase is expected to be roughly the same, but the upfront payments from customers, onetime cash revenue and recurring annual cash revenue are expected to be 36%, 33% and 90% higher, respectively, than our previous estimates. Importantly, the lease-up phase is expected to generate not only more annual recurring cash revenue, but will be materially more free cash flow efficient. I'd like to make three additional points on this plan. First, we continue to see the benefit of where our network is physically located as a competitive advantage. Over the years, we've built the Tier 2 and Tier 3 markets as a strategy. And many of these geographic areas are hotspots for new data center development, space ports, compute resale, training and inference model refinement, among others. Ready access to land, power and a relatively more lenient NIMBYism sentiment continue to make our footprint attractive for investment. Having an embedded network and a proven track record of execution gives us a meaningful cost and return advantage and a real right to win new business. Secondly, when we gave you our original estimates earlier this year on our fourth quarter earnings call, we were still speculating on most of the opportunity ahead of us. So we had to make many assumptions at that time. However, with now 12 months of extremely fast-moving activity, we have tangible proof points that give us confidence to increase our higher estimates. For example, 100% of the expected revenue in our current plan for the remainder of this year and all of 2027 is booked and in the process of being turned up. And close to 100% of that revenue in our plan for 2028 is either booked or actively being worked in our funnel with identified opportunities. All of which leads to my third and final point. We still have not found the ceiling for this generational growth opportunity. One of our biggest challenges is prioritizing the opportunities ahead of us. Our funnel of dark fiber and mega waves opportunities dwarf even the updated plan that I just walked you through. While our new estimate today is our best guess of the current opportunity ahead of us, I'd not be surprised if we were showing you higher estimates in the future. Speaking of mega waves packages, slide eight highlights our continued progress. As a reminder, our Wave strategy is not to compete on price nationally on highly trafficked routes with four to five other waves providers. Similar to our Tier 2 and 3 focus on metro markets, we're largely lighting unique intercity routes, including now connecting many of the unique data centers that we have and are continuing to build. The majority of our wave sales are multi-terabit deals that are largely bespoke or at least highly negotiated, similar to dark fiber builds. And we're winning based upon the uniqueness of our network and our track record of deploying on time and on budget. As you can see from a sampling of these deals from just this quarter, the customers are a mix of hyperscalers and superscalers with contract terms that not only ensure a good lease-up type return, but also protect us from a customer credit quality. I also want to point out that we're seeing more and more large enterprises either procuring or beginning discussions to procure mega wave packages. As we've been saying for some time, the heavy build cycle led by hyperscalers and now superscalers is a precursor to the more fulsome and exciting inference phase where traditional large enterprises would also need substantially more bandwidth. It's exciting that we're beginning to see that trend emerge. Before turning to an update on Kinetic, I'd like to briefly touch on the implications of recent industry trends and debate related to satellite companies. LEO, like fixed wireless is an alternative technology that competes for customers in our broadband business, and that has always been an assumption in our build plan. As slide nine highlights, our exposure to LEO losses in our fiber footprint remains small and amount to just a few million of recurring revenue annually. Arguably, these losses are even less because with our record low churn levels, we believe LEO is capturing share that would otherwise have gone to fixed wireless or cable. While losses could potentially grow over time, given the spectrum limitations of satellite, we think it is more likely that the losses either stabilize or decline as higher bandwidth, low-latency use cases are adopted by our residential and SMB customers, and we win back share. As an aside, we believe there could be good partnering opportunities with LEO for backup solutions for our customers as part of our copper retirement strategy in the future. Regardless, as you can see from the chart, the opportunity for our fiber infrastructure business related to satellite is materially higher than our losses in broadband. Today, we're billing close to $10 million of annual recurring revenue with satellite customers and have double that amount in our near-term funnel. And to be clear, we think the opportunity could be substantially higher in non-wireless backhaul given the proximity of our fiber network to certain data centers, base stations and planned base station investments that we see coming. In addition, based upon prior experience and tangible data points, along with recent customer conversations, we believe a new wireless entrant could yield another $15 million to $20 million of new backhaul revenue to Uniti. We believe more competition in wireless would only reinforce the value of owning fiber-to-the-home, either as part of a converged or bundled offering or as a stand-alone broadband product that is indisputably the best technology in the space. In short, we view satellite as a terrific opportunity for Uniti. Turning to Kinetic. We posted another solid quarter of performance, including our highest quarter of net adds ever, our highest quarter of new homes constructed ever and our second lowest fiber churn ever. Importantly, 50% of the Kinetic footprint is now covered with fiber, and we're not stopping there. As we foreshadowed last quarter, ARPU is also lower and in line with our expectations as we have responded to lower promotional pricing throughout the industry and made deliberate decisions to protect our base of subscribers. We not only believe these are the right decisions given the long-term value of fiber subs, but we also continue to believe that we will see ARPU growth in the fourth quarter. Stepping back for a moment and given that we're just over a year into a complete and highly successful transformation of Kinetic from a traditional copper-based ILEC to an insurgent share taker, we thought it useful to revisit some of our original assumptions underpinning our Kinetic fiber overbuild plan. First, fixed wireless competition is higher than we originally expected, and cable competition has adjusted their pricing lower. Both of these are market-driven dynamics, but we built a plan that is durable, sensitized to competitive threats and adjustable. With that said, our original penetration and fiber churn assumptions are proving conservative as we are performing very well in each KPI. Plus our build ramp and steady-state cadence and build costs are generally in line with our original assumptions. Lastly and very importantly, the wired competition in our markets and new fiber overbuilders in particular, have been less than we modeled. We intentionally retooled the Kinetic build to not only ramp but to focus on clustered markets and prioritize markets that are the most susceptible to overbuilders. In fact, by the end of this year, we will have largely completed the builds in those most at-risk markets, leaving us with greater flexibility to ramp the build up or down. Net-net, compared to our original estimates, our return models are performing better than anticipated. We will continue to invest wisely, execute at the highest level like we have and be prepared to adjust to shifting market dynamics in a nimble way with a focus on profitable growth. With that, I'll turn the call to Paul.

