Shenandoah Telecommunications (SHEN) Q3 2020 Earnings Call Transcript

Shenandoah Telecommunications (SHEN 2.08%)
Q3 2020 Earnings Call
Nov 06, 2020, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, everyone. Welcome to Shenandoah Telecommunications third-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.

John Nesbett -- IMS, Investor Relations

Good morning, and thank you for joining us. The purpose of today's call is to review Shentel's results for the third quarter of 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 website, 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 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, reminds you that this conference call may include forward-looking statements subject to certain risks and uncertainties.

These may cause our 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. Go ahead, Chris.

Chris French -- President and Chief Executive Officer

Thanks, John. We appreciate everyone joining us this morning and I hope everyone is healthy and safe. As reflected on Slide 4, we had another strong quarter of Broadband results with 6,000 net high-speed data additions driven in part by record Glo Fiber net adds of approximately 1,500. Together, our incoming cable and Glo Fiber year-over-year organic subscriber growth rates outpaced our public company peers, and with the strong sales and fiber construction momentum we have achieved, we're excited for the future growth of our Broadband business.

Dave will provide more detail on these outstanding results later on the call. Turning on Slide 5. Highlighting our commitment to shareholder returns. We announced last week a 17% increase in our annual cash dividend to $0.34 per share consistent with the growth of earnings per share driven by strong results from our Wireless business.

The dividend marks the eighth consecutive year of an annual increase and is also our 61st consecutive year of dividend payments. Moving to Slide 6. I'd like to transition now to the strategic direction we're taking following T-Mobile's exercise of their purchase option of our Wireless business. Over our long history, Shentel has continued to evolve by investing in the latest technologies to meet the growing demand for telecommunications services in the rural markets that we serve.

While we have mixed emotions about divesting our Sprint affiliate business the transaction will allow us to fully focus our resources on our transition to a regional integrated broadband communications company. Our new Glo Fiber and being fixed wireless broadband initiatives are the latest highlights in a decade long strategy that began with the acquisition of several rural incoming cable properties, and an aggressive middle-mile fiber expansion in our region. We're very pleased with our first year of Glo Fiber results having added 2,800 customers as of September 30, 2020., and our first Glo market in Harrisonburg, Virginia achieving a penetration rate of 16% both well ahead of our business plan. During the third quarter, we entered six new Glo Fiber franchise agreements expanding our target market by 33% to117,000 homes passed.

In October, we also launched a new fixed wireless broadband service under the being brand name in the Virginia counties of Albemarle and Rockingham is being serviced offers high-speed Internet access ranging from 25 megabits to100 megabits per second to underserved rural homes without a cable or fiber-based service available. Although, we have a very small sample size the initial response to our targeted launch has been very positive. We believe the Beam service will be a big step toward solving the long-standing digital divide between urban and rural broadband Internet connectivity in our markets. To further our potential coverage area and supplement our capacity, we purchased an incremental spectrum in the recent CBRS auction for 16 million.

This investment along with the development of the 2.5 gigahertz spectrum purchased in 2019 will increase our target addressable market to approximately 425,000 homes passed. With a complementary mix of state of the art cable, fiber, and now fixed wireless technologies, our Broadband business will be able to serve over 700,000 homes in the coming years and create a platform for sustainable long-term growth. As we transition to a Broadband Centric Company, we're analyzing the resources and capital structure needed to support our aggressive expansion plans, including the use of proceeds expected from the wireless sale. Beyond reserving cash to pay income taxes from the sale and fully repaying the term loans of our credit facility, we plan to address the remaining use of proceeds after the value of our Wireless business is determined in the upcoming appraisal process.

On a similar note and timeframe, we expect to provide guidance on a new credit facility, and the level of corporate expenses needed to support the Broadband business long term. Turning to Slide 7, I'll provide a brief update on Sprint's merger with T-Mobile. As previously announced, T-Mobile exercised their option on August 26, to purchase the assets and operations of our PCS business for 90% of the entire business value as outlined in our affiliate agreement, and to be determined through an appraisal process. We also previously announced that we had provided T-Mobile a notice of dispute relating to the appraisal framework and other contractual terms related to T-Mobile pending acquisition.

