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Executives

Adele Skolits – CFO, VP - Finance, Treasurer

Christopher French – President and CEO

Earle MacKenzie – COO and EVP

Analysts

Ric Prentiss – Raymond James

Barry Sine – CapStone Investments

Rick Burns – Sidoti & Co.

Shenandoah Telecommunications Company (SHEN) Q3 2010 Earnings Conference Call November 4, 2010 10:00 AM ET

Operator

Good morning everyone, and welcome to the Shenandoah Telecommunications Third Quarter of 2010 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.

Adele Skolits

Good morning and thank you for joining us. The purpose of today’s call is to review Shentel’s results for the quarter ended September 30th, 2010.

Our results were announced in a press release and a Q distributed yesterday evening and the presentation we’ll be reviewing is included on our website at www.shentel.com. Please note that a replay of the call will be made available later today. The details 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 remarks, we’ll conduct a question-and-answer session.

I’ll begin on slide two of the presentation. While we don’t provide guidance with respect to specific future financial results, we caution that this call may contain forward-looking statements, which involve a number of known and unknown 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 are 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 three 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.

I’ll turn the call over to Chris now.

Christopher French

Thank you, Adele. We appreciate everyone joining us this morning.

We had a great third quarter both in terms of customer growth and in terms of our strategic initiatives to expand our cable business and continued wireless growth. Slide 5 lists some of these highlights.

As we discussed on last earnings call, we closed on the acquisition of JetBroadband on July 30th. At close, the JetBroadband network passed approximately 115,000 homes and had approximately 66,000 revenue generating units for RGUs. In early October, we announced execution of an agreement to acquire two markets from Suddenlink in Salem, West Virginia and Oakland, Maryland, passing more than 7,000 homes and including 3,900 RGUs.

In our wireless segment, in early July we signed an amendment to our current contract with Sprint Nextel to allow Shentel to sell Virgin Mobile and Boost prepaid wireless services. These prepaid products and services became available on the Shentel Wireless service area through Sprint stores owned by Shentel as well as hundreds of other outlets. As part of this deal, we also acquired approximately 50,000 existing Virgin mobile customers in our wireless service area.

Operating results in our cable segment show we are being successful in adding services and increasing customers and revenues. Highlights of the accomplishments in this segment are shown on Slide 6.

We recently moved the JetBroadband customers to our existing billing platform and have integrated our management of the field workforce and customer care call centers serving these systems. In the existing pre-Jet markets, we were pleased with the 8% increase in RGUs during the quarter. These results are driven by a substantial progress we have made in expanding and improving services in this segment. Voice services are now available to 76% and high-speed Internet is available to nearly 88% of acquired homes passed.

Wireless segment highlights are shown on Slide 7. On top of the acquired customer base, prepaid customers grew by nearly 6,300 in the third quarter. Postpaid wireless PCS customers are up 5% from the year-ago. Continued growth was helped by churn of just 1.9% this quarter relative to 2.2% for the third quarter 2009. Like in the second quarter, we also began offering 3G/4G datacards and more recently handsets. This happened in conjunction with 4G services becoming available on our York and Harrisburg, Pennsylvania markets. 4G capable devices are now among our top sellers.

Financial results on a consolidated basis shown on Slide 8 were impacted by closing related expenses and additional interest expense from our JetBroadband acquisition, and a net after-tax loss from our new prepaid business. During the quarter, we also recognized a one-time after-tax gain of $2.6 million on the sale of our telephone directory. We are reporting net income of $4 million for the quarter compared to $6.3 million from the third quarter of 2009. Net income from continuing operations was $4.2 million for the quarter as compared to $6.3 million in the same quarter of last year. Adele will review the financial results in more detail in a moment. We’ve still not reached agreement for the sale of our Converged Services business, although we continue to work with potential buyers. This process remains challenging, but we continue to expect that the sale will ultimately be achieved.

I’ll now turn the call back to Adele to review the details of our financial results.

Adele Skolits

Thank you, Chris. I’ll begin on Slide 10. Adjusted operating income before depreciation and amortization, or OIBDA for Q3 ‘10 was $21.1 million or up $2.2 million from Q3 ‘09. In order to better understand the forces driving this change, I’ve provided the OIBDA results by segment on Slide 11. Here you get a picture of how the segment’s results are contributing to the consolidated financial results. In a moment, I will go into the wireless and cable OIBDA changes in depth. What you see from this table is that adjusted wireless OIBDA has grown despite the significant incremental costs associated with acquiring prepaid subscribers. While the increase in telephone rates drove a slight increase in wireline revenues, there have not been appreciable changes in the wireline results.

