Shentel’s fiber contracts drive up Q4 wireline revenues to $20.7M

Shentel’s wireline segment continues to reap revenues from its fiber business, which garnered new long-term deals from carrier and business customer segments in the fourth quarter.

The service provider’s fiber revenue for the fourth quarter of 2017 was $14.2 million, an increase of 9.7% from the same quarter last year, primarily due to the signing of new fiber contracts.

For the year, Shentel reported total fiber lease revenues of $52.3 million with $30.1 million in affiliate revenue and $22.2 million in non-affiliate revenue. However, new external fiber lease contracts, which have terms that range from 36 to 120 months, declined to $23.9 million.

Earle MacKenzie, EVP and COO of Shentel, said the company’s affiliated and nonaffiliated fiber revenues continued to grow throughout the year, up over 22% from 2016.

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Earle MacKenzie

“We signed $23 million of new nonaffiliated fiber contracts in 2017, down $3.2 million from 2016,” MacKenzie said during the earnings call, according to a Seeking Alpha earnings transcript. “We had a lower dollar total but signed more contracts in 2017 then 2016.”

Transitioning copper, cable broadband customers

In its traditional ILEC business, Shentel’s efforts to offer its customers the option to purchase a broadband only connection is helping the telco stem telephone access line losses.

During the quarter, Shentel reported access line losses were 2.8% due to what it said was “no longer requiring an access line to purchase internet service.”

“We continue to lose regulated telephone access lines, but the loss has slowed to levels like the period before we no longer required a customer to have a voice service to get broadband,” MacKenzie said.

The service provider is also transition more of its customers to higher speeds. Besides raising the speeds of cable customers that are on a 15 Mbps tier or higher to larger speeds, Shentel continues to migrate existing DSL customers in its cable footprint to cable modem broadband, an effort it will continue to ramp throughout this year to ramp its overall broadband customer base.

“In 2018, we are going to be more aggressive in moving DSL customers to cable modem where it is an option,” MacKenzie said. “Over the next few years, we plan to move all DSL customers in our cable footprint to cable modem and shut down the DSL network in the cable area that overlaps our regulated telephone service area.”

At the same time, Shentel will enhance its existing copper network with higher speed capabilities, but it did not elaborate on whether that includes shortening loops to deliver VDSL2 or another technology.

“We are continuing to invest to provide higher DSL speeds in the parts of our regulated telephone networks where we only have a coper network,” MacKenzie said.

Broadband, fiber drive wireline, cable revenues

Shentel’s ongoing efforts to raise fiber and broadband customers drove up revenues for the wireline and cable segments.

Here’s a breakdown of Shentel’s key metrics:

Cable: Cable revenues increased 7.7% due primarily to an increase in High Speed Data and voice Revenue Generating Units (RGUs), and new and existing customers selecting higher-speed data packages. Fourth quarter Cable revenue increased $2.2 million or 7.7% to $30.5 million, primarily due to growth in High Speed Data and Voice RGUs.

Wireline: Segment revenues rose 7.3% to $20.7 million, up from $19.3 million in the same period a year ago, due to increases in fiber revenue.

Capex: Shentel has projected its 2018 budget will be $163.2 million. This figure includes 2017 carryforward in addition to dollars for finishing in the nTelos expansion, along with the new wireless service areas. The service provider said that due to the timing of projects, it spent $138 million in 2017 less than $141 million it initially estimated it would spend.  

Financials: Shentel’s total revenues were $151.6 million, down year-over-year from $155.6 million in the same period a year ago. For the quarter, Shentel reported net income of $60.6 million, compared to a net loss of $0.2 million in the fourth quarter of 2016, representing an improvement of $60.8 million.