Shenandoah Telecommunications Company Reports Third Quarter 2016 Revenue Increased To $156.8 Million Due To Acquisition Of NTelos

EDINBURG, Va., Nov. 07, 2016 (GLOBE NEWSWIRE) -- Shenandoah Telecommunications Company ("Shentel") (NASDAQ:SHEN) announces financial and operating results for the three and nine months ended September 30, 2016.

Consolidated Third Quarter Results

For the quarter ended September 30, 2016, the Company reported total revenues of $156.8 million, an increase of 84.1% compared to $85.2 million for the 2015 third quarter.  All segments reported revenue increases, with the largest being due to the nTelos acquisition which was completed May 6, 2016.  The integration of nTelos' operations and the transition of its assets and customers are progressing as expected, with Shentel currently ahead of its schedule on the migration of nTelos customers to the Sprint platform.

Wireless service revenues increased 132.3% as a result of increases in average postpaid and prepaid subscribers of 75% and 46%, respectively, and a reduction in postpaid fees retained by Sprint.  Cable segment revenues increased 12.9% due to a 6.8% increase in average 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 8.4% due to higher fiber lease revenues, as well as higher internet service fees as customers upgraded their services.

Total operating expenses were $160.8 million in the third quarter of 2016 compared to $70.1 million in the prior year period.  Operating expenses in the third quarter of 2016 included $15.3 million of integration and acquisition costs associated with the nTelos acquisition, with $14.5 million in the Wireless segment and $0.8 million in the Other segment.  An additional $4.9 million of costs to operate and support the nTelos back office and billing functions until customers can migrate to Sprint platforms was included in cost of goods and services and selling, general and administrative expenses in the Wireless segment.

For the quarter ended September 30, 2016, the Company reported a net loss of $7.6 million, compared to net income of $8.0 million in the third quarter of 2015, primarily reflecting increased depreciation and amortization expenses and acquisition and integration costs incurred for its acquisition of nTelos.

Adjusted OIBDA (Operating Income Before Depreciation and Amortization) increased 100.4% to $73.7 million in the third quarter of 2016 from $36.8 million in the third quarter of 2015.  Continuing OIBDA (Adjusted OIBDA less the benefit received from the waived Sprint management fee over the next six years) increased 74.5% to $64.2 million.

President and CEO Christopher E. French commented, "Our third quarter results reflect our first full quarter including the assets and customers gained through our acquisition of nTelos.  In addition to the resulting increases in wireless, revenue and OIBDA also increased in our cable and wireline segments.  As we complete the operational changes related to blending our wireless operations, we are increasingly energized by the opportunities across all segments and our larger footprint and presence in the Mid-Atlantic region.  We are focused on leveraging the consistent coverage and high speed access of our state-of-the-art networks to serve our large and growing customer base."

Wireless Segment

Third quarter wireless service revenues increased $63.2 million or 132.3%, primarily related to the addition of approximately 580,000 postpaid and prepaid customers from the nTelos acquisition.   Additionally, the segment benefited from a reduction in the postpaid fees retained by Sprint as part of the amended affiliate agreement.

During the third quarter of 2016, net postpaid subscribers increased by 1,222 as compared to 7,035 net postpaid subscriber additions in the third quarter of 2015, while net prepaid subscribers declined by 13,865 during third quarter 2016, compared to a decline of 327 in the third quarter of 2015.

Third quarter adjusted OIBDA in the Wireless segment was $62.5 million, an increase of 130% from the third quarter of 2015.  Continuing OIBDA in the Wireless segment was $53.0 million.

"The doubling of our wireless customer base and the addition of several new, complementary markets positions us well for continued growth.  During the quarter, we saw continued expenses related to the migration of certain nTelos customers to the Sprint billing platform.  Our upgraded networks are a competitive advantage and we continue to make progress bringing improved reliability and coverage in our acquired markets," Mr. French stated.

Cable Segment

Revenues in the Cable segment increased $3.1 million or 12.9% to $27.6 million, primarily due to 6.8% growth in average RGUs (the sum of voice, data, and video users), video rate increases implemented in January 2016 to pass through programming cost increases, new and existing customers selecting higher speed data access packages and growth in the number of higher speed data and phone customers.  Operating expenses increased 1.1% to $25.3 million in the third quarter of 2016. Third quarter operating income was $2.3 million compared to an operating loss of $0.6 million in the prior year.