Cable results have improved as a result of the acquisition of JetBroadband. The impact of the incremental OIBDA from the JetBroadband business is being offset by the significant incremental cost of acquiring customers in the cable business as we will see in a moment.

On Slide 12, I have analyzed the changes in the wireless OIBDA results between Q3 ‘09 and Q3 ‘10. As Earle will discuss, postpaid revenues continue to grow as a result of the growth in its customer base. The prepaid business has already begun to make a meaningful contribution with $2.6 million in new revenue related to prepaid customers. As you may recall, the service fee charged by Sprint-Nextel in the postpaid business rose from 8.8% to 12% effective June 1st, 2010. This change increased service fees by $1 million in the third quarter of 2010. Acquiring prepaid customers involved additional expenses related to handset subsidies, commissions, marketing, and other sales related costs. As a result of our success in acquiring prepaid customers, there are $2.3 million at new prepaid costs in Q3 2010.

We also paid separate fees to Sprint-Nextel to provide ongoing support services for our prepaid customers. These prepaid services added an incremental $900,000 to expenses in 3Q 2010. Finally, we made an adjustment to accounting for certain tower leases which resulted in a favorable adjustment of $800,000 in our wireless segment’s revenues.

On Slide 13, I have shown the components of the changes in adjusted cable OIBDA, which improved $1.2 million in Q3 2010 over Q3 ‘09. As you can see in the first four green bars, revenues have grown substantially by $8.1 million. This was driven by the JetBroadband acquisition on July 30th, and the growth in RGUs, Earle will review in a moment.

As with wireless, the growth in customers comes with an immediate cost relating to acquiring the customers. This incremental cost was $1.8 million in Q3 ‘10 over Q3 ‘09. The increase in video customers resulted in an increase of $2.3 million in programing costs in Q3 ‘10 over Q3 ‘09. In addition, the improvements in the network and increase in broadband customers and the addition of JetBroadband resulted in a $1.9 million increase in network and backhaul expenses.

At this time, I will turn the call over to Earle to go into greater depths on some of the operating factors driving our results.

Earle MacKenzie

Thank you, Adele. Good morning, everyone.

Slide 15 shows the continued growth we have experienced in postpaid wireless customers. Over the past two years, we’ve seen consistent year-over-year growth of over 5% with our postpaid customer base growing by over 11,000 customers in the past 12 months to 230,587.

Growth in net additions are shown on Slide 16. We put on 3,175 net postpaid customers in the third quarter of 2010 compared to 3,286 in the same quarter last year. Year-to-date, we’ve put on about the same number of net adds as last year. We’ve done so with fewer gross additions due to year-to-date churn being below 2%, with the rate of 1.9% in the third quarter.

Slide 17 provides gross billed revenue per postpaid user for the third quarter 2009 and 2010. We saw a slight decrease in gross ARPU but continued increase in data ARPU. Data ARPU in the third quarter of this year was $21.58 compared to $19.07 in the third quarter of 2009, and $20.61 in the second quarter of 2010. The decrease in total ARPU is a result of continuing to add a higher percentage of second and third lines to account, and the unlimited plans eliminating overages.

A reconciliation of gross billed postpaid revenue to net postpaid revenue reflected on our financial statements is provided on Slide 18. Gross billed revenue increased approximately 5%, in line with our growth in postpaid customers. The net revenue was up only 3% due entirely to the increase in the net service fee which Adele mentioned earlier. Both bad debt and service credits were down from a year-ago. Excluding the increase in the net service fee, the increase in net revenue would have been approximately 7.5%.

As we’d stated previously the current 12% net service fee is at the maximum allowed by contract. At this point, we do not anticipate that rate will decrease.

Slide 19 provides a summary of our prepaid wireless stat. Effective July 1st, Shentel was able to sell CDMA Boost and Virgin Mobile prepaid services in our area. We purchased the existing 50,000 Virgin Mobile customers that were in our service area at $138 per subscriber. This is the same price that Sprint paid Virgin Mobile when Sprint purchased the Virgin Mobile in December 2009. Until July 1st, Boost on CDMA was not sold in the Shentel service area. During the quarter, 14,147 gross prepaid subscribers were sold in the Shentel area, resulting in 6,296 net prepaid additions, with churn of 5%. We ended the quarter with 56,203 prepaid subscribers.

