Shentel is taking a big bet that on fiber-to-the-home (FTTH) and broadband wireless will advance its rural broadband subscriber base.
The rural telco and cable operator has launched a two-pronged next-gen broadband strategy: targeting higher-density urban markets with its Glo Fiber FTTH service and Beam wireless service at lower-density rural areas.
It now passes 247,000 homes with Glo Fiber and Beam wireless, an increase of over 38,000 from the end of 2019.
Shentel’s Beam fixed wireless broadband service was launched in late October and contributed approximately 100 net additions to its broadband coffers.
Christopher French, CEO of Shentel, told investors during its fourth-quarter call that it will continue to expand the availability of Glo Fiber and Beam wireless.
“We plan to accelerate our investments in both Glo and Beam and expect to reach approximately 730,000 homes passed over the next 5 years,” he said. “The common denominator in all of our offerings is to provide the leading high-speed Internet service available in each market, combined with superior local customer service.”
French added that the company expects to see sizeable penetration rates from Glo Fiber, Beam and its existing cable business.
“With projected Glo and Beam terminal penetration rates in the low to mid-30s percent range and incumbent cable penetration in the mid-50 percent range, we expect our Broadband business to have industry-leading sustainable growth for the next several years,” he said.
Broadband Takes Charge
By selling its wireless business to T-Mobile—a deal it expects to be completed in the second quarter—Shentel can focus more of its attention on being a broadband provider.
French said in a release announcing how it would use the proceeds of the $1.95 billion sale of the assets in early February that the closing of the deal “along with the continued rapid expansion of our Glo Fiber to the Home and Beam fixed wireless services are part of our transformation to a broadband centric company.”
Broadband was clearly a key driver for Shentel during the fourth quarter, adding a combined 18,800 high speed data customers.
Cable was the clear leader in the provider’s broadband results. Shentel Cable added over 14,600 new subscribers due to what French said was “strong demand for faster data speeds at a fair value from our customers who are increasingly working and learning from home.”
What was also telling about the cable subscriber base was greater adoption of higher speeds and higher APRU.
As of the end of the fourth quarter, 79 percent of Shentel’s cable data customer are on plans of 25 Mbps or higher with an average subscribed download speed of 83 Mbps.
Broadband data average revenue per user in the quarter rose slightly versus the prior year period to $78.14. David L. Heimbach, EVP and COO of Shentel, said its Powerhouse double and triple bundled rates drove up APRU.
“Broadband data average revenue per user in the quarter increased slightly versus the prior-year period to $78.14 as our new Powerhouse branded rate card leveraging an improved value proposition based on our DOCSIS 3.1 speed upgrades now comprises 74 percent of the base,” he said.
Shentel also made progress with Glo Fiber and Beam fixed wireless. Shentel added 4,000 net Glo Fiber customers in its first full year of operations about 100 net Beam fixed wireless customers, which was launched in October.
“Glo has validated our investment thesis, and we plan to accelerate the pace of expansion,” French said.
Fiber-Based Gig Resonates
As Shentel expands Glo Fiber into more markets, the service provider is finding that more of its customers are purchasing its 1 Gbps FTTH speed tier. Leveraging an XGS-PON network architecture, Glo Fiber is targeting higher density Tier-3 and Tier 4 markets.
Heimbach said Shentel continues to “see a higher percentage of new subscribers electing our higher-priced gigabit speed tier, with 44 percent of new subscribers in the quarter adopting this plan comprising 40 percent of the overall Glo Fiber base.”
Glo Fiber customers continue to adopt its streaming TV and voice services with 28 percent and 15 percent attachment rates in the quarter, respectively.
During the first full year of carrying out its FTTH Edge Out strategy, Glo Fiber had about 5,800 total revenue generating units (RGUs) at the end of the fourth quarter with a 14.5 percent aggregate broadband data penetration rate across all markets comprised of just over 4,000 new Glo Fiber customer relationships.
At the end of 2020, 67 percent of Glo Fiber customers subscribed to a broadband data only service, while 25 percent of subscribers adopted a double-play bundle and 8 percent were in a triple-play subscription.
In its first Glo Fiber market in Harrisonburg, Virginia, Shentel reached 18.6 percent broadband data penetration at the end of the year with what Heimbach said was “some of our most mature neighborhoods in that community approaching our target terminal penetration rate.”
Despite concerns and delays related to COVID-19, Shentel’s FTTH buildout efforts exceeded its expectations in the fourth quarter and all of 2020. About 6,300 new residential and small business locations were constructed and released to sales in the quarter with a total of 27,000 Glo Fiber addresses added in 2020 and just under 29,000 overall at the end of the year.
After launching the Salem, Virginia market in January, Shentel expects to build and release to sales approximately 45,000 new Glo Fiber locations by the end of 2021, bringing total active passings to nearly 74,000.
“In total, Glo Fiber has approved franchised targeted passings of approximately 117,000 with a strong funnel of additional markets in our Edge Out strategy as we start 2021,” Heimbach said.
Here's a breakdown of Shentel’s key metrics:
Broadband revenue: During the fourth quarter, broadband revenue grew $3.9 million or 7.8 percent to $53.7 million due to a 11.6 percent increase in Residential and SMB revenue on a 22.3 percent increase in data subscribers.
Commercial Fiber: The growth in enterprise and backhaul connections drove up commercial fiber revenues 8.7 percent to $8.7 million.
RLEC revenue: Due to a decline in DSL subscribers and intercompany phone service, RLEC revenue dipped 20.5 percent to $4.2 million.
Total revenue: Driven by 31 percent growth in Tower and 5.4 percent in Broadband, Shentel’s total revenue grew 6.7 percent to $220.8 million.
(To keep up with the Q4 broadband earnings, make sure to check out our new report From AT&T to Verizon: Sizing up Q4 Broadband 2020 Earnings)
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