Anterix Inc. (ATEX) Earnings Call Transcript & Summary

Good morning. My name is Holly, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Anterix Investor Day. [Operator Instructions] Thank you. [Operator Instructions]

[Audio Gap] These statements are based on current expectations or beliefs and are subject to certain risks and uncertainties that may cause actual results to differ materially. Risk factors that may impact our performance are identified in our most recent SEC filings. Next, a few housekeeping items. Following our prepared remarks, we will have an operator-led question-and-answer session, which can only be accessed using the call-in information shown on your webcast screen. In addition, at the conclusion of today's event, a video and transcript of our presentation will be posted to our Investor Relations website. Now let's turn to the exciting part. We have a great morning lined up for you. We'll start with a short video highlighting Anterix' recent achievements before turning it over to our CEO, Rob Schwartz. Thank you, and let's begin. [Presentation]

Good morning, everyone, and welcome to the Anterix 2021 Investor Day. It's been over 2 years since our last Investor Day. And as this is my first as CEO, I am really excited to have this opportunity to share our vision for the future of Anterix. This is a vision that has been refined and improved over these past 2 years with our deep industry collaboration and experiences, our breakthrough successes and the resulting increasing market momentum and tailwind all fostering our mission to drive what has become a private broadband movement in the utility and critical infrastructure industry. This is a vision that underpins our investment thesis. I'm very proud of our team, having navigated the complexities in FCC process, transforming our nationwide spectrum into a highly valuable, unique asset. We have identified a high-margin opportunity to monetize that asset. We have fostered and facilitated considerable demand for this asset. We have assembled a team of seasoned wireless, utility and infrastructure experts, all executing on a plan that has already removed numerous initial business risk and a plan that can translate into what we believe is significant near-term cash flow. We'll also use this opportunity to further detail Anterix' progress to date with our target customers and the overall market and as a result, our strengthening position for execution in this next chapter of our growth. And ultimately, we'll talk about resulting positive improvements to our business model and investment thesis as measured by accelerating cash flow, risk reduction of execution, opportunities for capital return and options for future value expansion. I'm proud to say that 2 years later, our focus on our mission not only remains the same, but with our breakthrough achievements since then, we believe we now have the significant momentum and tailwinds necessary to achieve this mission. And while our mission remains the same from an investment perspective, much has changed in the last 2 years. With our team's execution and achievements, we have removed significant risk while simultaneously expanding the opportunity. Specifically, we have eliminated the question of whether we can convert our spectrum from narrowband to broadband. We also no longer have the question of whether there is a demand in the utilities sector. We also demonstrated that we can monetize our spectrum asset at fair market value, and we're on a clear path to be fully funded. We've demonstrated that we could educate and ultimately, unify the utilities sector, in line with our vision. And then we've also brought together the technology sector to join in this movement and centrally position Anterix for incremental value-creating opportunities. And ultimately, the utility and policy environment has changed significantly to our benefit. So with that, let me elaborate on our vision, which guides me and my team on our journey. Leveraging the valuable nationwide low-band spectrum asset on our balance [ sheet ], Anterix intends to become the de facto private wireless broadband solution provider to the utility and critical infrastructure sectors. This relationship starts with the long-term leasing of our spectrum to individual customers at fair market value, enabling each of these entities to build, own and operate the private broadband communications networks that are essential to supporting the rapidly changing industry modernization requirements that I'll expand upon shortly. And as each of these utilities build its individual private LTE network across their broadband service territories, we then see an organic opportunity to bring together the individual deployments into a nationwide federation of networks. We call this the network of networks, and with it, utilities will capture the nationwide scale and scope to support current and increasing requirements and drive collective innovation. As defined by Metcalfe's Law, the value of a network grows exponentially with the number of users on that [ network ]. With our [ Utility Broadband Alliance ], our Anterix Active Ecosystem Program and the many public forums where utilities are speaking out about the benefits of collective action at 900 megahertz, we are already seeing this growing industry desire to capture these scaled network benefits with their trusted peers. This virtuous cycle can not only improve utilities' collective cybersecurity, resiliency, decarbonization efforts but will also continue to enhance the appeal of our Anterix offering and is already resulting in an increase in the 900 megahertz spectrum leasing interest in our pipeline. This collective innovation supports the deployment of technology to [ sensibly ] power down power lines to prevent wildfire, reduce the risks of electrocution. It enables 2-way communication with the rapidly growing sources of renewable energy and battery storage to minimize carbon production and reach more aggressive emission reduction goal. Further, this collective innovation enhances cybersecurity by separating the private network from the public Internet and enables additional customized layers of cybersecurity protection. And while our primary goal will always be to maximize Anterix shareholder value, it's meaningful to me and my team that our vision addresses an urgent national need to foster and protect our nation's electric grid and support the robust introduction of renewable energy sources. Reaching aggressive carbon reduction goals over the coming years will require broad-scale deployment of intermittent sources of power, including residential- and industrial-scale solar, wind and battery storage as well as the electrification of numerous sectors, including transportation. Having resilient and secure communications networks to manage all of these new distributed energy resources will be critical to achieving carbon-neutral goals that address the climate crisis. And unlike some companies that need to shoehorn ESG requirements into their strategy, we are passionate about our vision, including, at its core, the use of our spectrum to provide the connectivity that vitally supports decarbonization and electrification requirements of our nation. And it's not just our mission, it's [ the absolute ] driving rationale for our product. Simply put, wireless broadband is essential to address environmental reckoning that all utilities face, and this highlights the important sense of purpose for our Anterix vision. As stakeholders, we should all feel great about it, not only because of the enhanced value proposition it provides for customers as well as the opportunity it presents for Anterix but because of the vital [ role ] we serve in this vital mission. So in order to fully appreciate our Anterix vision, I'd like to break it down into 3 fundamental elements of our opportunity, including the supply side, the demand side and then the resulting business opportunity at the intersection for Anterix. First on the supply side is our nationwide 900 megahertz spectrum asset. As most of you are aware, after a nearly 6-year pursuit of our petition to the FCC, just 13 months ago, we received a historic rule-making, setting up a clear process to allow Anterix to convert our nationwide spectrum [ holdings ] into broadband license. The purpose of our FCC journey and accordingly, the need for broadband could be traced to the digitization of the electric grid as the new use cases require a more robust communications platform. This was even further confirmed by the FCC stating that we think the 900 megahertz band can be a source of innovation for electric utilities. Licensed spectrum is the foundational element to build private and secure wireless networks. Our 900-megahertz spectrum is low band, which is known as beachfront property in the wireless industry. Because of its significant performance advantages and its scarcity, it's all been assigned by the FCC, and it can't be reproduced. Low band means under 1 gigahertz, which, based on the laws of physics, can travel greater distances and better penetrate [ obstructions ] like walls than spectrum at higher band. This translates into a fraction number of cell sites to cover comparable areas that would be required by higher bands of spectrum. The result is a substantial capital and operating cost advantage inherent in low-band spectrum like ours and often as much as 50% savings for the total cost of ownership to our utility customers to build their private broadband networks. With this spectrum offering, combined with our experienced team, the ecosystem we have created, we're able to supply a solution tailored specifically to utility need. So now having defined the supply side of our unique spectrum asset, this leads us to the second element, the demand side of the equation. While we were pursuing this FCC ruling that allows us to convert our spectrum to broadband that can be used by practically any sector, we concluded several years ago that the highest, best use of this spectrum, bull's eye of our target is to enable electric utilities and other critical infrastructure providers to finance, build and operate private broadband networks. Given the importance of what utilities do, they have always relied upon private networks to support these critical needs. The utility industry is a regulatory-protected sector of valuable mission-critical companies that provide the electricity that serves as the lifeblood of our nation's economy. The U.S. electric sector generates over $400 billion in annual revenues and is projected to invest $140 billion in annual capital expenditures and strongly demonstrated its resiliency through this COVID pandemic and resulting recession. This is a sector going through immense change, fueled by [ unstoppable ] macro forces of decarbonization requirements, renewable energy generation and industrial electrification while simultaneously facing growing cyber threats and frequent natural disasters. And reinforcing the need to address this change is a growing drumbeat of supporting statement, legislation and requirements from both the administration and the regulators of this industry. These include acknowledgments in multiple pieces of legislation that support a reliable, resilient and secure private communications solution. Foundational to this utility grid modernization is communication, driven by the need for connectivity to provide situational awareness and allow for the command and control of millions of distributed assets across the growing utility footprint. This connectivity then enables data-driven intelligence that supports life-saving, transformational new use cases. And this need from utilities for private broadband connectivity is propelling the demand side for Anterix' spectrum offering and is reflected in our growing pilot and industry activity. And to give you a better sense of these transformational changes that drive this demand, I'd like to share with you a short video of a discussion between our Executive Chairman, Morgan O'Brien; and Colette Honorable, the leading voice for the industry, as a former Commissioner of Federal Energy Regulatory Commission, former Chair of the Arkansas Public Service Commission and on the Board of one of the nation's leading utilities. [Presentation]

