Good morning, everyone. And welcome to the Shenandoah Telecommunications Second Quarter 2016 earnings conference call. [Operator Instructions] At this time, I will 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 30th, 2016. Our results were announced in a press release distributed this morning, and the presentation we'll be reviewing is included on the Investor page of our Web site at www.shentel.com. Please, if you are reviewing the slides online go to investor.shentel.com and in the lower right hand corner you will find a listing for events and rather than clicking on view all, please click on today's date, August 5th, and the slides will appear. Please note than an audio replay of the 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 Christopher French, our President and Chief Executive Officer; and Earle MacKenzie, our Executive Vice President and Chief Operating Officer. After our prepared remarks, 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 call 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 various 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. This was a very active quarter for us here at Shentel. Our closing as nTelos acquisition on May 6th, significantly increased our footprint and presence in the mid-Atlantic region. The combination result in a vastly different company and you'll see significant changes in our financial position and operating results when compared to prior periods. With the closing in May, the second quarter obviously doesn't include a full quarter results from the acquired business. There is also a significant change from nTelos's prior results as these markets transition from what was primarily a wholesale business which sprang into our traditional affiliate relationship. I'm pleased to say that the transition to one blended company is progressing very well. Network upgrades have continued uninterrupted and we made great progress on transition former nTelos customers onto this brand building system. In our presentation this morning, we'll point out the impact of the acquisition integration activity and attempt to give a view of the activity in both the legacy and acquired markets. On Slide 5, you'll see that adjusted operating income before depreciation and amortization or OIBDA for the quarter increased about 48% to $55.9 million. Revenues were a $130 million in the second quarter, a 52% increase from the prior year period. These increases were almost entirely due to the nTelos acquisition. As expected, we had a net loss for the quarter which primarily reflects the acquisition integration and migration cost we incurred. Our customer additions were very strong during the quarter for both our wireless segment and for our cable segment. Our wireless highlights begin on Slide 6. We saw a very significant jump in both prepaid and postpaid customer account as a result of the acquisition. We more than doubled the number…

Thank you, Chris. I'll begin on Slide 10, which shows our changes in profitability. As we expected when we committed to the acquisition of nTelos, profitability dropped an all three matrix shown here. Chris has outlined a growth in our customer base that drove the growth in revenues of $44.6 million or 52% in Q2 '16 from Q2 '15. However, operating expenses grew by $69.5 million or 114% resulting in an operating loss of $6.2 million in Q2 '16 or a drop of $24.9 million over Q2 '15. Integration, acquisition, and migration cost grew by $22 million in Q2 '16, over the $400,000 spent in Q2 '15. The costs include professional fees for investment bankers, lawyers and others, severant handset replacements and the cost to operate the nTelos back off as until the customers have migrated to this Sprint back office and finally the additional retail store staff to support the migration process. This includes $2.3 million in expenses that were recorded in each of the cost of good and services filled and selling general and administrative line item as you'll see when you get our cue. During the previous calls, we estimated that these costs in combination with an additional $24 million of financing fees we had since capitalized with total $130 million to $150 million when the migration is complete in late 2017. And we continue to believe that this is a good estimate. The growth in customers along with more than 150% growth in sales side drove a $19.7 million increase in other cost and of goods and services sold. Others selling general and administrative expenses grew by $13.1 million. Predominantly, as a result of the increase in the number of PCS retail stores and paying Sprint separately for commissions that were previously included and the fees…

Thanks, Adele. This has been a very busy but exciting quarter. In my prepared remarks on wireless, I'm going to provide you details broken down between our legacy wireless business and the former nTelos area, which had both nTelos and Sprint customers. This will give you a bridge to compare how we are doing compared to our historical data and a point of reference to track our progress in our new service area. We'll provide a dual information for a couple of quarters but as we progress through our integration will show only combined data. On Slide 17, I've shown the reconciliation of the pre and postpaid customers between the end of the first and second quarters. You see the customers we acquired on May 6 from nTelos and Sprint, we have net postpaid additions in our legacy area of 3504 an a net loss in the nTelos area of 4823. For prepaid, we had a net loss in both the legacy and nTelos areas. As you recall, we are migrating all the nTelos customers over to Sprint back office. As part of that process, we are doing a consultive resale with each former nTelos customer and found 1260 prepaid customers that qualified and preferred to upgrade to a postpaid plan. So, you see the shift between the two columns. Postpaid legacy net add was 17% tablet and 83% were phone. As in previous quarters, in the legacy area, we had strong gains and boosts and losses of in of Virgin Mobile and insurance customers. You will see the impact on prepaid ARPU and churn on later slide. Through July 31st, less than three months since closing, we have migrated 50722 nTelos customers or 18% of the base. 9% of the migrated customers added an additional line. All of the…

