Adele Skolits - CFO Christopher French - President and CEO Earle MacKenzie - EVP and COO :

Ric Prentiss - Raymond James David Dixon - FBR Capital Markets

Good morning everyone and welcome to the Shenandoah Telecommunications’ Second Quarter 2014 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Adele Skolits, CFO. Please go ahead ma’am.

Good morning and thank you for joining us. The purpose of today's call is to review Shentel's results for the quarter ended June 30, 2014. Our results were announced and a press release distributed this morning and the presentation we will be reviewing is included on the investor page of our Web site at www.shentel.com. Please note that an audio replay of the call will be made available later today. The details for accessing the replay were set forth in the press release announcing this call. With us on the call today are, Christopher French, our President and Chief Executive Officer, and Earle MacKenzie, our Executive Vice President and Chief Operating Officer. After our prepared, we’ll 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 may include forward-looking statements subject to certain risks and uncertainties. These may cause our actual results to differ materially from these statements. Shentel provides a detailed discussion of risk factors in our SEC filings, which you’re strongly 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. I’ll turn the call over to Chris now.

Thank you, Adele. We appreciate everyone joining us this morning. I’m delighted to share the news of our companies continued to grow and have good results for the quarter. On Slide 5, you’ll see the second quarter 2014 net income was $8.6 million, an increase of 9.9% compared to the prior year. Continued growth in our Wireless and Cable segments drove the improved net income performance. Adjusted operating income before depreciation and amortization or OIBDA for the quarter was $33 million, an increase of 5.7%. Revenues grew by almost $4 million reaching $81.4 million in the second quarter, which was 5.1% increase from the prior year period. Our subscriber growth increased data fees and enhanced product mix, drove the revenue increased in our wireless segment. In our Cable segment, revenues improvement was a result of an increase in the number of revenue generating units or RGUs and higher average revenue per customer. Our wireless highlights start on Slide 6. We had solid increases in both postpaid and prepaid this quarter. Compared to the end of second quarter in 2013, our postpaid customers grew by 4.3% and prepaid customers by 5.2%. Operating revenue grew 4%, an improvement of $2 million. Turning to Slide 7, you’ll see our cable segment highlights. We experienced substantial improvements in cable segments operating performance led by an operating revenue increase of 11.2% to $20.8 million. Cable adjusted OIBDA reached $3.9 million an increase of 20%. These increases were driven by RGU growth which was up 6.1% over the prior year. As listed on Slide 8, our solid results are being driven by the improved performance and capability of our networks as a result of the upgrades completed in 2013. On the wireless side new and existing customers are embracing our better coverage, stronger endorsing nodes, faster download speeds and enhanced crystal clear voice quality. The $115 million upgrade to 4G LTE, the biggest capital investment of our company’s history puts us on par, and in most cases ahead of our competitors. The upgrade to our cable infrastructure has strengthened our cable offering and enables us to meet customers’ continually growing demand for high-speed broadband services and premium digital TV packages. We have a lot of work ahead of us but I am proud of the progress the team here is making, improving our service reputation and customer trust. Our net promoter score, which measures how likely a customer, would recommend Shentel has improved considerably over the past three years as a result of these offers. I’ll now turn the call back to Adele to review the details of our financial results.

