Shenandoah Telecommunications Co · NASDAQ:SHEN

Shenandoah Telecommunications — Investor Presentation (October 2014)

45 slides from Shenandoah Telecommunications's investor presentation, October 2014

  1. Slide 1: Investor Presentation October 2014

    NASDAQ: SHEN Shenandoah Telecommunications Company INVESTOR PRESENTATION OCTOBER 2014

  2. Slide 2: Safe Harbor Statement

    Safe Harbor Statement This presentation includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, regarding, among other things, our business strategy, our prospects and our financial position. Th

  3. Slide 3: Use of Non-GAAP Financial Measures

    Use of Non-GAAP Financial Measures Included in this presentation are certain non-GAAP financial measures that are not determined in accordance with US generally accepted accounting principles. These financial performance measures are not indicative of cash provided or used by operating activities an

  4. Slide 4: Our vision

    Our vision: Shentel will ensure that rural communities have access to the same level of telecommunication services as those found anywhere else in the U.S. Shentel is committed to enriching: lives ofthe Customers .-serve with the highest quality telecommunications services by making major investment

  5. Slide 5: Company Overview

    Company Overview Providing a broad range of diversified telecommunications services to customers in the Mid-Atlantic United States and the exclusive personal communications service ("PCS") Affiliate of Sprint in portions of Pennsylvania, Maryland, Virginia and West Virginia.  Diverse Revenue Stream

  6. Slide 6: Building Value Since 1902

    Building Value Since 1902 $10 Book Value per share $0.40 Dividend payment per share $9 4G $0.35 Book Value per share* $8 $0.30 Dividend payment per share $7 $0.25 $6 $5 $0.20 $4 $0.15 Founded in 1902 as a $3 farmer’s mutual $0.10 $2 $0.05 $1 $0 $0.00 *Adjusted for stock splits 6

  7. Slide 7: Upgrades Complete; Cap Ex Decreasing

    Upgrades Complete; Cap Ex Decreasing We Are Here 2008-2010 2010-2013 2014 Acquisitions Upgrades Reduced CapEx Cable Cable • Capital Expenditures will • Acquired various cable • Upgraded acquired networks to offer decrease approximately assets in West Virginia, “Triple Play” with robust high speed 27

  8. Slide 8: External Revenues by Segment

    External Revenues by Segment ($ in thousands) 8

  9. Slide 9: Historical Net Income

    Historical Net Income $35 $29.6 $30 $25 ($ in millions) $20 $18.1 $16.3 $17.2 $15.1 $15 $13.0 $10 $5 $0 2009 2010 2011 2012 2013 1H'14 9

  10. Slide 10: Adjusted OIBDA by Segment

    Adjusted OIBDA by Segment $30 Wireless Cable Wireline 25.8 $25 23.9 23.0 22.4 22.1 21.9 21.0 $20 19.4 18.9 ($ in millions) $15 $10 6.3 7.2 6.5 5.8 5.8 6.1 6.0 5.9 5.0 $5 3.8 3.9 2.4 2.3 2.5 2.8 1.0 1.8 1.2 $0 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 10

  11. Slide 11: Wireless Segment

    AQSHENTEL WIRELESS SEGMENT

  12. Slide 12: Network Overview

    Network Overview • One of only 2 Sprint affiliates • 2.1 million covered POPs • 416k total subscribers  20% penetration of covered POPs • 528 base stations 12

  13. Slide 13: Attractive Relationship With Sprint Nextel

    Attractive Relationship With Sprint Nextel LONG TERM CONTRACT:  Initial contract term to 2024  Two 10-year renewals  Payment at termination  22% Fee (Management: 8%; Service: 14%); capped for the duration of the contract SPRINT PROVIDES:  Spectrum  Brand  National Platform  Access to Sprint

  14. Slide 14: PCS Subscriber Growth

    PCS Subscriber Growth Postpaid Prepaid 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0 14

  15. Slide 15: Diverse PCS Sales Channels

    Diverse PCS Sales Channels Postpaid Retail Channels Corporate 16 Branded 19 Local Agents 7 (LFI) Nationals (Big Box 78 Retailers) Total 120 15

