Shenandoah Telecommunications Co (SHEN) 2011 Q4 法說會逐字稿

Good morning, everyone. Welcome to the Shenandoah Telecommunications fourth quarter of 2011 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 December 31, 2011. Our results were announced in a Press Release distributed last night, and the presentation we will 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 with slide 2 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'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 statement.

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. I'll turn the call over to Chris now.

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

In recent years, we've been focused on two strategic initiatives, enhancing and expanding our wireless services and diversifying our business by significantly expanding the size of our Cable segment. Our diversification efforts do not provide immediate financial returns, but we are reaching significant milestones denoting our progress on these strategic objectives. On slide 5, we list some of the highlights in these areas. As of the end of the year, we had nearly 356,000 wireless customers and over 137,000 cable, revenue-generating units. In our Wireless segment we had more than 107,000 Boost and Virgin Mobile customer as of December 31, 2011. We again had positive net additions and postpaid subscribers, something we've accomplished in every quarter since first becoming a Sprint Nextel affiliate in 1999. Cable RGUs are 7% higher than year-end 2010, an increase of almost 9,000. We have now upgraded 51% of the JetBroadband cable markets acquired in July 2010.

Revenue for 2011 reached $0.25 billion. In the fourth quarter of 2011, revenues were 15% higher than they were in the fourth quarter of 2010 and 6% higher than third-quarter 2011. In December, the Board of Directors declared a cash dividend of $0.33 per share. This is the same amount as the previous year, but a much higher payout as a percent of earnings. This dividend represents the 52nd consecutive year of annual dividends, which began when Shenandoah Telephone Company paid its first dividend in 1960.

Wireless segment highlights are shown on slide 6. Prepaid customers grew by 40,144 in 2011 to just over 107,000. Post-paid customers are up by 13,811, or nearly 6% from a year ago. Continued postpaid growth was helped by churn of just 1.8% for 2011, relative to 1.9% for 2010. Annual operating income in the Wireless segment is up by 13% over 2010.

Highlights of the accomplishment in our Cable segment are shown on slide 7. As of December 31, 2011, we had upgraded 51% of the Jet markets acquired in 2010, and the remainder of our systems will be completed this year. The RGUs in our Cable segment grew by 7% to 137,238 as of year-end. Upon completion of the upgrades, we intend to relaunch our Shentel brand and improve customer awareness to take advantage of our enhanced competitive position. Earle will go into greater detail about our operational results at the end of this presentation.

Financial results on a consolidated basis are shown on slide 8. The initial acquisition of the prepaid customers and the cable systems in 2010, along with ongoing upgrades in our cable networks, resulted in $9.1 million of increased depreciation and amortization cost in 2011. Since these acquisitions, the cost of adding customers put further strain on operating results in 2011. As a result, we are reporting net income of $13 million for 2011 compared to $18.1 million for 2010. After adding back the loss from our discontinued Converged Services operation, net income from continuing operations was $13.5 million for 2011, as compared to $18.8 million in the prior year. You will recall that 2010's results included a $4 million pre-tax gain on the sale of our telephone directory. In a moment, Adele will review the financial results in more detail.

I'm pleased to report that we have executed contracts for the sale of most of our Converged Services properties and discussions continue with potential buyers for the remaining 17 properties.

Although we believe the price of our stock does not currently reflect the future potential of our business, we remain confident in our long-term prospects. We are working diligently to realize this potential and have identified several key areas of focus for this year. These are, continuing to invest in and enhance our networks, improving financial results by growing revenues and the number of customers and improving our operational efficiencies, and further improving the customer service and technical support we provide to our expanding customer base. This will be a challenging year and we have much to do, but I am confident in our team's ability to achieve our goals and continue our progress. 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. Adjusted operating income before depreciation and amortization, or OIBDA, for Q4 '11 was $21.6 million or up $200,000 from Q4 '10. 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 segments' results are contributing to the consolidated financial results. In a moment, I'll go into greater depth on the OIBDA changes for each segment. What you see from this table is that adjusted Wireless OIBDA has grown by $700,000, despite the significant incremental costs associated with acquiring prepaid customers. Also, the costs of acquiring Cable customers has reduced Cable OIBDA by $700,000. Wireline OIBDA was unchanged in Q4 '11 over Q4 '10.

