Executive Summary / Key Takeaways

• Fiber-First Transformation Driving Growth: Shenandoah Telecommunications (Shentel) is undergoing a significant transformation, aggressively expanding its Glo Fiber network and strategically acquiring assets to become a fiber-dominant broadband provider. This strategy is yielding substantial growth in Glo Fiber revenues and subscribers, positioning the company for long-term value creation.
• Strong Operational Momentum: In Q3 2025, Glo Fiber passings surpassed 400,000, with data revenue-generating units (RGUs) growing 39.5% year-over-year. The company is effectively driving penetration rates in new markets and responding to competitive pressures with enhanced promotional plans, leading to increased subscriber additions.
• Path to Positive Free Cash Flow: Shentel is on track to achieve positive free cash flow for the full year 2027, driven by the substantial completion of its Glo Fiber build-out and government grant projects by the end of 2026, which will significantly reduce capital intensity and allow for continued customer growth.
• Strategic Refinancing and Enhanced Flexibility: A planned hybrid refinancing structure, including asset-backed securitization for fiber businesses, aims to lower debt costs by approximately 100 basis points and increase financial flexibility, enabling Shentel to capitalize on industry consolidation opportunities.
• Competitive Advantages and Market Positioning: Shentel leverages its 100% fiber optic network, symmetrical multi-gigabit speeds, and local customer service to differentiate itself in duopoly markets, where 92% of Glo Fiber passings have only one fixed broadband competitor.

Shentel's Fiber-Fueled Evolution: A Strategic Imperative

Shenandoah Telecommunications Company (Shentel), founded in 1902, is in the midst of a profound strategic evolution, transitioning from a traditional cable and telephone operator to a dynamic, fiber-first broadband provider. This transformation is not merely an operational shift but a deliberate repositioning to capitalize on the escalating demand for high-speed, reliable internet connectivity across its eight-state service area in the eastern United States. The company's overarching strategy is built upon four key pillars: leveraging its historical success, completing its ambitious network expansion, accelerating growth in its fiber segments, and achieving sustainable positive free cash flow.

The journey has been marked by significant strategic moves, including the sale of its tower portfolio for $309.90 million in March 2024, a divestiture that streamlined its focus. This was swiftly followed by the $416.20 million acquisition of Horizon Acquisition Parent LLC in April 2024, which expanded Shentel's footprint into Ohio and brought with it substantial synergy opportunities, now projected at $13.8 million in annual run-rate savings. Further reinforcing its fiber commitment, Shentel completed a tuck-in acquisition of fiber-to-the-home (FTTH) assets in Virginia for $5 million in July 2025, adding 1,500 passings and approximately 700 customers to its Glo Fiber market in Blacksburg. These actions underscore a clear commitment to a fiber-centric future, aligning with broader industry trends of increasing fiber deployment and consolidation.

Technological Edge: The Power of Pure Fiber

At the heart of Shentel's growth strategy is its differentiated fiber optic technology, primarily under the Glo Fiber brand. This network utilizes state-of-the-art XGS-PON 10 Gbps technology, enabling superior performance compared to traditional hybrid fiber coaxial (HFC) networks. The tangible benefits for customers are symmetrical upload and download speeds of up to 5 gigabits per second (Gbps), a significant advantage over competitors' DOCSIS networks, which typically offer much slower upload speeds. Shentel's fiber networks also boast ample excess capacity, ensuring future-proof scalability and consistent service quality.

The company's extensive regional fiber network, spanning over 18,000 route miles, provides a robust backbone for its services. This infrastructure not only supports Glo Fiber's residential and small and medium business (SMB) offerings but also underpins its Commercial Fiber segment, which provides high-speed Ethernet, dedicated internet access, wavelength, and dark fiber leasing. For investors, this technological differentiation translates into a strong competitive moat. The ability to deliver faster, more reliable, and symmetrical speeds allows Shentel to attract and retain customers, particularly those demanding high bandwidth for remote work, online education, and entertainment. Furthermore, Shentel is integrating advanced technologies like AI to streamline technical support operations and optimize digital marketing, enhancing operational efficiency and customer engagement. This focus on technological superiority and operational innovation is critical for driving market share gains and sustaining long-term growth in a competitive landscape.

Financial Performance and Operational Momentum

Shentel's financial performance in the first nine months of 2025 reflects its strategic pivot and aggressive fiber build-out. Consolidated revenues for the three months ended September 30, 2025, increased 2.5% year-over-year to $89.8 million. This growth was primarily fueled by the Residential SMB - Glo Fiber Expansion Markets, which saw revenue surge by 41.1% to $21.3 million in Q3 2025, driven by a 41.3% year-over-year growth in data RGUs. For the nine months ended September 30, 2025, Glo Fiber revenue increased by an impressive 44.1% to $59.5 million.

Adjusted EBITDA for Q3 2025 climbed 11.7% year-over-year to $29.7 million, with margins expanding 300 basis points to 33%. This improvement is largely attributable to the high incremental margins associated with Glo Fiber subscriber additions and the realization of synergy savings from the Horizon acquisition. For the nine months ended September 30, 2025, Adjusted EBITDA reached $85.7 million. While the Incumbent Broadband Markets revenue decreased by 3.6% in Q3 2025, primarily due to a 14.9% decline in video RGUs as customers shift to streaming, new government-subsidized fiber passings in these markets are showing strong penetration, exceeding 45% five quarters after launch. The Commercial Fiber segment, despite a 5.3% revenue decline in Q3 2025 (due to non-cash adjustments and prior-year early termination fees), demonstrated underlying growth of 2.3% excluding these variances, with incremental monthly revenue sales of almost $157,000.

