WAYNESBORO, Va., Feb. 28 /PRNewswire-FirstCall/ -- NTELOS Holdings Corp. , a leading provider of wireless and wireline communications services (branded as NTELOS) in Virginia and West Virginia, today announced operating results for its fourth quarter and year 2007.
Operating revenues for fourth quarter 2007 were $127.9 million. Operating income for the quarter was $18.8 million and net income for the fourth quarter 2007 was $4.3 million, or $0.10 per share. Operating revenues for the year 2007 were $500.4 million. Operating income and net income for the year 2007 were $100.2 million and $32.5 million, respectively.
Operating highlights for the year include: -- Operating revenues for the year up 14% from 2006 -- Adjusted EBITDA (a non-GAAP measure) for the year up 18% from 2006 -- 2007 operating income of $100.2 million, up 65% from 2006 -- Net income of $32.5 million for 2007 compared to a loss of $(7.2) million for 2006 -- Wireless net subscriber additions for the year 2007 up 28% over 2006 -- 2007 Wireless adjusted EBITDA of $142.2 million, up 27% over 2006 -- New wholesale agreement with Sprint extended contract to July 2015; NTELOS launched EV-DO network upgrade
"Our results for the fourth quarter of 2007 provided a strong finish to a great year," said James S. Quarforth, the Company's Chief Executive Officer. "Net wireless subscriber additions for the fourth quarter were ahead of expectations giving us a good start into 2008 as we realize the full impact of these revenues. Adjusted EBITDA for the year finished up 18% from 2006, strengthening our cash position as we execute our aggressive EV-DO upgrade and network expansion plans for 2008."
Business Developments
Cash Dividends: Today, the Board of Directors of NTELOS Holdings Corp. declared a quarterly cash dividend on its common stock in the amount of $0.21 per share to be paid on April 11, 2008 to stockholders of record on March 20, 2008. The current dividend rate of $0.84 annually represents a 40% increase over the initial dividend declared in March 2007.
EV-DO Upgrade Progress: To date, new switches required for the EV-DO upgrade have been installed, as has equipment at approximately 180 cell sites. Testing continues and the company is on schedule to have approximately 140 of these sites, covering four markets, completely upgraded and operational early in the second quarter of 2008. Incremental capital expenditures for the EV-DO upgrade were approximately $25 million for the year 2007 with $35 million projected for the year 2008. Total incremental capital expenditures for the EV-DO upgrade are estimated at approximately $65 million, as previously disclosed.
Operating Highlights
Operating revenues for the fourth quarter 2007 were $127.9 million, a 12% increase over fourth quarter 2006 operating revenues of $113.8 million. Operating revenues for the year 2007 were $500.4 million, 14% over operating revenues for last year of $440.1 million.
Wireless operating revenues for the fourth quarter of 2007 were $96.5 million compared to $83.9 million for the same period in 2006, an increase of 15%. Wireless subscribers were 406,795 at year-end, an 11% increase from 367,197 at year-end 2006. This growth, combined with a 4% increase in average revenue per handset/unit, or ARPU (a non-GAAP measure), from year-end 2006 to year-end 2007 resulted in a 16% increase in subscriber revenues between these periods. Total wholesale revenues were $24.4 million for the fourth quarter 2007 compared to $20.9 million for the same quarter last year, an increase of 16%. Wholesale revenues were primarily derived from the strategic network alliance agreement with Sprint Nextel which totaled $24.0 million and $20.7 million for these respective periods. Wireless operating revenues for the year 2007 were $377.8 million, a $55.4 million or 17% increase over the year 2006.
Wireline operating revenues were $31.2 million for the fourth quarter of 2007, a 5% increase over fourth quarter 2006 of $29.7 million. RLEC operating revenues were $15.4 million in the fourth quarter of 2007 compared to $15.5 million in fourth quarter 2006, a decrease of less than 1%. In the Competitive wireline segment, which consists of Competitive Local Exchange Carrier (CLEC), Internet Service Provider (ISP) and network operations, operating revenues grew 12%, from $14.2 million in the fourth quarter of 2006 to $15.9 million in the fourth quarter 2007. Revenues from Competitive wireline strategic products, including local service, broadband, integrated access, transport and Metro Ethernet, grew $1.8 million, or 17%, for fourth quarter 2007 compared to fourth quarter 2006, partially offset by the loss of dial-up internet revenues and a reduction in carrier access revenues. For the year 2007, wireline operating revenues were $121.9 million, a 4% increase over last year.