So with this understanding of how the Anterix supply of unique nationwide spectrum meets this growing industry demand for mission-critical private broadband networks, let me now explain the Anterix business opportunity at this key intersection and some positive refinements for our business model. In the simplest financial terms, our core business is converting our supply of valuable spectrum on our balance sheet into long-term contracted proceeds at fair market value with some of the most creditworthy companies in our economy, the electric utilities. What I believe makes us unique wireless company is this ability to enable private wireless networks for utilities without having to deploy the tens of billions of dollars of capital that traditional wireless carriers do every year. Our capital-efficient model leverages the balance sheets and desires of utilities to build and own these broadband networks and creates a high-margin business opportunity for Anterix. And this works because the investor-owned utility business model is fundamentally based on investing capital to earn a fixed rate of return. This is really an important point. The marriage of our spectrum with their capital investment model sets us apart from all other wireless companies. As a real-world example, [ most recently ], in February, we concluded a spectrum purchase transaction with San Diego Gas & Electric, where they will pay $50 million for our spectrum in their service territory. And in December, we announced our first long-term $48 million 30-year spectrum with Ameren, the investor-owned utility in Illinois and Missouri. And as a further sign of progress, the FCC recently accepted our first broadband applications for Ameren service territory. This formally launched our process to convert our underutilized spectrum band of limited capability to a valuable spectrum asset. When we laid out our business model 2 years ago, we set a target of contracting approximately 50% of our spectrum value by fiscal year-end 2024, March 31, 2024. And after confirming our assumptions with these commercial achievements and our market momentum, we remain confident in achieving this important milestone. Based on our success to date and on the market pricing we're seeing, we project that by fiscal year-end 2024, we will have signed agreements that will generate contracted proceeds of approximately $1.8 billion for the use of this spectrum. And the other half of our spectrum value will still be an asset on our balance sheet to be monetized over the years that follow. And in addition, with our spectrum that has been leased, we will see the opportunity to monetize this spectrum through the residual values and renewals at lease end. As well, we'll be able to further leverage our role in this nationwide network of networks for capital and value expansion opportunities. As with our first 2 customer agreements, we continue to see an increasing desire for contract prepayment coming from discussions with the majority of our customers. This is driven by the needs of the investor-owned utility budget process and supported by their strong access to capital and low cost of debt. I want to make sure to highlight how beneficial this evolution towards prepayment is on our business model. The result is a considerably earlier accumulation of cash than in our prior long-term lease payment assumption and an elimination of funding risk. And with the visibility of this potential for increased near-term cash flow, we are actively evaluating tax-efficient and accretive ways to return this value to shareholders, which could include share buybacks or special dividends. With this trend towards prepayment, we believe the best measurement of our future success will be Anterix' contracted proceeds and free cash [ flow ]. And also, with this intersection of supply and demand, we see opportunities to further leverage these valuable relationships into additional product offerings that in turn can make it easier for utilities to adopt private LTE. As you probably saw, we announced last month our Anterix Active Ecosystem Program, then with 37 and now over 40 world-class technology industry leaders coming together to provide a full solution set for 900 megahertz private networks. These ecosystem members now have a vested interest in seeing us succeed in our mission. When you look holistically at these [ LTE ] broadband networks, a typical spectrum lease is less than 15% to 30% of the total cost of ownership. The remaining 70% to 85% of this utility spend creates an opportunity for Anterix to identify both capital-intensive ways to build incremental value for our shareholders. We expect to share more about these options for incremental product developments throughout this coming year. So before I pass the baton to Ryan to update you on our execution, let me close with some observations on the growing and positive market forces that ultimately support the adoption of private LTE networks by utilities. I described earlier the driving force of electrification, utility grid modernization spurred by the necessity of decarbonization, cybersecurity and electrification. In this past year, these have become above-the-fold issues, where every week, there are both positive and negative headlines, demonstrating the urgent need for transformational [ change ] of our utility infrastructure. We've all read about utility-caused wildfires, power outages, cybersecurity incursions causing catastrophic threats to our energy supply. At the same time, on the positive side, we've seen a tremendously increasing focus on carbon emission reduction efforts from President Biden and Congress. We have worked closely with policymakers and thought leaders on a range of legislative bills and potential additional stimulus funding that could help accelerate these essential changes. This focus is also resulting in more aggressive decarbonization goals coming from companies across industries and especially from utilities. Power utilities are committing to investing in gigawatts of renewable energy and battery storage projects nationwide. And this further enhances the need for communication for the command and control of all of these new distributed assets. We're also seeing a greater government focus on rural broadband and with this, an understanding that the private wireless networks of utilities will include the construction of new towers and fiber in previously unserved rural areas, providing a powerful foundation upon which to serve communities in need of broadband connectivity. And all of these new programs will require a foundation of resilient and secure communications function, and we expect this growing focus to continue to provide substantial tailwinds to Anterix' business for the foreseeable future. And lastly, I'd be remiss if I didn't describe the team we've built that is executing on our commercialization strategy. In this past year, we've dramatically strengthened our organization, including our Board, our sales team, our technology organization, our marketing leadership, our government [ relationship ], well beyond. We've assembled an experienced team that I'm proud to call Anterix and will lead us into this next exciting stage of our journey. And speaking of leaders, I'll now turn it over to our Chief Operating Officer, Ryan Gerbrandt.

