Good morning, everyone. Welcome to Shenandoah Telecommunications third quarter 2020 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. John Nesbett of IMS and Investor Relations for Shentel. .

Good morning and thank you for joining us. The purpose of today's call is to review Shentel's results for the third quarter 2020. Our results were announced in a press release distributed this morning and the presentation we'll be reviewing is included on our investor page of our website www.shentel.com.

Please note that an audio replay of this call will be made available later today. The details are set forth in the press release announcing this call. .

With us on the call are Chris French, President and Chief Executive Officer; Dave Heimbach, Executive Vice President and Chief Operating Officer; and Jim Volk, Senior Vice President, Finance and CFO. After our prepared remarks, we will conduct a question-and-answer session. .

As always, let me refer you to Slide 2 of the presentation, which contains our safe harbor disclaimer to remind you that this conference call may include forward-looking statements subject to certain risks and uncertainties. These may cause our actual results to differ materially from the statements.

Hence, I'll provide a detailed discussion of various risk factors in our SEC filings, which you're encouraged to review. You're cautioned not to place undue reliance on these forward-looking statements, except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements. .

With that, I'll turn the call over to Chris now. Go ahead, Chris. .

Thanks, John. We appreciate everyone joining us this morning, and I hope everyone is healthy and safe. As reflected on Slide 4, we had another strong quarter of broadband results with 6,000 net high-speed data additions, driven in part by record Glo Fiber net adds of approximately 1,500.

Together, our income in cable and Glo Fiber year-over-year organic subscriber growth rates outpaced our public company peers and with the strong sales in fiber construction momentum we have achieved, we're excited for the future growth of our broadband business. Dave will provide more detail on these outstanding results later on the call. .

Turning to Slide 5, highlighting our commitment to shareholder returns, we announced last week a 17% increase in our annual cash dividend to $0.34 per share, consistent with the growth of earnings per share driven by strong results from our wireless business.

The dividend marks the eighth consecutive year of an annual increase and is also our 61st consecutive year of dividend payments..

Moving to Slide 6, I'd like to transition now to the strategic direction we're taking following T-Mobile's exercise of their purchase option of our wireless business.

Over our long history, Shentel has continued to evolve by investing in the latest technologies to meet the growing demand for telecommunication services in the rural markets that we serve.

While we have mixed emotions about divesting our Sprint affiliate business, the transaction will allow us to fully focus our resources on our transition to a regional integrated broadband communications company.

Our new Glo Fiber and Beam fixed wireless broadband initiatives are the latest highlights in a decade-long strategy that began with the acquisition of several rural incumbent cable properties and an aggressive middle-mile fiber expansion in our region..

We're very pleased with our first year of Glo Fiber results having added 2,800 customers as of September 30th, 2020, and our first Glo market in Harrisonburg, Virginia achieving a penetration rate of 16%, both well ahead of our business plan.

During the third quarter, we entered into 6 new Glo Fiber franchise agreements, expanding our target market by 33% to 117,000 homes passed. .

In October, we also largely new fixed wireless broadband service under the Beam brand-name in the Virginia counties of Albemarle and Rockingham. Our Beam service offers high-speed Internet access, ranging from 25 to 100 megabits per second to underserved rural homes without a cable or fiber-based service available.

Although we have a very small sample size, the initial response to our targeted launch has been very positive. We believe that Beam service will be a big step toward solving the longstanding digital divide between urban and rural broadband Internet connectivity in our markets. .

To further our potential coverage area and supplement our capacity, we purchased incremental spectrum in the recent CBRS auction for $16 million. This investment, along with development of the 2.5-gigahertz spectrum purchased in 2019, will increase our target addressable market to approximately 425,000 homes passed.

With the complementary mix of state-of-the-art cable, fiber, and now our fixed wireless technologies, our broadband business will be able to serve over 700,000 homes in the coming years and create a platform for sustainable long-term growth..

As we transition to a broadband-centric company, we're analyzing the resources and capital structure needed to support our aggressive expansion plans, including the use of proceeds expected from the wireless sale.

