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Why the Uniti (ASX:UWL) share price is on watch today

The Uniti Group share price is on watch today following the company’s asset acquisition announcement. Here’s what you need to know.
The post Why the Uniti (ASX:UWL) share price is on watch today appeared first on The Motley Fool Australia. –

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The Uniti Group Ltd (ASX: UWL) share price remains in a temporary trading halt this morning. This follows the company’s announcement it has acquired select fibre-to-the-premises (FTTP) assets owned by Telstra Corporation Ltd (ASX: TLS). The Uniti share price was trading at $1.48 at market close yesterday.

What’s the deal?

In an ASX announcement this morning, Uniti revealed it has entered into a binding agreement to acquire Telstra’s FTTP assets, which provide high speed broadband to the Telstra Velocity estates and South Brisbane Exchange regions (Velocity).

The company said Telstra would become a retail service provider (RSP) of its FTTP business. Following on Uniti’s recent acquisition of OptiComm Ltd, this segment of the company has been rebranded as OptiComm.

The acquisition represents Australia’s second largest private FTTP network, with 65,000 connected premises of which 50,000 are active.

Uniti is paying $140 million for the assets, with $85 million payable upon completion. The acquisition will be funded via a combination of debt, underwritten equity placement and a share purchase plan.

The company forecasts the new assets will contribute $21 million in annual earnings before interest, tax, depreciation and amortisation (EBITDA), starting early January 2021.

What Uniti’s CEO had to say

Commenting on the Velocity acquisition, Uniti CEO Michael Simmons said:

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.

The agreement struck with Telstra for it to become an RSP of our W&I business is perhaps the most significant strategic aspect of this transaction, given the large universe of presently untapped greenfield property opportunities it will enable us to target with Australia’s largest RSP as part of our FTTP offering and associated range of value added services, such as access control, CCTV and perimeter WIFI services.

Uniti share price and company snapshot

Uniti Group provides internet and telecommunication products and services. Formerly Uniti Wireless Limited, the company also focuses on the acquisition and construction of communications infrastructure such as fibre, wireless towers and ground leases. Uniti makes up part of the All Ordinaries Index (ASX: XAO).

After crashing 53% during the February and March COVID-19 market panic, the Uniti share price came charging back, up 90% from its 19 March lows.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Uniti (ASX:UWL) share price is on watch today appeared first on The Motley Fool Australia.

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