Thank you, Rob, and good morning, everyone. Picking up where Rob left off, I will continue to build on our overarching message: momentum and execution. Momentum is defined as mass times velocity, which is the perfect way to think about the growing size, volume and pace of deals in our pipeline. This is how we measure momentum, and I intend to share with you today that we are seeing the pipeline develop in the evolution of critical use cases and in the execution of our strategy and our confident plan to deliver it. There are many positive signs of progress I see, signs of progress that I acknowledge, to the outside eye seems slow. But I could assure you these opportunities that make up our pipeline are developing. Our relationships with both utilities and partners are rapidly progressing, and Anterix has become a trusted partner at the heart of the private LTE discussion. It is this reality and our history of results that form the basis of my confidence in our ability to continue to execute on our committed plan, just as we have to date. For 20 years, after beginning my career working at a utility, I've been both a student of and innovator in this exciting and ever-changing industry, an industry that provides the lifeblood that powers our everyday lives, our core national infrastructure and everything around us. It is essential. I've dedicated my career and made it my mission to enhance the important role that information, digitization and control can bring to our transforming industry, an industry under stress, the stress of needing to play an important role in decarbonization, adapting to environmental changes and staying resilient and reliable with a new set of external threats. I've always believed, through a focus on communication systems, their applications and the driving vision, that one day, there will be technology solutions to unlock the full potential of a clean, efficient, secure and digital grid. As Gil Quiniones, CEO of New York Power Authority and Chair of the GridWise Alliance, was recently quoted, "We saw the mega trend of decarbonization, decentralization and digitization in our industry. And so at that time, we decided to embark on a digital transformation journey at the Power Authority." Now let me dive into our efforts at Anterix. My focus is on the electric utilities, and our bull's eye are the investor-owned or IOUs as commonly referred. They cover the majority of the country's population and most of our spectrum value. IOUs are an ideal fit to our business model, seeking customers with large geographical footprint, having strong credit and a desire and ability to deploy the significant capital necessary to build these private networks. For the purpose of today's conversation, I will characterize IOUs based on the potential value of the Anterix spectrum in their operating territory. As many of you know, spectrum value is like property value, varies in price from market to market, largely as a function of scarcity and usefulness. The most basic premise is spectrum value, just like the price of a 1,000-square-foot apartment, will differ greatly if you're in Manhattan, New York or Manhattan, Kansas. This reality is reflected in thousands of spectrum transactions that have occurred over the last several decades and is an accepted tenet of spectrum valuation. Now let me put this in perspective of our first 2 deals. Ameren, which serves Illinois and Missouri across a service territory spanning 64,000 square miles, signed a 30-year agreement for $48 million. Our second customer, San Diego Gas & Electric, with a service territory in Southern California covering roughly 4,100 square miles, signed an agreement for $50 million. In both instances, the spectrum value fell between the historical 600 megahertz and AWS auction prices for the unique service area they have to cover, and this is what we consider to be fair market value. These 2 transactions highlight the nature of market-specific spectrum value and suggests that we are on track to monetize our spectrum holdings at a value consistent with these 2 bookends. Applying this concept across our pipeline, you'll see we have a range of deal value that relate to location and size. In fact, half the prospects in our pipeline results in a potential prepaid spectrum value above $60 million and half are below. Now while our first 2 deals fell in the below $60 million category, we believe that upcoming deals will fall into both. Fueled by the momentum of our first movers and the clear need across our industry, our pipeline has now grown to include over 50 utilities with total potential prepaid contract value of approximately $3 billion. And to give a further point of perspective, just the top 5 largest of these opportunities have a combined potential prepaid contract value greater than $1 billion. I'm very pleased with our progress with multiple paths to convert this potential into the approximately $1.8 billion of contract proceeds by end of fiscal year '24. Let me now explain what's driving our demand and how and why we've built such a robust pipeline in such a short period of time. Number one, every wireless network must have spectrum, not optional. A nationwide licensed low-band spectrum like ours is scarce. Number two, utility grid modernization imperative is inherently digital and as a result, the driving demand for broadband connectivity that cannot be met by narrowband networks previously available. The need for visibility and control of millions of assets across a growing utility footprint is driving demand for private wireless broadband, and a private wireless broadband network built on 900 megahertz spectrum can provide the real-time coverage necessary to enable the digital and database innovation possible through applied machine learning, artificial intelligence and levering -- leveraging cloud computing. And number three, our 900 megahertz spectrum is low band, which means under 1 gigahertz. As a result, a cell site using low-band spectrum can provide coverage to a considerably larger area and penetrate obstructions better than comparable mid-band coverage and require a fraction of the sites to cover a similar area. As Rob referenced but important to repeat, the lower number of sites is significant because it directly translates into lower total cost of ownership for the utilities due to the reduced cost of building and operating a tower. Number four, we are pursuing standardized LTE with a path to 5G. The LTE standard is defined by the global 3GPP organization, supported by global infrastructure vendors and carriers with billions of connected devices, including the smartphone in your pocket today. For utilities, joining this global standard ensures compatibility and reduces risk of obsolescence and provides a robust ecosystem of devices and solutions into the future. And LTE as defined, long-term evolution, has been purposely built to evolve, just as the name suggests. It has been forward conceived to ensure a seamless migration to 5G when needed. Number five, finally, and in my opinion, most importantly, our licensed spectrum will enable the deployment of private LTE networks. Private means the utility can control all aspects of design, deployment and operation. Utilities have unique requirements, requirements that are met by network solutions purpose-built for them, and a private network will allow them to consider the priority of their use cases and build specifically for their needs. And when built on licensed spectrum, it will mean the utility does not need to compete for access when it's the most needed. Now keep these characteristics of 900 megahertz and LTE in mind as we discuss how they integrate to support not just today's use cases but the ones that will be developed in the many useful years of this network service. Serving these new and evolving use cases will not be possible with the narrowband single-purpose network utilities operate today. And it excites me that this evolution of standardized broadband creates an extended future value, value that will continue to grow as new use cases are created and added to network in the future. Let me share 5 of the dozens of real-world use cases we are seeing utilities currently pursue. First, reliability and resiliency are very important for a utility. Weather-related events, including wildfires, are occurring at an accelerating pace. Falling conductor protection is an excellent example of a use case addressing the urgent challenge of a utility-caused wildfire. A private LTE network built using 900 megahertz has unique technical capabilities and supports the speed and bandwidth necessary to identify a broken live electrical wire and deenergize it in the approximately 1.4 seconds it takes to hit the ground. The importance was brought into focus when PG&E in Northern California recently had to pay $25 billion in settlement claims and ultimately filed for bankruptcy protection as a result of the wildfire. This solution offers a game-changing outcome for utilities across the country faced with the corporate risk and liability associated with potential utility-caused wildfires. Second, monitoring, sensing and control are essential requirements for a digital grid. The ability to stream video, embed analytics with automated intelligence and machine learning unlocks new innovative solutions, leveraging screening data to analyze a video feed in real time or to deliver, on the spot, augmented reality or technical support to a new digital field workforce. This requires the broadband communications platform. When deployed at a substation or a generating station, it can detect the operating anomalies or security breaches of our physical infrastructure. And third, net zero carbon goals, associated incorporation of distributed energy resource and electrification of transportation will create a challenge for utilities. The fact is that renewables are intermittent by nature. They're spread throughout a utility service territory and require real-time monitoring and control. It is absolutely imperative for these dynamic renewable and distributed assets to communicate with their peers as well as other control systems in the grid to maintain stability and increase resiliency. Investigating and testing these real-world solutions is at the heart of what we and the National Renewable Energy Lab have been studying. The need for a communications network that offers territory-wide coverage and meets the technical requirements to provide ubiquitous connectivity with full visibility, control and reliability can be met by a private wireless LTE network. Fourth, another -- a different type of use case are those requiring mobility. As utilities recognize the need to evolve away from narrowband land mobile radio systems and technology developers designing products to address that evolution, the value of private LTE could not be more obvious as consumers like us use this capability nearly every day. The modern utility workforce is information-based and mobile. Whether it's the voice communications they need between crews or to connect the field workers to the map, work orders or equipment that require real-time information and control, private LTE will meet this need. And fifth, tying all these use cases together are the overarching benefits of a more cyber and physically secure network. As we've seen again recently with the events surrounding SolarWinds and Colonial Pipeline, the public Internet is the gateway to nefarious actors who, if given the access, can do harm, risking the provision of this critical service. A private network, by design, not connected to the public Internet aids in creating isolation and limits the touch points to these secure networks. Using an LTE standard allows utilities to extend their core security model into the field, creating an integrated view and better use of industry standard tools to monitor access and detect unauthorized behavior. To highlight how private LTE is being utilized to address these use cases and to further reinforce our momentum and market progress, let us listen to insights directly from some of our current and future customers. [Presentation]

