Earnings Call Transcript - ATEX Q1 2022

Operator, Operator

Good afternoon, ladies and gentlemen, and welcome to the Anterix First Quarter Fiscal Year 2022 Investor Update. It is now my pleasure to turn the floor over to your host, Natasha Vecchiarelli, Director of Investor Relations and Corporate Communications at Anterix. Ma'am, the floor is yours.

Natasha Vecchiarelli, Director of Investor Relations and Corporate Communications

Good afternoon, everyone, and welcome to the Anterix First Quarter Fiscal Year 2022 Investor Call. Joining me today are Rob Schwartz, our President and CEO; Ryan Gerbrandt, our COO; Tim Gray, our CFO; and Chris Guttman-McCabe, our Chief Regulatory and Communications Officer. Before we begin please note that during today's presentation, we may make forward-looking statements, either in our prepared remarks or in the associated question-and-answer session. These statements are based on current expectations or beliefs and are subject to certain risks and uncertainties that may cause actual results to differ materially. Risk factors that may impact our performance are identified in our most recent SEC filings. Following our prepared remarks, we will have an operator-led question-and-answer session. In addition, at the conclusion of today's call, a replay and transcript of our discussion will be posted to our Investor Relations website. With that, I'll turn the call over to Anterix's President and CEO, Rob Schwartz.

