SEC Filing - Shenandoah Telecommunications Co

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SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2007

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the transition period from__________ to __________

Commission File No.: 000-09881

SHENANDOAH TELECOMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)

VIRGINIA	54-1162807
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

500 Shentel Way, Edinburg, Virginia 22824
(Address of principal executive offices) (Zip Code)

(540) 984-4141
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

The number of shares of the registrant’s common stock outstanding on July 27, 2007 was 23,376,858, adjusted for the previously announced, 3 for 1 stock split effective August 2, 2007.

SHENANDOAH TELECOMMUNICATIONS COMPANY
INDEX

		Page Numbers

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Unaudited Condensed Consolidated Balance Sheets June 30, 2007 and December 31, 2006		3-4

	Unaudited Condensed Consolidated Statements of Income for the Three Months and Six Months Ended June 30, 2007 and 2006		5

	Unaudited Condensed Consolidated Statements of Shareholders’ Equity and Comprehensive Income for the Six Months Ended June 30, 2007 and the Year Ended December 31, 2006		6

	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006		7-8

	Notes to Unaudited Condensed Consolidated Financial Statements		9-17

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18-28

Item 3.	Quantitative and Qualitative Disclosures about Market Risk		28

Item 4.	Controls and Procedures		29

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings		30

Item 1A.	Risk Factors		30

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		30

Item 6.	Exhibits		31

	Signatures		32

	Exhibit Index		33

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

ASSETS		June 30, 2007		December 31, 2006


Current Assets
Cash and cash equivalents	$	23,256	$	13,440
Accounts receivable, net		11,655		11,611
Materials and supplies		3,706		2,499
Prepaid expenses and other		2,487		2,016
Deferred income taxes		2,023		1,297

Total current assets		43,127		30,863



Investments		9,666		7,075



Property, Plant and Equipment
Plant in service		276,165		267,622
Plant under construction		5,236		6,439

		281,401		274,061
Less accumulated amortization and depreciation		131,470		118,417

Net property, plant and equipment		149,931		155,644



Other Assets
Intangible assets, net		2,565		2,799
Cost in excess of net assets of businesses acquired		9,852		9,852
Deferred charges and other assets, net		1,521		1,487

Net other assets		13,938		14,138

Total assets	$	216,662	$	207,720

See accompanying notes to unaudited condensed consolidated financial statements.

(Continued)

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

LIABILITIES AND SHAREHOLDERS’ EQUITY		June 30, 2007			December 31, 2006


Current Liabilities
Current maturities of long-term debt	$	4,177		$	4,109
Accounts payable		4,942			7,364
Advanced billings and customer deposits		5,149			4,975
Accrued compensation		2,208			1,974
Income taxes payable		1,156			23
Accrued liabilities and other		4,048			2,835


Total current liabilities		21,680			21,280



Long-term debt, less current maturities		19,801			21,907




Other Long-Term Liabilities
Deferred income taxes		21,632			22,515
Pension and other		4,776			4,303
Deferred lease payable		2,641			2,526

Total other liabilities		29,049			29,344



Commitments and Contingencies



Shareholders’ Equity

Common stock		12,215			11,322
Retained earnings		135,708			125,690
Accumulated other comprehensive loss, net of tax		(1,791	)		(1,823	)

Total shareholders’ equity		146,132			135,189


Total liabilities and shareholders’ equity	$	216,662		$	207,720

See accompanying notes to unaudited condensed consolidated financial statements.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2007			2006			2007			2006


Operating revenues	$	35,101		$	41,426		$	68,149		$	81,226



Operating expenses:
Cost of goods and services, exclusive of depreciation and amortization shown separately below		11,068			17,563			22,470			34,447
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		7,070			11,977			14,544			24,204
Depreciation and amortization		7,225			7,114			14,313			13,653

Total operating expenses		25,363			36,654			51,327			72,304

Operating income		9,738			4,772			16,822			8,922



Other income (expense):
Interest expense, net		(472	)		(610	)		(979	)		(1,258	)
Gain on investments, net		348			211			408			10,728
Non-operating income, net		403			309			659			432

Income before income taxes and cumulative effect of a change in accounting		10,017			4,682			16,910			18,824


Income tax expense		4,070			1,899			6,892			7,421


Net income before cumulative effect of a change in accounting		5,947			2,783			10,018			11,403



Cumulative effect of a change in accounting, net of income taxes		—			—			—			(77	)

Net income	$	5,947		$	2,783		$	10,018		$	11,326



Income per share:
Basic net income per share:
Net income before cumulative effect of a change in accounting	$	0.25		$	0.12		$	0.43		$	0.49
Cumulative effect of a change in accounting, net of income taxes		—			—			—			—

	$	0.25		$	0.12		$	0.43		$	0.49



Weighted average shares outstanding, basic		23,350			23,127			23,327			23,106



Diluted net income per share:
Net income before cumulative effect of a change in accounting	$	0.25		$	0.12		$	0.43		$	0.49
Cumulative effect of a change in accounting, net of income taxes		—			—			—			—

	$	0.25		$	0.12		$	0.43		$	0.49



Weighted average shares, diluted		23,477			23,310			23,461			23,301

See accompanying notes to unaudited condensed consolidated financial statements.

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME
(in thousands, except per share amounts)

	Shares	Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total

Balance, December 31, 2005	23,061	$	8,128		$	113,576		$	(104	)	$	121,600
Comprehensive income:
Net income	—		—			17,922			—			17,922
SERP additional minimum pension liability	—		—			—			104			104
Net unrealized loss from pension plans, net of tax	—		—			—			(1,823	)		(1,823	)

Total comprehensive income												16,203

Dividends declared ($0.25 per share)	—		—			(5,808	)		—			(5,808	)
Dividends reinvested in common stock	30		474			—			—			474
Common stock repurchased	—		(6	)		—			—			(6	)
Stock-based compensation	—		94			—			—			94
Conversion of liability classified awards to equity classified awards	—		1,037			—			—			1,037
Common stock issued through exercise of incentive stock options	193		1,368			—			—			1,368
Net excess tax benefit from stock options exercised	—		227			—			—			227




Balance, December 31, 2006	23,284	$	11,322		$	125,690		$	(1,823	)	$	135,189
Comprehensive income:
Net income	—		—			10,018			—			10,018
Reclassification adjustment for unrealized loss from pension plans included in net income, net of tax	—		—			—			32			32


Total comprehensive income												10,050


Stock-based compensation	—		81			—			—			81
Common stock issued through exercise of incentive stock options	87		699			—			—			699
Conversion of liability classified awards to equity classified awards	—		18			—			—			18
Net excess tax benefit from stock options exercised	—		95			—			—			95


Balance, June 30, 2007	23,371	$	12,215		$	135,708		$	(1,791	)	$	146,132

See accompanying notes to unaudited condensed consolidated financial statements.

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Six Months Ended June 30,
	2007			2006


Cash Flows from Operating Activities
Net income	$	10,018		$	11,326
Adjustments to reconcile net income to net cash provided by operating activities:
Cumulative effect of change in accounting principle, net of taxes		—			77
Depreciation		14,020			13,379
Amortization		293			274
Stock based compensation expense		89			418
Excess tax benefits on stock option exercises		(95	)		—
Deferred income taxes		(1,626	)		(1,070	)
Loss on disposal of assets		546			504
Net gain on disposal of investments		—			(10,542	)
Net gain from patronage and equity Investments		(464	)		(220	)
Other		(12	)		(427	)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(44	)		2,170
Materials and supplies		(1,207	)		355
Increase (decrease) in:
Accounts payable		(2,422	)		(880	)
Deferred lease payable		115			191
Other prepaids, deferrals and accruals		2,436			143



Net cash provided by operating activities	$	21,647		$	15,698




Cash Flows From Investing Activities
Purchase and construction of plant and equipment, net of retirements	$	(8,819	)	$	(10,267	)
Purchase of investment securities		(2,585	)		(300	)
Proceeds from investment activities		457			11,447
Proceeds from sale of equipment		359			71




Net cash provided by (used in) investing activities	$	(10,588	)	$	951

(Continued)

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Six Months Ended June 30,
	2007			2006


Cash Flows From Financing Activities
Principal payments on long-term debt	$	(2,037	)	$	(2,243	)
Net payments on lines of credit		—			(1,178	)
Excess tax benefits on stock option exercises		95			—
Proceeds from exercise of incentive stock options		699			567




Net cash used in financing activities	$	(1,243	)	$	(2,854	)



Net increase in cash and cash equivalents	$	9,816		$	13,795


Cash and cash equivalents:
Beginning		13,440			2,572

Ending	$	23,256		$	16,367



Supplemental Disclosures of Cash Flow Information
Cash payments for:


Interest	$	961		$	1,270



Income taxes	$	7,650		$	6,819

See accompanying notes to unaudited condensed consolidated financial statements.

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. The interim condensed consolidated financial statements of Shenandoah Telecommunications Company and Subsidiaries (collectively, the “Company”) are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the interim results have been reflected therein. All such adjustments were of a normal and recurring nature. These statements should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. The balance sheet information at December 31, 2006 was derived from the audited December 31, 2006 consolidated balance sheet.

2. Operating revenues and income from operations for any interim period are not necessarily indicative of results that may be expected for the entire year.

3. In 1999, the Company executed a Management Agreement (the “Agreement”) with Sprint Nextel whereby the Company committed to construct and operate a PCS network using CDMA air interface technology. Under the Agreement, the Company is the exclusive Sprint PCS Affiliate of Sprint Nextel providing wireless mobility communications network products and services on the 1900 MHz band in its territory which extends from Altoona, York and Harrisburg, Pennsylvania, and south along the Interstate 81 corridor through Western Maryland, the panhandle of West Virginia, to Harrisonburg, Virginia. The Company is authorized to use the Sprint brand in its territory, and operate its network under the Sprint Nextel radio spectrum license. As an exclusive Sprint PCS Affiliate of Sprint Nextel, the Company has the exclusive right to build, own and maintain its portion of Sprint Nextel’s nationwide PCS network, in the aforementioned areas, to Sprint Nextel’s specifications. The initial term of the Agreement is for 20 years and is automatically renewable for three 10-year options, unless terminated by either party under provisions outlined in the Agreement.