For those of you looking for additional information, we expect to file our 10-Q on Monday. This concludes our prepared remarks. Sheen, would you now review the instructions for posting a question?

Absolutely. [Operator Instructions] We'll go first to Rick Sanchez of Raymond James. Your line is now open.

Thanks, good morning.

Good morning.

Good morning.

Hey, obviously nTelos transaction creates a lot of moving pieces by a lot of nice opportunity. Couple of questions and we do appreciate all the details you guys have provided. Earle I think you mentioned I think I heard 18% of the space has migrated by the end of July is that fairly well split between post-paid and pre-paid or and then what’s the pace you expect that to move towards complete migration?

That is correct. We migrated about 50,000 customers if you split it it's about 35 post and 15 pre which is it's about in the same ratio that we have customers. So we are seeing kind of a systematic moving at this point. The pace is a little faster than we actually anticipated. We have actually had – we haven't had to do awful lot of advertising or pushing customers into the store social media is helping us a lot as people are having a good experience, they are putting it out there on social media and other people are coming in. we have been able to staff up so that the lines are relatively short. If they are long we are getting people come back at a later time to make that positive experience. I think the pace will continue at probably close to 750 to 1000 a day is what we are seeing most days. That may during the holiday period we are kind of expecting that migration may go down during that period of time but then we will pick back up after the first of the year. At this point assuming that we get the [indiscernible] door I am really optimistic that we may be able to finish this up as early as the end of the third quarter but we are still targeting the end of the year next year.

Okay. And then on the financial side, the integration I guess you would call integration acquisition migration cost target of $130 million to $150 million Adele I think I heard you say that the $24 million financing feels now been capitalized so should we take that out of the 130 to 150 to think what’s affecting EBITDA?

Yes.

Okay. And as we look at you provided nicely the pro forma 1Q numbers are you considering in the 10-Q providing what 2Q would look like pro forma for the acquisition that have been there the whole time?

We are not and the difficulty with that Rick is the very different business models we operate under that would make apple to oranges comparison and then the slow migration provides even more moving parts. So frankly our focus has been on very robust and transparent analysis and you will see that also in the Q so that you can follow all those moving parts rather than trying to recreate history.

Okay. And then obviously a lot of moving pieces seen historically you guys have provided guidance on the CapEx line any thoughts towards moving towards like an EBITDA guidance as we try and think through what this business looks like in calendar 17?

We have considered that Rick. We remain committed to taking a long term focus on the business and believe that those kind of guidance factors focus management too much on the short term and not enough on delivering long term results.

Okay. Well, as long you keep giving us all these extra details and the 10-Q fine reading that will help. Final question from me I know it's a lot of questions. I apologize. CapEx is something you provided guidance in the past. Earle obviously mentioned the 281 million or so this year, sorry 218 million for this year, how do you think about CapEx for 2017 and then 2018 as you make it through the final migration and updated the sites and what normal might look like say by 2018?

When we have already announced that our expectations that we are going to be spending 214 million over this year and next for the Intelo upgrade so it will there will still be pretty robust CapEx for next year. I think if you just kind of assume 240 unless what we are paying – what we have assumed this year and leave everything else consistent it's a pretty good number for 2017. If you look at 2018 I believe that we will back down on the 110 to 120 million range.

Great, that's very helpful. Thanks guys.

And our next question comes from the line Barry Sine of Drexel Hamilton. Your line is now open.

