Shenandoah Telecommunications (SHEN) Q1 2021 Earnings Call Transcript

Shenandoah Telecommunications (SHEN 0.93%)
Q1 2021 Earnings Call
Apr 30, 2021, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, everyone. Welcome to Shenandoah telecommunications first-quarter 2021 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr.

Kirk Andrews, director of financial planning analysis for Shentel.

Kirk Andrews -- Director of Financial Planning Analysis

Good morning and thank you for joining us. The purpose of today's call is to review Shentel's results for the first quarter of 2021. Our results were announced in a press release distributed last night and the presentation we'll be reviewing is included on the 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 today, are Chris French, president and chief executive officer; Dave Heimbach, executive vice president and chief operating officer and Jim Volk, senior vice president of 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 and remind 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. Therefore, we have provided 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.

And with that, I'll now turn the call over to Chris. Go ahead, Chris?

Christopher French -- Chairman, President, and Chief Executive Officer

Thanks, Kirk. We appreciate everyone joining us this morning, and hope everyone is staying healthy and safe. I'm pleased to report that we started 2021 with a strong quarter of growth in both our operational and financial results. I'd like to start with the leading indicators for our financial growth.

As reflected on Slide 4, we added approximately 13,000 new passings in the first quarter, with total passings now just under 260,000. Our diversified last-mile broadband networks grew an impressive 48,000 passings year over year. Our Glo Fiber branded fiber-to-the-home business, added 5,800 new passings, including the launch of service in the Virginia markets of Salem during the first quarter and Roanoke and Lynchburg in April. We also added approximately 5,800 passings with our Beam service during the quarter, with service now available in five counties in Virginia.

Lastly the completion of the acquisition of Colane Cable on December 31, added over 1,000 homes passed to our incumbent cable network. Turning to Slide 5, broadband data net additions increased by over 4,200, or almost 62% from the first-quarter 2020. With the tailwinds from COVID slowing, our incumbent cable net additions of 2,500 have returned to pre-COVID growth levels. However, Glo Fiber and Beam now make up more than 40% of the broadband data net additions, keeping our organic penetration growth rates among the industry leaders.

We believe that we have a superior value proposition relative to our competitors in all markets we serve, as reflected by the outstanding broadband data churn results across all our services. Construction payments of our Edge Out network expansion in our hyper local marketing and customer service are critical components for driving sustainable double-digit revenue growth that Jim and Dave will provide more details on later in the call. Moving to Slide 6, I'd like to transition now to provide a brief update on the pending sale of our Wireless assets and operations. The Hart-Scott Rodino waiting period expired on April 26, without the Department of Justice is taking action, thus allowing the transaction to be consummated pending regulatory approvals from the Federal Communications Commission and the Public Service Commission of West Virginia, which we expect to secure in the next 60 to 90 days.

The asset purchase agreement with T-Mobile is expected to be executed during the same timeframe, and we expect to close on the sale in early third quarter. Related to the pending wireless sale, on April 5 we announced an organizational restructuring plan that will reduce our workforce by approximately 340 employees or 30% of our total base. About 90% of the reductions are employees who support Wireless operations and who will not automatically transfer to T-Mobile as part of the transaction. We are coordinating with T-mobile to assist in transitioning to them as many of the affected employees as possible following the closing of the sale.

We are also proactively providing career transition services and severance pay and benefits to those not hired by T-Mobile, to assist with the disruption uncertainty for the affected employees and their families. The first wave employees will exit in May, and we have recognized restructuring cost in the first-quarter results. We're continuing and discontinued operations of approximately 600,000 and 200,000, respectively. Most of the employees impacted by the workforce reduction will exit following the closing of the sale and any required transition services.

We expect to realize annualized run rate operating expense savings for continuing operations of approximately 4 million. With that, I'll now turn the call over to Jim to review the details of our financial results.

Jim Volk -- Chief Financial Officer

Thank you, Chris, and good morning everyone. Please refer to Slide 8 to discuss our financial results for the first quarter. Broadband revenue grew 10.8% to 55.2 million, driven by an increase of $5.9 million or 16% in residential and SMB revenue, due primarily from a 24.1% increase in broadband data RGUs, and an increase in video ARPU of $6.28. RLEC and other revenue declined 700,000, or 15.2%, to 3.7 million, primarily from fewer DSL subscribers and lower government support and intercompany flow service.

