Uniti Group Inc. (UNIT) Earnings Call Transcript & Summary

And, wow, we got a lot to talk about. If you didn't join our Verizon presentation this morning, Verizon was talking about how they don't want to partner on fiber, they want to own fiber, and when Sampath said that, I was like, well you want to buy Frontier. So apparently, the Wall Street Journal is now reported that Verizon is in advance stocks to buy Frontier. And so much of my questioning for Kenny was premised on trying to how would Frontier as an objective goal to be achieved from the Uniti Windstream construct. And so I don't think that that's wrong to go for.

But first things first, hot takes, what's your read on this Verizon Frontier thing? How does it -- how do you react to it?

I'm not surprised. I've met with a lot of -- some of the folks in the room today, so they'll back me up on this. I have been saying all morning that, I do think that, fiber-to-the-home is a space that is going to be consolidated and probably consolidated into the ownership of 1 or 2 or 3 parties. And convergence is a theme. I think convergence is a nice thing to have, not a must thing to have, but I think it is a theme that's important to a lot of folks. And with T-Mobile coming into the space, I think that's been somewhat of a flare for some of the other large participants. And so with that said, I'm not -- I don't know anything about the rumors, but I'm not surprised to see that.

Give me a multiple over and under. What do you think they get?

I would say that Uniti is worth somewhere in the high-single-digit to low-double-digits today based on the blend of business that we have. But as we grow that business and turn it into less of a copper to fiber conversion and more of a fiber, predominantly fiber business, that business is easily a double-digit multiple business. And we've been very transparent about our views of the sum of the parts of our business, right? It's out there, it's in our collateral. You can go on our website and see it. It's validated not only by what we're able to get in the ABS market from a leverage point of view. I mean, we can put 10x leverage on our fiber business, not to mention what it's worth. We can put 10x leverage on it. The same is true in fiber-to-the-home. And there's numerous private market multiples of 15x to 20x plus. So a lot of validation for what we think the intrinsic value of the business is. I can't comment on others, but at least from Uniti's perspective, we think there is a tremendous amount of upside in our intrinsic value versus where we're trading today.

So before we go further, so I should ask, you want to make any, whatever those kinds of announcements are, like safe things, safe harbor comments?

No, no. We're good.

All right. And the second thing is there is a presentation on the Uniti website that, it's kind of a summary of a lot of what I think we're going to talk about here. Third thing is, if you guys, this is a different kind of format. So if you guys have a question you want to, that I'm not getting to or you want to dig deeper, raise your hand. We've got a mic so that we can get our gentleman in the middle. Mic, 10 o'clock has a mic, so if you guys want to get on the webcast we can do that. So all right, let's start focusing on Uniti's, I guess I want to focus on the Uniti Windstream thing first. So tell me about, what Windstream. And some of these people have, and many people listening may have had access to the NDA. Many people may have read through the merger documents. I won't make you kind of tell the story of how this got done because that was 20 pages, I think. But tell us where we're starting from the Windstream. What are you inheriting as CEO of the new Uniti Windstream from a fiber-to-the-home business perspective?

So the new combined business will be what we're calling a fiber infrastructure business and a fiber-to-the-home business or Kinetic and then a Managed Services business. The fiber-to-the-home business Kinetic today is roughly 4.3 million households, with a current build plan to get to almost 2 million households. So about...

4.3 million total households.

Correct, correct. And a build plan to get to 1.8 million, 1.9 million households today. On a combined basis, we have talked about adding an additional 1 million homes.

To the 1.9 million?

To the 1.9 million. So getting to roughly 60% fiber coverage. That is a starting point. We think we can do better than that. But that's what we're -- that's what we're talking about now. And that that bill is fully funded with available liquidity between the 2 businesses.

Not including BEAD?

Not including, well, that actually does include some assumptions that we're making about how much of the BEAD opportunity we can win. RDOF. On a combined basis, it includes RDOF, it includes public-private partnership commitments that have been won, and it includes some additional, what we're calling strategic builds.