Beyond reserving cash to pay income taxes from the sale and fully repaying the term loans of our credit facility, we plan to address the remaining use of proceeds after the value of our wireless business is determined in the upcoming appraisal process.

On a similar note and time frame, we expect to provide guidance on a new credit facility and level of corporate expenses needed to support the broadband business long-term..

Turning to Slide 7, I'll provide a brief update on Sprint's merger with T-Mobile. As previously announced, T-Mobile exercised their option on August 26 to purchase the assets and operations of our PCS business for 90% of the entire business value is outlined in our affiliate agreement and to be determined through an appraisal process.

We also previously announced that we had provided T-Mobile, a notice of dispute relating to the appraisal framework and other contractual terms related to T-Mobile's pending acquisition. .

Earlier this week, we aligned in principle on certain elements of the appraisal and sales process. Under the agreement in principle, the appraised valuation will be performed as of July, 1, 2020.

The appraisal will also value Shentel's discontinued wireless operations as though Shentel were still an affiliate of Sprint with access to its brands and spectrum without any regard to T-Mobile's acquisition of Sprint or its subsequent integration efforts.

It's currently expected that the appraisers will complete their assessment of the entire business value on or about January, 20, 2021..

The transaction is expected to close in the second quarter of next year, subject to receipt of customary regulatory approvals. .

2020 has presented many challenges for our organization, and I cannot be more pleased with how our employees and management team have responded. Our company's accomplishments bode well for our ability to meet the challenges of the coming months and have as well prepared for the next phase of Shentel's long history of growth and change. .

With that, I'll now turn the call over to Jim to review the details of our financial results. .

Thank you, Chris, and good morning everyone. Before reviewing our financial results for the third quarter, let me walk you through the accounting changes we made regarding the pending sale of our wireless segment. Please refer to Slide 9.

As the T-Mobile exercised their option to purchase our wireless assets and operations on August 26, we concluded that the sale would be consummated within one year, and therefore, our wireless assets and liabilities are presented as held for sale in our consolidated balance sheet and the wireless net income is now presented as discontinued operations in our consolidated statement of comprehensive income.

.

On a similar note, the Wireless cash flows have been separated and shown as, operating, investing, and financing cash flows from discontinuing operations in our consolidated statement of cash flows. Prior period results and balances have been retrospectively revised and presented as discontinued operations and assets held for sale for comparability..

We have ceased depreciating and amortizing the assets held for sale prospectively starting in September.

In addition, certain intercompany expenses have been reallocated between segments to conform with the accounting standards on discontinued operations, and an income tax provision has been applied separately to continuing and discontinuing operations..

Lastly, our outstanding term loans have been reclassified as a current liability in our consolidated balance sheet. Although not a Wireless segment liability that will be transferred, there is a mandatory prepayment requirement in our credit agreement upon the sale of wireless.

Interest expense related to the term loans is included in net income from discontinued operations and repayments of our term loans is presented as cash used in financing activities from discontinued operations. Please refer to footnote 2 in the 10-Q we filed this morning for more details on the accounting changes regarding our wireless segment..

In addition to these accounting changes, we will no longer disclose Wireless operating statistics nor provide comments on the Wireless operations. .

Please now refer to Slide 10 to discuss financial results for the third quarter. Consolidated revenue was $55.2 million in the third quarter 2020 as compared to $51.8 billion in the third quarter 2019, due to growth of $2 million in our broadband segment and $1.4 million in our tower segment. .

Consolidated adjusted OIBDA for the quarter was $14.6 million compared to $12.1 million in the same period of last year. The increase was due primarily to growth in towers and a reduction in corporate expenses. .

Turning now to our segments in Slide 11. Revenue in our broadband segment grew $2 million or 4.2%, $50.7 million in the third quarter 2020, driven by an increase of $3.8 million or 11.2% in cable, residential and SMB revenue and primarily from a 19.8% increase in broadband data RGUs and lower bundling discounts and promotions..

