Uniti Group, Inc. (UNIT) Presents at Raymond James Institutional Investors Broker Conference Call - (Transcript)

Uniti Group, Inc. (NASDAQ:UNIT) Raymond James Institutional Investors Conference March 3, 2021 2:10 PM ET

Company Participants

Mark Wallace - EVP, CFO & Treasurer

Bill DiTullio - VP, Finance & IR

Michael Friloux - SVP & CTO

Conference Call Participants

Frank Louthan - Raymond James & Associates

Frank Louthan

All right. Good afternoon. I want to thank everybody for being here. My name is Frank Louthan. I'm the senior telecom analyst here at Raymond James covering telecom, data centers, cable companies. Very pleased to have Uniti back with us here at the March conference. And sorry, we don't have everybody live.

But as an upside, usually, the Wednesday afternoon slots are not the most desired. But in a virtual world, it doesn't really matter. So I hope everybody is charging here to the end of the conference. I really appreciate everybody participating.

I've got a few questions. I'm a sell side analyst. I've always got a ton of questions. But I would love for -- to get some interaction from folks there in the audience. [Operator Instructions].

Question-and-Answer Session

Q - Frank Louthan

So today, we've got Mark Wallace, Bill DiTullio and Mike Friloux here from the company. So maybe, Mark or whoever wants to, maybe spend a couple of minutes talking about -- describe Uniti, who you are, where you fit into the telecom space, and then we'll jump into some questions.

Mark Wallace

Yes. Bill, do you want to kick this off?

Bill DiTullio

Yes, sure. So Uniti Group, so we were originally spun off from Windstream back in 2015. And so at that time, Windstream was our only customer and we leased the assets that we had back to Windstream. Since then, we've done several acquisitions and have grown our network to now where we have over 123,000 route miles of valuable fiber, 6.9 million strand miles of fiber, and we have a well-diversified mix of customers.

So Windstream is still about 65% of our revenue today, about 35% comes from other customers as well. And so we have 2 main operating units, segments, Uniti Fiber and Uniti Leasing. So Uniti Fiber is our -- what we call our -- we refer to as our actively managed, actively owned network.

So there, we are selling services to the wireless carriers. So be it backhaul, dark fiber to the tower, small cells, we're building -- we build those networks out with an anchor tenant secured, one of the major wireless carriers, and most of that focus has been in the Southeast. We take a more regional approach to that. So if you look at our map of our network, the Southeast is where we're focused there.

We also leverage those networks as anchor networks to lease up additional services and fiber to nonwireless customers such as local enterprises, wholesale opportunities, schools, we [indiscernible] to the federally funded E-Rate program, health care and government. Those are the types of entities that we're focused on there. So again, active management, active ownership of that fiber by the regional approach.

Where Uniti Leasing -- it's more passively managed. So we acquire fiber on a national basis, so again, focused nationally. And if you look at the map, you'll see we have routes that span over 40 states. And there, we acquire the fiber, and then we're leasing that fiber on a long-term basis, in most cases, to carriers both domestic and international, content providers, cable providers, all long-term leases, highly accretive.

And really, the opportunities that we're focused on at both Uniti Fiber and Uniti Leasing are high-margin recurring revenue. So everything that we're going after has very high-margin profile, recurring revenue with pretty lengthy terms.

Frank Louthan

All right. Great. So why don't you talk to us a little bit about the integration of the Windstream portfolio assets that you got as part of the settlement agreement? And what are your primary goals for those assets this year, along with some of your other strategic priorities for the business?

Michael Friloux

Yes, sure. This is Mike Friloux. I'll start off on Windstream. So as you guys know, we've acquired accident rights to roughly 31,000 additional route miles of fiber. So we expanded our, we'll call, our sellable inventory on the leasing side by upwards of 90%. So it's been a major shift from the standpoint of available portfolio, which is really critical in, we'll call, our national and strategic accounts efforts.