On March 13, 2007, the Company’s PCS Subsidiary and Sprint Nextel entered into a series of agreements, the effects of which were to:

•	Amend, as of January 1, 2007, the Agreements to simplify the methods used to settle revenue and expenses between the Company and Sprint Nextel;

•	Transfer 13 Sprint Nextel operated Nextel store locations within the Company’s PCS service area to the Company’s PCS Subsidiary. The transfer of stores was effected during May 2007. The Company will sell Sprint Nextel iDEN (Integrated Digital Enhanced Network) phones and provide local customer service support for Sprint Nextel iDEN customers in the Company’s service area;

•	Provide the Company and Sprint Nextel with the right under certain circumstances and subject to agreement on appropriate terms to participate in future Sprint Nextel wireless service offerings within the Company’s PCS service area; and

•	Settle all outstanding claims arising out of the merger of Sprint Corporation and Nextel Communications, Inc. and the subsequent acquisition by Sprint Nextel of Nextel Partners, Inc.

As a result of the amendments to the Agreements with Sprint Nextel (the 2007 Amendment), the basis upon which the Company and Sprint Nextel settle revenue and expenses, including travel and roaming, and upon which the Company compensates Sprint Nextel for support services, such as customer service, billing, collections, long distance, national network operations support, inventory logistics support, national distribution and product development, has been simplified. As a result of the 2007 Amendment, the Company and Sprint Nextel will no longer settle such amounts; nor will the Company pay Sprint Nextel a fee per subscriber or a fee for each new subscriber added.

In lieu of such fees and the settling of revenues and expenses for use on each other’s networks, Sprint Nextel will retain a net service fee equal to 8.8% of billed revenue (net of customer credits, account write-offs and other billing adjustments). This 8.8% net service fee is in addition to the 8% of billed revenue (net of customer credits, account write-offs and other billing adjustments) retained by Sprint Nextel as a management fee under the prior Agreement. The net service fee is designed to approximate the current settlements adjusted to reflect new pricing for travel and CCPU and CPGA services (i.e., customer costs, service bureau, customer activation and billing). The net service fee is also net of the cost to provide local customer service support to Sprint Nextel iDEN customers in the Company’s local PCS service area.

The 8.8% rate for the net service fee can only be changed under certain circumstances. Until June 30, 2010, the net service fee can only be changed if changes in travel patterns and wholesale usage, or the amounts necessary for Sprint Nextel to recover costs for providing services to the Company, results in the net service fee (calculated using the same

methods employed in setting the original rate) moving by more than two full percentage points higher to 10.8% or more, or lower to 6.8% or less. After June 30, 2010, on an annual basis either party can request a change only if such change results in the net service fee moving by more than one full percentage point higher or lower than the net service fee then in effect. The net service fee is capped at 12.0%, unless the Company’s use of services under the Services Agreement is disproportionately greater than the use of the services in similar Sprint PCS markets, in which case the parties will negotiate an alternative arrangement.

As a result of these changes, the presentation of the PCS subsidiary’s results of operations for 2007 has changed significantly from the 2006 presentation. Based upon a review of the guidance provided in EITF Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as an Agent, the Company is reporting service revenues net of both the 8% management fee and the 8.8% net service fee. Revenues for 2007 are being reduced compared to 2006 by both the amount of the 8.8% net service fee, as well as by the absence of travel, roaming and wholesale revenues. Operating expenses have also decreased due to the absence of travel and roaming expenses, as well as the absence of fees for CCPU and CPGA services, long distance charges and commissions paid to regional and third party distributors. Uncollected customer balances, previously reported as bad debt expense, are netted against gross billings in the 2007 presentation.

4. Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standard No. 123, “Share-Based Payment (Revised 2004)” (“SFAS 123(R)”) using the modified prospective application transition method, which establishes accounting for stock-based awards exchanged for employee services. Accordingly, for equity classified awards, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized over the requisite service period. For those tandem awards of stock options and stock appreciation rights (“SARs”) which are liability classified awards, fair value is calculated at the grant date and each subsequent reporting date during both the requisite service period and each subsequent period until settlement.

The impact of initially applying SFAS 123(R) was recognized as of the effective date using the modified prospective method. Under the modified prospective method the Company recognized stock-based compensation expense from January 1, 2006, as if the fair value based accounting method had been used to account for all outstanding unvested employee awards granted in prior years. The cumulative effect of initially adopting SFAS 123R was $77 thousand, net of taxes.

No options were awarded during the first two quarters of either 2007 or 2006, and there were no material transactions or modifications of options during the first two quarters of either year.

5. Basic net income per share was computed on the weighted average number of shares outstanding. Diluted net income per share was computed under the treasury stock method, assuming the conversion as of the beginning of the period, for all dilutive stock options. There were no adjustments to net income.

In June 2007, the Company’s Board of Directors approved a three for one stock split with a record date of August 2, 2007. All share amounts have been increased by a factor of three, and all per share amounts have been reduced by a factor of three, for all periods presented in this report.

6. SFAS Statement No. 131, “Disclosures about Segments of an Enterprise and Related Information,” establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers. The Company has six reportable segments, which the Company operates and manages as strategic business units organized geographically and by lines of business: (1) PCS, (2) Telephone, (3) Converged Services (NTC), (4) Mobile, (5) Holding and (6) Other.

The PCS segment, as a Sprint PCS Affiliate of Sprint Nextel, provides digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia.

The Telephone segment provides both regulated and unregulated telephone services and leases fiber optic facilities primarily in Shenandoah County and throughout the northern Shenandoah Valley of Virginia.

The Converged Services segment provides local and long distance voice, video and internet services on an exclusive and non-exclusive basis to residential and off-campus college student MDU communities throughout the southeastern United States including Virginia, North Carolina, Maryland, South Carolina, Georgia, Florida, Tennessee and Mississippi.

The Mobile segment provides tower rental space to affiliates and non-affiliates in the Company’s PCS service area and paging services throughout the northern Shenandoah Valley.

Selected financial data for each segment is as follows:

Three Months Ended June 30, 2007

(In thousands)

	PCS			Telephone			Converged Services			Mobile			Holding			Other			Eliminations			Consolidated Totals

External Revenues
Service revenues	$	20,060		$	1,570		$	2,383		$	—		$	—		$	2,845		$	—		$	26,858
Access charges		—			2,764			—			—			—			—			—			2,764
Travel/roaming revenue		—			—			—			—			—			—			—			—
Facilities and tower lease		—			911			—			901			—			502			—			2,314
Equipment		1,137			7			—			—			—			65			—			1,209
Other		645			832			164			46			—			269			—			1,956

Total external revenues		21,842			6,084			2,547			947			—			3,681			—			35,101
Internal Revenues		—			1,653			—			592			—			905			(3,150	)		—

Total operating revenues		21,842			7,737			2,547			1,539			—			4,586			(3,150	)		35,101


Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below		6,974			1,430			1,940			441			2			2,991			(2,710	)		11,068
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		3,147			1,461			1,217			174			449			1,062			(440	)		7,070
Depreciation and amortization		3,727			1,188			1,548			232			16			514			—			7,225

Total operating expenses		13,848			4,079			4,705			847			467			4,567			(3,150	)		25,363

Operating income (loss)		7,994			3,658			(2,158	)		692			(467	)		19			—			9,738

Non-operating income (expense)		144			197			—			—			1,230			8			(828	)		751
Interest expense		(81	)		(1	)		(258	)		(95	)		(706	)		(159	)		828			(472	)
Income taxes		(3,256	)		(1,459	)		925			(258	)		(38	)		16			—			(4,070	)

Net income (loss)	$	4,801		$	2,395		$	(1,491	)	$	339		$	19		$	(116	)	$	—		$	5,947

Three Months Ended June 30, 2006

(In thousands)

	PCS			Telephone			Converged Services			Mobile			Holding			Other			Eliminations			Consolidated Totals

External Revenues
Service revenues	$	18,262		$	1,641		$	2,531		$	—		$	—		$	2,837		$	—		$	25,271
Access charges		—			2,786			—			—			—			—			—			2,786
Travel/roaming revenue		8,054			—			—			—			—			—			—			8,054
Facilities and tower lease		—			1,018			—			874			—			463			—			2,355
Equipment		1,053			9			—			—			—			213			—			1,275
Other		474			780			124			33			—			274			—			1,685

Total external revenues		27,843			6,234			2,655			907			—			3,787			—			41,426
Internal Revenues		—			1,397			—			417			—			633			(2,447	)		—

Total operating revenues		27,843			7,631			2,655			1,324			—			4,420			(2,447	)		41,426


Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below		12,622			1,796			2,140			390			4			2,759			(2,148	)		17,563
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		7,605			1,288			1,342			162			506			1,373			(299	)		11,977
Depreciation and amortization		3,557			1,219			1,598			210			17			513			—			7,114

Total operating expenses		23,784			4,303			5,080			762			527			4,645			(2,447	)		36,654

Operating income (loss)		4,059			3,328			(2,425	)		562			(527	)		(225	)		—			4,772

Non-operating income (expense)		106			261			3			—			1,142			11			(1,003	)		520
Interest expense		(447	)		(63	)		(260	)		(91	)		(599	)		(153	)		1,003			(610	)
Income taxes		(1,520	)		(1,339	)		1,027			(188	)		(20	)		141			—			(1,899	)

Net income (loss)	$	2,198		$	2,187		$	(1,655	)	$	283		$	(4	)	$	(226	)	$	—		$	2,783

Six Months Ended June 30, 2007

(In thousands)

	PCS			Telephone			Converged Services			Mobile			Holding			Other			Eliminations			Consolidated Totals

External Revenues
Service revenues	$	38,241		$	3,143		$	4,914		$	—		$	—		$	5,686		$	—		$	51,984
Access charges		—			5,571			—			—			—			—			—			5,571
Travel/roaming revenue		45			—			—			—			—			—			—			45
Facilities and tower lease		—			1,765			—			1,781			—			974			—			4,520
Equipment		2,198			12			—			—			—			141			—			2,351
Other		1,048			1,641			315			140			—			534			—			3,678