Rob Schwartz, President and CEO

Thanks, Natasha. Good afternoon, everyone, and thanks for joining our Q1 investor call. Just recently in June, we had our Investor Day, where we shared our refined vision of the future of Anterix and highlighted key improvements to our business model and investment thesis. The response to that event and specifically to our fine vision of the Anterix opportunity has been quite positive, not only from our customers in the utility sector, but also from the investment community. Since most of you heard the Investor Day presentation, I'll reiterate a few key points, and then I'll provide a brief update on the continuing momentum since then, further supporting this developing industry movement. Our prospective customer pipeline now includes over 50 utilities with a total potential prepaid contract value of about $3 billion. And with the increasing demand for prepayments that we're hearing from prospective customers, we currently believe that the majority of our contracts will be prepaid in full over the first three to five years of the contract terms. This evolution brings significant cash flow earlier than previously anticipated in our forecasts and allows us the potential opportunity to begin to return value to shareholders within the next two calendar years. In our current fiscal year ending March 31, 2022, based on our current sales pipeline, we continue to forecast signing contracts with proceeds over $200 million. Looking ahead through fiscal year end 2024, we intend to sign approximately $1.8 billion of contracted proceeds totaling about 50% of our nationwide spectrum value. By fiscal year end 2024, we would expect to have collected approximately $300 million to $500 million in cash proceeds with the remaining more than $1 billion contracted due to be collected soon thereafter. And beyond that point, we expect to continue to grow with 50% of our spectrum value still on our balance sheet available to monetize, as well as the residual value of our lease renewals and our ability to explore and develop potential new revenue opportunities with partners. Foundational to all this momentum is a modern communications platform driven by the utilities' need for connectivity to provide situational awareness and allow for the command and control of millions of distributed assets across a growing utility footprint. Our 900 megahertz low-band spectrum specifically addresses these needs and is propelling the demand for Anterix's spectrum offering, reflected in a growing list of pilots and industry activity. Let's now spend a few minutes discussing the significant additional signs of momentum that we've seen just since Investor Day. First, an additional three companies have applied for experimental licenses on our 900 megahertz spectrum. These entities include the utility, Tampa Electric, as well as technology leaders, Ericsson and Burns & McDonnell. It's worth noting that utilities are no longer pursuing pilots to confirm private LTE as a technology. Pilots are more often being used to demonstrate use cases and to build support internally for investment business cases. As Ryan has detailed in the past, not every utility will seek an experimental license before they move forward with private LTE, but they are a good indication of continuing momentum throughout the industry. Let's spend a few moments discussing key areas of focus for each of these three new experimental licenses. Tampa Electric is a Florida-based investor-owned utility, which, per the FCC experimental license application, is exploring use cases in support of electric and gas utility operations, including AMI, SCADA, and other uses. Tampa Electric joins more than 10 other utilities who have leveraged 900 megahertz spectrum to better understand the unique resiliency, reliability, and security features of a dedicated private LTE network. It's also worth noting that Tampa Electric is one of the 11 utilities that also purchased CBRS licenses at auction. Like several other CBRS licensees, they are working with us to explore the complementary nature of these bands, which is helping us develop our integrated solution. Ericsson, a global leader in broadband communications, and Burns & McDonnell, a leading engineering, construction, and consulting firm to utilities, are each independently showcasing the value of 900 megahertz private LTE in solving multiple use cases. Ericsson joins both Nokia and Motorola as infrastructure thought leaders working hand-in-hand with Anterix to help drive 900 megahertz education, development, and ultimately adoption. We have other major efforts underway to increase awareness and attractiveness of our spectrum to utilities, such as the Anterix Active Ecosystem program. As a reminder, we announced the program in May with 37 world-class technology industry leaders coming together to provide a wide range of solutions for 900 megahertz private LTE networks. The number has now grown to over 50 technology leaders, including Cisco, GE, Hitachi, Qualcomm, and many more. These ecosystem members have a vested interest in supporting private LTE at 900 megahertz and are actively engaged with our team to collaborate on devices, services, and solutions that can support and address the current and future needs of utilities and other critical infrastructure entities. Since the launch of this ecosystem program, we've heard from numerous utilities about the significant value they see in this active ecosystem effort. As I previously described, we also expect the relationships in this ecosystem program to develop into commercial opportunities for Anterix. And I want to highlight one example that we just announced. This morning, we issued a press release outlining a new relationship with Federated Wireless. For those of you who don't know Federated, they were the leading proponent of the FCC in bringing the CBRS spectrum to market in its novel shared model and are a key provider of the CBRS SaaS platform service that's required for access to that mid-band spectrum. As discussed in today's press release, we're bringing to market a combined and complementary offering of dedicated use of our 900 megahertz broadband spectrum paired with Federated Wireless’ shared spectrum SaaS services for use on the CBRS band. This is a logical relationship as we are already working with many utilities on the hybrid approach of combining low-band 900 megahertz with an overlay of mid-band CBRS to add capacity and coverage in incremental areas as needed. As we identified at our Investor Day, the remaining 70% to 85% of the utility spend on private LTE network deployments and operations beyond the cost of our 900 megahertz spectrum creates an opportunity for Anterix to identify low capital-intensive ways to build incremental value for our shareholders. This relationship with Federated is a good initial example of the kind of opportunities we referenced. We look forward to sharing more about these options for incremental developments throughout this coming year. We also are seeing continued significant positive momentum from policymakers. Yesterday, the Senate voted to pass the Infrastructure Investment and Jobs Act. Language in the Act embraces the intersection between grid modernization and private broadband communications, as well as the connection between utility private LTE deployments and the support for rural broadband. The bill provides billions of dollars earmarked to support these efforts. The legislation now moves to the House for their consideration. As we've detailed in the past, we do not need legislation to deliver on our business plan; however, the education of policymakers and the industry has already aided in heightening the awareness of the importance of our efforts. Washington's focus on decarbonization, distributed energy and infrastructure has shined a light on our goal of helping to modernize America's electric grid. That being said, with this bill passage, we would expect that this would be a further catalyst to securing utilities interest in Anterix’s offering. Another important milestone for Anterix in the last few weeks, the FCC granted our first broadband licenses for several counties of our initial customer, Ameren. Those grants are the culmination of a lot of hard work by our team, the utility sector, and the team at the FCC. They also represent the formalization of our effort to deliver broadband for mission-critical needs across the United States. As we shared at our Investor Day, Anterix intends to become the de facto private wireless broadband solution provider to the utility and critical infrastructure sectors. With our breakthrough achievements, continued significant momentum and tailwinds, we feel we are well aligned to achieve this mission and look forward to sharing more about our continued progress with you all soon. Thank you very much. With that, I'll turn it over to the operator to open the call for questions.