Thank you, Chris. I’ll begin on Slide 10. Our key financial metrics including operating income, net income and earnings per share, all rose substantially in Q2 ‘14 over Q2 ’13. Net income was up nearly 10% and operating income and earnings per share were up nearly 9%. On slide 11, I’ve shown the calculation of adjusted OIBDA. Here you can see that adjusted OIBDA grew by nearly $1.8 million or 5.7%. Depreciation grew by $524,000 in Q2 ‘14 over Q2 ’13. As a result primarily, of the incremental depreciation on 4G wireless equipment installed over the course of the last year. Share-based compensation expense was essentially flat and the loss on disposal of assets was down just $29,000. Slide 12 shows our growth in adjusted OIBDA by segment. This quarter once again the cable segment led the way with a 20% improvement followed by the wireless segment with an 8% improvement. The Wireline segment’s adjusted OIBDA decreased by $500,000 or 7%. On slide 13, I will analyze the changes in adjusted wireless OIBDA results between Q2 ’13 and Q2 ’14 postpaid revenues are up by $2.1 million between Q2 ’13 and Q2 ’14 a combination of factors drove this increase. Postpaid billings made are up over 3% during this period while average customers have grown by 4.2% partially offsetting the growth in gross revenues was a $900,000 increase in the postpaid net service fee we pay to Sprint. Effective August 1, 2013, this fee rose from 12% to 14% of net revenues, which is the maximum rate allowed under the current contract. In addition, prepaid revenues grew by $300,000 related primarily to growth in average prepaid customers of 3.4%. A 16.5% decrease in the number of gross additions to our prepaid customer base combined with a decrease in the cost…

Thank you, Adele. Good morning everyone. My comments begin on slide 18. We ended the quarter with 277673 postpaid wireless customers, up 3,952 since the beginning of the year compared to 3,405 for the first six months of 2013. Our postpaid smartphone penetration was 77% with 75% of smartphones being either LTE or TRAI mode capable. We launched Framily in April and at June 30, 6% of our postpaid base was on the Framily plan with 76% of them migrating from existing price plans. On slide 19, we show gross and net postpaid ads for the second quarter of this year compared to last. We had 15,898 gross ads in Q2 2014 an increase of 5% over Q2 2013. The 2013 gross ads included approximately 1,800 iDEN conversions so without the iDEN conversion the gross ads were up 19%. 23% of the second quarter 2014 gross ads were new Framily lines with 85% of Framily ads in Shentel control channel and 15% through national and other non-controlled channels. Included in 2014 gross ads are approximately 3,300 tablets with 50% from Shentel-control channels and 50% from nationals and other non-control channels. As you’re probably aware Sprint had a promotion that continues into July for a tablet that we ordered in our service areas. We process approximately 3800 Easy Pay transactions through Shentel controlled channels with 55% for new gross adds and 45% for upgrades. As we have disclosed Easy Pay transactions are not recorded on our financials we just process the paper for Sprint and Sprint records the revenue and corresponding cost have been sold. We don’t have any data for the number of Easy Pay transactions process by non-Shentel control distribution in our service area. Net adds for Q2 2014 were 2,648 an increase of 13% over 2013. Churn to…

This concludes our prepared remarks. Nova, would you review the instructions for posing question.

(Operator Instructions) We’ll go first to Ric Prentiss of Raymond James. Your line is open.

Okay. Hello guys, a couple questions, if I could. On the Framily plan, I think, Earle, you said it's now 6% of your base. And you launched that, was that launched in May? Raymond James: Okay. Hello guys, a couple questions, if I could. On the Framily plan, I think, Earle, you said it's now 6% of your base. And you launched that, was that launched in May?

That was in the middle of April.

Mid-April, okay. So it was almost a full quarter effect in there. As far as percent of sales, it looks like the appendix says it was like 23% of sales? Raymond James: Mid-April, okay. So it was almost a full quarter effect in there. As far as percent of sales, it looks like the appendix says it was like 23% of sales?

Yes.

As you look -- with July now in your pocket, has that increased, or is it still staying in that percent of sales range? Raymond James: As you look -- with July now in your pocket, has that increased, or is it still staying in that percent of sales range?

It does remain relatively constant.

Okay. And I think I missed the Easy Pay number. What you say Easy Pay was? Raymond James: Okay. And I think I missed the Easy Pay number. What you say Easy Pay was?

We had 3800 Easy Pay transactions.

Those are just through your channels? Raymond James: Those are just through your channels?

Just through our channels, yes.

Okay. Raymond James: Okay.

And 55% of those were for new gross adds and 45% were for upgrades.

And then tablets, what you said about tablets, as far as it’s becoming an increasing part? Raymond James: And then tablets, what you said about tablets, as far as it’s becoming an increasing part?

