Shenandoah Telecommunications Company Reports First Quarter 2018 Results

May 3, 2018 at 7:01 AM EDT

Sprint Territory Expansion Completed

Net Income More Than Doubles, Operating Income Improved 34%

EDINBURG, Va., May 03, 2018 (GLOBE NEWSWIRE) --  Shenandoah Telecommunications Company (“Shentel”) (NASDAQ:SHEN) announces financial and operating results for the three months ended March 31, 2018.

Consolidated First Quarter Results

For the quarter ended March 31, 2018, the Company reported net income of $4.8 million, compared to net income of $2.3 million in the first quarter of 2017, representing an improvement of $2.5 million, or 106.3%. The Company completed the acquisition and integration of Sprint subscribers related to the additional Sprint territory under the affiliate agreement on February 1, 2018. The 2018 financial results include the impact of the new revenue recognition standard and Tax Reform.

Earnings per Share was $0.10 in the first quarter 2018 compared to $0.05 in the prior year period. Excluding the impact of the new revenue recognition standard, earnings in the first quarter 2018 were $0.09 per share.

Total revenues were $151.7 million, a decrease of 1.4% compared to first quarter 2017 revenues of $153.9 million.  Excluding the impact of the new revenue recognition standard, which became effective January 1, 2018, total revenues improved approximately $2.0 million. The adoption of the new revenue standard now requires the Company to report costs such as commissions for the national sales channel that are settled separately with Sprint as reductions of revenue. Previously these costs were recorded in cost of goods and services and in selling, general and administrative expense.

Total operating expenses were $137.4 million in the first quarter of 2018 compared to $143.2 million in the prior year period, a decrease of $5.8 million or 4.1%.  Excluding the impacts of the new revenue standard, operating expenses decreased $1.4 million due to a decrease in acquisition and integration costs related to the nTelos integration, and a decrease in depreciation and amortization as assets acquired in the nTelos acquisition were retired. These declines were partially offset by increases in network and selling costs associated with the continued expansion of our networks to support the increase and demand of our subscriber base.

Adjusted OIBDA decreased 6.6% to $68.7 million in the first quarter of 2018 from $73.5 million in the first quarter of 2017. Continuing OIBDA (Adjusted OIBDA less the benefit received from the waived Sprint management fee) decreased 7.7% to $59.6 million from $64.6 million. The adoption of the new revenue recognition standard did not have an impact on Adjusted OIBDA.

President and CEO Christopher E. French commented, “We’re pleased to have continued our momentum from the fourth quarter, delivering enhanced net profitability as well as revenue improvement in two of our segments. The early completion of our transition of nTelos to the Sprint affiliate model resulted in a significant reduction in operating expenses for the quarter and our upgraded network and service packages position us well as a leading telecommunications provider in all of the markets in our extended coverage area.”

Wireless

First quarter wireless revenue decreased $5.1 million or 4.4%, due primarily to the adoption of the new revenue recognition standard. Excluding the impacts of the new revenue recognition standard, revenues decreased $0.9 million driven by a decline in average revenue per subscriber offset by an increase in the number of Sprint's subscribers, including the acquisition of the new territory on February 1, 2018.  The decline in average revenue per subscriber was driven by promotions and discounts.

First quarter operating expenses decreased $10.8 million or 10.1%.  Excluding the impacts of the new revenue recognition standard, operating expenses decreased $6.3 million.  The decrease was due to the elimination of acquisition and integration costs related to the nTelos integration and a reduction in depreciation and amortization.  These decreases were offset by increases in network costs resulting from the completion of our 4G roll-out and expanded coverage, as well as additional selling costs.

Shentel served 774,861 wireless postpaid customers at March 31, 2018, up 8.0% over March 31, 2017.  First quarter postpaid churn was 1.9% and flat to the preceding quarter. The Company had net additions of 38,264 postpaid customers in the quarter, including 38,434 postpaid subscribers in the acquired territory. As of March 31, 2018, tablets and data devices were 8% of the postpaid base reflecting a net gain of 187 for these devices in the quarter.

