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Uniti Group Inc. (NASDAQ:UNIT)Q4 2018 Earnings Conference CallMarch 20, 2019, 4:15 p.m. ET
Contents: Prepared Remarks Questions and Answers Call Participants Prepared Remarks:Operator
Welcome to Uniti Group's Fourth Quarter 2018 Conference Call. My name is Jamie and I will be your operator for today. A webcast of this call will be available on the Company's website www.uniti.com, beginning March 20, 2019 and will remain available for 14 days. At this time, all participants are in a listen-only mode. Participants on the call, will have the opportunity to ask questions following the Company's prepared remarks.
The Company would like to remind you that today's remarks include forward-looking statements and actual results can differ materially from those projected in these statements. The factors that could cause actual results to differ are discussed in the Company's filings with the SEC. The Company's remarks this afternoon will reference slides posted on its website and you are encouraged to refer to those materials during this call.
Discussions during the call will also include certain financial measures that are not prepared in accordance with the Generally Accepted Accounting Principles. Reconciliation of these non-GAAP financial measures to most directly comparable GAAP financial measures can be found on the Company's current report on Form 8-K, dated today.
I would now like to turn the call over to Uniti Group's Chief Executive Officer, Kenny Gunderman. Please go ahead, Mr. Gunderman.
Kenneth A. Gunderman -- President, Director and Chief Executive Officer
Thank you. Good afternoon everyone and thank you for joining. Before I review our operational performance for the quarter, I'd like to reflect on current industry trends and Company milestones we achieved in 2018. Just like last year, demand for fiber infrastructure continued to be one of the top telecom themes in 2018 and going into 2019. Preparation for a broader rollout of 5G wireless and fixed wireless services, our wireless carrier customers are looking to densify their networks with both additional macro towers, as well as small cell nodes.
As bandwidth consumption increases and new technologies continue to evolve and develop, the need for low latency dense fiber will continue to increase. This densification will require a tremendous amount of fiber. And we believe the both Uniti Fiber and Uniti Leasing are uniquely positioned to capture this demand with over 5 million strand miles available owned fiber.
At Uniti Fiber, we completed three dark fiber projects in 2018 and are currently in the process of completing the build out of several more dark fibers, small cell projects primarily in the Southeast by the end of this year. In fact, we deployed our 1,000 small cell during the fourth quarter. We currently have approximately 1,700 small cells on backlog and expect to deploy over -- over 1,350 in 2019. As we complete these projects, we will focus on leasing them up, not only with additional wireless opportunities but enterprise, E-Rate and government opportunities all of which have attractive economics and incremental yields.
We continue to see positive momentum in our tower business. In the US, we continue to expect to build between 200 and 300 towers on average annually over the next five years. With the backdrop of 5G densification, national wireless carriers continue to look for vendor diversity on new tower builds. Recently, AT&T announced that Uniti Towers is a strategic tower provider for them and we look forward to fostering and expanding this relationship with AT&T for years to come. AT&T also acknowledged Uniti as a bundled infrastructure provider, including small cells, fiber and towers. We believe this comprehensive product suite distinguishes Uniti in the marketplace, principally with the wireless carriers and Web-centric and National MSOs contemplating wireless strategies. At Uniti Leasing we announced four transactions in 2018, entering into sale leasebacks with TPx and CableSouth, acquiring fiber assets from CenturyLink, and entering into a dark fiber lease with the National MSO. We've been successful so far and leasing up these assets and expect similar opportunities to be abundant in 2019.
We also recently announced our first strategic OpCo-PropCo transaction with Macquarie Infrastructure Partners in acquiring the fiber assets of the Bluebird network. We believe this deal structure can be replicated with other operating partners and provides the framework for future similar -- similarly structured transactions. Together these announced transactions represented incremental $45 million of annual revenue with 90% plus EBITDA margins and little to no additional CapEx required. By offering a full suite of services across Uniti Fiber, Uniti Towers and Uniti Leasing, we have the potential to further unlock significant value for our Company.
