NTelos CEO mum on rumors of merger with Shentel, but says board is looking at strategic opportunities

The CEO of regional carrier and Sprint (NYSE: S) wholesale partner nTelos Wireless declined to discuss speculation that nTelos will be taken over by peer Shenandoah Telecommunications (better known as Shentel). However, nTelos CEO Rodney Dir last week said that the company's board is focused on improving shareholder value and potential strategic opportunities.

Last week, citing unnamed sources, the Financial Times reported that Shentel is nearing a $200 million bid to buy nTelos, with a price of around $9.25 per share. The report caused nTelos' shares to spike 30 percent last Wednesday; the company's stock is currently trading at around $8.17 per share. Shentel declined to comment, according to the FT.

Dir said last week at the Jefferies TMT 2015 conference that "like in the past, we're very focused on generating shareholder value and strong returns to our shareholders. Our board is very focused on opportunities like this." However, he declined to comment on the potential deal.

In West Virginia and western Virginia, nTelos is the exclusive provider of Sprint's brand in 70 percent of its territory. However nTelos does compete with Shentel directly in some areas--and there is a 30 percent overlap in their territories.

"There are no limitations to a transaction as part of the [Sprint Network Agreement]. In our opinion, such a transaction would have scale benefits and is likely to pass regulatory muster given the rural nature of the footprint," Jefferies analysts wrote in a research note of a potential merger between nTelos and Shentel.

Dir said "the real opportunity for us is to really position ourselves as a local, community-based carrier. We need to leverage our strength in the communities as well as our strength and our relationships with the rural markets."

Dir said the company has spent the past eight to 12 months "really identifying the strategic relevance of our assets. We've got a strong spectrum portfolio. We've got a strong partnership with Sprint. And all of those are really key."

NTelos has sold 91 of its 103 cell towers to an affiliate of Grain Management for $39.3 million. And it closed on its deal to sell some of its 1900 MHz PCS spectrum to T-Mobile US (NYSE:TMUS) for $56 million. The spectrum deal is part of nTelos' plan, which it announced in December, to exit from its Eastern Markets. NTelos wants to focus on markets in western Virginia and West Virginia where it has a stronger retail presence and benefits from a network deal with Sprint.

The spectrum nTelos sold to T-Mobile covers the operating markets of Hampton Roads/Norfolk and Richmond, Va. Under the agreement, nTelos is leasing back a portion of the spectrum to continue serving customers there until it shuts down its operations in those markets on Nov. 15.

Dir noted that in December nTelos had more than 1,000 employees but has been slashing jobs since then. It currently has 725 employees and plans to cut another 100 jobs by the end of 2015.

NTelos currently has LTE deployed in 44 percent of its network and about 50 percent of its POPs are covered by LTE. The company plans to increase that to 65 percent of POPs covered with LTE by year-end, and Dir said nTelos expects to complete its LTE buildout by late 2016 or early 2017.

Under the revised terms of a network agreement Sprint and nTelos agreed to in May 2014, nTelos will continue to be the exclusive network provider for Sprint services in its western Virginia and West Virginia service area, which covers around 2.1 million POPs. Sprint customers will have access to nTelos' LTE network and nTelos will have access to Sprint's 800 MHz, 1900 MHz and 2.5 GHz spectrum throughout the territory. Additionally, nTelos retail customers will also have access to Sprint's nationwide LTE network outside the nTelos network footprint. 

For more:
- see this FT article (sub. req.)
- see this Staunton News Leader article
- see this Wall Street Pit article

Related Articles:
NTelos adds 8,000 subs in Q1, migrates 50,000 subs to Sprint's network
T-Mobile completes $56M purchase of PCS spectrum from nTelos
NTelos to sell off 103 of its remaining cell towers for $41M to Grain Management
NTelos reports improved traction in Western markets, aims to cover 50% of customers with LTE by year-end
NTelos to expand LTE network in Virginia and West Virginia

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