Broadband adjusted OIBDA for the first quarter grew 1.7 million, or 8.3%, to 22.4 million from the same period a year ago. The revenue increase of 5.4 million was partially offset by 2.1 million increase in compensation expense, 900,000 in higher software and professional fees, and 500,000 in higher programming and retransmission fees. The compensation expense increase was due primarily from increased staffing to support the growth of Glo Fiber and Beam and lower capitalized labor. We passed along the increases in programing and retrans fees to our customers in January.

On Slide 9, tower segment revenue grew 25.1% to $4.7 million and adjusted OIBDA grew 40.5% to 3.2 million for the first-quarter 2021, due to 8.6% growth in tenants and 14.7% increase in the average lease rate, due to amendments to the intercompany leases. Moving to Slide 10, consolidated revenues grew 12.3% to 59.7 million in the first-quarter 2021. Consolidated adjusted OIBDA for the quarter grew 19.1% to 17.1 million. The increases were primarily due to strong broadband and tower revenue growth.

Turning now to the full year 2021 outlook on Slide 11. We are reaffirming our 2021 outlook. We expect consolidated revenues to be 241 to 248 million, and adjusted OIBDA to range between 69 and 76 million. Please note, we expect the corporate expense savings from the restructuring that Chris discussed earlier, to be back weighted to the second half of the year.

Moving to Slide 12. We ended the first quarter with 689 million in debt with an effective interest rate of 2.2% and 304 million in total liquidity. Cash and cash equivalents grew sequentially by 33.8 million to 229 million due to strong free cash flow of 74 million from our Wireless segment, that we report as discontinued operations. Continuing operations had $30 million of negative free cash flow in the first quarter, driven primarily by 25 million of capex and negative adjusted OIBDA for Glo Fiber and Beam, and 13 million in working capital changes.

With the pending Wireless sale now expected to close in early third quarter, we're providing guidance for 2021 cash sources and uses on Slide 13. Most of the cash flows have been previously disclosed, but there is one cash flow component that I'd like to highlight. We expect the 110 to 120 million of free cash flow from discontinued operations as a source of cash. This is an addition to the previously disclosed Wireless sale proceeds.

This assumes we continue to own the Wireless business through the second quarter and incur about 27 million in transaction and restructuring expenses at or around the closing. This favorable change along with minor updates to prior estimate -- estimates will likely result in cash at year-end ranging from 62 million to 100 million before the annual dividend, neural changes in working capital and any draws on our new credit facility. We have been working with our lenders in establishing new credit facility to replace the current facility that will be paid in full and terminated at the closing of the Wireless sale. We anticipate $400 million facility consisting of 300 million in delayed-draw term loans and 100 million in revolving -- in a revolving line of credit.

We expect the new facility to close on the same day as the Wireless sale, but do not expect to draw the new facility until late 2021 or early 2022. 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, where we've outlined our three primary product offerings to serve a variety of market dynamics. In summary, our Shentel incumbent cable network serviced both small towns and rural areas with broadband data speeds of up the 1 gig per second, home phone and cable TV service across roughly 210,000 homes and businesses, Virginia, West Virginia, and Maryland. Our Glo Fiber service targets higher density urban markets and our new Beam Internet fixed wireless service targets lower density rural areas, where it isn't cost effective to build cable or fiber.

As Chris said, at the beginning of the call, we now reach approximately 260,000 homes and businesses passed, which is an increase of nearly 48,000 from the first quarter last year. The common denominator in all of our offerings is to provide the leading high speed Internet service available in each market we serve, combined with superior local customer service. With projected Glo and Beam terminal penetration rates 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 as we build out our network over the next several years. Now, turning to Slide 16.

We've depicted our rapidly evolving and expanding fiber, cable and fixed wireless broadband footprint. This map helps illustrate the integrated nature of our broadband networks and how operating leverage will increase over time given the overlap and the adjacency of our operations in our growing footprint. Combined, our multi-pronged broadband growth strategy will more than triple homes passed to over 730,000 in the next five years. We'll update you today on the status of our Glo Fiber and Beam Internet expansion progress for the first quarter and each quarter as we continue to progress in our market development and construction efforts across our region.

Now, let's focus on our operating results in the first quarter, starting on Slide 17 with our incumbent cable business. Total RGUs grew an impressive 8.1% year over year in the first quarter to approximately 184,700, compared to roughly 170,900 in the same period in the prior year. We added roughly 3,000 net broadband data RGUs in the quarter and ended the quarter with over 111,500 broadband data RGUs, which is an exceptional 17.8% increase to the prior year period. We're also very pleased to report that our incumbent cable broadband data penetration increased from 41.7% in the first quarter of last year to 48.3% this quarter, on the continued strength of our new broadband data speeds, new rate card and service improvements and in spite of waning pandemic tailwinds this quarter, which drove record sales last year.