Shentel served 250,191 prepaid wireless customers at March 31, 2018, an increase of 35 thousand compared to the first quarter of last year.  Total first quarter prepaid churn was 4.4%, down from 5.0% in Q1 2017.  The Company had net additions of 24,369 prepaid customers in the first quarter of 2018, including 15,691 prepaid subscribers in the acquired territory. Excluding the impact of the acquired territory, prepaid subscribers grew 3.7%.

First quarter 2018 Adjusted OIBDA in Wireless was $57.6 million, a decrease of 6.3% from the first quarter of 2017.  Continuing OIBDA in Wireless was $48.5 million, down 7.6% from the first quarter of 2017.

Mr. French continued, “We have significantly grown our coverage area through both the nTelos acquisition and the recent expansion of our Sprint relationship which added 1.1 million POPs in Lancaster County, Pennsylvania, central and southwestern Virginia, southern West Virginia and eastern Kentucky.  With the addition of these new markets, we’ve focused our marketing efforts on increasing customer awareness around our state-of-the-art network, extended coverage area and enhanced service offerings.  We have expanded into complementary markets where we can build networks designed to improve the customer experience by bridging coverage between our existing service areas and Sprint’s metro networks while also providing more continuous, reliable service.  We believe the benefits of our upgraded network and expanded market coverage will drive continued customer additions and market share growth.”

Cable

Service revenues in Cable increased $2.1 million or 7.8% to $28.5 million, primarily due to growth in High Speed Data and Voice RGUs, video rate increases implemented in January 2018 to pass through programming cost increases, and new and existing customers selecting higher speed data packages.  Operating expenses increased 1.2% or $0.3 million in the first quarter of 2018. In the first quarter the Company added 1,223 High Speed Data users and 188 voice users, and lost 1,058 video users. The impact of the new revenue recognition standard, which includes the deferral of incremental commissions and installation costs, was immaterial to operating income for the period ended March 31, 2018.

Adjusted OIBDA in Cable for first quarter 2018 was $11.7 million, up 26.2% from $9.3 million in the first quarter of 2017.

“Consumers increasingly demand high speed, availability, and reliability when they select a new cable provider or look to upgrade their existing service, and our robust network meets and exceeds these requirements. Our ability to provide both high speed bandwidth and dependability is a competitive advantage that allows us to attract new customers and to seamlessly meet the changing needs of our existing customers,” Mr. French stated.

Wireline

Revenue in Wireline increased 2.9% to $19.7 million in the first quarter of 2018, as compared to $19.2 million in the first quarter of 2017.  Carrier access and fiber revenue for the first quarter of 2018 was $12.9 million, an increase of 1.5% from the same quarter last year, primarily as a result of new fiber contracts. Increases in broadband service revenue offset the loss of regulated voice service revenue.  Operating expenses increased 6.1% or $0.9 million to $14.9 million for first quarter 2018, primarily due to costs to support new fiber contracts. The impact of the new revenue recognition standard, which includes the deferral of incremental commissions and installation costs, was immaterial to operating income for the period ended March 31, 2018.

Adjusted OIBDA in Wireline for first quarter 2018 was $8.1 million, as compared to $8.4 million in first quarter 2017.

Other Information

Capital expenditures were $24.4 million in the first quarter of 2018 compared to $38.6 million in the comparable 2017 period. The Company has spent or committed $47.7 million of the estimated 2018 capital budget.

Cash and cash equivalents as of March 31, 2018 were $49.4 million, compared to $78.6 million at December 31, 2017. During the quarter, the Company funded the expansion of the Sprint territory with $52 million of cash on hand. Outstanding debt at March 31, 2018 totaled $810.9 million, net of unamortized loan costs, compared to $822.0 million as of December 31, 2017.  As of March 31, 2018 no amounts were outstanding under the revolving line of credit.

Conference Call and Webcast

Teleconference Information:

Date: May 3, 2018   
Time: 10:00 A.M. (ET)
Dial in number: 1-888-695-7639

Password: 9476919
Audio webcast: http://investor.shentel.com/

An audio replay of the call will be available approximately two hours after the call is complete, through May 17, 2018 by calling (855) 859-2056.