Adjusted EBITDA for the fourth quarter 2007 was $49.6 million, with a margin of 39%. This amount represents an increase of 12% over fourth quarter 2006 adjusted EBITDA of $44.3 million. Adjusted EBITDA for the year of 2007 and 2006 was $203.0 million and $172.5 million, respectively, an increase of 18%.
Wireless adjusted EBITDA was $34.1 million for the fourth quarter of 2007, compared to $29.0 million for fourth quarter 2006, an increase of 18%. The adjusted EBITDA margin for wireless was 35.3% for fourth quarter 2007, up from 34.5% in the fourth quarter of 2006. Wireless adjusted EBITDA for the year 2007 was $142.2 million, a $30.1 million or 27% increase over the year 2006.
Wireline adjusted EBITDA was $16.7 million for the fourth quarter of 2007, slightly above the same quarter last year. Wireline adjusted EBITDA margin for the fourth quarter 2007 was 53%. For the year 2007, wireline adjusted EBITDA was $65.3 million compared to $65.0 million for 2006.
Business Segment Highlights Wireless -- NTELOS previously reported customer data in a press release dated January 24, 2008. Gross customer additions for the fourth quarters of 2007 and 2006 were 44,353 and 44,591, respectively. Gross customer additions of higher-value, under-contract, post pay subscribers were 21,031 in the fourth quarter of 2007. Net subscriber additions for the year 2007 were 39,598, with 10,375 added in the fourth quarter. Net additions for higher-value post pay subscribers in fourth quarter 2007 were 5,021, and 21,669 for the year 2007, nearly double the 11,241 post pay net additions for 2006. At December 31, 2007, post-pay subscribers represented 72% of total subscribers. The national rate plans continue to be the plans most preferred by customers, representing 60% of fourth quarter 2007 post pay gross subscriber additions. Total wireless monthly subscriber churn was 2.8% for the fourth quarter 2007, down from 3.0% in the third quarter of 2007, while post pay churn for the quarter was 1.9%. For the comparable years, total wireless monthly subscriber churn was 2.8% for 2007, a 35 basis point improvement from 3.2% in 2006. Wireless monthly subscriber churn for post pay customers improved 44 basis points to 1.8% for 2007, from 2.3% in 2006. -- ARPU for fourth quarter 2007 was $55.94, 4% higher than ARPU of $53.64 for fourth quarter 2006. Post pay ARPU increased $2.07 from fourth quarter 2006 to $56.83, a 4% increase. The increase was attributable to continued growth in data services and data packages. Total data ARPU increased from $4.66 in third quarter 2007 to $6.24 in fourth quarter 2007. This increase is primarily attributable to a new prepay billing platform which enhances product offerings to customers and allows the company to separately identify certain data revenues previously bundled into blended ARPU. Beginning in the fourth quarter 2007, these revenues were reported in data ARPU. -- Cost per Gross Addition (CPGA - a non-GAAP measure) was $356 in fourth quarter 2007 compared to $354 in fourth quarter 2006. For the year 2007, CPGA averaged $349, compared to the average for 2006 of $357. Cash Cost per Handset/Unit (CCPU - a non-GAAP measure), was $34.43 for fourth quarter 2007, up from $31.40 in the same quarter last year primarily due to increased customer retention costs. Total network cell sites were 1,023 at December 31, 2007 compared to 984 at December 31, 2006, an increase of 39. Wireline -- RLEC: Access lines at year-end 2007 were 43,538 compared to 45,281 at year-end 2006, a 4% decrease. This line loss is reflective of wireless substitution, elimination of certain internal company lines related to network grooming and a reduction in Centrex and second lines throughout the year. RLEC operating revenues for fourth quarter 2007 were down 1%, or approximately $0.1 million from fourth quarter 2006. RLEC adjusted EBITDA for fourth quarter 2007 was $11.0 million compared to $12.0 million for fourth quarter 2006, reflecting increased access and compensation expenses. RLEC adjusted EBITDA for the year 2007 was $44.4 million compared to $46.6 million for 2006. -- Competitive Wireline: CLEC business local access lines at year-end 2007 were 49,065, a 5% increase over year-end 2006 of 46,781. Operating revenues for CLEC business local access lines increased 10%, from $4.1 million in fourth quarter 2006 to $4.6 million in fourth quarter 2007, reflecting a shift from analog lines to higher-ARPU integrated access and high-capacity connections. Revenue decline resulting from dial-up Internet subscriber losses was approximately $0.3 million for fourth quarter 2007 compared to fourth quarter 2006. Revenues from wireline strategic products, however, increased approximately $1.8 million, or 17%, to $12.5 million in fourth quarter 2007 from $10.7 million in fourth quarter 2006, due to customer growth. Broadband growth in the RLEC footprint continues to be especially strong, with customer penetration increasing to 37.6% at December 31, 2007 from 28.0% at December 31, 2006. Adjusted EBITDA for the Competitive wireline segment increased 25%, to $5.7 million in the fourth quarter 2007 from $4.5 million in the fourth quarter 2006. Competitive wireline adjusted EBITDA for the year 2007 was $20.9 million, $2.5 million or 13% over the $18.4 million for the year 2006.