So as you guys know, in the fiber business, it's all about solving customer problems, right? So having this expanded access in this inventory is really critical. And we've seen a comment here in a minute, some really good initial trends on how that's changing our business from a leasing perspective. In the actual, we'll call, the frontline integration efforts, a lot of activity has been going on for the last several months, going very well.

We've had a transition, a lot of asset, GIS-type information over. We've acquired a number of customer contracts as part of the settlement. So those customers have been onboarded and transitioning all the documentation and the key points of contact to our national accounts team. That's all going very well. So overall, we're seeing some really good pickup on the leasing side.

I think the one point of reference, the backlog, which is what we track on our sales funnel for all of the leasing activity, has doubled in roughly the last 3 months. So I think it's at around $500 million at the time of emergence. And we're now with a backlog with about $1 billion in total contract value.

And the reason for that is really twofold, like I mentioned already. The asset portfolio itself increased by 90%. But as we build more assets into the leasing portfolio, we're able to solve more problems so we generate a lot more interest. So we get a lot of inbound interest on the assets. And it's all about problem solving, really.

These are long sales cycle type opportunities. People are making long term, often 20-plus-year commitments on these investments. So yes, I guess, what I'd say overall, very, very happy with how we're doing on the Windstream side of it with the integration of the new assets.

So Bill, I don't know if you want to comment on the business priorities?

Bill DiTullio

Yes. So I'll take it through. I'll cover the strategy. I kind of highlighted some points earlier. And just to clarify, what Mike was talking about, that $1 billion, that represents our sales pipeline at Uniti Leasing that we're working through, so those are opportunities that we're actively working through that are in our sales pipeline today. So that's what we've doubled over the last few months since we got the Windstream fiber.

But just kind of go back to the points I was talking before about our 2 operating segments. So starting with Uniti Fiber. Our main strategy there, again, drive high recurring -- high-margin recurring revenue. And so if you go back about 2 years ago and when we made the acquisitions of PEG Bandwidth, Tower Cloud and Southern Light back in 2016 and 2017, each one of those companies had these large, dark fiber, small cell projects that they were undertaking.

And so through the combination of acquiring those companies and then taking on additional wireless builds as well, at the height of it, we had about 15 or 16 or so of these projects undergoing, and our capital intensity at Uniti Fiber was above 50% as a percentage of its revenues. And so again, these were all wireless builds, mostly in support of dark fiber to the tower and small cells and with a major wireless customer secured as the income tenant.

We have now completed, all those legacy projects I just mentioned, we've completed the last of those, completed the bulk of them in 2019 and 2020 and the remaining few, we just completed a couple of months ago. And so when we started building out those and we started looking at those projects, we anticipated or expected that the initial cash yield of those opportunities would be in the range of 5% to 7%. And now that we've completed those deals, we've seen that, that's played out, and we actually achieved initial yields of 7%, so very attractive yields for just the anchor customer.

And what we've been saying and have been saying is that through additional lease-up, we believe we can take that 5% to 7% initial yield and grow that into the low double digits into the teens. And so through the lease-up that we sold to date over the last 4 years, in fact, we have taken that 7% up to 14%, so we've doubled that yield within a short 4-year time frame through additional lease-up.

If you look at what the lease-up's been driven by, majority of it has been nonwireless, like I spoke about before, enterprise, schools, health care, government types of customers, and we expect that trend to continue. If you look at our mix of bookings left over the last several quarters, 70% plus of that bookings activity levels have been in nonwireless. And so again, all high-margin, highly accretive opportunities.

If you look at just 2020 alone, we actually -- of the lease-up that we sold, that represented about $14 million of annualized revenues with incremental yields of 50% plus. So again, as we continue to execute on that strategy and drive up, that 14% cumulative yield should continue to increase over time.

And so really, that's our focus and strategy in Uniti Fiber. And then like as I said before, when we were under -- when we were building out those large wireless builds, capital intensity was above 50%. And now that we've wrapped them up, you saw us end 2020 at around 40% capital intensity. And we expect going forward, that's going to trend towards the mid-30% range.