Revenue generating units totaled 132,430 at September 30, 2016, an increase of 6.4% over September 30, 2015.

Adjusted OIBDA in the Cable segment for third quarter 2016 was $8.2 million, up 50.5% from $5.5 million in the third quarter of 2015.

Mr. French stated, "We are confident in the strength and performance of our Cable segment as customer expectations and demands increase related to the availability and capabilities of their cable service.  The performance of our state-of-the-art network has prompted many existing customers to upgrade their monthly subscription plans and attracted new customers seeking robust service selections."

Wireline Segment

Revenue in the Wireline segment increased 8.4% to $18.7 million in the third quarter of 2016, as compared to $17.3 million in the third quarter of 2015.  Carrier access and fiber revenue for the quarter was $12.4 million, an increase of 13.8% from the same quarter last year, as a result of new fiber contracts.  Operating expenses increased 4.8% or $0.6 million to $13.9 million for third quarter 2016, primarily due to costs to support new fiber contracts.

Adjusted OIBDA in the Wireline segment for third quarter 2016 was $7.7 million, as compared to $7.5 million in third quarter 2015.

Other Information

Capital expenditures were $42.7 million in the third quarter of 2016 compared to $14.5 million in the comparable 2015 period. 

Cash and cash equivalents as of September 30, 2016 were $27.5 million, compared to $76.8 million at December 31, 2015. Total outstanding debt at September 30, 2016 totaled $809.6 million, net of unamortized loan costs, compared to $199.7 million as of December 31, 2015.  At September 30, 2016, debt as a percent of total assets was 56.5%. The amount available to the Company through its revolver facility was $75.0 million, and from the delayed draw term loan, $50.0 million.

"Our balance sheet remains strong, providing a secure foundation to drive the growth of our customer base, while also enabling us to continually improve our service offerings and capabilities.  The addition of the nTelos markets has significantly expanded our operations and we remain focused on adding new customers in new markets as we grow our position as one of the top six public wireless providers in the United States," Mr. French concluded.

Conference Call and Webcast

The Company will host a conference call and simultaneous webcast today, Monday, November 7, 2016, at 8:30 A.M. Eastern Time.

Teleconference Information:

Monday, November 7, 2016 8:30 A.M. (ET) Dial in number: 1-888-695-7639

Password: 10988671 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 14, 2016 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 and West Virginia.  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.

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
    September 30, 2016 December 31, 2015
       
Cash and cash equivalents   $ 27,531   $ 76,812  
Other current assets     113,998     51,135  
Total current assets     141,529     127,947  
               
Investments     10,113     10,679  
       
Building held for sale     4,950     -  
Net property, plant and equipment     667,741     410,018  
       
Intangible assets, net     458,401     66,993  
Goodwill     145,413     10  
Deferred charges and other assets, net     5,478     11,504  
Total assets   $ 1,433,625   $ 627,151  
       
Total current liabilities     135,464     60,729  
Long-term debt, less current maturities     783,595     177,169  
Total other liabilities     216,260     99,315  
Total shareholders' equity     298,306     289,938  
Total liabilities and shareholders' equity   $ 1,433,625   $ 627,151  
               

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts)
    Three Months Ended Nine Months Ended
    September 30, September 30,
    2016 2015 2016 2015
                                 
Operating revenues   $ 156,836     $ 85,212     $ 379,716     $ 255,202  
           
Cost of goods and services     58,317       30,570       140,354       91,541  
Selling, general, and administrative     40,369       18,306       96,263       55,024  
Integration and acquisition expenses     15,272       2,129       35,801       3,153  
Depreciation and amortization     46,807       19,118       96,961       53,119  
Total operating expenses     160,765       70,123       369,379       202,837  
                                 
Operating income (loss)     (3,929 )     15,089       10,337       52,365  
           
Other income (expense):          
Interest expense     (8,845 )     (1,808 )     (16,369 )     (5,663 )
Gain on investments, net     127       (211 )     237       (12 )
Non-operating income, net     1,400       391       2,910       1,265  
                                 