About Shenandoah Telecommunications

Shenandoah Telecommunications Company (Shentel) provides a broad range of diversified communications services through its high speed, state-of-the-art network to customers in the Mid-Atlantic United States.  The Company’s services include: wireless voice and data; cable video, internet and digital voice; fiber network and services; and regulated local and long distance telephone. Shentel is the exclusive personal communications service (“PCS”) Affiliate of Sprint in portions of Pennsylvania, Maryland, Virginia, West Virginia, and portions of Kentucky and Ohio.  For more information, please visit www.shentel.com.

This release contains forward-looking statements that are subject to various risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen factors. A discussion of factors that may cause actual results to differ from management's projections, forecasts, estimates and expectations is available in the Company’s filings with the SEC. Those factors may include changes in general economic conditions, increases in costs, changes in regulation and other competitive factors.

CONTACTS:
Shenandoah Telecommunications, Inc.
James F. Woodward
Senior Vice President, Finance and Chief Financial Officer
540-984-5990
James.Woodward@emp.shentel.com

Or
John Nesbett/Jennifer Belodeau
Institutional Marketing Services (IMS)
203-972-9200
jnesbett@institutionalms.com

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

  March 31,
 2018
  December 31,
 2017
       
Cash and cash equivalents $ 49,448     $ 78,585  
Other current assets 131,816     94,310  
Total current assets 181,264     172,895  
       
Investments 11,717     11,472  
Property, plant and equipment, net 672,017     686,327  
Intangible assets, net 413,537     380,979  
Goodwill 146,497     146,497  
Deferred charges and other assets, net 33,934     13,690  
Total assets $ 1,458,966     $ 1,411,860  
       
Total current liabilities 130,604     137,584  
Long-term debt, less current maturities 736,387     757,561  
Other liabilities 183,539     166,493  
Total shareholders' equity 408,436     350,222  
Total liabilities and shareholders' equity $ 1,458,966     $ 1,411,860  

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

    Three Months Ended
March 31,
    2018   2017
         
Service revenues and other   $ 134,153     $ 150,521  
Equipment revenues   17,579     3,359  
Total operating revenues   151,732     153,880  
         
Operating expenses:        
Cost of services   49,342     48,776  
Cost of goods sold   15,805     4,985  
Selling, general and administrative   28,750     40,153  
Acquisition, integration and migration expenses       4,489  
Depreciation and amortization   43,487     44,804  
Total operating expenses   137,384     143,207  
Operating income (loss)   14,348     10,673  
         
Other income (expense):        
Interest expense   (9,332 )   (9,100 )
Gain (loss) on investments, net   (32 )   120  
Non-operating income (loss), net   1,021     1,255  
Income (loss) before income taxes   6,005     2,948  
         
Income tax expense (benefit)   1,176     607  
Net income (loss)   $ 4,829     $ 2,341  
         
Earnings (loss) per share:        
Basic   $ 0.10     $ 0.05  
Diluted   $ 0.10     $ 0.05  
Weighted average shares outstanding, basic   49,474     49,050  
Weighted average shares outstanding, diluted   50,024     49,834  
             
             

The Company adopted ASU 2014-09, Revenue from Contracts with Customers (“Topic 606”), effective January 1, 2018, using the modified retrospective method as discussed in Note 2, Revenue from Contracts with Customers. The following table identifies the impact that the application of Topic 606 had on the Company for the three months ended March 31, 2018:

($ in thousands, except per share amounts)   Topic 606 Impact - Consolidated  
  Prior to
Adoption of
Topic 606
Changes in
Presentation
(1)
Equipment
Revenue (2)
Deferred
Costs (3)
3/31/2018
As reported
Service revenues and other $ 153,812   $ (20,014 ) $   $ 355   $ 134,153  
Equipment revenues 2,059     15,520     17,579  
  Total operating revenues 155,871   (20,014 ) 15,520   355   151,732  
Cost of services 49,199       143   49,342  
Cost of goods sold 6,118   (5,833 ) 15,520     15,805  
Selling, general & administrative 42,967   (14,181 )   (36 ) 28,750  
Depreciation and amortization 43,487         43,487  
  Total operating expenses 141,771   (20,014 ) 15,520   107   137,384  
  Operating income 14,100       248   14,348  
Other income (expense) (8,343 )       (8,343 )
Income tax expense 1,110       66   1,176  
  Net income $ 4,647   $   $   $ 182   $ 4,829  
           
