Coming off of a strong third quarter performance, regional service provider Shenandoah Telecommunications (Shentel) is forging ahead with ongoing broadband expansion and upgrades, and even eyeing possible mergers and acquisitions.
“I'll say there are a few smaller opportunities in the [M&A] pipeline right now,” said Christopher French, president and CEO of Shentel, on the company’s Q3 earnings call. “We believe there will be additional opportunities down the road. We think some of these fiber overbuilders and some of the folks that have taken government grant funding may struggle in the current economic environment. So, we think there are opportunities there down the road.”
Shentel CFO Jim Volk added, “Some of the broadband assets that were trading at multiples are coming down. Some of the deals that were available over the summer didn’t get done and I think expectations are coming down now. I think our ability to do creative deals and to be able to fund them in today's market is somewhat unique to some of the other broadband peers.”
The operator has access to a $400 million credit facility that it has drawn only about $25 million from so far, Volk said. That facility will help fund ongoing broadband expansion, but could be used in other ways. Additionally, Shentel still owns wireless towers that could be monetized for funding.
Meanwhile, Shentel officials also said they have forged a $21.1 million agreement with a wireless carrier to sell the spectrum licenses and leases its uses in its Beam fixed wireless service, which the company is in the process of winding down. That deal is expected to close in the first half of next year, subject to regulatory approval.
Regarding third quarter performance, Shentel posted $66.9 million in revenue, up about 7.5% compared with the third quarter of 2021, primarily due to broadband segment revenue growth of 7.7% to $62.4 million and a tower revenue boost of 5.1%. In broadband, Shentel said it increased total broadband data revenue generating units by almost 14% to 130,238. Passings for the company’s Glo Fiber service grew about 70,100 since the same quarter last year, and penetration was up slightly for both Glo Fiber and the company’s incumbent cable broadband service.
French further outlined the company’s long-term broadband expansion and upgrade plans: “For the next five years, we plan to grow our total number of broadband passings to more than 700,000, with over 75% served with multi-gig symmetrical fiber to the home service. In our incumbent cable markets… we will be overbuilding approximately a quarter of our incumbent cable passings with fiber. This will primarily be in our dense markets where fiber or cable overbuild competition is more likely. We will deploy 10-gig technology and expect our average cost for network upgrades to be in the range of $475 to $575 per passing. The multi-gig networks will allow us to offer higher speeds and provide more value to customers, along with lower maintenance expenses, allowing us to compete very effectively when we do encounter broadband competitors.”
He added that the company also is aiming for 30,000 broadband passings in rural unserved areas "as we continue to pursue government grant funding. To date we've been awarded approximately $69 million in grants.”