Why NTELOS Holdings Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of NTELOS Holdings (NASDAQ: NTLS  ) popped by nearly 11% during intraday trading Wednesday, then closed up 8% after the Virginia-based wireless carrier announced it has settled an outstanding revenue dispute with Sprint (NYSE: S  ) .

So what: The two companies have held a strategic network alliance since 1999, through which NTELOS sells access to its wireless network to Sprint. This affords both companies the ability to provide service to customers in Virginia and West Virginia. However, the original disagreement revolved around a data rate reset in the fourth quarter of 2011, as well as unrelated billing disputes raised in the third quarter of 2012.

Now what: According to the respective SEC filing, the resolution amends their original agreement to increase Sprint's minimum monthly payment to NTELOS from $9 million to $9.25 million, an amount that can be adjusted up or down going forward. As a result, and due to a reversal of the previously disclosed accrual relating to the disputes, NTELOS not only will recognize an additional $9.6 million in adjusted EBITDA for the current quarter, but also raised its adjusted full-year 2013 EBITDA guidance by roughly the same amount to between $150 million and $155 million.

All in all, then, it's fair to say today's boost looks appropriate with the stock trading at a reasonable 18.7 times trailing earnings and just 14.2 times next year's estimates.

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  • Report this Comment On September 26, 2013, at 11:12 AM, snommis69 wrote:

    There are analysts who claim Sprint does not intend to renew it's contract with NTELOS in 2015. I'm long on NTELOS, and follow it pretty closely, but haven't seen anything that indicates Sprint will not renew, however, the wording of the agreement states it automatically renews for three years unless one of the companies stops it. Just some more info.

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