Earnings per share          
  Basic $ 0.09         $ 0.10  
  Diluted $ 0.09         $ 0.10  
Weighted average shares o/s, basic 49,474         49,474  
Weighted average shares o/s, diluted 50,024         50,024  

______________________________________________________
1)        Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, and to provide on-going support to their prepaid customers in our territory were historically recorded as expense when incurred. Under Topic 606, these amounts represent consideration payable to our customer, Sprint, and are recorded as a reduction of revenue. In 2017, these amounts were approximately $44.8 million for the national commissions, previously recorded in selling, general and administrative, $18.7 million for national device costs previously recorded in cost of goods and services, and $16.9 million for the on-going service to Sprint's prepaid customers, previously recorded in selling, general and administrative.

2)     Costs incurred by the Company for the sale of devices under Sprint’s device financing and lease programs were previously recorded net against revenue. Under Topic 606, the revenue from device sales is recorded gross as equipment revenue and the device costs are recorded gross and reclassified to cost of goods and services. These amounts were approximately $63.8 million in 2017.

3)     Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, which historically have been expensed when incurred, are deferred and amortized against revenue over the expected period of benefit of approximately 21 to 24 months.  In Cable and Wireline, installation revenues are recognized over a shorter period of benefit. The deferred balance as of March 31, 2018 is approximately $52.9 million and is classified on the balance sheet as current and non-current assets, as applicable.

The following table identifies the impact that the application of Topic 606 had on the Company's Wireless operations for the three months ended March 31, 2018:

($ in thousands)   Topic 606 Impact - Wireless  
  Prior to
Adoption of
Topic 606
Changes in
Presentation
(1)
Equipment
Revenue (2)
Deferred
Costs (3)
3/31/2018
As reported
Service revenues and other $ 112,683   $ (20,014 ) $   $ 355   $ 93,024  
Equipment revenues 1,854     15,520     17,374  
  Total operating revenues 114,537   (20,014 ) 15,520   355   110,398  
Cost of services 33,750         33,750  
Cost of goods sold 6,040   (5,833 ) 15,520     15,727  
Selling, general & administrative 26,316   (14,181 )     12,135  
Depreciation and amortization 33,925         33,925  
  Total operating expenses 100,031   (20,014 ) 15,520     95,537  
  Operating income 14,506       355   14,861  

______________________________________________________
1)     Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, and to provide on-going support to their prepaid customers in our territory were historically recorded as expense when incurred. Under Topic 606, these amounts represent consideration payable to our customer, Sprint, and are recorded as a reduction of revenue. In 2017, these amounts were approximately $44.8 million for the national commissions, previously recorded in selling, general and administrative, $18.7 million for national device costs previously recorded in cost of goods and services, and $16.9 million for the on-going service to Sprint's prepaid customers, previously recorded in selling, general and administrative.

2)     Costs incurred by the Company for the sale of devices under Sprint’s device financing and lease programs were previously recorded net against revenue. Under Topic 606, the revenue from device sales is recorded gross as equipment revenue and the device costs are recorded gross and reclassified to cost of goods and services. These amounts were approximately $63.8 million in 2017.

3)     Amounts payable to Sprint for the reimbursement of costs incurred by Sprint in their national sales channel for commissions and device costs, which historically have been expensed when incurred, are deferred and amortized against revenue over the expected period of benefit of approximately 21 to 24 months. The deferred balance as of March 31, 2018 is approximately $43.2 million and is classified on the balance sheet as current and non-current assets, as applicable.

Non-GAAP Financial Measures

In managing our business and assessing our financial performance, management supplements the information provided by financial statement measures prepared in accordance with GAAP with Adjusted OIBDA and Continuing OIBDA, which are considered “non-GAAP financial measures” under SEC rules.