Total external revenues		41,532			12,132			5,229			1,921			—			7,335			—			68,149
Internal Revenues		—			3,224			—			1,026			—			1,768			(6,018	)		—

Total operating revenues		41,532			15,356			5,229			2,947			—			9,103			(6,018	)		68,149


Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below		12,784			3,802			3,850			902			6			6,312			(5,186	)		22,470
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		6,052			3,312			2,192			378			1,225			2,217			(832	)		14,544
Depreciation and amortization		7,403			2,365			3,027			464			28			1,026			—			14,313

Total operating expenses		26,239			9,479			9,069			1,744			1,259			9,555			(6,018	)		51,327

Operating income (loss)		15,293			5,877			(3,840	)		1,203			(1,259	)		(452	)		—			16,822

Non-operating income (expense)		299			350			—			—			2,083			11			(1,676	)		1,067
Interest expense		(221	)		(2	)		(517	)		(214	)		(1,411	)		(290	)		1,676			(979	)
Income taxes		(6,245	)		(2,359	)		1,679			(414	)		207			240			—			(6,892	)

Net income (loss)	$	9,126		$	3,866		$	(2,678	)	$	575		$	(380	)	$	(491	)	$	—		$	10,018

Six Months Ended June 30, 2006

(In thousands)

	PCS			Telephone			Converged Services			Mobile			Holding			Other			Eliminations			Consolidated Totals

External Revenues
Service revenues	$	36,125		$	3,273		$	5,207		$	—		$	—		$	5,600		$	—		$	50,205
Access charges		—			5,704			—			—			—			—			—			5,704
Travel/roaming revenue		15,114			—			—			—			—			—			—			15,114
Facilities and tower lease		—			1,979			—			1,732			—			975			—			4,686
Equipment		2,035			14			—			—			—			311			—			2,360
Other		734			1,535			242			68			—			578			—			3,157

Total external revenues		54,008			12,505			5,449			1,800			—			7,464			—			81,226
Internal Revenues		—			2,781			—			808			—			1,292			(4,881	)		—

Total operating revenues		54,008			15,286			5,449			2,608			—			8,756			(4,881	)		81,226


Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below		24,731			3,612			4,239			805			4			5,344			(4,288	)		34,447
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		15,589			2,416			2,610			323			1,166			2,693			(593	)		24,204
Depreciation and amortization		7,053			2,425			2,648			407			34			1,086			—			13,653

Total operating expenses		47,373			8,453			9,497			1,535			1,204			9,123			(4,881	)		72,304

Operating income (loss)		6,635			6,833			(4,048	)		1,073			(1,204	)		(367	)		—			8,922

Non-operating income (expense)		134			10,820			15			11			2,060			19			(1,899	)		11,160
Interest expense		(886	)		(128	)		(486	)		(160	)		(1,217	)		(280	)		1,899			(1,258	)
Income taxes		(2,419	)		(6,689	)		1,713			(370	)		121			223			—			(7,421	)

Net income before cumulative effect		3,464			10,836			(2,806	)		554			(240	)		(405	)		—			11,403
Cumulative effect of change in accounting, net of tax		(11	)		(27	)		(21	)		(1	)		(2	)		(15	)		—			(77	)

Net income (loss)	$	3,453		$	10,809		$	(2,827	)	$	553		$	(242	)	$	(420	)	$	—		$	11,326

The Company’s assets by segment are as follows:

(In thousands)
(unaudited)

	June 30, 2007			December 31, 2006			June 30, 2006

PCS	$	75,877		$	78,637		$	84,484
Telephone		64,943			62,619			70,807
Converged Services		25,285			25,226			22,809
Mobile		15,382			15,758			15,174
Holding		152,198			147,020			145,419
Other		20,727			21,213			22,585

Combined totals		354,412			350,473			361,278
Inter-segment eliminations		(137,750	)		(142,753	)		(149,585	)

Consolidated totals	$	216,662		$	207,720		$	211,693

7. In November 2006, the Company announced its intention to offer early retirement benefits to certain employees; to freeze its defined benefit plans as of January 31, 2007; and subsequently to settle such benefits and terminate the plans. Seven employees accepted the early retirement offer during 2006, and the Company reflected the effects of freezing the plans and the costs of the early retirement offer for those seven employees during 2006. In January 2007, an additional 25 employees accepted the early retirement offer, and through March 31, 2007, twelve employees reached their early retirement dates. The remaining 20 early retirees retired at various dates through April 30, 2007. The defined benefit pension plan disbursed approximately $5 million in lump sum distributions to early retirees in the first half of 2007, as shown in the table below. During the three months ended March 31, 2007, the Company recorded pension costs of $1.4 million (included in special termination benefits in the tables below), $0.4 million in other costs associated with the early retirements, and approximately $0.2 million in costs for the reduction in force. The Company recorded an additional $0.1 million of other costs in the second quarter of 2007. In May 2007, the Company’s board of directors approved a cost of living adjustment to increase the monthly benefits paid to retirees with retirement dates prior to 2007. The Company recorded a charge of $0.3 million in the second quarter of 2007 relating to this change. The Company expects to contribute approximately $1.9 million to the pension plan in order to complete the distribution of the defined benefit pension plan’s assets in September or October 2007. The Company will recognize the $1.7 million of unrecognized net loss reflected in the defined benefit plan table below as an expense at the time of the settlement of the defined benefit plan later in 2007.

In March 2007, the Company’s board of directors amended the Executive Supplemental Retirement Plan (SERP) to change it from a defined benefit type plan to a defined contribution type plan. The effect of amending the existing plan, rather than replacing it with a new plan, means that the SERP plan will not be settled (as that term is defined in FAS 88, Employers’ Accounting for Settlements and Curtailments of Defined Benefit Pension Plans and for Termination Benefits) during 2007, and thus the $1.3 million unrecognized actuarial loss reflected at December 31, 2006 will not be recognized as pension expense in 2007 as indicated in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, but will be amortized to expense over the remaining expected services lives of the participants in the plan.

In June 2007, the Company established a “rabbi trust” to hold invested funds related to participant balances under the SERP. The Company transferred approximately $2.5 million (representing the accumulated balances of active participants) into the trust on the last business day of the quarter, and in early July the contributed funds were invested per the participants’ elections.

The following table presents the defined benefit plan’s funded status and amounts recognized in the Company’s consolidated financial statements.

In thousands (unaudited)	As of, or for the six months ended, June 30, 2007			As of, or for the twelve months ended, December 31, 2006

Change in benefit obligation:
Benefit obligation, beginning	$	14,139		$	16,422
Service cost		—			953
Change in plan provisions		280			—
Interest cost		317			876
Actuarial loss		—			1,704
Benefits paid		(5,131	)		(312	)
Special termination benefits		1,313			369
Curtailment		—			(5,873	)

Benefit obligation, ending	$	10,918		$	14,139

Change in plan assets:
Fair value of plan assets, beginning	$	13,762		$	12,655
Actual return on plan assets		408			419
Benefits paid		(5,131	)		(312	)
Contributions made		—			1,000

Fair value of plan assets, ending	$	9,039		$	13,762


Funded status	$	(1,879	)	$	(377	)
Unrecognized net loss		1,695			1,701

Prepaid (accrued) benefit cost	$	(184	)	$	1,324


Amounts recognized in the consolidated balance sheets:
Accrued liabilities and other	$	(1,879	)	$	(377	)
Accumulated other comprehensive income		1,695			1,701

Net amount recognized	$	(184	)	$	1,324

The following table presents the actuarial information and amounts recognized in the Company’s consolidated financial statements for the SERP.

In thousands (unaudited)	As of, or for the six months ended, June 30, 2007			As of, or for the twelve months ended, December 31, 2006

Change in benefit obligation:
Benefit obligation, beginning	$	2,642		$	1,955
Service cost		34			189
Interest cost		—			110
Actuarial loss		—			425
Special termination benefits		94			—
Curtailment		—			(37	)

Benefit obligation, ending	$	2,770		$	2,642


Funded status	$	(2,770	)	$	(2,642	)
Unrecognized net loss		1,237			1,279

Accrued benefit cost	$	(1,533	)	$	(1,363	)


Amounts recognized in the consolidated balance sheets:
Pension and other	$	(2,770	)	$	(2,642	)
Accumulated other comprehensive income		1,237			1,279

Net amount recognized	$	(1,533	)	$	(1,363	)

The following tables present pension costs by plan and for the periods presented.

	Defined Benefit Plan						SERP

	Three Months Ended June 30,

In thousands (unaudited)	2007			2006			2007		2006


Net periodic benefit cost recognized:
Service cost	$	—		$	260		$	22	$	51
Change in plan provisions		280			—			—		—
Interest cost		188			224			—		27
Expected return		(224	)		(234	)		—		—
Amortization of unrecognized loss		3			30			21		12
Amortization of unrecognized prior service cost		—			—			—		9
Amortization of net transition asset		—			11			—		—
Special termination benefits		—			—			—		—

Total	$	247		$	291		$	43	$	99

	Defined Benefit Plan						SERP

	Six Months Ended June 30,

In thousands (unaudited)	2007			2006			2007		2006


Net periodic benefit cost recognized:
Service cost	$	—		$	520		$	34	$	102
Prior service cost		280			—			—		—
Interest cost		317			448			—		54
Expected return		(448	)		(468	)		—		—
Amortization of unrecognized loss		6			60			42		24
Amortization of unrecognized prior service cost		—			—			—		18
Amortization of net transition asset		—			22			—		—
Special termination benefits		1,313			—			94		—

Total	$	1,468		$	582		$	170	$	198

8. Effective January 1, 2007, the Company adopted the provisions of FAS Interpretation No. 48, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109, (“FIN 48”). The Company has identified no material tax positions with uncertainty as of June 30, 2007. For federal tax purposes, 2004 and future years are subject to audit, and the Company is subject to state tax audits going back to 2003 in the major jurisdictions of Pennsylvania, Maryland and Virginia.