On slide 12, I've analyzed the changes in the Wireless OIBDA results between Q4 '10 and Q4 '11. As Earle will discuss, postpaid revenues grew by $3.5 million as a result of the growth in its customer base and continued growth in the average billing rate per customer. The $10 smartphone charge instituted by Sprint in January 2011 made a substantial impact on this growth. As a result of this substantial growth in the prepaid customer base, revenues from this product have grown by $3.3 million, while the related acquisition costs have grown by $2.1 million, and the ongoing support of this customer base by $600,000. Post-paid customer acquisition costs grew by $2.2 million. $1.1 million of this cost increase related to the increased subsidies associated with the iPhone relative to other smartphones. Enhancements to our wireless network, primarily to accommodate incremental data traffic, increased network cost by $1 million.

On slide 13, I've shown the components of the changes to adjusted Cable OIBDA, which declined by $700,000 in Q4 '11 from Q4 '10. As you can see, all revenue lines grew in the fourth quarter. This growth was driven by the 7% growth in RGUs. As with Wireless, the growth in customers comes within an immediate cost related to acquiring customers. This incremental cost was $1.4 million in Q4 '11 over Q4 '10. The increase in video customers resulted in an increase of $600,000 in programming cost in Q4 '11 over Q4 '10. In addition, the improvements in the network and an increase in broadband customers drove network and backhaul expenses up by $700,000.

On slide 14, I've shown the components of the change in Wireline revenues. Facility revenues have grown by $1.1 million as a result of the substantial growth in sales of fiber and ethernet facilities to businesses. The sale of the directory business in 2010 resulted in the loss of $500,000 in directory advertising revenues in 2011. Revenues and expenses from all other sources dropped by $600,000 net. At this time, I'll turn the call over to Earle to go into greater depth on some of the operating factors driving our results.

Thank you, Adele. Good morning, everyone. I'll be starting on slide 16. We continued our positive trend on postpaid net adds with a strong fourth quarter and an increase of approximately 6% for the year bringing us to 248,620 postpaid customers at December 31.

Slide 17 provides the details of those postpaid gross and net adds for the year. We had 65,240 gross adds, an increase of 1,725 from 2010. We had net adds of 13,811, an increase of approximately 10% from 2010. The fourth quarter was very strong with 5,072 net adds, an increase of 21% over the fourth quarter of 2010. Churn for the fourth quarter was at 1.89% up slightly from 2010. But for the year, we improved to 1.78% from 1.89%, which contributed to our improved net adds.

As shown on slide 18, we continue to have a significant increase in postpaid, gross-billed revenue per user to $59.44 per month, an increase of $1.98 from the third quarter of 2011 and $3.90 from the fourth quarter of 2010. The $4.84 increase in the data component for 2011 is a result of continuing to focus on selling high-end price plans and the $10-per-month charge that Sprint initiated at the end of January on all new smartphone users. The 6% increase in customers and higher average billed revenue resulted in a 10% increase in total postpaid gross-billed revenue to $166 million shown on slide 19. Bad debt decreased by $300,000 and credits remained at 10% of gross revenue. The lower 9% increase in net revenue is due to the increase in the net service fee percentage paid to Sprint from 8.8% to 12% on June 1, 2010.

The same three price plans that were the most popular in the third quarter were again the most popular options in the fourth quarter. This is shown on slide 20. On the right side of the slide are the top selling phones. The fourth quarter was the first time we had the iPhone, and you can see that it was the top-selling phone, but only at 16%. At year-end, 53% of our postpaid customers had a smartphone, that's a 5% increase from the end of the third quarter and a 19% increase since the end of 2010.

On slide 21, I've provided some details on our initial iPhone sales and penetration. As I've stated earlier, 16% of all new activations in the fourth quarter purchased an iPhone. 36% of all iPhones in our service area were sold in Shentel-controlled channels. Including upgrades, at December 31, 3.6% of the postpaid base had an iPhone, with 42% buying the iPhone 4 and 58% purchasing the iPhone 4S.

Moving to our prepaid results on slide 22, you see that we had a strong fourth quarter with 8,827 net adds on 20,700 gross adds. We are ending the year with 107,100 prepaid customers, a 67% increase over year-end 2010. We believe that we've reached critical mass in prepaid and expect ongoing profitability. On slide 23, you see that prepaid churn dipped below 4% in the fourth quarter, and average monthly prepaid gross-billed revenue has remained relatively flat from the third quarter at $22.33.