Adjusted OIBDA is defined as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of:  certain non-recurring transactions; impairment of assets; gains and losses on asset sales; actuarial gains and losses on pension and other post-retirement benefit plans; and share-based compensation expense, amortization of deferred costs related to the adoption of Topic 606, and adjusted to include the benefit received from the waived management fee by Sprint over the next approximately five-year period. Continuing OIBDA is defined as Adjusted OIBDA, less the benefit received from the waived management fee by Sprint. Adjusted OIBDA and Continuing OIBDA should not be construed as an alternative to operating income as determined in accordance with GAAP as a measure of operating performance.

In a capital-intensive industry such as telecommunications, management believes that Adjusted OIBDA and Continuing OIBDA and the associated percentage margin calculations are meaningful measures of our operating performance.  We use Adjusted OIBDA and Continuing OIBDA as supplemental performance measures because management believes these measures facilitate comparisons of our operating performance from period to period and comparisons of our operating performance to that of our peers and other companies by excluding potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the other items described above for which additional adjustments were made.  In the future, management expects that the Company may again report Adjusted OIBDA and Continuing OIBDA excluding these items and may incur expenses similar to these excluded items.  Accordingly, the exclusion of these and other similar items from our non-GAAP presentation should not be interpreted as implying these items are non-recurring, infrequent or unusual.

While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the current period allocation of costs associated with long-lived assets acquired or constructed in prior periods, and accordingly may obscure underlying operating trends for some purposes.  By isolating the effects of these expenses and other items that vary from period to period without any correlation to our underlying performance, or that vary widely among similar companies, management believes Adjusted OIBDA and Continuing OIBDA facilitates internal comparisons of our historical operating performance, which are used by management for business planning purposes, and also facilitates comparisons of our performance relative to that of our competitors.  In addition, we believe that Adjusted OIBDA and Continuing OIBDA and similar measures are widely used by investors and financial analysts as measures of our financial performance over time, and to compare our financial performance with that of other companies in our industry.

Adjusted OIBDA and Continuing OIBDA have limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.  These limitations include the following:

  • they do not reflect capital expenditures;
  • many of the assets being depreciated and amortized will have to be replaced in the future and Adjusted OIBDA and Continuing OIBDA do not reflect cash requirements for such replacements;
  • they do not reflect costs associated with share-based awards exchanged for employee services;
  • they do not reflect interest expense necessary to service interest or principal payments on indebtedness;
  • they do not reflect gains, losses or dividends on investments;
  • they do not reflect expenses incurred for the payment of income taxes; and
  • other companies, including companies in our industry, may calculate Adjusted OIBDA and Continuing OIBDA differently than we do, limiting its usefulness as a comparative measure.

In light of these limitations, management considers Adjusted OIBDA and Continuing OIBDA as financial performance measures that supplement but do not replace the information reflected in our GAAP results.

The following tables reconcile Adjusted OIBDA and Continuing OIBDA to operating income, which we consider to be the most directly comparable GAAP financial measure, for the three months ended March 31, 2018 and 2017:

                     
                     
Three Months Ended March 31, 2018
(in thousands)
  Wireless   Cable   Wireline   Other   Consolidated
Operating income   $ 14,861     $ 5,527     $ 4,772     $ (10,812 )   $ 14,348  
Deferral of costs due to Topic 606   (354 )   141     (35 )       (248 )
Plus depreciation and amortization   33,925     6,024     3,394     144     43,487  
Plus share based compensation expense               2,037     2,037  
Plus the benefit received from the waived management fee (1)   9,048                 9,048  
Plus amortization of intangibles netted in rent expense   81                 81  
Less actuarial gains on pension plans               (82 )   (82 )
Adjusted OIBDA   57,561     11,692     8,131     (8,713 )   68,671  
Less waived management fee   (9,048 )               (9,048 )
Continuing OIBDA   $ 48,513     $ 11,692     $ 8,131     $ (8,713 )   $ 59,623  