What does that mean?

Meaning non-subsidized builds.

Okay.

So the Kinetic footprint is unique relative to a lot of others in that it's more Tier 2 and Tier 3 market focus of smaller markets, less competition, which if you know Uniti that's our strategy. Our fiber infrastructure business for years has been focused on building in less competitive markets, with theoretically less upside, but a lot less competition. I think we've proven that strategy to be very successful in our fiber business. We're expanding it to Kinetic, to the -- to the fiber-to-the-home story. And I think, if you look at the competitive dynamic in Kinetic's markets today, very little over builders have come into those markets, and our view is if you build fiber first and early, you have an opportunity to win for the foreseeable future. And I think with our expanded build plan, those competitive dynamics should only improve. So when you take that and you combine it with the fiber infrastructure business, I think one of the things that's going to be unique about the new business is you not only have fiber-to-the-home, but you also have the owned backhaul that's going into those markets, which is unique relative to a lot of the other fiber-to-the-home providers. And so owning that network soup to nuts, right, all the way to the home, back to the core, is going to give, continue to give us a competitive build advantage going forward.

Name some people that you think are doing fiber-to-the-home but don't have fiber-to-the-core, because I struggle to think of any.

I would say, I don't want to name names, but I would say that, if you consider companies that own IRU-ed fiber or they're buying lit capacity back to the core, that's not the same as actually owning that backhaul outright like we do. Now, the very large RBOCs do, but beyond that, very few do.

Okay. So that's, I think goes to one of the parts of the question. So we put out a note this morning kind of looking at the IRR analysis of fiber-to-the-home. I was with the 2 CEOs of DICOM last week, looking at what it takes to build in rural markets. So there were 2 things that were interesting to me. One is that it is possible for rural markets to be cheaper, but one of the numbers I came away with was that it takes about $10 a foot to install fiber. That doesn't include what it takes to get there. That's at $650 a home passed, which is the number you're throwing out, it implies that homes are 65 feet apart wherever you're doing this. I struggle to understand that. Can you convince me $650 is a real number? Because no one has that number.

I agree that that is a number that's better than others.

The best number I've ever heard.

It is not a manufactured number. There's not a lot of footnotes that go with that number. It's a real number. And 2 of the things that people miss when they see that number is, number 1, over the past 10 years, Windstream has built a lot of fiber to the node. So from the core out to the node before you get to that last mile, and back to what I was saying earlier about owning that backhaul, that investment, $0.5 billion plus investment over the past 10 years has pushed fiber way out into the network. And if you look at the cost of building fiber-to-the-home, backhaul is roughly 20% of it. And I haven't read your report, but it's roughly 20% of building. So historically, Windstream has already made that investment. Now, that is the Uniti network that's now being recombined with Kinetic with this transaction. That investment's been pushed out to the node. That's number 1. Number 2, Windstream, unlike a lot of others, builds over 90% of their own fiber in Kinetic. And we estimate that to be another roughly 20% to 30% savings relative to outsourcing to contractors. So put those 2 things together, plus it's generally a little bit cheaper to build in more rural markets. I can tell you from experience, it's a lot cheaper to build in Panama City or Mobile, Alabama than it is Chicago or New York City, right? So putting all those things together, that $650 is a legitimate number. It's not manufactured. It's a legitimate number.

So that's not a Windstream number that you inherited. That's a Kenny Gunderman number that he endorses?

That's a number that we believe in at Uniti.

So another piece of this I wanted to understand was you are, I think, the only company that has proactively chosen to in-source building out your fiber network. And I've seen how complicated this can be and how far-flung it can be. And then after you've built the network, then you've got to go back to all these far-flung places to drop the drop wire. And those drop wires can be a long ways away. How does this decision work for Windstream, and no one else has chosen the Windstream path?

So I've seen both sides of it, right? I see Kinetic building 90% plus in-house, and at Uniti today, like a lot of fiber companies, we build roughly 20% in-house and outsource the rest. It works to build 20% to 30% in-house because you've got the crews you need to build strategic routes that have to get done on time, where you need to move more quickly or you need to be able to control it. That also gives you the ability to keep contractors honest, right? You know what build costs are, and you've got the ability to use that.