I want to point out that our accounting prepaid revenues and expenses is different from postpaid. Postpaid revenues are net of the 8% management fee, the 12% net service fee, bad debt, and service credits. Prepaid revenues are only at 6% management fee. All expenses to acquire and maintain the prepaid customers are allocated to Shentel based on Sprint average cost per subscriber, and are recorded in the expense section of the Shentel income statement.

In the third quarter, prepaid expenses exceeded revenues due to the cost related to adding a high percentage of gross additions relative to the total customer base, and the amortization of purchase price. We anticipate the prepaid business will grow up by early next year that the prepaid business will provide a meaningful positive margin to our wireless segment in 2011.

Slide 20 shows the same service plans continue to be the best sellers. We are seeing an increase in smartphone sales. Although 4G coverage is not widely available in our service area, the HTC EVO represented 10% of phone sales with most customers buying and using the phone with only 3G services available.

Slide 21, recaps our wireline results. Once again we had very modest access line loss, with 192 losses in the third quarter and 495 year-to-date. We’ve seen a 11% growth in DSL customers in the past 12 months, with DSL penetration at 39% and ARPU of $38.

We experienced very strong cable RGU growth in the third growth. Slide 22 shows the net gain or loss in RGUs by quarter. So it’s the first quarter of 2009, after we closed on our first cable acquisition. On July 30th, we closed on JetBroadband. So the third quarter includes two months of net additions for the Jet Systems. We had an increase of 4,112 net RGUs in the latest quarter, broken down between 2,335 net RGUs from our previously owned systems and 1,777 net RGU additions in the Jet Systems. At the bottom of the chart, are the total RGUs at the end of each quarter which reflects RGUs we sold in the fourth quarter 2009 and the Jet RGUs we purchased this past quarter.

Slide 23 provides the number of homes passed and the penetration rates at year-end 2008 and 2009 along with the end of the third quarter 2009 and 2010. We believe that we have significant upside in video, Internet and voice. We’ve completed the upgrades of all but one small systems purchased from Rapid in December 2008. Work has already begun on the upgrade of the JetBroadband systems. We will spend approximately $11 million this year on the Jet systems with most of the upgrades completed in 2011.

The upgrade of the Jet systems in Southern West Virginia will begin in 2011 but will not be completed until 2012. The Suddenlink systems we recently announced should be closed before the end of the year and we should upgrade by late 2011 or early 2012.

I will now turn it back over to Adele.

Adele Skolits

This concludes our prepared remarks. Joe, would you now review the instructions for posing a question?

Question-and-Answer Session

Operator

Absolutely. (Operator Instructions). We will go to Ric Prentiss of Raymond James.

Ric Prentiss – Raymond James

Questions for you. I appreciate the slide deck. The prepaid side, I heard Earle say early ‘11 you think prepaid will start providing positive margins. When you bought the 50,000 subscribers from Sprint and the Virgin Mobile guys what was their ARPU and are they not helping you contribute some to reach margins?

Earle MacKenzie

There’s a significant difference, Ric, between the ARPU of the Virgin Mobile customers that we acquired and what we’re seeing on incremental customers, both Virgin Mobile and Boost, virtually all of the Virgin Mobile customers we bought with the pay-go. They had not implemented the new price plans for Virgin Mobile prior to our acquiring them. So the average revenue on those are very low, kind of the mid-teens. But the incremental customers we are seeing are significantly higher ARPU and so we are going to see a good lift in average ARPU over the next couple of quarters.

Ric Prentiss – Raymond James

Okay. And so I assume when you’re seeing more of these at least $30, if not $50 kind of prepaid plans that you are selling now?

Earle MacKenzie

Yes. But the real issue here is just numbers when you start off with 50,000 at a level about, it takes a little while and some churn to raise that average ARPU.

Ric Prentiss – Raymond James

Is it safe to say that bigger benefit of getting the agreement with Sprint was to get the go-forward now from the existing service?

Earle MacKenzie

Absolutely.

Ric Prentiss – Raymond James

Okay. Sprint has talked a lot about their network modernization program and what might or might not be happening. Any impact to you guys in having to follow suit, maybe with some capital spending on the network in 2011 or 2012?