Earlier this week, we aligned in principle on certain elements of their appraisal and sales process. Under the agreement in principle, the appraised valuation will be performed as of July 1, 2020. The appraisal will also evaluate Shentel's discontinued wireless operations as though Shentel were still an affiliate of Sprint with access to its brands and spectrum without any regard to T-Mobile as the acquisition of Sprint or its subsequent integration efforts. It's currently expected that the appraisers will complete their assessment of the entire business value on or about January 20, 2021.

The transaction is expected to close in the second quarter of next year, subject to receipt of customary regulatory approvals. 2020 has presented many challenges for our organization, and I could not be more pleased with how our employees and management team have responded. Our Company's accomplishments bode well for our ability to meet the challenges of the coming months and have as well prepared for the next phase of Shentel's long history of growth and change. With that, I'll now turn the call over to Jim to review the details of our financial results.

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Thank you, Chris. And good morning, everyone. Before I'll review our financial results for the third quarter, let me walk you through the accounting changes we made regarding the pending sale of our wireless segment. Please refer to Slide 9.

After T-Mobile exercised their option to purchase our Wireless assets and operations on August 26, we concluded that the sale would be consummated within one year and therefore, our Wireless assets and liabilities are presented as held for sale, and our consolidated balance sheet and the wireless net income is now presented as discontinued operations in our consolidated statement of comprehensive income. On a similar note, the Wireless cash flows have been separated and shown is operating best they can finance cash flows from discontinuing operations in our consolidated statement of cash flows. Prior period results and balances have been retrofit -- retrospectively revised and presented to discontinued operations and assets held for sale for comparability. We have ceased depreciating and advertising assets held for sale prospectively starting in September.

In addition, certain intercompany expenses have been reallocated between segments to conform with the accounting standards on discontinued operations, and an income tax provision has been applied separately to continuing and discontinuing operations. Lastly, our outstanding term loans have been reclassified as current as of the current liability in our consolidated balance sheet. Although not a wireless segment liability that will be transferred, there is a mandatory prepayment requirement in our credit agreement. Upon the sale of wireless, interest expense related to the term loans is included in net income from discontinued operations, and repayments of our term loans are presented as cash used in financing activities from discontinued operations.

Please refer to footnote 2 in the 10-Q we filed this morning for more details on the accounting changes regarding our wireless segment. In addition to these accounting changes, we will no longer disclose wireless operating statistics, nor provide comments on the wireless operations. Please now referred to Slide 10, to discuss financial results for the third quarter. Consolidated revenue was $55.2 million in the third quarter of 2020 as compared to $51.8 million in the third quarter of 2019, due to growth of $2 million in our broadband segment and $1.4 million in our tower segment.

Consolidated adjusted OIBDA for the quarter was $14.6 million, compared to $12.1 million in the same period last year. The increase was due primarily to growth in towers, and a reduction in corporate expenses. Turning now to our segments in Slide 11. Revenue in our Broadband with $2 million or 4.2% to $50.7 million in the third quarter 2020, driven by an increase of $3.8 million or 11.2% in Cable Residential and SMB revenue, due primarily from a 19.8% increase in broadband data RGUs and lower bundling discounts and promotions.

Fiber Enterprise and Wholesale revenue declined 500,000 due to a one-time adjustment of $1.7 million to advertising revenue, more than offsetting the $1.2 million growth in monthly recurring revenue from an increase in enterprise and backhaul circuits. Our LED revenue declined 900,000 or 16.8%, primarily from lower OIBDA primarily from lower DSL subscribers in intercompany service. Broadband adjusted OIBDA for the third quarter declined 300,000 to $19.6 million from the same period a year ago. The decline was primarily due to the one-time adjustment of $1.7 million as the Fiber Enterprise and Wholesale average revenue, and 600,000 dilution from the launch of Glo, Glo Fiber, and Beam.

Excluding these impacts, adjusted OIBDA was 10.2% and the adjusted OIBDA margin would have been 41.8% On Slide 12, our segment revenue grew 43.3% to $4.5 million, and adjusted OIBDA grew 42.9% to $2.9 million for the third quarter 2020, due to 8.9% growth in tenants and 37.9% increase in the average lease rate due to amendments to the intercompany leases. Moving to Slide 13. We ended the quarter with $706 million in debt with an effective interest rate of 2.3% and $259.1 million in total liquidity, including $148 million in cash and equivalents. Cash grew$40.4 million sequentially in the third quarter.