Hey, good morning folks. So I wanted to also ask a number of questions on the conversion. I guess first of all that 80% that's pretty good. So congratulations on that. It seems like you are going really well. I think you have said that you have converted about 50,000 customers over if I look at I think at FY 17, you also lost what is about 11000 customers in that area. Where are those customers going? What is the experience the customers are facing when they come into a store obviously they need to do phone or they face with having to pay more for the phone subsidizing that and what is your outlook? I know Earle said you expect to have subscriber in the Intelo’s market for the next several quarters but if you give us a little flavor not just like converted but those that you are unsuccessful on whether …?

As far as they are experienced when they come into the store, they really have two options. If they are satisfied with the vintage of phone that they have we are basically giving them a sprint version of their phone in most cases. So for instance if they have a galaxy 5 or galaxy 6, we are giving them a sprint version of galaxy 5 or 6. If they would prefer a newer phone then they have the option to upgrade at that point in time and they can use all of the resources we have. They can put it on a lease they can put it on installment plan or they can take subsidized phone plan. So actually we are getting very good response from the customers as far as the phone treatment because it isn't costing them anything unless they choose to have it cost them something. As far as the experience itself, we have on average they are there for about 30 minutes to most of that is transferring the information in their existing phone to their new phone but during that time we do take the time to talk about their data usage, and about the various sprint plan versus the Intelo’s plan there on and as I said almost 45% of them are moving to a sprint plan. As far as where the others are going it's fairly evenly divided between AT&T and Verizon maybe Verizon taking up slightly higher percentage of those customers. And what’s interesting is Verizon has been running the full page ads basically sense closing and encouraging customers from Intelo’s to join them and as we look back over the months prior to closing and these the months now their number of customers are taking reporting is about the same or even maybe a little less. So we really had the falling nice when we took over these markets. They were losing customers. We are working now to slow that loss we are just being realistic that it's going to take a couple of quarters and the continued improvement in the network for people really believe that there will a change. But we are doing everything we can to support the customers and I think they will be back in the growth mode within a couple of quarters and be back to where we started by the end of next year. So this is how we anticipated the curve to look and so far we are at or ahead of where we would thought we would be and to be perfectly honest we never thought we would have 50,000 customers migrated in the first 90 days. So I mean that’s really been the plus from our standpoint and obviously the faster we can get those customers migrated and can migrate fully to the affiliate model the better the bottom line is going to look.

And speaking of the bottom line, I think you have disclosed that your cost during the quarter towards back office of about $2.3 million, so 1.15 million per month just want to get some visibility on that. That's the presumably that's the more of a fixed cost so that cost is going to continue until it doesn't and – it drops to zero after the end of 2017 can you give us some visibility on that?

Yes. That cost will include the customer care operation, the billing cost and the network operating center that we have to maintain down in Waynesborough in the interim and you are absolutely right we would expect that Sprint would assume all of those cost that the by the end of 2017 when all the customers are migrated.

And is that a pretty good run rate that 1.15 per month or is there factors in that rollout?

I think as the number of customers on the old systems diminishes we will be pairing back the customer care operations particularly and the billing cost is directly related to the number of customers. So I would expect that that would diminish overtime.

And then, the larger integration cost I think you said 20.1 million at the quarter. Could you give us sense of what’s in there and then what the glide slope on that is I guess over the next six quarters that will awesomely good as trying to get 2018 but what is the glide slope on that look like. Was there a lot of upfront cost now that maybe that won't be quite so high in the next couple of quarters?

Sure could. Yes 9.5 million of that 22.4 is severance and so while people will be let go overtime as I just described it will substantially less than 9.5 we incurred in this quarter as we got rid of a lot of the executive team and so forth. So that's the most substantial part of that. 4.3 million of it is investment and legal fees actually closer to 5 million of it or more. So that's obviously not going to continue. Migration handset is about $3 million. And then the remainder is the departments that we have talked about as well as some other things.

Okay so it does fall off pretty quickly?

It sure does. Yes.

Okay that's very helpful. Okay I won't take up any more questions. I will leave somebody else to. Thank you.

Thank you Barry.

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

Hi, this is Aleksandra for Amy. So my first question is combined legacy post-paid trend this quarter was 1.56 what should we expect in 2Q and how will the iPhone 7 impact metrics?