But these are unionized build costs.

Well, but I think on the Kinetic side, and frankly, building fiber in general with internal crews, the key is to keep them utilized 99% of the time. They're not traveling around. They're not spending a day or 2 days a week traveling. They're spending 5 days a week working and building. And if you keep them fully utilized, the economics work. And that's what Kinetic is demonstrating. Again, the $650 number is a real number for that reason. In a world, where the constraint on building at Kinetic, especially on a combined basis, the constraint is not going to be capital. It's not going to be the number of market opportunities because we think they're expansive, like markets that actually could generate terrific demographics for us to build fiber-to-the-home. The limiting factor is human capital. It's being able to put people on the ground and get it built. So Windstream rightly made the decision 2 years ago, 3 years ago, to build out this internal build engine so that they weren't competing with others for contracting resources. They weren't as worried about the inflationary environment for labor. And today, I think we're benefiting from that. And we're going to benefit from that over the next couple or 3 years as we complete the majority of this build. At some point, when the majority of that build is complete and you're starting to get into more of a status quo period, then do you really want to own 90% of your build capacity? Probably not. You probably flex back down to 20% or 30% internal and the rest outsourced. But having that capacity today has been a terrific resource.

The reason why I'm interested is because, again, you didn't read the report. You made that clear. But what we did is every $100 can increase the IRR of a project in fiber-to-the-home by 1%, with the midpoint being around 14%, was our math. But the more important variable is penetration. You put out a slide related to our conference. It's kind of in the last 1/3 or so of the deck. And what it says, it shows us the 1-year cohort penetration kind of running 15% to 20%. The 2-year cohort penetration running roughly closer to 25% to 30%. But you didn't put the third-year cohort penetration or the fourth-year cohort penetration because I don't know how substantive those numbers are. But could you throw some numbers out, like what you think penetration could look like for Windstream? Because there's an affordability question here, too, and all these other things.

There is. But I would say, the latter cohorts at Windstream, at Kinetic, are better than the early cohorts. And I would say materially better. One of the things to keep in mind at Kinetic is because Windstream had pushed fiber out to the node over the past 7 or 8 years, DSL speeds and therefore DSL penetration at Kinetic is higher than the peers. So if you can go compare it, I won't give numbers, but if you went and compared it, you would see DSL penetration is higher as a result. So going into a new fiber market, or a new market where you're building fiber-to-the-home, and you have DSL speeds of 100 plus meg, it's going to be harder to capture initial penetration than if you have 25 meg. So getting into some of these first markets that have that 100 meg speed, you're going to get less penetration initially, but over time, you're going to capture it. Secondly, and Windstream has talked about this, but I think the initial, a lot of the initial markets, the go to market was probably more like an ILEC go to market than it is an insurgent share taker go to market. And as they've applied more -- more digitally focused boots on the ground, proactive marketing, so true insurgent go to marketing strategies, those early penetrations have been higher than those early cohorts. And so now there's an opportunity to not only do that on a go forward basis in all new markets, but also go back in some of those early cohorts and get those penetration levels up, which I think is a nice opportunity for us.

All right. So I don't want to go down this fiber-to-the-home, rabbit hole too much further, unless people want to go dig deeper. But the next thing I wanted to talk about with respect to the Uniti Windstream merger was the strategic optionality that it kind of presents. And so on the one hand, we've spent a year waiting for Frontier to come up with their strategic plan or Crown Castle to come up with their strategic plan. And we don't even know, obviously we might know what the end game here for Frontier is. But you know, we've been wondering, like it takes a long time to come up with strategic plans. This deal is not intended to close until the second half of 2025. So my question is, are you spending the next year coming up with a plan that you're going to implement right away? Or are we going to have to wait until the second half of 2026 to figure out what it is that Uniti wants to be when it grows up?