And that's a factor of 2 things. One, it's because we wrapped up these large builds, right? So we will continue to pursue greenfield builds. We're just most likely not going to do 15 at a time. We'll probably do a handful at a time, set the cadence better, set up the CapEx spend, make sure that we're in that mid-30% range. But the other factor is that the lease-up requires substantially less CapEx than the anchor builds themselves because you are leveraging that existing network. So those 2 things combined, that's where we expect our capital intensity again to be in that mid-30% range.

And then pivoting over to Uniti Leasing, again, what I said before, very similar to Uniti Fiber, focused on leasing up the existing assets there. So 2 -- a couple of years ago, we acquired some pretty valuable fiber from CenturyLink that we've been able to lease up extremely well. And then most recently, as Mike mentioned, we acquired about 2.2 million strand miles of fiber from Windstream as part of our settlement agreement with them that we have been able to already transact on within the short time period we had it. So for instance, a couple of quarters ago, we announced the Everstream transaction, which we expect to close later this year. And that utilized a substantial part of the Windstream fiber that we got.

So there, again, it's really looking at the assets that we have. We have 3 million strand miles of fiber that we can lease to third parties. And we will increase that by 90% after we got the Windstream fiber. So we have -- we believe we have a great portfolio of assets that we can monetize.

And the really nice thing about leasing is -- again, we talked about some CapEx associated with Uniti Fiber. But absent the capital you spend to acquire the assets at Uniti Leasing, when you go to lease up those strands, they really do require minimal to no incremental CapEx. And you're talking about margins that are at generally 90% plus, approaching 100% in some cases. So these are very highly accretive activity. So the more that we can do that and we can generate off that $1 billion sale pipeline, total contract value, as we convert some of that -- and again, the sales cycle is -- can take well, they can be lengthy. It can be anywhere from 6 to 12 months. So it does take some time to go through that.

But nonetheless, these are really highly accretive opportunities that can not only improve our margin profile, but also be significant sources of cash flow as well because a lot of these -- excuse me, a lot of the lease-up at Uniti Leasing is structured in an ROU format. And for those of you who are not aware of what that is, these are usually 10-, 20-year type contracts, 20 years usually. And the customer usually pays that 20-year lease upfront and then usually paying an annual fee to help maintain and cover other expenses of the fiber network. So with that upfront ROU fees, we get that upfront kind of the prepayment of the lease. We can then redeploy that capital into our business where we see fit. So we really feel good about the opportunity there.

Michael Friloux

Yes. And I'll add some to Bill's commentary there. So on the Uniti Fiber front, kind of the macro view, if you think of it this way, 2016 to 2019, we went through, what I'll call, a really aggressive expansion phase, acquisitions through our anchor builds. In the background, there was a lot of integration work that was being completed to get the companies onto common systems. And so a lot of -- kind of almost like a land grab in the strategic Tier 2, Tier 3 markets where we think we have a competitive advantage.

So 2020 kind of marked the transition year where we're moving from an expansion fee in the Uniti Fiber footprint specifically into a harvest strategy. And so we have a lot of headroom potential in our local markets with -- by virtue of these anchor builds to go out and tackle new business that's on net, near net. So very capital-efficient type of expansion strategy.

We're investing in business intelligence on the sales front. We'll talk about the sales team here a little bit, but getting a lot smarter about how we target our capital in market, multi-tenant locations, looking for addressable market expansion where we have corridors of high enterprise-type consumption. And of course, we have continued lease-up from the wireless carriers as they do with their networks. So it's really -- the focus in 2021 is really all about on net, near net and very similar with the leasing portfolio. So I think we're in a really good position to show some significant progress this year.