Income (loss) before taxes     (11,247 )     13,461       (2,885 )     47,955  
           
Income tax expense (benefit)     (3,651 )     5,465       (2,174 )     19,199  
Net income (loss)   $ (7,596 )   $ 7,996     $ (711 )   $ 28,756  
           
           
Earnings (loss) per share:          
Basic   $ (0.16 )   $ 0.17     $ (0.01 )   $ 0.59  
Diluted   $ (0.16 )   $ 0.16     $ (0.01 )   $ 0.59  
           
Weighted average shares outstanding, basic     48,909       48,406       48,768       48,364  
Weighted average shares outstanding, diluted     48,909       49,071       48,768       48,967  
                                 

Non-GAAP Financial Measure

In managing our business and assessing our financial performance, management supplements the information provided by financial statement measures prepared in accordance with GAAP with adjusted OIBDA and continuing OIBDA, which are considered "non-GAAP financial measures" under SEC rules.

Adjusted OIBDA is defined by us as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of:  certain non-recurring transactions; impairment of assets; gains and losses on asset sales; straight-line adjustments for the waived management fee; amortization of the affiliate expansion asset; and share-based compensation expense.  Adjusted OIBDA should not be construed as an alternative to operating income as determined in accordance with GAAP as a measure of operating performance.  Continuing OIBDA is defined by us as adjusted OIBDA, less the benefit received from the waived management fee by Sprint over the next approximate six years.

In a capital-intensive industry such as telecommunications, management believes that adjusted OIBDA and continuing OIBDA and the associated percentage margin calculations are meaningful measures of our operating performance.  We use adjusted OIBDA and continuing OIBDA as supplemental performance measures because management believes they facilitate comparisons of our operating performance from period to period and comparisons of our operating performance to that of other companies by excluding potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the other items described above for which additional adjustments were made.  In the future, management expects that the Company may again report adjusted OIBDA and continuing OIBDA excluding these items and may incur expenses similar to these excluded items.  Accordingly, the exclusion of these and other similar items from our non-GAAP presentation should not be interpreted as implying these items are non-recurring, infrequent or unusual.

While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the current period allocation of costs associated with long-lived assets acquired or constructed in prior periods, and accordingly may obscure underlying operating trends for some purposes.  By isolating the effects of these expenses and other items that vary from period to period without any correlation to our underlying performance, or that vary widely among similar companies, management believes adjusted OIBDA and continuing OIBDA facilitates internal comparisons of our historical operating performance, which are used by management for business planning purposes, and also facilitates comparisons of our performance relative to that of our competitors.  In addition, we believe that adjusted OIBDA and continuing OIBDA and similar measures are widely used by investors and financial analysts as measures of our financial performance over time, and to compare our financial performance with that of other companies in our industry.

Adjusted OIBDA and continuing OIBDA have limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP.  These limitations include the following:

  • they do not reflect capital expenditures;
  • many of the assets being depreciated and amortized will have to be replaced in the future and adjusted OIBDA and continuing OIBDA do not reflect cash requirements for such replacements;
  • they do not reflect costs associated with share-based awards exchanged for employee services;
  • they do not reflect interest expense necessary to service interest or principal payments on indebtedness;
  • they do not reflect gains, losses or dividends on investments;
  • they do not reflect expenses incurred for the payment of income taxes; and
  • other companies, including companies in our industry, may calculate adjusted OIBDA and continuing OIBDA differently than we do, limiting its usefulness as a comparative measure.

In light of these limitations, management considers adjusted OIBDA and continuing OIBDA as a financial performance measure that supplements but does not replace the information reflected in our GAAP results.