Operator, Operator

Your first question is coming from Phil Cusick from JPMorgan.

Phil Cusick, Analyst

Maybe dig into that $200 million of contract value, I think you said by March 31, 2022. How do you count the ones that have been signed already in that? And how many should we expect between now and then?

Rob Schwartz, President and CEO

This is Rob. As we've talked about at Investor Day, the $200 million is the incremental contracts we intend to sign through the end of the fiscal year. That can be all kinds of mixes given the breadth of the pipeline we have over 50 utilities. And so I don't know, Ryan, do you want to add anything? Any color to Phil's question?

Ryan Gerbrandt, COO

Yes, I'd be happy to, Phil. Let me come back to a little bit, as Rob said. So in the aggregate, net incremental contract proceeds of $200 million. We talked a lot about it at the Investor Day around how we're qualifying and what we see in terms of opportunities in the pipeline. I'll just reiterate, I hit on a few of the very key points in the earlier remarks, but let me add a little depth to some of it. So in addition to what we're seeing now in the growth of the over 50 accounts representing over $3 billion, we break that down into the various phases. That’s the different phases in the evolution of accounts through those phases, which are really the basis of how we think about operationalizing the path towards both the $200 million goal and the year-end fiscal year 2024 goal. The highlight that I take away from what we've seen in terms of that momentum that builds the capability and what we see in terms of the confidence has really been defined in terms of some of the evolution that we've seen into what we call the Phase 2 category, Phil. With today, already roughly a third of the pipeline value represented in that phase. And that's important to me because that's where a lot of the opportunity pipeline growth is coming from in addition to obviously what we have already in Phase III, which, as I said, is at the late stage of contract negotiations, kind of at the bottom of the funnel as we ultimately think about it. But with that doubling in the overall growth of the pipeline and frankly, just the diversity that we're seeing. So we've now scaled a world-class front-end sales organization to be able to capture not just singular opportunities that we see in front of us, but to really lean in and capture all of the interest and demand that we're seeing across the whole market. That creates a powerful set of optionality. As we think both to the near term and the long term, we now have a diversity of large, medium, and small-sized customers that gives us a variety of paths actually here now in the $200 million goal for this year and as we look out to fiscal year 2024.

Phil Cusick, Analyst

And I know it's only been, what, six to eight weeks since the Analyst Day, but any change in the Phase II count or the types of customers coming in there and then movement from Phase II to Phase III?

Ryan Gerbrandt, COO

Yes. No. And as you said, Phil, it's not been a lot of time in between. So we've not seen a dramatic set of changes in any of the overall categories that I think is worth noting. What we are, though, continuing to see, and this is playing out literally day by day, week by week, is just the overall intersection. I'll say with what we've been driving in terms of market education, market awareness, coming off the heels of some of the things like industry and customer participation in the active ecosystem program, a broadening understanding and awareness as we see across the entirety of the pipeline. That's most measurable as I'm seeing the new customers coming into the top of the funnel. A year ago, most customers coming in had an interest in PLT, didn't know a lot about it. We had to spend a lot of time in cycles really educating them on the ins and outs of what the technology is, how it fits into their business cases, what are the applications even that they can support on it. One very positive thing that I'm continuing to see is how that education has landed and it's not just us delivering it anymore. It's coming from across the entire market and ecosystem, is that they're coming in more educated. They're coming in more aware with information in hand that they've been able to source either directly from us or through others, either indirectly through the ecosystem or through organizations like AVA, who've been all collectively doing just a fantastic job driving the overall education and awareness of the broader set of customer base. That matters to me from a pipeline trajectory perspective because it helps the process move faster earlier. So we don't need to invest as much time in that front end and really get into the brass tax, and that's helping to work through the details of the business case and executive volume and sponsorship where really we can put some of our best skills to work in the world-class team that we've been able to assemble.

Operator, Operator

Your next question is coming from Simon Flannery with Morgan Stanley.