Frank Louthan

So Mark, maybe how does all this start to ramp up as we're looking -- looking forward, you had a lot of growth, a lot of new customers coming on. How should we think that's going to -- how should we see that translate as these projects, the newer ones slow down and these others start to get fully built out and coming in on the revenue side?

Mark Wallace

Well, I think Bill covered a lot of it. What you'll see in Uniti Fiber, in particular, is we're starting to see a lot of revenue expansion because essentially, the -- when we sell enterprise services for a part of lease-up and some of the other industries that we serve, you'll see those come on at very high incremental contribution margins. So you'll see the EBITDA margin ramp up. Probably about 400 basis points this year is what we're anticipating year-over-year.

And then at Uniti Leasing, you'll start to see what Bill described. Some of the activity at Uniti Leasing will be more back-end loaded just because of the sales cycle that I think Mike and Bill both referenced. But we will start to see more and more of the fiber that we acquired from Windstream start to be leased up. You'll start to see those. Your bookings start to occur. This is more in the back half of the year and start to see revenue to come in, in the last half of the year and then also in the -- also into 2022.

So look, I mean, I think we're set up really well here at both companies. As Mike alluded to, we've made a lot of investments that are going to be fiber over the last four years. We were the acquiring company. We now have all those integrated and we're now really in a position to really realize a lot of the economics that you get from pure infrastructure at that business unit.

And then look, the Windstream settlement with the additional fiber strands has really just totally changed the [indiscernible] transactions were kind of singles and doubles. And then there's larger sale-leaseback transactions. There are larger opco, propco transactions, five were done with [indiscernible] and Macquarie and then also the recently announced Everstream transactions, which are good long-term recurring revenue associated with them, but they also bring [indiscernible] helps us to manage our balance sheet.

So I think we're set up really well. I think as you know, the demand trends in our business are great. It's a long-term investment cycle from the carriers. There's growing bandwidth usage constantly, so we can see the quest for new build, bandwidth upgrades. And so I think, fortunately, COVID has had very minimal impact on us. And frankly, in some cases, we've seen an increase in demand for some of the critical industries that we serve. So I think we're set up really well going into this year.

Frank Louthan

All right. Great. So going forward, Windstream is going to be not as large of a percentage of revenue as in the past. Maybe you update us on where that stands. And then what are -- who are some of the other largest customers by vertical? And what are they telling you with respect to their fiber needs for 2021 and beyond? What kind of solutions are they looking to solve?

Bill DiTullio

Yes. So like I think I said in my opening remarks, Windstream is about 65% of revenue today. And the bulk of the remaining 35% is at our Uniti Fiber segment, about 30%, and then the remaining 5% is at Leasing, we don't call non-Windstream revenue. And so we continue to be focused on diversifying away. And I think between the lease-up efforts that we're doing now, that's all going to help add additional revenue on -- that should help further diversify away.

So we continue to see increased demand from both wireless and nonwireless customers. Some of the trends like the things we've talked about before at Uniti Fiber is the 5G. So 5G rollout, been rolling out mostly in Tier 1 markets. We primarily operate in Tier 2, Tier 3 markets, more suburban and rural, although they tend to be less competitive as well, right? So in most cases, we're competing against maybe a local regional fiber provider in the ILEC.

And so when you look at our network, especially in the Southeast, we believe we have a very high -- dense owned fiber network that's best-in-class. And when -- in any of these markets that we enter, our strategy is to really own that market. So we take at least our fair market share and compete. We think we can compete on our service level and offer a competitive price, if not better.

So really, that's what we're focused on there. But the underlying demand trends that we're seeing is definitely, 5G is coming out. We're seeing increased RFP activity with all the wireless carriers as 5G continues to roll out more in earnest there. And even just beyond 5G, I mean, there's just this continued effort to continue to densify the networks and make them stronger just to meet current broadband, mobile broadband needs with 4G. And so really healthy demand across the wireless landscape.

