Shenandoah Telecommunication to Acquire NTELOS
Tuesday, August 11, 2015 at 3:59PM
Jared Taylor in Deal Advisor, Deals: Mobile Wireless, Ntelos, Shenandoah Telecommunications
On Monday, August 10th, Shenandoah Telecommunications Company (NASDAQ: SHEN) announced that it will acquire NTELOS Holdings, Corp. (NASDAQ: NTLS), also known as nTelos, for approximately $586.00 million. As part of the deal, certain assets will also be exchanged with Sprint (NYSE: S). The deal is subject to regulatory approval and is expected to close by the beginning of 2016.
Valuation Analysis and Deal Metrics
Transaction Facts
- ShenTel will finance the acquisition with a new credit facility.
- nTelos shareholders will receive $9.25 per share in cash at closing.
- Deal has already been approved by both company’s Board of Directors and is awaiting shareholder approval.
- ShenTel’s affiliate agreement with Sprint will be revised.
- nTelos spectrum licenses will be transferred to Sprint.
- 291,000 Sprint customers will become ShenTel Sprint affiliate customers in addition to the 281,500 customers ShenTel picks up from nTelos.
- ShenTel acquires $130 million net operating loss carryforwards, of which it expects to utilize all but $20 million.
Strategic Considerations
- Transaction overlaps areas of existing ShenTel cable, fiber, wireless and wireline networks.
- Overlapping should allow ShenTel to eliminate roughly 148 redundant cell sites, as well as leverage fiber and tower assets.
- Combination of a ShenTel's local market focus along with the Sprint brand could lead to an increase subscribers.
- Increased access and scale of Sprint’s shared services could help to increase operating efficiencies.
- Sprint will be adding value to the transaction, partly due to $252.00 million in reduced affiliate agreement fees over the next 5 to 6 years.
JSICA’s Take
- Transaction increases Shenandoah’s Mid-Atlantic footprint while providing ShenTel a regional area to deploy LTE services and utilize its fiber assets for backhaul.
- Acquisition will approximately double ShenTel’s covered POPS, wireless subs, revenue, and OIBDA, before taking into account any potential synergies realized.
- Strengthens ShenTel’s affiliate relationship with Sprint by revising its current agreement and extending the term by five years to 2029.
Article originally appeared on JSI Capital Advisors (http://jsicapitaladvisors.com/).
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