I always giggle a little bit when companies talk about initiating a strategic review because I think, aren't you supposed to be doing that every single day, right, with your assets? And that's honestly our mindset. And if you read the proxy, read the background information, you can see that we've been extremely active and engaged with the M&A market over the past 3 or 4 years at Uniti and even at Windstream. And part of that's because that's just our mentality. We think that we should constantly be assessing.

Like you're a banker or something.

We should be constantly be assessing. I tell people, I never knew how bad a banker I was until I wasn't a banker anymore. But we're constantly assessing, where are we going to get the better value in the public markets, private markets, are there other ways to optimize our value? And I think that our strategic roadmap is to constantly evaluate that. And I think historically we have felt undervalued. I've talked about that many times. But I think on a go-forward basis, I feel very confident that we have a story to tell to the market that's now understandable. Whereas selling a unique MLA relationship was challenging, selling fiber-to-the-home, to the public markets is understandable. Selling fiber infrastructure to the public markets is understandable. And I'm excited to tell that story. And I think we're going to get a fair valuation. But if we don't, we're going to evaluate whether these assets should fit somewhere else. And we absolutely believe one of the reasons for doing this transaction, bringing these valuable assets together under one umbrella, is that it gives us a lot more optionality to pursue options beyond just the public market.

So I think that you've ‑‑ we'll explore this a little bit more. But I think that you've come out and said that the Managed Services business is kind of something that's not mission critical. Could you explain what is the Managed Services business and what makes it non-mission critical and what is it worth?

Yes. So that last one got me. Our fiber infrastructure business, our strategy there, inclusive of Kinetic, is to own our underlying network and sell simple products. Ethernet, internet, DIA, Dark Fiber, Waves. And any products that support those are okay. But we like to keep our products simple. The Windstream Managed Services business is a cloud‑based enterprise business. So UCaaS, SASE, SD-WAN, a good business. But it's more technology‑driven. It's more product‑driven than it is connectivity.

Is it more organic developed stuff or is it more resale?

I would say a little bit of both. But it's a good business. The core cloud‑based products are growing. Growing at a nice clip. There's also a TDM part of that business that's tailing off. And so when you look at it from 30,000 feet, you see a top line declining business. But a lot of that is because TDM is tailing off. Intentionally so. And by the end of this year going into next year, most of that TDM business will be gone. So what you're largely going to be left with is a strategic cloud‑based product business. Largely off net. So it's not on an owned network. And so as a result, complicated products, largely off net, not core to our fiber infrastructure strategy. But it's not a bad business. In fact, it's a very good business and it's very strategic to other cloud‑based enterprise providers.

What makes it good? Its growth rate? Its margin? Its cash flow?

Its growth. Its product set. Its blue chip customer base. The fact that it's a scale business, it's close to a $1 billion of revenue. It moves the needle for large strategic who are also in that business. And so it's a business that top line is declining, EBITDA is flat to growing, very little CapEx associated with it. So it is not dilutive to our business. In fact, it's cash flow accretive to our business. But it's not consistent with our strategy. And so I think it's going to be a source of capital on a go forward basis as opposed to not.

For the sake of argument, it sounds like I'm 1 for 1 today, by the way. It sounds like a lumen would be the natural strategic fit for that. But maybe this changes. Their multiple has gone up a whole turn in a bit in the last 6 weeks for reasons that I want to explore with you also.

I won't speculate openly about where we think the right home for that business.

Privately later.

Privately later, yes. Don't want to speculate about that openly. I do think that it's -- again, it's a good business. It's not dilutive to our business today. It's cash flow accretive. But there could be a different home for it. And we're going to lean into that.

So I'll just push back a little bit on that, which is, we'll have AT&T here tomorrow. And they've got negative 10% growth in their enterprise business. And they say it's in part related to the fact that they've chosen not to be in this fancy schmancy solutions based business because it's a lot of wholesale and it's very hard to buy these products and keep the people and if you organically develop them, the shelf life is very short. So it's just not a good business. So AT&T says it's not a good business and they've been in this business for 100 years and they're the market share leader. You say, it's good. Are you sure?

