T-Mobile US wants to buy Shenandoah Telecommunication’s wireless operations, exercising a Sprint affiliate contract option that dates back to 1999 — but price is a sticking point in the negotiations.
Shentel, historically one of Sprint’s major PCS affiliates, provides network coverage for Sprint customers in parts of Kentucky, Ohio, Pennsylvania, Virginia and West Virginia, with about 1.1 million prepaid and postpaid subscribers as of June 2020. Its territory was expanded as recently as 2018, when Shentel agreed to invest $56 million over three years to expand and improve coverage in the mid-Atlantic region for an addition 67,000 Sprint postpaid and prepaid customers. That deal, for which Shentel was paid $65 million and acquired about 105 Sprint cell sites, brought Shentel’s covered potential customers (POPs) to more than 7 million.
According to a T-Mobile US filing with the U.S. Securities and Exchange Commission, Shentel and T-Mobile had already been in discussions regarding the appraisal framework through which the purchase price for Shentel’s wireless telecommunications assets would be determined, if Sprint — now part of T-Mobile US — were to exercise its purchase option. T-Mo said that it formally exercised the option on August 26, but the two parties “were not able to agree on certain terms for an effective appraisal of Shentel’s wireless telecommunications assets.” Shentel responded with a formal notice of dispute, which gives the parties some additional time to negotiate — but if the two don’t resolve their dispute within 60 days, either one could pursue legal action.
Shentel noted in its recent quarterly reporting that there was an initial 90-day period under its affiliate agreement to negotiate mutually agreeable terms under which Shentel might continue as a T-Mobile US affiliate — but that period expired on June 30. Now T-Mo has the option purchase Shentel wireless assets for 90% of the “entire business value” as determined by an appraisal — which is at issue.
Wireless accounts for the majority of Shentel’s business. Shentel’s wireless operating income as of the most recent quarter was nearly $43.9 million, far greater than the $8.7 million in operating income from its broadband business or $2.2 million from its tower segment. The company reported that has already been navigating numerous changes in the transition from Sprint to T-Mobile US collection policies and branding. “Although the impact to Sprint customers in our affiliate area is uncertain at this point in time, the integration plans are likely to adversely affect our wireless segment operating and financial results in future periods,” the company said.