So let me go deeper into the pipeline of customer opportunities and provide you with some details of incredible progress we have been seeing. We've come a long way since the FCC decision last May, and particularly in the last 6 months. We're working with more prospective customers in parallel than we ever have before, growing the pipeline to more than 50 in total, a pipeline, as I said, that now contains approximately $3 billion in potential prepaid contract value and represents approximately 85% of our addressable market. Think about it. It's one thing to identify who our addressable market is, but it's quite another and much better when 85% of that addressable market is in our pipeline now and are actively engaged with us. With my experienced sales team led by a seasoned utility industry executive, we have better visibility than we ever have had about our future customers, which yields a much stronger understanding of each buyer, their influencers and the journey they are on. My team and I are confident in our understanding of their journey, from interested but uninformed to contract signing which historic -- which history has shown us will take between 18 and 36 months. But fortunately, we are continuing to encounter utilities who have started this exploration even before we engage. That's shortening our time with [ them ]. In just the past year, we've experienced a dramatic change in the status of the journey with our customers. To me, it's best described as the transition from a vendor to a partner. We're now jointly working with them on their desired outcome, including everything from helping them with internal deliberations to technology and vendor choice. And it's measured by the increase of prospective customers in the pipeline. The mass education we are successfully delivering is clearly engaging more utilities into the journey with us. For our internal customer engagement tracking, we build this pipeline into 3 phases, with the heaviest lifting occurring in phase 1 and phase 2. In the beginning, all our customers start with education, and our relationship with them is best described as transactional. This is phase 1. It is transactional in our exchange of information and knowledge as they are developing an understanding of the important role of licensed spectrum and the role private LTE can play in meeting their connectivity needs. Before, I would have described this as being about breaking down doors and trying to turn skeptics, but this has changed. Utilities are getting engaged, sharing knowledge, building experience and joining us directly in a campaign to a common goal. We've recently heard from a major utility president and COO, after gaining awareness of Ameren's private LTE project, challenged team with, "Why don't we have one of these? Let's go figure it out." That is momentum and demonstrates the power of the utility voice with their peers. And this momentum is important to our progression. The deals we are working in phase 1 today will be the deals from our funnel which we believe will lead to more and larger deals in fiscal year '23 and '24. But even more meaningful to me as the indicator of our progress is the evolution of phase 2 pipeline relationships. I've seen it many times over the years. There's an imaginary line or a point in time in the utility buying psychology where we so clearly cross into a new relationship in this process. Just as I described the first phase as transactional, phase 2 is transformational. We've seen a significant uptick in number of prospective customers moving into this stage, more than doubling of this category in the last 6 to 8 months. I want to repeat that. The prospective customers in this phase alone has more than doubled in the last 6 to 8 months. This is momentum. In this phase 2 category, we're potentially running pilots, assisting utilities through building their internal business case, with internal stakeholder buy-in and supporting them across many other aspects of their planned development, taking full advantage of our talented team and our advisory council who's made up of a range of experienced individuals, including public utility, FCC and FERC commissioners, the former Head of FEMA, the 2-term governor, the former CTO of the Department of Energy and more. Due to the efforts of these incredible team members, the combined potential prepaid contract value of the utilities in this advanced category alone has grown to more than $1 billion. The final, closing stage is what we call phase 3. Expected to be the shortest phase in the process, here, our confidence on closing a deal is high. But it also remains the most difficult to predict the exact timing with accuracy. While prospective customers in this phase have made a solid commitment to 900 megahertz and have a defined private LTE plan, we're now together finalizing their internal stakeholder engagement, negotiating price, terms and drafting final agreements. While we're under NDA so I can't mention specific companies, let me give a couple of examples of prospective customers in phase 3. One large customer with whom we've been working has completed their pilot. And now in coordination with their CIO, we're working to align their deployment schedule priority and focus with our commercial offer. The result of this will be an integrated plan and finalized business case for their internal committee approval. A second utility, after completing their internal due diligence regarding their private LTE network plan, is now finalizing their review of a broader, integrated network study to conclude the timing of a variety of critical network investments. As we see commonly, private LTE is part of an integrated grid modernization or digitization project with many related but independent components. As I said earlier, with both these examples, we feel there is solid support of 900 megahertz as their foundational spectrum choice, and we're now working through as partners to assist them through their internal process in this final phase. Let me now share 2 examples that I feel demonstrate the activity and excitement that is fueling our pipeline and driving the momentum that is progressing customers through these phases. First, the pilots. When you get down to the basics of why utilities run pilots, usually either about proving technology or to confirm assumption. From my years of experience, I've seen the progression that is taking place here before. Bluntly, utilities are no longer pursuing pilots to confirm private LTE as a technology. But now they're using pilots to build support, building supporting facts to underpin their business case, building internal support with pilots to showcases for the C level and building support through demonstrations with the regulators. As of today, we've seen 11 experimental licenses granted by the FCC for our 900 megahertz spectrum. And I'm happy to announce the 12th was just filed last week with [Audio Gap] 8 of the 12 are directly with individual utilities, including Ameren; and now SDG&E, who notably did not pursue a 900 megahertz experimental license prior to our deal. One of the remaining 4 is with the National Renewable Energy Lab, who includes an advisory council of utilities working with us in the lab focused on energy research, development, commercialization and deployment of renewable energy and energy efficiency technologies. All told, there are now 14 utilities that are or that have participated in private LTE networks. And we Have additional utilities exploring more. Another indicator of our traction could be seen in the emergence of the Anterix Active Ecosystem Program and for the solutions it will deliver. For any investment, utilities must demonstrate value, a positive business case and ultimately, provide a reliable, clean and affordable product for those customers. Solutions designed for utilities demonstrate this value. This is one of the foundational reasons we formed and launched the Anterix Active Ecosystem with now over 40 market leaders in the device, services and solutions space, including leading companies like GE, Cisco, Motorola, Nokia, Ericsson, Qualcomm and many more. The goal of the program is to provide a collaborative environment where technology leaders can investigate and develop utility-focused 900 megahertz solutions. This benefits not only its participants, but also the utilities and Anterix. For the utilities, it is easier to consume integrated solutions, and it enhances the value of private LTE investment, adding additional use cases and accelerating the integration of these solutions. For the technology developers, the use cases that the utilities identify on their own and through the utility's broadband alliance could be investigated and addressed together through the Anterix Active Ecosystem Program. And for Anterix, it creates an easier path to yes and now captures the enormous sales and marketing power of the combined ecosystem, and it also creates a low capital-intensive platform for us to explore and develop potential new revenue opportunities with partners. The one thing that is common connecting the entire Anterix Active Ecosystem together is the de facto standard that is forming around our 900 megahertz spectrum. Let us now hear from some of the large founding members. [Presentation]

So what does this all mean to our current and future shareholders? The size and number of potential deals that reside in our pipeline, our deep understanding of where customers are in the process and the assisting fuel of the developing and supportive ecosystem gives us a range of path to achieve the accelerating year-over-year growth necessary to deliver on our approximately $1.8 billion fiscal year '24 forecast, and having roughly 50% of our spectrum put to work. In the near term, we have a robust deal funnel that makes me confident in delivering on our 2 to 3 customer contracts later in this fiscal year. And specifically, we forecast more than doubling last year's results, yielding at least $200 million of contracted proceeds in this fiscal year. And finally, before I hand it over to Tim, I wanted to address a very important element of our efforts to meet customer needs. Investor-owned utilities are regulated companies, and just to keep it simple, operate under a business model that creates a capital rate base approved by the Public Utilities Commission in their operating state or states, of which utilities can then earn a rate of return on that capital investment. This means utilities have a strong preference for capitalizable assets. We've partnered with several utilities to help find a solution that addresses their financial and regulatory accounting needs specifically. Prepaid leases have proven an excellent solution to this unique utility challenge, and Tim will discuss in a minute the benefits to Anterix. It's a true win-win. Our industry needs private wireless broadband connectivity, period. We at Anterix are no longer the only one saying it. As you can certainly already sense, there's a convergence of real need and opportunity. We have built and are continuing to build on the trust of our customers and the pipeline prospects have put in us as the literal bridge between the mega sectors of telecom and energy. Our ecosystem sees the emergence of the de facto standard that 900 megahertz private LTE networks will be, and we have a vested interest in realizing the acceleration of end-to-end private LTE network adoption across the nation. We have delivered on our mission to date, and we are confident in our team and our execution into the future. And our business plan puts us at the heart of the grid modernization imperative, crucial to America's safety, economy and future. And with that, I'll pass it over to Tim Gray, our Chief Financial Officer.