Quarforth concluded, "Our performance for 2007 was marked by significant and steady growth in customers, operating revenues and adjusted EBITDA and strengthened liquidity. We enter 2008 poised for continued growth."
Business Outlook
The following statements are based on management's current expectations. These statements are forward-looking and actual results may differ materially. Please see "Special Note from the Company Regarding Forward-Looking Statements."
The company updated guidance for interest expense to reflect the recent lowering of interest rates. This change, with the associated changes to net income and income taxes is detailed in the "Business Outlook for the Year 2008" exhibit to this press release. NTELOS reaffirmed all remaining guidance for 2008, including consolidated revenues projected to be between $531 million and $540 million and 2008 adjusted EBITDA projected to be between $216 million and $221 million.
Note: The Company has entered into a new agreement with more favorable terms to provide handset insurance to wireless subscribers, beginning April 1, 2008. Due to the differences in the terms of this new arrangement, it is expected that revenues for handset insurance will no longer be reported on a gross basis, but on a net basis instead. For 2007, the 12-month impact of the changed terms of this agreement would have resulted in a reduction to wireless revenues and wireless cost of sales of approximately $11.2 million. Based on average subscribers for 2007 of 388,788, the 12 month impact to total 2007 ARPU and CCPU would have been a reduction of approximately $2.40.
Non-GAAP Measures
Adjusted EBITDA is defined as net income before interest, income taxes, depreciation and amortization, accretion of asset retirement obligations, gain on sale of investment, advisory termination fees, other income, minority interests, non-cash compensation charges and secondary offering costs.
ARPU, or average monthly revenues per handset/unit in service, is computed by dividing service revenues per period by the weighted average number of handsets in service during that period. Please see footnotes in exhibits for a complete definition of this measure.
CPGA, or cost per gross addition, is computed by adding the income statement component of merchandise cost of sales, which is included in cost of sales and services, and sales and marketing, which is included in customer operations expense and reducing that amount by the equipment revenues from sales to new customers, which is included in operating revenues. The net result of these components is then divided by the gross subscriber additions during the period. Please see footnotes in exhibits for a complete definition of this measure.
CCPU, or cash cost per handset/unit, is computed by adding wireless maintenance and support, wireless access, roaming and cost of services, all of which are included within the income statement component cost of sales and services, wireless corporate operations and customer operations (excluding sales and marketing), less equipment revenue and costs incurred to acquire new subscribers. The net result of these components is then divided by average subscribers for the period. In addition to the Company's subscriber costs, CCPU includes the costs of other carriers' subscribers roaming on the NTELOS network. Non-cash operating expenses such as depreciation, amortization and non-cash compensation are excluded from the calculation. Please see footnotes in exhibits for a complete definition of this measure.
Adjusted EBITDA, ARPU, CPGA and CCPU are non-GAAP financial performance measures. They should not be considered in isolation or as an alternative to measures determined in accordance with GAAP. Please refer to the exhibits and materials posted on the Company's website for a reconciliation of these non- GAAP financial performance measures to the most comparable measures reported in accordance with GAAP and for a discussion of the presentation, comparability and use of such financial performance measures.
About NTELOS
NTELOS Holdings Corp. is an integrated communications provider with headquarters in Waynesboro, VA. NTELOS provides products and services to customers in Virginia, West Virginia, Kentucky, Ohio, Tennessee, Maryland and North Carolina, including wireless phone service, local and long distance telephone services, IPTV-based video services, and data services for internet access and wide area networking. Detailed information about NTELOS is available at http://www.ntelos.com/.