9. On August 4, 2005, the board of directors of the Rural Telephone Bank (the “RTB”) adopted a number of resolutions for the purpose of dissolving the RTB as of October 1, 2005. The Company held 10,821,770 shares of Class B and Class C RTB Common Stock ($1.00 par value) which was reflected on the Company’s balance sheet at December 31, 2005, at $796,000 under the cost method. During the first quarter of 2006, the Company recognized a gain of approximately $6.4 million, net of tax, related to the dissolution of the RTB and the redemption of the stock. In April 2006, the Company received $11.3 million in proceeds from the RTB.

10. The Company elected to early adopt FAS 157, Fair Value Measurements, and FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities, as of January 1, 2007. This decision was made to permit the adoption of FAS 159 and apply its provisions to certain assets the Company expected to acquire. Such assets are expected to consist of investment funds, such as stock and bond mutual funds, that the Company intends to use as a funding vehicle related to the Company’s SERP (see Note 7 above). The Company intends to purchase assets to mirror the investment choices made by SERP participants. The gains and losses recognized by these investments will also determine the interest component of changes in the liabilities under the SERP. Accounting for these investments at fair value under FAS 159 will allow the Company to recognize the investment gains to offset the interest component of pension expense under the SERP. The initial application of FAS 159’s provisions relating to these investments will be in the third quarter of 2007.

ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions as they relate to Shenandoah Telecommunications Company or its management are intended to identify these forward-looking statements. All statements regarding Shenandoah Telecommunications Company’s expected future financial position and operating results, business strategy, financing plans, forecasted trends relating to the markets in which Shenandoah Telecommunications Company operates and similar matters are forward-looking statements. We cannot assure you that the Company’s expectations expressed or implied in these forward-looking statements will turn out to be correct. The Company’s actual results could be materially different from its expectations because of various factors, including those discussed below and under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2006. The following management’s discussion and analysis should be read in conjunction with the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2006, including the financial statements and related notes included therein.

General

Overview. Shenandoah Telecommunications Company is a diversified telecommunications company providing both regulated and unregulated telecommunications services through its wholly owned subsidiaries. These subsidiaries provide local exchange telephone services and wireless personal communications services (as a Sprint PCS affiliate of Sprint Nextel), as well as cable television, video, Internet and data services, long distance, sale of telecommunications equipment, fiber optics facilities, paging and leased tower facilities. The Company has the following six reporting segments, which it operates and manages as strategic business units organized geographically and by lines of business:

	•	wireless personal communications services, or PCS, as a Sprint PCS Affiliate, through Shenandoah Personal Communications Company;

	•	telephone, which involves the provision of regulated and non-regulated telephone services, through Shenandoah Telephone Company;

	•	converged services, which involves the provision of data, video, voice and long-distance services, through Shentel Converged Services, Inc.;

	•	mobile, which involves the provision of tower leasing and paging services, through Shenandoah Mobile Company;

	•	holding, which involves the provision of investments and management services to its subsidiaries, through Shenandoah Telecommunications Company; and

	•	other, which involves the provision of Internet, cable television, network facility leasing, long-distance, CLEC, and wireless broadband services, through ShenTel Service Company, Shenandoah Cable Television Company, Shenandoah Network Company, Shenandoah Long Distance Company, ShenTel Communications Company, Converged Services of West Virginia and Shentel Wireless Company. Shentel Wireless Company ceased operations during the fourth quarter of 2006.

Additional Information About the Company’s Business

The following table shows selected operating statistics of the Company for the most recent five quarters.

	June 30, 2007		Mar. 31, 2007		Dec. 31, 2006		Sept. 30, 2006		June 30, 2006

Telephone Access Lines	24,738		24,794		24,830		24,849		24,935
Cable Television Subscribers	8,359		8,420		8,440		8,478		8,555
Dial-up Internet Subscribers	8,895		9,423		9,869		10,714		11,512
DSL Subscribers	7,222		6,999		6,599		5,967		5,373
Retail PCS Subscribers	172,983		165,148		153,503		141,594		134,559
Long Distance Subscribers	10,613		10,541		10,499		10,523		10,458
Fiber Route Miles	632		630		625		620		618
Total Fiber Miles	34,335		34,083		33,764		33,612		33,444
Long Distance Calls (000) (1)	7,952		7,502		7,235		7,045		7,003
Total Switched Access Minutes (000)	86,035		83,664		80,587		77,848		76,019
Originating Switched Access Minutes (000)	24,819		24,952		23,995		23,421		22,484
Employees (full time equivalents) (2)	400		358		376		380		382
CDMA Base Stations (sites)	334		334		332		331		328
Towers (100 foot and over)	100		100		100		99		97
Towers (under 100 foot)	13		13		13		13		13
PCS Market POPS (000) (3)	2,291		2,281		2,268		2,268		2,242
PCS Covered POPS (000) (3)	1,775		1,766		1,752		1,750		1,728
PCS Ave. Monthly Retail Churn % (4)	1.7	%	1.8	%	1.9	%	1.9	%	1.9	%
Converged Services (NTC) Properties Served (5)	109		105		102		108		106
Converged Services (NTC) Video Service Users (6)	8,735		9,524		8,989		8,539		7,374
Converged Services (NTC) Telephone Service Users (6)	4,169		4,466		4,492		5,741		8,797
Converged Services (NTC) Network/Internet Users (6)	19,204		22,350		21,943		22,881		18,719


(1) –	Originated by customers of the Company’s Telephone subsidiary.

(2) –	The March 31, 2007, number reflects early retirements, attrition and terminations during the quarter. An additional 20 early retirements occurred in April 2007. During May 2007, the Company acquired 13 retail locations, and added additional employees to fully staff and support these additional locations.

(3) –	POPS refers to the estimated population of a given geographic area and is based on information purchased by Sprint Nextel from Geographic Information Services. Market POPS are those within a market area which the Company is authorized to serve under its Sprint PCS affiliate agreements, and Covered POPS are those covered by the network’s service area.

(4) –	PCS Ave. Monthly Churn is the average of the three monthly subscriber turnover, or churn calculations for the period.

(5) –	Indicates MDU complexes where Converged Services provides service under the NTC and Shentel brands

(6) –	The variation in users between quarters largely reflects the impact of the cycles of the academic year.

Significant Transactions

On March 13, 2007, the Company’s PCS Subsidiary and Sprint Nextel entered into a series of agreements, the effects of which were to:

•	Amend, as of January 1, 2007, the Agreements to simplify the methods used to settle revenue and expenses between the Company and Sprint Nextel;

•	Transfer 13 Sprint Nextel operated Nextel store locations within the Company’s PCS service area to the Company’s PCS Subsidiary. The transfer of stores was completed during May 2007. The Company will sell Sprint Nextel iDEN (Integrated Digital Enhanced Network) phones and provide local customer service support for Sprint Nextel iDEN customers in the Company’s service area;

•	Provide the Company and Sprint Nextel with the right under certain circumstances and subject to agreement on appropriate terms to participate in future Sprint Nextel wireless service offerings within the Company’s PCS service area; and

•	Settle all outstanding claims arising out of the merger of Sprint Corporation and Nextel Communications, Inc. and the subsequent acquisition by Sprint Nextel of Nextel Partners, Inc.

As a result of these amendments, the basis upon which the Company and Sprint Nextel settle revenue and expenses, including travel and roaming, and upon which the Company compensates Sprint Nextel for support services, such as customer service, billing, collections, long distance, national network operations support, inventory logistics support, national distribution and product development, has been simplified. The Company and Sprint Nextel will no longer settle such amounts; nor will the Company pay Sprint Nextel a fee per subscriber or a fee for each new subscriber added.

In lieu of such fees and the settling of revenues and expenses for use on each other’s networks, Sprint Nextel will retain a net service fee equal to 8.8% of billed revenue (net of customer credits, account write-offs and other billing adjustments). This 8.8% net service fee is in addition to the 8% of billed revenue (net of customer credits, account write-offs and other billing adjustments) currently retained by Sprint Nextel as a management fee under the Agreement. The net service fee is designed to approximate the current settlements, adjusted to reflect new pricing for travel and CCPU and CPGA services (i.e., customer costs, service bureau, customer activation, and billing). The net service fee is also net of the cost to provide local customer service support to Sprint Nextel iDEN customers in the Company’s local PCS service area.

On August 4, 2005, the board of directors of the Rural Telephone Bank (the “RTB”) adopted a number of resolutions for the purpose of dissolving the RTB as of October 1, 2005. The Company held 10,821,770 shares of Class B and Class C RTB Common Stock ($1.00 par value) which was reflected on the Company’s balance sheet at December 31, 2005, at $796,000 under the cost method. During the first quarter of 2006, the Company recognized a gain of approximately $6.4 million, net of tax, related to the dissolution of the RTB and the redemption of the stock. In April 2006, the Company received $11.3 million in proceeds from the RTB.

Results of Operations

Three and Six Months Ended June 30, 2007 Compared with the Three and Six Months Ended June 30, 2006

Consolidated Results

The Company’s consolidated results for the second quarter and the first six months of 2007 and 2006 are as follows:

(in thousands)	Three Months Ended June 30,					Change					Six Months Ended June 30,				Change
	2007		2006			$			%		2007		2006		$			%

Operating revenues	$	35,101	$	41,426		$	(6,325	)	(15.3	)	$	68,149	$	81,226	$	(13,077	)	(16.1	)
Operating expenses		25,363		36,654			(11,291	)	(30.8	)		51,327		72,304		(20,977	)	(29.0	)
Operating income		9,738		4,772			4,966		104.1			16,822		8,922		7,900		88.5
Other income (expense)		279		(90	)		369		n/m			88		9,902		(9,814	)	(99.1	)
Income tax provision		4,070		1,899			2,171		114.3			6,892		7,421		(529	)	(7.1	)
Net income before cumulative effect	$	5,947	$	2,783		$	3,164		113.7		$	10,018	$	11,403	$	(1,385	)	(12.1	)

Operating revenues

For the three months and six months ended June 30, 2007, operating revenue decreased $6.3 million, or 15.3%, and $13.1 million, or 16.1%, respectively, primarily due to the effects of the changes in the PCS segment resulting from the 2007 Amendment (see “Significant Transactions”). For the three and six months ended June 30, 2007, PCS operating revenues decreased $6.0 million, or 21.6%, and $12.5 million, or 23.1%, respectively. All other Company revenues decreased by $0.3 million and $0.6 million, respectively, compared to the three and six months ended June 30, 2006. See the PCS segment section for additional details concerning changes resulting from the 2007 Amendment.

