Shenandoah Telecommunications Co., has agreed to purchase nTelos Holdings in a deal valued at about $330 million in cash and debt and separately expanded its affiliate relationships with Sprint that will nearly double its wireless customer base.
ShenTel agreed to pay $9.25 per share in cash for nTelos, a 25% premium to its Aug. 7 close of $7.38 per share. As part of the deal, ShenTel will acquire all of nTelos’ wireless network assets, retail stores and about 298,000 customers in its Western markets. ShenTel will complete nTelos’ plans to shutter its Eastern markets, and at closing will pay off its $523 million in outstanding debt. The companies said their respective boards of directors have approved the deal unanimously.
Speculation around a ShenTel deal with Telos was heavy in May after the Financial Times reported the two were close to a deal.
In concert with the NTelos deal, ShenTel and Sprint have agreed to exchange certain assets in nTelos’ Western area. ShenTel will convert about 290,000 nTelos retail wireless customers into Sprint branded affiliate customers, and an additional 8,000 nTelos retail wireless customers into Sprint branded retail customers. Sprint will then transition its existing retail wireless operations in the nTelos footprint, including about 291,000 retail customers in nTelos’ footprint, to Sprint branded affiliate customers.
These existing Sprint retail customers, in combination with the nTelos customers, will enable Shentel to serve approximately 581,000 additional customers under its affiliate arrangement with Sprint. As part of the transaction, ShenTel and Sprint have also agreed to extend their Affiliate relationship by five years through 2029. Sprint will receive certain spectrum assets of nTelos, and has agreed to reduce the retained revenues that would otherwise be due to Sprint under the Affiliate Agreement by $252 million over an expected period of five to six years. In addition, at closing Sprint will purchase from ShenTel the nTelos equipment receivables for nTelos customers at a discounted amount to be paid over 24 months.
After taking into account the payments from Sprint for the exchange of certain assets, ShenTel net consideration of the nTelos acquisition will be $330 million. After the closing, Shentel's wireless segment will continue to operate as a Sprint Affiliate and is expected to serve a licensed market area with a total population of 5.4 million, a network that covers 4.3 million POPs and total subscribers of over 1 million.
"This is an exciting time for our company,” said ShenTel chairman and CEO, Christopher French in a statement. “This transaction more than doubles Shentel's wireless customer base, enhances our presence in the Mid-Atlantic region by adding a highly complementary footprint and further strengthens our longstanding partnership with Sprint. With the close of this deal, Shentel will be positioned as one of the top six public wireless providers in the United States. We look forward to welcoming nTelos employees to the Shentel team and to serving the nTelos customers."
ShenTel will finance the nTelos acquisition and network upgrade with $960 million in credit facilities (including term loans totaling $885 million and a revolver of $75 million) from a syndicate of lenders. The acquisition is expected to close by early 2016. Moelis & Company LLC acted as exclusive financial advisor to Shentel. Hunton & Williams LLP acted as legal counsel to Shentel.