The following table shows adjusted OIBDA for the three and nine months ended September 30, 2016 and 2015:
    Three Months Ended Nine Months Ended
(in thousands)   September 30, September 30,
    2016 2015 2016 2015
Adjusted OIBDA   $ 73,746     $ 36,804     $ 170,166     $ 110,759  
Continuing OIBDA   $ 64,228     $ 36,804     $ 154,554     $ 110,759  
                                 

The following table reconciles adjusted OIBDA and continuing OIBDA to operating income (loss), which we consider to be the most directly comparable GAAP financial measure, for the three and nine months ended September 30, 2016 and 2015:
Consolidated:          
(in thousands)   Three Months Ended Nine Months Ended
    September 30, September 30,
    2016 2015 2016 2015
Operating income (loss)   $ (3,929 )   $ 15,089     $ 10,337     $ 52,365  
Plus depreciation and amortization     46,807       19,113       96,961       53,119  
Plus (gain) loss on asset sales     (81 )     (1 )     (144 )     229  
Plus share based compensation expense     496       469       2,570       1,893  
Plus temporary back office costs to support the billing operations through migration (1)     4,948       -       8,071       -  
Plus integration and acquisition related expenses (1)     15,272       2,129       35,801       3,153  
Plus straight line adjustment to reduce management fee waiver (2)     4,640       -       7,687       -  
Plus amortization of intangible netted in revenue (3)     5,593       -       8,883       -  
Adjusted OIBDA   $ 73,746     $ 36,804     $ 170,166     $ 110,759  
Less waived management fee (2)     (9,518 )     -       (15,612 )     -  
Continuing OIBDA   $ 64,228     $ 36,804     $ 154,554     $ 110,759  
                                 

The following tables reconcile adjusted OIBDA and continuing OIBDA to operating income by major segment for the three and nine months ended September 30, 2016 and 2015:
Wireless Segment:   Three Months Ended   Nine Months Ended
(in thousands)   September 30,   September 30,
    2016   2015   2016   2015
Operating income   $ (5,407 )   $ 17,393   $ 20,905     $ 56,101
Plus depreciation and amortization     38,038       9,644     70,026       26,089
Plus loss on asset sales     (45 )     40     (84 )     73
Plus share based compensation expense     246       109     1,058       441
Plus temporary back office costs to support the billing operations through migration (1)     4,945       -     8,067       -
Plus integration and acquisition related expenses (1)     14,499       -     19,889       -
Plus straight line adjustment to reduce management fee waiver (2)     4,640       -     7,687       -
Plus amortization of intangible netted in revenue (3)     5,593       -     8,883       -
Adjusted OIBDA   $ 62,509     $ 27,186   $ 136,431     $ 82,704
Less waived management fee (2)     (9,518 )     -     (15,612 )     -
Continuing OIBDA   $ 52,991     $ 27,186   $ 120,819     $ 82,704
                             

Cable Segment:        
(in thousands)   Three Months Ended   Nine Months Ended
    September 30,   September 30,
    2016 2015   2016 2015
                                   
Operating income (loss)   $ 2,282     $ (603 )   $ 4,043     $ (1,706 )
Plus depreciation and amortization     5,860       5,948       17,834       17,286  
                                 
Plus (gain) on asset sales     (19 )     (39 )     (53 )     12  
Plus share based compensation expense     108       164       673       665  
Adjusted OIBDA and Continuing OIBDA   $ 8,231     $ 5,470     $ 22,497     $ 16,257  
                                 

Wireline Segment:        
(in thousands)   Three Months Ended Nine Months Ended
    September 30, September 30,
     2016   2015   2016   2015 
                                 
Operating income   $   4,792     $   3,974     $   15,070     $   11,769  
Plus depreciation and amortization     2,822       3,404       8,789       9,411  
Plus loss on asset sales     -       (2 )     40       132  
Plus share based compensation expense     49       84       284       330  
Adjusted OIBDA and Continuing OIBDA   $   7,663     $   7,460     $   24,183     $   21,642  
                                 

(1) Integration and acquisition costs consist of severance accruals for short-term nTelos personnel to be separated as integration activities wind down, transaction related expenses, device costs to support the transition to Sprint billing platforms, and other transition costs to support the migration to Sprint back-office functions.  Once former nTelos customers migrate to the Sprint backoffice, the Company incurs certain postpaid fees retained by Sprint and prepaid costs passed to us by Sprint that would offset a portion of these savings.  For the three and nine months ended September 30, 2016, these offsets were estimated at $1.3 million and $3.1 million, respectively.(2) As part of the Company's amended affiliate agreement, Sprint agreed to waive the management fee, which is historically presented as a contra-revenue by the Company, for a period of approximately six years.  The impact of Sprint's waiver of the management fee over the approximate six-year period is reflected as an increase in revenue, offset by the non-cash adjustment to recognize this impact on a straight-line basis over the contract term of approximately 14 years.(3) Pursuant to the intangible asset exchange with Sprint, the Company recognized an intangible asset for the affiliate contract expansion received.  Consistent with the presentation of related service fees charged by Sprint, the Company recognizes the amortization of this intangible as a contra-revenue over the contract term of approximately 14 years.