Well, first of all, there's a lot of apples and oranges when people are comparing enterprise businesses. So take, for example, Uniti's enterprise business today. That business is growing at 15% a year. It's on net. It's in roughly 30 metro markets where we have an expansive dense fiber network. We have boots on the ground. We're selling very simple products, Ethernet, DIA, Dark Fiber. Our market share in our markets is maybe 5%, 6%. So yes, AT&T is large, has a lot of market share. We're small, have very little market share. We're taking market share, right? Those are important things to point out. Number 2, our business is not weighed down by legacy products. We don't have a lot of, frankly, have no sonnet-based TDM business in our enterprise business. A lot of the legacy enterprise businesses at the larger telcos and frankly some of the fiber businesses do have those legacy services which are declining and therefore offset growth. So growth is hidden within enterprise businesses that have those declining legacy products. We don't have that. On a combined basis with Windstream, and thirdly, enterprise is a small part of our business. So today it represents less than 5% of all of Uniti's business. On a combined basis with Windstream, enterprise will be less than 20% of our business and legacy services will also be less than 20% of our business. And so you don't have those, it's not the tail wagging the dog, number 1. And number 2, you don't have legacy products weighing it down. So I think just be careful, and I'm not talking to you, but just be careful not to compare apples and oranges or apples and bowling balls. I think when we can, I think with…

Is that a famous Arkansas saying?

I've got 1 million of them.

Okay. Good. Feel free to share. So I was asking this question of Crown Castle earlier today about the need to keep certain businesses together. Do we need to have enterprise and small cell to be the same business? Could they be separate? Could they be worth more to different people? And the answer was, everybody's got a different opinion about that, and I've got one. But with respect to this business, there was a moment in time when there was a third party, and I think it was apparent from the disclosures in your S-4, I guess, is the document, where there was a thought that maybe what we do is we take the enterprise business and move it over here and give it to an enterprise services company. They're the best players to do that. And that there's a separate kind of fiber-to-the-home business, and there's a certain value proposition to that that's unique to the fiber-to-the-home setup. So you've kind of expressed more of a middling version, which is like, well, there's this fancy enterprise services business that we don't want to be in, but we do want to be in the second, third tier enterprise services business, and we want to marry that to our fiber-to-the-home business, and that gives us some owner's economics in terms of lowering our cost to build. Is that absolutely the strategy, or could we kind of parse that apart a little bit?

I think other than the middling comment, I think you generally have it right. I think there's a lot of synergy to the strategy of focusing on Tier 2 markets in fiber, whether it's residential or enterprise or wholesale. That's our strategy, right? We're selling wholesale on unique Tier 2 to Tier 2 inner city routes. We're selling enterprise in unique Tier 2 metro markets, and with Kinetic, they're selling fiber in unique Tier 2 residential markets. Building fiber first or early with unique routes, unique markets, you have a right to win many years into the future. There's a lot of synergy to owning the backhaul, soup to nuts, for fiber-to-the-home business. I think economically, it proves itself in the build costs, and you control that customer experience. I've said this publicly, but some of our biggest customers on the wholesale side over the past few years have been fiber-to-the-home companies buying backhaul from us. Back to your earlier point, they have backhaul, but they've bought it from us and others. So, there is synergy there, but at the same time, there is also potentially a different strategic home for some of these assets, if you think about just the world purely from an M&A point of view. We're not unaware of that. One of the things I remind folks of is if you read the S4 and the background information and all the activity, virtually none of those options that we've pursued historically or that have been presented to us historically are off the table. In fact, one of the reasons for doing this transaction is bringing all these assets together, having it under a single roof, removing some of the historical unnatural complexity, and now giving us the ability to pursue some of those options or other options from a position of strength.