Shentel's operational achievements are equally compelling. By the end of Q3 2025, Glo Fiber had reached a significant milestone of 400,000 homes and businesses passed in its greenfield expansion markets. The company added 6,400 new Glo Fiber customers in Q3 2025, bringing total Glo Fiber data RGUs to 83,000, a 39.5% increase year-over-year. Data penetration in Glo Fiber expansion markets reached 20.6%, with earlier cohorts (2019 and 2020) achieving an average data penetration rate of 37%. Monthly broadband data churn remained low at 1.17% in Q3 2025, even during the seasonally highest churn quarter. The introduction of new promotional rate plans with 5-year price guarantees in mid-Q3 2025 has already led to a significant lift in gross additions, with 68% of new residential customers opting for speeds of 1 gig or higher.

Liquidity, Capital Allocation, and Future Outlook

Shentel's aggressive fiber build-out necessitates substantial capital investment. For the nine months ended September 30, 2025, capital expenditures of $251.5 million exceeded net cash provided by operating activities from continuing operations ($74.5 million) by $177.1 million. The company expects capital expenditures to continue to outpace operating cash flows through 2026 as it completes its network expansion. As of September 30, 2025, total available liquidity stood at $212.6 million, comprising $22.6 million in cash, $117.9 million in available revolver capacity, and $72.1 million in remaining government grant reimbursements. The company's net indebtedness was approximately $534.1 million, with a weighted-average interest rate of 7.47% on its Term Loans and Revolver.

Management has provided clear guidance for 2025, reiterating expected revenues of $352 million to $357 million and Adjusted EBITDA of $113 million to $118 million. Capital expenditures, net of grant reimbursements, are projected to be between $260 million and $290 million. A pivotal aspect of Shentel's financial strategy is its plan to refinance credit facilities through a hybrid structure: asset-backed securitization for its Glo Fiber and commercial fiber businesses, paired with a new credit facility for its incumbent broadband business. This approach is anticipated to lower the cost of debt by approximately 100 basis points, strengthen its credit profile, and enhance financial flexibility, with completion expected in the coming months.

The long-term outlook is anchored by the projected completion of the Glo Fiber build-out and government grant projects by the end of 2026. This milestone is expected to dramatically reduce capital intensity, with long-term capital investments projected to settle between 20% and 25% of revenues from 2027 onwards. This decline in capital intensity, combined with continued customer growth, is expected to drive Shentel to achieve positive free cash flow for the full year 2027, with "meaningful amounts of growth in 2028 and beyond" from the Glo Fiber business. Management anticipates annual Adjusted EBITDA margins to grow by 300 to 400 basis points as high incremental margins from Glo Fiber customer additions are realized.

Competitive Landscape and Strategic Positioning

Shentel operates in a dynamic telecommunications landscape, competing with national giants like Verizon (VZ) and AT&T (T), and major cable operators such as Comcast (CMCSA) and Charter Communications (CHTR). Shentel's strategic positioning as a greenfield overbuilder and share taker is a key differentiator. In its Glo Fiber expansion markets, 92% of passings are in duopoly markets with only one fixed broadband competitor, while 70% of its incumbent market passings face no fixed broadband competitor. This favorable competitive dynamic allows Shentel to leverage its superior fiber technology and local customer service.

While larger competitors benefit from scale and broader technological integration (e.g., Verizon's and AT&T's 5G networks), Shentel's focus on regional markets and pure fiber offerings provides a distinct advantage. The company has not raised broadband service prices for Glo Fiber since its launch six years ago, and its new promotional plans, offering enhanced speeds with a 5-year price guarantee, directly counter competitive offerings like Comcast's similar guarantees. These plans are designed to leverage Glo Fiber's symmetrical speed advantage and ample network capacity. Although the new promotional plans are expected to have a minimal impact on data ARPU in the short term and a slight decline of approximately 1% for 2026, they are crucial for accelerating subscriber growth.

Risks to the investment thesis include the significant capital expenditures required for the fiber build-out, which will continue to exceed operating cash flows through 2026. While the company has largely mitigated tariff impacts on construction materials, potential future tariff exposure on electronic equipment could lead to increased monthly equipment rental fees. Additionally, the seasonal nature of churn, particularly in Q3, and the ongoing shift of video customers to streaming services in incumbent markets, present continuous operational challenges. However, Shentel's proactive approach to government grants, which are expected to cover over 50% of the total cost for broadband expansion projects, helps de-risk a portion of its capital investments.

Conclusion

Shentel is executing a bold and transformative fiber-first strategy, positioning itself for sustained growth and a significant inflection point in free cash flow generation. The company's aggressive Glo Fiber expansion, coupled with strategic acquisitions and a disciplined approach to operational efficiency, is yielding tangible results in subscriber growth and Adjusted EBITDA expansion. Its technological advantage in delivering symmetrical multi-gigabit fiber speeds, combined with a strong focus on local customer service, provides a compelling competitive edge in its targeted markets.

The path to positive free cash flow by 2027, driven by declining capital intensity post-2026 and continued customer additions, represents a critical milestone for investors. The planned hybrid refinancing structure is expected to further enhance financial flexibility and reduce debt costs, enabling Shentel to pursue future growth opportunities in a consolidating industry. While challenges such as high capital expenditures during the build phase and competitive pressures persist, Shentel's clear strategic vision, robust operational execution, and commitment to technological leadership underscore its potential for long-term value creation for shareholders.