Chris French, president and CEO of Shentel, declared 2023 a strong year when addressing shareholders at the company’s Q4 earnings report on Feb. 21, crediting the company’s Glo fiber expansion plan.
“Consolidated revenues and adjusted EBITDA grew approximately 8% and 19%, respectively, driven by Glo fiber subscriber growth,” said French. “Since our first full year of launching Glo fiber in 2020, our consolidated revenue and adjusted EBITDA have grown at a compound annual growth rate of approximately 9% and 18%, respectively. We believe this is an industry-leading pace among publicly traded broadband companies.”
As of December 2023, Shentel had more than 41,700 Glo fiber subscribers, a 73% increase from 2022.
“We added over 86,000 new Glo fiber passings in 2023, almost a 20% increase from 2022 and over a threefold increase from 2020 levels,” French said.
French also provided an update on Shentel’s acquisition of Horizon Telcom, reporting that, depending on the timing of regulatory approval, the transaction is expected to be finalized in the second quarter of 2024, with system integration work finishing in the first quarter of 2025.
Glo Fiber drives broadband revenues
Shentel reported that fourth-quarter broadband revenues were boosted by Glo Fiber.
The company’s broadband revenue grew $20.3 million or 8.1% to $269.3 million.
“Glo fiber revenue was the primary catalyst,” said Jim Volk, Shentel’s senior vice president of finance and CFO, “growing $16.8 million or 92% from the prior year with strong customer growth of over 71% and a 4% increase in data subscriber ARPU. Cable market revenues, excluding the impact of our discontinued Beam service, grew $2.5 million or 1.4% due primarily to 1.8% growth in data subscriber ARPU. Commercial fiber revenue grew $3.3 million or 8.5% due primarily to $3 million in nonrecurring early termination fees related to backhaul circuit disconnects.”
He added that broadband adjusted EBITDA grew $15.8 million to $105.8 million in 2023, a 17.6% increase from 2022.
“Consolidated revenue,” said Volk, “grew 7.5% to $287.4 million in 2023 due to the previously mentioned growth in broadband. Consolidated adjusted EBITDA grew 19.3% to $90.6 million, also due to growth in broadband. Adjusted EBITDA margins expanded year-over-year from 28.4% to 31.5% in 2023 due to the scaling of our fiber network.”
Increasing subscriber count
As Shentel expanded the availability of Glo fiber, the service provider saw an uptick in subscribers, adding more than 4,300 Glo customers in the fourth quarter.
“For the quarter, 47% of our new residential subscribers adopted speed tiers of 1 Gbps or higher, including approximately 4% that took speeds of 2 Gbps or higher,” said Ed McKay, executive vice president and COO of Shentel. “At the end of the fourth quarter, approximately 11% of our total Glo fiber customers subscribed to video service, and approximately 12% subscribed to voice service.”
McKay also noted the provider kept churn rates at bay.
“Our churn remained very low at 1.0% for 2023, an improvement of 7 basis points over the prior year,” he said. “Broadband data churn was 1.58% for the fourth quarter of 2023, an improvement of 5 basis points year-over-year as we increased broadband speeds in the second half of the year, giving customers higher speeds and more value for the same price. For the entire year, churn was 1.65%, up about 7 basis points year-over-year due to overbuilder competition in some markets.”
Ramping new construction
McKay reported a record quarter for fiber construction, with Shentel adding over 33,000 new fiber passings and constructing nearly 500 new route miles of fiber.
“With strong Glo fiber construction results in the fourth quarter, we finished 2023 with capital spending at the higher end of our previous guidance range at approximately $257 million,” said McKay. “The significant increase over 2022 was driven by investments in Glo fiber and government-subsidized passings. In 2023, we invested $31 million in government-subsidized projects, and we expect to be reimbursed for approximately 50% of these costs as we complete construction. Our Glo fiber investment was $182 million in 2023, including approximately $156 million to design and construct new passings and approximately $17 million to connect new customers.”
Looking forward into 2024, McKay reported that Shentel expects to spend $260-$290 million on continued construction for Glo fiber and government grant projects.
“We plan to invest approximately $32 million net of government subsidies to expand broadband to approximately 7,000 unserved homes,” he said. “We also plan to invest about $190 million in Glo fiber, including approximately $160 million to expand service to 100,000 new passings and $24 million to connect new customers. For our commercial fiber business, we have budgeted approximately $11 million in success-based spending. We’ve also budgeted about $41 million in our incumbent cable business, including $10 million in DOCSIS upgrades to add additional capacity and provide higher speeds in competitive markets.”
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