Our discontinued wireless operation continues to generate strong free cash flow with $165million year to date. Our transitioning to date, please note that our share repurchase program has expired and will reevaluate, reinflate for many after the largest valuation is determined in the first quarter of 2021. And now, I'll turn the call over to Dave.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Thanks, Jim. And good morning, everyone. I'll begin on Slide 15, with our incumbent cable business in which total RGU grew a robust 7.8% year over year in the third quarter to approximately181,500, compared to roughly 168,400 in the same period in the prior year. As Chris pointed out at the start of the call, we added roughly 4,500 net broadband data RGUs in the quarter and ended the quarter with 96,000 data RGUs which is an impressive 16.4% increase to the prior-year period.

We're also very pleased to report that our incumbent cable broadband data penetration increased from 40% in the third quarter last year to 46.2% this quarter on the continued strength of our new broadband speeds, rate card, service improvements, and increased demand related to COVID-19. Incumbent cable broadband data churn declined 9-basis-points to 1.88% in the third quarter, representing the 14th consecutive quarter of year-over-year churn improvement. Excluding the impact of deferred non-paid disconnects from the second quarter, third-quarter data churn and our incumbent cable business would have been 1.73% In those markets. Broadband Data average revenue per user increased slightly versus the prior year to$77.66 as our new PowerHouse-branded rate card leveraging an improved valued proposition based on our DOCSIS 3.1 speed upgrades, now comprises 70% of the base.

At the end of the third quarter 2019, 37% of incumbent cable data customers run rate plans of 10 megabits per second or less, and now 75% were on plans at 25 megabits per second or greater, with an average subscriber download speed of 79 megabits per second, which is well beyond the reach of our DSL competitors. Turn into Slide 16. We continue to gain momentum with our new Fiber to the home edge-out strategy Glo Fiber. Glo had approximately 4,000 total RGUs at the end of the third quarter with a 12.5% broadband data penetration rate comprised of roughly 2,800 unique broadband data customer relationships.

As Chris mentioned at the start of the call, our Harrisonburg, Virginia market has achieved 16.4% broadband data penetration in aggregate with some of our most mature neighborhoods in that community already achieving 30% penetration. We continue to see extraordinarily low churn in our Glo Fiber high-speed data product with only that 9.8% churn in the quarter. ARPU was down sequentially to $80.03 in the quarter as a result of new activation revenue time. We're seeing a higher percentage of new subscribers electing higher speeds with 38% of new subs electing the 1 gig speed tier in this quarter.

Our streaming TV and voice services continue to perform well with 26% and 14% attachment rates in the quarter respectively. Slide 17 depicts the status of our active and approved Glo Fiber markets as of the end of the third quarter. Construction efforts are progressing very well, and also exceeded our expectations in the quarter in spite of concerns of delays related to COVID-19. Approximately 9,200 new residential and small business passings were released to sales in the quarter, with a total of 20,600 addresses constructed year to date, and 22,300 overall at the end of September.

We expect to have approximately 27,300 total new target passings released to sales by the end of the year. The third quarter was a productive one for our new market development team as well. We added new Glo Fiber franchises in the cities of Frederick, Maryland, Charles Town [inaudible] in West Virginia, which added over 15,000 new target passes. Then in October, we successfully added three additional markets, including Martinsburg, West Virginia; Brokenstraw Township, Pennsylvania, and Blacksburg, Virginia adding approximately 13,500 additional target passes.

In total, Glo Fiber has approved franchise target passes of approximately 117,000 with a strong funnel of additional markets and our edge-out strategy heading into the fourth quarter. On Slide 18. We have depicted our Fiber, cable, and fixed wireless broadband footprint. This map really helps illustrate the integrated nature of our broadband networks and how operating leverage will increase over time given the overlap in the adjacency of our operations and our growing footprint.

As Chris mentioned at the start of the call, we're very excited to have launch Beam Internet, which is our new fixed wireless broadband service in early October. The beam will leverage our newly acquired spectrum and target approximately 425,000 unable households with speeds of up to 100 megabits per second. We'll have roughly 25 macro sites on air by the end of this year as we continue to bring critical high-speed Internet access to the underserved in our region. We will continue to update you on the status of both our Glo Fiber and Beam Internet expansion plans as we progress in our market development and construction efforts toward the launch of commercial services over the next several quarters.