Your guess on the iPhone is as good as mine. What we tended to see, what we are tended to see is kind of when there are major changes and major enhancements in the iPhone there is more interesting upgrading. When the changes have been rather minor we haven't seen that kind of shift. So I think once we clearly understand all of the features and changes it might happen in the iPhone 7 we can have a pretty much better guess. As far as churn we don't know of anything specifically that will cause churn to change dramatically from where we are today. It's going to continue to be elevated in the churn area as we are doing the construction but we are seeing good stability in our churn rate in our legacy area.

Got it. Thank you and another one if I may as you read with broadband and more standalone broadband services to market your key board services how do you think that will impact -- is it harder to reach prices of the standalone product and how strategic is video and could you look to launch an OTT offering in the future?

So broadband is – standalone is the easiest sale in cable at this point and also most profitable because what we do in our bundling strategy is if you bundle a second product with the broadband we give you $20 off the second product. So a standalone broadband customer is by far the most profitable customer we have. As far as over the top we haven't embraced over the top almost since day one. We do not own any content. The content that we offer are linear video. It's extremely expensive we spend about $0.65 of a dollar for the video content. And so we encourage customers and make it as easy as possible for them to go over the top and the part that we like about them going over the top is normally they will match that with the higher speed, higher capacity broadband connection which is even more profitable for us.

Got it, thank you very much.

You are welcome.

And our next question comes from the line of David Dixon of FBR Capital Markets, your line now open.

Thank you for that. Good morning Earle and Adele. I had a question just on the right of the postpaid decline in the new area, in [indiscernible] area, I think it’s part [indiscernible] to be converted and it looks like 11,000 losses from the new area of this quarter which is about 20% loss straight. So I am just curious if we should expect that to maintain that trajectory, that loss rate or are you getting better at how you're pitching the Shentel opportunity to these customers you get through 80% of the base, so maybe we can expect that to improve somewhat from here.

We definitely seen improvement. [indiscernible] there. We have seen an improvement in June and existing and continued improvement July. So although I believe that will probably still be the net loss for the next couple of quarters, we don't anticipate being at 11,000 rate.

Okay, what’s [indiscernible] just been standardizing the pitch across the company?

Yes, think about it David, we basically had to train the nTelos, the customer and customer service and the store people on Sprint plan, kind of on the ply while they were still nTelos, a customer employee and so although it was a smooth relatively smooth transition from the 6th to 7th and we went from selling nTelos plans to Sprint plans in those stores, there has been a learning curve. And I think we now have had 90 days to Shentelies, the force and I think at that point we feel pretty comfortable that they now understand how to sell the Sprint product, how to talk about what's happening and what's going to happen and we now be able to put some advertising into the market. You have to remember that we had no control of really what the message was up until May 6, and it takes a while, whenever you put a new message into a market it takes a while for that to catch on. So it's there's no one big thing is just a lot of small things that we're doing trying to do the right thing every day and will continue to see the improvements.

So the [indiscernible] look for the new will remain elevated but it will improve progressively as expectation.

Yes and also the port in port out I mean we had 0.4 to 1 that never had a situation where we have been in that kind of negative porting position but that was the position that both the existing sprint stores and nTelos had prior to our acquisition. And so once again it's difficult to make those changes overnight but I am optimistic.

Okay. Great. And just looking bigger picture now could you update us on just how the team is going in directions with Sprint just trying to get update on expectations for the next field if you could characterize the discussions the areas you might be suggesting, the sizing of the timing, just giving a sense of how Sprint can do another deal. There has been some changes on the sprint side broader team is now in task with collaborative work with some of the rural telcos to establish better partnership so -- can you give us an update that will be helpful.

Well, to your last point first, we have been getting some phone calls more so that the normal over the last 60 days from groups that are considering expanding their relationship with sprint. So we have been positive about that because we feel very positive about our current relationship with sprint. As far as expanding the area, those discussions are going forward. I think what the best way I would characterize it is probably going to go relatively small initially to kind of lay the ground work of how we might continue expand that relationship but then once the ground work is laid it will set the stage for continued expanding our relationship with sprint. And hopefully we will have something to share this year.

This year okay good. That's on that so rather small initially. One thing you had said in the past was you think the team is fully engaged with the nTelos now maybe you can get on the small deal done, but in general are you thinking at operationally the firm is kind of restricted to doing one significant deal in nTelos like deleveraging couple of years?

