Shenandoah Telecom Co Citi’s 2026 Global TMT Conference

For those of you that I haven't met yet, I'm Mike Rollins, and I'm joined with my colleague, Roberta Versiani, and we cover the communication services and infrastructure stocks for Citi. It's a real pleasure to welcome Ed McKay, President and CEO of Shentel. Ed, thank you so much for being with us today.

Appreciate it. Great to be here in the city, and thank you for the invitation and the hospitality.

Great. Just to get us started, maybe for those less familiar with your business, you can share a little bit about your strategy, your focus, and the key priorities, not just for the remainder of this year, but as you're looking out over time.

Sure. Shentel, long-term operator founded in 1902 as a local telephone company. We've evolved into a cable company, and then now a fiber-first company. As far as our big priorities, we've been building out our Glo Fiber fiber to the premise network since 2019. It's a major construction project for us. By the end of the year, we'll have over 510,000 fiber passings, so major priority for us is wrap up construction by the end of the year. Another big priority is continue to grow our commercial fiber business. We now have almost 20,000 route miles of fiber stretching from Chicago to the Washington, D.C., area. We've had a lot of success with enterprise mid-market customers. Our wholesale and wireless carrier business for backhaul services is growing significantly. We also think we have a new opportunity for some data center connectivity as well. So that's a big priority.

The third priority is operating efficiently, keeping our operating costs steady as we grow our top-line revenue with our fiber businesses.

Yeah. For the short to mid-term, definitely sustainable. In our Glo Fiber markets, current data penetration about 21%, so we're targeting 37% penetration in the mid-term, five to seven years after we launch a market, and we're well on our way to reaching that. We have a lot of opportunity for organic growth in our business. When you look at our combined fiber businesses, our commercial fiber business and our Glo Fiber business, our revenue grew 21% over the past 12 months. We look at our Glo Fiber subscribers, they grew 31% over the past 12 months. So we certainly have a good organic growth trajectory there in the short to mid-term.

When you think of the company and investors do their work, should they think of your company really as three businesses? You have the incumbent cable business, you have the kind of historical telecom and fiber markets, but then you've got these expansion markets. Let's group them together. So incumbent cable and fiber, the expansion markets where you're new into those regions, and then the third would be business and enterprise. Is that a fair way to think about Shentel?

Yeah. I would recommend viewing it as a sum of the parts. The incumbent broadband business, which is, again, the cable and the telco, and then the commercial fiber business, and then our Glo Fiber business. Our fiber business is now 51% of our total revenue, so we've become a fiber dominance company. In the second quarter for the first time, that was when our fiber businesses overtook our incumbent business from a revenue standpoint, and we expect that trajectory to continue.

Sure. Long term, we see upside from that 37%. When you look at our oldest cohorts that were built back in 2019, 2020, we are seeing some of them over 40% penetration now, and that number continues to grow. So we think long term, our fiber technology is superior to the cable competition, so we think there's a significant upside there. As far as competition from satellites, I would say the impact has been minimal so far. In the first quarter, we did see a small impact in our very rural cable markets. At that time, Starlink was basically giving away free equipment. They also had highly promotional pricing in place ahead of their IPO. But since then, we've seen them back off on the free equipment and the promotional pricing. But really virtually no impact in our Glo Fiber, fiber to the home markets.

Very little impact in our more dense cable markets. The only place we really saw any activity was in the very rural cable markets. Since the first quarter of this year, that impact has declined. We've also rolled out new pricing plans in those very rural markets to give customers more value. So in those markets now, a Shentel customer, they can get twice the speeds as Starlink at a lower price. So we think we're positioned very well to compete there. Again, virtually no impact in our fiber to the home markets, which are becoming our largest part of our business.

In the Glo Fiber markets, sometimes there is more commercial competition. There may be another third party in there providing commercial fiber services. In some cases, a local telephone company still has copper for their residential customers, but they actually have fiber for business customers. I would say a little more competition in some markets for commercial. With commercial, a small business customer in our Glo Fiber markets, they have twice the data ARPU as a residential customer. They also have a much higher take rate on phone services, and they pay more for those phone services. Even at a lower penetration rate on commercial fiber, or small business customers, we still get similar returns or even better returns in some cases, at a lower penetration rate versus a higher penetration rate in the residential areas.