Shenandoah Telecommunications wireline revenue steady at $3.3M in second quarter

Shenandoah Telecommunications (Nasdaq: SHEN) reported steady wireline revenue and an increase in the number of DSL customers during the second quarter of 2012, even as the company continued to add voice customers to its triple play voice, video and data cable broadband package.

The company's consolidated results showed a strong year-over-year increase in net income, from $3 million in Q2 2011 to $5.6 million in Q2 2012--an 86 percent jump. Shentel reported earnings per share of 24 cents.

The Edinburg, Va.-based holding company reported wireline operating revenue of $3.3 million--down $100,000 from the second quarter of 2011--and adjusted operating income before appreciation and amortization (OIBDA) that was up $100,000 to $5.8 million.

Subscriber figures were similarly skewed. Shentel picked up 305 DSL customers to climb to 12,505--a 2.5 percent spike from the prior year--but access lines continued to decline, coming in at 22,670. In December 2011, the carrier said it had 232,083 access lines and in June 2011 it reported that it had 23,461.

The "regulated telephone access lines decrease (was) much slower than the industry average," said Earl MacKenzie, executive vice president and COO during a conference call with analysts, noting that 55 percent of access lines have DSL.

"We still have approximately 1,200 dial-up customers; virtually all in surrounding counties outside our telephone service area where broadband is still not available," he added.

Shentel's cable business did a little better, as the carrier completed upgrades to systems it acquired in 2010. Operating revenue increased $2.2 million on 6 percent growth in average revenue generating units (RGUs)—subscribers who buy one or a package of the cable-based video, voice and data services. There was also a 4 percent spike in revenue per subscriber compared to 2011, the carrier said.

At the end of the quarter Shentel said it had 137,025 RGUs, an increase of 4.6 percent or 6,015 RGUs over the previous year even though there were 2,574 fewer in the quarter compared to an increase of 310 RGUs in 2Q 2011.

"Similar to last year, the second quarter reflects the drop in RGUs due to college students … leaving for the summer," MacKenzie said. "It appears that more students went home this year than last.

The carrier also experienced a drop because of "an increase in the number of customers that disconnected due to non-payment," MacKenzie said.

The majority of lost RGUs came in the video segment.

"New activations are weakest in video," MacKenzie said, so the carrier is "pushing two and three service bundles since our research shows that those customers are less likely to churn." As part of that plan, Shentel launched a two-year contract option on bundles with additional 10-15 percent discounts on low-end price increases during the contract period.

Interestingly, for a telephone company, Shentel said its cable voice service grew by 4.9 percent in the first quarter and 43 percent in the second quarter to total 11,133 customers and "we continued to see upside in both residential and small business phone sales."

Shares of Shentel closed Friday at $15.97, up 41 cents or 2.63 percent for the day, and opened at $16.15 Monday, with prices steady at midmorning trading.

For more:
- see this news release
- and this transcript

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