Shenandoah Telecommunications (NasdaqGS: SHEN) operates its Wireless segment as a Sprint Affiliate. How will Shentel fare with Sprint merged into T-Mobile?
Shentel is the sixth largest wireless service provider in the U.S. behind the four national Tier 1 carriers (T, VZ, TMUS, S) and U.S. Cellular (see, U.S. Cellular Is Big In Small Markets). Headquartered in Edinburg, Virginia, Shentel’s Wireless segment has operated as a Sprint Affiliate since 1995.
Under an Affiliate agreement, Shentel is Sprint’s only wireless services provider throughout the U.S. Mid-Atlantic region covering large portions of central and western Virginia, south-central Pennsylvania, West Virginia, and parts of Maryland, Kentucky, and Ohio.
Within this designated Sprint Affiliate Area, Shentel has exclusive use of the Sprint brand names and Sprint’s licensed spectrum in the 800 MHz, 1900 MHz and 2.5 GHz bands. Shentel’s nearly 2,000 cell sites cover 6.3 million POPs. As of December 31, 2019, Shentel’s Wireless segment provided network services to 1.1 million Sprint postpaid and prepaid wireless customers.
Shentel’s Tower segment leases space on 225 owned towers to the company’s Wireless segment and other wireless service providers in the region. In addition to local broadband, video and voice services, its Broadband segment leases dark fiber and fiber optic services over its nearly 6,300 fiber route mile network to Enterprises and other wireline and wireless carrier customers within its service area.
In parts of its Affiliate Area, Shentel’s Wireless segment competes with AT&T Mobility, Verizon Wireless, T-Mobile and U.S. Cellular along with mobile virtual network operators (MVNOs) such as Comcast.
For its part, Sprint provides Shentel with significant support services. Such services include use of the Sprint brand names, national advertising, national distribution and product development, inventory logistics support, billing, collections, national network operations support, and customer care.
Under the agreement, Shentel earns revenues for providing wireless network services to Sprint. Revenues vary based on Sprint’s subscriber billings within the Affiliate Area. At the same time, Sprint retains certain fees for the support services it provides to Shentel.
Sprint’s contribution is substantial, accounting for two-thirds of Shentel’s consolidated service revenues.
That’s why T-Mobile’s Sprint merger announcement on April 1, 2020, was a significant development for Shentel. The company subsequently received from T-Mobile a notice of Network Technology Conversion, Brand Conversion and Combination Conversion (Conversion Notice) in accordance with the Affiliate agreement.
This Conversion Notice stipulates several key conditions and milestones:
- Following receipt of the Conversion Notice, both parties have a 90-day period to negotiate mutually agreeable terms and conditions under which Shentel would continue as a T-Mobile Affiliate.
- If T-Mobile and Shentel have not negotiated a mutually acceptable agreement within the 90-day period, T-Mobile then would have a subsequent 60-day period to exercise an option to purchase the assets of Shentel’s Wireless segment for 90 percent of the “Entire Business Value,” as defined under the Affiliate agreement.
- If T-Mobile does not exercise its purchase option, Shentel then would have a 60-day period with an option to purchase the legacy T-Mobile network and subscribers in its regional service area.
- If Shentel does not exercise its purchase option, T-Mobile must sell or decommission its legacy network and customers in the Affiliate Area.
The clock is ticking. T-Mobile and Shentel, hopefully, will agree on a mutually beneficial arrangement. Such a deal is not assured. For now, Shentel’s future hangs in the balance.
by John Celentano, Inside Towers Business Editor