SPECIAL NOTE FROM THE COMPANY REGARDING FORWARD-LOOKING STATEMENTS
Any statements contained in this presentation that are not statements of historical fact, including statements about our beliefs and expectations, are forward-looking statements and should be evaluated as such. The words "anticipates," "believes," "expects," "intends," "plans," "estimates," "targets," "projects," "should," "may," "will" and similar words and expressions are intended to identify forward-looking statements. Such forward- looking statements reflect, among other things, our current expectations, plans and strategies, and anticipated financial results, all of which are subject to known and unknown risks, uncertainties and factors that may cause our actual results to differ materially from those expressed or implied by these forward-looking statements. Many of these risks are beyond our ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the date they are made. We do not undertake any obligation to update or review any forward- looking information, whether as a result of new information, future events or otherwise. Important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ from those contained in the forward-looking statements, include, but are not limited to: leverage; operating and financial restrictions imposed by our senior credit facilities; our cash requirements; rapid development and intense competition in the telecommunications industry; increased competition in our markets; declining prices for our services; changes or advances in technology; the potential to experience a high rate of customer turnover; our dependence on our affiliation with Sprint Nextel ("Sprint"); a potential increase in the roaming rates we pay; wireless handset subsidy costs; the potential for our largest competitors and Sprint to build networks in our markets; the potential loss of our licenses; federal and state regulatory developments; loss of our cell sites; the rates of penetration in the wireless telecommunications industry; our capital requirements; governmental fees and surcharges; our reliance on certain suppliers and vendors; the potential for system failures or unauthorized use of our network; the potential for security breaches of our physical facilities; the potential loss of our senior management and inability to hire additional personnel; the trading market for our common stock; the potential influence over us by our largest stockholder, Quadrangle; our ability to pay dividends; provisions in our charter documents and Delaware law; and other unforeseen difficulties that may occur. These risks and uncertainties, as well as other risks and uncertainties that could cause our actual results to differ significantly from management's expectations, are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements and risk factors included in our SEC filings, including our Annual Reports on Forms 10-K.
Exhibits: -- Condensed Consolidated Balance Sheets -- Condensed Consolidated Statements of Operations -- Summary of Operating Results -- Reconciliation of Net Income (Loss) to Operating Income -- Reconciliation of Operating Income (Loss) to Adjusted EBITDA -- Customer Summary -- Wireless Customer Detail -- Wireless Key Performance Indicators (KPI) -- Business Outlook for the Year 2008 NTELOS Holdings Corp. Condensed Consolidated Balance Sheets (dollars in thousands) December 31, 2007 December 31, 2006 ASSETS Current Assets Cash and cash equivalents $53,467 $44,180 Accounts receivable, net 45,543 38,396 Inventories and supplies 7,693 5,471 Other receivables 4,184 3,777 Income tax receivable 11,753 - Prepaid expenses and other 7,944 6,562 130,584 98,386 Interest rate swap 347 3,874 Securities and investments 523 294 Property, plant and equipment 596,210 489,811 Less accumulated depreciation 193,306 113,039 402,904 376,772 Other Assets Goodwill 127,637 151,976 Franchise rights 32,000 32,000 Other intangibles, net 85,901 99,379 Radio spectrum licenses in service 114,180 114,102 Radio spectrum licenses not in service 19,641 19,594 Deferred charges and other assets 4,771 4,470 384,130 421,521 Total Assets $918,488 $900,847 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Current portion of long-term debt $6,751 $13,152 Accounts payable 31,525 25,209 Dividends payable 8,833 - Advance billings and customer deposits 17,809 16,709 Accrued payroll 12,929 10,021 Accrued interest 70 305 Deferred revenue 622 683 Accrued operating taxes 3,067 3,584 Other accrued liabilities 3,214 3,749 