Good morning, everyone. Welcome to Shenandoah Telecommunications Second Quarter 2020 Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. John Nesbett of IMS and Investor Relations for Shentel.

Good morning and thank you for joining us. The purpose for today's call is to review Shentel's results for the second quarter 2020. 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 Web site, 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 Volk, 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 reminds you that this conference call may include forward-looking statements subject to certain risks and uncertainties. These may cause 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. With that, I'll turn the call over to Chris now. Go ahead, Chris.

Thanks, John. We appreciate everyone joining us this morning, and I hope everyone is healthy and safe. I’ll start by highlighting a few of the outstanding operating results we achieved during the second quarter before discussing our progress managing through significant change created by COVID-19 and the closing of the Sprint/T-Mobile merger. As reflected on Slide 4, our broadband business had a record quarter of data net additions of 6,000. To put this in perspective, we had more data net adds in the second quarter than we did in all of 2016 and 2017. And our 2020 year-to-date net adds of 9,000 exceed both 2018 and 2019’s full year results. As Dave will discuss in more detail later on the call, the strong second quarter results were driven by having the most robust broadband network in our markets and a combination of our rate card value proposition, COVID-19 stay-at-home directives, new service offerings, complementary upgrades and service that we initiated after the start of COVID-19 and Glo Fiber gaining traction. Moving to Slide 5. You see the growing cash flow generation of our businesses. Normalized free cash flow for the first six months of 2020 grew about 63% to 82 million from the same period a year ago. Wireless normalized free cash flow was 87 million for the first half of 2020. We’ve been able to redeploy the strong cash flow from wireless into our broadband business, particularly our new Glo Fiber and Beam networks, providing new platforms for growth in the next several years. I am pleased with our continued focus on execution despite the many changes that have been driven by COVID-19 and the Sprint merger with T-Mobile. Slide 6 outlines some of the relevant points regarding both. Starting with COVID-19, we began to see a phased reopening…

Thank you, Chris, and good morning, everyone. Before reviewing our financial results for the second quarter, let me first comment that we have an unusual number of non-routine and nonrecurring charges and credits in our financial results due to COVID-related actions and Sprint/T-Mobile merger developments. Slide 9 highlights the Sprint/T-Mobile merger developments and their operating and financial impacts on the second quarter results. As Chris mentioned earlier, we resolved the Sprint travel dispute through binding arbitration during June. The travel fee has reset to 18 million per year for the period 2019 to 2021. As a result, we recognized 21 million of travel revenues during the second quarter 2020 for services that we have provided since May [indiscernible]. If you recall, we recognized 6 million in travel revenue in 2019 prior to Sprint ceasing payments. Sprint paid the 21 million in July. Going forward, we will recognize and collect 1.5 million per month through the end of the three-year period. Now turning to the integration activities during the second quarter. Sprint adopted the T-Mobile credit and collection policies that shortened the timeframe by 40 days to collect past due amounts and disconnect the customer’s service. As a result, approximately 4,400 postpaid involuntary disconnects were accelerated into the second quarter subscriber results. Excluding this policy change, postpaid churn for the second quarter would have been about 20 basis points lower or 1.37%. There was no impact on bad debt during the quarter. Last week, we implemented an employee retention bonus plan after the Sprint/T-Mobile merger announcement in 2018 that was conditioned on the closing of the merger and certain other conditions. The closing of the merger now makes these payments probable, and we accrued 1.2 million in expense in the second quarter 2020 and expect to incur another 1.2 million through…