Thanks, Ryan, and good morning, everyone. As CFO, I'm excited to share with you how our momentum and execution that you've heard about today translates into value for our shareholders. I am extremely proud of our achievements, providing us with the opportunity to make positive updates to our model, which I'll review with you today. Let me start by highlighting the 3 pivotal concepts I'll be focusing on. We expect to capture an important segment, customer demand for private wireless networks, and therefore, forecast contracted proceeds of approximately $1.8 billion by the end of our fiscal year '24. To be clear, that's less than 3 years from now. We believe the majority of our contracts will be prepaid full over the first 3 to 5 years of the term to meet our customers' needs, bringing significant cash to our balance sheet sooner than previously anticipated and allowing us the opportunity to begin to return value to shareholders within the next 2 calendar years. We anticipate the value of our future contracts will be consistent with our first 2 customer agreements, both of which represented fair market value for the service territories covered. Now I'll spend some time expanding upon each of these critical areas of our plan. Afterwards, I'll discuss updates of the cost structure of our business. Today, you've heard the indicators of growing customer demand for private wireless networks, collectively highlighting integral need for private spectrum to serve as a foundational layer of these networks. As a result of this increased demand, proprietary 900 megahertz spectrum offering, our pipeline has seen a meaningful increase in opportunity with an associated prepaid monetization opportunity of roughly $3 billion. With the evolution of our customer conversion process on track, we reiterate our short-term guidance of signing 2 to 3 customers with over $200 million of contracted process later this fiscal year. So let me repeat these very important facts about this fiscal year. We have a current pipeline value of roughly $3 billion, and we believe we will sign 2 to 3 customers with over $200 million of contracted proceeds later this fiscal year. In addition, based on the growing demand and expansion of our pipeline, we are forecasting to contract approximately $1.8 billion of our spectrum value by the end of fiscal year '24. Our confidence in this value is supported by publicly known spectrum transaction comparable, the actual pricing discussions we are having with our customers as well as our knowledge of the low-band spectrum resource on our balance sheet, which becomes more valuable as we convert narrowband licenses to -- narrowband spectrum to broadband licenses. We previously forecasted timing payments of our contracts to be annualized over the lease term. What we are now forecasting is primarily upfront payments of the entire agreement over the first 3 to 5 years of the lease. That means as we contract with prepaid customer, we've received significant incoming cash flows much faster than previously projected, strengthening our balance sheet and reducing risk. Customer prepayments will likely continue to be made similar to how our contracts are structured with Ameren, SDG&E, including a downpayment, then aligning the remainder of the payments with the timing of our delivery, broadband spectrum coordinated the deployment requirements of their private wireless network. Based on our forecast of contracts over the next 3 fiscal years and the corresponding prepaid terms associated with these deals, we forecast to receive proceeds of $300 million to $500 million by the end of March 2024, which does include contracted amounts due from Ameren and SDG&E. Also keep in mind, after fiscal year '24, the over $1 billion in contracted that will be due to be collected from executed leases under our plan. We will have roughly half our spectrum value still on our balance sheet, and our sales team will be working to convert those assets to valuable contracts. We firmly believe we are fully funded in factoring in our remaining contracted proceeds to be received from both Ameren and SDG&E of $77 million; future operating expenses, estimated costs associated with spectrum clearing and the projected cash payments associated with future spectrum transactions. Anterix has a debt-free balance sheet and a strong starting cash position of $117 million as of March 31, 2021, which includes $20 million received from SDG&E in our last fiscal quarter. Accordingly, there is a great opportunity to begin returning value to shareholders earlier than anticipated and within the next 2 years, as we execute on our customer plans. We intend to consider the use of cost-effective and tax-efficient ways to return value to shareholders, which could include share buybacks and/or special dividends. While the timing of cash proceeds have significantly improved since our initial guidance in May 2019, there are a series of additional elements of our financial forecast that remain intact. Those include our key assumptions on contract terms where we continue to target having a portfolio of customer agreements with average maturities of around 20 years, annual pricing escalators and long-term renewal options. As an [ integration ], let's look at a spectrum lease with associated proceeds of $100 million, paid annually over 20 years, including an annual 3% escalator and compare it to a spectrum lease for $100 million prepaid over the first 4 years of the contract term with the annual escalator reflected in the NPV of the agreement and a lease structured with annual payments and an annual 3% escalator, the initial proceeds would be approximately $4 million in year 1 and grow to $6.5 million in year 20. Under GAAP, we would recognize revenue on a straight-line basis at $5 million per year for each of the 20 years. Now taking that same 20-year contract and converting it to fully prepaid over a 4-year term requires the lessor to present value the annual cash payments. Given that our utility customers are financially strong with some of the best investment-grade credit ratings, we can use a range of single-digit discount rates when calculating the present value of the contract. So the present value again, applies to the same lease, converts the $100 million paid over a 20-year term to roughly $45 million to $65 million of upfront prepayment paid over the first 4 years of the lease. Using the middle of the range in this example, Anterix will have $55 million on our balance sheet fully received, 4 years after signing the contract, that of only $16 million in the first lease scenario with the residual payments being made over 20 years. Under GAAP, we would recognize $2.75 million of revenue annually, which is roughly half of the annual revenue associated with the long-term payment lease. Again, an influx of cash being paid upfront and far sooner than originally anticipated is a welcome opportunity. Looking more broadly, we will recognize revenue as our spectrum is delivered and available for use by our customers. Our goal is to put our spectrum to use as quickly as possible as it is cleared. Based on our 2 contracts executed to date, we expect to recognize revenue associated with these deals this fiscal year. As a result of our customers' choice to prepay, we are pleased with the positive changes to our forecast. Going forward, we will focus our discussions on contracted proceeds and free cash flow. Accordingly, our previously projected contracted annual run rate revenue may no longer be an appropriate indicator of our business. As a result of the changes in timing of cash proceeds, we believe that Anterix should be valued on free cash flow. Securing cash upfront reduces risk, strengthens our balance sheet and helps to ensure there is no need to go out to the capital markets for additional funding. It also provides us with the opportunity to return value to shareholders earlier than anticipated based on our execution. There's also a substantial residual value to be captured after the initial lease periods, when either customers choose to renew their leases for additional predetermined terms, bringing in new proceeds or Anterix reclaims the spectrum to use for another purpose. Now I'll turn to the cost structure of our business. Our operating expenses are estimated to run between $37 million and $40 million per year through fiscal '24, which includes spend to evaluate potential value-adding opportunities that is not considered material. Following the report in order, we gave a range of $130 million to $160 million for spectrum clearing costs and we're right on track. This range includes spectrum purchases, moving incumbents out of the broadband segment as well as any necessary anti-windfall payment to the FCC to deliver broadband license. As a reminder, we issued a letter to our shareholders that provided all the relevant details associated with our spectrum clearing obligations and costs, which can be found on the Investor Relations page of our website. I'm pleased with the progress we have made since receiving FCC approval of the rules almost a year ago. Since our last Investor Day in May 2019, we have completed deals to clear approximately 1/3 of the incumbents in the 900 megahertz band. In our last fiscal year, we spent $14 million through contractual arrangements with incumbents. Going forward, we expect to spend approximately $30 million for clearing efforts per year for the next 3 years as customer acquisitions ramp up. As previously noted, clearing cost could be decelerated or accelerated [ based on demand ]. So when combining our projected operating expenses in clearing costs, we will be spending approximately $70 million per year throughout fiscal '24 year-end. Lastly, on the cost structure, I'd like to address taxes. The prepaid nature of our leases will increase our taxable income sooner than previously planned because these proceeds must be recognized as taxable revenue within the first 2 years of receipt. However, based on the projected timing of our cash receipts and expenses and the $250 million of federal NOLs we have accumulated as of March 31, 2021, we do not anticipate being a federal taxpayer through fiscal year-end '24 as we utilize those NOLs. Now I would like to spend a moment to review the value of what we own, 900 megahertz asset. Broadband spectrum is valuable, and recent FCC auctions have significantly exceeded market expectations in terms of dollars per megahertz pop. Our customers value dedicated spectrum and have already started investing as evidenced by $175 million spent by 11 utilities in the CBRS auction, plus nearly $100 million spent for 900 megahertz by 2 utilities with us. SDG&E, an innovative force in private networks, has invested in both 900 megahertz and CBRS, and we anticipate others will make similar decision to leverage the complementary benefits of low-band and mid-band spectrum. Spectrum is scarce and, therefore, reinforces our confidence that future contracts reflect the benefits and value of our foundational low-band broadband spectrum. We believe that 900 megahertz will continue to garner fair market value, consistent with the expectations set forth 2 years ago and demonstrated in our initial 2 customer contracts. Both Ameren and SDG&E fell within the book end range of the 600 megahertz and AWS auctions or what we see as fair market value. Continuing to monetize our spectrum within that range should result in a multibillion-dollar opportunity for our spectrum asset, which is more reflective of the average of our prospective future contracts over time. Going forward, we believe our contracts will be bespoke and will reflect fair market value for the service territories of our customers. In conclusion, for much of the 7 years I've been here at Anterix, my role as CFO has been focused on ensuring that we have sufficient capital to support our long-term business. Our forecasted $1.8 billion of contracted proceeds by end of fiscal year '24 expands that focus. Those proceeds would represent only half of our spectrum value, translating to about $100 of contracted proceeds per outstanding share. I'm pleased to say that as a result of our experience in monetizing our 900 megahertz asset, my focus will expand to include identifying the most efficient ways to return this value to shareholders. I look forward to elaborating more on these plans with you in the future discussions. With that, I'll turn it back over to Rob.

Thank you, Tim. Before we jump into questions and answers, let me summarize just why I'm so excited about this Anterix opportunity at this moment in time. You heard a lot today about momentum. Momentum that, in my view, is translating into a movement. No longer in our voice, it's in their voices. The voices of utility executives, legislators, technology leaders, all identifying this tremendous need for private broadband networks to solve mission-critical use cases. And that intersection with our business model, a different kind of wireless company, where we're leveraging the balance sheets and capital investments of utilities for a very capital-efficient model for long-term leasing of our spectrum, translates into our ability to project these contracted proceeds and near-term cash flows and also allows us now to talk about the potential for returning substantial value to shareholders. And the continued execution on this unique business opportunity is what excites me and my team. Thank you. And with that, I'll turn it over to the operator for questions.

[Operator Instructions] And our first question is going to come from the line of James Ratcliffe with Evercore ISI.

Two, if I could. First of all, Rob, could you give us some -- and or Tim, could you give us some color on the kind of investments you're talking about to drive adoption? I mean are these opportunities that are high ROI on their own? Or are these more investments that facilitate the sale lease of the spectrum portfolio? And secondly, just looking at capital returns and the cost, if my math is right, about $120 million in cash now, add $300 million to $500 million by end of FY '24, get to $400 million, $600 million, plus 3 years at $70 million, that would still leave you with $200 million to $400 million in cash at the end of FY '24. So I guess the question is why not push the capital return sooner and in greater size? And also if you could just mention what -- you mentioned tax concerns, what potential tax concerns that could be around capital returns?

