Shentel’s acquisition of Horizon Telecom is not just about enhancing its Glo Fiber fiber-to-the-home (FTTH) offering. The acquisition also sets it on a path to address broader business and wholesale opportunities in Ohio and other regions.
Speaking to investors during its first-quarter earnings call, the company said the Horizon deal benefits its residential and business customer bases.
“Horizon's fiber-rich network will open up new Glo Fiber expansion markets in Ohio while doubling the size of our commercial fiber business,” said Christopher French, CEO of Shentel.
Having completed the Horizon acquisition in early April, Shentel recently announced plans to expand the Glo Fiber network to Greenfield, Hillsboro, Jackson, Johnstown and Zanesville, Ohio.
“We now have over 15,000 route miles in our super-regional fiber network spanning seven adjacent states,” French said. “Our commercial customers have received the combination with Horizon well. We now have 25 Glo Fiber markets.”
The service provider is also bolstering its business services unit’s leadership ranks, naming Horizon Telecom veteran Glenn Lytle to lead commercial sales for the combined company. French said, "Glenn brings over 25 years of commercial fiber sales experience, including the last five years successfully growing the Horizon Commercial Fiber business.”
T-Mobile effect
While Shentel has carved out a growth path for commercial fiber revenue, the service provider’s first quarter results reflected the near-term headwind of T-Mobile shutting down the former Sprint network.
Commercial Fiber revenue decreased as expected due to the previously guided decline in T-Mobile revenue from prior period backhaul circuit disconnects as part of decommissioning the former Sprint network.
In the first quarter, Shentel reported that commercial revenues declined by $2.3 million or 19.8%.
However, James Volk, Shentel's CFO, said the effect of T-Mobile’s drag on revenues was expected.
“As reported throughout 2023, T-Mobile disconnected backhaul circuits as part of decommissioning the former Sprint network,” he said. “The revenue decline reflects a full period of these disconnects, a significant reduction, and related early termination fees. We still expect about $7 million in lower T-Mobile revenue in 2024 and for the commercial revenue to return to mid- to high single-digit growth rate starting in 2025 as previously disclosed.”
Prepped for growth
As the T-Mobile disconnect process continues through the remainder of 2024, Shentel is already seeing signs of growth in the Commercial Fiber unit.
During the first quarter, Shentel booked new sales totaling $110,000 in monthly revenue, up almost 4% year-over-year. Additionally, its installed monthly revenue for the first quarter was $66,000, and it finished the quarter with an installation backlog of approximately $165,000 in monthly revenue.
“We expect most of this backlog to be installed in the second quarter,” said Ed McKay, COO of Shentel. “Monthly churn and compression decreased significantly year-over-year to 1% for the first quarter of 2024. T-Mobile has completed most backhaul disconnects associated with the Sprint network rationalization.”
He added that while “these disconnects will temporarily slow revenue and earnings growth in 2024, we expect our commercial fiber business to return to historical growth rates in 2025 and beyond.”
Another sign of growth was seen in the small to medium business (SMB) space, which its Glo Fiber business unit serves.
The $4.7 million, or 9.1% growth, in the residential and SMB space, was a crucial driver in Shentel’s overall revenue growth for the first quarter. Revenue grew 3.1% to $69.3 million in the first quarter of 2024, partially offset by the expected decline of $2.3 million or 19.8% in commercial revenue.
Shentel noted that the residential SMB revenue increase was driven by a 73.1% growth in Glo fiber markets revenue due to a 62.3% increase in broadband data RGUs and a 9.7% increase in data ARPU.
The service provider’s potential future growth will also be supported by the ongoing build-out of its fiber network. As of the end of the first quarter, Shentel had passed 259,567 homes and businesses in its Glo Fiber markets.
Shentel is progressing toward over 100,000 additional fiber passings in 2024.
“We now have approximately 260,000 Glo Fiber passings, and our total number of approved Glo Fiber passings reached 565,000 at the end of the first quarter,” McKay said. “Combined with 15,000 existing greenfield fiber passings in former Horizon markets and our recently announced expansion to 40,000 additional homes in Ohio, we now have enough passings in our construction pipeline to reach our goal of 600,000 total Glow Fiber passings by 2026.”
McKay said it plans 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.”
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