Earle MacKenzie

At this point, we are still evaluating and having preliminary conversions with Sprint about upgrading their network. There are lot of issues including the fact that they are talking about integrating other spectrum in this upgrade. So, our discussion with them is going to be kind of widespread. As far as CapEx, we don’t anticipate any significant CapEx impact in 2011. At this point, it’s too early to estimate what it will be in 2012.

Ric Prentiss – Raymond James

Okay. And a lot of discussions on smartphones on all the conference call we’ve been on, even just today. What are your thoughts about retention spending, percentage of your base on smartphones?

Earle MacKenzie

Well, in the third quarter, 38% of our gross adds were purchase of smartphone. On upgrades during the quarter, 43% of them bought a smartphone or got a smartphone. And, you know, today 28% of our base has a smartphone. So I think a combination of smartphones and the trend of adding additional lines to existing accounts is what attributing to us being able to keep our churn below 2%.

Ric Prentiss – Raymond James

And any thoughts on what the total retention spend was on the quarter and what impact that might have on margins?

Earle MacKenzie

I don’t have that off the top of my head.

Ric Prentiss – Raymond James

Yes, you’d a lot on there. I appreciate it. Thanks, guys.

Earle MacKenzie

Thank you Ric.

Operator

Our next question comes from Barry Sine with CapStone Investments.

Barry Sine – CapStone Investments

Good morning, folks. I wanted to follow up on some of those questions. In terms of the prepaid ARPU for the quarter, on the acquired subscribers, could you give us a range of what type of ARPU that you’re seeing for the subscribers you are adding?

Earle MacKenzie

Well, on the subscribers we are adding, if you look at, there’s two different brands. We have got the Boost brand, which are primarily – the most popular plan there is kind of the All You Can Eat for $50; on the Boost CDMA. On the Virgin Mobile, there’s a mix. Sprint is selling a brand called Assurance which is a low income, which is, you know, in the $10-12 range with a limited number of minutes. And then they also offer the per minute pay-as-you-go plans. And then in the third quarter, they implemented and put out some new $25, $35, $45 plans where you get more minutes and more texting and more Internet access. What we’re finding is that the new customers we were adding are at the higher ARPU levels except that they all are – Virginia is one of the states where Sprint has been able to sell this low income. And so we have seen some interest in our area for that low income product for folks who qualify.

Barry Sine – CapStone Investments

Okay. And then during the quarter, you recorded amortization expense for the purchased subscribers. Could you give us a little forward looking visibility on that? What should we expect per quarter and for how many quarters do you expect to book that expense?

Adele Skolits

The expense is being amortized over the expected life of the customer. And you can assume that, you know, substantially most of the expense will be recognized over – at about 5% per month because that’s our churn rate. Right?

Barry Sine – CapStone Investments

Correct.

Adele Skolits

So, you know, it gets to a point of where – it’s higher early on, Barry, because it’s matching the number of customers that we’ve retained from the original acquisitions, am I making sense?

Barry Sine – CapStone Investments

Yes. So you are actually looking at the customers as they churn and record in your expense, as they churn?

Adele Skolits

We’re estimating the churn rate at 5% and so we recognize 5% in Month 1 of the amortization. You get to Month 2 and you recognize 5% of 95% of your original acquired customers, and it works like that, the math works like that, and I would be happy to provide you a schedule of that. So it will diminish overtime, but it’s more substantial now than it will be 12 months from now for instance, and it’s running about 390,000 a month at the moment.

Barry Sine – CapStone Investments

Okay. And just turning to the cable part of the business and I guess mainly on the Rapid properties where you’ve already done the upgrades. Could you talk about what type of promotions you’re in the market with? What type of pricing you are offering for triple play? Are you doing anything like giving away DVRs, something like that? What is the product offering in those markets right now?

Earle MacKenzie

Well actually, right now we are not offering a promotion. But we have in the past, and in part of the third quarter, we did offer a promotion of three months at half price for Internet and video to sign up. We are also awaiting installation charges right now. We have in the past run some DVR promotions, but we don’t have one of those running right now. So, we plan to be in and out of the market with promotions. If we have a promotion in the market all the time, then it comes more the standard pricing than it is a promotion. As far as our bundles, if you are buying kind of our video package along with 3 megs and our phone service, the phone service without unlimited long distance, just unlimited local, that’s approximately $100 a month. We have a little bit different pricing in different markets based on kind of where the pricing was when we acquired the market, and also who the competitor is.