Thank you, Kenny. Starting on Slide 13, I'd like to review the key third quarter highlights for both Kinetic and our Fiber Infrastructure segment. The third quarter was another record-breaking quarter across several fronts for Uniti. Starting with Kinetic, we expanded our fiber network to pass an additional 162,000 homes with fiber, our highest level of new passings on record, ending the quarter with approximately 2.2 million homes passed with fiber. Kinetic also added 46,000 net new fiber subscribers during the quarter, ending the quarter with 648,000 total fiber subscribers. Fiber net adds for the quarter were the highest on record, and total Kinetic fiber subscribers grew 28% from the prior year period. Kinetic consumer fiber revenue grew 22% year-over-year during the quarter. This growth is being driven by strong adoption of our fiber-to-the-home product, bolstered by the performance of the various marketing initiatives at Kinetic that target both our newer and more seasoned cohorts. At fiber infrastructure, we recorded consolidated bookings MRR of approximately $1.9 million, our second highest level on record, driven by the continued robust demand we are seeing for both dark and lit fiber solutions from hyperscalers, superscaler and neocloud customers. Slide 14 highlights the sustained momentum we are seeing within Kinetic Fiber. We achieved fiber penetration of 28.9% during the quarter, consistent with the levels we have seen in recent quarters and despite a more accelerated build pace. We also now passed 50% of our Kinetic consumer footprint with fiber. As we alluded to last quarter, consumer fiber ARPU during the quarter was impacted by a number of factors, including new customer volume, the timing of rate plan adjustments and customer retention initiatives, as Kenny mentioned. However, we still expect ARPU to stabilize in the fourth quarter and grow low single digits over the long term. Turning to Slide 15. The continued strong improvement in our cohort fiber penetration is being driven by highly targeted marketing, customer experience and customer retention initiatives being deployed by the Kinetic team. Penetration levels in our year one 2025 cohort are outpacing year two and year three levels in our older cohorts. We expect to maintain or improve this trajectory going forward. Given this trajectory, we remain confident that our 40% terminal penetration target is very achievable and perhaps could prove to be conservative over time. Slide 16 lays out our key targets for Kinetic in 2026. We continue to expect the incremental homes passed with fiber this year to be between 475,000 and 525,000 homes, reaching 2.33 million to 2.38 million homes passed with fiber by the end of this year. This would bring fiber coverage within the Kinetic footprint to over 50%, a significant milestone in our goal to reach 3.5 million homes by the end of 2029. We also expect to end the year with between 675,000 to 700,000 fiber subs. I'll touch more on this in a minute, but given the results at Kinetic in the third quarter and the expected results in the fourth quarter, we now expect to realize $610 million to $630 million of consumer fiber revenue in 2026, an increase of roughly 20% to 25% from the prior year. Slide 17 provides a pro forma view of Uniti's consolidated results for the third quarter. Consolidated pro forma revenue and adjusted EBITDA were down 10% and 22% year-over-year, respectively, during the quarter, primarily driven by the continued declines in legacy copper and TDM services across all of our segments as well as higher-than-expected churn in our consumer DSL subscriber base. However, we continue to see strong growth in the strategic parts of our business. Kinetic fiber-based revenue, inclusive of consumer business and wholesale services grew 15% year-over-year. As we continue to execute on and accelerate our fiber overbuild plan, fiber services at Kinetic will deliver consistent strong growth quarter-over-quarter. At fiber infrastructure, revenue and adjusted EBITDA growth was primarily impacted by higher onetime nonrecurring revenue in the prior year as well as a onetime charge associated with converting near-term TDM revenue to longer-term strategic revenue with a wholesale customer. In addition to the information provided in our earnings materials, we've also included supplemental pro forma financial information on our Investor Relations website. Slide 18 demonstrates that the growth in our core fiber business has been strong, and we expect that growth to continue given the superior nature of fiber as a service. With this pace of growth, we continue to expect fiber to overtake legacy services as a majority of