Three Months Ended March 31, 2017 
(in thousands)
  Wireless   Cable   Wireline   Other   Consolidated
Operating income   $ 9,137     $ 3,139     $ 5,073     $ (6,676 )   $ 10,673  
Plus depreciation and amortization   35,752     5,788     3,132     132     44,804  
Plus (gain) loss on asset sales   (24 )   (23 )   30     (11 )   (28 )
Plus share based compensation expense   725     364     146     331     1,566  
Plus the benefit received from the waived management fee (1)   9,184                 9,184  
Plus amortization of intangibles netted in rent expense   258                 258  
Plus temporary back office costs to support the billing operations through migration (2)   2,593             2     2,595  
Plus acquisition, integration and migration related expenses   3,792             697     4,489  
Adjusted OIBDA   61,417     9,268     8,381     (5,525 )   73,541  
Less waived management fee   (8,940 )               (8,940 )
Continuing OIBDA   $ 52,477     $ 9,268     $ 8,381     $ (5,525 )   $ 64,601  

________________________________
 1)    Under our amended affiliate agreement, Sprint agreed to waive the Management Fees charged on both postpaid and prepaid revenues, up to $4.2 million per month, until the total amount waived reaches approximately $255.6 million, which is expected to occur in 2022.
 2)    Represents back office expenses required to support former nTelos subscribers that migrated to the Sprint back office.

Operating Results

Three Months Ended March 31, 2018                    
(in thousands) Wireless   Cable   Wireline   Other   Eliminations   Consolidated Totals
External revenues                      
Service revenues $ 89,759     $ 28,471     $ 5,308     $     $     $ 123,538  
Equipment revenues $ 17,374     $ 159     $ 46     $     $     $ 17,579  
Other 2,026     2,050     6,539             10,615  
Total external revenues 109,159     30,680     11,893             151,732  
Internal revenues 1,239     1,031     7,814         (10,084 )    
Total operating revenues 110,398     31,711     19,707         (10,084 )   151,732  
                       
Operating expenses                      
Costs of services 33,750     15,156     9,802         (9,366 )   49,342  
Cost of goods sold 15,727     56     22             15,805  
Selling, general and administrative 12,135     4,948     1,717     10,668     (718 )   28,750  
Acquisition, integration and migration expenses                      
Depreciation and amortization 33,925     6,024     3,394     144         43,487  
Total operating expenses 95,537     26,184     14,935     10,812     (10,084 )   137,384  
Operating income (loss) $ 14,861     $ 5,527     $ 4,772     $ (10,812 )   $     $ 14,348  


                     
Three Months Ended March 31, 2017                    
(in thousands) Wireless   Cable   Wireline   Other   Eliminations   Consolidated
Totals
External revenues                      
Service revenues $ 108,186     $ 26,411     $ 5,048     $     $     $ 139,645  
Equipment revenues $ 3,145     $ 182     $ 32     $     $     $ 3,359  
Other 2,897     1,853     6,126             10,876  
Total external revenues 114,228     28,446     11,206             153,880  
Internal revenues 1,235     567     7,948         (9,750 )    
Total operating revenues 115,463     29,013     19,154         (9,750 )   153,880  
                       
Operating expenses                      
Costs of services 33,423     15,178     9,233         (9,058 )   48,776  
Cost of goods sold 4,895     50     40             4,985  
Selling, general and administrative 28,464     4,858     1,676     5,847     (692 )   40,153  
Acquisition, integration and migration expenses 3,792             697         4,489  
Depreciation and amortization 35,752     5,788     3,132     132         44,804  
Total operating expenses 106,326     25,874     14,081     6,676     (9,750 )   143,207  
Operating income (loss) $ 9,137     $ 3,139     $ 5,073     $ (6,676 )   $     $ 10,673  

Wireless Service Revenues

  Three Months Ended
March 31,
  Change
(in thousands)

2018   2017   $   %
Wireless Service Revenues:              
Postpaid net billings (1) $ 93,290     $ 92,989     $ 301     0.3  
Amortization of deferred contract & other costs (3) (6,871 )       (6,871 )   *
Management fee (7,400 )   (7,383 )   (17 )   0.2  
Net service fee (7,955 )   (7,200 )   (755 )   10.5  
  Total Postpaid Service Revenue 71,064     78,406     (7,342 )   (9.4 )
               