Thanks, Jim, and good morning, everyone. On Slide 17, we summarize in more detail the impacts of COVID-19 in our wireless segment. As Chris pointed out earlier in the call, after an abrupt closure of 40% of our Sprint branded postpaid retail stores at the end of March, we gradually reopened stores throughout the second quarter and are proud to report that substantially all locations are now open for business. However, as a result of these store closures, gross adds were down 28% from the prior-year period in the second quarter. Conversely, postpaid voluntary churn declined 23% or 28 basis points versus the prior-year period on lower porting activity industry-wide. As a Sprint affiliate, we participated in the FCC’s Keep Americans Connected pledge and suspended nonpaid disconnects relating to COVID-19. Sprint’s collections practices returned to business as usual July 1st. However, we estimate that 10 basis points of involuntary churn favorability in the second quarter will likely reverse in the third quarter. As a result, we recognized a 1.2 million contra-revenue charge in postpaid for expected bad debts related to these deferred disconnects. Additionally, we recognized $1.4 million in prepaid COVID-related revenue retention credits in the second quarter to keep Boost customers connected. Sprint discontinued this practice in June and subsequently divested the Boost business to DISH Networks on July 1st, and we look forward to working with DISH and growing the Boost business in our service area. During the second quarter, we focused on keeping our employees safe while continuing to provide our essential communication services. We incurred approximately $1 million in additional expense in the quarter for COVID-related pay to idled employees and supplemental pay for frontline wireless employees. Lastly, we reduced advertising spend by $2.8 million versus the prior-year period due to the stay-at-home directives in our…

[Operator Instructions]. And our first question comes from the line of Ric Prentiss with Raymond James. Your line is now open.

Thanks. Good morning, guys.

Good morning, Ric.

Hi, Ric. Hi. Hope you and your family employees continue to stay safe and well during the COVID-19 timeframe.

Likewise. A lot of moving pieces here obviously on a busy earnings day. I want to unpack maybe in a couple of areas. First, on all the COVID-19 call-outs as far as different line items, did you guys adjust EBITDA to remove the COVID-19 impacts or does EBITDA really affect the full brunt of COVID-19?

Yes. Ric, we did not remove them. So it does – OIBDA does include the full impact. And is it possible to kind of summarize by wireless and broadband what kind of the total magnitude of puts and takes on COVID-19 impact on EBITDA was? Because some companies are calling out, here’s how much we spent on – here’s how much COVID-19 impacted us within the quarter. And then also maybe as we think going forward, the third quarter and fourth quarter, where you think those different cost levels might be?

Yes. Ric, on the wireless side, it was just about $4 million between incremental expenses and retention credits and bad debt expenses and the like hit into the second quarter numbers. On the broadband side, I’m going to say that number was closer to 1 million. As far as for future impacts, I think the bad debt expense really – I think we’ve taken the accrual. I don’t expect it to get any worse and it should come down in future periods on that side. Lot of the programs that we had for supplemental paper, our employees who are customer interfacing, some of that is being phased out as we speak, so that should be lower going forward as well. Okay. And then obviously, the elephant in the room is still the relationship with T-Mobile. Can you update us as far as how active the discussions are? Obviously, August 2nd is not very far away as far as them removing the Sprint brand. And do you need to then increase advertising until a decision is made?

Yes, Ric, the discussions continue to be active and constructive. So we’re in routine and active dialogue with our friends in Bellevue. So increasing advertising in lieu of the integration plans, we’re fairly sure that in the short term, we’re not expecting any major negative impacts. We expect to have access to the new rate plans that they’ve announced, we’ll be able to sell those in our Sprint-branded stores and so forth. And we’re evaluating our longer-term plans in terms of potential advertising changes or other changes we might need to make in lieu of their integration plans, but nothing to announce at this time. All right. And one final one just on that process. When you consider the 90% of entire business value if first option is chosen that they exercised their option to buy your wireless business, how does comps play into it? Is there a need to look at USM, T-Mobile with the Sprint purchase price? How do kind of comps play into that discussion on the valuation of EBD?

Jim, you want to take that one?

Yes. Ric, we think as an affiliate, we should be – the best precedent transactions are looking back at other affiliate transactions. Now I know a lot of them have not been recent, but there was a dozen or so. As you are well aware – and you covered these companies back in 2005 through 2010, between Sprint affiliates and Nextel affiliates that I think are a good comp for our program. U.S. Cellular, you mentioned, is a regional player. They’re not tied to a national company. Their expenses are going to be higher. Their growth is lower as a result, not being affiliated with a national brand. Great. Well, good luck and continue – best wishes, you, your family, employees as we make a go at these turbulent times.

