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Shenandoah Telecommunications Company Reports Third Quarter 2017 Results

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Transformation of nTelos to Sprint Affiliate Model Completed

  - Third Quarter Net Income Improved $11.1 million

EDINBURG, Va., Nov. 02, 2017 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company ("Shentel") (NASDAQ:SHEN) announces financial and operating results for the three months ended September 30, 2017.

Consolidated Third Quarter Results

For the quarter ended September 30, 2017, the Company reported net income of $3.5 million, compared to a net loss of $7.6 million in the third quarter of 2016, representing an improvement of $11.1 million, or 146.5%. This improvement primarily relates to improved results in the Cable and Wireline segments, the reductions in the integration and acquisition expenses related to the transformation of nTelos to the Sprint Affiliate model, partially offset by higher interest on the increased balance of outstanding debt as a result of the nTelos acquisition.  The Company is also excited to report that the integration of nTelos' operations, the transition of its customers, and the upgrade of the network have been completed ahead of schedule.

Total revenues were $151.8 million, a decrease of 3.2% compared to $156.8 million for the 2016 third quarter. Wireless service revenues decreased 3.2% as a result of lower average revenue per subscriber.  Of the former nTelos customers, approximately 65% of prepaid and 75% of postpaid migrated to the Sprint platform. Cable segment revenues increased 9.2% due to an increase in High Speed Data and voice Revenue Generating Units (RGUs), video price increases to offset increases in programming costs, and new and existing customers selecting higher-speed data packages.  Wireline segment revenues increased 6.0% due to increases in fiber revenue.

Total operating expenses were $142.3 million in the third quarter of 2017 compared to $160.8 million in the prior year period, a decrease of $18.5 million or 11.5%.  Operating expenses in the third quarter of 2017 included $2.9 million of integration and acquisition costs associated with the nTelos acquisition and the exchange transaction with Sprint, compared to $20.2 million in the same quarter last year.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) decreased 9.3% to $66.9 million in the third quarter of 2017 from $73.7 million in the third quarter of 2016. Continuing OIBDA (Adjusted OIBDA less the benefit received from the waived Sprint management fee) decreased 9.8% to $57.9 million from $64.2 million.

President and CEO Christopher E. French commented, "We delivered solid results in the third quarter of 2017 with the most notable achievement being our completion of the transformation of nTelos into the Sprint Affiliate model, which we accomplished a full quarter ahead of schedule and under budget.  The transformation included upgrading the nTelos wireless network to a state-of-the art 4G LTE network, which will allows us to capitalize on the fourth quarter selling season.  We have launched the biggest advertising campaign in our Company's history to highlight our enhanced network and drive new customer growth."

Wireless Segment

Third quarter wireless service revenues decreased $3.6 million or 3.2%, primarily related to a reduction in average revenue per customer as a higher percentage of our postpaid customer base moved from higher revenue subsidized phone price plans to lower revenue price plans associated with leased and installment sale phones.

Shentel served 727,954 wireless postpaid customers at September 30, 2017, up 1.3% over September 30, 2016.  Third quarter postpaid churn was 2.19% for the total company and 1.66% in the Legacy area. Excluding the impact of churn caused by customer migrations, the total Company churn was 1.85%.  The Company had a net loss of 4,710 postpaid customers in the quarter with the Legacy area adding 2,878. Excluding the customer loss due to nTelos customer migration, the Company had net adds of approximately 5,700. As of September 30, 2017, tablets and data devices were 7.6% of the postpaid base reflecting a net loss of 1,388 in the quarter.

Shentel served 224,609 prepaid wireless customers at September 30, 2017, a decrease of 20 thousand compared to the third quarter of last year.  The decrease includes the 24 thousand prepaid customer reduction in the fourth quarter 2016 due to Sprint decreasing the length of time an inactive customer would be carried in the customer counts. Total third quarter prepaid churn was 5.25% and 5.04% in the Legacy area.  The Company had net additions of 2,571 prepaid customers in the third quarter of 2017, with the Legacy area net additions of 1,942.

As previously reported, the prepaid migration was completed in late December 2016, and the outsourced prepaid billing arrangement was terminated. Shentel completed the migration of the postpaid nTelos customers and the upgrade of the network September 30, 2017.

Third quarter 2017 Adjusted OIBDA in the Wireless segment was $54.2 million, a decrease of 13.3% from the third quarter of 2016.  Continuing OIBDA in the Wireless segment was $45.2 million, down 14.7% from the third quarter of 2016.

Mr. French continued, "During the third quarter we completed the migration of postpaid nTelos customers and as expected we saw higher customer churn in the quarter as we reached the end of the migration period.  With the transition activities complete, we now turn our full focus on marketing our improved network, extended geographic coverage area and enhanced service offerings to attract new customers and grow our base of both prepaid and postpaid subscribers.  We are excited about the opportunity to provide our comprehensive price plans and state-of-the art network to an expanding consumer base."