Fiber enterprise and wholesale revenues declined $500,000 due to a one-time adjustment of $1.7 million to amortized revenue, more than offsetting the $1.2 million growth in monthly recurring revenues from an increase in enterprise and backhaul circuits. .

RLEC revenue declined $900,000 or 16.8% primarily from lower DSL subscribers in intercompany [ band ] service. Broadband adjusted OIBDA for the third quarter declined $300,000 to $19.6 million from the same period a year ago.

The decline was primarily due to the one-time adjustment of $1.7 million to the Fiber enterprise and wholesale amortized revenue and $600,000 dilution for the launch of Glo Fiber and Beam. Excluding these impacts adjusted OIBDA would have grown 10.2% and the adjusted OIBDA margin would have been 41.8%. .

On Slide 12, towers segment revenue grew 43.3% to $4.5 million, and adjusted OIBDA grew 42.9%, $2.9 million for the third quarter 2020, due to 8.9% growth in tenants and 37.9% increase in the average lease rate due to amendments to the intercompany leases..

Moving to Slide 13, we ended the quarter with $706 million in debt with an effective interest rate of 2.3% and $259.1 million total liquidity, including $148 million of cash and equivalents. Cash grew $40.4 million sequentially in the third quarter.

Our discontinued wireless operation continues to generate strong free cash flow with $165 million year-to-date. .

Before transitioning to Dave, please note that our share repurchase program has expired and we'll reevaluate re-implementing after the wireless valuation is determined in the first quarter of 2021. .

Now I'll turn the call over to Dave. .

Thanks, Jim, and good morning everyone. I'll begin on Slide 15 with our incumbent cable business in which total RGUs grew a robust 7.8% year-over-year in the third quarter to approximately 181,500, compared to roughly 168,400 in the same period in the prior year.

As Chris pointed out at the start of the call, we added roughly 4,500 net broadband data RGUs in the quarter and ended the quarter with 96,000 data RGUs, which is an impressive 16.4% increase to the prior-year period.

We're also very pleased to report that our incumbent cable broadband data penetration increased from 40% in the third quarter last year to 46.2% this quarter, on the continued strength of our new broadband speeds, rate cards, service improvements and increased demand related to COVID-19. .

Incumbent cable broadband data churn declined 9 basis points to 1.88% in the third quarter, representing the 14th consecutive quarter of year-over-year churn improvement. Excluding the impact of deferred non-paid disconnects from the second quarter, third-quarter data churn in our incumbent cable business would have been 1.73% in those markets.

Broadband data average revenue per user increased slightly versus the prior year to $77.66 as our new powerhouse branded rate card leveraging an improved value proposition based on our DOCSIS 3.1 speed upgrades now comprises 70% of the base..

At the end of the third quarter 2019, 37% of incumbent cable data customers were on rate plans of 10 megabits per second or less, and now 75% are on plans of 25 megabits per second or greater with an average subscribed download speed of 79 megabits per second, which is well beyond the reach of our DSL competitors. .

Turning to Slide 16. We continue to gain momentum with our new Fiber to the Home Edge Out strategy, Glo Fiber. Glo had approximately 4,000 total RGUs at the end of the third quarter with a 12.5% broadband data penetration rate comprised of roughly 2,800 unique broadband data customer relationships.

As Chris mentioned at the start of the call, our Harrisonburg, Virginia market has achieved 16.4% broadband data penetration in aggregate, with some of our most mature neighborhoods in that community, already achieving 30% percent penetration.

We continue to see extraordinarily low churn in our Glo Fiber high-speed data product with only 0.98% churn in the quarter. .

ARPU was down sequentially to $80.03 in the quarter as a result of new activation revenue time. We're seeing a higher percentage of new subscribers electing higher speeds with 38% of new subs electing the 1-gig speed tier in this quarter.

Our streaming TV and voice services continue to perform well with 26% and 14% attachment rates in the quarter, respectively. .

Slide 17 depicts the status of our active and approved Glo Fiber markets as of the end of the third quarter. Construction efforts are progressing very well and also exceeded our expectations in the quarter in spite of concerns of delays related to COVID-19.