Prepaid net billings (2) 26,341     25,202     1,139     4.5  
Amortization of deferred contract & other costs (3) (12,788 )       (12,788 )   *
Sprint management fee (1,649 )   (1,557 )   (92 )   5.9  
  Total Prepaid Service Revenue 11,904     23,645     (11,741 )   (49.7 )
               
Travel and other revenues 6,791     6,135     656     10.7  
Total Service Revenues $ 89,759     $ 108,186     $ (18,427 )   (17.0 )

_______________________________________________________
1)     2018 includes the effect of the adoption of Topic 606 that requires the Company to report transactions previously classified as cost of goods sold as reductions of revenue.
2)     Postpaid net billings are defined under the terms of the affiliate contract with Sprint to be the gross billings to customers within our wireless network coverage area less billing credits and adjustments and allocated write-offs of uncollectible accounts.
3)      Due to the adoption of Topic 606, costs reimbursed to Sprint for commission and acquisition cost incurred in their national sales channel are recorded as reduction of revenue and amortized over the period of benefit.  Additionally, costs reimbursed to Sprint for the support of their prepaid customer base are recorded as a reduction of revenue.  These costs were previously recorded in cost of goods sold, and selling, general and administrative.

Supplemental Information

Subscriber Statistics

The following tables indicate selected operating statistics of Wireless, including Sprint subscribers, as of the dates shown:

    March 31,
2018 (3)
  December 31, 
2017 (4)
  March 31,
2017
  December 31,
2016
Retail PCS Subscribers – Postpaid   774,861     736,597     717,150     722,562  
Retail PCS Subscribers – Prepaid (1)   250,191     225,822     214,771     206,672  
PCS Market POPS (000) (2)   7,023     5,942     5,536     5,536  
PCS Covered POPS (000) (2)   5,889     5,272     4,836     4,807  
CDMA Base Stations (sites)   1,742     1,623     1,476     1,467  
Towers Owned   193     192     196     196  
Non-affiliate Cell Site Leases   192     192     206     202  

_______________________________________________________

  1. As of September 2017, the Company is no longer including Lifeline subscribers to be consistent with Sprint's policy. Historical customer counts have been adjusted accordingly.
  2. "POPS" refers to the estimated population of a given geographic area.  Market POPS are those within a market area which we are authorized to serve under our Sprint PCS affiliate agreements, and Covered POPS are those covered by our network. As of December 31, 2017, the data source for POPS is U.S. census data. Historical periods previously referred to other third party population data and have been recast to refer to U.S. census data.
  3. Beginning March 31, 2018 includes Richmond Expansion Area.
  4. Beginning December 31, 2017 includes Parkersburg Expansion Area.
    Three Months Ended
March 31,
    2018   2017
Gross PCS Subscriber Additions – Postpaid   81,420     38,701  
Net PCS Subscriber Additions (Losses) – Postpaid   38,264     (5,412 )
Gross PCS Subscriber Additions – Prepaid (1)   55,802     39,445  
Net PCS Subscriber Additions (Losses) – Prepaid (1)   24,369     8,099  
PCS Average Monthly Retail Churn % - Postpaid (2)   1.89 %   2.05 %
PCS Average Monthly Retail Churn % - Prepaid (1)   4.42 %   5.01 %

_______________________________________________________

  1. The Company is no longer including Lifeline subscribers to be consistent with Sprint's policy. Historical customer counts and churn % have been adjusted accordingly.
  2. PCS Average Monthly Retail Churn is the average of the monthly subscriber turnover, or churn, calculations for the period.