  16. Slide 16: Growth Rate and Penetration Compare Well to Peers

    Growth Rate and Penetration Compare Well to Peers As of 6/30/2014 Shentel US Sprint Verizon AT&T nTelos T-Mobile PCS Cellular Nextel Wireless Mobile Covered POPS 2,100 6,000 31,729 279,000 290,000 308,000 321,000 (in 000s) % Growth 4.6% 0.7% (6.1%) (0.5%) 2.6% 4.5% 3.5% Penetration 19.8% 7.6% 14.2%

  17. Slide 17: PCS Revenues - Postpaid

    PCS Revenues - Postpaid Annual Gross Billed Revenues - Postpaid ($ millions) * *Net service fee increased from 12% to 14% effective 8/1/2013 17

  18. Slide 18: Key PCS Results – Average Postpaid

    Key PCS Results – Average Postpaid Gross Billed Revenue per Postpaid User – Data & Voice 1 Voice Data $62.76 $64.79 $31.29 $34.57 $31.47 $30.22 Q2'13 Q2'14 1 – Before Service credits, bad debt, Sprint Nextel fees. 18

  19. Slide 19: PCS Revenues - Prepaid

    PCS Revenues - Prepaid Gross Billed Revenues - Prepaid ($ millions) $11.6 $11.3 0.7 0.7 Service Fees Net Revenue $10.9 $10.6 Q2'13 Q2'14 19

  20. Slide 20: Key PCS Results – Average Prepaid

    Key PCS Results – Average Prepaid Gross Billed Revenue per Prepaid User 20

  21. Slide 21: Mobile Tower Leasing

    Mobile Tower Leasing Steady Recurring Cash Flow  Tower lease revenue of $9.9 million in FY’13 with $6.2 million of EBITDA  Long-term opportunity to increase leasing revenues given growing demand for data  Company owns 154 cell towers • Most carriers do not own their own towers 21

  22. Slide 22: Cable Segment

    AQSHENTEL CABLE SEGMENT

  23. Slide 23: Cable: Important Growth Initiative Since 2008

    Cable: Important Growth Initiative Since 2008  Focus on broadband  Diversifies revenue streams  Opportunity to consolidate cable providers in region  Strong regional presence  Long-term opportunity to acquire/upgrade neglected markets  Strong demand in the region for high-speed “triple play” o

  24. Slide 24: Cable: Net Promoter Score Improvement

    Cable: Net Promoter Score Improvement 24

  25. Slide 25: Cable Network

    Cable Network  171K Video Homes Passed  170K Internet Homes Passed  167K Voice Homes Passed  99% of HP upgraded  98% of HP are on-net PA MD WV VA Shentel Fiber Routes Shentel POP Leased Routes Internet POP Planned Routes Master Headend 25

  26. Slide 26: Cable Competitive Advantage

    Cable Competitive Advantage Shentel Cable  Improved customer experience: higher speeds, lower cost, and choice to bundle or pick and choose services  We own/control our backbone fiber network and our telephone switch  Local/Regional focus Competitors Verizon/CenturyLink/Frontier Dish/DirecTV  DS

  27. Slide 27: Sequential RGU Growth

    Sequential RGU Growth Customers 68,322(2) 69,216 69,538 70,670 69,889(2) RGU's/Customer 1.60 1.62 1.64 1.65 1.66 1. Prior periods revised to reflect transfer of Shenandoah County, VA video activities to Wireline 2. College students disconnect during summer 27

  28. Slide 28: Average Monthly Revenue is Growing

    Average Monthly Revenue is Growing Average Monthly Revenue per RGU Average Monthly Revenue per Customer* *Average monthly revenue per video subscriber was $109.66 and $124.32 for Q2 2013 and Q2 2014, respectively. 28

  29. Slide 29: How Does Shentel Compare?

    How Does Shentel Compare? JuneSeptember 30, 30, Peer 2013 2014 Average* Video Homes Passed 168,523 171,147 Penetration 31.7% 30.2% 30.9% High-speed Internet Available Homes 166,675 168,923 Penetration 25.5% 28.5% 29.4% Voice Available Homes 161,709 166,186 Penetration 8.4% 9.9% 8.2% Acquired Neglect

