Shentel/nTelos Expected To Get Quick FCC OK
Shentel CEO Chris French said on a call with analysts Tuesday that its buy of nTelos was a “a natural next step” for the Edinburg, Virginia-based carrier, increasing its customer base from 442,000 to more than 1 million and making the company the No. 6 U.S. publicly traded wireless carrier. French said he expects regulatory approval, including by the FCC, early next year. Others agreed. Sprint and Shentel unveiled the deal after the close of U.S.financial markets Monday (see 1508100063).
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Shentel also had to negotiate a new affiliate agreement with Sprint as part of the deal, MacKenzie said. The original affiliate agreement was written in 1999 and last modified in 2007, said Earle MacKenzie, Shentel chief operating officer. “A lot has changed in the wireless industry since those last two dates, and we modified our agreement to reflect the realities of 2015 and beyond.” Under the new agreement, Shentel could remain a Sprint affiliate through 2049, he said. With the agreement, Shentel gets immediate access to Sprint’s 2.5 GHz spectrum in its service territory and access to the band in nTelos territory once the deal closes, he said.
Industry officials told us that they also don't expect much opposition to the deal as regulators take a closer look. "This transaction should fly through the FCC as it has only limited market impact,” said Roger Entner, analyst at Recon Analytics. “Pure spectrum transitions have generally been approved and combinations of providers resulting in one-million subscriber competitors does not raise any concerns either.”
Shentel, also known as Shenandoah Telecommunications, is already addressing potential local concerns. William Pirtle, Shentel vice president-wireless, told WHSV-TV Harrisonburg, Virginia, that most local jobs will be preserved. “Our intention is to bring all the retail store employees over along with their management, all of the operations folks in the field and all of their management and most of the engineering folks and some of their management,” he said. The company doesn't plan to shutter retail stores in most cases, executives said on the call with analysts.
Discussions had been underway since September, said MacKenzie on the call. “It was very complex due to having to simultaneously negotiate agreements with both nTelos and Sprint,” he said. Shentel was willing to sign a deal with nTelos only if it could also get a good deal for Sprint, MacKenzie said. “We believe what resulted was a win-win-win transaction.”
Shentel plans to add significantly to its wireless infrastructure as part of the acquisition, MacKenzie said. NTelos previously sold most of its cell towers and Shentel will pick up eight towers to add to the 546 it owns, he said. Shentel plans to eliminate 148 duplicate cell sites, add 150 coverage sites and “dozens of fill-in sites” in the combined service territory, he said. Shentel executives said the carrier plans to spend $378 million over five years, with $145 million in the first year, on building out its network.
Ric Prentiss, managing director at Raymond James, said on the call that working out the complex agreement couldn't have been easy. “No surprise that nTelos was looking to sell, no surprise Shentel was looking to expand the footprint,” Prentiss said. “We are a little bit surprised that you got Sprint to the table given so much going on at Sprint.” French responded that the deal make economic sense for both Shentel and Sprint.
Dish Network and nTelos have an ongoing pilot program delivering broadband service in rural Virginia (see 1310250033). A Sprint spokesman referred questions to Shentel. Neither Shentel nor Dish commented on the Dish aspect by our deadline. The agreement didn't come up on the call with analysts.