Shentel scales Q2 E-Rate, enterprise business service revenue amidst wireless backhaul transition

Aug. 6, 2023
Regional provider continues to scale fiber network to satisfy wholesale wireless, enterprise and school district customers.

Shentel saw its second-quarter commercial segment sales rise on new E-Rate and enterprise fiber sales. Still, the backhaul segment took a hit as T-Mobile decommissions the former Sprint sites. During the second quarter, the telco booked recent sales with monthly revenue totaling approximately $102,000, up 5% year-over-year.

Commercial fiber revenue grew $900,000 or 9.8% to $10.3 million due to $500,000 in recurring revenue from circuit growth and $400,000 in non-recurring early termination fees related to the backhaul disconnects in the quarter.

One of the essential precursors of commercial growth was its ongoing fiber build. Besides supporting its growing fiber-to-the-home (FTTH) Glo Fiber network, the service provider’s fiber build supported new business service opportunities.

“We had another record quarter for fiber construction as we built over 350 new route miles for Glo Fiber passing, commercial fiber customers and government grant projects in unserved areas,” said Ed McKay, EVP and COO of Shentel during the second quarter earnings call. “This was an improvement of more than 20% over our construction rate in the first quarter, and we are on track to accelerate our number of fiber passings in the second half of the year.”

Wireless backhaul transitions
In its wireless backhaul wholesale service business segment, Shentel has entered a transitional time.

The service provider faces the reality that T-Mobile, which is Shentel’s largest wireless backhaul customer, will shut down the former Sprint network and disconnect 22 backhaul sites during the second quarter. “We expect an additional 151 backhaul disconnects later in the year as part of this network rationalization,” said Jim Volk, SVP of Finance and CFO for Shentel. “We have yet to recognize any churn from T-Mobile to date, though we have received notices that they plan to terminate 53 leases as part of the previously announced decommissioning of the former Sprint network.”

Over the past year, T-Mobile has shut down 222 connections, and Shentel expects about 151 additional sites to be disconnected this year. The remaining 167 sites are under a long-term seven-year contract. Taking out T-Mobile, Shentel's churn and revenue compression for its Commercial Fiber business did increase year-over-year but remained low at 0.7% for the second quarter.

In its tower segment, Shentel ended the quarter with 448 total tower tenants and approximately two tenants per tower. Its third-party Tower tenants increased to 437. However, Shentel’s intercompany Tower leases decreased from 31% to 11% as it turned down Beam fixed wireless sites in 2022.

McKay said the company’s tower business will also see the impact of T-Mobile’s decommissioning of the Sprint network. “We expect T-Mobile to reduce the number of Tower leases as they complete the Sprint network rationalization project later this year,” he said.  

Raising E-Rate
E-Rate was a shining star in Shentel’s commercial segment. The service provider serves schools and libraries via the E-Rate program in Virginia, West Virginia, Kentucky, and Maryland.

Our wins for the quarter included three new E-Rate contracts. McKay said these new deals brought its total of E-Rate contracts “total to more than 40 school systems and a dozen library systems under contract.”

He added that Shentel “also installed new services totaling $85,000 in incremental monthly revenue, a 30% improvement over the second quarter of 2022.”

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