The REIT will own Windstream’s existing fibre and copper network, along with other fixed real estate assets. The tax-free separation is said to enable Windstream to lower debt by approximately $3.2 billion, while increasing free cash flow to invest in areas such as broadband and IP.
The company has said the move will enable it to pursue plans to extend availability of its 10Mbps internet service to more than 80% of its customers in the US by 2018. It also plans to double availability of its 24Mbps internet service to more than 30% of its customers by 2018.
"This transaction will make Windstream a more nimble competitor in today's increasingly dynamic communications marketplace and accelerate our deployment of advanced communications services," said Jeff Gardner, president and CEO of Windstream. "Additionally, the REIT will have geographically diverse, high-quality assets and sustainable cash flows with the ability to grow and diversify over time."
While converting assets into a REIT has been common practice among mobile tower companies, Windstream’s move to convert infrastructure into a REIT marks something of an industry first. If successful, it could pave the way for other operators to explore similar spin-offs of network infrastructure. According to Bloomberg, the company’s shares soared following the move, while telecoms stock in general also climbed.
