Shentel's fiber sales rise to $7.1M, but contract costs take a $400K bite

Shentel's wireline network continues to see gains from its wholesale fiber services business with $7.1 million in third-quarter sales. The service provider said that it has strong customer interest for its fiber network services.

"You see that fiber sales are significantly ahead of last year and we have a healthy sales funnel," said Earle McKenzie, executive vice president and COO, during the earnings call, according to a Seeking Alpha earnings transcript.

However compelling the fiber network gains were, Shentel's wireline results were impacted by $400,000 in charges related to cable programming costs and new fiber contract costs.

The service provider continued to see improved penetration in digital video, broadband and voice services.

On the broadband front, Shentel began offering cable modem service to the nearly 16,000 homes in its ILEC that are also passed by its traditional copper network. Additionally, it is leveraging bonding to offer higher speed DSL services in its rural non-cable areas.

The service provider has increased broadband penetration in its LEC to 59.4 percent. 

While a bit late to the game, the service provider also began offering a standalone or "naked" DSL broadband service, meaning customers don't have to purchase a phone line when they want data service.

"The biggest change is that we will no longer require residential customers in our LEC area to have voice service in order to obtain broadband," McKenzie said. "We have increased our DSL rates by $10 per month, which we will credit if the customer keeps its voice service."

Shentel's total wireline segment revenues rose 8.5 percent to $17.3 million in the third quarter of 2015, up from $15.9 million in the third quarter of 2014.

The growth in new fiber contracts drove carrier access and fiber revenue for the quarter to $10.9 million, an increase from $9.9 million from the same quarter last year.

Operating expenses increased 15.8 percent or $1.8 million to $13.3 million for third quarter 2015, due to higher cable programming costs, costs to support new fiber contracts, and the $0.4 million Wireline-related portion of the depreciation adjustment recorded in the third quarter of 2015.

Shentel's overall third-quarter operating income was $15.1 million, up 6.7 percent from the same quarter last year.

However, net revenues were $8 million, the same as the third quarter of 2014. The service provider said the current year results were unfavorably impacted by $2.1 million of expenses related to the company's acquisition of NTELOS and a depreciation adjustment of $2.6 million.

For more:
- see the earnings release
- here's the earnings transcript (sub. req.)

Special report: Tracking wireline telecom earnings in Q3 2015

Related articles:
Shentel realigns top management following nTelos acquisition
Shentel's $640M purchase of nTelos to boost company's fiber, cable business
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

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