Approximately 9,200 new residential and small business passings were released to sales in the quarter with a total of 20,600 addresses constructed year-to-date and 22,300 overall at the end of September. We expect to have approximately 27,300 total new target passings released to sales by the end of the year. .

The third quarter was a productive one for our new market development team as well. We added new Glo Fiber franchises in the cities of Frederick, Maryland, Charles Town-Ransom, West Virginia, which added over 15,000 new target passings.

Then in October, we successfully added 3 additional markets including Martinsburg, West Virginia; Lancaster Township, Pennsylvania; and Blacksburg, Virginia adding approximately 13,500 additional target passings..

In total, Glo Fiber has approved franchise target passings of approximately 117,000, with the strong funnel of additional markets and our Edge Out strategy heading into the fourth quarter. .

On slide 18, we have depicted our fiber,, cable and fixed wireless broadband footprint. This map really helps illustrate the integrated nature of our broadband networks and how operating leverage will increase over time given the overlap an adjacency of our operations in our growing footprint. .

As Chris mentioned at the start of the call, we're very excited to have launched Beam Internet, which is our new fixed wireless broadband service in early October. Beam will leverage our newly acquired spectrum and target approximately 425,000 un-cable households, with speeds of up to 100 megabits per second.

We'll have roughly 25 macro sites on air by the end of this year as we continue to bring critical high-speed Internet access to the underserved in our region..

We will continue to update you on the status of both our Glo Fiber and Beam Internet expansion plans as we progress in our market development and construction efforts toward the launch of commercial services over the next several quarters.

Combined, our multi-pronged broadband growth strategy will more than triple homes passed to over 700,000 in the next five years.

As summarized on Slide 19, we now have product offerings to serve a variety of market dynamics, with our Glo Fiber service targeting higher density urban markets and Beam fixed wireless service targeting lower density rural areas.

The common denominator in all of our offerings is to provide the leading high-speed Internet service available in each market, combined with superior local customer service.

With projected terminal penetration rates of Beam and Glo in the low to mid-30% range and incumbent cable penetration in the mid-50% range, we expect our broadband business to have industry-leading sustainable growth for the next several years. .

Turning to Slide 20, total towers and small cells increased to 230 in the quarter, with total tenants increasing 8.9% year-over-year to 414. We had a backlog of 119 open orders related to upgrades of existing tenants or the addition of new tenants at the end of September, 2020. .

Finally, on Slide 21, we provide an update to our 2020 capital spending results and guidance for our continuing operations. We no longer wireless guidance as a result of the pending sale and discontinued operations presentation.

Capital expenditures were $82.7 million through the third quarter 2020, compared to 48.8 million at the end of the third quarter in 2019. The primary driver of the year-over-year increase relates to the investments in our Glo Fiber and Beam Internet fixed wireless broadband initiatives. .

For the full year 2020, our revised guidance is now $104 million to $116 million as we capitalize on our strong liquidity and cash flow generation to invest aggressively in the expansion of our fiber cable and fixed wireless broadband networks. .

Thank you very much, and operator, we're now ready to take questions. .

[Operator Instructions]. Your first question comes from the line of Ric Prentiss with Raymond James. .

Thanks, good morning guys. Glad to hear you're doing okay during these crazy times. A couple of questions, first on the wireless process.

So have all 3 of the appraisers been selected to get started on their work?.

Ric, that's going to happen here before the month is out. .

Okay.

And with the framework in place, what's the expectation on how they'll be able to do that work? Is it just kind of cash flow, comps? What is the expectation of how they'll perform that appraisal process?.

Likely, it's a combination of factors, Ric. DCF would be among them, precedent transactions, comps, etc. But we don't want to comment too much and how we're applying too much on how we think they ought to conduct the process, obviously, because we don't want to taint the process. Likely it's a combination of factors. .

And how would the expansion territories you addressed in that, I know it's assuming that the T-Mobile, Sprint deal had not happened.

So is there a thought that the expansion territories have to be addressed in that valuation?.

Yes. That's right.

Jim, do you want to take that one?.

