Shentel fiber leases drive wireline revenue to $18.6M

Shentel’s wireline segment continues find success in selling fiber-based services and deepening relationships with local schools districts and colleges. Revenue for the segment rose 12.9 percent to $18.6 million, up from $16.5 million in the second quarter of 2015.

Carrier access and fiber revenue for the quarter was $12.3 million, an increase from $2.1 million for the same quarter last year due to signing new fiber contracts.

“We continue to sign $2 million to $3 million of fiber contracts per month with non-affiliated customers, including replacing existing contracts, upgrading a current contract or creating a new relationship,” said Earle MacKenzie, EVP and COO for Shentel during an earnings call, according to a Seeking Alpha transcript.

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Significant new contracts in the second quarter included the school systems of Harrisburg and Giles County, Virginia, Sweet Briar College, and the Virginia Community College system, MacKenzie added.

Similar to a number of fiber specialist companies and fellow ILECs like FairPoint, Shentel is seeing more fiber sales from local school districts, which are taking advantage of the new FCC rules regarding dark fiber.

Under the FCC’s E-Rate order that was issued in 2015, the regulator amended the eligible services list to support the equal treatment of lit and dark fiber services. Local school districts can purchase either kind of service depending on their specific needs via an FCC Form 470 application.

Within the fiber business, Shentel saw gains in affiliated and non-affiliate fiber lease revenues, which have grown over the past 12 months. Affiliate fiber lease revenue was $5.7 million, while non-affiliate revenues were $4.6 million.

Total wireline and cable fiber lease revenues were $10.3 million, up 22.2 percent from the second quarter of 2015. 

Shentel also reported an uptick in wireline and cable segment external fiber contracts. The telco reported $4.5 million and $3.8 million in wireline and cable fiber contracts, ending the quarter with a total of $8.3 million external fiber lease contracts.

Another possible contributor to Shentel’s fiber growth during the quarter was an initiative to expand its fiber network in parts of four states. In February, the telco announced that it started enhancing the reach of its fiber network in Cumberland, Maryland, Morgantown, West Virginia, and the Pennsylvania communities of Carlisle, Harrisburg, Hershey, Waynesboro and York. Over this network, Shentel said it can support 100G speeds as needed.

In addition to  higher fiber revenues, Shentel's move to offer standalone DSL and cable-based broadband in October 2015 is lifting broadband subscriber numbers while reducing telephone access line losses.

“We've seen a decrease of just over 2,000 access lines but have added 1,200 broadband customers including 700 cable modem customers,” said Adele Skolits, VP of finance and CFO. “The increase in broadband revenues has offset the decrease in local telephone service.” 

Operating expenses increased 7.3 percent or $0.9 million to $13.4 million for second quarter 2016, primarily due to costs to support new fiber contracts. Adjusted OIBDA in the wireline segment was $8.3 million, as compared to $7.3 million in second quarter 2015.

Shentel’s total quarterly operating revenues were $130 million, a leap of 52.1 percent year-over-year from $85.7 million from the same period a year ago -- largely due to the completion of its nTelos acquisition, which added more than a half-million wireless subscribers to its rolls. However, the company posted a net loss of $11.8 million a 14 cent per-share loss, a reversal from the year previous when it saw $17.3 million in net income.

For more:
- read the Seeking Alpha earnings transcript (sub. req.)
- see the earnings release

Special report: Tracking wireline telecom earnings in Q2 2016

Related articles:
Shentel fiber sales drive to $10M as E-Rate, tower business rise
Shentel expands Mid-Atlantic fiber network to pursue new business, wireless backhaul opportunities
Shentel realigns top management following nTelos acquisition

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