We added 3300 tablets in the second quarter. We now have about 2% of our base for tablets.

So the postpaid base? Raymond James: So the postpaid base?

Yes.

And as you think about the way you calculate ARPU, tablets obviously coming in at lower or rate, how are tablets being reflected in ARPU and is there a thought from you and I guess Sprint as they provide a lot of numbers on separating those out and thinking how we report ARPU Raymond James: And as you think about the way you calculate ARPU, tablets obviously coming in at lower or rate, how are tablets being reflected in ARPU and is there a thought from you and I guess Sprint as they provide a lot of numbers on separating those out and thinking how we report ARPU

ARPU on the tablet is averages about $15. So it is work into the average that we provide for all but so it certainly has an impact on the overall average, but the average is about $15 per customer per tablet.

And then you mentioned the upgrade percent was high 7.5% you’re down to 12,000 WiMAX left. What are your thoughts as far as the trend on first non-WiMAX upgrades and then kind of total upgrades? Raymond James: And then you mentioned the upgrade percent was high 7.5% you’re down to 12,000 WiMAX left. What are your thoughts as far as the trend on first non-WiMAX upgrades and then kind of total upgrades?

Both were up for the quarter. We really have a push to try to get all the WiMAX out by the end of the year. We probably won’t get to a 100% but we virtually want to have all those out so the customer get’s the full advantage of our LTE network but we also saw an uptick in non-WiMAX upgrades this quarter also.

We think that it will stay elevated then through the rest of ’14 and then maybe come back down in ’15? Raymond James: We think that it will stay elevated then through the rest of ’14 and then maybe come back down in ’15?

I would think so with the combination of just kind of the WiMAX and also with the new iPhone I suspect that we’ll have upgrades in this range for the rest of the year.

And then more importantly Sprint on their call mentioned that they’re trialing a lot of different rate plans and they try and think through what’s happening in the competitive environment. Are they offering any of those trails in your neck of the woods, and can you share with us what’s being looked at? Raymond James: And then more importantly Sprint on their call mentioned that they’re trialing a lot of different rate plans and they try and think through what’s happening in the competitive environment. Are they offering any of those trails in your neck of the woods, and can you share with us what’s being looked at?

No, we are not involved the new trials we’re selling just the list prices that are on the Web site and we really don’t have any significant visibility on that. We basically are just waiting for the results and once as we have always done we’ll mirror what Sprint does nationally.

And from your competitive dynamics though it doesn’t seem like T-Mobile is that prevalent in your markets. Is that still the case? Raymond James: And from your competitive dynamics though it doesn’t seem like T-Mobile is that prevalent in your markets. Is that still the case?

They really only have any significant presence in the Eastern part of Transylvania so that’s really the place that we’re seeing their impact. So although they certainly are impacting the dialog nationally with their advertising there is not that many distributors points at our footprint.

Sorry for all these rapid-fire ones, but I've got some easy quick ones, I think. And then, nTelos, on their call the other day mentioned how they had seen an increased presence from Cricket with AT&T now owning them, and from Metro expanding outside their area. Have you noticed an increased presence of those prepaid offerings in your market? Raymond James: Sorry for all these rapid-fire ones, but I've got some easy quick ones, I think. And then, nTelos, on their call the other day mentioned how they had seen an increased presence from Cricket with AT&T now owning them, and from Metro expanding outside their area. Have you noticed an increased presence of those prepaid offerings in your market?

We have not. They have the Norfolk Richmond area, which are much bigger metropolitan areas than what we serve so we really haven’t seen the impact of that yet.

Thank you. Our next question comes from the line of David Dixon of FBR Capital Markets. Your line is open.

I have a couple of questions, things on network quality and service differentiation from here. Could you give us an update on your spectrum position as you look at the ramping LTE usage? I know you've called out the extra 10 megahertz of spectrum on the PCS band, and I think you touched on some of this in your prepared remarks. But just to give a sense of where you are now, and how you see yourself positioned from a spectrum standpoint?