Simon Flannery, Analyst

I wonder, Rob, if you could update us on the progress with Ameren and SDG&E? And how you're getting on with the clearing? It sounds like you're making some progress with the FCC. But how do those two stand? And what's the latest thoughts in terms of cash receipts for the balance of the funds from them?

Rob Schwartz, President and CEO

Sure. Why don't I talk about the relationship continuing, Tim? Maybe you want to jump in on the cash receipt side. Individually, Ameren and SDG&E are both progressing tremendously from my view in that we are actively working with them. I think of them both as really sandboxes for not just the deployment of our spectrum, but also better understanding how utilities are using and getting value out of private LTE networks. We've got teams working across the board with Ameren on planning their deployment. You heard the great news about their first licenses coming from the FCC. That was a really momentous occasion for us because it really showed that despite us talking about it and getting rules, now the process works and we can apply for and get granted it on reasonable short-term licenses to fulfill our obligations under the contract. SDG&E, the same thing; we continue to see their innovative thinking on use cases. They are active participants across the board, nationwide, also working with UBBA and with other vendors helping us drive the ecosystem forward. They've made comments to us about how much they appreciate how we brought together that ecosystem. I think overall, those relationships are really just getting started from our standpoint and will continue to grow.

Tim Gray, CFO

Sure. Let me talk about clearing first, Rob and Simon. I think we've made good progress in both territories on the clearing front, and we'll continue to do so with what we see in front of us. So the FCC put out the rules for applying for broadband licenses in May. We were in line with the first several bunch of counties for Ameren as soon as we could be on the day that it opened. The process has been rather seamless working with the FCC. As Rob mentioned, we've started to get our first set of broadband licenses and would expect our next payment from Ameren to be in the next few months based on the timeline that we've laid out with them. We feel like we're in really good shape with that as well. So all things are progressing forward. The last thing I'll say, Simon, is as part of our plan for broadband licenses, we've also begun to work with the FCC on anti-windfall payments. Their calculations have been right in line with where we expected, which gives us even more confidence in our overall nationwide estimate for our clearing costs, which we've probably talked about before, is the $130 million to $160 million. So overall, clearing is progressing as we had hoped at this point.

Simon Flannery, Analyst

Great. And that's helpful. Maybe one for Ryan. I think that the CBRS thing is really interesting. Do you think we might see the utilities active in the upcoming Auction 110, the $3.45 to $3.55? I know it's sort of bigger license areas. And relating to that, we've talked a lot about LTE today, but how is 5G coming into the conversations as utilities think about should I be waiting to deploy a 5G network rather than doing LTE for now?

Rob Schwartz, President and CEO

So Simon, it's Rob. Maybe I'll start on just on the other band. Obviously, we can't share anything we know confidentially under NDAs with the relationship with utilities. But just broadly speaking, I'm not hearing about any considerable interest from utilities, specifically in that band. That's not to say that there aren't utilities that may be thinking about it overall. But Ryan, maybe you want to step in on the rest of the question.

Ryan Gerbrandt, COO

Yes. No, and I agree with you on that. I'm not hearing anything specific at this time also, Simon. But let me come back to the 5G part of the conversation. We do encounter this question. Obviously, there's a lot of hype still put into the 5G conversation coming from various stakeholders. I find utilities though are pretty pragmatic in what they're anticipating in terms of their evolution of network functionality and really the roadmap towards supporting some of these next evolution networks like 5G. A lot of it is rooted in the use case and the capabilities that they really need today. A broad understanding of kind of what they can get and the value proposition that a 4G LTE network brings is more than sufficient for what they need. We also talk a lot about risk aversion. Utilities aren't known for wanting to be on what I would call the cutting edge of the technology landscape. There's some wariness in terms of letting others prove the technology and capabilities and being really able to capture that value at a potential time in the future. It's not been a big focus of the conversation that we're seeing in the utility buying process today, but they're not blind to it either, I think is really the point. They're looking at both the capabilities today as it's ready, it can be deployed and they can put it to work very quickly. But thinking through the long-term perspective of their architecture and the various systems as they're putting together the design and vendor choices that they're making to keep open the optionality around how, at the right time, with the right ecosystem and the right demand use cases in place, they can naturally evolve to that outcome when they're ready.