Barry Sine – CapStone Investments

Okay. And on the JetBroadband properties, now that you’ve completed the acquisition, you’ve owned those properties for a while now. Any surprises vis-a-vis what – you know, you were telling investors when you announced the acquisition? Anything look different than what you looked at when you announced it?

Earle MacKenzie

At this point, the answer is no. We haven’t really found any surprises. The transition has gone extremely smooth. We were able to convert to our billing system, our back office systems in less than 90 days, which I think is quite an accomplishment. We virtually had no turnover for many of the Jet employees. The integration is going quite smoothly. We’ve integrated them into our organization. And so far, things have gone pretty much as planned, and we’ve been able to continue to add RGUs and keep people focused on growing the business rather than kind of wringing our hands and wondering what might happen next.

Barry Sine – CapStone Investments

And again shifting gears, on the converged business, I know you’ve talked for a number of quarters now about that sales process. Can you give us a little bit more visibility of what is going on there? Do you have a buyer identified? Are you still marketing it? Any prospects we may see that actually get sold?

Earle MacKenzie

We actually have several prospects. The problem that we have is that they are much smaller companies than ourselves and they are having difficulty in raising the capital. The desire is there. We basically have term sheets from several players, but it’s really been their ability to finance that has caused the delay. The good news from our standpoint is that we have been through another move in since most of our customers are students. We didn’t experience any loss in net revenues. We continue to basically be able to provide good service and have not really seen any degradation in the business itself. So, we are still optimistic that once one of these potential buyers can get their financing lined up, we will be able to sell it.

Barry Sine – CapStone Investments

The issue with financing, that seems like I’ve heard that from you guys before that the buyers are having that trouble. So any sense that you could break the logjam? Maybe you take a note in exchange for the sale of that property yourself?

Adele Skolits

We are not very – you know we are not really in a business to finance other companies. We prefer not to have that on the balance sheet, but it’s certainly an option we’ve considered.

Barry Sine – CapStone Investments

How long has this current situation been going on when you’ve had term sheets but the buyers can’t line up financing?

Earle MacKenzie

Well actually it’s been from different buyers. So, we’ve actually had buyers from very – who’s had terms sheets probably to the last three or four quarters, but the ones that we are most active talking to right now are not the same ones we were talking to a year-ago.

Barry Sine – CapStone Investments

Okay. And then my last question is kind of a longer term strategic question. Obviously, you’re making much more of a bet on cable architecture than the legacy telco architecture. In Shenandoah County, you’re operating two plants. Any further thoughts about down the road deactivating the redundant copper plant and just going to a pure cable architecture?

Earle MacKenzie

It’s funny you should that ask that question. We’ve spent a great deal of time talking about that, looking that internally. The biggest issue is, you know, that’s kind of plowing new ground in a regulated telephone environment. But we actually have had some initial conversations with the Public Service Commission here in Virginia, and continue to look at the feasibility of that from a regulatory standpoint. Obviously, from a technical standpoint, we can offer voice and Internet over our cable plan, because we are doing it elsewhere. But it certainly is kind of a different issue when you are dealing with access charges. And the other issue is that, you know, no ground has been plowed yet on how to do that. So, it’s something that definitely makes sense. We don’t have all the answer to how to accomplish them.

Barry Sine – CapStone Investments

Okay. Those are my questions. Thank you very much.

Earle MacKenzie

Thank you.

Operator

Our next question comes from Rick Burns with Sidoti & Co.

Rick Burns – Sidoti & Co.

Good morning. Just a question, could you remind me what the level of synergies you are hoping to achieve with the JetBroadband acquisition were? And if you achieved any of those in this quarter and, you know, what we can project going forward?

Adele Skolits

These synergies are really more than anything, initially related to back office functions like consolidating the billing. So we accomplished that in October. So you will see that reflected in the fourth quarter and they were paying something on the order of $1.50 to $2 per customer per month to outsource that billing. So that’s the first step. The next step will actually relate to how the cable modems get provisioned. Now I don’t know how much you want to say about where we stand on that.

Earle MacKenzie

We will be able to convert that early next year and we will see some savings there. And some savings we’ll also see over the next six plus months as we are able to leverage our backhaul. Right now, we are still using all of the backhaul facilities as they were designed by Jet. We are in the process of re-engineering that to be able to access and use our fiber assets and then we will see a combination of two things. Number 1, lower cost but more importantly we will see a significantly more capacity that we will be able to offer to the customers in the Jet markets.

Adele Skolits

They also pay a third party for the switching of the voice phone calls and I think we are looking at early to middle of next year to eliminate that expense as well.