Yes. Ric, so we expect the appraisers will want to look at our 10-year plan and growth that we're expecting from the expansion markets, which as you know are a big part of our growth strategy going forward.

So they will be factored in from a DCF perspective in that respect, and there is also a mechanism within in the affiliate agreement in the framework that if for some reason the appraised value for the expansion markets was of the multiple for the expansion market on EBITDA is less than book value, they would bump the value for the expansion markets up to the net book value as of the valuation date.

So there is the mechanism was intended to make sure that we don't lose our investments that we've been making since we acquired these markets. .

Makes sense. And Chris, you had mentioned, you look at the proceeds, obviously, you have to repay the term loan and then income taxes.

Any indication of what kind of taxes might be borne or what the basis is on the wireless business?.

Not that we've publicly said yet. I don't know Jim, if you want to add any other color. We have not disclosed the cost basis on those assets. .

Yes. Ric, as Chris said, we have not disclosed the basis, but we will. Once the value is determined, it looks like it's going to be the second half of January. We will disclose not only value but what we think the after tax proceeds would be and what the tax impact will be. .

Makes sense. I think Chris you also mentioned guidance and financing and corporate costs, obviously, that would be one of the areas that you have to look at.

What's the thought as far as time frames as far as looking at the corporate costs? How do you right-size the organization? How should we think about that timing and rough magnitude of what the dollar level might be?.

Yes. We're obviously looking at that now and time frame will be about the same as once we get clarity on the proceeds from the sale and the tax effect and all that. So should be the first or second quarter of next year. .

Then as we think about the tower business, how critical is that to keep with the broadband business? We've seen some transactions even just this week, American Tower paid 30.4x tower cash flow for a private tower company.

So how should we think about the tower business? Is it something you want to keep, you need to keep? Or is it something that might get monetized as well?.

Yes. Go ahead, Jim. .

I would say we'll take it one step at a time here. Wireless is in the batter's box right now and then we'll determine what do a towers down the road.

I don't think it's strategic to us, as I think we've said in the past but the towers can be a valuable source of funding if we're doing an acquisition and we wanted to monetize them to help us fund an acquisition. So we're thinking about it in those lines. .

And last one just to pick up on that comment.

Are there any transactions out there that in the Telco, Cable broadband space? How is that market looking at pipeline for potential acquisitions?.

Ric, we continue to look for opportunities both, kind of, a small tuck-in opportunities like Big Sandy that we completed last year, and there's a couple of those that we're competing on as we speak today, and we're also looking at more transformative opportunities as well.

They don't come along as frequently, but we're poised to be opportunistic is as they do. data. .

Your next question comes from the line of Zack Silver with B. Riley. .

The first one, just following up on some of Rick's questions around the appraisal process. In the towers deal, I think Sprint agreed to waive around $250 million of cash payments for management fees.

Is that something that is factored into the appraisal framework?.

Zack, it actually won't be a part of the appraisal framework, as it much it will be like a working capital purchase price adjustment once the value is determined. It will be added to the ultimate value, but it will be done not be added after the fact, not as part of the appraisal process. .

That makes sense. Then, you flagged that the term loans require repayment upon closing of the wireless sale.

When you think about how the new Shentel looks, how are you thinking about capitalizing that business from a leverage perspective?.

Zack, we're still putting pen to paper on that. But I would say in general, you probably can expect leverage similar to the leverage that we have today -- in the same range that we have today. We will be growing the business, the broadband business aggressively as Dave and Chris had outlined on the call.

So we will put something in place that will allow us to make sure we have adequate funds to keep funding that business and keep growing the business. .

Got it. Then, at a more high level, it seems like that alongside COVID accelerating demand for high-speed broadband and the relative attractiveness of this business, there's been a lot of investment from incumbent players and also new entrants, and you guys sort of have a hybrid approach there.

How do you see the competitive environment evolving in your markets? And what gives you the confidence that you can compete with some of the larger incumbents or others pursuing fixed wireless technology in those markets?.