Combined our multipronged broadband growth strategy will more than triple homes pass to over 700,000 in the next five years. As summarized on Slide 19, we now have product offerings to serve a variety of market dynamics with our Glo Fiber service targeting higher density urban markets, and Beam fixed wireless service targeting lower density rural areas. The common denominator in all of our offerings is to provide the leading high-speed Internet service available in each market, combined with superior local customer service. With projected terminal penetration rates of Beam and Glo in the low to mid 30% range and incumbent cable penetration in the mid 50% range, we expect our broadband business to have industry-leading sustainable growth for the next several years.

Turning to Slide 20. Total towers and small cells increased to 230 in the quarter. The total tenants increasing 8.9% year over year to 414. We had a backlog of 119 open orders related to upgrades as existing tenants were the addition of new tenants at the end of September 2020.

And finally, on Slide 21, we provide an update to our 2020 capital spending results and guidance for our continuing operations. We're no longer providing wireless guidance as a result of the pending sale and discontinued operations presentation. Capital expenditures were $82.7 million through the third quarter of 2020, compared to $48.8 million at the end of the third quarter in 2019. The primary driver of the year-over-year increase relates to the investments in our Glo Fiber and Beam Internet fixed wireless broadband initiatives.

For the full year 2020, our revised guidance is now 104 million to 116 million, as we capitalize on our strong liquidity and cash flow generation to invest aggressively in the expansion of our fiber, cable, and fixed wireless broadband networks. Thank you very much. And operator, we're now ready to take questions.

Questions & Answers:

Operator

[Operator instructions] Your first question comes from the line of Ric Prentiss with Raymond James.

Ric Prentiss -- Raymond James -- Analyst

Thanks. Good morning, guys. Glad to hear you're doing Ok during these crazy times.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Good morning, Ric.

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Good morning, Ric.

Ric Prentiss -- Raymond James -- Analyst

A couple of questions. First, on the wireless process. So have all three of the appraisers been selected to get started on their work.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Ric that's going to happen here before the month is out.

Ric Prentiss -- Raymond James -- Analyst

Ok. And with the framework in place, what's the expectation on how they'll be able to do that work. Is it just cash flow coms? What was the expectation of how they'll perform that appraisal process?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Likely it's a combination of factors Ric, DCF would be among them, present transactions, comps, etc. But, we don't want to comment too much on how we're applying too much on how we think they ought to conduct the process. Obviously, because we don't want to taint the process. Likely, it's a combination of factors.

Ric Prentiss -- Raymond James -- Analyst

And how would the expansion territories be addressed in that? I know it's assuming that the T-Mobile/Sprint deal had not happened. So, is there a thought that the expansion territories have to be addressed in that valuation?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Yes, that's right. Jim, do you want to take that one.

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Yes. Ric, so we expect the appraiser who wants to look at our 10-year plan and the growth that we're expecting from the expansion markets which as you we're a big part of our growth strategy going forward. So there will be factored in from a DCF perspective in that respect. And there's also a mechanism within the in the affiliate agreement in the framework that if for some reason the appraised value for the expansion markets -- was multiple for the expansion market on the EBITDA is left in the book value, we would -- they would bump the value for the expansion markets up to the net book value as of the valuation date.

So there is a -- the mechanism was intended to make sure that we don't lose the investments that we've been making since we acquired those markets.

Ric Prentiss -- Raymond James -- Analyst

Right. It makes sense. And Chris, you had mentioned you look at the proceeds. Obviously, you have to repay the term loan and then income taxes.

Any indication of what taxes might be borne, or what the basis is on the wireless business.

Chris French -- President and Chief Executive Officer

Not that we've publicly said yet. I don't know, Jim if you want to add another color. We have not disclosed the cost basis on those assets.

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Yes. As Chris said, we have not disclosed the basis, but we will. Once the value was determined, it looks like it's going to be the second half of January. We will disclose not only value, but what we think the tax proceeds would be, and what the tax impact will be.

Ric Prentiss -- Raymond James -- Analyst

Make sense. Ok. I think Chris, you also mentioned guidance, and financing, and corporate costs. Obviously, that would be one area that you have to look at.

What's the thought of first-time frames as far as looking at the corporate cost. How do you rightsize the organization, and how should we think about that timing and rough magnitude of what that dollar level might be.