Moving on to our Cable results on slide 24, we added 1,483 net RGUs in the fourth quarter, and 8,976, or a 7% increase for the year, bringing the total to 137,238. We had a 926 decrease in video RGUs in the fourth quarter, but we added 246 for the entire year. In the fourth quarter, higher margin voice and high speed internet RGUs grew by 1,039 and 1,307, respectively. For the year, we had a 56% increase in voice RGUs and a 16% increase in high speed internet RGUs. As with other cable operators, the primary new demand is for non-video services. At year end, approximately 17% of our 75,348 customers do not purchase a video service from us. With a very competitive phone product and up to 25 megabits of internet speed, our primary competitor is the local telephone company.

Slide 25 shows the changes in our penetration rates over the past three years. You see that basic video has fallen, but digital video, high speed internet and voice have increased. As we complete our upgrades in 2012, we'll have more homes passed to offer high speed internet and voice.

Our Wireline results are shown on slide 26. We continue to have one of the lowest losses of access lines in the industry with just under 3% access line loss in 2011. Our DSL penetration in our LEC area grew to 53%. As you recall, we have the cable operator in our LEC area but do not offer voice or internet over the cable network. Total connections, the total of access lines and DSL lines, were 35,434, a 218 or a 0.6% decrease from year-end 2010.

2011 capital expenditures came in at $74.6 million. On slide 27, $36.4 million was spent on the Cable segment primarily on upgrades, and $24.5 million on Wireless, primarily on capacity. As of year end, we have upgraded 51% of the homes [passed] that we've purchased from JetBroadband in mid-2010. We will finish up the Virginia systems in the first quarter of 2012, and we'll have the Jet and Suddenlink systems in West Virginia and Maryland completed later this year.

If you joined us on our announcement about Sprint addendum and Network Vision on February 6, you're aware that we're expecting to spend $115 million on the Network Vision over two years, with $60 million in 2012. Our total capital expenditures are expected to be $138.4 million. Excluding Network Vision, that leaves $78.4 million, about the same we spent in 2011, for the balance of our capital projects, which will consist primarily of finishing the cable upgrades, capacity on the wireless network, and success-based expenditures.

On slide 28, I've summarized the major points of our Network Vision plans. We have set a very aggressive objective to upgrade 274 of our 510 cell sites by year-end. We will expand our backhaul capacity, launch LTE on the G-block by the third quarter of 2012, and offer voice service in the 800 block, which will substantially improve in-building coverage. As a result of the changeout, we will need to accelerate depreciation on retiring assets by $7.3 million in 2012 and $5.3 million in 2013. I'll now turn it back over to Adele.

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

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

Couple of questions for you, if I could. First, as you think about the iPhone details you provided us, Earle, 16% of the gross adds in the quarter seemed a little bit light. I know early on you had mentioned there was some supply issues. Can you talk a little bit about what the trends you're seeing in Q1 so far, has that become a larger percent of sales?

The answer is no. We haven't seen it that much larger, not a significant change in the first quarter. I can't really contribute why that's happening, but we carry a pretty robust group of phones. You can see that 36% of them were sold in our control distribution areas. What we do is we actually have salespeople in each office that are experts on particular phones. And I think part of it is, people tend to sell the phone they are the most comfortable with. So, if a customer comes in without a strong feeling to buy an iPhone, we may be moving him to a different phone just because of the sales person is enthusiastic about the phone they are selling.

And do you know the stat about how many of your iPhone sales are people that are new to Shenandoah versus just the retention? So, is that 16% of gross adds, is that kind of indicating that's the percent that's new? That's probably 16% of the total gross adds. I'm just trying to think of how many iPhones were to new-to-you customers.

About 3,000 new-to-us customers in the fourth quarter.

Okay. And then, you mentioned the smartphone penetration, 53% of your base. The $10 bolt-on, would you think that ARPU growth can continue in '12 from the increased sale of smartphones?

The answer is yes because of two things. Number one, I think the penetration is going to continue to grow, but you have to remember that any smartphone that was not a 4G Smartphone prior to January is not receiving that $10 surcharge. So, as we start to see some smartphones that are reaching that two-year age, they will be upgrading. And once they upgrade, we'll be able to collect the additional $10.

Final question, and I'll circle back in if there's time. Been a lot of movements in the DC on access reform, USF reform. Can you talk to us a little bit about, across all your businesses, what kind of exposure you have, first to USF and then to access?