Operating expenses

For the three and six months ended June 30, 2007, operating expenses decreased $11.3 million, or 30.8%, and $21.0 million, or 29.0%, respectively, primarily due to the effects of the changes in the PCS segment resulting from the 2007 Amendment. For the three and six months ended June 30, 2007, PCS segment operating expenses decreased $9.9 million and $21.1 million respectively.

Cost of goods and services in the PCS segment declined $5.6 million and $11.9 million for the three and six month periods, respectively, principally due to the absence of travel and roaming expenses (except for final settlements related to 2006 recorded in the first quarter of 2007), while PCS segment selling, general and administrative expenses declined by $4.5 million and $9.5 million, respectively, principally due to the absence of CCPU fees and most third party commissions eliminated in the 2007 Amendment. Telephone segment operating expenses declined $0.2 million in the second quarter after increasing $1.3 million in the first quarter, as this segment bore a significant share of the $2.0 million of first quarter 2007 costs associated with early retirements and severance. See the individual segment discussions for additional details about the changes in operating expenses for both periods.

Other income (expense)

The decrease of $9.8 million reflected in other income (expense) for the six months ended June 30, 2007, principally reflects the gain on redemption of the RTB stock recorded in the first quarter of 2006, totaling approximately $10.5 million on a pre-tax basis, or $6.4 million after tax.

Net income

For the three months ended June 30, 2007, net income before cumulative effect of a change in accounting increased by $3.2 million, primarily due to improved operating results in the PCS segment. For the six months ended June 30, 2007, net income before cumulative effect of a change in accounting decreased $1.4 million, due to the gain in 2006 of approximately $6.4 million, net of tax, related to the redemption of the RTB stock, the recording in 2007 of approximately $1.2 million, net of tax, in costs related to early retirements and severance, offset by the increase in net income of the Company’s PCS subsidiary.

PCS

Shenandoah PCS Company, as a Sprint PCS Affiliate of Sprint Nextel, provides digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia.

The Company receives revenues from Sprint Nextel for subscribers that obtain service in the Company’s network coverage area. The Company relies on Sprint Nextel to provide timely, accurate and complete information for the Company to record the appropriate revenue and expenses for each financial period.

The Company had 334 PCS base stations in service at June 30, 2007, compared to 328 base stations in service at June 30, 2006. The Company’s average PCS retail customer turnover, or churn rate, was 1.7% in the second quarter of 2007, compared to 1.9% in the second quarter of 2006. As of June 30, 2007, the Company had 172,983 retail PCS subscribers compared to 134,559 subscribers at June 30, 2006, an increase of 28.6%. The PCS operation added 19,480 net retail customers in the first half of 2007 compared to 11,584 net retail subscribers added in the first half of 2006, an increase of 68.2%.

As discussed under Significant Transactions, the Company amended its agreements with Sprint Nextel effective January 1, 2007, resulting in changes in both revenues and expenses for the PCS segment.

(in thousands)	Three Months Ended June 30,				Change					Six Months Ended June 30,				Change
	2007		2006		$			%		2007		2006		$			%

Segment operating revenues
Wireless service revenue	$	20,060	$	18,262	$	1,798		9.8		$	38,241	$	36,125	$	2,116		5.9

Travel and roaming revenue		—		8,054		(8,054	)	n/m			45		15,114		(15,069	)	(99.7	)
Equipment revenue		1,137		1,053		84		8.0			2,198		2,035		163		8.0
Other revenue		645		474		171		36.1			1,048		734		314		42.8

Total segment operating revenues		21,842		27,843		(6,001	)	21.6			41,532		54,008		(12,476	)	(23.1	)

Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		6,974		12,622		(5,648	)	(44.7	)		12,784		24,731		(11,947	)	(48.3	)
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		3,147		7,605		(4,458	)	(58.6	)		6,052		15,589		(9,537	)	(61.2	)
Depreciation and amortization		3,727		3,557		170		4.8			7,403		7,053		350		5.0

Total segment operating expenses		13,848		23,784		(9,936	)	(41.8	)		26,239		47,373		(21,134	)	(44.6	)

Segment operating income	$	7,994	$	4,059	$	3,935		96.9		$	15,293	$	6,635	$	8,658		130.5

Operating Revenues

For the three months ended June 30, 2007, wireless service revenue totaled $20.1 million and consisted of gross billings of $27.6 million, less credits and adjustments of $2.5 million, allocated write-offs of $1.3 million, royalty fee of $1.9 million and net service fee of $2.1 million. For the three months ended June 30, 2006, wireless service revenue totaled $18.3 million and consisted of gross billings of $21.6 million and wholesale revenue of $0.6 million, less credits and adjustments of $2.4 million, and royalty fee of $1.5 million.

Gross billings for the three month periods increased $6.0 million as a result primarily of the increase in the number of subscribers; credits and adjustments increased $0.1 million; royalty fees increased $0.4 million due to increased billings; and the allocated write-offs and the net service fee for 2007 are new components of wireless service revenue as a result of the 2007 Amendment. Wholesale revenue was eliminated by the 2007 Amendment. The Company recorded $0.3 million of revenue in the second quarter of 2007, representing final adjustments of net amounts due from periods prior to the effective date of the 2007 Amendment.

For the six months ended June 30, 2007, wireless service revenue totaled $38.2 million and consisted of gross billings of $53.8 million and wholesale revenue of $0.1 million related to 2006, less credits and adjustments of $5.5 million, allocated write-offs of $2.5 million, royalty fee of $3.8 million and net service fee of $4.1 million. For the six months

ended June 30, 2006, wireless service revenue totaled $36.1 million and consisted of gross billings of $42.0 million and wholesale revenue of $1.5 million, less credits and adjustments of $4.4 million, and royalty fee of $3.0 million.

Gross billings for the six month periods increased $11.8 million, or 28.1%, as a result primarily of the increase in the number of subscribers; credits and adjustments increased $1.1 million due to promotional incentives and adjustments offered by Sprint Nextel in late 2006 and early 2007; royalty fees increased $0.8 million due to increased billings; and the allocated write-offs and the net service fee for 2007 are new components of wireless service revenue as a result of the 2007 Amendment. The wholesale revenue of $0.1 million in 2007 was recorded to true up 2006 accruals.

As a result of the 2007 Amendment, travel, data, long distance and wholesale revenues, totaling $7.7 million and $14.6 million for the three and six month periods in 2006, are no longer recorded by the Company.

Equipment revenue increased $0.1 million and $0.2 million for the three and six month periods, respectively, as a result of increased sales of handsets to both new and upgrading customers.

Other revenue increased $0.2 million and $0.3 million for the three and six month periods, respectively. For the three month period, the increase resulted from revenue collected from Sprint Nextel associated with their new activations; for the six month period, the increase resulted from both the activation related revenue described above, as well as additional universal service fund revenues received in first quarter 2007 compared to 2006.

Cost of goods and services

The $5.6 million decrease in cost of goods and services in the three months ended June 30, 2007, from 2006, consists of $7.1 million of 2006 expenses eliminated under the 2007 Amendment, principally travel expenses, long distance costs and costs related to new activations, offset by increased costs of handsets of $1.0 million in 2007 due to increased handset unit sales; and increased rent for tower leases of $0.2 million in 2007 over 2006.

Cost of goods and services decreased $11.9 million in the six months ended June 30, 2007, from 2006, consisting of $13.7 million of 2006 expenses eliminated under the 2007 Amendment, principally travel expenses, long distance costs and costs related to new activations and $0.6 million of net credits recorded in 2007 to true up 2006 accruals for expenses settled with Sprint Nextel. Offsetting these positive impacts, handset costs increased $1.5 million in 2007 over 2006; warranty costs increased $0.4 million; rent for tower leases increased $0.2 million in 2007 over 2006; and maintenance costs increased $0.2 million over the 2006 period.

Selling, general and administrative

Selling, general and administrative expenses decreased $4.5 million in 2007 from the second quarter of 2006, consisting of $3.5 million of 2006 expenses eliminated under the 2007 Amendment, principally $2.7 million of customer service and billing provided by Sprint Nextel and $0.9 million of commissions paid to third party and national retailers who activate customers in the Company’s PCS service area. Other decreases included $0.3 million of lower marketing costs; and $0.6 million in bad debt expense recorded as selling, general and administrative in 2006. Second quarter costs also included approximately $0.2 million in costs for 13 new retail locations.

Selling, general and administrative expenses decreased $9.5 million in 2007 from the first six months of 2006, consisting of $7.3 million of 2006 expenses eliminated under the 2007 Amendment, principally $5.3 million of customer service and billing provided by Sprint Nextel and $2.0 million in commissions paid to third party and national retailers who activate customers in the Company’s PCS service area and $1.3 million in bad debt expense recorded as selling, general and administrative in 2006. Bad debts are reflected as an offset against billed revenue in 2007 under the 2007 Amendment.

Other components of the first half change in selling, general and administrative expenses included $1.3 million in lower marketing costs; $0.2 million in higher costs for the 13 store locations acquired from Sprint Nextel during the second quarter of 2007; $0.4 million in higher local commissions; and a $0.2 million increase in legal fees related to the negotiation of the 2007 Amendment. The Company recorded $0.1 million in 2007 to true up 2006 accruals, and reversed $0.5 million of bad debt reserves. At December 31, 2006, the Company had a reserve for doubtful accounts of $0.5 million. The new settlement agreement calculates the monthly settlement based on collected revenues, therefore eliminating the need for the reserve.

The Company acquired 13 retail locations from Sprint Nextel during the second quarter of 2007, and began to incur the operating expenses associated with these locations. These expenses primarily impacted the selling, general and administrative category, and will increase to include the full three months of expenses in the third quarter. Beginning in the fourth quarter of 2007, the Company expects to bring on-line as many as 50 sites with EVDO capability for high speed data transmission such as internet access and 20 additional cell sites to expand our capacity and coverage footprint, increasing operating expenses in the fourth quarter and future periods.