Zack, look, we have a, I think, track record over the course of the last year that hopefully gives you confidence in our ability to do that with the investments we've made and the results we're achieving. We're a well-known company in our region and the urban markets get real rural quickly here in this part of the country.

And so I think having a multi-pronged broadband strategy here leveraging 3 distinct technologies is the absolute best way to go. .

We have been -- as I think you would observe, we've been aggressive in acquiring protected spectrum assets in our region, and you've probably noticed the overlap of the 3.5 we acquired with our incumbent cable markets as well. So we have both an offensive and defensive strategy with our three-pronged strategy here.

And I'm quite confident in our ability to take market share and defend our existing market share in the near future. .

Got it. And then, last one for me, the incumbent, the broadband penetration for the incumbent cable business, I mean, I think expanded at one of the better rates that we've seen this quarter.

Can you talk about where the new subs are coming from? Is it folks upgrading from DSL? Is it broadband levers? And just what were those new additions coming from?.

Yes. I think it's both of those categories in addition to folks that perhaps were leveraging their cellular data plan and trying to tether off of that. Obviously, we're capitalizing on the tailwinds of the pandemic and work and study from home.

But our investments in both our network, and our new rate card, and our operations all came at an outstanding time quite frankly. .

So I think we're executing better. I think we've got a better price-value equation now than we did before. I think you see that as evidenced in 14 consecutive quarters of churn reduction. Our NPS scores are through the roof, and not so long ago they were pretty poor.

So I think if you consider the operational momentum that we have in addition to the tailwind of the demand factors of COVID, I think they've all come together quite nicely here to produce those results.

But in terms of where the share is coming from, it's dealing it from our DSL competitors, it's taking it from folks that were tethering to cellular plans, may have been using satellite previously, and last but not least, to your point, there is probably some broadband levers that have added service. .

We didn't make a comment about this in the script, Zack. But the other aspect of the growth is, we added 700 net prepaid subs in the quarter. That's part of that overall number, and that's to deal with our more credit-challenged subscriber base, and we added a rate plan in the midst of COVID, that we've allowed to persist here through the year.

And we're in the midst of revamping overall prepaid strategy and expect to see good growth through those investments as well. .

[Operator Instructions] Your next question comes from the line of Hamed Khorsand with BWS Financial. .

Just building on that competition theme.

Have you guys done any analysis on what your expectations as far as the cost of acquisition beyond just the cost per passing?.

Yes, of course. Good morning, Hamed. For which category are you questioning? All 3, or... .

Really just the Glo Fiber and the Beam. .

Yeah. So the cost to connect the Glo Fiber customer is in the $800-$900 range, Hamed, all-in. And on Beam, it's roughly half of that. .

What's usually the enticement to get a customer switch over? Is it just that you're faster?.

We're faster. We've got a much more straightforward go-to-market strategy with respect to our value proposition. We've got 3 speed choices. We're not playing games or gimmicks on introductory prices that raise after expiration.

People recognize that this offering is coming from a regional company and generally around here, folks like to spend their dollars with companies that reinvest in their communities. And candidly, there is just Comcast [indiscernible]. Folks are very pleased to have a choice.

All of these markets are non-Fios Verizon markets, the far that we've launched in. And so their option is really if they want to a robust high-speed broadband product, it's either us or Comcast. .

Okay.

does having multiple options, what are the chances here just expanding your coverage region beyond what we're used to?.

Well, I think with our Glo strategy, we've clearly demonstrated a track record here of adding new markets every quarter, and we'll continue to do that. And if you take a look at the map and you just look at where we started and where we are now, you're seeing us edge out further and further beyond home base, so to speak.

So I think there is a strong likelihood that when you look at the combination of the spectrum footprint on that map in the presentation and you look at the markets that we've added for Glo, I think you can expect for us to continue to grow the footprint.

Having said that, we're very conscious of taking advantage of operating leverage and operating synergies, and we don't want to pickup and plonked down 5 states away with a greenfield build that probably would not be something you should expect us to do.

But edging out from the home base in the center of our universe is something we're very focused on. .

Your next question comes from the line of Kent Newcomb with Wells Fargo. .

