Shentel may have only closed its acquisition of Horizon Telecom in early April, but the telco is getting off to a quick start to make the new asset part of its business.
As part of its integration process, which it expects to complete next year, Shentel changed the brand name from Horizon to Glo Fiber in mid-April and put forth its pricing structure for Ohio customers.
But the bigger picture is that the acquisition will bolster Shentel's fiber broadband reach.
“Although we've only owned Horizon for about 5 weeks, we are off to a fast start with our integration efforts,” said Christopher French, CEO of Shentel, during its first quarter earnings call. “We announced a brand change from Horizon to Glo Fiber in mid-April and implemented a new Glo Fiber rate card in Ohio. Like our plans in the Mid-Atlantic states, we focus on easy, straightforward pricing with no long-term contracts.”
The telco successfully secured $356 million in new financing on April 1, a strategic move that included $275 million in incremental credit facility capacity and $81 million in preferred equity.
French assured that this financing will serve as “growth capital to sustain our investments into new Glo Fiber expansion markets.”
Shentel’s fiber expansion is already on track. The company announced plans to expand the Glo Fiber network to Greenfield, Hillsboro, Jackson, Johnstown, and Zanesville, Ohio. This move will enable the company to extend Glo Fiber into new markets in Ohio while doubling the size of the telco’s commercial fiber business.
French emphasized that the company's next phase is to move forward with meeting its build-out timelines and selling services to consumers and businesses.
“With the Horizon acquisition closed and most of the underwriting of new markets completed, we have good visibility into the future state of our Glo Fiber network and markets,” French said. “The following 32 months will be focused on executing our build and sales plan.”
He added that now that the acquisition has been completed, "Horizon's fiber-rich network will open up new Glo Fiber expansion markets in Ohio while doubling the size of our commercial fiber business.”
Competitive threats rise
While Shentel is progressing with its fiber broadband builds, the service provider isn’t immune to competitive pressures from local cable operators and fiber overbuilders.
During the quarter, Shentel’s broadband data subscriber base decreased slightly year-over-year to 109,000. Likewise, broadband data churn increased to 1.67%.
Shentel's total Cable Markets and Glo Fiber Markets broadband data RGUs as of March 31, 2024, were 155,687, representing 12.2% year-over-year growth. Shentel’s penetration for Cable Markets and Glo Fiber Markets as of March 31, 2024, were 50% and 18%, respectively, compared to 52% and 17% as of March 31, 2023.
Total Glo Fiber Markets passings grew year-over-year by 94,509 to 259,567.
The telco noted that data penetration decreased to 50.3%, driven by the decrease in subscribers and the addition of over 4,000 passings in the past year, primarily in government-subsidized areas.
Revenue-generating units (RGUs) decreased by about 4.5% yearly as we continue to see declines in video and residential voice services due to cord-cutting.
“Competition has increased, but unlike some of our larger cable peers, our markets are predominantly rural with a cable or fiber competitor offering service to less than 20% of our passings,” said Ed McKay, COO of Shentel.
He added that ARPU rose during the quarter because other providers challenged them with different offerings.
“Despite competitive pressure in portions of some of its markets, Shentel’s broadband data ARPU increased by 2.4% year-over-year to $85, offsetting most of the decrease in revenue from fewer RGUs,” McKay said.
Fiber expansion progresses
Despite the competitive pressures it faces in its markets, Shentel is continuing with an aggressive fiber buildout plan.
During the first quarter, Shentel constructed and released the sales of almost 26,000 new Glo Fiber passings.
McKay noted that the “construction pace was 47% faster than the first quarter of 2023.”
With the 260,000 fiber passings Shentel constructed in the Mid-Atlantic markets and 15,000 passings acquired as part of the Horizon merger, the telco now has 275,000 Glo Fiber expansion market passings or 46% of its year-end 2026 target of 600,000.
McKay said it will also leverage public funding to extend service into other areas. “We plan to construct approximately 23,000 fiber passings as part of government grant projects, and 3,500 were complete at the end of the first quarter,” he said.
Shentel has also started engineering, permitting, and construction in eight more markets, including five new markets in Ohio.
Horizon currently passes 15,000 homes and businesses with fiber in 3 greenfield markets and 14,000 passings in the RLEC market.
Jim Volk, Shentel's CFO, noted that the “Glo Fiber CapEx in Ohio will combine initial engineering and permitting for these new markets, construction of a few thousand more passings in existing Ohio markets, and success-based CapEx to connect customers.”