Chris French -- President and Chief Executive Officer

Yes. We're obviously, looking at that now. And time frame will be about the same as once we get clarity on the proceeds from the sale, and the tax effect and all that. So should be the first or second quarter of next year.

Ric Prentiss -- Raymond James -- Analyst

Ok. And then, as we think about the Tower business. How critical is that to keep with the Broadband business. We've seen some transactions even just this week, American Tower paid 30.4 times to tower cash flow for a private tower company.

So how should we think about the Tower business? Is it's something you want to keep, you need to keep, or is it something that might get monetized as well.

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Yes. I would say, we'll take it one step at a time here. Wireless is in the batter's box right now. And then, we'll determine what to do with towers down the road.

I don't think it's strategic to us. I think we've said in the past. But the towers can be a valuable source of funding if we're doing an acquisition, and we wanted to monetize that can help us fund an acquisition. So so we're thinking about it in those [Inaudible].

Ric Prentiss -- Raymond James -- Analyst

Last one. Just to pick up on that comment. Are there any transactions out there that in the telco, cable, broadband space, how's that market look in the pipeline for potential acquisitions?

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Ric, we continue to look for opportunities both a small tuck-in opportunity like Big Sandy that we completed last year, and there's a couple of those that we're competing on as we speak today. And we're also looking at more transformative opportunities as well. They don't come along as frequently, but we're poised to be opportunistic as data for it.

Ric Prentiss -- Raymond James -- Analyst

Great. Thanks, guys. Appreciate it. Have a good day.

Stay well.

Chris French -- President and Chief Executive Officer

Thanks, Ric.

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Thank you.

Operator

Your next question comes from the line of Zack Silver with B. Riley.

Zack Silver -- B. Riley Securities -- Analyst

Ok. Great. Thanks for taking the question. The first one, just following up on some of Ric's questions around the appraisal process.

Is it still, I think spread agreed to wave around 250 million of cash payments for management fees. Is that something that is factored into the appraisal framework?

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Zack, it actually won't be a part of the appraisal framework. Is it much more will be like a working capital purchase price adjustment once the value stringer if any will be added to the ultimate value. But it will be done after the fact, not as part of the appraisal process.

Zack Silver -- B. Riley Securities -- Analyst

Ok. That makes sense. And then, you find that the term loans require repayment upon closing at the Wireless sale. When you think about how the new Shentel looks, how are you thinking about capitalizing that business from a leverage perspective.

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Zack, we're still putting pen to paper on that. But I would say in general you probably can expect to leverage similar to the leverage that we have today in the same range that we have today. We will be growing the business, the broadband business as aggressively as Dave and Chris have outlined on the call. So we will put something in place that will allow us to make sure we have adequate funds to keep funding that business and keep growing the business,

Zack Silver -- B. Riley Securities -- Analyst

Got it. And then at a more high level. It seems like that alongside, COVID accelerating demand for high-speed broadband and the relative attractiveness of this business. There's been a lot of investment from incumbent players, and also new entrants and you guys don't have a hybrid approach there.

How do you see it? How do you see the competitive environment evolving in your market, and what gives you the confidence that you can compete with some of the larger incumbents, or others pursuing fixed wireless technology in those markets.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Hey. Good morning, Zack. Yes. Look we have a -- I think a track record over the course of the last year that hopefully, it gives you confidence in our ability to do that with the investments we've made and the results we're achieving.

We're a well-known Company in our region and the urban markets get rural quickly here in this part of the country. And so, I think having a multipronged broadband Strategy here leveraging three distinct technologies is the absolute best way to go. We have been -- as I think you would observe, we've been aggressive in acquiring protected spectrum assets in our region. And you've probably not noticed the overlap of the 3.5 we acquired with our incumbent cable markets as well.

So we have both an offensive and defensive strategy with our three-pronged strategy here. And I'm quite confident in our ability to take market share and defend our existing market share in the near future.

Zack Silver -- B. Riley Securities -- Analyst

Got it. And then last one for me. I'd be incumbent on the broadband penetration and that incumbent cable business. I mean -- I think expanded at one of the better rates that we've seen in this quarter.

Can you talk about where the new subs are coming from? Is it folks upgrading from DSL to broadband Nevers. And just what were -- are those new additions coming from.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Yes. I think it's both of those categories in addition to folks that perhaps were leveraging their cellular data plan, and trying to tether off that. Obviously, we're capitalizing on the tailwinds of the pandemic and work and study from home. But our investments in both our network, and our new rate card, and our operations all came at an outstanding time quite frankly.

