'Landlord-Tenant' No More: Windstream, Uniti to Merge

Almost 10 years after Windstream divested tower operator UnitiGroup, the companies are merging under the Uniti brand.

Privately traded Windstream will operate under the banner of publicly traded Uniti in a deal various media outlets are estimating to be $13.4 billion. The agreement merges two groups that have continued to work together since Windstream sold Uniti in 2015, with Windstream leasing Uniti's network.

A Friday announcement from the companies said the merger combines Uniti’s national wholesale-owned network with Windstream’s fiber-to-the-home (FTTH) business.

"The demand for fiber broadband has never been greater, and Uniti is now expanding its reach into FTTH with an attractive scaled platform," said Uniti president and CEO Kenny Gunderman. "The combination of Uniti and Windstream also removes several dis-synergies that exist in the current landlord-tenant relationship and greatly enhances Uniti’s optionality for strategic initiatives. We look forward to working with Windstream to create a national fiber powerhouse that will continue to bridge the digital divide for our customers."

Those "dis-synergies" between Uniti and Windstream have been well-documented. The companies went to court during Windstream's chapter 11 bankruptcy in 2019. Windstream demanded a discount on its lease, and Uniti at one point threatened to evict Windstream from its network. The companies ended up arriving at a settlement where Windstream sold certain fiber assets to Uniti and Uniti pledged $1.75 billion in capital improvements to Windsteam ILEC and CLEC properties.

Windstream-Uniti Financial Details

The news emerged in late April that the two entities were closing in on a transaction rumored to be close to $15 billion. The actual financial arrangement of the deal has Uniti giving Windstram shareholders $425 million in cash and $575 million in preferred equity for the combined business. That adds up to $1 billion, but Uniti furthermore will give Windstream shareholders some 38% of outstanding common equity in the merged company.

Partners Hold Their Breath

While Windstream sells through channel partners, many members of the agent market stay away from the carrier.

Many partners worked with the various companies Windstream acquired, including Paetec, Broadview, ATC and EarthLink. But for many agents, relationships with Arkansas-based Windstream have soured since the M&A.

In particular, Windstream's culling of more than 1,000 agents from its commission books during its bankruptcy process caused existential harm to smaller agents who owned a direct contract and forced others to migrate to the protection of national tech services distributors (TSDs).

"Frankly, Windstream is the epitome of dysfunction in the telecom and technology sectors, much like Monsanto is in agriculture," BB Telco owner Craig Bullock told Channel Futures. "Many in the channel space go out of their way to avoid Windstream, treating it as if it were the Bubonic Plague itself. Just hearing the name Windstream makes me uncomfortable."

Bullock knew that a merger between Unti and Windstream was possible. He has had "exceptional" experiences with Uniti, but he worries about how integrating Windstream might impact the company.

BB Telco's Craig Bullock

"Uniti is easily one of my top choices for fiber companies to partner with; however, if Uniti becomes entangled in Windstream's notorious bureaucratic quagmire and convoluted processes, I'll be deeply frustrated. I will continue to distance myself from Windstream as I have always done," Bullock said. "Ultimately, my view on this merger hinges significantly on whether there will be significant leadership changes at Windstream. Moreover, it would serve them well to distance themselves completely from the tarnished Windstream brand. Time will tell how this unfolds."

As of publication time, Uniti and Windstream had not responded to inquiries from Channel Futures about the partner impact of their transaction or the above comments about the Windstream channel.