And then on the nonwireless side, really just starting to ramp up. We're still in the early innings there and ramping up the lease-up opportunity there with enterprise, health care, government, schools. So we have a team of enterprise sales people that deployed locally into these markets. And really, they're just going door to door and introducing who we are and really jumping up business there.

And so I think when we talked about having seen the effects of COVID, I think one thing that the pandemic has done is accelerated the virtualization of our society. So here we are at this conference using video platform. You have schools that are using -- that are learning remotely and using technologies like just to connect classrooms. The health care, government, all those customers that we're selling to, we're seeing increased need to provide that. And to make all this work seamlessly, you need fiber, right? So fiber is a connective tissue that brings it all together for both existing and new technologies going forward.

And one statistic, I think we pointed out in earnings call, which is I found to be amazing was that basically, over the last 4 years, we've seen a tenfold increase in the level of traffic on our IP backbone. And I think that's made to come from like 16 gigs per second to up to 160 gigs of peak traffic. And I think that really speaks to the explosion in the need to connect everybody and we're going to. Those trends are expecting to continue.

And then no matter the technology, you look at it, be it 5G, be it fixed wireless, fiber to the home. You've seen a big increase in that with the RDOF funding. It all requires fiber to make it work. And so I think that really plays well into what we're doing in our network and our best-in-class network in the Southeast.

Frank Louthan

Okay, great. Maybe give us a little bit of an update on the growth capital improvement plan, GCI with Windstream. What stage are you in with that right now? And overall, what kind of incremental yield opportunities do you think you can realize from -- I guess, you have -- some can sell a little bit more off of that network than your prior match release agreement. Talk to us a little bit about that.

Michael Friloux

Yes, sure. So I'll address the GCI program, and I'll let Bill kind of fill in on the economic side of that question. But in 2020, we ended up with net investments of about $85 million due to the Windstream GCI program. Obviously, a big part of their focus is building fiber to the premise.

They're really moving from the legacy copper infrastructure to a more advanced fiber plant infrastructure. That equated to about 2,600 route miles of new fiber deployed in 2020. As we look into 2021, the current forecast that we have is right around $200 million on the GCI program. Again, probably 90% of that capital is targeted to fiber to the premise where they're, again, transitioning from copper to fiber.

So we have -- we meet with them. We go through their annual plan. We look at the markets they're expanding into. We'd look at their selection criteria. And as you can imagine, making the early -- the front-loaded decision on where to spend capital is really critical. A lot of that's driven by household density. You've got to have the right kind of density metrics in order to get the return on these type of investments.

So overall, very pleased with the way the program is going. We've got some headroom to grow additional GCI if we uncover those opportunities in 2021. But the interaction, the teamwork that we're able to work out with Windstream is going very good. So very, very pleased with the GCI program. And we think it's critical to their business, and what's good for them is also good for us. So happy with it. So Bill, I don't know if you want to comment on the economic side of that.

Bill DiTullio

Yes. So for those of you who have made that before, the way the GCI program work is Windstream spends the capital first upfront, right? So they make the investment, they decide where they're going to invest that capital. And then Uniti, we will review each one of those investments to make sure it meets our criteria. So as Mike mentioned, is it for fiber, fiber-related assets, does it meet certain return thresholds.

So if it meets all the criteria under the GCI program, we then basically acquire that fiber from Windstream, reimburse them for the CapEx that we spent. And then on the one -- and then at that time it becomes Uniti's asset, we own that asset. And then the 1-year anniversary of us making that investment reimbursed in Windstream, it gets added to the master leases, the existing master leases at an 8% initial yield. That's subject to a 0.5% annual escalator.

And so under the program, what we've committed to is funding up to $1.75 billion over the 10 years at the time remaining on the initial term of the master leases. And so for this year, in 2020, we expect to invest $200 million in that program. So that fiber that we reimburse, that gets exclusively leased to Windstream, Frank. So we don't have the ability to lease that to other parties.

But as part of that program, there is a part of the -- Windstream is making an investment and from Uniti's standpoint, we think we could use some of that fiber. We have the right to joint build certain parts of the segments that they're doing. And if we choose to joint build that with them, we would then split the cost of that joint build 50-50.

And then any excess strands beyond what Windstream would retain would be -- Uniti would have the ability to lease that to other parties. So there is a way for us through that, that joint build to potentially lease-up additional strands. But if we don't do that, it is exclusively leased to Windstream over the remaining initial term on the leases.

Frank Louthan

All right. Great. So with all of this, requires a sales team, where are you -- do you think you are on the sales force side, you have the right size? Any changes you need to make or do you think it needs to grow with this opportunity here over the next 12 months?

Michael Friloux

Yes, that's a great question. So we'll kind of look at this from a couple different -- maybe on a segment-by-segment basis. So on the leasing front, we recently integrated our Uniti -- big portions of our Uniti Fiber sales organization with our Uniti Leasing sales organization. So we now have a single focus on what we'll call national and strategic accounts. So these are all the national carriers, large regional carriers, cable cos, hyperscalers. So anybody that is really actively involved in building out, we'll call it, national or regional communication infrastructure.

So that team, I think, is pretty well staffed. We've added some support staff to it from a sales support standpoint, business operation standpoint. We've added a few sales support, service delivery type resources. So that team is led by Greg Ortyl, long-term industry executive. And I think we're positioned really well in terms of what we need in leasing from a sales perspective today.

We will proactively seek to grow that organization organically based on success of closing our funnel. When we get into some of these national carriers or some of these bigger accounts, they can often get pretty complicated, right? So the big spread operations, they may have a lot of initiatives going on simultaneously in various parts of the country.

So we're going to leave ourselves the flexibility to go deeper into some of these accounts as we need. But we also like the idea. And the main reason we initiated that change was to be a single -- have a single focus point of contact for each of these key accounts. So that helps us manage these customers and their needs a lot more efficiently. It helps us make better decisions on the sales funnel and where we feel like we want to invest capital. So I'd say, from a leasing standpoint, really well positioned and we'll continue to grow that organically as the need arises, but plenty of good opportunities to handle right now.

Bill mentioned E-Rate and government. We -- I think we're rightsizing those arenas in the Uniti Fiber organization. So not a lot of changes in terms of sales growth there from a headcount perspective. So really in a good position. Our big opportunity, I think, is going to continue to look at expanding our enterprise sales efforts. And they use the term sales efforts because part of that obviously is sales, quota-bearing reps in market.

But there's a lot of business intelligence that we're trying to implement in 2021. This gets into the, we'll call the conceptually how we support the expansion of addressable market, and we do this on a market-by-market basis. So every one of these markets where we have these anchor builds, we're looking at how do we strategically build the addressable market in each of those markets, right? Because when we do initially an anchor build, we don't blanket the entire metro market with fiber right, down every street, down every corridor. Those are design solutions for typically big carriers or school systems.

And so what that does is it leaves us with a lot of headroom to be strategic about how do we maximize the addressable market in each of those areas. So a couple of things we're trying to do through our business intelligence efforts are targeting multi-tenant type locations, driving down some of the threshold requirements to prove investment in those because our experience shows that every time we get into a multi-tenant location, our ability to close additional business is very high. So our probabilities on return are increased tremendously.

So we're trying to be smart about -- hey, how can we go tackle these multi-tenant locations more aggressively. As we do that, every time we add one, we're adding additional addressable market. So the best kind of analogy to think is we had a route mile of fiber in a metro market, we may be doing that to get a multi-tenant location on that. But in the process of doing that, we're also typically going by another half dozen to a dozen other enterprise-type customers that we can sell to.

So there's kind of this reinforcing effect as we grow the addressable market in each of these metro areas. We're picking up more addressable market. And so these are some of the things we're doing strategically in 2021 to drive more opportunity and to really drive.