Operator, Operator

Your next question is coming from Walter Piecyk with LightShed Partners.

Walter Piecyk, Analyst

Rob, can you elaborate on the Federated deal? Specifically, are you approaching the utilities to discuss GAA licenses? Are the utilities open to using GAA licensing? I know San Diego has its own licenses, but can you clarify if other utilities would be willing to adopt GAA licenses instead of the priority licenses that the San Diego utility currently has?

Rob Schwartz, President and CEO

I’m pleased to hear your dog is as excited about Anterix as you are. The Federated deal, led by Iyad Tarazi, a good friend and colleague, is backed by a highly skilled team that played a pivotal role in promoting the concept of spectrum sharing and in working with the FCC to include that band in its current structure, which includes both licensed and unlicensed elements. While I can't discuss the specifics of our agreement due to restrictions, it does ensure economic benefits for both parties. We see ourselves as a significant channel for them into the utility sector, which they highly value. In turn, we appreciate their deep expertise in CBRS and related elements, which they leverage to enhance the ecosystem effectively. They have a strong understanding of deployment, strengths, and limitations, making this a beneficial relationship for us. Although the spending in CBRS may not be substantial compared to overall utility spending, it's a prime example of how we can transform partnerships into win-win scenarios. We gain by integrating their products and enhancing appeal to customers, while Federated accesses a valuable customer base we've nurtured for years, ultimately providing customers with better solutions. This is crucial for boosting adoption. I believe we'll see more utilities embrace this concept beyond just Tampa Electric as a CBRS licensee. Many PAL license holders acquired licenses at auction exist, but the unlicensed GAA licenses certainly add significant value. Once we establish the foundational element of 900, we can expand on that with unlicensed spectrum, applications, devices, and more. We view our role, beyond 900, as enhancing the value of our solution set, with CBRS being a critical aspect. We believe that eventually other bands will be integrated through this layered approach. The advantage of adopting LTE as the standard, though new to utilities, is that it offers a forward compatibility path to increasing capacity and capabilities as developments take place.

Walter Piecyk, Analyst

Got it. I have a different question. I believe Motorola Solutions is part of your ecosystem. Greg Brown just reported a very good quarter, and his camera security business is seeing tremendous traction, especially in public safety. Where do you stand with them regarding opportunities in electric utilities, which are very clear nationwide? But beyond utilities, how is Motorola working to expand into other market segments that might be interested in the spectrum?

Rob Schwartz, President and CEO

Yes, I think Motorola, obviously, we've had a long-standing relationship, as you know, they were the key technology partner of Nextel and continue to be an important partner of ours from the beginning of Anterix, even PDV prior. We're actively working with them. They are part of the ecosystem. They have a very unique set of assets and skills that we think are really valuable to utility customers and are complementary to a lot of the other ecosystem providers. I think all of the application skills they have, that you've talked about, a lot of which have been further developed through their FirstNet experience, a lot of them are translatable into being applications and skills for utility networks. So we think we see strong capabilities. The other thing to remember is that a lot of the incumbent licensees that were retuning here are two-way radio customers, LMR customers, many of whom are Motorola. Their ability to understand that and understand the migration path of those two-way radio systems as utilities get more comfortable with the idea of mission-critical push-to-talk, which FirstNet, again, is driving and Southern Company as a utility has adopted already. We see that they have a very big role in helping with that migration of LMR to LTE for mission-critical push-to-talk. Just migrating those networks, as utilities understand that the future of communications is LTE and private LTE, I think they can be a great partner in doing that.

Walter Piecyk, Analyst

I see that what you described indicates good value for them in terms of selling LTE radios to their existing safety or utility customer base. My question is whether there is an opportunity for them to use this spectrum to sell to non-utility customers, like public safety and other industries where they have a strong presence. While it's clear you are focusing on utilities, which is a strong market, if competitors in different sectors, such as public safety, want to access that spectrum, do you think that’s a viable opportunity? Is Motorola considering this?

