Shenandoah Telecommunications Sees Positive Free Cash Flow as Fiber Build Winds Down

Shentel expects positive free cash flow in 2027 as its elevated Glo Fiber construction program ends in 2026 and consolidated capital intensity falls below 30% of revenue. Glo Fiber surpassed 100,000 subscribers and reached roughly 500,000 homes passed, with residential fiber revenue up 33% year over year and strong demand for gigabit-plus plans. The company is targeting low-double-digit annual EBITDA growth , supported by 4%–5% revenue growth, cost-saving initiatives, and margin expansion from 34% to above 40% over the next several years.

Shenandoah Telecommunications NASDAQ: SHEN is nearing the end of a multiyear fiber construction program and expects to return to positive free cash flow next year as capital spending declines, according to Chief Financial Officer Jim Volk. Speaking at a KeyBanc communications services presentation, Volk outlined the company’s three business lines: Glo Fiber residential fiber service, commercial fiber, and its legacy cable operation. He said Glo Fiber represented about 28% of revenue and grew 33% year over year in the second quarter, while commercial fiber accounted for about 23% of revenue and increased 9%. The company has built roughly 500,000 greenfield fiber passings in rural markets, typically entering as the second broadband provider but the first fiber provider, Volk said. Shentel recently surpassed 100,000 Glo Fiber subscribers and expects to reach 500,000 homes passed by the end of the year.

Volk said Shentel’s Glo Fiber strategy has focused on technology and local customer service rather than leading with low prices. In 88% of its markets, Glo Fiber competes primarily against a cable provider, he said. The company promotes fiber’s faster speeds, symmetrical upload and download capabilities, and network resiliency. Volk said 80% of Glo Fiber gross additions are purchasing gigabit service or higher, including 20% selecting service tiers between 2 gigabits and 8 gigabits. “Our playbook now for seven years ... has been to not lead with price, but lead with technology and the local customer service where we can differentiate ourselves,” Volk said. Shentel’s Glo Fiber churn has averaged about 1% per month on an annual basis over the past seven years, according to Volk. He added that the business has maintained a Net Promoter Score in the 60% range for the past two years, compared with low-single-digit or negative scores that he said are common among cable operators. Door-to-door sales have become the largest Glo Fiber acquisition channel, accounting for roughly 35% to 40% of gross additions following increased investment. Online sales represent about 25% of gross additions, retail stores about 20%, and call centers about 15%, he said. Shentel estimates commissions of approximately $50 to $60 per gross addition and advertising spending of about $250 per gross addition.

Shentel has owned its cable business for more than 20 years and separates the operation into denser competitive markets, grant-supported expansion areas, and rural markets where it is the only broadband provider. In competitive cable markets, the company has implemented a more competitive rate card and has held or improved its unit market share, though it has given up some average revenue per user, Volk said. The company has also nearly completed construction of about 25,000 passings supported primarily by government grants covering roughly half of the build cost. In those grant-funded areas, Shentel’s penetration rate is about 40% after two years, and Volk said the company expects it to reach about 65% during the next cou...