our revenue by the end of 2026. Please turn to Slide 19, and I'll now cover our updated full year 2026 outlook for the combined company. Beginning with Kinetic, we now expect revenues and contribution margin to be $2.11 billion and $855 million, respectively, at the midpoint, given the higher DSL churn, lower-than-expected consumer fiber ARPU and increased marketing and customer acquisition costs. We still expect to deploy $1.27 billion of net CapEx at the midpoint of our guidance. At fiber infrastructure, we now expect revenues and contribution margin to be $1.045 billion and $600 million, respectively, at the midpoint for full year 2026. The increase from our prior guidance range reflects the increased hyperscale AI activity we expect to see in the fourth quarter. Our outlook for net CapEx at fiber infrastructure this year remains $140 million at the midpoint of our guidance and represents a capital intensity of approximately 13%. Please also note that as has always been our practice, our net CapEx reporting offsets our gross CapEx by upfront payments received in an IRU arrangement as the cash received will offset a significant portion of the CapEx related to these deals. Turning to Uniti Solutions. We now expect revenues and contribution margin of $715 million and $345 million at the midpoint. The increase in our revenue and contribution margin guidance reflects lower churn and incremental success selling higher-margin strategic services. As we have mentioned several times before, while Uniti Solutions is not core to our go-forward fiber infrastructure strategy, it does generate meaningful predictable cash flow. While we expect revenue and EBITDA to continue to decline at a mid-teens pace year-over-year over the next few years, a crucial part of our strategy is to retain the most profitable portion of this business while winding down low-value legacy and TDM services. The favorability we are seeing at Uniti Solutions is early evidence of execution on this longer-term stabilization strategy. Altogether, we expect consolidated revenue and adjusted EBITDA of approximately $3.68 billion and $1.475 billion at the midpoint of our 2026 outlook with consolidated net CapEx of about $1.525 billion. Finally, I'd like to provide some comments on the current state of capital markets and our balance sheet. While the current market backdrop and interest rate environment are certainly challenging, the previous series of planned actions that were systematically implemented to extend our debt maturities, lower our overall cost of debt established access to new debt markets and optimize our mix of secured and unsecured debt have positioned us well to weather current market conditions. As Slide 20 highlights, the blended yields on our debt are still trading approximately 280 basis points better than they did the last time we were in a heightened rate environment. Also, outside of our convertible notes that mature at the end of 2027, we do not have any significant debt maturities prior to 2029, and all of our existing debt is either fixed rate or in the case of our floating rate Term Loan B, largely hedged against rising rates. While high-yield debt markets would not be an efficient vehicle for raising capital at this moment, the ABS market provides us access to investment-grade debt and continues to be resilient and less volatile, and we remain confident in our ability to access the ABS market very well. We continue to expect that we will be active in the ABS market. And as I have said many times previously, we intend to be balanced in our approach to raising ABS financing. To that end, as you saw us do in the third quarter with the $500 million paydown of secured corporate debt, you can expect that we will continue to rightsize our corporate debt complex as we raise additional ABS financing to fund the investments we are making in the business. While ABS will be an important part of our strategy to fund the strategic investments we are making in our business, it's not the only source of capital we have at our disposal. For example, as has been our practice at Uniti, we are constantly evaluating our portfolio of assets for optimization. We believe there are $500 million to $1 billion of noncore assets that we could monetize over a three-year period. And as a reminder, the monetization of these assets would have a negligible effect on our adjusted EBITDA as many of them are underutilized and produce minimal to no cash flow for the business. As part of this process, we recently sold our CBRS spectrum portfolio, and we're making solid progress on several other potential transactions. With that, we'd be happy to take your questions. Operator?

