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TheStreet Open House

Shenandoah Telecommunications' CEO Discusses Amended Sprint Nextel Agreement (Transcript)

Stock quotes in this article: SHEN

The Addendum was signed on February 2 and was attached to our 8-K release that evening. We’re very pleased with the terms we’ve been able to reach.

In addition to the benefits I’ve just highlighted, key contract points which are outlined on slide five are as follows. Shentel will use our best efforts to complete the upgrade by December 31, 2013. Initial 20-year term of our current affiliate contract has been extended to five additional years, now going out to November 2024. Additionally, our agreement retains the provisions for two 10-year extensions.

Our current contract has limits on the level of capital expenditures that Sprint can require Shentel to make in our network. Those limits remain in effect.

Continuing on slide six, Shentel will benefit from the migration of adding customers in our service area. Sprint will have a migration plan to move the postpaid and prepaid customers currently on the iDEN network, and we anticipate this will begin later this year and be completed by the end of 2013. There is no change to the 8% management fee we currently pay to Sprint, but the net service fee cap that’s currently 12% on net billed revenues will increase to 14% on July 1, 2013. That does not mean that the net service fee will necessarily increase to 14% on that date, but if an analysis of the balance of payments between Sprint and Shentel supports raising the rate, Sprint could increase the net service fee to 14% at that time.

As was the case with the 12% cap, the 14% cap cannot be changed without the mutual consent of both parties. Retaining the cap for all the services that Sprint provides was an important contract term for Shentel as it gives us the ability to forecast our expected financial results with more accuracy.

And finally, the contract continues to enable us to purchase network equipment and services from Alcatel Lucent at the same price they are sold to Sprint.

Read the rest of this transcript for free on seekingalpha.com

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