Rob Schwartz, President and CEO

Yes. While I won't delve into Motorola's specific goals, our focus remains on the utility sector, which is our primary target. However, we believe that other critical infrastructure users can also play a complementary role. We've engaged in numerous discussions with various vendors in our ecosystem to explore ways to increase network usage. Currently, we see that while there are alternatives from other sectors, many of these users work well together. As we piece together different components of networks, such as the service territories for utilities, they can evolve into a larger network of networks, ultimately forming a nationwide system. This is a significant asset. I often refer to the Southern Company example, as they are advanced in deploying private LTE and have decided to allow other municipal utilities and co-ops to utilize their network. They've even catered to public safety customers by creating a network with enhanced resiliency, reliability, and cybersecurity, alongside longer battery backup capabilities, which are uniquely suited to their needs. Therefore, while there may be opportunities for substitutes from other critical infrastructure segments, it seems more probable that these entities will find ways to collaborate, sharing costs and benefits within this expansive nationwide network of networks.

Operator, Operator

Your next question is coming from George Sutton with Craig-Hallum.

George Sutton, Analyst

Along the same lines of the concentric circle concept, as we've spoken with people in the industry, we're noticing an increased focus on rural broadband opportunities. I'm curious if you would consider that complementary or an incremental opportunity.

Rob Schwartz, President and CEO

George, thanks for the question. So we've talked about rural broadband. In fact, we've recently been out promoting what's soon going to be a paper published on the topic of work in conjunction with a number of partners. From our view, there are a couple of key values about rural broadband. As utilities build their infrastructure for private LTE, and already utilities have a lot of infrastructure that's being leveraged for third-party communications networks. As they start to pull more fiber and build more towers to get private LTE coverage, those assets are a critical piece of unlocking the opportunity to serve rural broadband. We do see, and we've been talking with several parties from NARUC, the National Association of State Regulators, to Edison Electric, the industry association, and then to the utilities themselves, about how they individually want to facilitate that from happening. A lot of utilities want to enable ISPs to build those rural broadband capabilities, leveraging their networks. We're talking to a series of utilities about their individual models on how they want to do that. I think it's less likely that utilities are going to want to serve those end users in rural broadband, but I think that most utilities will want to enable those models, and that could be leasing their fiber, using their towers, supporting that deployment because it's in their interest. One of these utilities said to us that they want to make sure that these communities, especially the rural communities, keep their residents because they're investing in infrastructure to serve power and other things to those customers, and they don't want to see a migration of those customers to cities or elsewhere. It's very important. I think the legislation that you heard about, I'm sure, and I'm sure you wrote about it as well, George, puts a lot of capital again into both the last mile, the fiber, and broadband to the end user. But the middle mile is a really important piece of it too, as talked about in legislation. Middle mile being a lot of the investment of what utilities are putting into their fiber and their infrastructure. I think we'll see a lot of support for investment in that middle mile to support rural broadband.

George Sutton, Analyst

You mentioned NARUC, I know you've conducted multiple webinars in conjunction with their commissioners. Can you just give us a sense of their comfort with all of these different opportunities that you're looking at? Our sense is it could accelerate some of your approvals in the future.

Rob Schwartz, President and CEO

Yes, I could start and maybe Chris Guttman-McCabe, our Chief Regulatory Officer, wants to jump in on that. But I think overall, we've spent a lot of time educating about the importance of broadband wireless in completing the communications to all these important assets, but also the importance of it in supporting, as we just talked about, the Rural Broadband as well. Chris, do you want to elaborate?