84,820 73,412 Long-Term Liabilities Long-term debt 607,455 613,371 Other long-term liabilities 54,445 61,842 661,900 675,213 Minority Interests 428 457 Stockholders' Equity 171,340 151,765 Total Liabilities and Stockholders' Equity $918,488 $900,847 NTELOS Holdings Corp. Condensed Consolidated Statements of Operations Three months ended: Year ended: (in thousands, except for per December December December December share data) 31, 2007 31, 2006 31, 2007 31, 2006 Operating Revenues $127,918 $113,846 $500,394 $440,076 Operating Expenses (1) Cost of sales and services (exclusive of items shown separately below) (inclusive of non-cash compensation expense of $105 and $403 for the three months and year ended December 31, 2007, respectively, and $91 and $1,087 for the three months and year ended December 31, 2006, respectively) 42,104 38,154 161,344 146,429 Customer operations (inclusive of non-cash compensation expense of $146 and $603 for the three months and year ended December 31, 2007, respectively, and $138 and $1,448 for the three months and year ended December 31, 2006, respectively) 29,767 26,061 108,848 99,998 Corporate operations (inclusive of non-cash compensation expense of $868 and $3,322 for the three months and year ended December 31, 2007, respectively, and $703 and $10,702 for the three months and year ended December 31, 2006, respectively) 7,579 6,225 32,090 34,398 Depreciation and amortization (2) 29,520 21,160 97,061 84,921 Accretion of asset retirement obligations 196 152 818 816 Termination of advisory agreements (1) - - - 12,941 109,166 91,752 400,161 379,503 Operating Income 18,752 22,094 100,233 60,573 Other Income (Expenses) Interest expense (10,300) (10,961) (43,021) (59,850) Loss on interest rate swap agreement (879) (389) (3,527) (246) Gain on sale of investment - - - 1,723 Other income 806 296 3,146 2,833 8,379 11,040 56,831 5,033 Income tax expense 4,051 4,882 24,411 12,190 4,328 6,158 32,420 (7,157) Minority interests in losses (earnings) of subsidiaries (6) (3) 33 (28) Net Income (Loss) 4,322 6,155 32,453 (7,185) Dividend distribution preference on Class B Shares - - - (30,000) Income (Loss) applicable to common shares $4,322 $6,155 $32,453 $(37,185) Basic and Diluted Earnings (Loss) per Common Share: Income (loss) per share - basic $0.10 $0.15 $0.78 $(0.95) Income (loss) per share - diluted $0.10 $0.15 $0.77 $(0.95) Average shares outstanding - basic (3) 41,661 41,160 41,487 39,231 Average shares outstanding - diluted (3) 42,377 42,170 42,315 39,231 Cash dividends declared per share - common stock $0.21 $- $0.51 $- (1) Includes non-cash compensation charge related to capital stock and options to purchase capital stock of $1.1 million and $4.3 million for the three months and year ended December 31, 2007, respectively, and $0.9 million and $13.2 million for the three months and year ended December 31, 2006, respectively. Also includes $0.5 million of fees in the first quarter of 2006 paid under advisory agreements with CVC Management LLC and Quadrangle Advisors LLC whereby they provided advisory and other services to the Company. These advisory agreements were terminated in February 2006 for a termination fee of $12.9 million. See NTELOS Holdings Corp. Form 10-K for the year ended December 31, 2006 for further details. (2) Depreciation expense for the period August 1, 2007 to December 31, 2007 includes $15.9 million of accelerated depreciation related to 3G- 1xRTT equipment scheduled to be replaced or redeployed in connection with the EVDO upgrade. (3) Earnings (Loss) per share and average weighted shares outstanding have been adjusted for all periods in 2006 to reflect the conversion of Class A and Class L common shares to Class B common shares as of the initial public offering based on a 2.15 conversion ratio. All Class B common shares were converted to common shares by December 31, 2006. NTELOS Holdings Corp. Summary of Operating Results (dollars in thousands) Three Months Ended: Year Ended: December December December December 31, 2006 31, 2007 31, 2006 31, 2007 Operating Revenues Wireless PCS Operations $83,933 $96,524 $322,329 $377,761 Subscriber Revenues 57,612 66,544 223,563 259,338 Wholesale/Roaming Revenues, net 20,939 24,386 77,747 95,976 Equipment Revenues 5,150 5,305 20,143 21,321 Other Revenues 232 289 876 1,126 Wireline Operations RLEC 15,493 15,355 60,767 61,458 Competitive Wireline 14,216 15,878 56,158 60,467 Wireline Total 29,709 31,233 116,925 121,925 Other 204 161 822 708 $113,846 $127,918 $440,076 $500,394 Operating Expenses (before depreciation & amortization, accretion of asset retirement obligations, asset write-down and impairment charges, gain on sale of assets, termination of advisory agreements, non-cash compensation and secondary offering costs, a non-GAAP Measure) Wireless PCS Operations $54,958 $62,425 $210,287 235,575 Cost of Sales and Services Cost of Sales - Equipment 7,081 7,478 28,080 28,891 Cost of Sales - Access & Other 10,821 12,702 40,333 48,379 Maintenance and Support 11,021 11,930 41,584 45,360 Customer Operations 22,109 24,974 83,380 91,637 Corporate Operations 3,926 5,341 16,910 21,308 Wireline Operations RLEC 3,534 4,353 14,155 17,033 Competitive Wireline 9,678 10,227 37,723 39,561 Wireline Total 13,212 14,580 51,878 56,594 Other (1) 1,338 1,326 5,423 5,215 $69,508 $78,331 $267,588 $297,384 Adjusted EBITDA (a non-GAAP Measure) (2) Wireless PCS Operations $28,975 $34,099 $112,042 $142,186 Wireline Operations RLEC 11,959 11,002 46,612 44,425 Competitive Wireline 4,538 5,651 18,435 20,906 Wireline Total 16,497 16,653 65,047 65,331 Other (1) (1,134) (1,165) (4,601) (4,507) $44,338 $49,587 $172,488 $203,010 Capital Expenditures Wireless PCS Operations $13,829 $46,170 $59,409 $77,640 Wireline Operations RLEC 1,567 2,577 8,862 9,318 Competitive Wireline 2,708 3,738 12,103 15,314 Wireline Total 4,275 6,315 20,965 24,632 Other 1,869 1,820 6,233 7,332 $19,973 $54,305 $86,607 $109,604 Adjusted EBITDA less Capital Expenditures Wireless PCS Operations $15,146 $(12,071) $52,633 $64,546 Wireline Operations RLEC 10,392 8,425 37,750 35,107 Competitive Wireline 1,830 1,913 6,332 5,592 Wireline Total 12,222 10,338 44,082 40,699 Other (3,003) (2,985) (10,834) (11,839) $24,365 $(4,718) $85,881 $93,406 (1) Other Operations expense includes $0.5 million in first quarter 2006 of fees paid under advisory agreements with CVC Management LLC and Quadrangle Advisors LLC whereby they provided advisory and other services to the Company for an annual advisory fee of $2.0 million. These advisory agreements were terminated in February 2006 for a termination fee of $12.9 million. See NTELOS Holdings Corp. Form 10-K for the year ended December 31, 2006 for further details. (2) Please see earnings release schedules available on the Company's website or NTELOS Holdings Corp. SEC filings for reconciliations of adjusted EBITDA to operating income and to net income. NTELOS Holdings Corp. Reconciliation of Net Income (Loss) to Operating Income (dollars in thousands) Three Months Ended: Year Ended: December December December December 31, 2006 31, 2007 31, 2006 31, 2007 Net income (loss) $6,155 $4,322 $(7,185) $32,453 Interest expense 10,961 10,300 59,850 43,021 Loss on interest rate swap agreement 389 879 246 3,527 Income taxes 4,882 4,051 12,190 24,411 Minority interest 3 6 28 (33) Other income (296) (806) (4,556) (3,146) Operating income $22,094 $18,752 $60,573 $100,233 Wireless $14,336 $11,395 $52,799 $71,398 Wireline 9,838 9,681 38,841 38,346 Other (2,080) (2,324) (31,067) (9,511) Operating income $22,094 $18,752 $60,573 $100,233 NTELOS Holding Corp. Reconciliation of Operating Income (Loss) to Adjusted EBITDA (dollars in thousands) 2006 Wireless Competitive PCS RLEC Wireline Other Total For The Three Months Ended December 31 Operating Income $14,336 $8,397 $1,441 $(2,080) $22,094 Depreciation and amortization 14,464 3,559 3,090 47 21,160 Sub-total: 28,800 11,956 4,531 (2,033) 43,254 Accretion of asset retirement obligations 175 3 7 (33) 152 Non-cash compensation - A shares - - - 932 932 Adjusted EBITDA $28,975 $11,959 $4,538 $(1,134) $44,338 Adjusted EBITDA Margin 34.5% 77.2% 31.9% N/M 38.9% 2007 Wireless Competitive PCS RLEC Wireline Other Total For The Three Months Ended December 31 Operating Income $11,395 $7,389 $2,292 $(2,324) $18,752 Depreciation and amortization 22,530 3,610 3,345 35 29,520 Sub-total: 33,925 10,999 5,637 (2,289) 48,272 Accretion of asset retirement obligations 174 3 14 5 196 Non-cash compensation - A shares - - - 1,119 1,119 Adjusted EBITDA $34,099 $11,002 $5,651 $(1,165) $49,587 Adjusted EBITDA Margin 35.3% 71.7% 35.6% N/M 38.8% 2006 Wireless Competitive PCS RLEC Wireline Other Total For The Year Ended December 31 Operating Income $52,799 $32,243 $6,598 $(31,067) $60,573 Depreciation and amortization 58,453 14,356 11,800 312 84,921 Sub-total: 111,252 46,599 18,398 (30,755) 145,494 Accretion of asset retirement obligations 790 13 37 (24) 816 Advisory Fees - - - 12,941 12,941 Secondary offering costs - - - - - Non-cash