Given all your experience as a banker coming into this whole situation and watching this unfold, I think it's been about 10 years now, do you have some philosophical bright lines, something that you absolutely believe has to be done or something that absolutely cannot be done from a business structure standpoint? People might have an idea that they're wrong, like we've got to do this. I don't know. I would throw, like, Jay Brown and the Small Cell business, he might still be proven right. But it was questioned, right? But what do you believe?

I think the only red line I have and my Board has is that we want to do what's right for the shareholders. I'm a large…

You're so adorable.

You're killing me.

I'm trying to get you to loosen up a little bit.

I'm a large shareholder. I think if you include all my equity, I'm a top 10 shareholder in the company.

That's a good point.

And so over 10 years, you accumulate not only a lot of blood, sweat and tears, but you accumulate a lot of equity. And so there are no sacred cows under our portfolio. We want what's right. I think, we announced our deal, what, 3 months ago? And I can tell you that we've had a rocky period of time with the equity, a lot of volatility. But as a large equity holder, I feel better today about that deal, about the deal that I did when we announced it. Because the winds are blowing in our favor. You know, when you look at the fiber infrastructure business, there's a lot of buzz and around hyperscalers and the opportunity around hyperscalers. That's real. It's not all AI. That's demand coming from a customer set. It's not about AI. It's about demand coming from a large customer set that's new. It's incremental to the TAM. It's validating of fiber being a mission critical asset. And when you look at fiber-to-the-home, the convergence theme is also real. And I don't need to comment on the rumors today. I think that some of the large players, some of the large financial investors in and around this space have validated that model with their smart money. And I feel like as a Uniti shareholder, we're going to own, when this deal closes, a lot of super valuable assets. And I think it's going to be important for us to not only execute on the business, focus on that first, but execute on the business, put an integration plan in place so we can execute on the synergies, but also be very proactive around M&A. And that's what we intend to do.

So let me talk about let's talk about that AI situation, right? So Lumen's coming tomorrow. I'm skeptical. Ana's here. She's less skeptical.

I shouldn't have to look at both of you in the same way. It's intimidating.

And so, like, there is an AI opportunity. It is real. There will eventually, someday, be new data centers that have been built in new places that don't already have connectivity from 100 different players. And there will be 1 or 2 players that might be willing to go out and reach out to those players and secure these deals over the next many years. And then once these AI engines are built, there will be companies, healthcare companies, enterprise companies, that someday might want to eventually access those. They might even build their own data center engines to create their own artificial intelligence engines. But I've got some of your peers say 100% it's all what's happening. And then some of your peers say, no, it's not. You have to give the whole store away to get business from these hyperscale guys who can do business with anyone they choose. And they're going to choose the lowest possible bidder. And that's not who you want to be. So I want to interrogate that just a little bit, double click into the word AI comes up in every single presentation. Is it really a real part of this story? Or is it just could be a part of the story someday?

Well, I think the answer is somewhere in the middle of all that, right? And it's company specific. So I won't comment on others. I'll comment on Uniti. So at the beginning of this year, we had roughly 10 opportunities with hyperscalers in our funnel. And we now have approaching 100. And that's a big jump for us. So what qualifies as an opportunity? What qualifies as an opportunity is something that has been through costing, pricing, and sales engineering, plus some level of grant of authority within Uniti. So it's actually a structured.

So it's an RFP that you submitted a bid for?