Chris Guttman-McCabe, Chief Regulatory and Communications Officer

Thank you, Rob. Thank you, George. I believe Rob emphasized the crucial point, which is education. When we first approach a policymaker, our goal is to educate them, especially regarding the link between grid modernization and advanced communications systems. This has been our focus over the past few years at NARUC, and I believe we've made significant progress. As Rob mentioned, we are now seeing discussions about grid modernization that incorporate communications. There is also an emphasis on closing the digital divide, particularly in terms of rural broadband and access to underserved areas, with a focus on the middle mile. We've witnessed their evolution through our educational efforts, moving from discussing only fiber to including aspects of the wireless network as well. I think we’ve achieved substantial advancements. This progress is reflected in the recent developments coming from the Senate, as Rob pointed out. I believe it creates a circular benefit where our work at NARUC has aided our efforts in federal legislation, and what we’ve accomplished at the federal level will, in turn, support our utility customers as they navigate rate cases at the state level.

George Sutton, Analyst

Super. And last question for me. You talked about use cases. San Diego Gas & Electric has been fairly excited about one of the use cases, which is the ability to shut off a power line before it hits the ground and therefore avoid all of these fires. Of course, much of our country has had fire issues recently. I would sense that creates an accelerated pace of discussions from many of the utilities. Can you just discuss that use case specifically?

Rob Schwartz, President and CEO

Yes. Ryan, do you want to talk about falling conductor a little bit? If not, I can jump in.

Ryan Gerbrandt, COO

Yes, let me take that one. So falling conductor protection, you're absolutely right. San Diego has put a lot of focus on it as part of their proactive wildfire mitigation plans. Obviously, here we are in the middle of wildfire season out on the West Coast. The application supports obviously all utilities across various geographies that are facing similar challenges. The essence of the technology, when it's complementary to a lot of the other wildfire strategies that we see publicized from the utilities, is really the proactive ability for a utility grid to detect a down power line. Just as that down power line becomes a potential emission source for wildfires, if it touches the ground, the technology is designed to drop the power effectively to that phase of the transmission line or distribution line to limit the potential of it causing a source of fire. Now, obviously, the requirements of it are that it needs a broadband, low latency kind of communication system. The ability to communicate in near real-time across the various assets, technology that are necessary to enable the solution are quite critical. That is an important alignment to what we're talking about in terms of private LTE. I do anticipate just as we are, and we're going to continue to see conversations about it. I'm sure other similar technologies will emerge. As an industry, we continue to come together to try to find more and more innovative technology-based solutions to support all of the nation's utilities with dealing with some of these environmental disasters like fires. Not to reiterate the same set of issues, but the Infrastructure Act and the legislation as it came out of the Senate really recognized the need to move funding toward resiliency and redundancy of the grid, particularly to help stimulate technologies that can prevent utility line-caused wildfires. There is this additional catalyst, I guess I would say, that is out there.

Operator, Operator

Your next question is coming from Mike Crawford with B. Riley.

Mike Crawford, Analyst

Given all the cash you're expecting to collect and then return to shareholders in the next three to five years, why wouldn't Anterix convert to a REIT?

Rob Schwartz, President and CEO

Thanks for the question, Mike. Just, I mean as we've said before, obviously, we see this trend towards the prepayment as being very positive. Tim talked about it at Investor Day, giving us the opportunity to contemplate returning capital over the next couple of years. We do have our NOLs in place. Tim, maybe you want to detail our thinking on how we're planning for it at this point.

Tim Gray, CFO

Yes, Mike. And good question. We get that one quite often. So right now, we've got over $250 million in federal NOLs that will get us through the next several years with the proceeds that we see coming in and how they impact taxable income. With that, we have some runway to look at and fully analyze whether or not we want to be a REIT. I would say we're examining that possibility with our advisers and trying to figure out if that's one, possible; and then two, the best path forward for us. More to come on that as we move forward through the process, but it's something we're actively looking at.

Mike Crawford, Analyst

And then I know that spectrum lease cost itself is a relatively small portion of the overall investment utilities would make to deploy a private broadband network. But has there been any reaction from your customers following this wildly successful auction of 3.5 gigahertz spectrum in Canada that came in two to three times what people probably thought would accrue?

