TMT Credit Research: UNIT Credit: Built for Fiber, Priced for Execution – UNIT Risk/Reward Looks Balanced

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TMT Credit Research: UNIT Credit: Built for Fiber, Priced for Execution – UNIT Risk/Reward Looks Balanced

Idea

May 14, 2026 04:49 AM GMT

Morgan Stanley & Co. LLCMTMT Credit Research | North America David M Hamburger

Credit Analyst

UNIT Credit: Built for Fiber, David.Hamburger@morganstanley.comJuliana Gonzalez +1 212 761-1580

Juliana.Gonzalez.Montalvo@morganstanley.com +1 212 761-0918

Priced for Execution – UNIT

Risk/Reward Looks Balanced

UNIT’s fiber strategy is gaining credibility, but current trading

levels assume successful execution through peak leverage in

2027/28. As a result, further upside depends on evidence that

fiber growth can translate into recurring EBITDA, manageable

leverage, and FCF improvement.

UNIT’s fiber strategy is gaining credibility, but current trading levels increasingly

assume successful execution through peak leverage in 2027/2028. 1Q26 further

supported the long-term fiber thesis, with stronger Kinetic fiber KPIs, continued

hyperscaler and AI-related demand, and expanded ABS funding capacity. However,

the quarter did not eliminate the core credit issue: UNIT remains a highly levered,

capital-intensive transition story with negative free cash flow during the peak build

years and increasing reliance on ABS financing.

At current levels, we think the market is already giving UNIT credit for the better

parts of the story: improving Kinetic fiber KPIs, hyperscaler demand, expanding ABS

capacity, non-core monetization optionality, and a lower cost of capital. With UNIT’s

yield at ~6.5% today versus approximately 12.5% in February 2023, we think the

low-hanging spread compression has largely been realized. The next leg tighter

requires more than good fiber KPIs; it requires evidence that fiber revenue growth is