So I think I think we're executing better. I think we've got a better price-value equation now than we did before. I think you see that as evidenced in 14 consecutive quarters of churn reduction. Our NPL scores are through the roof.

And not so long ago, they were pretty poor. So I think if you consider the operational momentum that we have in addition to the tailwind of the demand factors of COVID, I think they've all come together quite nicely here to produce those results. But in terms of where the share is coming from, it's stealing it from our DSL competitors. It's taking it from folks that we're tethering to say their plans may have been using satellite previously.

And last but not least to your point, there are probably some broadband numbers that have added service. The last we didn't make a comment about this in the script Zack, but the other aspect that the growth is, we added 700 net prepaid subs in the quarter. That's part of that overall number. And that's to deal with our more credit-challenged subscriber base, and we've -- we added a rate plan in the midst to COVID that we've allowed persisting here through the year.

And we're in the midst of revamping the overall prepaid strategy and expect to see good growth through those investments as well.

Zack Silver -- B. Riley Securities -- Analyst

Got it. That's helpful. Thanks, guys.

Operator

[Operator instructions] Your next question comes from the line of Hamed Khorsand with BWS Financial.

Hamed Khorsand -- BWS Financial -- Analyst

Good morning. Just building on that competition theme. What -- have you guys done any analysis and what are your expectations as far as the cost of acquisition beyond just the cost per passing.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Yes. Of course. Good morning, Hamed. For which category are you questioning.

All three?

Hamed Khorsand -- BWS Financial -- Analyst

Really just the Glo Fiber and the Beam.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Yes. So the cost to connect the Glo Fiber customers is in the $800 to $900 range, Hamed, all in. And on Beam, it's roughly half of that.

Hamed Khorsand -- BWS Financial -- Analyst

What usually the enticement is to get customers to switch over. Is it just faster.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

We're faster. We've got a much more straightforward go-to-market strategy with respect to our value proposition. We've got three-speed choices. We're not playing games or gimmicks on introductory prices that raise after expiration.

People recognize that this offering is coming from a regional company, and generally, around here, folks like to spend the dollars with companies that reinvest in their communities. And candidly, there's just Comcast fatigue. Folks are very pleased to have a choice. All of these markets are non-files Verizon markets thus far that we've launched in.

And so they're there. Their option is really if they want a robust high-speed broadband product that's either us or Comcast.

Hamed Khorsand -- BWS Financial -- Analyst

They're having multiple options. What are the chances here just expanding your coverage region beyond what we're used to?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Well, I think with our Glo strategy, we've clearly demonstrated a track record here of adding new markets every quarter, and we'll continue to do that. And if you take a look at the map and you just look at where we started, and where we are now, you're seeing us edge-out further and further beyond home base, so to speak. So I think there is a strong likelihood that when you look at the combination of the spectrum footprint on that map and the presentation, and you look at the markets that we've added for Glo, I think you can expect us to continue to grow the footprint. Having said that, we're very conscious of taking advantage of operating leverage, and operating synergies.

And we don't want to pluck -- pick up and plunk down five states away with a greenfield bill. That probably would not be something you should expect us to do. But edging-out from the home base and the center of our universe is something we're very focused on.

Hamed Khorsand -- BWS Financial -- Analyst

Ok. Thank you.

Operator

Your next question comes from the line of Kent Newcomb with Wells Fargo.

Kent Newcomb -- Wells Fargo Securities -- Analyst

Good morning. Can you hear me ok?

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Yes. Good morning, Kent

Kent Newcomb -- Wells Fargo Securities -- Analyst

Good morning. My question is on the dividend. You recently raised quite a bit. I guess I'm under the assumption that you expect to maintain that dividend after the sale of wireless.

And I guess the question would be -- are the cash flows sufficient to do that and continue your investment build-out, or perhaps, obviously, going to use proceeds from the sale to invest as well.

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Yes. Kent we have a long history of having an annual dividend. We will probably right size that according to the broadband tower businesses that we own -- that will own at that this time next year. So it will likely adjust according to the cash flows and the earnings coming from those businesses.

But yes, we think we're in a strong liquidity and cash generation prospect here that we can do both. We can return value to the shareholders, and we can continue to invest in our new Glo Fiber and Beam products.