Supplemental Information

Subscriber Statistics

The following tables show selected operating statistics of the Wireless segment as of the dates shown:
    Sept. 30,   December 31,   Sept. 30,   December 31,
    2016   2015   2015   2014
Retail PCS Subscribers - Postpaid   718,785   312,512   303,527   287,867
Retail PCS Subscribers - Prepaid   275,446   142,840   145,104   145,162
PCS Market POPS (000) (1)   5,536   2,433   2,421   2,415
PCS Covered POPS (000) (1)   4,715   2,224   2,213   2,207
CDMA Base Stations (sites)   1,425   552   548   537
Towers Owned   181   158   154   154
Non-affiliate cell site leases   186   202   203   198
                 

The changes from December 31, 2015 to September 30, 2016 shown above include the following amounts acquired in the nTelos acquisition and exchange with Sprint on May 6, 2016:
Acquired PCS Subscribers - Postpaid   404,444
Acquired PCS Subscribers - Prepaid   154,944
Acquired PCS Market POPS (000) (1)   3,099
Acquired PCS Covered POPS (000) (1)   2,298
Acquired CDMA Base Stations (sites) (2)   868
Towers   20
Non-affiliate Cell Site Leases   10
     

    Three Months Ended Nine Months Ended
    September 30, September 30,
    2016 2015 2016 2015
                               
Gross PCS Subscriber Additions - Postpaid     41,563       19,638     85,104       54,477  
Net PCS Subscriber Additions  - Postpaid     1,222       7,035     1,829       15,660  
Gross PCS Subscriber Additions - Prepaid     35,202       20,228     83,786       63,806  
Net PCS Subscriber Additions (Losses) - Prepaid     (13,865 )     (327 )   (22,338 )     (58 )
PCS Average Monthly Retail Churn % - Postpaid (3)     2.01 %     1.40 %   1.71 %     1.47 %
PCS Average Monthly Retail Churn % - Prepaid (3)     5.43 %     4.72 %   5.06 %     4.85 %
                               

1) POPS refers to the estimated population of a given geographic area and is based on information purchased from third party sources.  Market POPS are those within a market area which we are authorized to serve under our Sprint PCS affiliate agreements, and Covered POPS are those covered by our network.2) Net of approximately 160 overlap cell sites we intend to shut down in coming months.3) PCS Average Monthly Retail Churn is the average of the monthly subscriber turnover, or churn, calculations for the period.

During the three and nine months ended September 30, 2016, 2,880 and 4,410 former nTelos prepaid subscribers switched to postpaid subscribers as they migrated to the Sprint back-office platforms during the three and nine months ended September 30, 2016, respectively.

The following table shows selected operating statistics of the Cable segment as of the dates shown:
      Sept. 30,     December 31,       Sept. 30,     December 31,  
      2016     2015       2015     2014  
Homes Passed (1)     184,698     172,538       172,388     171,589  
Customer Relationships (2)                            
Video customers     48,924     48,184       48,421     49,247  
Non-video customers     28,469     24,550       23,816     22,051  
Total customer relationships     77,393     72,734       72,237     71,298  
Video            
Customers (3)     51,379     50,215       50,839     52,095  
Penetration (4)     27.8 %   29.1 %     29.5 %   30.4 %
Digital video penetration (5)     76.3 %   77.9 %     75.2 %   65.9 %
High-speed Internet            
Available Homes (6)     183,814     172,538       172,388     171,589  
Customers (3)     59,852     55,131       53,960     50,686  
Penetration (4)     32.6 %   32.0 %     31.3 %   29.5 %
Voice                            
Available Homes (6)     181,077     169,801       169,651     168,852  
Customers (3)     21,199     20,166       19,723     18,262  
Penetration (4)     11.7 %   11.9 %     11.6 %   10.8 %
Total Revenue Generating Units (7)     132,430     125,512       124,522     121,043  
Fiber Route Miles     3,124     2,844       2,842     2,834  
Total Fiber Miles (8)     84,945     76,949       75,021     72,694  
Average Revenue Generating Units     131,707     124,054       123,282     117,744  
                             