We're particularly proud of our ongoing improvements to customer lifetime value through reductions in our incumbent cable broadband data churn. Churn in the first quarter continued to improve, declining 19 basis points versus the prior year quarter to a record low of 1.29%, representing the 16th consecutive quarter of year-over-year churn improvement. Broadband data average revenue per user in the quarter increased slightly versus the prior year period to $78.12 as our new Powerhouse-branded rate card leveraging an improved value proposition based on our DOCSIS 3.1 speed upgrades now comprises of three-fourths of the base, contributing to our healthy broadband data ARPU and reductions to churn, our changes that we made to data allowances in addition to the introduction of an unlimited data plan in October, 2018. Before we launched the new rate card and increased allowances, between 10% and 20% of our customers were receiving a surprise bill any given month with average monthly overage charges of roughly $35.

But at the end of the first-quarter 2021, only 2% of customers received overage charges, and over 12,000 broadband data subscribers in our incumbent cable network, were on a $30 per month unlimited plan, comprising 17% of the total broadband database. In addition, 79% of broadband data subscribers are now on plans of 25 megabits per second or higher, with an average subscribed download speed of 82 megabits per second, which is well beyond the reach of our DSL competitors. Now, turning to Slide 18 and our rapidly expanding Glo Fiber business. Glo had approximately 7,700 total RGUs at the end of the first quarter with a 16% aggregate broadband data penetration rate across all markets, comprised of just over 5,500 new Glo Fiber customer relationships.

The first quarter last year was our first full quarter of selling Glo Fiber services. We're very proud to have added over 7,000 net Glo Fiber RGUs in the last year and continue to be very bullish on our residential and small business fiber Edge Out investment thesis. We continue to see extraordinarily low churn in our Glo Fiber Broadband data product with only 86 basis points of churn in the quarter. Broadband data ARPU was down year over year to $74.24 in the quarter as a result of the change in accounting for deferred revenue from the account level to the product level, but importantly, not due to discounting.

In fact, we continue to see a higher percentage of new subscribers electing our higher priced $80 per month gigabit speed tier, which is our standard rate card offer. We think this clearly demonstrates the value Glo subscribers see in an all-fiber based broadband data service offered by a local company with superior local customer service. In the first-quarter 2021, 48% of new subs adopted dot one gig speed tier comprising 43% of the overall Glo Fiber customer base. Our streaming TV and voice services continue to perform very well with 25% and 16% attachment rates in the quarter, respectively.

At the end of the first-quarter 2021, 68% of Glo Fiber customers were single-play broadband data only, 25% of subs were in a double play and 7% were in a triple play. Slide 19 depicts the status of our active and approved Glo Fiber markets as of the end of the first quarter. Our first Glo Fiber market in Harrisonburg, Virginia reached nearly 21% aggregate broadband data penetration in the quarter, with some of our most mature neighborhoods in that community already in excess of 30% broadband data penetration. As Chris pointed out at the start of the call, construction efforts for Glo are progressing very well and exceeded our expectations again in the first quarter with roughly 5,800 new residential and small business Shenandoah constructed and released sales.

This was particularly impressive, given the ongoing pandemic headwinds and to the tough weather conditions we experienced during the winter months in our Mid-Atlantic region here of the country. Glo Fiber now has total passings of 34,400, and the pace of our construction will be accelerating as we head into the summer months. We expect to have approximately 74,000 total Glo Fiber passings by the end of the year. We launched the sale in Virginia market in January and Roanoke and Lynchburg this month, and we're very excited to be able to bring more choice to consumers across the State of Virginia with ultra-fast symmetrical low latency high speed Internet service.

In addition, we now have franchise approval in markets in Maryland, the panhandle of West Virginia and Central Pennsylvania. Total Glo target passings have increased across all franchise approved markets to over 170,000 as we continue to make inroads with new municipalities and surrounding counties. We're now past the halfway mark in our goal of constructing 300,000 Glo Fiber passings over the next several years with a healthy pipeline of new franchises across our region as we start the second quarter. On Slide 20 we've highlighted our early stage results in our emerging fixed wireless broadband data service called Beam Internet.

