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Head of Mobile-based Uniti Fiber predicts more high-tech growth – AL.com


From eight floors — soon to be nine — in Mobile’s RSA Trustmark tower, Andy Newton oversees the growth of a fiber-optic network that spans nearly half the continental United States.

Newton, the President of Uniti Fiber, has spent the last 20 years playing the winning bet that there’s no such thing as too much telecommunications infrastructure. Maybe the day will come when the country is laced with so much fiber-optic cable that it never needs another line, but he doesn’t see that day coming anytime soon.

“We’re nowhere near the saturation point,” he says.

ON-RAMPS AND OPPORTUNITIES

Speaking in April to a group of high-school students participating in a Junior Achievement Business Plan Challenge, Newton gave a quick overview of the backstory that brought Uniti Fiber to Mobile.

In the late ’90s, he said, he read a newspaper article that said the nation’s growing data infrastructure was serving major cities well but that smaller cities like Mobile and Pensacola were in danger of being left behind if they didn’t build on-ramps to the metaphorical information superhighway. He was in the home construction business but saw an opportunity.

He began developing the idea in 1998 and got $8 million in funding in 2001. He and his partners in the venture called Southern Light began building their own fiber network, keeping the company almost brutally lean as they built toward the day when the investment would pay off.

When one of the young entrepreneurs asked him if it had been worth it, he took a deep breath before giving them an eye-opening answer.

“Is it worth it? It’s absolutely worth it, if entrepreneurship is your passion,” he said. “If you just want to be a millionaire, put $2,000 away every year and by the time you’re 65 you’ll be a millionaire, if you put it in an interest-bearing account …

Uniti Fiber employees keep track of things in a Network Operations Center in the company's headquarters in the RSA Trustmark building in Mobile. (Lawrence Specker | LSpecker@AL.com)

Lawrence Specker | LSpecker@AL.com

Uniti Fiber employees keep track of things in a Network Operations Center in the company’s headquarters in the RSA Trustmark building in Mobile. (Lawrence Specker | LSpecker@AL.com)

“The important thing is to follow your passion,” he said. “And the reason is, is because from 1998 to probably 2007 it was the hardest thing that I’ve ever done. I would not want to try to do it again. I guess I still have some youthful years in, but it was really hard. Times when I had to be the one who, we had a network and it could never go down, and somebody had to monitor it and we only had three employees. Every third night I would stay up all night long watching a computer screen, and if a green light turned red, I would have to go fix something. And my partners did the other two nights. That was grueling. So you have to be passionate about not only your idea, but about the entrepreneurship.”

In 2017, Uniti Group acquired privately-held Southern Light for an astounding $700 million. While outsiders might have seen that as a jackpot, Newton said at the time that he saw it as more of an investment.

Two years later, the company’s progress has borne that out.

SPECIALIZED APPROACH

“We are a somewhat complex company,” says Newton. It’s true on more than one level.

Even if you understand that Uniti Group’s focus is telecommunications, and that it has major divisions devoted to cell towers and fiber networks, it’s easy to misunderstand what Uniti fundamentally is. Uniti Group is a Real Estate Investment Trust (REIT). REITs are sometimes compared to mutual funds: The big similarity is that they allow investors to buy stock in a diversified portfolio. The big difference is that in case the portfolio consists of real estate holdings rather than stocks and bonds. Essentially, Uniti Group defines telecommunications assets as a highly specific type of real estate.

“We’re the only communications REIT,” says Newton. “That provides a unique financing vehicle.”

Uniti Group has projected revenue of nearly $1.1 billion in 2019. Uniti Fiber had $77 in revenue in the first quarter, with more than $1.3 billion in revenue under contract, according to Uniti Group’s first-quarter report to investors. Not that things have been all positive this year: Uniti was created back in 2015 with assets spun off from Windstream Holdings and in February Windstream suffered an expensive courtroom loss to a hedge fund that had charged the spinoff had violated terms of a bond deal with Windstream. That ruling did cause a substantial drop in Uniti’s stock price, but the extent to which it’ll affect Uniti’s business remains to be seen.

Uniti has continued to absorb other assets since Southern Light. Major developments fall into several categories. Some are buy-leaseback deals, in which the company buys fiber routes from the companies that built them and leases the use of some or all of it back to those companies. Uniti gets the physical assets and the other companies get capital to move on with other plans, Newton said.

Uniti Fiber's headquarters occupies multiple floors in the RSA Trustmark building in Mobile. In the elevator lobbies, artwork made from the ends of wooden cable reels identifies the floors. (Lawrence Specker | LSpecker@AL.com)

Lawrence Specker | LSpecker@AL.com

Uniti Fiber’s headquarters occupies multiple floors in the RSA Trustmark building in Mobile. In the elevator lobbies, artwork made from the ends of wooden cable reels identifies the floors. (Lawrence Specker | LSpecker@AL.com)

Some of the deals are acquisitions of other independent network companies such as M2 Connections, a fiber optic broadband provider based in Anniston.