compensation - A shares - - - 13,237 13,237 Adjusted EBITDA $112,042 $46,612 $18,435 $(4,601) $172,488 Adjusted EBITDA Margin 34.8% 76.7% 32.8% N/M 39.2% 2007 Wireless Competitive PCS RLEC Wireline Other Total For The Year Ended December 31 Operating Income $71,398 $30,249 $8,097 $(9,511) $100,233 Depreciation and amortization 70,052 14,160 12,754 95 97,061 Sub-total: 141,450 44,409 20,851 (9,416) 197,294 Accretion of asset retirement obligations 736 16 55 11 818 Advisory Fees - - - - - Secondary offering costs - - - 570 570 Non-cash compensation - A shares - - - 4,328 4,328 Adjusted EBITDA $142,186 $44,425 $20,906 $(4,507) $203,010 Adjusted EBITDA Margin 37.6% 72.3% 34.6% N/M 40.6% NTELOS Holdings Corp. Customer Summary Table Quarter Ended: 12/31/06 3/31/07 6/30/07 9/30/07 12/31/07 Wireless Subscribers 367,197 383,143 391,195 396,420 406,795 RLEC Access Lines 45,281 45,054 44,697 44,224 43,538 CLEC Access Lines (1) 46,781 47,381 48,095 48,615 49,065 RLEC Broadband Customers (2) 9,000 9,833 10,571 11,194 11,680 Total Broadband Connections (2) 17,177 18,066 18,784 19,510 20,172 Dial-Up Internet Subscribers 27,628 26,322 24,795 23,048 21,795 Long Distance Subscribers 45,237 46,531 47,929 48,260 48,367 (1) Includes customer Primary Rate Interface (PRI) line equivalents at 23 lines per PRI. Excludes intercompany PRI lines. (2) Includes DSL, dedicated Internet access, wireless broadband, broadband over fiber, metro Ethernet, ATM and frame relay. All revenues from broadband products, including RLEC broadband, are recorded in the operating revenues of the Competitive wireline segment. NTELOS Holdings Corp. Wireless Customer Detail Quarter Ended: 12/31/06 3/31/07 6/30/07 9/30/07 12/31/07 Total Wireless Subscribers Beginning Subscribers 357,424 367,197 383,143 391,195 396,420 Prepay 94,771 98,846 109,689 110,506 110,285 Postpay 262,653 268,351 273,454 280,689 286,135 Gross Additions 44,591 47,579 38,937 40,788 44,353 Prepay 22,116 27,476 18,277 19,557 23,322 Postpay 22,475 20,103 20,660 21,231 21,031 Disconnections 34,818 31,633 30,885 35,563 33,978 Prepay 17,797 16,315 17,164 19,256 17,968 Postpay 17,021 15,318 13,721 16,307 16,010 Net Additions 9,773 15,946 8,052 5,225 10,375 Prepay 4,319 11,161 1,113 301 5,354 Postpay 5,454 4,785 6,939 4,924 5,021 Ending Subscribers 367,197 383,143 391,195 396,420 406,795 Prepay 98,846 109,689 110,506 110,285 115,068 Postpay 268,351 273,454 280,689 286,135 291,727 Year Ended: 12/31/2006 12/31/2007 Total Wireless Subscribers Beginning Subscribers 336,306 367,197 Prepay 80,023 98,846 Postpay 256,283 268,351 Gross Additions 164,375 171,657 Prepay 82,232 88,632 Postpay 82,143 83,025 Disconnections 133,484 132,059 Prepay 62,582 70,703 Postpay 70,902 61,356 Net Additions 30,891 39,598 Prepay 19,650 17,929 Postpay 11,241 21,669 Ending Subscribers 367,197 406,795 Prepay 98,846 115,068 Postpay 268,351 291,727 NTELOS Holdings Corp. Wireless Key Performance Indicators Three Months Ended: Year ended: Dec. 31, Dec. 31, Dec. 31, Dec. 31, 2006 2007 2006 2007 Average Subscribers (weighted monthly) 360,526 399,573 350,235 388,778 Gross Subscriber Revenues ($000) $58,012 $67,054 $225,218 $261,151 Revenue Accruals & Deferrals (348) (458) (1,575) (1,626) Eliminations & Other Adjustments (52) (52) (80) (187) Net Subscriber Revenues ($000) $57,612 $66,544 $223,563 $259,338 Average Monthly Revenue per Handset/Unit (ARPU) (1) $53.64 $55.94 $53.59 $55.98 Average Monthly Revenue per Postpay Handset/Unit (ARPU) (1) $54.76 $56.83 $54.84 $56.60 Average Monthly Data Revenue per Subscriber (ARPU) (1) Average Monthly Data Revenue per Handset/Unit (ARPU) (1) $2.89 $6.24 $2.71 $4.67 Average Monthly Data Revenue per Post Pay Subscriber (ARPU) (1) Average Monthly Data Revenue per Postpay Handset/Unit (ARPU) (1) $3.36 $5.68 $3.12 $4.99 Cost of Acquisition per Gross Addition (2) Cost of Acquisition per Gross Addition (CPGA) (2) $354 $356 $357 $349 Monthly Cash Cost per Handset/Unit (CCPU) (3) $31.40 $34.43 $31.25 $33.02 Strategic Network Alliance Revenues ($000) Home Voice 10,980 $12,998 $41,672 $50,623 Travel Voice 5,704 4,209 23,041 18,768 Total Voice 16,684 17,207 64,713 69,391 Home Data NA 2,647 NA NA Travel Data NA 2,587 NA NA Total Data 3,973 5,234 12,017 22,032 Revenue Minimum Adjustment 1,603 - 3,359 Total $20,657 $24,044 $76,730 $94,782 Monthly Postpay Subscriber Churn 2.2% 1.9% 2.3% 1.8% Monthly Blended Subscriber Churn 3.2% 2.8% 3.2% 2.8% Total Cell Sites (Period Ending) 984 1,023 984 1,023 Cell Sites under the Strategic Network Alliance