Certainly. And our first question for today comes from the line of Gregory Williams from TD Cowen.

First one is just for Kenny. Just given the current environment as we consider interest rates and the AI pullback and the pullback in your stock and even think about like wireless spectrum Auction 115 coming up, are you seeing a change in the M&A discussions of the M&A environment or M&A activity? And then the second question is on the Kinetic side. You did trim your guidance there. You mentioned DSL churn and the weaker ARPU. Can you help us what's changed incrementally? It sounds like there's more fixed wireless competition, more cable competition and what confidence you have in driving that ARPU rebound in the fourth quarter and going forward?

Greg, I'll start and then I'll start a little bit on Kinetic and then turn it over to John to finish that one. Look, on M&A, we have always said we think it's important to keep our ear to the ground and stay engaged in M&A conversations. That's always been part of our core strategy over the years. And we've also said that post legal day one of our merger with Windstream closing that we were going to begin engaging those conversations in an even more earnest way, and we've certainly done that. And along the way, we've learned a few things that are revealing and reinforcing of our views, which are, number one, that the parties that we expect to have interest in our assets have interest in our assets. That's in line with our expectations. And two, that interest in those assets is dispersed across assets and parties. And that's also in line with our expectations, and it's reinforcing of our decision to set up our business in a modular fashion to allow for strategic optionality like we talked about. Thirdly, we have been very pleasantly surprised by the increasing interest in our fiber infrastructure business, especially fueled by the growth and the opportunity among the hyperscalers and the generative AI build base. And a year ago or certainly two years ago, that part of our business was more of a theory than an actuality. And as we've talked about in our prepared remarks and you fast forward now, we've got very tangible proof points of revenue and EBITDA and lease-up revenue and EBITDA on those builds that are very interesting to the marketplace. And I think causing potential new entrants in the space and creating lots of options for us, including big strategic options, but also financing options, JV options, et cetera. And so based upon all these conversations, we continue to think that the strategic intrinsic value of our business is higher than where we trade as a public company and therefore, continue to think that continuing to explore M&A and strategic optionality is in the interest of our shareholders, and we're going to continue to do that. With that said and really landing the plane on your question, Greg, I do think some of the macro environment has impacted conversations as you would expect it to, right, with the yield environment and some of the so-called renewed uncertainty around the broadband environment. But I think these are temporary delays. And I think as the market settles out and realizes that LEO for Uniti, for example, is not a net negative, it's a net positive. And frankly, I think it puts a positive spotlight on fiber-to-the-home in all cases, I think conversations and opportunities are likely to pick up. And eventually, I think we're going to have some interesting things to talk about. With respect to Kinetic, we've talked about the fact many times that we've seen higher fixed wireless competition than we originally modeled. And so that is not unexpected. And as John will comment on shortly, we've had a conscious deliberate effort in place to transition customers from DSL to fiber. And obviously, that includes pricing strategies and migration strategies that may lead to higher DSL churn, and you're seeing some of that. But that's not necessarily a bad thing because ultimately, you're moving those customers to longer-term fiber. So there's some of that going on, and I'll let John comment on that further, including on our ARPU thoughts.

Yes. Thanks, Kenny. And I'll start with the DSL piece and then address fiber ARPU. I mean when you look at the DSL revenue and the fiber ARPU, those are the almost 50-50. Those are the drivers of the adjustment that Paul mentioned earlier. And because fixed wireless is such a big drop for our DSL base, we have seen customers migrate to that. And we think DSL churn can improve a little bit, but it's not going to go back to sub-2% like it was years ago. We do believe that we're getting these customers back. In fact, when you look at third-party syndicator research that I imagine many folks look at, about 12% of our overall incoming customers in our fiber footprint are from DSL customers or fixed wireless customers from the different carriers. And that's the type of service. It's great. It's an attractive new shiny proposition at the beginning. But this type of service, along with other types of services, don't get better when more customers start using it, right? That's when congestion hits, that's when you start running into performance issues. And that's when as we build fiber, we get these customers back. So we're confident in that. This is why we're building fiber as fast as we can. And that is how we see DSL churn evolving. We are managing that business like a mature business. So when you look at our year-over-year ARPU for DSL customers, it's up 12%. So what we're really doing is maximizing the revenue opportunity there to fund the fiber build. When you look at fiber ARPU, first, we have to remember that we're at the high end of the category in terms of overall fiber ARPU. And that's due to a couple of reasons. First is the nature of our footprint allows us to command a higher price based on just the nature of the footprint as we've gone through the competitive dynamics before. And the second is prior to the Windstream merger in August, those fiber customers were priced up 3x in the 18 months prior to the merger in August last year. So it was artificially high at that point. And if you recall, we said this level of ARPU growth at the time of that earnings call is not sustainable. And just to put it in perspective, our 300 meg customers as we started the year in January 2026, on average, we're paying $80 a month. Our gig customers were paying $94 a month. Compare that 300 meg customer at $80 a month to Xfinity's proposition, which was half that, right, a $40 delta. Spectrum was maybe $30, $35 less. Gig customers were compared to Xfinity's $50, five-year price lock versus our $94 and spectrum was a little bit better, around $60. So on top of that, when the prior model endorse the traditional rack rate promotional roll-off, so these customers that these fiber customers would get exorbitant roll-offs, they would call in, see cable's aggressive promotions. And we made the conscious choice to rerate those customers and we would do it again. Financially, it's the right investment. It's more costly than we want it to be, but it's the right investment, and it allows us to continue to serve, continue to improve churn and move those customers up the speed ladder and sell them additional services. In 2026, we'll have re-rated 20% of our fiber base. That's a fairly significant investment. And the reason why we're confident in returning to growth is because that's largely a onetime event. And forecasting ARPU is fairly predictable. It's largely based on timing of price and volume of price ups and promo roll-offs, how effectively you can move customers up the speed ladder and sell that and how you can control credits. And we're confident in our ability to do that. The one thing that we got more aggressive on this year, but we would, again, still do it is the AT&T virtual bundle. I mean we have over 60,000 customers as we sit here today on that bundle. It's very popular. Over 11% of our incoming fiber customers take that bundle. And yes, that's over $1 of ARPU pressure per month on our entire base, but that's an investment that we make every single day. It's a win for our customers, and it's a win for both companies.

