Tidbits from latest Shentel Quarterly results:
From a competitive standpoint, we believe a merger would be beneficial in establishing a stronger competitor against the much larger AT&T and Verizon.
We showed the components of change of our Wireless customer base from September 30, 2017, to September 30, 2018. We had 785,500 postpaid and 255,500 prepaid subscribers at the end of current quarter, for a total of 1,041,000 customers. This includes 54,000 customers acquired as a result of the Richmond Expansion in February 2018 and 34,000 added from organic growth.
This represents growth of 8% in postpaid and 14% in prepaid as compared to the third quarter of 2017 and also a sequential improvement from the second quarter of 2018. At the end of the quarter, 21% of our customers were still on subsidized plans down from 22% at the end of the second quarter. 7.1% of our base upgraded their device in the quarter and of these upgrades, 98% were phones and 2% non-phones. Overall 8.5% of the postpaid base are now tablets and data devices.
We continue to have a positive poured in versus poured out ratio at 1.35 to 1 for the third quarter of 2018. You also see postpaid churn for the quarter of 1.84%, a 35 basis point improvement versus the third quarter of 2017 with churn in our core legacy area at 1.68%. Phone churn was 1.7% and non-phone churn was 3.38%. Our significant progress in churn was aided by the completion of the nTelos migration of subscribers in 2017, but somewhat offset by increases in line level churn as a result of the new Sprint rate card.
Prepaid gross adds increased to 38,500 and net adds increased to 3,400 on the strength of Boost customer additions. We are reaping the benefits of our strategic investments in the Boost brand through local advertising and the continued expansion of Boost stores throughout our service area. Additionally, prepaid churn for the quarter of 4.62% is a 63 basis point improvement over last year’s third quarter and ARPU gained traction as well.
I'd like to update you on our store expansion. By year-end 2018, we're on track to have 167 branded Sprint stores and 151 branded Boost stores, representing about 21% and 30% increases, respectively, since the end of 2017.
53% of homes past are now capable of an upgrade to DOCSIS 31 and broadband speeds of up to 1 gig per second.
More than half of 2018 capital is allocated for cell site upgrades and the expansion of our coverage in recently acquired territories.
Q On margins and expansion
...With respect to our expansion, we continue to build fiber wherever we can. In fact, we're going to build fiber to over 100 towers this year incrementally. And that does a couple of things for us, it helps grow our fiber footprint and create sales opportunities in the commercial and wholesale space, but it also drives cost out on above-market rates that we're paying primarily related to the nTelos acquisition. So we're pretty proud of the results we've had.
I think the best way to think about that is that, over time, we expect them to remain where they are or grow that, but that could be lumpy because as we've talked about, we like the towers up, right? And then we unleash what is proving to be a pretty robust and effective marketing arm and sales arm, and we spend a lot of time thinking about the timing of those two things, so there's not a lag there. So the opportunity for us is in these expansion territories where the penetration is very low when we acquired it.
As we build it out, it goes – just doing nothing heroic, we're getting that penetration up to what we're at now like 18% or so. I think that gives us a lot of potential upside. And the other part of that is, is that dependent – and obviously, of course, it's dependent on the pricing and the promotions and whatnot from Sprint. But if Sprint letting the promotional – promotions lapse, if that does, we start to see some of the same things that Sprint saw. I think that's, again, more margin expansion.
Q: in the transition of Voice Over IP, have you quantified how much in cost savings you expect to see?
In terms of the VoIP margin benefit, it's in the range of $2 million to $3 million annualized.
Q: Could you talk about the cost savings you had on these switches moving to VoIP facilities? Was this the remnants from nTelos or was this the CapEx program for the entire company?
Now, that was related to some Sprint architecture changes, it's company-wide, system-wide, not nTelos related...
Q: First on the expansion territories, I think you guys have had Parkersburg for a little bit over a year now. And presumably, you've begun kind of selling into that. I just was curious on whether Parkersburg was a meaningful contributor to gross adds? And then, also, if you could give us an update on when you expect to start selling into Richmond, when that network build-out is going to be complete?
Parkersburg in terms of a meaningful contribution to gross activations, I wouldn't characterize it as meaningful. The majority of the capital investment in the Wireless business this year is to wrap up the investments in the acquired nTelos territories. So we're seeing more contribution from legacy nTelos markets than Parkersburg. And with respect to the Richmond sliver, we really haven't begun in earnest our upgrade program in the acquired Richmond geography, and so that's more of a 2019 and 2020 opportunity for us than it is a 2018 opportunity.
Q: CapEx, obviously, came in a little bit lower than previous. You called out some equipment deliveries. Can you help us understand what's going on there a little bit? And then longer term on CapEx, what are your thoughts about 5G spending, particularly as you heard what Sprint's plans might be?
there is not really any meaningful story on CapEx relative to what was budgeted. I think the primary drivers, as noted in the scripted comments this morning, were really better Wireless equipment pricing. And as you can expect with the vast majority of our capital going into the wireless business, equipment pricing benefits that weren't budgeted or expected were meaningful. We had budgeted some fiber RUs, we ended up not needing, which was several million dollars and other just kind of cats and dogs related to timing, but there's no major headline there, so to speak.
In terms of our go-forward plans relative to 5G, I think the company has previously disclosed and I would reiterate that the 5G opportunity for us, as well as the threat, is relatively muted just given the geography that we cover and in particular, the fact that Sprint leverages the 2.5 spectrum band for most of their LTE advanced deployments and the 5G opportunity that they see. And that's a relatively small portion of our macro network, it's 23% versus 70% for Sprint in the more urban areas. So you shouldn't expect to see a big increase in CapEx related to 5G for us.
Q: And there's a spectrum lease agreement between Sprint and T-Mobile announced recently. Are you familiar with that, the agreement? Obviously, it's outside of the auspices of the transaction, but will that have any impact on your ability for spectrum?
Yes, we're aware. And no, we don't believe it will impact our spectrum strategy.