Telephone


(in thousands)	Three Months Ended June 30,				Change					Six Months Ended June 30,				Change
	2007		2006		$			%		2007		2006		$			%

Segment operating revenues
Service revenue — wireline	$	1,697	$	1,723	$	(26	)	(1.5	)	$	3,395	$	3,440	$	(45	)	(1.3	)

Access revenue		3,145		3,223		(78	)	(2.4	)		6,368		6,547		(179	)	(2.7	)
Facilities lease revenue		1,924		1,775		149		8.4			3,682		3,512		170		4.8
Equipment revenue		7		9		(2	)	(22.2	)		12		14		(2	)	(14.3	)
Other revenue		964		901		63		7.0			1,899		1,773		126		7.1

Total segment operating revenues		7,737		7,631		106		1.4			15,356		15,286		70		0.5

Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		1,430		1,796		(366	)	(20.4	)		3,802		3,612		190		5.3

Selling, general and administrative, exclusive of depreciation and amortization shown separately below		1,461		1,288		173		13.4			3,312		2,416		896		37.1
Depreciation and amortization		1,188		1,219		(31	)	(2.5	)		2,365		2,425		(60	)	(2.5	)

Total segment operating expenses		4,079		4,303		(224	)	(5.2	)		9,479		8,453		1,026		12.1

Segment operating income	$	3,658	$	3,328	$	330		9.9		$	5,877	$	6,833	$	(956	)	(14.0	)

Shenandoah Telephone Company provides both regulated and unregulated telephone services and leases fiber optic facilities primarily throughout the northern Shenandoah Valley.

Over past periods, the trend amongst regulated local telephone service providers has been a decline in subscribers, principally due to competition from cable companies, other competitive providers, and consumer migration to wireless and DSL services eliminating second and often the primary access lines. The construction of new homes within Shenandoah County appears to have moderated this trend until recent quarters. In Shenandoah County, Shentel has the overlapping cable franchise, which does not offer internet or voice service. Based on industry experience, the Company anticipates that the long-term trend toward declining telephone subscriber counts may dominate for the foreseeable future.

Operating Revenues

Access revenue decreased $0.1 million and $0.2 million for the three and six months ended June 30, 2007, respectively, primarily due to rate changes for interconnection fees.

Facilities lease revenue increased $0.1 million and $0.2 million for the three and six months ended June 30, 2007, respectively, due to a new fiber lease with the Company’s cable television affiliate and additional circuits with the Company’s long distance affiliate.

Other revenue increased in both periods due to an increase in directory revenue during 2007 compared to 2006.

Cost of goods and services

Cost of goods and services decreased in the three months ended June 30, 2007, by $0.4 million due primarily to accrual adjustments of $0.3 million relating to reciprocal compensation expenses payable to wireless carriers for periods prior to 2007 following a review of the contracts.

Cost of goods and services increased in the six month 2007 period by $0.2 million, due to $0.6 million of costs in the first quarter associated with the early retirements and severances allocated to the Telephone segment, offset by the accrual adjustment for reciprocal compensation expenses discussed above.

Selling, general and administrative

Selling, general and administrative costs increased $0.2 million for the three months ended June 30, 2007, due to the one-time cost of an increase in retirement benefits for past Telephone Company retirees, and $0.9 million for the six months ended June 30, 2007, due to the cost of the early retirements and severances allocated to the Telephone segment in the first quarter of 2007, as well as the cost of the increase in retirement benefits described above.

Converged Services

(in thousands)	Three Months Ended June 30,						Change					Six Months Ended June 30,						Change
	2007			2006			$			%		2007			2006			$			%

Segment operating revenues
Service revenue — wireline	$	2,383		$	2,531		$	(148	)	(5.8	)	$	4,914		$	5,207		$	(293	)	(5.6	)
Other revenue		164			124			40		32.3			315			242			73		30.2

Total segment operating revenues		2,547			2,655			(108	)	(4.1	)		5,229			5,449			(220	)	(4.0	)

Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		1,940			2,140			(200	)	(9.3	)		3,850			4,239			(389	)	(9.2	)
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		1,217			1,342			(125	)	(9.3	)		2,192			2,610			(418	)	(16.0	)
Depreciation and amortization		1,548			1,598			(50	)	(3.1	)		3,027			2,648			379		14.3

Total segment operating expenses		4,705			5,080			(375	)	(7.4	)		9,069			9,497			(428	)	(4.5	)

Segment operating (loss)	$	(2,158	)	$	(2,425	)	$	267		(11.0	)	$	(3,840	)	$	(4,048	)	$	208		(5.1	)

The Converged Services segment provides local and long distance voice, data and video services on an exclusive and non-exclusive basis to MDU communities throughout the southeastern United States including Virginia, North Carolina, Maryland, South Carolina, Georgia, Florida, Tennessee and Mississippi.

The number of MDU properties served increased by three net properties, to 109 at June 30, 2007 from 106 as of the end of the second quarter of 2006. Four properties were added during the second quarter of 2007. The Company has terminated contracts with smaller, less profitable properties. The Company also lost four larger properties during the third quarter of 2006 that chose not to renew their contracts as expected by the Company. These four properties generated over $0.2 million in quarterly revenue.

Operating Revenues

Service revenue decreased $0.1 million for the three months ended June 30, 2007, and $0.3 million for the six months ended June 30, 2007, primarily as a result of declining voice service revenue. Service revenues consist of voice, video and data services at MDU properties in the southeastern United States. Voice revenues declined as college students migrate to wireless phone service, while video and data service revenues increased compared to the 2006 periods. The Company also lost four larger properties during the third quarter of 2006 that chose not to renew their contracts as expected by the Company. These four properties generated over $0.2 million in quarterly revenue.

Other revenues increased due to an increase in activation fees. Activation fees are deferred and amortized over the life of the customer, typically one year in this segment.

Cost of goods and services

Cost of goods and services decreased in 2007 by $0.2 million and $0.4 million for the three and six month periods ended June 30, 2007 compared to the comparable 2006 periods. Cost of goods and services reflects the cost of purchasing video and voice services, the network costs to provide Internet services to customers and network maintenance and repair. The Company continues to focus on eliminating redundant processes and integrating the

operation to reduce the costs of operation. The Company also migrated to a more robust, but less expensive, video solution beginning in late 2006.

Selling, general and administrative

Selling, general and administrative expense decreased by $0.1 million and $0.4 million for the three and six month periods ended June 30, 2007, respectively, due to decreases in other operating taxes and allocated internal costs.

Depreciation and amortization

Depreciation and amortization expense decreased in the three months ended June 30, 2007 due to the write-off in 2006 of $0.5 million of equipment related to the four terminated contracts discussed above. Depreciation and amortization expense increased $0.4 million compared to the first six months of 2006, due primarily to fixed assets added over the past twelve months.

Mobile

(in thousands)	Three Months Ended June 30,				Change			Six Months Ended June 30,				Change
	2007		2006		$		%	2007		2006		$		%

Segment operating revenues
Tower lease revenue-affiliate	$	592	$	416	$	176	42.3	$	1,026	$	806	$	220	27.3
Tower lease revenue-non-affiliate		901		874		27	3.1		1,781		1,732		49	2.8
Other revenue		46		34		12	35.3		140		70		70	100.0

Total segment operating revenues		1,539		1,324		215	16.2		2,947		2,608		339	13.0

Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		441		390		51	13.1		902		805		97	12.0
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		174		162		12	7.4		378		323		55	17.0
Depreciation and amortization		232		210		22	10.5		464		407		57	14.0

Total segment operating expenses		847		762		85	11.2		1,744		1,535		209	13.6

Segment operating income	$	692	$	562	$	130	23.1	$	1,203	$	1,073	$	130	12.1

The Mobile segment provides tower rental space to affiliated and non-affiliated companies in the Company’s PCS markets and paging services throughout the northern Shenandoah Valley.

At June 30, 2007, the Mobile segment had 113 towers and 158 non-affiliate tenants compared to 110 towers and 152 non-affiliate tenants at June 30, 2006.

Operating revenues

The increases in tower lease revenue – non-affiliate resulted primarily from leases on new towers added during 2006. Approximately ten tower leases were eliminated during the first quarter of 2007, reflecting the continuing consolidation of wireless carriers, as the combining companies eliminated duplicate tower leases, offsetting other new leases added over the past year.

The increase in tower lease revenue – affiliate in the three months ended June 30, 2007, resulted from changes to tower lease rates in the second quarter of 2007, bringing monthly affiliate rents more in line with market rents for tower leases.

The increase in other revenue in the six month period resulted primarily from fees received for early lease terminations resulting from continuing consolidation among wireless carriers.

Operating expenses

The increase in cost of goods and services for both the three and six month periods primarily resulted from write-offs of certain preliminary tower site acquisition costs for tower sites that will not be built.

The increase in selling, general and administrative costs resulted primarily from increased operating taxes, including disputed sales taxes paid during the first quarter of 2007 period by the Company in excess of amounts previously accrued.

Liquidity and Capital Resources

The Company has four principal sources of funds available to meet the financing needs of its operations, capital projects, debt service, investments and potential dividends. These sources include cash flows from operations, cash and cash equivalents, the liquidation of investments and borrowings. Management routinely considers the alternatives available to determine what mix of sources are best suited for the long-term benefit of the Company.

Sources and Uses of Cash. The Company generated $21.6 million of net cash from operations in the 2007 six month period, compared to $15.7 million in the 2006 six month period. Major changes in operating cash components from 2006 to 2007 included the 2006 gain from the sale of RTB stock (reflected in net income and gain on disposal of investments). Changes in accounts receivable and accounts payable were less during 2007 due to changes related to the 2007 Amendments with Sprint Nextel. The increase in materials and supplies largely reflects purchases of handsets to support 13 additional retail stores acquired in the second quarter of 2007.

Indebtedness . As of June 30, 2007, the Company’s indebtedness totaled $24.0 million, with an annualized overall weighted average interest rate of approximately 7.5%. As of June 30, 2007, the Company was in compliance with the covenants in its credit agreements.