Kenny, can I follow up on your comments about the higher interest on the fiber info side, mentioning big strategics. To put a finer point on it, we see huge deals from NVIDIA with Zayo. Could we see those sorts of companies or hyperscalers at the bidding table for some natural fiber assets?

Greg, you can ask those kind of follow-up questions all day. Look, I think that the type of interest in that part of our business is growing each day as it should. And I think given we're hearing about new entrants potentially entering the wireless space, for example, and having unique reasons why. I think there's tremendous amounts of mission-critical fiber that are being built for very well-capitalized companies that recognize increasingly the mission-critical nature of not only the data centers, but the fiber. So I think there's lots of opportunities for us to explore going forward to help unlock value on that part of our business.

And our next question comes from the line of Frank Louthan from Raymond James.

All right. Great. Not to beat the dead horse, but just to be clear, you're seeing interest from other parties. Are you actively taking offers? And just what is your stance on seeking strategic alternatives? And if the company does not see M&A, what is sort of the outlook for the company long term for just operating the business with the balance sheet and so forth? And then I've got a follow-up, if I can.

Frank, we're definitely engaged in conversations like we have been for years, and we're going to continue to stay actively engaged. And I think that the real point that I'm trying to make is that that's normal course for us, right? That's never going to change. And it's especially true when we think that the strategic intrinsic value of our business is higher than where we trade as a public company. And so as fiduciaries and capital allocators, that's what we're supposed to be doing. But we're approaching that deliberately. We're not on a set time line. We're not working towards artificial goals. We're approaching it deliberately. And we're approaching it deliberately really because of your last question, which is we're not forced sellers. We're not forced to do anything that would be contrary to the interest of our shareholders. We've got a good well-performing business that, as I said in my prepared remarks, where we're making investments in fiber, we're seeing tangible returns on that. And we think every day that goes by that we make those investments, we're creating more value for our shareholders. And we believe that's true based upon the data points that we see both in the public markets and certainly in the private markets. So very confident in that. And look, with respect to the balance sheet, we are experienced at having higher leverage. We're experienced at having higher leverage during a heavy build cycle. We're experienced at having higher leverage during a build cycle where there's a very volatile yield environment. And so as a result of that, we're constantly planning for circumstances that are beyond our control. And if you think about it, three months ago, we were flying high. The capital structure was trading at all-time highs or levels that we hadn't seen in a long time. And within three short months, the sentiment has changed, but we're not flat-footed at all. In fact, when you look at where we sit, we have no near-term maturities, as Paul talked about in his prepared remarks, or no material near-term maturities. We have $1 billion of liquidity. We started noncore asset sale conversations months ago to be timed with our build plan. And we have a capital structure that's entirely fixed rate or at least it's locked in as fixed rates. We have no exposure to volatile yields. And we have a capital plan that is success-based so that we can ratchet it up or down depending upon circumstances. And most importantly, probably most importantly, we've got terrific access to the ABS market that hasn't changed. In fact, maybe has only improved in the past several months. And similar to M&A, we think it's mission-critical for us to keep our ear to the ground on the capital markets in the same way as we do on M&A, just to know on a daily basis, weekly, quarterly basis, what our options are. And so we feel like our options to continue investing in the business and growing as a stand-alone company are actually really strong. And we think that's an important precursor to having good disciplined M&A conversations.

Okay. Great. And just a quick follow-up for John. I think you said you repriced 20% of the fiber base. Where does that need to go? Does that kind of finish it for what you need to target from some of those overpriced plans you inherited? How much more of the base needs to be repriced? And over what time period will that happen?