In providing this new broadband service, we're leveraging our expertise in designing, building and operating wireless networks over the last 25 years as a Sprint affiliate. Unlike fixed wireless offerings you may read or hear about from the Big 3 mobile operators, Beam Internet leverages professionally installed high-gain outdoor mounted equipment on the customers home, which ensures optimal network performance and capacity. The foundation of the Beam network is a 5G-ready LTE based core that leverages secure Tier 1 European equipment vendors and licensed mid-band spectrum in both the 2.5 and 3.5 gigahertz bands, that we acquired over the last couple of years expressly for this purpose. Beam is offered from commercial grade towers or small cells that are predominantly fiber-fed ensuring high reliability and low latency.

Customers receive a robust indoor Wi-Fi signal leveraging the same eero mesh Wi-Fi technology that we use in our Glo Fiber markets, and for all new customers in our incumbent cable networks, too. Lastly, Beam customers will get the same great customer service that all Shentel customers have come to expect from our local call center agents and technicians. Beam subscribers totaled nearly 500 at the end of the quarter with an impressive broadband data ARPU of $73.14. We believe that folks would pay a premium for quality, reliable, unlimited high-speed Internet connection in areas where cable and fiber have not and likely will not be constructed, given the low density nature of these areas in our footprint.

But we've been pleasantly surprised to see that nearly two-thirds of customers have adopted our $80 per month 50 megabit per second speed tier, which has exceeded our expectations and a strong validation of our rural broadband investment thesis. Penetration in this early stage investment reached 3.1% in the quarter and churn came in just under 1%, which is very encouraging to see given that fixed wireless delivery model has a number of nuances to it as compared to wire line-based technology like cable and fiber. We're now servicing just over 15,000 target households and plan to construct nearly 70 new Beam sites in 2021, which we expect to increase target households passed to approximately 45,000 by the end of the year. Turning to Slide 21, total tower tenants increased 8.6% year over year to 443.

This includes 236 intercompany tenants, primarily for our wireless operations. We had a backlog of 144 open orders related to upgrades of existing tenants or the addition of new tenants at the end of the first quarter. Finally, Slide 22 provides an update to our year-to-date capital spending results and guidance for our continuing operations for 2021. We're no longer providing wireless guidance as a result of the pending sale and discontinued operations presentation.

Capital expenditures were $39 million in the first quarter compared to 23 million in the first quarter of 2020. The obvious driver of the year-over-year increase relates to the accelerating investments in our Glo Fiber and Beam Internet fixed wireless broadband initiatives. For 2021, our guidance for the full year is 157 to 168 million as we continue to invest aggressively in the expansion of our fiber cable and fixed wireless broadband networks. Of the 55 to 60 million of capital spend in our legacy broadband operations, roughly 24 million is success based and supported the continued growth in our commercial and wholesale fiber business, and the increase in broadband data penetration we expect to achieve, in our incumbent cable markets.

Of the 100 million to 105 million Glo Fiber and Beam related capital spend in 2021, approximately 74 million is related to design and construction of new fiber and fixed wireless target passings, and 13 million is related to connecting new fiber and fixed wireless subscribers. Thank you very much, and operator, we're now ready for questions.

Questions & Answers:

Operator

[Operator instructions] Our first question comes from the line of Rick Prentiss from Raymond James. You may begin.

Rick Prentiss -- Raymond James -- Analyst

Can you guys hear me OK?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

We can now.

Rick Prentiss -- Raymond James -- Analyst

OK, good. I won't say, can you hear me now? A little wirelss humor. Down the road from you guys in DC, lots going on. Wondering if you can talk a little bit about how you think you might be able to benefit or take -- participate in the EVP, the emergency broadband benefit, but also how you see things shaking out on the infrastructure bill.

Obviously, the cake's not all the way baked, but how do you think it might affect you guys, both EBBP, infrastructure bill and whatever else you're seeing in DC area?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Yeah. Thanks, Rick. On the EBBP front, we applied on expedited basis and are approved to provide that in our footprint and, it's hard to say, Rick, but we think we're going to see, maybe roughly 4,000 gross activation lift this year from participating in that program, assuming that it stays funded in through the fall. And so, it's a nice program that we look forward to participating and we're ready.

We've just obviously received word yesterday that I think May 12 is the start of the program. So, we're looking forward to jumping in there. As it relates to the infrastructure bill, we probably don't have enough time on this call to kick around all that the twist in turns that that may end up taking as it makes its way through congress. But just as a general statement, we see more opportunity than threat associated with increased spending in the sector.