We currently have consolidated revenue remaining under contract of nearly $10 billion and if you exclude revenue relating to the Windstream Lease, our total revenue under contract grew over 45% from the prior year. It's important to note that over 90% of our revenue remaining under contract relates to leasing, towers, dark fiber and small cells which have little to no churn associated with them and provide highly visible steady cash flows over the next several quarters.
Let me now provide an update on our operational results. Uniti Fiber sales bookings in the fourth quarter were approximately $0.5 million of MRR, consistent with the prior quarter. 40% of our sales bookings in the fourth quarter came from local enterprises, government and K-12 schools. 37% from the four national wireless carriers and 23% from wholesale. We continue to see strong, wireless momentum as the rollout of 5G services continues to ramp. RFP activity for both small cells and backhaul from wireless carriers remains healthy in our markets, and we continue to see increased demand from non-wireless customers as well. For example, in the fourth quarter, we were awarded a 20-year contract from a national wireless carrier to build dark fiber to over 160 backhaul sites located primarily in the Southeast, which represents approximately $1 million of annual recurring revenue with an initial yield of approximately 15%. We also signed the contract during the quarter for approximately 80 small cell nodes that are being deployed for enhanced coverage including for first responders in the Florida Panhandle. Combined both of these deals add over $23 million of total contractual revenue to our backlog.
Our E-Rate season is off to a good start, as we expect to retain most of our existing business and we've already won a handful of new deals as well. In fact, we were verbally awarded a 10-year contract with a large metropolitan school district in Florida that will add over 118,000 of MRR representing total contract value of $14 million. We are already seeing benefits from our ITS acquisition as we have won a handful of deals that are ITS and Uniti sales teams partnered on. We are actively pursuing several deals including some larger scale ones and we'll have a more comprehensive update on our E-Rate season during our next earnings call.
Uniti Fiber installed $0.6 million of MRR during the fourth quarter 2018 with 18% related to bandwidth upgrades and 30% relating to dark fiber, backhaul and small cell projects. Installs were negatively impacted in the quarter by recovery efforts related to Hurricane Michael. Excluding the impact of the Hurricane, installs would have been $0.9 million in the fourth quarter of '18, an increase of $0.2 million from the prior quarter, and consistent with last year's fourth quarter activity level. As we entered 2019, we continue to see solid improvement in dark fiber and small cell site performance as they work closely with our customers and municipalities to complete these builds. We still expect the vast majority of our existing dark fiber and small cell construction projects will be completed by the end of 2019.
Total churn for the quarter excluding intercompany churn related to the ITS transaction was $0.5 million resulting in a monthly churn rate of 0.8% in line with the prior year's fourth quarter. For full year 2018, our monthly churn was 1%. We continue to make steady progress in Uniti Fiber as we've worked through most of the headwinds we outlined in prior quarters. We will remain committed to our strategy of focusing on Tier 2 and Tier 3 markets with both attractive economics and competitive dynamics.
Turning to towers, we completed 78 new towers in the US during the quarter. We also added three towers in Mexico and our total tower count in the US and Latin America combined now stands at 928 towers. In the US, we expect to complete construction of approximately 200 towers in 2019. Lease up activity on our tower portfolio in the US continues to ramp. Excluding towers acquired from Windstream and Non, our current tenancy ratio in the US is at 1.1 times. We look to continue to engage our wireless customers after furthering our existing relationships as they continue to look to diversify their existing vendor relationships.
In Uniti Leasing, we continue to see strong interest and additional opportunities, including additional lease up, new sale leasebacks and OpCo-PropCo structures. We remain actively engaged and leasing additional routes with customers across our entire footprint including the largest content providers, MSOs and wireless carriers in the industry. In fact we signed an MLA with national wireless customer in the fourth quarter on a 20-year term to lease long-haul fiber representing a total contract value of over $5 million. Based on our conversations with customers, we're
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