Yes. I think by the end of this year, we'll be through that. And that's why I said 20% by the end of the year. Over 120,000 customers will have been repriced fiber customers. So that's fairly significant. And then beyond that, it's just from overall price that's actively managing yield. The great thing is beginning in the fourth quarter last year, we walked away from that rack rate pricing approach. So now we can adjust our price ups more surgically and then maximize our yield from that price of activity because when you have such grant price ups, you really reduce your net effective yield. So that's why I think this was an investment year. It was a transition year. And going forward, I think it's a lot more predictable for us.

And our next question comes from the line of Richard Choe from JPMorgan.

I wanted to follow up on the enterprises that are looking for these mega wave packages. Can you give us a sense of what type of enterprises are looking at these types of packages and what they might be using them for? And then on the hyperscaler and AI opportunity, obviously, a lot more color and timing and granularity. But at the same time, given the elections last week, have you had time to go through that with what projects could be at risk in terms of data center projects and any early read on that?

Richard, good questions. The Waves business for us has been a terrific source of upside for the year, and I think will continue to be going forward. We expected the Waves business to be a great lease-up opportunity on top of our builds, but that's come in sooner than I expected, and it's come in bigger than I expected. And it's really coming from multiple sources. We talk about superscalers and superscalers are really just large bandwidth consumers. They're not the hyperscalers, but they're large bandwidth consumers. So think about companies like the LEO providers, think about some of the AI developers. And these companies are procuring waves from these data center campuses that we've built over the past couple of years, and they're really using the waves to resell compute capacity largely. And we think that's going to continue going forward. We continue to hear our customers talk publicly and certainly privately about that being more and more a part of their business as usual. And so I think you're going to see a lot more of that going forward. And I think the more and more of these data centers that we build in our footprint, that will be a bigger opportunity for us. We also are seeing more and more regular enterprise customers and wholesale customers procuring waves for large bandwidth consumption themselves. And we don't know for sure what they're using it for, but I have surmised that they're using it for the internal AI use cases within their businesses. And we think that's going to continue and definitely are excited about that as a part of the lease-up potential in our business. With respect to your question about the elections and what that means for data center development, we've obviously given that a ton of thought. We think about it regularly because we view it as both a risk and an opportunity for us. And by opportunity, I mean that when you think about this election cycle, there's a lot of states out there that have talked about data center moratoriums, New York State and Maine and Michigan and New Jersey. And frankly, I think a lot of that debate has sucked oxygen out of the room. And in reality, where most of the data centers are being built, you're not hearing nearly as much debate. And so for us, we operate in states that are generally more friendly towards data centers. And so the more and more of this debate that continues, I think, could be an opportunity for us. And post the election, we've actually seen a step-up in conversations in our states related to that. Importantly, look, if fewer data centers are built, that just puts more of a scarcity value on the ones that are already built. And so back to my earlier comment, I think that could lead to more lease-up potential in the existing data centers because the need for compute capacity is not going to go down. It's just going to continue to go up and people are going to need to find places to execute there. With all that said, Richard, I actually don't think there's going to be a slowdown. I think given that the midterms are behind us, I think this is going to become less of a political issue. I think the debate is not about whether or not data centers should be built. It's not a binary question. The debate really is what are the terms and conditions upon which they should be built. And I think the hyperscalers have a lot of capital and resources at their disposal, and they're leaning into working with the governing authorities to arrive at mutually beneficial ways to get these things built. And now that the public discourse is sort of -- has become a little bit more tame, I think we're going to start having more rational conversations. For example, the Governor-elect of Texas, who ran on a data center moratorium came out almost immediately and said that didn't apply to existing builds that were in process. And that really leads to your question, which we haven't seen any slowdown in our projects that are in motion, some of which are in Texas. And so when we look at the rest of this year, all of next year and frankly, a lot of 2028, those projects have been greenlighted and they're continuing to move forward, and I don't see any delay. And I think by the time we get to new projects, I think this whole debate will have subsided even further.

Yes. And data centers need to be more rural. It seems like they need more fiber to be connected being built.

As I've said many times, Richard, it's sometimes better to be lucky than good, and we built the network years ago in places where the hyperscalers just happen to want to be. So I agree with you.

[Operator Instructions] Our next question comes from the line of David Barden from New Street Research.

Just two, if I could, please. Kenny, you mentioned in the prepared remarks that you guys kind of gone back to the first principles of your Kinetic modeling in fiber and that your penetration rates looked good to conservative. Your cost expectations looked in the ballpark, but we've been talking a lot about ARPU right now. And I think that a couple of questions on that topic, which would be what is the market clearing price that the 20% of those fiber customers that had to get their prices cut to compared to where the kind of reported ARPU is. And when you kind of thought about the longer-term trajectory of what maybe you thought ARPU would do a couple of years ago when you came up with a plan, what does that look like now? And I guess my last point on that is when we think about satellite, yes, there's this rural component on the fixed broadband part. But I think that the real concern is that if the LEO satellite constellations put pressure on fixed wireless access and then by extension, fixed wireless access puts pressure on cable and DSL, then by extension, there is incremental pressure on fiber. Even though it's not a substitute of product, it's just by the transit property, it's an element of the calculation that I'd be interested to understand how you think about when you're now looking at your longer-term model trajectory. And then I guess my last question is for Paul. Just with respect to kind of how deeply penetrated the fiber base is now, what would you kind of consider to be the ABS financeable capacity in your model that's kind of like the latent liquidity, but you haven't tapped into?