Rick Burns – Sidoti & Co.

Okay, thanks. And on the most recent cable acquisition, what does the margin look like or I guess the pipeline? Are you still in the market looking for similar type assets in the region?

Earle MacKenzie

We don’t have a formal pipeline. I think that it is probably pretty obvious to our neighbors that we are acquirers. I think that we will continue to look at opportunities as they arise. We may even be proactive and speak to some in the future. But right now, we are pretty busy just digesting what we’ve acquired. The Suddenlink properties were just kind of an opportunity that presented themselves and so we’ve taken advantage of that. The relative size of it was such that we felt comfortable we could integrate that and not impact our integration of Jet properties. But obviously we would have to balance the price that someone might want and our capacity to integrate as we look at additional acquisitions.

Rick Burns – Sidoti & Co.

Okay. Thank you.

Adele Skolits

Thank you Rick.

Operator

Our next question is a follow-up from Ric Prentiss with Raymond James.

Ric Prentiss – Raymond James

Yes. Hey guys, just wanted a couple of quick follow-ups, just to make sure, Adele, on the amortization of the customer base, I assume that is A in EBITDA, that that’s been normalized out of wireless EBITDA.

Adele Skolits

It has in the adjusted OIBDA, it has been normalized out, yes.

Ric Prentiss – Raymond James

Okay. And then from a competitive standpoint, what’re you seeing in the wireless market in your area as far as any pressure on ARPUs or obviously, you are still adding customers, seems to recover a little bit from the economy – just kind of an update on competitive landscape and ARPU.

Earle MacKenzie

As far as competitive landscape, we haven’t really seen any significant change in the last six months or so. You know, our competitors are – there hasn’t been a lot of new distribution opened or any significant change in their level of advertising. So the market has been fairly stable as far as distribution goes. Obviously any price changes that have been announced nationally by Verizon or AT&T, we are seeing it on market. The good news is we still don’t have any competition from Metro or from Leap. So as far as the prepaid market, it is fairly stable and I think it reflects in our being in that business for just two-and-a-months or so, the number of adds we were able to make that there’s good demand for that product in our marketplace.

Ric Prentiss – Raymond James

Coming up on the seasonally strong prepaid fourth quarter-first quarter kind of timeframes, do you think there was pent-up demand or you think we could see some nice seasonal pop for prepaid in the Christmas and first quarter season?

Earle MacKenzie

I really don’t know, Ric. I mean, this is a new area for us. You know, I can tell you that the numbers for October look equally as strong as what we’ve seen up to this point because there were prepaid services available in the marketplace, just not the Sprint brand of prepaid. So, I guess that there probably would be some opportunity for some pent-up demand, but the good news is we continue to see the same level of demand, now that we are in the fourth month that we saw in the second month. So at this point, it’s a little hard for me to predict, but I would anticipate that our prepaid curve should look pretty much like the rest of the industry.

Adele Skolits

It would be a very strong first quarter.

Ric Prentiss – Raymond James

Right. And a lot of times holiday season and the income tax refund season seems to really drive those markets.

Adele Skolits

It has in my experience.

Ric Prentiss – Raymond James

Okay. Hey, Adele, on the balance sheet, any update as far as what you guys are thinking on the balance sheet, leverage levels, debt?

Adele Skolits

You know we’re at just over two times levered right now. That still leaves us in our estimation a significant amount of dry powder to pursuit some of these opportunities that Earle is looking at or will be considering in the near future. And we do have dry powder even within our existing credit facilities and some very willing lenders. So we are very hopeful that we can get future deals at least in the short run here, of intermediate size, finance with our existing lenders.

Ric Prentiss – Raymond James

And the cost of debt still seems pretty attractive?

Adele Skolits

Sure it does. We are paying LIBOR plus 3.5 right now and as we deleverage over time, I expect that will go down over the life of this facility which is five years, so it goes down to LIBOR plus 3. So…

Ric Prentiss – Raymond James

Good. Okay, thanks.

Earle MacKenzie

Thank you Ric.

Operator

I am showing no further question on the phone. I would now like to turn the conference back to Adele Skolits.

Adele Skolits

Thank you all for participating especially on such a busy day. Please let me know if there details you would like on future calls. My contact information was provided on the press release. Thanks again.

Operator

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

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Source: Shenandoah Telecommunications CEO Discusses Q3 2010 Results – Earnings Call Transcript
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