Thank you, James. On your first question about the incremental investments that really what we talked about as the incremental opportunities for our shareholders, I want to be crystal clear. Our focus as a company today is on the execution of building the contracted proceeds that we talked about, right? The accumulation of that through this fiscal year and through 2024 and well beyond, right? We're only monetizing half of our spectrum through 2024 as we're talking about and still have half the spectrum on our balance sheet to be able to build more value and the residuals, the renewals of those leases beyond that. The incremental aspect of us investing in additional businesses, we're really looking at things that are low capital intensive, right? As we have built these relationships, especially you saw it most recently in all of you, the follow-on announcements, and as part of our Anterix Active Ecosystem Program, right, where we had 37 and now have over 40 leading technology vendors, that ecosystem, right, turning our spectrum into a solution is where we see opportunity to capture additional value. And those are low investments from our standpoint, most of which is already included in all of the numbers that you're hearing from Tim as he forecasted. Tim, maybe you want to take the financial question.

Sure. Thanks, James. Thanks for the question on capital return. One of the reasons why I was excited to have this meeting was to be able to talk about returning capital to shareholders sooner than we had earlier anticipated. The math you did was right. And so we -- that's why I said we anticipate being able to return capital within the next 2 calendar years. So you'll hear more about that as we move forward. And we're going to try to do that in the most tax-efficient way as possible for our shareholders. So you'll hear us talk about potential for dividends, the potential for share buybacks as we move closer to being able to come through on those promises.

And our next question is going to come from the line of Simon Flannery with Morgan Stanley.

This is Alexis on for Simon. Can you hear me okay?

We can. Yes.

Okay. Great. I guess one question on the pipeline. You previously talked about, I guess, 70%, 80% of the pipeline in Phase 1. How should we think about kind of how that cohort has shifted and how the customers are moving to the pipeline? And then another question is, have you seen customers -- production customers walk away at this point? And then another question is, are you hearing anything in terms of utilities contemplating other service providers or anything of that order? Are they kind of just coming to you as the only option?

Yes. I'll take that last question. I mean Ryan can answer the other 2. On other alternatives, the key thing that we talked about in our prepared remarks was about this driving demand for private communications, right? And private really has some essential aspects that aren't available from commercial networks. And a number of us came from the carrier world, so we've got tremendous respect in the great business model of carriers. But when you're a utility and you got to realize utilities for decades have run private networks for their own needs. And why have they done it? They've done it because they need a level of control of those networks, right? The ability to build these networks to their standards, with the backup requirements, with the battery requirements and additionally, they build it where they need it. A lot of assets of utilities are in places where there aren't people intentionally, substations, high-power transmission lines. And so that coverage aspect is another key area of why they want private and why they're not looking to carriers. There's also a long history of issues that utilities have had with carriers in the past. And you can go through hurricane after hurricane or storm after storm of where their needs weren't prioritized. And so that gets into the -- with private that the prioritization of their capacity over anyone else's is essential, especially in the time of need during those storms. And lastly, before I turn to Ryan, is about really the cybersecurity aspects. Needless to say, you're reading about this every day in the paper about all the incidents that are happening and a lot of which are pointed at these utilities. And so the ability to build a system, first of all, that's private, meaning separated from the public Internet is a critical piece of their focus, but also being able to layer on additional cybersecurity layers of applications and software as they need -- and this is a changing environment. It's dynamic. And so it's not a onetime build. It's the ability to own their networks and let it evolve as these continued threats occur. Ryan, do you want to take the other question?

Yes, absolutely. Let me just add actually to that point before I come back to the pipeline, Alexis. One of the recently filed experimental licenses that I spoke about was with Avangrid. So Avangrid is up in New York, up in New England area. And their use case really highlights a lot of the attributes that Rob was talking about. And I think it's a great example. I encourage you to go look at, to really hear it from the voice of the customer about what drives their considerations as to think about exactly that challenge at the intersection between the options that they see, driving private networks versus some of the other options. But what they really focus on comes down into 3 main components. They talked about a hardened network, which is something that we've seen in the past, where hardened to a utility means they have special requirements. They have special requirements for how they need to operate for the capabilities, the backup power supplies that may go with the towers and the sites that they're building. And that drives them to a level of customization. And this is part of the feature of control that utilities are really looking at when they're building their private networks. And the next piece really comes down around coverage. Utilities coverage footprint, obviously, can be quite different than what they see in terms of some of the options that they get from the carriers. Obviously, they don't have the luxury of only servicing 80% of their service territory or a fraction of their overall customer base. They're absolutely obliged to be able to provide that coverage to every square mile of the service territory, which we see a lot in the United States, can include quite a bit of remote rural service territory and being able to have that flexibility. And their specific design requirements is a big attribute of why they drive private. And then the third piece is to highlight what Rob said, is really this idea of how to improve and increase the level of cyber physical security as they can see advantageously through the adoption of a private LTE network, being able to establish, as we call it, the air gap between the public Internet and what they can do in controlling the connectivity to their OT or their operational technology devices, which is where a lot of the sensitivity is. And the further that they can go to isolate that, the better they are off in terms of being able to protect themselves from the nefarious actors that can come in through the public Internet. But now let me come back to the pipeline. So what we've been seeing just relatively over time, as I highlighted, is growth in a variety of areas. Obviously, we've seen growth in the overall size of the pipeline, moving up to 50 total customers who are active with us. And I think it's important to recognize we're quite stringent in terms of how we think about the development and who and how we enter new customers into the pipeline. These are what we call qualified customers. Obviously, there's a lot more customers who we may here have an interest or who may be on the sideline starting to consider that. But we really want to make sure that we got a thorough process in terms of how we qualify and enter those onto the pipeline in the first place. So seeing that growth is actually fantastic. Frankly, from my experience, it's faster than I would have predicted it in terms of seeing that more in the mass stage of adoption in terms of how that evolution has played out. But as I said, what -- the key that I'm really focused on right now, because this is my indicator, this is what I'm looking at as I'm thinking about building the pipeline and what comes as we move towards '23 and '24 is what's happening in the evolution of Phase 1 to Phase 2 customers. And being able to see the doubling of the amount of customers that are working that way into Stage 2 in the last 6 to 8 months is absolutely a phenomenal sign to me, both momentum and just the general way that the conversation is extending itself and continuing to carry on in the market. And it makes me confident. It makes me absolutely confident in terms of the options that I see in the various ways that we can ultimately get to both the $200 million in this fiscal year and then building what is the clear accelerating pipeline needs as we go to the goal in fiscal year '24.

[Operator Instructions] And our next question is going to come from the line of Phil Cusick with JPMorgan.

A follow-up and then another one. Can you -- just to push on this, again, can you quantify the number of potential customers in each stage? How many are in that final stage? And what was the number 6 months ago?

Yes. Thank you for the question. I'll take a stab at that one. Like I said, well, we've been looking at big picture just the overall growth. I'm laser-focused on really what we're trying to do in terms of the options and how it ultimately works its way through. The question on Phase 3, obviously, there's sensitivities when we get into Phase 3. So truly appreciate the question. But I want to be very careful, obviously, when we get down to that phase. As I said, we're at a smaller, the low end or the bottom end of the funnel, however you want to think about it. But in terms of that's where we're finalizing the agreements and both from a strategic and from a competitive perspective, there's some sensitivities there that I want to be careful with. But coming back to the overall, what I'm primarily looking at it is the overall growth of the pipeline. We were at 40 before when I last talked about it, over 40 to now over 50. And the biggest change has been really then into what we've seen in terms of the doubling of the size into Phase 2.

Okay. Okay. That's helpful. And then you mentioned additional value-add services. It sounds like you're not ready to be too specific, but can you give us some general ideas as to what those might look like and the type of upfront costs we should anticipate?