David, that's a lot, but it's good to have you back, and those are all great questions. So keep us honest to make sure we hit all of them. I'll start, and then I'll let John add on, on the ARPU question in particular. And then, of course, Paul will close out on ABS. So look, on the return models for Kinetic, we hit the key inputs into those models in the prepared remarks. And I think, like I said, competition is higher in fixed wireless. The pricing is lower. And so therefore, ARPU assumptions in our models are probably going to be lower going forward than they were originally in our -- but we think that our penetration and our churn levels are going to be better. And our costs on the build and our ability to ramp the build have all been in line with our expectation. But really, I think your question is just getting to the competitive environment on a go-forward basis. What does ARPU look like on a go-forward basis? How does satellite impact that or LEO impact that? And I think an important consideration there is, like we said in our prepared remarks, we have not seen more fixed -- sorry, wired competition in our markets like we assumed. And a fiber overbuilder into one of our markets is a bigger risk to us than LEO or to fixed wireless. And we've said that many times. And the fact that we're not seeing that level of competition gives us confidence in the longer-term model and our ability to price our customers and to control ARPU. And that's just that's just a true statement. I think anyone would probably say that even though there's a lot of speculation about how much better of a product LEO could be in the future versus what it is today, even if it's exponentially better than what it is today, I think fiber is going to continue to be a superior product. And I'm not dismissing your point about the competitive pressure that LEO could have on ARPU, and that's why we're acknowledging that input into our model. But these models are multiyear models. There's multiple inputs into them. And when we work through sensitizing each of those inputs, we definitely are arriving at equal or better returns than we originally expected. The last point I'd make on LEO, and then I'll turn it over to John. I continue to say, I mean, we're a wholesale provider first. And when the use cases on last mile delivery, ebb and flow like LEO or fixed wireless or mobile wireless, cable, fiber-to-the-home, we win in every one of those categories. When you look at our distribution of bookings this quarter on the wholesale side, 12%, 13% of those came from wireless carriers and other fiber-to-the-home providers. And of that 13% of superscalers, a large percentage of that was LEO. And so a very large percentage of our wholesale bookings for the quarter are coming from theoretically competitors of ours on the wholesale side. So even if these different products outperform or perform better in the future than current expectations, there's going to be an offsetting benefit to us on the wholesale side. With that, John, do you want to comment further on?

Yes. Thanks, Kenny, and thank you, David. You asked a lot, David, about the adjustments to the base. And like we mentioned, we did a lot of them this year. We're doing a lot of them this year, and we think it's a onetime rerate of those customers. And then beyond that, it's kind of standard BAU. We brought them closer to market, and we're trying to do better there. We now have better tools in the second half of the year than we did in the first half of the year and better processes. The whole goal is to get customers up the speed ladder, give them more for slightly more dollars. If we have to, we'll give them more speed for less or for the same and at worst case, the same speed for a little bit less. And we're fine-tuning our capability to do that. If you take the first half of the year and say we re-rated customers an average of x dollars. In the third quarter, that number was 40% less. So we're getting better at it, and we know that's sustainable based on the processes we put in place. So that's why we're confident in managing that level going forward. And when you think about the incoming customers, right now, we're happy to say that our incoming customers are coming in at $70-plus average ARPUs, right? And that's with the bundled discount for the virtual bundle that we give to over 11% of the people coming in. So partly, that's due to our ability to upsell, partly is due to our like regional -- I call it regional, but it's not math-based ZIP code level pricing that we do, and we're able to capture more value in those markets that are less competitive. And our team's ability to upsell up the speed ladder and additional SASE. Our wireless backup, we're selling that to over 10% of incoming customers. That's a great product. Those customers churn lower, and that's a $20 a month add-on. So that helps us maintain and grow our ARPU, not only for existing customers, but for the base. And then relative to LEO and satellite -- LEO and fixed wireless, it's hard to say that they're impacting our business or having an incremental adverse effect when we have record top line growth, we have record low churn for the third quarter, 21%, 22% better than last -- and so you could argue that would it have been better but for the fixed wireless or satellite competition? Maybe, but it's hard to speculate on hypotheticals. What we know is this, very few customers leave us in our fiber footprint for LEO. Very few customers come to us in our fiber footprint from LEO. And at the end of the day, regardless of a world view that either SpaceX will take over the world and redefine the bundle with Tesla, Grok and mobile or wireless carriers double down on their fiber investment due to the cost-to-serve advantage that it has and the convergence benefits, Uniti has a unique assets and we're the missing connected tissue to them succeeding in their plans. So in a multi-technology network environment, we play an important role. And we've yet to explore the possibilities to partner with LEO providers. We love to have discussions with Amazon Leo and Starlink about wireless backup for enterprise solutions for our enterprises with both fiber and remote locations for accelerating copper retirement and even serviceability. We have customers that hit our website that we're not able to serve based on our footprint. I'd love to refer those to LEO providers. So I think there's a lot we can do there in the future.

