Good morning everyone. Welcome to the Shenandoah Telecommunications' Fourth Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Jennifer Belodeau 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 quarter and year ended December 31, 2018. Our results were announced in a press release distributed this morning and the presentation we'll be reviewing is included on our Investor page at 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 today are Chris French, President and Chief Executive Officer, Dave Heimbach, Executive Vice President and Chief Operating Officer and Jim Woodward, 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 and 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. Also, in an effort to provide useful information to investors, we note on Slide 3 that our comments today include non-GAAP financial measures. Details on these measures, including why we use them, and reconciliations to the most comparable GAAP measures are included in our SEC filings. These reconciliations are also provided in an appendix to today's slide presentation. With that, I'll turn the call over to Chris now. Go ahead, Chris.

Good morning and thank you for joining us. We delivered a solid performance in the fourth quarter of 2018, closing out a strong year. We achieved consolidated revenue growth, significantly increased operating income and improved OIBDA or Operating Income Before Depreciation and Amortization. We also achieved customer growth in all of our operating segments during 2018, highlighted by record customer additions in both our Wireless and Cable businesses during the fourth quarter. As a result of strategically expanding our geographic reach and upgrading our network, Shentel is positioned as the most reliable provider with both the capacity and speed to meet the broadband needs of the areas we serve. Throughout 2018, we saw the benefits of our efforts as distribution levels and activation rates steadily increased. We continue to follow the public reports of progress on the proposed Sprint, T-Mobile merger. The transaction received approval in December from the Committee on Foreign Investment in the US and the Departments of Justice, Homeland Security and Defense also submitted a filing to the FCC saying they had no objections to the merger. We're optimistic that our long-standing affiliate agreement with Sprint positions Shentel well for whatever outcomes reached. Competitively speaking, we continue to believe the merger would establish a stronger competitor in the Telecom industry as an alternative to the dominant AT&T and Verizon. We've maintained a strong and mutually beneficial relationship with Sprint for more than two decades, delivering the latest in wireless technology to predominantly rural markets. We welcome the opportunity to continue providing value to the new combined Company. While we wait for more clarity, we remain focused on continuing to grow our wireless business while providing excellent coverage and service to our Sprint customers. Moving to our results on Slide 5, we summarize some highlights of our full-year…

Thank you, Chris and good morning everyone. We show the changes in our quarterly results on slide 12. Fourth quarter revenue was $161.5 million compared to $151.6 million in 2017 excluding the impact of Topic 606, revenue increased $11.8 million, driven by the wireless and cable operations. Fourth quarter consolidated operating expenses increased by $1 million. Again, excluding the Topic 606, operating expenses increased by $7 million as a result of the higher cost of services and cost of goods sold related to our continued growth and expansion. Operating income increased $8.9 million or 49% to $27 million over the prior year quarter, excluding Topic 606, operating income increased $4.8 million or 26.5% to $22.9 million. We recorded net income of $14.9 million or $0.31 per share compared to $60.6 million or $1.23 per share in the fourth quarter of 2017. Excluding Topic 606, fourth quarter earnings per share were $0.24. As Chris mentioned, fourth quarter 2017 net income included a one-time non-cash tax benefit of approximately $53.4 million related to the enactment of the Tax Cuts and Jobs Act in December 2017, excluding the one-time tax benefit, net income in the fourth quarter was $7.2 million or $0.15 per share. Moving to Slide 13, you will see fourth quarter adjusted OIBDA results by segment, which illustrates the components driving the quarter-over-quarter change. Adjusted OIBDA for the fourth quarter was $73.2 million representing a margin of 45.3%. Continuing OIBDA is also shown on this slide to illustrate the impact of the Sprint management today. As a reminder, when we acquired nTelos, Sprint committed to waive the 8% postpaid and 6% prepaid management fees, up to $4.2 million a month until the total waive fee reaches $255.6 million. We expect to receive the benefit of the waive management fee through 2022.…

Thanks, Jim and good morning, everyone. I'll start on Slide 20 with operational highlights from 2018, where we saw a strong subscriber growth adding 58,579 postpaid Wireless subs and 32,882 prepaid subs. In our cable segment, we also added 4261 broadband subscribers while growing broadband ARPU 9.2% year-over-year. Other highlights include commercial fiber sales revenue, which grew more than 7% from 2017. We constructed 212 new fiber miles in 2018 raising our total to over 5600 miles with 83% of total fiber capacity available for future growth. We also constructed 16 new Shentel owned towers bringing the new total of Company-owned towers to 208. Additionally, 89 new Fiber to the Tower sites were constructed in 2018, which raised the total to 423 and drove lower back haul related operating expenses. We'll continue to invest in fiber as a means for not only reducing OpEx across all segments of our business, but for growing Wireline and Cable revenue as well. On Slide 21, we show the components of change in our Wireless customer base year-over-year. We added 795,000 postpaid and 259,000 prepaid subscribers at the end of the fourth quarter for a total of 1,054,000 customers. This includes 54,000 customers acquired as a result of the Richmond expansion in February 2018 and approximately 37,500 added through organic growth. As previously disclosed, postpaid produced all-time high net additions for the fourth quarter of approximately 9,600. Prepaid added 3,200 net subs in the quarter with the Boost brand achieving record gross activations. 8.7% of our base upgraded their device in the quarter and as of the end of 2018, 9% of the postpaid base was comprised of tablets and data devices. Lastly, while ARPU was down about $1 year-over-year in the fourth quarter, postpaid ARPU for fiscal year 2018 was actually up slightly,…