During the first quarter of 2006, the Company paid down the remaining outstanding balance on the line of credit used to fund the NTC acquisition in late 2004. While no balances are currently outstanding on this line of credit, the Company has the ability to borrow approximately $12.0 million.

The Company has no off-balance sheet arrangements and has not entered into any transactions involving unconsolidated, limited purpose entities or commodity contracts.

Capital Commitments. Capital expenditures budgeted for 2007 total approximately $36.7 million, including approximately $14.1 million for additional PCS base stations, additional towers and switch upgrades to enhance the PCS network. Approximately $7.2 million is budgeted for Converged Services’ network upgrades and new apartment complex build outs, improvements and replacements, approximately $3.5 million for local regulated telephone operations, approximately $6.4 million for fiber projects, and approximately $5.5 million for technology upgrades and other capital needs. Following the execution of the 2007 Amendments, the Company increased the budget for PCS related capital expenditures from $5.1 million to $14.1 million.

For the 2007 six month period, the Company spent $8.8 million on capital projects, compared to $10.3 million in 2006. Spending related to PCS is scheduled to be completed primarily in the final months of 2007, while spending increased for DSL equipment upgrades and other projects in the Telephone segment and for network equipment upgrades and new project buildouts in the Converged Services segment.

The Company believes that cash on hand, cash flow from operations and borrowings expected to be available under the Company’s existing revolving credit facility will provide sufficient cash to enable the Company to fund its planned capital expenditures, make scheduled principal and interest payments, meet its other cash requirements and maintain compliance with the terms of its financing agreements for at least the next 12 months. Thereafter, capital expenditures will likely continue to be required to provide increased capacity to meet the Company’s expected growth in demand for its products and services. The actual amount and timing of the Company’s future capital requirements may differ materially from the Company’s estimate depending on the demand for its products and new market developments and opportunities. The Company currently expects that it will fund its future capital expenditures primarily with cash from operations and with borrowings, although there are events outside the control of the Company that could have an adverse impact on cash flows from operations.

These events include, but are not limited to: changes in overall economic conditions, regulatory requirements, changes in technologies, availability of labor resources and capital, changes in the Company’s relationship with Sprint Nextel, cancellations or non-renewal of Converged Services contracts and other conditions. The PCS subsidiary’s operations are dependent upon Sprint Nextel’s ability to execute certain functions such as billing, customer care, and collections; the subsidiary’s ability to develop and implement successful marketing programs and new products and services, and

the subsidiary’s ability to effectively and economically manage other operating activities under the Company’s agreements with Sprint Nextel. The Company’s ability to attract and maintain a sufficient customer base is also critical to its ability to maintain a positive cash flow from operations. The foregoing events individually or collectively could affect the Company’s results.

Recently Issued Accounting Standards

There were no recently issued accounting standards, not adopted by the Company as of June 30, 2007, that are expected to have a material impact on the Company’s results of operations or financial condition.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risks relate primarily to changes in interest rates on instruments held for other than trading purposes. The Company’s interest rate risk involves three components. The first component is outstanding debt with variable rates. As of June 30, 2007, the Company has no variable rate debt outstanding. The Company’s debt has fixed rates through maturity. A 10.0% increase in interest rates would decrease the fair value of the Company’s total debt by approximately $0.4 million, while the estimated fair value of the fixed rate debt was approximately $25.4 million as of June 30, 2007.

The second component of interest rate risk consists of temporary excess cash, which is generally invested in short-term investment vehicles that have limited interest rate risk, such as overnight repurchase agreements and Treasury bills with a maturity of less than 90 days. Management continues to evaluate the most beneficial use of these funds.

The third component of interest rate risk is marked increases in interest rates that may adversely affect the rate at which the Company may borrow funds for growth in the future. Management does not believe that this risk is currently significant because the Company’s existing sources of liquidity are adequate to provide cash for operations, payment of debt and near-term capital projects.

Management does not view market risk as having a significant impact on the Company’s results of operations, although future results could be adversely affected if interest rates were to increase significantly for an extended period and the Company were to require external financing. General economic conditions affected by regulatory changes, competition or other external influences may pose a higher risk to the Company’s overall results.

As of June 30, 2007, the Company has approximately $7.2 million invested in privately held companies directly or through investments with portfolio managers. Most of the companies are in an early stage of development and significant increases in interest rates could have an adverse impact on their results, ability to raise capital and viability. The Company’s market risk is limited to the funds previously invested and an additional $0.5 million committed under contracts the Company has signed with portfolio managers. Additionally, the Company’s investments at June 30, 2007, included approximately $2.5 million held in a “rabbi trust” to be invested in various stock and bond mutual funds in connection with participants’ investment elections under the SERP. The transfers to specific funds did not occur until early July 2007.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management, with the participation of our President and Chief Executive Officer, who is the principal executive officer, and the Executive Vice President and Chief Financial Officer, who is the principal financial officer, conducted an evaluation of our disclosure controls and procedures, as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934. The Company’s principal executive officer and its principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of June 30, 2007.

Changes in Internal Control Over Financial Reporting

During the second fiscal quarter of 2007, there were no changes in the Company’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Other Matters Relating to Internal Control Over Financial Reporting

Under the Company’s agreements with Sprint Nextel, Sprint Nextel provides the Company with billing, collections, customer care, certain network operations and other back office services for the PCS operation, and Sprint Nextel remits to the Company approximately 60% of the Company’s total operating revenues. Due to this relationship, the Company necessarily relies on Sprint Nextel to provide accurate, timely and sufficient data and information to properly record the Company’s revenues, and accounts receivable, which underlie a substantial portion of the Company’s periodic financial statements and other financial disclosures.

Information provided by Sprint Nextel includes reports regarding the subscriber accounts receivable in the Company’s markets. Sprint Nextel provides the Company with monthly accounts receivable, billing and cash receipts information on a market level, rather than a subscriber level. The Company reviews these various reports to identify discrepancies or errors. Under the Company’s agreements with Sprint Nextel, the Company is entitled to only a portion of the receipts, net of items such as taxes, government surcharges, certain allocable write-offs and the 16.8% of revenue retained by Sprint Nextel. Because of the Company’s reliance on Sprint Nextel for financial information, the Company must depend on Sprint Nextel to design adequate internal controls with respect to the processes established to provide this data and information to the Company and Sprint Nextel’s other Sprint PCS affiliate network partners. To address this issue, Sprint Nextel engages an independent registered public accounting firm to perform a periodic evaluation of these controls and to provide a “Report on Controls Placed in Operation and Tests of Operating Effectiveness for Affiliates” under guidance provided in Statement of Auditing Standards No. 70 (“SAS 70 reports”). The report is provided to the Company on a semi-annual basis and covers a ten-month period. The most recent report covers the period from January 1, 2006 to November 30, 2006. The most recent report indicated there were no material issues which would adversely affect the information used to support the recording of the revenues and expenses provided by Sprint Nextel related to the Company’s relationship with them.

PART II.	OTHER INFORMATION

ITEM 1.	Legal Proceedings

The Company had no material legal proceedings as of the date of this report.

ITEM 1A.	Risk Factors

As previously discussed, our actual results could differ materially from our forward looking statements. Except as set forth below, there have been no material changes in the risk factors from those described in Part 1, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

FCC Rulemaking on Exclusive Access Agreements. In March 2007, the FCC initiated a rulemaking proceeding with respect to exclusive access agreements for video services to determine if such agreements should be prohibited or otherwise restricted. In connection with its Converged Services business, the Company negotiates with operators of MDU communities for the exclusive right to provide video services in order to justify the capital investment needed to deliver the video services demanded by residents of MDUs. While we cannot predict the outcome of the FCC rulemaking proceeding, the adoption of regulations prohibiting or otherwise regulating the entry into exclusive access agreements could negatively impact our ability to obtain, with respect to a specific property or community, the minimum penetration rates and operating efficiencies necessary to earn a reasonable return on the capital invested as well as limit our ability to obtain favorable terms from equipment vendors and content suppliers.


ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds

The Company maintains a dividend reinvestment plan (the “DRIP”) for the benefit of its shareholders. When shareholders remove shares from the DRIP, the Company issues a certificate for whole shares, pays out cash for any fractional shares, and cancels the fractional shares purchased. The following table provides information about the Company’s repurchases of fractional shares during the three months ended June 30, 2007; all amounts have been adjusted to reflect the three for one stock split effective August 2, 2007:

	Number of Shares Purchased		Average Price Paid per Share

April 1 to April 30		10	$	15.68
May 1 to May 31		6	$	15.30
June 1 to June 30		2	$	16.26

Total		18	$	15.60

ITEM 6.	Exhibits

	(a)	The following exhibits are filed with this Quarterly Report on Form 10-Q:

3.1	Amended and Restated Articles of Incorporation of Shenandoah Telecommunications Company as of August 1, 2007

3.2	Amended and Restated Bylaws of Shenandoah Telecommunications Company, effective as of July 17, 2007, (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on July 18, 2007).

31.1	Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2	Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32	Certifications pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. § 1350.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

SHENANDOAH TELECOMMUNICATIONS COMPANY
(Registrant)

	/S/ Earle A. MacKenzie

	Earle A. MacKenzie, Executive Vice President and Chief Financial Officer
	Date: August 7, 2007

EXHIBIT INDEX

	Exhibit No.		Exhibit

	3.1		Amended and Restated Articles of Incorporation of Shenandoah Telecommunications Company as of August 1, 2007

	3.2		Amended and Restated Bylaws of Shenandoah Telecommunications Company, Effective as of July 17, 2007, (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed on July 18, 2007).

	31.1		Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

	31.2		Certification of Executive Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

	32		Certifications pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. 1350.

Exhibit 3.1

August 1, 2007

SHENANDOAH TELECOMMUNICATIONS COMPANY

Date of Incorporation: February 4, 1981

ARTICLES OF INCORPORATION

ARTICLE I

The name of the Corporation is SHENANDOAH TELECOMMUNICATIONS COMPANY.