  30. Slide 30: Wireline Segment

    AQSHENTEL WIRELINE SEGMENT

  31. Slide 31: Key Wireline Operational Results

    Key Wireline Operational Results Access lines (000s)  Access line loss of 2.8% in past 12 months  Broadband penetration in LEC area at 58.2%  Total connections at 6/30/14 of 34.5 thousand DSL Customers (000s)  Over 6,000 video subscribers at 6/30/14 31

  32. Slide 32: Fiber Sales Activities

    Fiber Sales Activities Fiber Lease Revenue New External Fiber Lease Contracts* * Amounts shown represent the total contract value. Contract Terms range from 36 to 120 months. Revenues may be booked either in the Wireline or Cable segment depending on which assets are used to provide the service. 32

  33. Slide 33: Fiber Network

    Fiber Network  3,900+ fiber route-miles  37% in Wireline markets  63% in Cable markets PA MD WV VA Shentel Fiber Routes Leased Routes Planned Routes 33 33

  34. Slide 34: Capital Investment

    AQSHENTEL CAPITAL INVESTMENT

  35. Slide 35: Significant Reduction in 2014 Cap Ex

    Significant Reduction in 2014 Cap Ex Capex Spending ($ millions)  2014 Capex Spending:  24% Maintenance  24% Capacity  30% Network Expansion  22% Success-Based * Accounts payable at December 31, 2013 and 2012 included $7.6 million and $24.7 million associated with PCS Network Vision capital exp

  36. Slide 36: Q&A

    AQSHENTEL Q&A

  37. Slide 37: Appendix

    AQSHENTEL APPENDIX

  38. Slide 38: Postpaid PCS Customers Top Picks Q2 2014

    Postpaid PCS Customers Top Picks Q2 2014  Top Service Plans – 84% of  Top Devices – New Activations Gross Adds – All Channels Unlimited, My Way 38% iPhone 32% * Sprint Framily 23% Samsung Galaxy S 22% 3G/4G Tablet 1GB 14% Samsung Galaxy Tablet 20% Everything Data 1500 9% Smartphones made up 77% of

  39. Slide 39: PCS Postpaid Statistics

    PCS Postpaid Statistics Gross Additions (000s) Cumulative Customers (000s) 39

  40. Slide 40: PCS Prepaid Statistics

    PCS Prepaid Statistics Gross Additions (000s) Cumulative Customers (000s) *The loss of customers in Q2’13 related to more stringent governmental requirements for customers renewing their eligibility for the government subsidized Assurance program. 40

  41. Slide 41: PCS Postpaid Statistics

    PCS Postpaid Statistics Churn % Average Gross Billed Revenue 41

  42. Slide 42: PCS Prepaid Statistics

    PCS Prepaid Statistics Churn % Average Gross Billed Revenue 42

  43. Slide 43: Forbes America's Most Trustworthy Companies 2014

    AQSHENTEL Forbes | 2014 AMERICA’S COMPANIES “Shenandoah Telecommunications Company was selected from among thousands for its exemplary trustworthy behavior.” i ; : 43

  44. Slide 44: Top Ten Institutional Shareholders at 6/30/14

    Top Ten Institutional Shareholders at 6/30/14 % Shares Holder Name / Fund Name Mkt Val Outstanding BlackRock Institutional Trust Company, N.A. $52,855,106 7.20% The Vanguard Group, Inc. 35,397,992 4.82% 12 West Capital Management, L.P. 32,967,955 4.49% Dimensional Fund Advisors, L.P. 16,897,715 2.30

  45. Slide 45: Covering Analysts

    Covering Analysts Analyst Firm Contact Name Drexel Hamilton, LLC Barry Sine Friedman, Billings, Ramsey & Co. Inc. David Dixon Raymond James & Associates, Inc. Ric Prentiss 45

Shenandoah Telecommunications Company — Investor Presentation (October 2014) on 6ix