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

Thanks. Good morning, guys. Obviously you had pre-announced the subscriber gross adds in wireless with postpaid and prepaid. I thought it was interesting the gross adds were up, you talked to the stores a little bit, help us understand how many stores do you anticipate opening in 2019 versus what you had in 2018, and are you starting to see any of this in those turf expansions whether it's Parkersburg or the Richmond sliver?

Good morning, Ric. This is Dave. Yes. We will continue to open stores this upcoming year and it will be in the same zip code of total store openings as 2018 and we do, we are seeing good growth in the new expansion territories as you might expect and I think that's really one of the core competencies of the company here as our ability to shepherd both our owned, corporate-owned stores and our third-party dealer network through our continuing growth and expansion of our network.

And sometimes seasonality effects the numbers, fourth quarter is usually pretty good time of year for selling wireless, do you expect seasonality to maybe have gross adds tail off, as we look into 1Q, just trying to think of trends in the industry.

Well, you know that prepaid is a particularly strong growth quarter, yes in the first quarter exactly. So we expect to see an uptick there on prepaid, and yes, I mean first quarter seasonally is a little bit lighter in postpaid than the fourth quarter as you noted.

Okay. And have you noticed any, Chris you talked about the Sprint, T-Mobile merger obviously making through its decision process, but operationally have you seen much overbuilding by T-Mobile in your markets and what kind of market share do you kind of think they have in the territory?

Well, in terms of overbuilding, I think you'd raised this question in a prior call, and we haven't seen any material uptick or downtick one way or the other, a continued steady flow of activity from T-Mobile and in terms of market share relative to us, we believe that given the strength of our network and given the strength of our distribution, that we had substantially more subscribers in our geographies than they do, but I don't want to get too specific because we would be just estimating and speculating.

Okay. And you talked a little bit, Dave about the 5G and the massive MIMO in dense urban areas. Is there an opportunity -- first, how much CapEx do you think 5G will require of you as you look out over the next several years and is it evolution or a revolution kind of in spending and is fixed wireless broadband an application that might make sense in your territories as well, U.S. Cellular talked about it on their call?

Yes, so in terms of 5G Ric, as we've previously guided you, it's not going to be a substantial portion of CapEx for us just given the relative densities we have in our geography. We're deploying carrier aggregation across our spectrum bands that's providing a much bigger bang for our buck candidly given our density levels and given the fact that 2.5 spectrum doesn't propagate as well in long distances and rural areas. So we're leveraging carrier ag across our lower band spectrum to get a boost in capacity and throughput. And in terms of fixed wireless, we're kicking the tires as a lot of folks are, you've been here to our office and you know the geography, we have a lot of rolling hills and a lot of trees, those aren't always conducive to line of sight technology, but we're continuing to be opportunistic in terms of that technology and how it might play for us in the future.

And have you guys been trialing any like external mounted antennas on house for fixed wireless?

Yes, I mean that's generally how the technology works. And as you know, I've spent some time at a fixed wireless company the last few years and that's generally how the industry approaches the installation.

Okay, thanks guys.

Our next question comes from the line of Amy Yong from Macquarie. Your line is open.

Hi this is Rachel for Amy. Can you just specify Big Sandy acquisition any OpEx for them in synergies you guys expect to see, and then you mentioned it will be accretive, is this the cash?

So the Big Sandy look, it's a -- you can tell by the numbers it's a relatively small acquisition. So, it's -- as far as synergies goes, there are some synergies there, otherwise we probably wouldn't have purchased it, but I mean there, and so we didn't get into that there, it's not a -- it's a tuck-in acquisition for us. So, and yes, we do, it's going to be, it will be accretive immediately to cash flow.

Okay. And then just quickly on prepaid competition, what are you guys seeing so far in 1Q?

We -- Rachel, we're not seeing anything different than the last several quarters there isn't really much to report there same competition is as it is we've had previously.

Okay. Thank you.

Our next question comes from the line of Hamed Khorsand from BWS Financial. Your line is open.