And so, we think we're uniquely positioned to take advantage of that. A, given our relationships in BC, given our near adjacency here in that regard. And B, just given the nature of the relationships that we have in surrounding municipalities and counties and with co-ops and so on and so forth. So, we think across the spectrum, we're pretty uniquely positioned, particularly given our financial strength and our strong legacy in the region.

Rick Prentiss -- Raymond James -- Analyst

And as you think -- one of the questions we get a lot is lot of press about low earth orbit satellites, LEOs as they're called, and people wondering will SpaceX Starlink come in and disrupt rural markets that you guys operate in. So, can you share with us a little bit about what you see in the satellite competitive landscape and maybe a little bit more thought about what kind of population density areas you're serving versus where you see satellite having a a success?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Yeah, in terms of the things that keeps us awake at night here, and I don't think LEOs is one of them, I know that that's grabbing a lot of headlines especially more recently. But our Beam Internet fixed wireless service, we think is really the only product that we're offering where the densities would be consistent with those that you would expect a satellite-based offering to target. But we think that with the LTE standards based 5G-ready network that today is capable of delivering 100 meg, but down the road is likely going to be capable of delivering 300 meg in the not too distant future, with low latency in fiber-based backhaul that's terrestrial-based. We still think we're going to have a superior product offering there.

The other thing is, we're just a little bit dubious about the, the economic model, the end-of-the-line business model and the cost of customer equipment, and I think we both know that there is a lot of maturing that needs to take place for that business to achieve any kind of scale where it has anything close to subscriber level economics like we see.

Rick Prentiss -- Raymond James -- Analyst

OK. And last one for me. You guys did do an acquisition in the cable space a few months back. How is the appetite out there? Any thought with capital gains tax on the agenda in Washington that there might shake out some people interested in selling?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Yeah, on the M&A front, Rick, we continue to be an opportunistic acquirer, and we have been and continue to be in dialog with a number of operators in and around our footprint. We have competed in a couple of options unsuccessfully. The market is very frothy, and we'd like to be disciplined in terms of how we think about M&A as one of the tools in our toolkit. So, I would characterize us as an opportunistic acquirer of assets with all the consolidation that has occurred and continues to occur in the industry.

It's probably why we're more predominantly focused on the organic growth strategy because we think the returns are exceptional, and candidly we think generally based on where we've seen transactions over the last couple of years, it seemed to be only accelerating in this regard. We think we can create our own luck at much lower cost and much higher level of accretion to our shareholders by building it on our own than buying somebody else's problems.

Rick Prentiss -- Raymond James -- Analyst

Makes sense, and good luck closing the deal with T-Mobile. I think last one for me then. Usually T-Mobile likes to close transactions on the first day of the month, the first or second month of the quarter. So, should we think maybe hopefully July 1 is higher probability than August 1 or how are you handicapping it?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Jim, you want to field that one.

Jim Volk -- Chief Financial Officer

Yeah, Rick. That is accurate. That -- T-Mobile has expressed the same to us and we're comfortable with that. So, yeah, I would say we need to get -- I think the long pole in the tent is the FCC approval here, but I think it's likely that that will occur in the next 60 to 90 days.

And if it gets done before the end of June, we plan to close July 1. I would say the outer date would likely be August 1.

Rick Prentiss -- Raymond James -- Analyst

OK. It makes sense. And you got to love Charlie Ergen calling T-Mobile the Grinch, so I know you guys had quite a process to get that one over the finish line. So, congrats on being almost there.

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Thanks, Rick.

Operator

[Operator instructions] Next question will come from line of Hamed Khorsand from BWS Financial. You may begin.

Hamed Khorsand -- BWS Financial -- Analyst

Good morning. So, the first question I had was, are you seeing any changes in your subscriber habits now that COVID restrictions are loosening?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Not, not really, not yet in the data that we look at. We continue to see a steady increase in consumption. I think, last month we clocked in at average of over 400 gigs per sub consumed on our networks and it's even a little bit higher metric on the Glo Fiber networks than that. And what -- we're going to, obviously, pay close attention to that as things continue to open up here.

But no, I can't say that we've seen any material change in behavior.

Jim Volk -- Chief Financial Officer

Yeah. And then if I could add one thing to that. The one thing we haven't seen change is customers switching or switching off of the higher bandwidth plans that they adopted during COVID. As you can see in our record low incumbent cable churn, one point -- below 1.3%.

So, we think that's here to stay.