I think, no, it doesn't have to be an RFP. In fact, most of what we're seeing from hyperscalers is not an RFP. It's more bespoke conversation. So I think that's one of the things that I've heard in the discourse that's not accurate, right? We're not out competing for the last dollar in a lot of these transactions. And I don't think that in the business that we've been awarded, it's been based upon price. I don't think that's accurate either. I think it's more about where you have network and do you have a proven ability to build on time and on budget? And so yesterday, for example, we announced, publicly announced a transaction that normally we wouldn't announce, but we wanted to start getting out for the market to understand better what these deals look like for us. So we announced a deal with a hyperscaler connecting, it's a new route. It's a new build connecting Mobile, Alabama, and Montgomery, Alabama. If you know our footprint, that's right in the heart of our footprint to super strategic markets that otherwise were not connected. We have a hyperscaler as the anchor customer paying well, paying more than the 5% to 10% initial anchor yield that we usually talk about. And we have terrific lease up potential on top of that. That is a very strategic deal. It's right down the fairway with the anchor lease up model we've always talked about. It's with a hyperscaler and yes, they're paying an NRC and yes, there's a construction element to it, but that doesn't make it a one-off deal. That doesn't make it a bad deal. That doesn't make it a purely financially driven deal. That makes it a strategic deal with a hyperscaler as the customer. And as I said, I don't know whether they're going to use that capacity for AI or they're going to use it for the rest of their business. Because I think the other thing that the market is fixated on, I think inappropriately is it's not AI driven. The hyperscalers businesses run on the internet and their businesses are tethered to eyeballs and clicks and the next app and it may or may not be AI. And if you listen to what they say publicly, which we do, they say, we're going to use this infrastructure for AI and if we don't, we're going to use it for something else. So they're not, and they're not, there's greater risks to over, under-investing than there is to over-investing, right, in their words. And when you compare the amount of capital that they're spending on an annual basis, $200 billion plus as a group, depending on how you define the group, that dwarfs what the wireless carriers are spending. And so wireless carriers historically have been some of the largest wholesale customers of our business and other fiber businesses. There's a 5x differential in the spend at the hyperscalers versus the wireless carriers and I don't think that spend is going to dissipate any time soon. Now how much of that materializes into digital infrastructure and fiber still remains to be seen. But net-net, my point is, Uniti's future is not tied to the hyperscalers. I mean, they represent 20% of our funnel and a substantially smaller percentage of our overall business. But if we're smart about it, which I plan to be, as best we can, we can use them as anchor customers on a go forward basis to help build strategic parts of our network.

And just to clarify, when you say Uniti, you mean the current Uniti?

The new, current plus new Uniti.

So when we talk about current Uniti, I'm going to run out of time.

That's intentional.

I know. Thanks for your answers. The 2Q MRR production from Uniti was, I think, tied with 4Q 2022 as the best quarter you've had. Guys like Digital Realty had their best ever quarter in first quarter of 2024. They said that, half of that was related to AI. That's them. But is what we just talked about a piece of what is driving the $1.1 million of incremental MRR that you got?

Yes. Frankly, our first quarter was probably the biggest quarter of new business we've had. But you didn't see it because some of the deals don't get reflected in bookings just because of the nature of the deal. In the second quarter, 40% of our bookings were coming from hyperscalers. Not AI. Hyperscalers.

Cloud is a different thing than AI, but we get it.

Yes. So, yes. On a go forward basis, we've also been cautious to say don't expect those types of quarters every quarter. These deals are lumpy. I do think, however, that once we get for the hyperscalers, once you get past this intelligence building out intelligence phase, the deals are going to be less lumpy and you're going to get into the inference phase where you're going to see more of an MRR impact to fiber businesses, including fiber to the home businesses, by the way. Because that's where having that 1 gig connection is going to give you the ability to access all of the learning's that are being put in place now. So, we've tried to caution. Don't expect these lumpy deals every quarter and the time will come where you'll start to see it in MRR.

So, I guess I've only got 30 seconds left. Can you give us the latest on the kind of regulatory process closing the merger? We've got Andy Littmann coming up next, our regulatory legislative guru. We can ask him what's going on. But your take on what's happening.

Well, Andy knows as well. I should wait to hear what he says. But we told them…

You didn't tell me you could talk about that.

We told the market second half of 2025 to close. I think we're increasingly of the view that's a conservative point of view. We're not ready to change that. But we think it's conservative. We've gotten 7 of the 18 PUC approvals and counting. We haven't heard any negative feedback. And so, we're feeling like we're on track.

That's great. Congratulations. Thanks, Kenny. Appreciate it.

Good to see you again. I will read that report. I just haven't had a chance to. Thank you.

All right. Thank you, everybody. Andy Littmann's next. We've got a 10-minute break.