1) Homes and businesses are considered passed ("homes passed") if we can connect them to our distribution system without further extending the transmission lines.  Homes passed is an estimate based upon the best available information. 2) Customer relationships represent the number of customers who receive at least one of our services.3) Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer.  Where services are provided on a bulk basis, such as to hotels and some multi-dwelling units, the revenue charged to the customer is divided by the rate for comparable service in the local market to determine the number of customer equivalents included in the customer counts shown above.  During the first quarter of 2016, we modified the way we count subscribers when a commercial customer upgrades its internet service via a fiber contract. We retroactively applied the new count methodology to prior periods, and applied similar logic to certain bulk customers; the net result was reductions in internet subscriber counts of 559, 660 and 673 subscribers to December 31, 2015, September 30, 2015 and December 31, 2014 totals, respectively.4) Penetration is calculated by dividing the number of customers by the number of homes passed or available homes, as appropriate.5) Digital video penetration is calculated by dividing the number of digital video customers by total video customers.  Digital video customers are video customers who receive any level of video service via digital transmission.  A dwelling with one or more digital set-top boxes or digital adapters counts as one digital video customer.6) Homes and businesses are considered available ("available homes") if we can connect them to our distribution system without further extending the transmission lines and if we offer the service in that area.7) Revenue generating units are the sum of video, voice and high-speed internet customers.8) Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance.  For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

On January 1, 2016, the Company acquired the assets of Colane Cable Company.  With the acquisition, the Company acquired 3,299 video customers, 1,405 high-speed internet customers, and 302 voice customers.  The customers are included in the September 30, 2016 totals shown above.

The following table shows selected operating statistics of the Wireline segment as of the dates shown:
    Sept. 30, Dec. 31,   Sept. 30, Dec. 31,
    2016 2015   2015 2014
Telephone Access Lines (1)   18,737 20,252   21,598 21,612
Long Distance Subscribers   9,186 9,476   9,651 9,571
Video Customers (2)   5,285 5,356   5,375 5,692
DSL Subscribers (3)   14,195 13,890   13,323 13,094
Fiber Route Miles   1,916 1,736   1,625 1,556
Total Fiber Miles (4)   133,903 123,891   107,432 99,387
             

1) Effective October 1, 2015, we launched cable modem services on our cable plant, and eliminated the requirement that a customer have a telephone access line to purchase DSL service. 2) The Wireline segment's video service passes approximately 16,000 homes.3) September 2016 and December 2015 totals include 911 and 420 customers, respectively, served via the coaxial cable network.  During first quarter 2016, we modified the way we count subscribers when a commercial customer upgrades its internet service via a fiber contract. We retroactively applied the new count methodology to prior periods and the net result was increases in internet subscriber counts of 804, 489 and 352 subscribers to December 31, 2015, September 30, 2015 and December 31, 2014 totals, respectively.4) Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance.  For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles. Fiber counts were revised following a review of fiber records in the first quarter of 2015.

Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker.  The Company has three reportable segments, which the Company operates and manages as strategic business units organized by lines of business: (1) Wireless, (2) Cable, and (3) Wireline.   A fourth segment, Other, primarily includes Shenandoah Telecommunications Company, the parent holding company.

The Wireless segment has historically provided digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia, as a Sprint PCS Affiliate.  With the recent acquisition of nTelos, the Company's wireless service area expanded to include south-central and western Virginia, West Virginia, and small portions of Kentucky and Ohio. This segment also owns cell site towers built on leased land, and leases space on these towers to both affiliates and non-affiliated service providers.

The Cable segment provides video, internet and voice services in Virginia, West Virginia and Maryland, and leases fiber optic facilities throughout southern Virginia and West Virginia. It does not include video, internet and voice services provided to customers in Shenandoah County, Virginia.