Hamed Khorsand -- BWS Financial -- Analyst

OK. And then as you're expanding Glo Fiber and Beam, what are you learning along the way that you're incorporating into the new markets in the homes that you're passing, either from a marketing standpoint or just the customer outreach?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Yeah, they're two different, but what we're seeing is that there's a convergence occurring as we engage at the county level, where we're primarily focused with our Beam fixed wireless offering. So, as we is we move through this cycle, and we think about the three prongs of our RESI and SMB broadband strategy, we have our hybrid fiber coax incumbent cable networks that we continue to extend and do line extensions on. And we've got Spectrum -- I'm sure you've noted on the map, we've got Spectrum basically surrounding all of those areas that we can do further edge out with fixed wireless to extend our franchise into areas that maybe the cable plant doesn't cover. And I think the same is really true with Glo Fiber, Hamed, in the sense that in the urban and suburban areas with the densities a little higher, and it makes good economic sense, we're going to continue to stay focused on constructing fiber but, edge out with fixed wireless.

And so, we're pursuing the strategy at both ends and meeting in the middle, if you will. And what I mean by that is, we're deploying Beam right now in pretty low-density rural areas, but what we're finding is, those folks have a desire for fiber, too, right? Everybody has a desire for fiber. So, between an unsubsidized fiber-build approach and maybe a subsidized fiber-build approach back to Rick's question, in addition to the globe, the Beam fixed wireless strategy, we really feel like we've got all the bases covered here. So, in terms of what we've learned in any given market, I'd say that the experience has been pretty homogeneous across our different Glo Fiber markets thus far, in terms of any -- we haven't seen any unique competitive response or any unique customer profile or anything in that regard.

I think, generally speaking, everybody's very, very happy on the Glo Fiber side to have a choice versus cable. And there's a ton of demand, and we're happy to be able to bring consumers choice there. And thus far we haven't had to do any discounting to win customers. So, we're not leading with price, we're leading with value.

And then on the Beam side, folks are just thrilled to have any viable broadband connection whatsoever. Lot of folks moving from low-speed DSL or from satellite and it's really life changing. If you look at some of the social media posts for Beam subs, it's really heartwarming stuff, because the folks finally can work or study from home, when previously they haven't been able to do that effectively.

Hamed Khorsand -- BWS Financial -- Analyst

OK. And then my last question was, given the increase in free cash flow from Wireless business, any intention to accelerate your capex in that homes passed plan?

Dave Heimbach -- Executive Vice President and Chief Operating Officer

The acceleration of capex is really more of an operational governor than it is a free cash flow governor, Hamed. So, we're pushing the team very hard and they're responding very, very, very well. As I mentioned in my scripted comments, we're going to be accelerating the pace of construction as we move through the year here, and you can expect that that will increase yet again as we move into next year. But it does take a while to get this locomotive moving down the tracks, and once it is then it's going to take on a momentum of its own.

But we're still at a place in our development here where we want to be reasonable with our expectations of what we can put on the team to go get done. Last year, roughly 25,000 passings constructed, this year it will be a little less than half of that, but almost -- or sorry, a little less than twice that, but almost twice that. And next year, we would expect to probably construct, about 75,000 or so. That's more of an operational constraint than a financial constraint.

And then on the Beam side, it's really -- the constraint there is on the site acquisition front. It takes a while to do the RF design and engineering work and then find or construct the towers or small cells and that's really the governor there. Jim, I don't know if there's anything you want to add to that. But in summary, it's not a financial constraint, it's more operational in terms of how fast we can go.

Jim Volk -- Chief Financial Officer

Yeah, I agree. And on that, the change in free cash flow is really a result of just owning the Wireless business longer. Each month we own it, we're -- it's very profitable in generating a lot of cash. So, that's just -- the small delays in the closing have generally been a part a net positive from a cash flow perspective.

Hamed Khorsand -- BWS Financial -- Analyst

OK. Great. Thank you.

Operator

[Operator instructions] And I'm not showing any further questions in the queue.

Jim Volk -- Chief Financial Officer

Well, I'd like to thank everyone for joining the call this morning, and we look forward to updating you in July on our continued progress here at Shentel with Glo and Beam. Thanks, everyone, and have a good day.

Operator

[Operator signoff]

Duration: 43 minutes

Call participants:

Kirk Andrews -- Director of Financial Planning Analysis

Christopher French -- Chairman, President, and Chief Executive Officer

Jim Volk -- Chief Financial Officer

Dave Heimbach -- Executive Vice President and Chief Operating Officer

Rick Prentiss -- Raymond James -- Analyst

Hamed Khorsand -- BWS Financial -- Analyst

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