Shentel says fiber network is producing new revenues, controlling costs

two utility workers setting up a fiber cabinet on a sidewalk
Fiber expansion continued to be a key theme for Shentel in 2016.

Shentel is finding that its ongoing fiber network build-out is serving multiple purposes to not only raise wireline and cable segment revenues, but also to rein in costs across all of its business lines.

“Our extensive fiber network serves both as a source of revenue, but also helps control our operating costs by supporting both our wireless and cable segment transport needs,” said Christopher French, president and CEO of Shentel, during the fourth-quarter earnings call, according to a Seeking Alpha transcript.

Fiber expansion continued to be a key theme for Shentel in 2016. In 2016, the service provider increased fiber route miles and total fiber miles. It added 235 fiber route miles and over 18,000 total fiber miles.

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Wireline and cable fiber lease revenues totaled $11.3 million, up 15.3% from the fourth quarter of 2015. In the fourth quarter, 196 towers generated $1.6 million of OIBDA.

Within the fiber lease segment, Shentel saw gains in the cable and wireline segment sales. Wireline fiber lease revenue was $10.2 million, while cable lease revenues were $1.1 million.

Shentel said it had what it called another “record year” in fiber sales with new third-party contracts totaling $27.1 million.

Carrier access and fiber revenue for the quarter was $12.9 million, up 9.6% from the same quarter last year, a factor the telco attributes to new fiber contracts. 

Earle MacKenzie, COO and EVP of Shentel, said that the uptick in fiber revenues was a key contributor to wireline and cable unit growth.

“Another factor in the continued growth of our wireline and cable segments is the growth of affiliated and nonaffiliated fiber revenue,” Mackenzie said. “The growth in affiliated revenue is a result of us continuing to build fiber to our wireless cell sites and pay ourselves rather than outside parties.”

MacKenzie added that Shentel expects future cable segment sales to continue to ramp: “In the last two years, we've taken advantage of selling capacity on the significant fiber in our cable footprint, and we see the future of fiber revenue in the cable segment to be material.”

Shentel’s overall wireline segment revenue rose 6.5% to $19.3 million in the fourth quarter of 2016, up from $18.1 million in the fourth quarter of 2015. Wireline operating expenses increased 2.7%, or $0.4 million, to $13.8 million for the fourth quarter of 2016, primarily due to costs to support new fiber contracts.

Similar to earlier quarters, Shentel reported expected declines in traditional voice lines and long-distance voice subscribers, ending the period with a total of 18,443 and 9,149 subscribers, respectively. While Shentel lost 92 video subscribers, the telco added 424 new DSL subscribers.

“We continue to see a decrease in regulated access lines, but service revenues have not decreased due to the growth of high-speed internet customers and similar to the cable segment existing customers upgrading their speed,” MacKenzie said.

Adjusted OIBDA in the Wireline segment for the fourth quarter of 2016 was $8.4 million, as compared to $8.1 million in the fourth quarter of 2015. Shentel reported total revenues of $155.6 million, up 78.2% from $87.3 million in the fourth quarter of 2015. The company reported a net loss of $0.2 million, compared to net income of $12.1 million in the fourth quarter of 2015.