I'll take that. In 2011, about $13.7 million in access fees were recorded by our Wireline segment; however, over $3 million of that was affiliate billing. So, our access fees net, if you eliminated the inner-Company billing, are about $10 million. We spent some time analyzing this. We don't have the final analysis done yet, Ric, but we believe that at this point, the impact on us can be compensated for by charges to our end-users. But we are still testing the waters on that, and still analyzing the full impact on us. But it's far less for us than it is for many other RLECs at this point.

Earle, do you want to talk about the end-user rates that we have now?

Yes, basically our one-rate right now is in the [$12.50] range. We did not have any price increases up until a couple of years ago for almost 30 years, so we believe that we've got some headroom in order to increase rates without significantly impacting the total number of customers. We recently, just in the first quarter -- I didn't talk about it in this call, but we will in the first-quarter call. We increased our rates at the beginning of the year, and we virtually had no pushback from the customer at all on about $1.75 increase in our monthly rate.

So, we believe that, as Adele said, that we can cover those increases. We can increase our local rates, at least in the short run, next couple of years, to compensate to keep our total revenue at about the same level.

Great. Thanks, Earle and Adele.

You're quite welcome.

Our next question comes from Barry Sine with Drexel Hamilton.

Good morning, folks. I want to start off following up on questions about, again, on the iPhone. If I recall correctly, in 4Q you didn't have the iPhone, because it wasn't introduced until part way into the quarter; and then it was a later date when you actually got inventory in the stores. I think in response to the prior question, you said that your sell rates on iPhones are about the same in 1Q so far as 4Q. I would think it would be higher because now you've got the inventory in the stores for the full quarter. Could you expand on that a little more?

Barry, you are correct. It wasn't launched right at October 1, but it was launched in the middle of October. We did have phones available in the market. We just didn't have a lot of phones available in our stores. Sprint was sure that Best Buys and some of their big, national retailers had phones, so it's not completely correct that the phones weren't there. We didn't have a lot of the S's, but we had iPhone 4s, really since the first day it launched.

So, part of it is we are actively trying to determine with the customer what is the best phone for their need. And unless they come in there with a really strong opinion that they've got to have an iPhone, oftentimes a customer is very happy with one of our androids; and we actually have those priced at a lower price point than the iPhone. So, the customer is somewhat price sensitive, and is looking for functionality and not for the brand. It's not that difficult sometimes to move them from an iPhone to one of our androids.

If you can remind me, what was the date when you did have inventory in your stores on the 4S, and what is your inventory situation now? Do you have devices, and when new devices come out, like an iPad 3, will you have availability when the rest of the Sprint retail stores nationally have inventory, or will there be another lag?

We were no more impacted than other Sprint stores. They really do try to treat us pretty much like they do the rest of their stores. Sprint kind of had a momentary problem on the S's, and it wasn't just Sprint. When the S came out, everybody kind of sucked those up real quickly. But we had S's within a week to 10 days from the launch, so by the beginning of November. And October was not a particularly strong month for us. November and December were by far the stronger of the two months of the quarter.

And going forward, we have plenty of product now. We have no problem with availability. And as far as I know, we will be getting any additional product at the same time as Sprint will offer it in their other stores.

Thank you. And turning on to the Cable side of the business, the fourth-quarter RGU adds in Cable were a little bit less than I was thinking of. You've spent quite a bit upgrading. And for example, if you look at video, I think one of the things you're doing in the video upgrades is upgrading to a digital plan with HD DVR, and some of that plan had been analog in the past, so why isn't that a more attractive offering in the marketplace? Why aren't you getting more traction with the network upgrades on the video side, for example?

So, we are having growth on the digital side. If you look at the video in two pieces, it's the analog that we're losing customers, and it's the digital HD that we're gaining customers. You also have to remember that during the fourth quarter, DirecTV had a very, very aggressive promotion early on where they were offering the NFL package for free, if you signed up. And so, I won't tell you that didn't have an impact on our net adds. Because the customer could get a very attractive introductory price, plus free NFL package; I believe that was compelling for a lot of our customers. Whether they will remain a DirecTV customer long-term when next year they have to pay the full price for the NFL package and their promotion rolls off, that's to be seen, but that was a big impact on us in the fourth quarter.

What did you counter with in terms of packages and promos?

