Sprint affiliate Shentel starts negotiation clock with new T-Mobile

Shenandoah Valley
Among the options: Shentel could become an affiliate of T-Mobile or T-Mobile could buy Shentel's wireless business. (Fierce Wireless)

The closure of the T-Mobile merger with Sprint kicked off a round of questions about how the new entity will work, including for Sprint affiliate Shenandoah Telecommunications (Shentel), which offers services under the Sprint brand.

Shentel revealed this week in a Securities and Exchange Commission (SEC) filing that it received a Conversion Notice from T-Mobile pursuant to the terms of its affiliate agreement with Sprint. Shentel’s wireless segment has been an affiliate of Sprint since 1995; Shentel also offers cable and wireline services. 

The affiliate agreement sets forth a cascade of deadlines and potential outcomes. First, there’s a 90-day period for the companies to negotiate mutually agreeable terms and conditions for Shentel to continue as an affiliate of the new T-Mobile. If no agreement is reached, then T-Mobile has 60 days to exercise an option to buy the wireless operations of Shentel.

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If T-Mobile doesn’t exercise its option, Shentel has 60 days to buy the legacy T-Mobile network and subscribers in its service area. Finally, if Shentel doesn’t exercise its purchase option, T-Mobile must sell or decommission its legacy network and customers in Shentel’s service area.

Shentel said its management team has been in discussions with T-Mobile and it expects those talks to continue, but it’s not commenting beyond that for the time being.

“We are glad to see the negotiations between Shenandoah and T-Mobile begin, and expect TMUS will want to work through the process quickly,” wrote Raymond James analyst Ric Prentiss in a note to investors Tuesday. “SHEN has been a very good wireless operator and partner for Sprint, and we think the final outcome of the negotiation clock process will balance cash flows.”

During Shentel’s fourth-quarter earnings conference call back in February, Shentel EVP and COO Dave Heimbach said it’s reasonable to assume that there are a lot of folks with a lot of unanswered questions with respect to how the merger is going to impact their businesses, particularly in third-party distribution channels. Shentel has a substantial portion of its footprint where it relies on third parties, and that applies to both prepaid and postpaid, he said.

“We have uncertainty related to the Boost brand with respect to the prospect of a new owner in the form of Dish. But also on the postpaid side, where folks are a little uncertain as to what their status will be in a new T-Mobile world,” he said, according to a Seeking Alpha transcript.

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He also noted during the call that the company was making progress toward its goal of launching a new fixed wireless broadband offering in the second half of 2020, targeting roughly 300,000 rural households across portions of Virginia, West Virginia and southeastern Ohio, where it recently acquired 2.5 GHz licensed spectrum.  

Shentel serves about 1.1 million subscribers. In 2016, it acquired nTelos, a provider of wireless services in portions of Virginia, West Virginia, Maryland, North Carolina, Ohio, Pennsylvania and Kentucky. 

 

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