Shenandoah Telecom Co Technology Leadership Forum 2026
Review the key takeaways and the transcript of this earnings call.
- Shenandoah Telecommunications reported that its residential fiber business represents about 28% of revenues and grew 33% year over year in the second quarter.
- The commercial fiber business accounts for about 23% of revenues and grew 9% year over year in the second quarter, serving commercial customers including national wireless carriers and K-12 E-Rate programs.
- The incumbent cable business has been owned for over 20 years, with limited capital investment and three market segments: dense competitive markets, government grant-subsidized rural markets, and very rural non-competitive markets.
- The company has built about 500,000 greenfield fiber passings and 25,000 government grant-subsidized passings, expecting to increase penetration from 40% to 50-65% in the subsidized segment over the next couple of years.
- Starlink satellite internet has had minimal impact on the fiber business and competitive cable markets, with some churn in lower demographic unserved areas, which the company is addressing with lower-priced entry-level broadband.
- Glo Fiber recently surpassed 100,000 subscribers and plans to reach 500,000 homes passed by year-end, focusing on technology and local customer service rather than price.
- The company uses four sales channels for Glo Fiber: door-to-door (35-40% of gross adds), digital advertising (25%), retail stores (20%), and call centers (15%).
- Customer acquisition costs average about $310 per gross add, split between commissions ($50-$60) and advertising ($250).
- The cable business penetration in unserved areas is about 40%, with efforts underway to improve penetration through rate card changes and value proposition adjustments.
- The entry-level cable broadband service price was reduced from $65 to $50 with a $10 promotion in March, lowering the effective price to $40 for the first year.
- No significant rerating of the cable customer base has occurred, but gross adds have increased, particularly at the $40 entry-level tier.
- Long-term cable RPU is expected to decline about 1% annually over the next few years, while fiber ARPU has averaged around $77 in recent years.
- The commercial fiber business growth was driven by carrier demand and seasonal E-Rate sales, with potential opportunities to connect new data centers near Columbus, Ohio, where hyperscalers are investing in AI infrastructure.
- The company is focusing on capital-light commercial fiber opportunities leveraging existing fiber assets, with 20-25% of route miles leased or serviced rather than built.
- Capital intensity is expected to decline next year to below 30% of revenues, with residential business capital intensity around 25% and commercial around 25-30%, enabling a return to positive free cash flow next year.
- A 10% reduction in workforce (about 100 employees) was announced to right-size the organization as the fiber build winds down.
- Expense management initiatives include deploying AI for productivity improvements and competitive vendor bidding, expected to yield over $2 million in annual savings starting next year.
- Management expects low double-digit annual EBITDA growth over the next couple of years, with EBITDA margin expansion of 300 to 400 basis points annually, reaching above 40%, supported by 4-5% top-line revenue growth.
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Transcript
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Good afternoon, everybody. This is the presentation with Shenandoah Telecommunications. We have Jim Volk, CFO. Jim, thanks for being here.
Brandon, thanks for the invite.
My name's Brandon Nispel. I cover comm services for KeyBanc. Jim, maybe just to start, Shentel's fairly unique in terms of your footprint. You partially have a cable business, you partially have a fiber business. Maybe just outline for us the competitive elements in each of these businesses, how you think about allocating capital for them, and really the growth outlook for each business.
Absolutely. We run three lines of business. Our Glo Fiber business is our residential fiber business. It represents about 28% of our revenues. The past second quarter, year-over-year, it grew 33%. So growing like a weed. We've built about 500,000 passings, greenfield passings, to overbuild in rural markets to be the second competitor in those markets for broadband and the first to provide fiber and having great success on that side. We also run a commercial fiber business that represents about 23% of our revenues. That grew 9% year-over-year in the second quarter. It's been up a tick. We've been growing more in the low to mid-single digit growth rates, but it's picked up more recently. This business serves commercial customers from the national wireless cellular guys with backhaul. We provide bandwidth to other carriers. We have a big K through 12 E-Rate program business.
And we just serve general enterprises in our local areas. Great, solid, recurring revenue business for us. Then the last piece is our incumbent cable business, which we've owned for over 20 years. Not spending a whole lot of capital in that business. That I think about in three different types of buckets. We have our more dense markets, good demographics. Those areas generally have another broadband provider. But we've been performing well there. That's been the case for about three years now, and we've put a good playbook in place that we have a more competitive rate card, and we're more than holding our share from a unit perspective. Our churn rates have come down, but we are giving up a little bit of ARPU to accomplish that.
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