Shenandoah Telecommunications (Shentel), a regional broadband and telecommunications company, recently released their Q1 2024 earnings transcript, showcasing their ambitious fiber-first strategy. The headline? A record-breaking 5,000 Glo Fiber customer additions and the successful acquisition of Horizon Telecom, opening the door to the lucrative Ohio market. But beneath the surface, a subtle shift in Shentel's cable business might be signaling trouble in paradise.

While Shentel celebrates Glo Fiber's success, a closer examination of their cable market performance reveals a potential cause for concern: stagnant subscriber growth. In Q1 2024, cable broadband subscribers remained flat compared to Q1 2023. This flatline contrasts starkly with the explosive growth of Glo Fiber, painting a picture of two diverging trajectories.

Here's where things get intriguing. Shentel attributes the cable subscriber stagnation to competition from cable and fiber overbuilders. However, they downplay the impact, stating that less than 20% of their cable passings face competition. Could this be a strategic understatement? Are they downplaying the potential scale of cable subscriber churn to direct attention towards Glo Fiber's triumphs?

Let's delve into the numbers. While total cable broadband subscribers remained flat, Shentel added 4,000 new cable passings over the past year, primarily through government-subsidized projects. This indicates that, despite expanding their cable footprint, they failed to attract any new subscribers. More importantly, if we subtract the newly added passings from the total subscriber count, a rough estimate suggests a potential loss of approximately 4,000 cable subscribers.

This hypothesis raises a crucial question: Is Shentel facing a silent exodus of cable subscribers, masked by the strategic expansion of Glo Fiber and the narrative of overbuilder competition? If so, this could have significant implications for Shentel's long-term strategy.

Consider this: Shentel projects capital expenditures of $260 million to $290 million for 2024, with a substantial portion allocated to Glo Fiber expansion. Simultaneously, they are investing $10 million in DOCSIS upgrades for their cable business. If a significant number of cable subscribers are indeed leaving for competing fiber networks, these investments could be misallocated. Upgrading a network losing subscribers might not be the wisest use of capital.

Glo Fiber vs. Cable Subscriber Growth

The chart below illustrates the diverging growth trajectories of Shentel's Glo Fiber and cable broadband services based on available data.

Furthermore, Shentel highlights the limited impact of the Affordable Connectivity Program (ACP) on their business, stating that less than 4% of their broadband customers subscribe to ACP-supported plans. While this might be true for their overall broadband business, a further breakdown of ACP penetration within their cable market segment would be revealing. Are they seeing a disproportionately higher percentage of ACP subscribers leaving their cable network for competitor offerings?

The narrative Shentel is presenting focuses on their aggressive fiber expansion and the exciting new opportunities in Ohio. However, the potential for a significant cable subscriber exodus lurking in the shadows demands closer scrutiny. The success of Glo Fiber shouldn't overshadow the need for a critical examination of their incumbent cable business.

While Shentel's future might indeed lie in fiber, understanding the dynamics of their existing cable customer base is crucial to ensure a smooth transition and a sustainable long-term growth trajectory. Investors should demand more transparency about cable subscriber churn and ACP penetration within the cable segment to assess the true health of Shentel's overall broadband business.

"Fun Fact: Shentel's name originates from its roots in the Shenandoah Valley of Virginia, where the company was founded over a century ago. This deep regional connection contrasts with its recent expansion into the Ohio market, marking a new chapter in Shentel's history."