Shentel’s Q3 fiber sales driven by uptick in wireless tower backhaul deals

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Shentel is seeing the benefits of wireless operators’ expansion efforts as demand for its fiber to connect towers continues to drive up wireline fiber lease revenues.

RELATED: Tracking wireline telecom earnings in Q3 2016

Earle MacKenzie, EVP and COO of Shentel, told investors during the company's third-quarter earnings call that affiliated fiber sales were related to winning new fiber-to-the-tower deals.

“Affiliated and non-affiliated fiber lease revenues continue to grow,” MacKenzie said. “The affiliated is a result of our continuing to build fiber-to-the-towers, which avoids dollars being paid to others.”

Wireline and cable fiber lease revenues were $10.9 million, up 17.6 percent year-over-year. Within this segment, there was $6.2 million in affiliate and $4.7 million in non-affiliate fiber lease revenue.

However, the service provider’s new external fiber lease contract revenues were $3.4 million, down from $7.1 million in the same period a year ago.

“The drop in new sales was related to the timing of a big contract in 2015,” MacKenzie said.

Overall wireline segment revenue increased 8.4 percent to $18.7 million in the third quarter of 2016, up from $17.3 million in the third quarter of 2015. 

Carrier access and fiber revenue for the quarter was $12.4 million, an increase of 13.8 percent from the same quarter last year, as a result of new fiber contracts. 

Wireline operating expenses rose 4.8 percent, or $0.6 million to $13.9 million, for third quarter 2016, primarily due to costs to support new fiber contracts. Adjusted OIBDA in the wireline segment for third quarter 2016 was $7.7 million, as compared to $7.5 million in third quarter 2015.

On the consumer side of the wireline ILEC business, Shentel narrowed access line losses to 13.2 percent in past 12 months as a result of no longer requiring access line to purchase internet service. The service provider reported that it had a total of 18,700 total access lines as of the end of the quarter.

The service provider had a total of 13,300 DSL subscribers and 900 cable modem data subscribers, ending the quarter with a total of 14,200 broadband subscribers.

In the Shenandoah County, Virginia market where it operates its traditional ILEC business, Shentel is using its cable plant to offer 100 Mbps and above speeds to customers that were traditionally limited to slower speed DSL services.

“In the past 12 months, we have seen customers take the higher speed cable modem service,” MacKenzie said. “As we have seen in our cable business, customers are migrating up speed so the loss of access line revenue has been offset by the increase in broadband revenues.”

For the third quarter, Shentel reported total revenue of $156.8 million, up 84.1 percent from $85.2 million for the third quarter of 2015. 

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