Some are different, such as 2018’s $54 million acquisition of Wetumpka-based Information Transport Solutions, a company that Uniti has described as “a full-service provider of technology solutions, primarily to educational institutions in Alabama and Florida.” Newton said such deals are more about “layering on services” to the infrastructure Uniti owns.

The company’s map of its fiber network shows blue speckles and veins over most of the Southeast, including an especially intense stripe along the central Gulf Coast; a second chunk covering most of Illinois and touching on surrounding states; and a sprawling patch of the Northeast and East Coast, from the southern edge of Virginia up into New York. According to investor information, it owned 5.5 million fiber strand miles, as of Dec. 31, 2018.

“We’re in the business of owning telecommunications assets,” says Newton. That still means building them as well as buying them, he says. Maybe more so than ever.

“We’re building to a much larger degree than the legacy companies that are now Uniti,” he says, with major projects under way in southern Florida, Milwaukee and New Orleans.

“One of our big drivers now is the race for 5G,” he says. Fifth-generation cell-phone technology requires a “significant leap in bandwidth,” Newton says. You may think of your phone as wireless, but the gap between your phone and a cell tower is the shortest leg of the connection. All that data makes most of its journey along the fiber that connects those towers and nearly everything else in the global telecommunications net.

5G requires an extremely dense network of transmitters and receivers, Newton says, meaning it calls for “small cells” all over cities. Uniti has or is building more than 400 small cell nodes in New Orleans, around 500 in Milwaukee.

And that, in turn, “is pushing companies like ours to build very dense networks,” Newton says.

The rule still holds: There’s no such thing as too much fiber.

TOWN AND COUNTRY

But what does this building boom, and Uniti’s prominence within it, mean for Alabama?

In Mobile, the impact has a lot to do with the fact that the Uniti-Southern Light deal brought Uniti Fiber’s headquarters to the Port City and put Newton in charge of it. Uniti Fiber employs about 730 people, not all it Mobile, Newton said, and its 2019 budget calls for the hiring of 161. About 50 of those have been hired so far, he said.

Newton says the impact isn’t just the workers occupying eight floors of the RSA Trustmark building. (Incidentally, none of those floors are filled with racks of servers. There’s a Network Operations Center full of big screens and computer workstations, but otherwise this is mostly office space.)

Uniti Fiber's headquarters in the RSA Trustmark building in Mobile features polished concrete floors, exposed structural elements and an open layout. (Lawrence Specker | LSpecker@AL.com)

Lawrence Specker | LSpecker@AL.com

Uniti Fiber’s headquarters in the RSA Trustmark building in Mobile features polished concrete floors, exposed structural elements and an open layout. (Lawrence Specker | LSpecker@AL.com)

The company’s business involves a lot of corporate travel, he says, meaning Uniti generates economic activity including thousands of hotel room-nights. One snag is that “a high percentage” of those visitors find it more convenient to fly in via Pensacola rather than booking flights into the regional airport in west Mobile. A proposed airport swap that would shift passenger service to the Downtown Mobile Airport at the Brookley Aeroplex is an attractive idea.

“I think we see the airport moving downtown as very important to us,” Newton says. “We would love for that [Pensacola traffic] to be pushed to Brookley or downtown over time.”

For the state as a whole, the prognosis varies.

“I think the major cities in Alabama have infrastructure providers that are building out at a fairly rapid rate,” says Newton. Those providers include Uniti, of course: Even prior to 2017, Southern Light had a statewide presence. “From an infrastructure perspective, Mobile has possibly one of the most dense fiber networks in the Southeast,” he says.

Smaller cities are a mixed bag, he says. Uniti serves quite a few. Some have encouraged investment in fiber infrastructure more than others. “Surprisingly, some cities don’t understand the advantages,” Newton says.

In a sense, cities are the easiest part. Higher population densities mean more users per mile of fiber, which promises more return on the investment of installing it. But that creates the risk that the state will end up with “these haves and have-nots,” Netwon says.

“We are now seeing the demand to build more fiber in rural areas,” he says. Uniti is spending “significantly” to try to serve that demand, he says. “We want that fiber to be inclusive of rural areas.”

One thing that helps is the federal E-Rate program, which supports broadband for schools and libraries. Newton says E-Rate support can function as a critical incentive: When a company builds a fiber network to connect schools in a rural county, that helps make fiber access more practical for the county as a whole.

“We are building out multiple school systems in rural counties,” he says.

Newton also credits Gov. Kay Ivey with supporting wider access to broadband connections.

As it has been for twenty years now, the answer is the same: More fiber. Build it, buy it, own it.

“Hopefully Alabama will be in a position to lead the way,” Newton says.



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