Rob Schwartz, President and CEO

Good question, Mike. We saw your note on the bio, well explained. Our view is we always talk about the value of our spectrum in these conversations being fair market value. Any new data points that occur in between these transactions go into that discussion and calculation of fair market value. You should assume that as we're both internally and using our external experts, positioning the value of spectrum, which, as you know, over time, has shown historically to increase in value over a pretty significant trend line. We're not surprised to see other good high-water marks, and we will continue to use those in our negotiations and discussions to continue to drive getting what we think is good strong fair market value.

Mike Crawford, Analyst

Okay. So I know it's only been a couple of weeks, but you haven't seen any accelerated interest to just sign on the dotted line somewhere, given lower prices you're talking about versus what the big three carriers paid up north?

Rob Schwartz, President and CEO

I don't want to say anything disparaging about Canada because our Chief Operating Officer, Ryan Gerbrandt, is from Canada. But I think it's an important data point, but it's clearly not in the context of all the other data points. Just like anything, where you have comparables, it's another important one to show the positive trend and an upward trend of spectrum. Ryan, anything you want to add there?

Ryan Gerbrandt, COO

No other than I'll confirm I'm from Canada. I think you hit the nail on the head. There's a lot of considerations, obviously, that the utilities are going into in their buying process here. There's no doubt seeing other auction transactions at good quality prices only helps support the conversations that we're having. But it in itself doesn't change the process that the utilities have to go through. They're still, as you said, working their way through justification and stakeholdering on a deal that size is much larger than what we see in just the spectrum transaction, and that's still a necessary process, even though they are, I'm confident in this, seeing the urgency and the scarce nature of what the spectrum offering is, that's promoting a lot of the conversations we're seeing.

Operator, Operator

Your next question is coming from Chase White with Height Capital.

Chase White, Analyst

First one, were the utilities the ones driving the Federated agreement and just the general conversation? Or was that more you guys and Federated coming together? And are you in discussions with any other SaaS providers like Amdocs or Google for similar collaborations?

Rob Schwartz, President and CEO

So Chase, regarding the beginning of our relationship, we've known Federated almost since their inception. Iyad Tarazi, their CEO, is a former colleague from Nextel and a friend. We've been collaborating with them from the start. We've been considering the complementary nature of our arrangement with them. This initiative was indeed driven by us, as we've been following CBRS closely and recognize its complementary potential. I like to compare it to using WiFi at home or in the office, then switching to cellular when you go outside. That's how I view the complementary aspect of CBRS. It's mid-band technology that performs well in buildings and campuses, but when it comes to covering larger service areas, you require foundational spectrum like 900. Federated understands this from the outset and they have an excellent team. However, there's nothing particularly exclusive from a utility perspective. We believe we have a solid, long-standing relationship with Federated and want to assist them in developing a better product that integrates with ours for utility customers. As you mentioned, there are many choices for SaaS providers, and we think Federated has a very robust offering, as they are solely focused on how to present that kind of shared spectrum solution to the market. We are excited about the partnership.

Chase White, Analyst

Great. And in terms of returning capital to shareholders, once you've started to roll up more of these leases over time, assuming that they're similar to the Ameren contract, what it sounds like you guys are thinking that they will be where the cash is received in stages pretty much upfront. Given the creditworthiness of these utilities, do you see an opportunity to take on leverage to accelerate or smooth out the capital returns?

Rob Schwartz, President and CEO

We are consistently focusing on maximizing financial returns for our investors, including evaluating our capital structure. However, it's likely too early to discuss specific actions we might take. That said, our past experiences, particularly with leverage during the initial stages of Nextel and other companies, inform our approach. If the timing is right and aligns with our financial planning, we would indeed consider such options.

Tim Gray, CFO

Yes, Chase, we're going to look at all the things we can put into our toolkit and see what's the best use for both Anterix and for our shareholders. More to come on our thoughts on that as we move forward with these contracts.

Operator, Operator

We have no further questions from the lines at this time. I would now like to turn the floor back to Rob Schwartz for closing remarks.

Rob Schwartz, President and CEO

Thanks, Catherine, and thanks, everyone, for the continued time and interest. We look forward to talking to you all again soon. Have a good day.

Operator, Operator

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.