I think I've touched on it roughly before. There's a few different ways in which you can think about this, right? When -- we've defined all the different companies participating in our Anterix Active Ecosystem Program. You can get an idea of the kind of needs of the utility ecosystem in their needs for a solution, right? So spectrum is the underlying foundational element, but you obviously need equipment, right? And that's both the infrastructure and the end points, both of which we're playing a role with those vendors. You saw the follow-on announcements we had with Ericsson, Motorola and Nokia, all critical vendors, global scale vendors, distributing band-aid equipment today around the globe, each of them. End points. The opportunity that we bring to deliver in this concept of a network of networks of scale, right? So focusing developers on applications and devices One great example in that ecosystem is GE. GE has a product called the Orbit. It's probably the leading fixed wireless device, a router that sits on a pole to connect mission-critical devices. That product now in their marketing materials says Anterix Active, right? So the idea of this ecosystem, first, it drives awareness and knowledge of the ecosystem that we have and the importance of our spectrum. But when you get to incremental opportunities, we see things like tower infrastructure, as an example, right? If you think about each individual utility, these are big electric utilities, but they're small wireless footprints. When you think about it in the scale of national footprints, they don't have the economies of scale of negotiating and purchasing, and they don't have the expertise either. So we want to bring that centralized capability, negotiating on behalf of the nationwide utilities for master lease agreements with towers as one example, for equipment, for development, creating that scale and scope value for them and in doing so, creating opportunities for us to translate that into additional value for our shareholders. We think the investment requirements in there. A lot of it's already built into what we're doing because we're driving these ecosystems. But I would describe it today as de minimis. It's marginally incremental to what we're doing already, and it's low-capital intensive from my standpoint.

And our next question is going to come from the line of Mike Crawford with B. Riley Securities.

Just to be clear in terms of timing in the next 3 years. So you're saying 2 to 3 customers signed this year. And then I would imagine it's 5 to 7 next year and then 10 or more in the year after that, which is fiscal '24, which is in March of '24, not too far away.

Ryan can fill in the details. What we're really focused on is this concept of contracted proceeds and cash flow. As you heard from Ryan, the diversity and size of these customers makes it challenging to say just how many because there's so many different ways you can make up the targets out of our pipeline, our growing pipeline now with over 50 customers. And so it's hard to say it's going to -- we're targeting, yes, 2 to 3 this year to get at least $200 million of spectrum proceeds. And as we said, fiscal year 2024, a target of getting $1.8 billion of contracted proceeds. But beyond that, the specific number of the mix, as you can imagine, given the scale of under $60 million, over $60 million. We've talked in the past about tens of millions to hundreds of millions of dollars. The combination could be less or more of the number of customers. So we're focused more on that contracted proceeds.

Yes. It's absolutely right, Rob. And yes, I mean, you call it what it is. I mean we see hockey stick. And ultimately, it's a progression of what we see absolutely supported by the growing footprint that we have in the pipeline. But I reflect back, I think this is helpful to think about how that journey plays out. Not a little over a year ago, May last year, really through the FCC report and order was when we had a product, as I think about it, available to us as a company for the first time and having the capability to deploy and ultimately promote the broadband licenses. Not 10 months after, basically through the first transaction that we had later that last year, we've been able to promote that or progress that to the $100 million of contracted proceeds that we saw through Ameren and SDG&E. And to me, that's just phenomenal in its own right in terms of a sign of traction and the progression. Not forecasting through this year into more than doubling that again to go over the $200 million that we see in this fiscal year, absolute signs of what we're seeing in kind of that growing and accelerating pace of volume and value ultimately into these deals. And then as Rob said, it's -- as I look at the over 50 customers that we have in the growing pipeline, covering over $3 billion already of potential contract value, what I see is options. What I see in there is various pathways that could make up different volumes and sizes of accounts to ultimately continue to flesh out as we work them through the process as we look to really '23 and '24. And that's why I just come back to again. I'm so focused on kind of that evolution, as I talked about in the progression of Phase 2. Some of those deals are absolutely going to be candidates as we think about this year, but I'm really focused on how do we build that momentum and how do we really capture that voice and what's going on in the industry as we get set up to execute on '23 and '24.

Okay. And then just regarding your spectrum, so you own 60% of these 399 contiguous channels, a former, BILT spectrum that's been moved to this private LTE allocation by the FCC report and order. But you characterize Anterix is the largest holder of FCC-licensed spectrum in the 900 megahertz band. But where does that put NextNav, which owns 8 megahertz in the LMS band between 919.75 and 927.75, actually right between your paired spectrum?

Yes. Good question, Mike. I think when we make the statement about being the largest holder, really talking about the largest holder within the 10 megahertz band that we've identified and was part of our FCC petition. So as you know, the rules require in each of the individual licensing applications. And as we've stated earlier, we're proud to have just filed our -- the first broadband license for the Ameren service territory. NextNav uses their spectrum for a different business or a different purpose, not broadband used for the same thing. So within our band, the 10 megahertz of which we're -- the FCC and their May ruling has allowed us to use 6 megahertz that for broadband, the remaining for narrowband. We're the largest holder within that band nationwide by far.

And our next question will come from the line of Walter Piecyk with LightShed.

So the 50% for $1.8 billion obviously implies, based on simple math, approaching $2 a megahertz pop, your first 2 transactions, which were very different. Obviously, we're at $1.07 and $2.31. So when you think about -- let's just look at the first year, the $200 million. Obviously, you don't know you were answering previously, you don't know how many it's going to be, and it could obviously vary if you have a rural guy come in versus a metro guy. But just thinking about like the next -- over the course of the next year to hit the $200 million and then more broadly, to hit hitting the 50%. How wide of a range do you think in terms of price per megahertz pop that those deals would be? And then similarly, these are great validation points. Obviously, those first 2 are great validation points for the company. Are you going to announce everything? Like so if there's a smaller utility that may have a lower price per megahertz pop is rural small, like what is the materiality that you see as necessary to report each transaction as we kind of move forward here?

Yes. Thanks for the question. Maybe I'll start and Tim can fill in on some of those details. Just generally, our approach to spectrum, right? We talked about this idea of fair market value and there are thousands of public market and private market transactions that we use as reference points. As you can imagine, these are long-term deals. Ameren, for an example, right, a 30-year lease, it's a significant negotiation. They're bookends as we talk about between the 600 megahertz spectrum auction, AWS 3. But it's worth noting that in the time -- since those auctions, we're seeing rising spectrum prices, increasing demand and more scarcity of low-band spectrum, right? The C-band auction most recently, while not directly comparable, is showing that increase in demand and higher price points. So for us, remember, we're also talking about a lease, right? So the dollars that we're negotiating for is for the use of the spectrum during the lease term. For Ameren, it's 30 years. Typically, we're looking at 20 years. And so that says that there's also renewal value after the end of that lease term as well. But we're expecting. And I think we flashed up a chart pretty quickly, but really indicated the idea that those 2, it does vary, as you pointed out, dramatically by county, right? We're licensed by county throughout the U.S., where, as Ryan talked about, Manhattan, Kansas versus Manhattan, New York, you're going to see tremendously different megahertz pop values. But yes, when you get to the average between them, we do see that we're going to be falling within that midpoint between those 2 bands and see that continuing through our current conversations.

So your point is -- so Rob, your point is, Rob, that if announcement, let's say, the next deal or for whatever reason, the one that you get across the finish line is more rural and it ends up being whatever, $1.25, that like that's -- we should still expect that type of variability. Because obviously, every utility is different, and they're in different locations, that the band will still be fairly wide. And the end goal would be to kind of end up at around $2 a megahertz pop for this first 50% of spectrum?

Yes. I think you had it right, Walt. As Rob said, I mean, it's going to be a dichotomy of deals, and they're going to be up a little bit all over the place. But we expect that average to get closer to $2 that you talked about over time.

So the attraction of your spectrum, obviously, to utilities, knows no population density balance, meaning that a rural guy obviously is as interested in protecting their network as a metro market guy? So when I think about the second 50% over the years beyond your kind of 2024 time line, is there any reason to think that the valuation should be differently? Or when you kind of look back and you look at your pipeline, that you're thinking that maybe that first 50% is going to be more population dense and then you'll get to more rural areas in the second 50%.

Different from what we learned in the wireless world of having kind of rural properties and urban properties. These utilities own -- the big investor utilities have multi-state territories, and they're everything from rural to they're statewide. So they've got rural, they've got urban in their footprints. So you'll see in these larger transactions, coverage of both ends of that equation. So it's not that we're going to close urban areas and leave rural behind. I think you're going to see already as with Ameren, for example, that's got Missouri and more populated areas as St. Louis and some of Illinois as well. And so you're going to have a pretty broad mix of that, I think, in what we see in our pipeline. And so yes, there will be other smaller entities in areas. We see the opportunity eventually for co-ops and municipal utilities as well. NYPA is an example, right? New York Power Authority is Gil, who we quoted earlier, their CEO, is very active in this space talking about the necessity for private broadband for the digitization of their grid. They're serving a vast territory within New York all the way from rural New York down to New York City. And so the needs on both ends is what I expect to see in the transactions that we're seeing in the pipeline.

And I don't see any differentiation moving from the first 50% to the second 50% in valuation.

