Shentel's $640M purchase of nTelos to boost company's fiber, cable business

Mid-Atlantic telecommunications company Shentel said it will purchase nTelos for approximately $640 million in a move the company said will improve its fiber and cable holdings. 

There will be some overlap of nTelos network assets, including fiber and cable, that Shentel will be able to leverage, President and CEO Chris French said on a call with investors this morning announcing the acquisition.

Shentel will migrate much of nTelos' backhaul traffic onto its own network, Adele Skolits, CFO and VP of finance for Shentel, told FierceTelecom. "To the extent we have fiber in the area in which nTelos has, or we will be building new cell sites, we intend to take advantage of that.  Over time any existing agreements for backhaul will be replaced with our backhaul in those areas."

Shentel's carrier access and fiber revenues have grown slowly but steadily this year, from $9.6 million in the first quarter to $10.2 million in the second quarter of 2015, for example. New fiber contracts drove much of that growth.

Wireless backhaul has become a key component of Shentel's strategy over the past couple of years, helping to offset the inevitable declines in POTS voice revenue. In 2014, for example, the provider doubled its external fiber lease contracts in the third quarter alone, and it has continued to build on that throughout 2015.

Shentel has built fiber to 199 cell sites -- 157 Shentel sites and 42 other cell sites -- so far, "with routes for an additional 31 sites under construction," said Earle MacKenzie, EVP and COO, in the company's second-quarter earnings call, according to a Seeking Alpha transcript of the event.

Shentel's deal for nTelos will double its retail wireless customer base to more than 1 million, and expand its wholesale wireless relationship with Sprint. In addition to gaining nTelos' retail wireless assets in the Mid-Atlantic and Southeast regions, Shentel will receive payments from Sprint over the next five to six years totaling up to $252 million, under new affiliate terms with the top U.S. wireless carrier. Sprint and Shentel have extended their terms by five years, to 2029. FierceWireless has complete details in this article.

The size of Shentel's overall network may be a real boost to Sprint in both Shentel's current operating areas and the areas it will take over from nTelos once the deal closes. Customers in cities served by Sprint "are always impacted by the quality of the Sprint network around us," MacKenzie said on the earnings call. "They have been able to bring up some additional capacity, but they still having some capacity issues in the outer suburbs of the big cities. And it is impacting us." A closer wholesale relationship with Sprint, one in which it's easier to leverage Shentel's current 550-plus cell sites, may help resolve some of those capacity issues.

The transition of nTelos' assets is expected to be smooth, with retail customers not noticeably affected, the company said in a statement. Shentel told local TV affiliate WHSV that most jobs in nTelos' current operating areas are safe, for now.

"Our intention is to bring all the retail store employees over along with their management, all of the operations folks in the field and all of their management and most of the engineering folks and some of their management," William L. Pirtle, VP of wireless for Shentel, told the station. "There is some overlap in the functionality between the nTelos Headquarters location and Spring Headquarters Location." Shentel will manage nTelos' retail locations, which will rebrand as Sprint stores.

Any significant personnel changes in overlapping nTelos areas likely won't be made until 2016, after the deal closes, Pirtle said.

For more:
- see this nTelos/Shentel release
- see FierceWireless' coverage
- see this WHSV article

Related articles:
Sprint affiliate Shentel buys fellow wholesale partner nTelos for $640M
Shentel's cable segment helps drive up Q2 2015 total fiber sales to $10.2M
NTelos CEO mum on rumors of merger with Shentel, but says board is looking at strategic opportunities

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