T-Mobile revealed in a Securities and Exchange Commission (SEC) filing that it will exercise an option to buy the wireless assets of Shenandoah Telecommunications (Shentel), a Sprint affiliate since 1995, including about 1.1 million subscribers.
However, the purchase price for Shentel’s wireless assets is still the subject of an ongoing dispute and will be determined through an appraisal process. Shentel previously disclosed that T-Mobile could elect to buy the operating assets of its PCS business for 90% of the entire business value.
T-Mobile flipped the switch on the Sprint branding on August 2, when the two became united under the T-Mobile brand at stores across the country. However, Shentel continues to operate using the Sprint brand in its mid-Atlantic stores, according to a report as of last week by Wave7 Research.
With headquarters in Edinburg, Virginia, Shentel also offers cable and wireline services. In 2016, it acquired nTelos, a provider of wireless services in portions of Virginia, West Virginia, Maryland, North Carolina, Ohio, Pennsylvania and Kentucky.
Shentel’s future has been a question mark for a while now as several options were on the table due to Sprint’s merger with T-Mobile. One option, if T-Mobile declined to purchase Shentel’s assets, was for Shentel to buy the legacy T-Mobile network and subscribers in its service area and become an affiliate of T-Mobile.
On Monday, Shentel delivered to T-Mobile a “Notice of Dispute” related to the appraisal framework that extends the period of review for 60 days. If they fail to resolve a dispute by then, either party may pursue other remedies.
New Street Research investment analyst Jonathan Chaplin issued a note today saying that assuming the dispute finds a timely resolution, “it clears a minor roadblock on the path to unlocking value at New T-Mobile,” and doesn’t change their thesis, which rates T-Mobile shares a “buy” with a 12-month price target of $116.
Analysts at Raymond James told investors they expect three independent appraisers will be in place within 40 days. Their understanding is that if all three appraisals are within 10% of each other, the average will be used; if only two appraisals are within 10%, the average of only those two appraisals will be used; if none of the appraisals are within 10% of each other, the middle appraisal will be used.
“We are disappointed that T-Mobile chose the buy Shenandoah wireless business option versus choosing the option of keeping Shenandoah around as an affiliate and selling the T-Mobile operations in footprint to Shenandoah,” wrote Raymond James analyst Ric Prentiss.
“But we understand Option 1 will make running the business cleaner and allows T-Mobile to be in control of the complete integration of the Sprint network and customer base," he said, adding that Shenandoah had done an excellent job as a Sprint affiliate.