NTELOS Holdings Corp. NTLS (the "Company" or "NTELOS"), a leading regional provider of nationwide
wireless voice and data communications and home to the "best value in
wireless," announced today several strategic initiatives to refocus on its
Western Markets.
After an extensive review of its operations and in an effort to maximize
long-term shareholder value, the Board of Directors of NTELOS has decided to
focus the Company's business operations exclusively in its Western Markets
(West Virginia and western Virginia), where it has experienced strong
operating performance, has a favorable competitive position for its branded
retail offering and benefits operationally and financially from its Strategic
Network Alliance ("SNA") with Sprint. On May 22, 2014, NTELOS successfully
amended and extended its agreement with Sprint to serve as the exclusive
network provider in the SNA territory through the end of 2022.
To effect this strategic decision, NTELOS has commenced an orderly exit from
its Eastern Markets (eastern Virginia), which include the operating markets of
Hampton Roads/Norfolk and Richmond. As an initial step, NTELOS has entered
into an agreement to sell its 1900 MHz PCS wireless spectrum licenses covering
these markets to T-Mobile for approximately $56.0 million in cash. The
transaction is subject to customary closing conditions, including regulatory
approval by the Federal Communications Commission, and is expected to close in
April of 2015. In addition, NTELOS will wind down its network and retail
operations in its Eastern Markets over the next year. This is expected to
include a transition of its subscribers to another carrier.
With the exit from the Eastern Markets, the Company intends to strengthen its
Western Markets' network and operating results with the expansion of 4G LTE
services, improved retail performance and enhanced service capabilities. "The
initiatives we are announcing today enable us to focus our operations where
the opportunity is greatest and where we are the most competitive against
other carriers," stated Rod Dir, NTELOS's President and Chief Operating
Officer. "We look forward to bringing our customers in West Virginia and
western Virginia a terrific 4G experience."
NTELOS will have increased financial flexibility to invest in its Western
Markets from the cash generated from the wind down of its Eastern Markets and
the elimination of capital expenditures and costs that would otherwise be
incurred in future periods in the Eastern Markets. In addition to these
activities, NTELOS is exploring potential opportunities to monetize other
non-core assets, including the sale of owned towers and undeployed spectrum.
"In an effort to strengthen our retail sales performance and leverage our
strategic relationship with Sprint, we are right-sizing our business and
redirecting our resources on our Western Markets, which provide us the
greatest opportunity for sustained, profitable growth. At the same time, we
are exiting markets that have become increasingly competitive and where we
have been unable to achieve acceptable financial returns," said Michael A.
Huber, Chairman of the Board of NTELOS Holdings Corp. "Focusing on our Western
Markets, where we benefit from a strong branded retail presence and access to
multi-band spectrum in the SNA territory, will allow us to make additional
investments to improve the experience of our customers. We believe these
investments will enable us to increase our market share, ultimately leading to
greater operating efficiency and profitability. The initiatives we announced
today improve the strategic coherence of our business as well as enhance our
ability to seek opportunities to leverage our strategic assets as we build out
our 4G LTE network."
The table below provides a brief comparison of the Eastern and Western
Markets, as of September 30, 2014:
Western as % of
Category Existing Western Markets
Existing
POPs 8.0 million 4.4 million 55%
Covered POPs 6.0 million 3.0 million 50%
Retail Subscribers 457,200 277,100 59%
FY 2014 YTD SNA Billed Revenue $115.4 million $115.4 million 100%
Total Cell Sites 1,446 998 69%
Please see the attached table for quarterly subscriber activity for the
Western Markets, beginning with the first quarter of 2013.
Eastern Markets Wind Down
o NTELOS expects to implement a transition plan for its subscribers in the
Eastern Markets over the next 12 months, with a targeted shut down date of
November 15, 2015. During this transition period, NTELOS will continue to
provide a quality network experience to its subscribers while minimizing
discretionary expenditures.
o Upon closing of the spectrum transaction, NTELOS will lease back a portion
of the spectrum for continued operations. NTELOS is contractually
obligated to release all the sold spectrum to the buyer on or before on
November 15, 2015.
o NTELOS anticipates that it will incur costs of approximately $55.0 million
to complete the wind down process, of which approximately $15.0 million is
contractually payable between now and the end of 2015.
o NTELOS will explore the potential sale of additional Eastern Markets
assets prior to the wind down date which may result in incremental
proceeds for the Company.
Stephens, Inc. and UBS Investment Bank advised the Company on this transaction
and will continue to advise the Company as it explores opportunities to
monetize other Eastern Markets assets.
Business Outlook
The wireless sector in which NTELOS operates is characterized by intense
competition and has seen increasing promotional activity and price competition
in recent quarters. Although the Company does not expect the overall
competitive dynamics of the wireless sector to improve, it is reiterating
previous full year guidance for 2014:
o Adjusted EBITDA of between $128.0 million and $132.0 million, and
o Capital expenditures of approximately $105.0 million.
In addition, for the quarter ended December 31, 2014, the Company expects to
incur impairment charges related to certain long-lived assets currently being
utilized in the Eastern Markets and the spectrum being sold.
The Company is also providing a preliminary outlook for full year 2015
Adjusted EBITDA of between $100.0 million and $108.0 million. This outlook
reflects the Company's current view of the competitive retail wireless market,
the estimated decline in SNA billed revenue as previously disclosed and the
recognition of only a portion of the estimated annual savings associated with
the realignment of the business commensurate with a smaller retail subscriber
base. This range excludes the expected revenue, expenses and one-time charges
related to the wind down of the Eastern Markets. Capital expenditures for
2015 are expected to be modestly less than 2015 Adjusted EBITDA.
Conference Call
The Company will host a conference call with investors and analysts to discuss
the transaction today, December 2, 2014, at 8:00 a.m. ET. To participate,
please dial 1-888-317-6002, 1-855-669-9657 in Canada and 1-412-317-1083 for
international, approximately 10 minutes before the scheduled start of the
call. The conference call and accompanying presentation will also be
accessible live on the Investor Relations section of the Company's website at
http://ir.ntelos.com.
An archive of the conference call will be available online at
http://ir.ntelos.com beginning approximately one hour after the call. A replay
will also be available via telephone by dialing 1-877-344-7529, 1-855-669-9658
in Canada or 1-412-317-0088 internationally and entering access code 10056862
beginning approximately one hour after the call and continuing until December
16, 2014.
Non-GAAP Measures
Adjusted EBITDA is defined as net income attributable to NTELOS Holdings Corp.
before interest, income taxes, depreciation and amortization, accretion of
asset retirement obligations, transaction related costs, restructuring and
asset impairment charges, gain/loss on sale or disposal of assets and
derivatives, net income attributable to noncontrolling interests, other
expenses/income, equity-based compensation charges, separation charges,
secondary offering costs, and adjustments for impact of recognizing a portion
of the billed SNA contract revenues on a straight line basis.
Adjusted EBITDA is a key metric used by investors to determine if the Company
is generating sufficient cash flows to continue to produce shareholder value
and provide liquidity for future growth.
Adjusted EBITDA is a non-GAAP financial performance measure. It should not be
considered in isolation or as an alternative to measures determined in
accordance with accounting principles generally accepted in the United States
of America ("GAAP"). Please refer to the exhibits and materials posted on the
Company's website for a reconciliation of non-GAAP financial performance
measures to the most comparable measures reported in accordance with GAAP and
for a discussion of the presentation, comparability and use of such financial
performance measures.
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