In the third quarter Shenandoah Telecommunications' (Shentel) fiber-optic service, Glo Fiber, expanded its coverage by nearly 20,000 new passings, pushing the company's total to 200,000 passings.
That means Glo Fiber increased passings 55% year over year. “Our Glo Fiber passings are now almost the size of our cable market passings,” said Shentel CEO Christopher French during earnings.
With its recently announced Horizon Telecom acquisition expected to close in 2024 and accelerated construction anticipated across all the Glo Fiber markets,” French noted the company expects “to double broadband passings again by the end of 2026.”
In Q3 Glo Fiber markets added around 4,500 subscribers, 13.9% higher than the third quarter of 2022 and 12.5% higher than the second quarter 2023.
“Our track record over the past four years provides confidence for us to grow our broadband data subscriber base at similar growth rates in the next three to four years as we expand our Glo Fiber network,” French said.
Additionally, he claimed the growth in broadband data subscribers has driven a steady expansion of the company’s EBITDA margin year over year since 2019, when it first launched Glo Fiber.
Shentel’s broadband adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) grew 19.4% to $26.6 million.
In the third quarter Shentel launched two new Glo Fiber markets in Hanover County, Virginia, and Greencastle Pennsylvania, and now offers multi-gigabit service in 21 markets with construction underway in four more.
In the same period Shentel was awarded $2.6 million in government grants to bring broadband to approximately 1,000 additional unserved homes adjacent to its cable systems in West Virginia. The company has now been awarded a total of approximately $90 million in grants that will enable it to extend broadband over 28,000 unserved locations, primarily through fiber-to-the-home (FTTH) technology.
Shentel is projecting roughly a 25% increase in its number of fiber passings between 2022 and 2023. And COO Ed McKay said during earnings, “We think we could continue to scale that particularly as we ramp up construction and some additional markets.”
However, McKay added that construction pace is “dependent on other utilities to process pole attachment permits, and locate existing underground facilities,” a recurring issue for providers across the broadband space.
In some cases, the industry-wide high volume of broadband deployments is causing delays for both permitting and locates, he said. “This is a risk we're monitoring closely and actively working with our utility partners to mitigate and we expect to finish the year with approximately 235,000 total fiber passings.”
“So, we're continuing to have some challenges there, but we think we can still grow the number of passings even with those delays,” McKay added.
According to McKay, Shentel’s construction backlog remains “very robust” with 340,000 passings approved for construction.
Shentel Q3 financials
Shentel’s revenue grew 7.3% to $71.8 million compared to the third quarter of 2022. Specifically, Glo Fiber markets revenue grew 90.5% to $9.3 million and broadband revenue grew 8.1% to $67.4 million over the same period.
Broadband operating income was $9.3 million in the third quarter of 2023, compared to $4.8 million in the third quarter of 2022.
The company’s overall consolidated EBITDA grew 20.5% to $22.9 million compared to the third quarter of 2022.
Shentel also recorded impairment charges of $1.5 million during the third quarter, compared with $0.5 million of impairment charges in the same period the year prior. However, the company noted that jump in impairment charges were “primarily a result of Beam fixed wireless assets that are no longer expected to be used and have no alternative use.”