Kent Newcomb -- Wells Fargo Securities -- Analyst

Thank you.

Operator

You have a follow-up question from the line of Ric Prentiss with Raymond James.

Ric Prentiss -- Raymond James -- Analyst

Thanks, guys. I found Slide 19 really interesting. I think it lays it out quite well. A couple of questions related there.

What kind of speeds will you be offering the Beam customers.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Hey, Ric. Our initial rate plan is entry at 25 megabits download and then up to 100 megabits download. Depending on what -- where you are with respect to the tower and what our signal propagation characteristics looked like. Over time, we expect to offer higher speeds when CPE advancements continue to develop here.

But out of the gates, we're offering three tiers 25, 50, and 100.

Ric Prentiss -- Raymond James -- Analyst

Ok. Great. And then, as you think about what markets get Glo Fiber versus what gets Beam, is there a breakpoint where fiber density as far as population per square mile says, no time to go Beam versus Fiber. What would that breakpoint basically be?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Yes. Look there's a combination of factors here that we evaluate. Certainly density, and whether its route mile or square mile density is one of them. Another fact that we look at is just what the competitive landscape looks like.

So for instance, we are not targeting cable areas, in other words, folks that have a choice from a Comcast or a Cox or someone with our fixed wireless strategy. We're targeting areas that only would have maybe DSL or satellite for a local unlicensed spectrum wireless ISP as they're viable, most viable broadband choice. So it's a function of density. It's a function of competition.

And it's also a function of other socioeconomic factors, and poverty rates, and all kinds of other factors as we look at the level of investment. As you can appreciate in that slide, it's a much greater upfront investment deploying fiber, than it is deploying. The point, being which is a much more capital-efficient technology. So we want to have a little greater certainty on the Glo Fiber side of achieving our penetration rate objective as a result.

Ric Prentiss -- Raymond James -- Analyst

Great. Because I think the trust will market in the late hours that there's a much larger addressable market for the Beam side than the Glo side of things right now.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Yes. That's right. And the other factor Ric that we consider candidly is, in these franchise permits, we're getting those for our ability to offer video service. Obviously, there's going to be a point in time in the not too distant future, we're not entirely certain when that is.

You're probably not either, but we all have a pretty good inclination that we're heading to a streaming-only universe. But to date, we have not wanted to put ourselves in a position where we didn't have a viable video product in the bundle, particularly when competing with Comcast. But I imagine there will be a point in time at which data only would be a viable strategy, and that we could achieve the penetration rates, and churn rates, and broadband data or oppose that would support the IRR as we expect to get with a three product bundle strategy. And to that extent, it would enable us to get out of some of these more urban centers, and into suburban areas that might be out in the county, which to date, we've been reluctant to do because that would obligate us to a build strategy for the video franchise for the whole county, which we obviously, don't want to obligate ourselves to do giving the get given the density characteristics.

So I actually went back to change over time as the market evolves.

Ric Prentiss -- Raymond James -- Analyst

And obviously, T-Mobile has launched the T vision product which is content related to streaming but also to be a portal for fixed wireless broadband. Do you see entering that content side of the business or offering content bundles to try and push the penetration rates, or you don't even need it given the competition level that you're going against? for the fixed wireless strategy.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

For the fixed wireless strategy, we don't have any plans right now to offer a bundled video offering of any kind. That could change over time, but we don't have any plans at present.

Ric Prentiss -- Raymond James -- Analyst

Ok. Thanks, guys.

Operator

It appears that there are no additional questions. I would now like to turn the conference back to Jim Volk, for closing remarks.

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

I'd like to thank everyone for joining our call this morning. And we will keep you posted as we make progress both on the wireless side with the appraisal process, and of course, with our broadband and tower businesses. Thank you for joining the call today. Have a good day.

Operator

[Operator signoff]

Duration: 44 minutes

Call participants:

John Nesbett -- IMS, Investor Relations

Chris French -- President and Chief Executive Officer

Jim Volk -- Senior Vice President, Finance, and Chief Financial Officer

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Ric Prentiss -- Raymond James -- Analyst

Zack Silver -- B. Riley Securities -- Analyst

Hamed Khorsand -- BWS Financial -- Analyst

Kent Newcomb -- Wells Fargo Securities -- Analyst

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