Got it. And then just one more, if you don't mind. On the services business, which obviously, you've got some level of SG&A targeted at that. I mean you've had a lot of announcements. Motorola Solutions, obviously, in my view, at least a great one just because of their similar targeted customer base. But you've also, I think Ericsson and a couple of the other vendors, H.ow do you see that kind of ecosystem playing out in terms of monetization? Or is it more just like, "Okay, we've created this ecosystem where you've got highly respected vendors that are developing solutions, putting those R&D dollars into your spectrum, obviously, critical. And that helps you monetize the spectrum." Or is there also some specific revenue opportunity in these ecosystem partners that you think is available to Anterix.

I'll kick it off and then pass it to Ryan, but I think you hit right on it, right? Well, there's a big opportunity, first for that to be an accelerator, right? So to have the research and development of these global scale companies, you can't take that for granted. Motorola is very powerful in the 2-way radio systems that these utilities are already using, and they're looking at the way they transform those systems to evolve them into broadband and LTE. In New York, they're all coming together also through the Utility Broadband Alliance, right? And so their willingness in this sector, very different than other sectors, to share that information. So when we go through a pilot with SDG&E, and you saw in our agreement, there's a big collaborative element of what they're doing there, in which they're offering to help not just the state of California with their wildfire mitigation plan, but also want to help the rest of the nation to build this scale and scope, right? This nationwide network of networks is no longer our concept. It's something that you're hearing. If you heard Caroline Winn, the CEO of SDG&E, just spoke on a webinar that was on Public Utilities Fortnightly, one of the leading magazines in the trade. She talked specifically about that, about the need for this collective action for scope. And simple examples of a truck roll in a storm or a wildfire goes from one utility territory to another, those communication systems are not compatible today. They don't have that interoperability. The devices don't work on each other's systems. And so this idea of collective action of coordinating that, it builds a lot of value for them first as a solution, and that means faster adoption potentially. And that -- the idea of kind of that vital aspect of adoption as well. But within that, we definitely see opportunities. And yes, Walt, with your question within the ecosystem of areas where we can be part of that, right, helping drive the optimization of those devices, the applications of software and participating in the economics of the sale of those devices, on those software and other elements of it. So that's something we're still evaluating, identifying where we can find low capital-intensive ways to be able to drive that. And we do expect to come back later this year talking more about that.

Yes. Excellent. I'll just add one point to that, Walt. Obviously, utilities are looking for a solution. So to the point of an accelerator or added fuel, I mean, being able to help build that and pull it together as we're working with these customers, help them move faster. It helps to take them out of the integrator role, help puts more of that burden on us and the ecosystem really as we're pulling all those pieces together and kind of being a solutions-orientated business in terms of how they evaluate value and how they get to business outcomes and ultimately underpin their business models is critical to be able to help them through that. But where the opportunity comes in, one thing I've seen in the utility space and one of the thing we're investing heavily in terms of why we're looking at our sales engagements as really about relationship engagements. How do we build credibility, how do we build trust? It's such an important part of the selling process. But in that, you overcome really that risk barrier, that risk mentality that you get on the utilities, you get to the other side of that conversation. And once you overcome that opportunity, they start looking to you to do more. They want to see you input, they want to see your help because, frankly, it's less risky. They have a trust and we've been able to deliver and being able to continue to work with us and we get these questions today already from customers who have seen what we've done in the emergence of ecosystem, really clearly us and look for our input and guidance as they're making their tough decisions around what they're doing across the various pieces of the infrastructure. And we can be a similar honest broker. We can really be transparent and helpful to them to evaluate and consider what their choices might look like, taking full advantage of the knowledge that we're building in the full capabilities of the ecosystem.

So do you envision that being more of a recurring revenue managed service type of relationship or a sell pieces of the puzzle on behalf of the ecosystem partners and kind of onetime sales situation?

I think it's too early to tell what, but I think you could probably see a combination. As you know, the utilities have a desire, as we've talked about, to prepay even for long-term services. So they could be services that are rendered over a while, but also I wouldn't be surprised if you see them paying in advance for them. But I think we'll see opportunities on both sides of that.

And our last question for today will come from the line of George Sutton with Craig-Hallum.

Well, what a difference the 2 analyst days make. And of course, I'm referring to Tim having taken the aggressive stock mental from Rob this time. I had 2 quick questions. One, I'm impressed with the 40-member ecosystem number. I'm just curious if you can point to what the commitment is to be part of this ecosystem. Number two, as we look at some of the use case examples, cyber risks and the Texas disaster and what you're referring to relative to the carbon emissions. And as we talk to utilities and they have a very long strategic to-do list, are any of these things meaningfully elevating your private broadband network opportunity up the curve?

Thanks, George. I'm going to take your second question first, and then maybe Ryan can fill it on the first one. As far as -- are the incidents changing environment, you heard my comments earlier, look, from my standpoint, we're in an accelerating environment of incidents, whether they're cyber-related, whether they're weather-related, whether they're honestly man-made as we saw in some of the forensics that happened in some of the California wildfires. And so from that, we're hearing, again, the voices of legislators as an example, right, the awareness that is part of whether there's an infrastructure bill or just state regulation to allow the spending on these kind of things. The imperative that these have to happen is just blatantly obvious. And so we used to -- and you made reference back to our Investor Day, and thank you for the stock reference as well. I appreciate that, George. It wouldn't be an Investor Day without your stock reference. But going back then when we were talking about these issues, this was not a mainstream issue, right? We were the ones beating the drum going into regulators, going into customers, talking about the necessity and really connecting the dots, right? So these are big issues, right? Decarbonization is mission-critical. But do regulators understand that in order to connect all of these millions of devices, distributed energy sources, intermittent energy sources, that you need an underlying communications network, the one that's robust, that's secure and able to provide the security under these cyber issues. It wasn't their awareness, but now there really is. And we've done dozens of visits on Capitol Hill. We're part of now the GridWise Alliance, a seat at the table in helping them shape the vision of how legislation should come forward to help support the investment, not just in infrastructure, but investment in modernizing utilities and they specifically define the wireless infrastructure that's necessary to be able to enable that to happen. So absolutely, we see that the unfortunate events that are happening, and they're really unfortunate. But the good news is that we're seeing the wakening of across the board from legislators, utility executives, industry associations that are going to drive near-term solutions. And that all for us is tailwinds. We don't need any legislation to happen to already feel the strength of those tailwinds that are driving a lot of the conversations at all levels.

Yes. Thank you. I'll add one point then I'll come back to the first question. There's a great place you can go look. I mean obviously, there's a lot of different filings that are happening within the individual state regulators that are really focused on forward-looking plans that are intersecting with a lot of these issues. And they'll take the forms of capital, long-term capital expenditure plans. They'll take the form of storm protection plans or integrated resource plans that are looking at the synergy between all these different topics that we've talked about. And what we've seen in that, and there's 22 of those that we've actually been looking at who are acknowledging the intersection between those initiatives and the important role at some level of communication play is an underpinning component of what that forward-looking plan would look like. And we look at those for indication, just general connection to some of the points that Rob said at the macro level, where some of these things drive that down to what we're focused on. But coming back, we come back to the ecosystem now. So as we've talked about, really, what we're bringing together in the ecosystem really at this point, is, frankly, the like-minded interest that comes through collaboration around a common cause. And the reality of it, when you look at the intersection of this being kind of what we're trying to drive with 900 megahertz in private LTE, you need -- there's a necessity to having the ecosystem having a commonality to the vision and the ultimate outcome that we're trying to go. It helps the whole ecosystem, frankly, in terms of putting those pieces together, talk about joint R&D in terms of building the solutions, driving the integration, pushing for FCC certifications, whatever they are, that help expand that portfolio faster. And that's something that's a common, that we're looking for in terms of all the members in terms of their participation. And what goes along with that is really kind of how we participate in joint marketing, selling that there is a uniformity to our voice. There is a common understanding about what we're trying to do because all of our goal as an ecosystem is the same. Our goal is to accelerate the market. We want to help customers get value faster through the adoption of private LTE. And that's really the baseline of where it's at right now. And that's -- as we've talked about, we'll be exploring other ways to be able to participate directly through grade and testing all the things that we're doing with them right now, but then will expand undoubtedly with time.

Thank you. At this time, there are no further questions. Mr. Schwartz, I'll turn the call back over to you.

Thank you, operator, and thank you, everybody, for your time and interest in really following us through this Anterix journey. We're excited to have shared all this with you. We look forward to talking to you again soon. Thanks again.

This concludes today's conference call. You may now disconnect.