My question is on the dividend. You recently raised it quite a bit. I guess I'm under the assumption that you expect to maintain that dividend after the sale of wireless.

And I guess, the question would be, are the cash flows sufficient to do that and continue your investment build-out or perhaps you're obviously going to use proceeds from the sale to invest as well?.

Kent, we have a long history of having an annual dividend. We will probably right size that according to the broadband and tower businesses that we'll own at this time next year, so it will likely adjust, according to the cash flows and in the earnings coming from those businesses.

But yes, we think we're in a strong liquidity and cash generation prospect here year that we can do both. We could return value to the shareholders, and we can continue to invest in our new Glo Fiber and Beam products. .

You have a follow-up question from the line of Ric Prentiss with Raymond James. .

I find Slide 19 really interesting I think it lays it out quite well. Couple of questions related there.

What kind of speeds will you be offering the Beam customers?.

Ric, it's -- our initial rate plan is entry at 25 megabits download and then up to 100 megabits download, depending on where you are with respect to the tower, and what our signal propagation characteristics look like.

Over time, we expect to offer higher speeds when CPE advancements continue to develop here, but out of the gates we're offering 3 tiers 25,50 and 100. .

Okay. Great.

And then as you think about what markets get Glo Fiber versus what get Beam, is there a breakpoint where fiber density as far as population per square mile says has enough time to go Beam versus fiber? And what would that breakpoint basically be?.

Yes. Look, there is a combination of factors here that we evaluate. Certainly, density and route, whether it's route mile or square mile, density is one of them. Another factor we look at is just what with the competitive landscape looks like. So for instance, we are not targeting cable areas.

In other words, folks that have a choice from a Comcast or a Cox or someone with our fixed wireless strategy. We're targeting areas that only would have maybe DSL or satellite or a local unlicensed spectrum wireless ISP as their most viable broadband choice. .

So it's a function of density, it's a function of competition, and it's also a function of other socioeconomic factors and poverty rates and all kinds of other factors as we look at the level of investment.

As you can appreciate in that slide, it's a much greater upfront investment deploying fiber than it is deploying, the point being, which is a much more capital efficient technology. So we want to have a little greater certainty on the Glo Fiber side of achieving our penetration rate objectives as a result. .

Right. Because I think the addressable market that's laid out is that there is a much larger addressable market for the Beam side than the Glo side at least right now. .

Yes. That's right. And the other factor, Ric, that we consider candidly is in these franchise permits we're getting, those are for our ability to offer video service. Obviously, there is going to be a point in time, in the not-too-distant future, we're not entirely certain when that is, you're probably not either.

But we all have a pretty good inclination that we're heading to a streaming-only universe. But, to date, we have not wanted to put ourselves in a position where we didn't have a viable video product in the bundle, particularly when competing with Comcast.

But I imagine there will be a point in time, at which data only would be a viable strategy and that we could achieve the kinds of penetration rates and churn rates and broadband data ARPUs that would support the kind of IRRs we expect to get with a 3 product bundle strategy and to that extent, it would enable us to get out of some of these more urban centers and into suburban areas that might be out in the county, which to date, we've been reluctant to do because that would obligate us to a build strategy for the video franchise for the whole county, which we obviously don't want to obligate ourselves to doing given the density characteristics.

So I think you can expect this to change over time as the market evolves. .

Obviously, T-Mobile has launched the T-Vision product which is content related for streaming but also to be a pull for fixed wireless broadband.

Do you see entering kind of that content side of the business or offering content bundles to try and push the penetration rates or you don't even need it given the competition level that you're going against?.

For the fixed wireless strategy, we don't have any plans right now to offer a bundled video offering of any kind. That could change over time, but we don't have any plans at present. .

It appears there are no additional questions. I would now like to turn the conference back to Jim Volk, for closing remarks. .

I would like to thank everyone for joining our call this morning, and we will keep you posted as we make progress both on the wireless side with the appraisal process and of course, with our broadband and tower businesses. Thank you for joining the call today. Have a good day. .

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect..