Uniti bags 50,000 FTTP services in $140M Telstra Velocity deal

Uniti Group has acquired Telstra Velocity and South Brisbane Exchange assets in a landmark deal worth $140 million.

The deal will give the publicly-listed telecommunications services provider access to 50,000 Telstra fibre-to-the-premises (FTTP) services to its network.

Velocity is Telstra's optical fibre network that utilises FTTP technology for broadband, phone, payphone, subscription TV and free-to-air services, which totals around 55,000 services across 128 residential housing estates in all mainland states.

Meanwhile, the South Brisbane Exchange region, which was previously serviced by Telstra copper prior to the sale of the exchange, is also included. This brings the total of acquired active superfast broadband carriage services up to approximately 50,000.

The deal sees the provider increasing its active premises on its wholesale and infrastructure (W&I) FTTP network by 40 per cent, to over 170,000, according to a statement released by Uniti to the Australian Securities Exchange (ASX).

Michael Simmons, managing director and CEO of Uniti, said the acquisition was "another remarkable milestone for our young company".

“To have secured such a large FTTP network aligned to our core strategy which can be integrated quickly to grow our ‘core plus’ infrastructure earnings is a wonderful way to end what has been a completely transformative year for Uniti Group,” he said.

The $140 million purchase price consists of $85 million payable on completion of the deal, with $55 million deferred, $20 million payable over three years and $35 million on the completion of asset and services migration.

The total purchase price is also subject to the size of the customer base at the time of migration.

This is expected to be funded from its debt facilities of the Commonwealth Bank and Westpact for an additional $50 million, as well as $50 million in underwritten institutional placement and a share purchase plan, with the deferred consideration components funded from Uniti's operating free cashflow.

The deal is also expected to be accretive with annual incremental earnings before interest, tax, depreciation and amortisation (EBITDA) of at least $21 million, representing more than 20 per cent growth in Pro forma FY21 EBITDA, to $116 million.

This is also anticipated to make Uniti the primary wholesale provider in the estates it services, making Telstra a retail service provider (RSP) of Uniti's FTTP business and generating retail competition between its RSPs in the estates Velocity was previously available in.
 
Simmons claimed the decision for Telstra to become an RSP on its W&I network was "perhaps the most significant strategic aspect of this transaction" as he said it presents "the large universe of presently untapped greenfield property opportunities".

The acquisition of the Telstra Velocity assets has capped off a busy six months for the provider. In June, it began a bidding war to acquire wholesale network infrastructure operator OptiComm, which was then finalised in November. In that latter month, it also acquired Harbour ISP.

This followed on from a slew of acquisitions in the FY20 financial year, with the provider ending up with an EBITDA of $26.5 million after ending the first half of that financial year in the red to the tune of $900,000.

Outside the realm of acquisitions, the provider got the green light from the Australian Competition and Consumer Commission in October to split its operations in two -- consolidating its W&I business and its consumer and business enablement (CBE) unit.