The Wireline segment provides regulated and unregulated voice services, DSL internet access, and long distance access services throughout Shenandoah County and portions of Rockingham, Frederick, Warren and Augusta counties, Virginia. The segment also provides video and cable modem services in portions of Shenandoah County, and leases fiber optic facilities throughout the northern Shenandoah Valley of Virginia, northern Virginia and adjacent areas along the Interstate 81 corridor through West Virginia, Maryland and portions of central and southern Pennsylvania.
Three months ended September 30, 2016              
               
(in thousands)              
               
    Wireless   Cable   Wireline   Other   Eliminations   Consolidated Totals
External revenues                                            
Service revenues   $ 111,001     $ 24,948   $ 4,948   $ -     $ -     $ 140,897  
Other     7,978       2,031     5,930     -       -       15,939  
Total external revenues     118,979       26,979     10,878     -       -       156,836  
Internal revenues     1,140       587     7,854     -       (9,581 )     -  
Total operating revenues     120,119       27,566     18,732     -       (9,581 )     156,836  
                                             
Operating expenses                                            
Costs of goods and services, exclusive of depreciation and amortization shown separately below     43,097       14,654     9,442     -       (8,876 )     58,317  
Selling, general and administrative, exclusive of depreciation and amortization shown separately below     29,892       4,770     1,676     4,736       (705 )     40,369  
Integration and acquisition expenses     14,499       -     -     773       -       15,272  
Depreciation and amortization     38,038       5,860     2,822     87       -       46,807  
Total operating expenses     125,526       25,284     13,940     5,596       (9,581 )     160,765  
Operating income (loss)   $ (5,407 )   $ 2,282   $ 4,792   $ (5,596 )   $ -     $ (3,929 )
                                             

Three months ended September 30, 2015                                              
                                               
(in thousands)                                              
                                               
    Wireless   Cable     Wireline     Other     Eliminations     Consolidated Totals  
External revenues                                              
Service revenues   $ 47,793   $ 22,284     $ 4,904     $ -     $ -     $ 74,981  
Other     2,734     1,882       5,615       -       -       10,231  
Total external revenues     50,527     24,166       10,519       -       -       85,212  
Internal revenues     1,109     251       6,759       -       (8,119 )     -  
Total operating revenues     51,636     24,417       17,278       -       (8,119 )     85,212  
                                               
Operating expenses                                              
Costs of goods and services, exclusive of depreciation and amortization shown separately below     15,572     14,124       8,212       -       (7,338 )     30,570  
Selling, general and administrative, exclusive of depreciation and amortization shown separately below     9,027     4,948       1,688       3,424       (781 )     18,306  
Integration and acquisition expenses     -     -       -       2,129       -       2,129  
Depreciation and amortization     9,644     5,948       3,404       122       -       19,118  
Total operating expenses     34,243     25,020       13,304       5,675       (8,119 )     70,123  
Operating income (loss)   $ 17,393   $ (603 )   $ 3,974     $ (5,675 )   $ -     $ 15,089  
                                               

Nine months ended September 30, 2016              
               
(in thousands)              
    Wireless Cable Wireline Other Eliminations ConsolidatedTotals
External revenues                                            
Service revenues   $ 250,053   $ 73,455     $ 14,727   $ -     $ -     $ 338,235  
Other     17,461     5,799       18,221     -       -       41,481  
Total external revenues     267,514     79,254       32,948     -       -       379,716  
Internal revenues     3,417     1,159       22,754     -       (27,330 )     -  
Total operating revenues     270,931     80,413       55,702     -       (27,330 )     379,716  
                                             
Operating expenses                                            
Costs of goods and services, exclusive of depreciation and amortization shown separately below     94,892     43,864       26,892     -       (25,294 )     140,354  
Selling, general and administrative, exclusive of depreciation and amortization shown separately below     65,219     14,672       4,951     13,457       (2,036 )     96,263  
Integration and acquisition expenses     19,889     -       -     15,912         35,801  
Depreciation and amortization     70,026     17,834       8,789     312       -       96,961  
Total operating expenses     250,026     76,370       40,632     29,681       (27,330 )     369,379  
Operating income (loss)   $ 20,905   $ 4,043     $ 15,070   $ (29,681 )   $ -     $ 10,337  
               