And so I think we're -- we plan on adding some additional headcount in the enterprise sales initiative. I think we have a lot of headroom. Some of that will be determined on how successful some of our decisions are in the early stages. But 2020 showed that we definitely have plenty of opportunity in the enterprise space. And now we're trying to figure out how do we get smarter about it, how do we perfect that.

As a side note, not to leave operations off the table, one of the -- is -- I think most people will appreciate. We also have a challenge in scaling the operational side. So as we grow the sales organization, we've also got to keep pace with the operations side of the business so that we can follow through on delivery and customer service.

So another big initiative that I don't think we've talked about very much in the unique fiber front is our NOA strategy where we basically pair it up by region, we split it into 5 operating regions. We split up the sales leadership with a corresponding operational leadership so that we can actually scale the production of our networks much more efficiently and much quicker time to market.

And so we've seen some really drastic improvements in 2020 utilizing that strategy and so excited to see what we can do in 2021. So we're going to -- as long as we can drive high-margin incremental business on net, near net and we're being successful, we'll continue to apply more resources on that front as needed.

Frank Louthan

All right. Great. Well, folks, we're -- I got a few more questions. Mark, maybe a quick question for you. One of the biggest conversations, one of the hottest topics we had with investors last year was the dividend, what was going to happen with that. Very pleased to see it remain where it is. But you discussed it on the call, Monday night, maybe talk to us a little bit about your -- how the Board feels about the dividend and the likelihood of it staying at least at current levels, if not potentially seeing some growth down the road.

Mark Wallace

Yes. Thanks, Frank. Look, while I have every expectation that I expect it will at least stay at the current levels, we've already given guidance as to what our payout ratio -- I'm sorry, what our payout of tax income will be this year, which is $144 million for the year. And that's -- that generates a yield of about 5% based on recent [indiscernible] of our stock. But like said on the call, and I'll go ahead and repeat it here, is that we still have a bulk payoff ratio relative to AFFO. We have about 3% a little bit after that. So we certainly have the flexibility to increase the dividend should the Board have decided to do that going forward.

I think when you think about what decision they'll make, and I'll leave that to them to do that in the future, but it's obviously a balance between using capital allocation for dividends, for [indiscernible] capital, using cash flow for reducing leverage or -- and reducing -- and using cash flow for the organic growth that Mike and Bill have talked about, as well as we expect to be -- continue to be active on the M&A front as well.

And so we've always been very active on M&A. I'm sure that there will be opportunities for us to continue to do that in 2021. And so that's another -- that's the other place where I would expect to deploy capital. So it's a -- so we'll see, but we certainly have a flexibility to make dividend changes going forward if the Board decides that's the right decision to make.

Frank Louthan

All right. So you mentioned M&A. What size deals are you comfortable with? Where are you as far as your ability to integrate some new deals? And are there some legitimate targets that are out there?

Mark Wallace

Yes, there definitely are legitimate targets. Our M&A pipeline has always been [indiscernible] proprietary and it's pretty diversified. And when I say that, I mean both -- really in terms of transaction structure. So nowadays, we don't just think about -- I don't have to think about M&A in terms of [indiscernible] acquisitions. We certainly have done a lot of those. We'll continue to look at those.

But we also, particularly at Uniti Leasing, have entered into sale leaseback transactions. On occasion, we've done opco, propco transactions a little bit, expect to see more of those in our future. So we have a lot [indiscernible]. So anyway, we have a lot of flexibility there. As I've said, we continue to have a very robust M&A pipeline. So I'm sure we'll have opportunities to execute on those going forward.

Frank Louthan

All right. Great. Well, maybe talk to me a little bit about one -- sort of the last thing to kind of wrap up here. What are some of the elements of the story that you think are misunderstood by the investment community at large you could kind of clarify for folks. I mean I think it's often a name that we -- clearly, we like it a lot. I think it's one of my best ideas right now, but there's a lot of misunderstanding there. What are some things that -- some of the common misunderstandings of the company of things that we can maybe clear up with investors that are new to the name?

Mark Wallace

Well, I'll start and Bill and Mike can add in. I'd say that the Uniti Leasing division is probably most misunderstood. To Bill's point earlier, when we were first spun off, Uniti Leasing was nothing more than the Windstream lease. And now the Windstream's come out of bankruptcy. They're a much more deleveraged company than they were previously. The leases are much stronger. And so our largest tenant is much healthier than it was previously.

But at the same time, we have much more additional fiber that we acquired as part of the settlement agreement that Mike talked about and Bill talked about. And there's just a tremendous amount of potential for lease-up with standard ROU transactions, the opco, propco transactions. And so we've gotten -- we have a very large sales pipeline currently that we've talked about. And there's just a lot of opportunity there over the next several years.

So I think the profile change at either leasing was something that has been at least recognized by investors. But I will say this, having been to a lot of conferences lately, a lot of people are starting to dig in on that division and with how the profile has changed and what the opportunity set there is. And we're starting to get a lot of questions about the Uniti Leasing that we didn't previously get.

Frank Louthan

All right. Great. Well, so talk to me a little bit about one other set of opportunities there. One of the things I think that's going to continue to be needed in some -- further out in more rural areas were edge data centers and small facilities like that. What does that opportunity look like for you guys going forward? Would you build any of those yourselves? Or is this something more of an opportunity to help support those to add some incremental growth?

Michael Friloux

Yes. So I got to comment on that for a bit here. So I would say that edge data centers is a pretty broad term, right, and you can interpret that from a lot of different angles. Where we're seeing most of this activity is in working with our wireless carrier customers. So they have the needs, obviously, in their space as they densify their footprint across the country.

How do they optimize their operational cost? And one of the ways they're doing that is with small cells. They're using the CPRI protocol. They're trying to optimize connectivity cost and expense and equipment cost. And so that's really driving a need for them to have multiple locations where they can actually put operating equipment that you would typically see like in a data center.

So we're actively engaged on this front. I mean there's all shapes and sizes of opportunity that are out there. And so we have to be careful to look at it from both a short-term and long-term perspective. Because if you look at it strictly on the short-term view, one of the things that we're trying to solve for is getting enough scale to launch these deals like we would an anchor market, right?

So in an anchor fiber build, we're looking for a certain type of return on that initial investment with the ability to lease it up. It's a very similar analogy to the edge data center spaces. We've got to size those data centers appropriately. We've got to get a good enough anchor opportunity to justify the investment. And then we've got to have confidence that we can follow through and get some additional lease up.

And so it really literally is all shapes and sizes at this point. We had a lot of discussions going on. And -- but there's definitely clearly a need for this. And I think we're going to play some part of that going forward.

The long-term nature of it, too, I want to comment on that as well and specifically, the strategic component of this as it relates to us working with the carrier customers. So as we think about positioning ourselves for future business with the wireless carriers, having a piece of the edge data center requirement that they're trying to satisfy actually gives us some strategic advantage in capturing more of their densification efforts.

So as we go into and we look at these opportunities, we've got to be careful not to just focus on what's my 1, 2, 3 year return. We've also got to look at it through the lens of what's the strategic sales benefit to having that solution set embedded with that customer base. So lots and lots of discussion going on in this topic nationally, and we're right in the middle of it and I think really trying to come up with some creative solutions too to kind of solve for it. So nothing definitive yet. But definitely, I think we're going to be playing in this space.

Frank Louthan

All right. Great. Well, with that, we're out of time. I really appreciate everybody being here. Thank you to Uniti for being part of the conference again this year. I hope everybody is having a great conference. We wrap up today with good meetings. Let me know if anyone wants to follow up with anything. With that, we'll say goodbye to everybody and get back to their meetings.

Mark Wallace

All right. Thank you, Frank.

Bill DiTullio

Thanks, Frank.

Michael Friloux

Thanks, Frank.