Hi good morning. So first off, could you just talk about the pricing metric here as far as wireless is concerned, is this more about doing with the contracts and pricing plans or is this really just the year-over-year comps are getting better?

Hamed, hey, good morning, this is Dave. In terms of the pricing metrics and impacts from contracts where we're headed with that, can you clarify it for me?

Well, I mean is this more of the carriers are now a little bit more aware that they can't just keep going down to zero as far as pricing plans is concerned, is that's what's helping you with the ARPU on Wireless or there's really more association with a calendar effect from where it was just -- we've gone through a cycle of these downward sloping pricing?

Yes, well, as you may recall, in 2018 toward the back half of the year in fact, it started over the summer Sprint had launched a new rate card with new rate plans and they also announced the discontinuation of some fairly long-standing promotions and those things combined as well as then letting off the breaks a bit on the free line promotion, which they reintroduced toward the end of the fourth quarter, all contributed to a stabilizing effect on postpaid ARPU. The other thing that's helping us in kind of an inverse way is that at a line churn is up about 12 bps year-over-year for us, but account level churn is down about 17 bps for us year-over-year and the account level churn is having a nice impact on the stabilization of ARPU as well as you might have imagined.

And could this be a continuing churn or should we just think that's going to flat line right around…

We'd like to think so, I mean if you look at the last four quarters, there's a slide in the appendix there that will show you that we've got four quarters in a row of flat to slightly increasing postpaid ARPU and then prepaid ARPU was stable year-over-year as well. So we're feeling better about ARPU these days.

And then how much of your subscriber ads are coming from the new footprint?

We don't disclose new versus legacy footprint subscriber results at this point, Hamed.

Okay. All right, thank you.

[Operator Instructions] Our next question comes from the line of Zack Silver from B. Riley FBR. Your line is open.

Okay, great. Thanks for taking the question. On the cable CapEx guide this year, does that include sort of network upgrades for the Big Sandy acquisition?And then to follow up on that, their footprint is in eastern Kentucky, and I think that one of your sort of turf expansions in wireless is in eastern Kentucky. So is there a potential for synergies between maybe running some backhaul over that Big Sandy network.

I'll take the first half of that question Zack and then hand it over to Jim for the second half related to Big Sandy. Cable CapEx increases really reflect the ongoing investment in the DOCSIS 31 conversion, we've gotten through a bunch of the Virginia markets we have West Virginia still to do this year. Some of what's represented there is investments in CPE, as well as the CMTS infrastructure as we migrate subs over to DOCSIS 31 technology, there's a pretty healthy chunk of CapEx related to fiber as I mentioned in our prepared comments as well, and that's really what's driving the uptick and Jim you can speak to the Big Sandy.

Yes, Zack you're exactly right, it's a good observation and so we'll be exploring those opportunities to get and create some of the same synergies that we have in more of our traditional geography, but I would say the acquisition wasn't dependent on that. It wasn't. That was a, we would have, we were interested in that regardless of the fact that it happened overlap with our wireless geography.

Got it, okay. And then one more on, there were some language in Sprint's 10-Q about they're doing a couple backhaul architecture tweaks where they're getting out of some Ethernet contracts for I think a one-time cost and they are saying that they should see some savings over the long term, I know that you guys kind of follow their playbook via your agreement, is there any impact on you guys from that disclosure from Sprint?

Yes, not really.

Got it. Okay.

And Zack, I'll then jump on that. We operate our network, we, our backhauls are backhaul, so we do, of course pay attention to what others in the industry are doing, but as far as the playbook on that we run our own playbook.

Got it. Okay and then just one last one on Cable, it seems like there is some upside there from a penetration perspective, but that may come at the cost of maybe introducing some lower-tiered plans or not taking price as much, so how do you think of that kind of the balance between volume and price in the Cable segment?

Yes, there is a lot of art and science that goes into that as you might expect Zack, we agree that there is a further upside through higher penetration and that's really what supports our investment thesis in upgrading speed. One of the things that we did is, as we got into the fourth quarter is we launched a new rate card in the markets that we upgraded, but we were very thoughtful about that new rate card in terms of the impact that it would have to ARPU and thus far, we're happy to report that we're able to maintain our collective ARPU that we've been reporting in the trends that you've been witnessing there with also continuing to grow subscribers, but that's a metric that we watch pretty much daily around here and we'll keep you posted on as we move through the year.

Got it. Thank you very much.

[Operator Instructions] There are no further questions at this time. I would now like to turn the conference back to Jim.

Thank you and, thank you everyone for joining us today. As Chris mentioned, we had a very solid performance in 2018 and are proud of our performance, and look forward to keeping everyone up-to-date on what we believe will be a prosperous 2019 as well. So thank you for joining us today.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.