No I don't think the way we restrain at all. It's just basically you have to have the right deal come along and if the right deal comes along we will evaluate it see if it's good for the shareholders. If we are – if it's good for the shareholders we will find a way to get it done.

Okay that sounds a bit different. That's more encouraging actually. Is that you have gone through learning curve now with nTelos and a bit more conference now in terms of being out get the next deal done early then expected?

Well, I think two things number one we had the planning has gone well and execution has gone well. And additionally we have been able to broaden the bench with some of the folks we brought on from nTelos that's always a plus when you look at an acquisition like nTelos they had a lot of talented people and we were able to bring on several vice presidents and number of directors in key roles and have allowed us to have a deeper bench which will allow us to do more things in the future.

Okay, great that's great. Thanks for the update.

You are welcome.

And our next question comes from the line of Hamed Khorsand of BWS Financial. Your line is now open.

Good morning. Could you talk about the migrating customers? Are you seeing much of the increase in ARPU?

Well, for those who are staying on their same plan which is 55%-56% no. Generally nTelos has a lower ARPU than we had in our legacy area specially in the last six to eight months they were pushing at $25 plan which obviously pushed down their average revenue. What we have agreed to is to allow the customer to migrate on their current plan for one phone cycle. So, when they upgrade the next time, they will not be able to remain on their nTelos plan. They will have to move to a sprint plan. So as far as those customers are concerned we are seeing no increase at all. When you look on the one that have migrated to sprint the answer is yes often that is increased because what we have done is we have increased their data usage as I mentioned 9% of those migrating have added the line. And when they have added the line they have added the line under a sprint plan not on nTelos plan because we are not adding any additional customers under the old sprint plan -- adding any incremental customers on the sprint. So yes I think we will see is an improving ARPU from the nTelos space but it won't happen all migration. It will happen migration plus over the next two years.

So is this ARPU rate is increasing for those migrating? Is that at or near 100% as far as incremental profit to you on the difference in ARPU?

Well, once again you have to look at. It's a different model. These customers if they stayed under the old nTelos plan we pay 16.8% if they move to a new sprint plan we are paying 16.8% so yes if they are paying more than what they were paying at nTelos virtually all of that is margin.

16.6% it’s 8plus 3.6

Yes. Okay and my other question was how much broadband customers are paying for larger bank with capacity? How much run rate of growth do you have there?

Well. our average broadband customers paying us in the low 60s if and then if you look at the price that we offer we charge $199 for 100 meg. So we are continuing to see virtually every month an increase in that average ARPU or broadband customers as and really what the big movement is, is we are moving customers who maybe have 10 meg up to the 15 and 25. we are not seeing a tremendous number of customers who are taking 50 or 100 but we are seeing a good shift monthly – month after month of those customers who are at and lower we actually have some who are lower than 10 moving up to the 15-25 level and so we will continue to see an increase in ARPU without even having to raise prices. In some point of time in the future we will consider increasing our pricing.

Okay. My last question is with this acquisition you increased your tower count to by 20 but it didn't look like you are monetizing the additional 20 is there a plan for that?

The number of tenants on the tower we acquired from an nTelos were basically one maybe just nTelos and actually there is some that we acquired because they are in the East markets of nTelos have no tenant today so we are going to be looking at those new towers and determining whats best going forward but they certainly are not typical of our current tower portfolio.

Earle right now we have an average 2.3 tenants a tower including ourselves.

Yes. So the average gets used by these kind of one off towers that you have to remember nTelos sold all of their valuable towers a number of years ago and then they did one of the somewhat valuable towers just before we acquired them and so the ones that we got left were really kind of the low value towers that they couldn't sell. So we are going to look evaluate how we can increase the tenants on those or may end up exposing some of them. But we are looking at that right now.

Okay. Thank you.

You are welcome.

I am showing no further questions in the queue at this time.

That's all we have. Thank you for participating. If you have any additional details you like to see on future calls please let me know. My contact information was provided on the press release.

And again ladies and gentlemen this does concludes today's conference. We thank you for your participation. You may now disconnect.