Well, in total we have 54 megahertz of spectrum with the original 30 the G Block 10 and then the 14 800 spectrums. We have formed one 10 megahertz section out of the original 30 so we are using the 10 on the G Block we’re using one 10 block out of the original 30 and we’re using 10 out of the 800. As I mentioned right now, we have a limitation that we can only use 20 megahertz of LTE on anyone side. We are testing the software now that is going to allow us to expand that and we expect that that testing will be done by the end of August. And then we’ll actually be able to launch a third carrier on sites where we’re having the demand. And so we feel like we’re in a very good position, already have a significant number of sites with 20 megahertz of spectrum and then certainly by the fourth quarter we’ll be able to have 30 megahertz of LTE spectrum on any site we need to.

And as you think then about the 30 megahertz of spectrum that you will get to, as you get towards the end of the year hopefully, what's the importance of 2.5 for additional service differentiation to drive growth? Do you see that as an important tool in the toolbox, going forward?

We do, and actually we are doing the preparation work this year. We’ve identified between 100 and 125 sites that we believe that would make sense for us to deploy the 2.5. This is certainly a little bit of different to us decision that where the Sprint is. Sprint is looking at the top 100 markets, we really only have one top 100 markets and that’s Harrisburg. But we’re looking at some of our other markets where we have very high penetration like Hagerstown, Maryland and Martinsburg, West Virginia and Winchester, Virginia. And we will deploy 2.5 in those markets too in the core area. And we see that probably as a 2015 event don’t know if we’ll get all 100s plus sites done then but we’ll certainly start that deployment in 2015. And we are selling the TRAI mode phones now. So, we are equipping our customers with the equipment that they can use and we feel very comfortable that we will launch that sometime in 2015. And it really will be a differentiator for us.

Because some of the pushback that nTelos made on Sprint in the new agreement, was to try to wind down the 2.5, where Sprint had seen it as much more of a service differentiation opportunity, and we're looking for a lot more about clustered based approach. So the 100 to 125 sites that you have identified, would that be deployed as a cluster, so there would be a real service differentiation in those core markets you have identified?

Absolutely, if you’re looking at the service area, we have a lot of geographies where there is not a lot of density. Where we have the density of population, that’s where we are going to do this. So there will be a cluster, certainly our definition of cluster will be different than Sprint’s because of just the size of the markets. But the metropolitan area “inside the Beltway areas” we would deploy the 2.5.

And then the question if I could turns on the estimated costs to incorporate additional bands on the network. There is obviously some options in terms of how the industry is going to reshape itself. And in the scenario where Sprint and T-Mobile did come together, the plan there very clearly, is to try to simplify on to the T-Mobile core network in many markets across the country. And so, in the event that that does play out, do you have a sense of what the costs would be to incorporate the additional bands on the network, that would be on the TMO network, so AWS for example, and 700 to layer that in? Or would that be another rip and replace?

No it would not be a rip and replace, because the architecture of our network is the ability to add different spectrum carriers into the base station. So really what you should have is you should have the card in the base station, and you would have new antennas or additional antennas that you have to be at that spectrum level put on the towers. So there would be some additional expense obviously, tower expense to add more antennas to the tower, but the amount of CapEx is certainly nothing close to a rip and replace. My estimate would probably be somewhere 150,000 plus or minus per tower for the card, the antennas, and the construction cost.

Right. And last question, on the base of customers that you have with the software upgrade, what proportion of the customers would you estimate, if you can estimate this, would be able to receive an AWS-based LTE signal, if that was the scenario that we saw going forward?

I really don’t have a guess at that, David.

Okay, we can still go back on that.

(Operator Instructions)

Nobody; it sounds like that’s it for us. Thank you for participating. Everyone, I would like to invite you to let me know if there are additional details. You are invited to see on future calls. My contact information was provided on the press release.

Again ladies and gentlemen, this does conclude today’s conference. We thank you for your participation. And you may now disconnect.