Cable Segment

Service revenues in the Cable segment increased $2.0 million or 8.0% to $26.9 million, primarily due to growth in High Speed Data and Voice RGUs, video rate increases implemented in January 2017 to pass through programming cost increases, and new and existing customers selecting higher speed data packages.  Operating expenses increased 4.7% or $1.2 million in the third quarter of 2017. Operating income was $3.6 million compared with $2.3 million in the prior year, primarily due to the continued transformation of our Cable segment from a video focus to broadband.  In the third quarter the Company added 1,483 High Speed Data users and 327 voice users, and lost 869 video users.

Adjusted OIBDA in the Cable segment for third quarter 2017 was $10.0 million, up 21.1% from $8.2 million in the third quarter of 2016.

"We have established a robust network to address high consumer expectations for speed and reliability from their cable provider.  Our network provides the high speed bandwidth and availability that our customers demand, providing an advantage in the competitive marketplace as we look to capture new customers and grow with our existing subscribers as they upgrade their service packages," Mr. French stated.

Wireline Segment

Revenue in the Wireline segment increased 6.0% to $19.9 million in the third quarter of 2017, as compared to $18.7 million in the third quarter of 2016.  Carrier access and fiber revenue for the third quarter of 2017 was $13.2 million, an increase of 6.9% from the same quarter last year, primarily as a result of new fiber contracts. Increases in broadband service revenue offset the loss of regulated voice service revenue.  Operating expenses increased 5.9% or $0.8 million to $14.8 million for third quarter 2017, primarily due to costs to support new fiber contracts.

Adjusted OIBDA in the Wireline segment for third quarter 2017 was $8.4 million, as compared to $7.7 million in third quarter 2016.

Other Information

Capital expenditures were $39.8 million in the third quarter of 2017 compared to $42.7 million in the comparable 2016 period. To date, the company has spent or committed $132.9 million of the estimated 2017 capital budget.

Cash and cash equivalents as of September 30, 2017 were $75.5 million, compared to $36.2 million at December 31, 2016. Total outstanding debt at September 30, 2017 totaled $833.0 million, net of unamortized loan costs, compared to $829.3 million as of December 31, 2016.  At September 30, 2017, debt as a percent of total assets was 57.6%. The amount available to the Company through its revolver facility was $75.0 million.

Conference Call and Webcast

The Company will host a conference call and simultaneous webcast Thursday, November 2, 2017, at 10:00 A.M. Eastern Time.

Teleconference Information:

November 2, 2017 10:00 A.M. (ET) 
Dial in number: 1-888-695-7639

Password: 2275277
Audio webcast: http://investor.shentel.com/

An audio replay of the call will be available approximately two hours after the call is complete, through November 10, 2017 by calling (855) 859-2056.

About Shenandoah Telecommunications

Shenandoah Telecommunications Company (Shentel) provides a broad range of diversified communications services through its high speed, state-of-the-art network to customers in the Mid-Atlantic United States.  The Company's services include: wireless voice and data; cable video, internet and digital voice; fiber network and services; and regulated local and long distance telephone. Shentel is the exclusive personal communications service ("PCS") Affiliate of Sprint in portions of Pennsylvania, Maryland, Virginia, West Virginia, and portions of Kentucky and Ohio.  For more information, please visit www.shentel.com.

This release contains forward-looking statements that are subject to various risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of unforeseen factors. A discussion of factors that may cause actual results to differ from management's projections, forecasts, estimates and expectations is available in the Company's filings with the SEC. Those factors may include changes in general economic conditions, increases in costs, changes in regulation and other competitive factors.

CONTACTS:
Shenandoah Telecommunications, Inc.
Adele Skolits
CFO and VP of Finance
540-984-5161
Adele.skolits@emp.shentel.com

Or
John Nesbett/Jennifer Belodeau
Institutional Marketing Services (IMS)
203-972-9200
jnesbett@institutionalms.com

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

  September 30,
 2017
  December 31,
 2016
       
Cash and cash equivalents $ 75,467     $ 36,193  
Other current assets 97,750     125,272  
Total current assets 173,217     161,465  
       
Investments 11,319     10,276  
       
Net property, plant and equipment 683,355     698,122  
       
Intangible assets, net 421,672     454,532  
Goodwill 146,497     145,256  
Deferred charges and other assets, net 11,012     14,756  
Total assets $ 1,447,072     $ 1,484,407  
       
Total current liabilities 129,537     164,263  
Long-term debt, less current maturities 778,686     797,224  
Other liabilities 239,504     227,026  
Total shareholders' equity 299,345     295,894  
Total liabilities and shareholders' equity $ 1,447,072     $ 1,484,407  

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)

    Three Months Ended
September 30,
  Nine Months Ended
September 30,
    2017   2016   2017   2016
                 
Operating revenues   $ 151,782     $ 156,836     $ 458,920     $ 379,716  
                 
Operating expenses:                
Cost of goods and services, exclusive of depreciation and  amortization shown separately below   55,834     58,317     162,976     140,354  
Selling, general and administrative, exclusive of depreciation and amortization shown separately below   42,199     40,369     125,374     96,263  
Integration and acquisition expenses   1,706     15,272     9,873     35,801  
Depreciation and amortization   42,568     46,807     132,297     96,961  
Total operating expenses   142,307     160,765     430,520     369,379  
Operating income (loss)   9,475     (3,929 )   28,400     10,337  
                 
Other income (expense):                
Interest expense   (9,823 )   (8,845
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