I really couldn't -- anything that was comparable to that. We continue to offer promotions of price point for a limited period of time of 90 days. We have worked with HBO and Starz to offer promotional periods where we can offer their product at free or reduced rate, but we just really don't have access to anything like the NFL package.

Okay. And then just two numbers questions, I guess for Adele. Do you have the churn rate for prepaid in the fourth quarter?

Yes, I believe I do. It would have been 1.89%. I'm sorry, that's postpaid. Prepaid would have been 3.9% in the fourth quarter of 2011. The previous fourth-quarter, 2010, it was 4.61%, so we've seen some substantial improvement there.

And then, Adele, I also want to clarify on the depreciation numbers you gave related to the wireless upgrade. How do we think about that accelerated depreciation vis-a-vis 2011? I think for 2011, depreciation and amortization was $55.8 million. When you say there's an additional $7 million, obviously we're going to add that for the accelerated depreciation, but then there's going to be additional depreciation charges associated with the new plant that's going in, so it's going to be somewhere north of $55 million plus $7 million; is that the right way to think about it?

It is the right way to think about it. And in general, the CapEx spending in Wireless is depreciated over roughly eight years, so that's the right way to think about that.

Those are my questions; thanks, folks.

Our next question comes from Greg Burns with Sidoti & Company.

Thanks for taking the questions. I want to dig a little more into the improvement in prepaid churn. Was there any churn -- any specific puts and takes that are driving that lower; and is this a sustainable level going forward, or could we see some further improvement?

Greg, this is Earle. Prepaid churn is quite seasonal. Once again, we've not been in the business that long, but looking at other carriers, prepaid can be pretty seasonal. And if you look at the other prepaid carriers, they had pretty good churn numbers for the fourth quarter. So, I can't say that there's anything we did specifically related to that, but we're still trying to learn some patterns, and also look at it geographically.

Will there be a difference between our prepaid customers who are in central Pennsylvania, which is -- significant part of that population is in the York/Harrisburg area, which is a more urban area, versus our quad-states area which is less urban, I guess is a nice way of putting it. Will there be a big difference there? Once again, we just haven't had customers long enough to know what the real patterns are going to be.

Thanks. And in terms of the sequential improvement on the Cable side, how much of that is being driven by some of the operational efficiencies you're getting from the fiber backhaul upgrade and moving the voice customers onto your switches?

Both of those things happened late in third-quarter or fourth-quarter timeframe. So, the fourth quarter was the first quarter we really started to see some of the impact of that. For all practical purposes, on the voice side, what we were paying, what we inherited from Jet, there was very little margin on a voice customer.

We've been able now to move them over to our switch; and we control the backhaul of that, and we have a very favorable contract with, actually, Verizon who completes the LD on our VoIP customers, which allows for a nice margin there. As far as the backhaul, most of the construction of the backhaul wing that is going to carry all of the video in many cases as we consolidate head-ins, and the backhaul for the data and voice is in place, and we'll see a full year of that, advantages in 2012.

Okay, thank you very much.

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

Thanks. A couple follow-ups. Chris, maybe one for you. Early on or in your remarks you mentioned 2012 would be a challenging year -- a lot of moving pieces. You mentioned part of that was your goal to have increasing revenue and increasing subscribers. You did not mention EBITDA. Would the thought be that EBITDA can grow this year as well?

Yes, definitely. That's one of our key priorities, and certainly one of the components of our incentive plan is trying to have good growth in that area.

Okay, and then on the Vision project, probably for Earle, can you talk a little bit about, I think you mentioned that the 274 cell sites that you want to touch in 2012 was aggressive. What's the gating factor in getting the network turned up as early as third-quarter '12, and as you look at the project, now that you guys are probably full-bore on it?

Well, there are a couple parts of it. First of all, we have to upgrade the switch before we can really implement any of the upgrades at the cell sites, and we've already started that process; and we are optimistic that we'll have the switch updated some time mid-second quarter. Once that is in place, we can start installing and bringing up the new equipment at the individual cell sites.

So, the other gating issues -- and we actually started earlier on this -- is you've got to have significant backhaul. T1 backhaul doesn't work, so that's the reason why we had started our fiber-to-the-tower buildout actually almost two years ago now, and we are going to use a combination of our own buildout to our towers, microwave, which we are engineering right now, and then purchasing capacity from third parties for the remaining sites. We've been aggressively negotiating those for the last 90 to 120 days in anticipation of this, and actually have started signing some of those contracts right now.

