Shentel hints at using acquisitions to complement its fiber expansion effort
Shentel has hinted that it would look at purchasing other assets that would complement the ongoing build-out of its Glo Fiber fiber-to-the-home (FTTH) network.
During its second-quarter earnings call, Jim Volk, SVP and CFO Shentel, told investors it would look at an existing cable or fiber provider property. “We continue to be opportunistic and look for other properties to continue our Glo Fiber expansion strategy,” he said. “It could come in the form of buying an incumbent Cable business or a fiber business; we would entertain either one.”
He added, “Ideally, it would be sizable enough that it would have a good strong base business, but with the opportunity to expand out from there to replicate what we're doing in the Mid-Atlantic area in other parts of the country.”
Expanding fiber passings
As Shentel considers potential complementary options to expand its network, Shentel continued to ramp up the reach of its fiber network to new areas. The service provider invested $99 million year-to-date, including approximately $90 million for engineering and construction and $8 million to connect new Glo Fiber customers.
For the full year, Shentel said it will spend $260 million to $300 million as it continues to execute its Fiber First growth strategy. During the quarter, Shentel built over 350 new route miles for Glo Fiber, commercial fiber customers, and government grant projects in unserved areas.
Ed McKay, EVP and COO, said that a significant portion of the fiber built out in the second quarter was to prepare it to make new passings in the third quarter. “Many of the markets we're building now are markets where we needed existing fiber infrastructure,” he said. “So, we had to establish a pop and then build fiber out to the neighborhoods. A lot of our construction in the second quarter was building that fiber to get out to the neighborhoods.”
At the end of the second quarter, Shentel lit up Glo Fiber in Shippensburg and Waynesboro in Pennsylvania. The provider has enabled Glo Fiber multi-gigabit service in 19 markets, with four additional market launches planned by the end of the year.
It has secured franchise agreements to bring Glo Fiber to 18,000 additional homes and businesses, including the new market of Orange in Virginia and other boroughs and townships adjacent to its existing needs in Pennsylvania. Its approved Glo Fiber passings have grown to 478,000 with 65 franchise agreements in 23 markets across five states.
Additionally, Shentel continues to win government grant awards. The company has been awarded over $87 million in grants, enabling it to extend broadband to over 27,000 unserved locations through fiber-to-the-home technology. It added 18,000 new fiber passings, including 400 recent government-subsidized passings, and it now passe more than 183,000 homes and businesses with fiber.
In the second quarter, Shentel was awarded $6.3 million in grants to expand broadband to over 2,000 additional unserved homes surrounding its cable footprint. “About 23,000 of our planned government subsidized passings will extend broadband to unserved areas around our cable markets,” McKay said. “This is an excellent opportunity for Broadband subscriber growth as we complete construction over the next several years.”
Driving ARPU, higher speed adoption
Shentel’s bet on fiber broadband continued to bear fruit in the second quarter as fiber subscribers and broadband ARPU rose.
Glo Fiber data customers rose 92% year-over-year, ending the second quarter with nearly 33,000. The provider added 16,000 broadband data customers in the past year, and its penetration rate climbed to 18% in the second quarter, up from 15.2% a year ago. Shentel’s total number of data, video and voice revenue-generating units has reached almost 41,000, up approximately 81% year-over-year.
Shentel said Glo Fiber revenue was the “primary catalyst,” growing $4.1 million or over 100% from the prior year with solid customer growth and a slight increase in ARPU.
During the quarter, broadband data ARPU increased by 1.5% year-over-year, reaching $75.63. McKay said the rise in ARPU “was driven by a combination of additional equipment revenue and customers selecting higher speed tiers.”
More Glo Fiber customers continued to migrate to 1 Gbps and other higher speed tiers. “For the quarter, almost 43% of our new residential subscribers adopted speed tiers of 1 gig or higher, including approximately 4% that took speed tiers of 2 gig or higher,” McKay said.
Also, Shentel found that its Glo Fiber customers are adopting its Glo TV video and Glo Voice services. In areas where Glo TV is available, the service achieved an attachment rate of 11% for the second quarter. Glo voice service is open to all Glo Fiber passings, and the quarter's attachment rate was over 11%.
At the end of the second quarter, approximately 12% of Glo Fiber customers subscribed to video service, and about 12% subscribed to voice service. And finally, our churn continues to remain very low at 1.1%, an improvement of 11 basis points over the second quarter of 2022.
However, Shentel reported a quarter decline of approximately 500 Broadband data RGUs. From a seasonality standpoint, the second quarter is typically our slowest quarter.
Overbuilder competition challenges
Like other providers, Shentel is not immune to emerging challenges from a growing host of fiber overbuilder providers in its service territory.
Shentel said the percentage of incumbent cable passings with a cable or fiber competitor is currently in the high teens.
McKay anticipates competition in its markets to “grow to approximately 25% over the next few years with announced construction projects.”
However, he added that most of the builds it will conduct from the government grants it secured in its cable territory could drive up its subscriber base.
“Approximately 23,000 of our planned government subsidized passings will extend Broadband to unserved areas around our Cable markets,” McKay said. “We see this as an excellent opportunity for Broadband subscriber growth as we complete construction over the next several years.”
Sean Buckley
Sean is responsible for establishing and executing the editorial strategies of Lightwave and Broadband Technology Report across their websites, email newsletters, events, and other information products.