Thanks, Ric.

Thanks, Ric.

Same to you, Ric.

Thank you. [Operator Instructions]. And our next question comes from the line of Hamed Khorsand with BWS Financial. Your line is now open.

Hi. Good morning. Could you talk about the Boost relationship? Did you need to do like a side deal with them? And how did that kind of spill over into the T-Mobile negotiations?

Yes. Hamed, this is Dave. I’ll start and then ask Jim to bolt-on here. But in terms of how that works, our prepaid and postpaid business are contemplated in their entirety in the affiliate agreement with now T-Mobile, previously Sprint, of course. And we’re in active dialogue with the folks at DISH and actively supporting their efforts to market and sell the Boost brand in our regions. So they really haven’t – they haven’t factored in. We don’t have any side deals or anything of that regard. Jim, anything else you want to add to that?

Yes. No, our economic relationship is the same as it was before the sale. Okay. And then could you elaborate on your port ratio dropping below 1? I think it’s the first time in a very long time it’s done that?

It is. It is the first time in a very long time. And I think it’s entirely COVID-related. Candidly, porting activity was down across the board, as you know. And we didn’t see any material change in the competitive landscape or environment in the quarter. It was just a totally abnormal quarter on pretty much every level on the postpaid front and was most notably impacted despite the reduction to retail store traffic and retail store closures. Okay. My last question was the new programs are being in place for the promotions. So those are lower rate cards than what you’re used to. Are you required to advertise those and how is that going to impact ARPU? Are you able to mitigate some of the downward pressure?

On the broadband side? On the broadband side and also on the wireless side with the T-Mobile promotions that they’ve implemented?

Yes. So on broadband, the activities that we undertook as a result of the pandemic really all expired with the start of the third quarter here. So we gave temporary relief to non-pay subs. We’ve enumerated the expected impact there. It’s only about 700 subs potential. And we did offer a new prepaid plan. It’s 1,000 subs at $25 a month, but that rate card or rate plan will expire here shortly as we revamp our overall prepaid broadband rate card and set of offerings. And the way we’re handling the temporary speed increase is those are expiring as well, and then we’re inviting customers to retain that speed for a modest upcharge or to go back to their old speed. And the temporary relief that we offered in terms of data allowances, we’re actually going to allow to – customers to retain those. And as we’ve seen a significant uptick, as you might expect, on traffic. And so as we expect that to normalize over time, in addition to the new unlimited great plan that we introduced in terms of our data tiers, we feel as though on overage charges and the like will be net neutral on revenue from where we expect it to be this year. So that’s a long way around the barn to say that we’re not expecting any long-term impacts as a result of the actions we took or the discounting that we offered. And to the contrary, based on the strong subscriber growth we’ve seen in addition to normalizing some of these temporary activities, we think we’ll see a pretty good uptick in the future on pricing. In postpaid, we – as you know, we elect to leverage Sprint and now T-Mobile’s national rate card. And so we’re not entirely in charge of how we moderate or mitigate any impacts from any decisions they decide to make in terms of discounts or adjustments and the like. That’s why we noted those in the quarter.

And one thing to add on the wireless side. The service plans that T-Mobile is launching next week are more aggressive than what we’ve seen previously with Sprint. But on the flip side, the handset offers actually have changed recently and there’s less service discounts that we are providing starting in July on that side. So I think the two things are going to offset each other as we go forward. All right. I appreciate that. Thank you.

Thank you.

Thank you. [Operator Instructions]. I’m not showing any further questions at this time. So this does conclude today’s question-and-answer session. I would now like to turn the call back to Jim Volk for closing remarks.

I’d like to thank everyone again for joining our call this morning. There’s a lot going on. We will keep you posted as things progress, and I hope everybody stays safe and healthy. Thanks, everyone.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.