Frank, I'll take your question on ABS capacity. I appreciate that question. So we have talked -- sorry, David, I got my friends mixed up here on the call. But David, sorry, your question. So we've talked consistently about $5 billion capacity at Kinetic. That's a capacity we're very confident in if you look at the current build we have now and the penetration curves and the build we are projecting out into the future. Most of that, I really think is to kind of get to your question is what I would consider more near-term capacity. You build capacity at Kinetic from an ABS standpoint in two ways: one, building new markets and opening those markets up to new customers there or continuing to penetrate existing markets with new customers. With year one penetrations for our markets getting into the mid-30s after just a year, we don't have to season these markets very long before they become good opportunities for ABS. But specifically to your question, we've got about $2 billion of Kinetic ABS out there today. It's probably that much in existing capacity that from the cash flows we already have in the markets we've already built at Kinetic. And then incremental capacity, I would say, would happen over time as we build new markets. I think the $5 billion number is probably conservative over the longer period of time. We think about that as a little bit more of a near-term capacity. But there's considerable existing capacity at Kinetic, and we think more to open up over time. And then I should also mention that we've got two ABS programs. We've got the Kinetic ABS program, and we've got the ABS program that we originally launched at fiber infrastructure as well. And with the merger and the integration of the Uniti Fiber assets and Uniti Leasing assets with the Windstream wholesale assets, that business and the cash flows there are significantly bigger as well. So there's significant capacity as well on the fiber infrastructure side, should we look to tap into it. Now talking a lot about a lot of capacity for ABS, which is a good thing for the business, gives us optionality and access to largely investment-grade capital and capital that is, as Kenny mentioned, less volatile, less susceptible to dislocations in the market, which is a good thing. But I'll continue to repeat because I think I need to that we're going to be balanced in the way that we approach ABS funding going forward. It's a good source of funding to continue to invest in the build, but we're going to continue to, as I said in my prepared comments, rightsize the corporate box as well as we draw upon ABS debt to keep things in balance. So I think that's an important perspective as well.

And our next question comes from the line of Matthew Griffiths from BofA.

One is just a clarification. I think earlier in the prepared remarks, referring to slide six, there's a comment about greater visibility or 100% kind of visibility, I think, in about one of the, I think, must be the revenue or the CapEx numbers. And so I was just wanting to get some clarity on what the increased visibility was and if it applied only to the build phase, it was only the CapEx, if you had the 100% visibility on the onetime revenue, it would just be helpful. And then just maybe finally, you have a slide in the deck kind of listing some inflection points. If free cash flow was one of those items, what could you share about kind of the inflection time line on a free cash flow basis for the business?

Matthew, it's Kenny. I'll take both of those. On the commentary about the hyperscaler plan relative to our original estimate about a year ago, we were really making the point that when we gave you those estimates a year or so ago, we were speculating on a lot of it because we certainly had proof points, tangible data points in terms of the types of deals, how those deals would be structured, how much the NRC would be, for example, and we were factoring those into our guidance. But there was a lot of it that was still speculative. So we were projecting out those initial tangible data points towards what we thought was going to happen over the course of the year and the course of the next several years. But now that we're a year into it, rather than speculating, we're able to populate our models with actual deals that we have sold and that we're in the process of turning up, especially for the next 18 months and really almost the next 24 to 36 months. And the point about visibility, the 100% visibility, I'm really referring to revenue and EBITDA and largely CapEx associated with those deals. And with respect to the lease-up phase, more and more of that is being pulled in as well. So ultimately, when you look at the recurring revenue, we took that from $400 million to $500 million up to $450 million to $550 million. That's where the Waves business is impacting us. And again, I think that number is appropriate, but also conservative given what we're seeing with tangible proof points. On the inflection slide, I don't think we've commented on free cash flow historically, and I don't want to get too far ahead of giving guidance for next year. But I do continue to feel good about revenue and EBITDA growth next year for the company. And I know that's on that slide for a proof point. And like I said, I don't want to get too much into the specifics of it. We'll have more to say in February around all that, but still feel good about that revenue and EBITDA growth for the company.

Thank you. This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.