The other big issue is, we have to evaluate cell-site-by-cell-site, are there any zoning issues that we're going to have to deal with, are there any load issues on the tower that we're going to have to deal with? And obviously, on those towers that we own, negotiations with the tower owner is pretty easy, but the two-thirds of the towers that we lease capacity on, we have started that process. The good news is that Sprint has kind of paved the way because many of the tower companies that we are on, Sprint is also on them elsewhere in the country, so it's not that we're having to educate them. They understand exactly what Network Vision is, and how it's going to impact the tower. So, we're moving through that process also. So, although there's many moving parts, and to try to accomplish this in a very short period of time is a big deal.

One thing that we constantly think about is -- we've got to stay competitive with AT&T and Verizon. We know how aggressive they've been, so failure is not an option here. And we've got a good team in place. We've gotten some extra resources lined up because of our long time in this business; and we have some very good relationship with contractors that we've been able to leverage. And then we're obviously using Alcatel Lucent as a primary contractor on this project; and we've had a long and good relationship with them.

I agree, failure is not an option. Focus is critical, so we're glad to hear that Sprint, if there was discussion in the metro PCS, stayed focused to getting Vision done, because that's obviously critical.

Another item on the Vision plan -- so you mentioned microwave. What percent of your sites do you think you'll put microwave on?

We're thinking it's going to be about 30%, and our goal is that there would never be more than three or four hops on the microwave; and this is going to be primarily focused on the edges of our network. And they will come into a tower that does have fiber to it. But as we've looked at it, you could almost kind of assume that the microwave will be the peripheral backhaul, but the core backhaul through especially the high-usage sites will all be fiber-based.

I assume from the tower negotiations, if you do put microwave on there, a lot of times that has to be on a different [RAD] center too, right?

That is correct. (multiple speakers)

So, a little more ramp [for] the microwave?

That is correct.

Okay, and then Adele, maybe an update on the financing of the program.

We have available to us under our current credit facilities a $50 million revolver and a $100 million accordioned. We have projections that indicate that we will need, over the course of this two years, as much as $125 million of incremental funding. So, I certainly could make that happen with our existing syndicated lenders, and that's certainly an option we'll be looking at. We'll also be looking at alternative options that may enable us to extend the maturities of this debt, and fully amortize the debt, which the current facility does not do.

Any thought on rates? Seems like the debt market is pretty open to a lot of these type projects.

It is, and I believe that we'll get a competitive rate there. As you know, we pay LIBOR plus 3% right now. I expect that it will be slightly higher than that, but hard to say at this point, until we're further along in the process, where we might end up.

Sure, that makes sense. And then maybe one more for Chris. We've heard it from a lot of the regional carriers, including Atlantic Tele-Network that just finished up just before you guys, but we've heard a lot of discussion that there is a lot of M&A buzz in the industry. Obviously, last weekend there was some buzz from somebody that might have been associated with you guys. What are you seeing in the M&A environment out there? Is there anything of interest to you guys?

Ric, we won't comment on speculative transactions. Our focus this year as we've said is going to be on the Network Vision project, which is, for us, historically a very large, very intense program. We have the cable investment that we have to finish up our upgrades, and then start improving the results in that. So, I guess our philosophy is, we'll certainly look at anything that may make sense, but I think this year our priorities are really going to be on the business we have and improvements in those areas.

I think that's the right focus. Thanks for that.

At this time, I'd like to turn it back over to Adele for any closing remarks.

Do we have any further questions at this point, Jevon?

Yes, ma'am. We do have a questions from Greg Burns with Sidoti & Company.

Hi, Adele. Just one last quick one on the D&A for this year. Is there any meaningful offset to the incremental depreciations on the amortization line from the Sprint prepaid going off a little bit?

Yes, there is. The Sprint prepaid, as we've talked about before, is essentially amortized over what's believed to be the life of the customer. So, you can assume that every month we assume that balance decreases by 1.8% as that percentage of customers [churn] off. So, essentially that amortization declines over the life of the customer. And if you need details on that, Greg, I can certainly share them, if I haven't done so in the past.

Okay, great. Thank you very much.

At this time, I'd like to turn it over to Adele for any closing remarks.

That's all we had. My information was included on the Press Release announcing this call, so please let me know if there's additional information you'd like us to include on future calls. Thank you for participating.

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