The subscriber statistics shown above include the following:

  February 1, 2018   April 6, 2017   May 6, 2017
  Richmond
Expansion Area
  Parkersburg
Expansion Area
  nTelos Area
PCS Subscribers - Postpaid 38,343     19,067     404,965  
PCS Subscribers - Prepaid 15,691     5,962     154,944  
Acquired PCS Market POPS (000) (1) 1,082     511     3,099  
Acquired PCS Covered POPS (000) (1) 602     244     2,298  
Acquired CDMA Base Stations (sites) (2) 105         868  
Towers         20  
Non-affiliate Cell Site Leases         10  

_______________________________________________________

  1. POPS refers to the estimated population of a given geographic area.  Market POPS are those within a market area which we are authorized to serve under our Sprint PCS affiliate agreements, and Covered POPS are those covered by our network.
  2. As of March 31, 2018 we have shut down 107 overlap sites associated with the nTelos Area.

The following table shows selected operating statistics for Cable as of the dates shown:

    March 31,
2018
  December 31,
2017
  March 31,
2017
  December 31,
2016
Homes Passed (1)   184,975     184,910     184,819     184,710  
Customer Relationships (2)                
Video users   43,264     44,269     47,160     48,512  
Non-video customers   35,133     33,559     30,765     28,854  
Total customer relationships   78,397     77,828     77,925     77,366  
Video                
Users (3)   45,555     46,613     49,384     50,618  
Penetration (4)   24.6 %   25.2 %   26.7 %   27.4 %
Digital video penetration (5)   75.8 %   76.2 %   77.1 %   77.4 %
High-speed Internet                
Available Homes (6)   184,975     184,910     183,935     183,826  
Users (3)   65,141     63,918     61,815     60,495  
Penetration (4)   35.2 %   34.6 %   33.6 %   32.9 %
Voice                
Available Homes (6)   184,975     182,379     181,198     181,089  
Users (3)   22,743     22,555     21,647     21,352  
Penetration (4)   12.3 %   12.4 %   11.9 %   11.8 %
Total Revenue Generating Units (7)   133,439     133,086     132,846     132,465  
Fiber Route Miles   3,371     3,356     3,233     3,137  
Total Fiber Miles (8)   124,701     122,011     100,799     92,615  
Average Revenue Generating Units   132,865     132,759     132,419     131,218  

_______________________________________________________
 1)    Homes and businesses are considered passed (“homes passed”) if we can connect them to our distribution system without further extending the transmission lines.  Homes passed is an estimate based upon the best available information.

 2)    Customer relationships represent the number of billed customers who receive at least one of our services.

 3)    Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer.  Where services are provided on a bulk basis, such as to hotels and some multi-dwelling units, the revenue charged to the customer is divided by the rate for comparable service in the local market to determine the number of customer equivalents included in the customer counts shown above.

 4)    Penetration is calculated by dividing the number of users by the number of homes passed or available homes, as appropriate.

 5)    Digital video penetration is calculated by dividing the number of digital video users by total video users.  Digital video users are video customers who receive any level of video service via digital transmission.  A dwelling with one or more digital set-top boxes or digital adapters counts as one digital video user.

 6)    Homes and businesses are considered available (“available homes”) if we can connect them to our distribution system without further extending the transmission lines and if we offer the service in that area.

 7)    Revenue generating units are the sum of video, voice and high-speed internet users.

 8)    Total Fiber Miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance.  For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

The following table shows selected operating statistics for Wireline as of the dates shown:

    March 31,
2018
  December 31,
2017
  March 31,
2017
  December 31,
2016
Telephone Access Lines   17,765     17,933     18,160     18,443  
Long Distance Subscribers   8,980     9,078     9,134     9,149  
Video Customers (1)   4,912     5,019     5,201     5,264  
DSL and Cable Modem Subscribers (2)   14,695     14,665     14,527     14,314  
Fiber Route Miles   2,078     2,073     1,997     1,971  
Total Fiber Miles (3)   155,188     154,165     145,060     142,230  

_______________________________________________________

  1. Wireline’s video service passes approximately 16,500 homes.
  2. December 2017 and December 2016 totals include 2,105 and 1,072 customers, respectively, served via the coaxial cable network.  During 2016, we modified the way we count subscribers when a commercial customer upgrades its internet service via a fiber contract.
  3. Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance.  For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

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Source: Shenandoah Telecommunications Co

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