Nine months ended September 30, 2015                                            
                                             
(in thousands)                                            
    Wireless Cable Wireline Other Eliminations ConsolidatedTotals
External revenues              
Service revenues   $ 144,917   $ 65,802     $ 14,543   $ -     $ -     $ 225,262  
Other     8,611     5,495       15,834     -       -       29,940  
Total external revenues     153,528     71,297       30,377     -       -       255,202  
Internal revenues     3,319     585       18,950     -       (22,854 )     -  
Total operating revenues     156,847     71,882       49,327     -       (22,854 )     255,202  
                                             
Operating expenses                                            
Costs of goods and services, exclusive of depreciation and amortization shown separately below     47,661     41,378       23,224     -       (20,722 )     91,541  
Selling, general and administrative, exclusive of depreciation and amortization shown separately below     26,996     14,924       4,923     10,313       (2,132 )     55,024  
Integration and acquisition expenses     -     -       -     3,153         3,153  
Depreciation and amortization     26,089     17,286       9,411     333       -       53,119  
Total operating expenses     100,746     73,588       37,558     13,799       (22,854 )     202,837  
Operating income (loss)   $ 56,101   $ (1,706 )   $ 11,769   $ (13,799 )   $ -     $ 52,365  
               

Wireless Service Revenues
(in thousands)   Three Months Ended              
    September 30,   Change
Service Revenues   2016   2015   $   %
Postpaid net billings   $ 97,470     $ 45,864     $ 51,606     112.5  
Sprint fees                              
Management fee     (7,919 )     (3,687 )     (4,232 )   114.8  
Net Service fee     (6,745 )     (6,453 )     (292 )   (4.5 )
Waiver of management fee     7,996       -       7,996     NM
      (6,668 )     (10,140 )     3,472     (34.2 )
Prepaid net billings                              
Gross billings     25,156       12,760       12,396     97.1  
Sprint management fee     (1,521 )     (766 )     (755 )   NM  
Waiver of management fee     1,521       -       1,521     NM  
      25,156       11,994       13,162     109.7  
                               
Travel and other revenues     5,276       75       5,201     NM  
Accounting adjustments                              
Amortization of expanded contract     (5,593 )     -       (5,593 )   NM  
Straight-line adjustment - management fee  waiver     (4,640 )     -       (4,640 )   NM  
      (10,233 )     -       (10,233 )   NM  
Total Service Revenues    $ 111,001     $ 47,793     $ 63,208     132.3  
                               

(in thousands)      
    Nine Months EndedSeptember 30, Change
Service Revenues   2016   2015   $   %
Postpaid net billings   $ 218,327     $ 139,342     $ 78,985       56.7  
Sprint fees                                
Management fee     (17,914 )     (11,124 )     (6,790 )     61.0  
Net Service fee     (15,986 )     (19,468 )     3,482       (17.9 )
Waiver of management fee     13,126       -       13,126       NM  
      (20,774 )     (30,592 )     9,818       (32.1 )
Prepaid net billings                                
Gross billings     58,744       38,255       20,489       53.6  
Sprint management fee     (3,524 )     (2,305 )     (1,219 )     NM  
Waiver of management fee     1,486       -       2,486       NM  
      57,706       35,950       21,756       60.5  
                                 
Travel and other revenues     11,364       217       11,147       NM  
Accounting adjustments                                
Amortization of expanded contract     (8,883 )     -       (8,883 )     NM  
Straight-line adjustment - management fee waiver     (7,687 )     -       (7,687 )     NM  
      (16,570 )     -       (16,570 )     NM  
Total Service Revenues    $ 250,053     $ 144,917     $ 105,136       72.5  
                                 
CONTACTS: Shenandoah Telecommunications, Inc.Adele Skolits CFO and VP of Finance540-984-5161Adele.skolits@emp.shentel.comOr John Nesbett/Jennifer BelodeauInstitutional Marketing Services (IMS)203-972-9200jnesbett@institutionalms.com