ARTICLE II

The purpose of the Corporation is to conduct any or all lawful business not required to be specifically stated in these articles.

ARTICLE III

The Corporation shall have authority to issue 48,000,000 shares.

ARTICLE IV

No stockholder shall have the preemptive right to acquire unissued shares of the Corporation or securities convertible into such shares or warrants, options or rights to acquire such shares.

ARTICLE V

The initial registered office shall be located at 11th Floor, 707 East Main Street, Richmond, Virginia, in the City of Richmond, and the initial registered agent is John W. Riely, whose business address is the same as the address of the initial registered office and who is a resident of Virginia and a member of the Virginia State Bar.

ARTICLE VI

The authorized number of directors of this Corporation shall be not less than seven (7) and not more than nine (9). The number of directors within this range shall be stated in the Corporation’s Bylaws, as may be amended from time to time. When the number of directors is changed the Board of Directors shall determine the class or classes to which the increased or decreased number of directors shall be apportioned; provided that the directors in each class shall be as nearly equal in number as possible. No decrease in the number of directors shall have the effect of shortening the term of any incumbent director.

Effective as of the annual meeting of shareholders in 1998, the Board of Directors shall be divided into three classes, designated as Class I, Class II and Class III, as nearly equal in number as possible, and the term of office of directors of one class shall expire at each annual meeting of shareholders, and in all cases until their successors shall be elected and shall qualify, or until their earlier resignation, removal from office, death or incapacity. The initial term of office of Class I shall expire at the annual meeting of shareholders in 1999, that of Class II shall expire at the annual meeting in 2000, and that of Class III shall expire at the annual meeting in 2001, and in all cases as to each director until his successor shall be elected and shall qualify, or until his earlier resignation, removal from office, death or incapacity.

Subject to the foregoing, at each meeting of shareholders the successors to the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third succeeding annual meeting and until their successors shall be elected and qualified.

The directors remaining in office acting by a majority vote, or a sole remaining director, although less than a quorum, are hereby expressly delegated the power to fill any vacancies in the Board of Directors, however occurring, whether by an increase in the number of directors, death, resignation, retirement, disqualification, removal from office or otherwise, and any director so chosen shall hold office until the next shareholder meeting at which directors are elected and until his successor shall have been elected and qualified, or until his earlier resignation, removal from office, death or incapacity.

Any director may be removed from office at a meeting called expressly for that purpose by the vote of shareholders holding not less that 75% of the shares entitled to vote at the election of directors.

ARTICLE VII

1. In this Article:

“Applicant” means the person seeking indemnification pursuant to this Article.

“Expenses” includes counsel fees.

	“Liability” means the obligation to pay a judgment, settlement, penalty, fine, including any excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding.

	“Party” includes an individual who was, is, or is threatened to be, made a named defendant or respondent in a proceeding.

	“Proceeding” means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal.


2.	In any proceeding brought by a shareholder of the Corporation in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, no director or officer of the Corporation shall be liable to the Corporation or its shareholders for monetary damages with respect to any transaction, occurrence or course of conduct, whether prior or subsequent to the effective date of this Article, except for liability resulting from such person’s having engaged in willful misconduct or a knowing violation of the criminal law or any federal or state securities law.

3.	The Corporation shall indemnify (a) any person who was or is a party to any proceeding, including a proceeding brought by a shareholder in the right of the Corporation or brought by or on behalf of shareholders of the Corporation, by reason of the fact that he is or was a director or officer of the Corporation, or (b) any director or officer who is or was serving at the request of the Corporation as a director, trustee, partner or officer of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability incurred by him in connection with such proceeding unless he engaged in willful misconduct or a knowing violation of the criminal law. A person is considered to be serving an employee benefit plan at the Corporation’s request if his duties to the Corporation also impose duties on, or otherwise involve services by, him to the plan or to participants in or beneficiaries of the plan. The Board of Directors is hereby empowered, by a majority vote of a quorum of disinterested directors, to enter into a contract to indemnify any director or officer in respect of any proceedings arising from any act or omission, whether occurring before or after the execution of such contract.

4.	The provisions of this Article shall be applicable to all proceedings commenced after the adoption hereof by the shareholders of the Corporation, arising from any act or omission, whether occurring before or after such adoption. No amendment or repeal of this Article shall have any effect on the rights provided under this Article with respect to any act or omission occurring prior to such amendment or repeal. The Corporation shall promptly take all such actions, and make all such determinations, as shall be necessary or appropriate to comply with its obligation to make any indemnity under this Article and shall promptly pay or reimburse all reasonable expenses, including attorneys’ fees, incurred by any such director, officer, employee or agent in connection with such actions and determinations or proceedings of any kind arising therefrom.

5.	The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the applicant did not meet the standard of conduct described in Section 2 or 3 of this Article.

6.	Any indemnification under Section 3 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the applicant is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 3.

	The determination shall be made:

(a)	By the Board of Directors by a majority vote of a quorum consisting of directors not at the time parties to the proceeding;

(b)	If a quorum cannot be obtained under Subsection (a) of this section, by majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties may participate), consisting solely of two or more directors not at the time parties to the proceeding;

(c)	By special legal counsel;

(i)	Selected by the Board of Directors or its committee in the manner prescribed in Subsection (a) or (b) of this section; or

(ii)	If a quorum of the Board of Directors cannot be obtained under Subsection (a) of this section and a committee cannot be designated under Subsection (b) of this section, selected by majority vote of the full Board of Directors, in which selection directors who are parties may participate; or

(d)	By the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the proceeding may not be voted on the determination.

Any evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is appropriate, except that if the determination is made by special legal counsel, such evaluation as to reasonableness of expenses shall be made by those entitled under Subsection (c) of this Section 6 to select counsel.

Notwithstanding the foregoing, in the event there has been a change in the composition of a majority of the Board of Directors after the date of the alleged act or omission with respect to which indemnification is claimed, any determination as to indemnification and advancement of expenses with respect to any claim for indemnification made pursuant to this Article shall be made by special legal counsel agreed upon by the Board of Directors and the applicant. If the Board of Directors and the applicant are unable to agree upon such special legal counsel, the Board of Directors and the applicant each shall select a nominee, and the nominees shall select such special legal counsel.

7. (a)

The Corporation shall pay for or reimburse the reasonable expenses incurred by any applicant who is a party to a proceeding in advance of final disposition of the proceeding or the making of any determination under Section 3 if the applicant furnishes the Corporation:

(i)	a written statement of his good faith belief that he has met the standard of conduct described in Section 3; and

(ii)	a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet such standard of conduct.

(b)	The undertaking required by Paragraph (ii) of Subsection (a) of this section shall be an unlimited general obligation of the applicant but need not be secured and may be accepted without reference to financial ability to make repayment.

(c)	Authorizations of payments under this section shall be made by the persons specified in Section 6.

8.	The Board of Directors is hereby empowered, by a majority vote of a quorum consisting of disinterested directors, to cause the Corporation to indemnify or contract to indemnify any person not specified in Section 2 or 3 of this Article who was, is or may become a party to any proceeding, by reason of the fact that he is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the same extent as if such person were specified as one to whom indemnification is granted in Section 3. The provisions of Sections 4 through 7 of this Article shall be applicable to any indemnification provided hereafter pursuant to this Section 8.

9.	The Corporation may purchase and maintain insurance to indemnify it against the whole or any portion of the liability assumed by it in accordance with this Article and may also procure insurance, in such amounts as the Board of Directors may determine, on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by him in any such capacity or arising from his status as such, whether or not the Corporation would have power to indemnify him against such liability under the provisions of this Article.

10.	Every reference herein to directors, officers, employees or agents shall include former directors, officers, employees and agents and their respective heirs, executors and administrators. The indemnification hereby provided and provided hereafter pursuant to the power hereby conferred by this Article on the Board of Directors shall not be exclusive of any other rights to which any person may be entitled, including any right under policies of insurance that may be purchased and maintained by the Corporation or others, with respect to claims, issues or matters in relation to which the Corporation would not have the power to indemnify such person under the provisions of this Article. Such rights shall not prevent or restrict the power of the Corporation to make or provide for any further indemnity, or provisions for determining entitlement to indemnity, pursuant to one or more indemnification agreements, bylaws, or other arrangements (including, without limitation, creation of trust funds or security interests funded by letters of credit or other means) approved by the Board of Directors (whether or not any of the directors of the Corporation shall be a party to or beneficiary of any such agreements, bylaws or arrangements); provided, however, that any provision of such agreements, bylaws or other arrangements shall not be effective if and to the extent that it is determined to be contrary to this Article or applicable laws of the Commonwealth of Virginia.

11.	Each provision of this Article shall be severable, and an adverse determination as to any such provision shall in no way affect the validity of any other provision.



	(s) John W. Riely

EXHIBIT 31.1

CERTIFICATION

	I, Christopher E. French, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Shenandoah Telecommunications Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/S/ Christopher E. French

	Christopher E. French, President and Chief Executive Officer
	Date: August 7, 2007

EXHIBIT 31.2

CERTIFICATION

	I, Earle A. MacKenzie, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Shenandoah Telecommunications Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	/S/ Earle A. MacKenzie

	Earle A. MacKenzie, Executive Vice President and Chief Financial Officer
	Date: August 7, 2007

EXHIBIT 32

Written Statement of Chief Executive Officer and Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Each of the undersigned, the President and Chief Executive Officer and the Executive Vice President and Chief Financial Officer, of Shenandoah Telecommunications Company (the “Company”), hereby certifies that, on the date hereof:

(1) The quarterly report on Form 10-Q of the Company for the three months ended June 30, 2007 filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) Information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

	/S/ Christopher E. French

	Christopher E. French President and Chief Executive Officer August 7, 2007

	/S/ Earle A. MacKenzie

	Earle A. MacKenzie Executive Vice President and Chief Financial Officer August 7, 2007

The foregoing certification is being furnished solely pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 (the “Exchange Act”) and 18 U.S.C. Section 1350 and is not being filed as part of the Report or as a separate disclosure document. This certification shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to liability under that section. This certification shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act except to the extent this Exhibit 32 is expressly and specifically incorporated by reference in any such filing.