Agreement (Period Ending; Sub-set of Total Cell Sites above) 595 604 595 604 (1) Average monthly revenues per handset/unit in service, or ARPU, is an industry metric that measures service revenues per period divided by the weighted average number of handsets in service during that period. ARPU as defined may not be similar to ARPU measures of other companies, is not a measurement under GAAP and should be considered in addition to, but not as a substitute for, the information contained in the Company's statement of operations. The Company closely monitors the effects of new rate plans and service offerings on ARPU in order to determine their effectiveness. ARPU provides management useful information concerning the appeal of NTELOS rate plans and service offerings and the Company's performance in attracting and retaining high value customers. (2) CPGA is cost per gross addition and summarizes the average cost to acquire new customers during the period. CPGA is a non-GAAP financial measure that is computed by adding the income statement component of merchandise cost of sales, which is included in cost of sales and services, and sales and marketing, which is included in customer operations expense and reducing that amount by the equipment revenues from sales to new customers, which is included in operating revenues. The net result of these components is then divided by the gross subscriber additions during the period. NTELOS believes CPGA is a useful measure used to compare the Company's average cost to acquire a new subscriber to that of other wireless communications providers, although other wireless communications providers may include or exclude certain items from their calculations which may make the comparison less meaningful. The inclusion of merchandise cost of sales net of the equipment revenues from sales to new customers is critical to the understanding of how much it costs the Company to acquire a new subscriber. (3) CCPU is cash cost per handset/unit and represents the average cost to provide wireless service and support per subscriber. CCPU is a non- GAAP financial measure computed by adding wireless maintenance and support, wireless access, roaming and cost of services, all of which are included within the income statement component cost of sales and services, wireless corporate operations and customer operations (excluding sales and marketing), less equipment revenue and costs
incurred to acquire new subscribers. The net result is then divided by
average subscribers for the period. In addition to the Company's subscriber costs, CCPU includes the costs of other carriers' subscribers roaming on the NTELOS network. Non-cash operating expenses such as depreciation, amortization and non-cash compensation are excluded. NTELOS believes CCPU is a useful measure to compare the Company's average costs to that of other providers, although others may include or exclude certain items from their calculations which may make the comparison less meaningful. The Company believes CCPU is useful to evaluate effectiveness in managing cash costs associated with providing services. CCPU should be considered in addition to, but not as a substitute for, information contained in the Company's statement of operations. NTELOS Holdings Corp. Business Outlook for the Year 2008 (1) (as of February 28, 2008) Twelve Months 2008 (Dollars in millions, except for metrics) Operating Revenues - Guidance Wireless (2) $409.0 to $415.0 Wireline 121.0 to 124.0 Other 1.0 1.0 $531.0 to $540.0 Reconciliation of Net Income to Adjusted EBITDA - Guidance Net Income $35.0 to $41.0 Interest expense 34.0 to 34.0 Income tax expense (3) 24.0 to 27.0 Other income (1.0) (1.0) Operating Income 92.0 to 101.0 Depreciation and amortization 119.5 to 115.5 Accretion of asset retirement obligations 1.0 1.0 Non-cash compensation charges 3.5 3.5 Adjusted EBITDA $216.0 to $221.0 Wireless $158.0 to $161.0 Wireline 63.0 to 65.0 Other (5.0) (5.0) Adjusted EBITDA $216.0 to $221.0 Capital Expenditures Wireless $84 to $82 Wireline 28 to 27 Other 9 9 Total Capital Expenditures $121 to $118 Wireless Metrics Net subscriber additions Greater than 30,000 Blended ARPU (2) Greater than $55 Post pay Churn Approximately 1.8% Blended Churn Approximately 2.8% Cost per Gross Acquisition (CPGA) $355 to $365 Cash Cost per Handset/Unit (CCPU) (2) Approximately $33 Wireline Metrics RLEC Line Loss 4% to 7% Competitive Wireline revenue growth Approximately 5% (1) These estimates are based on management's current expectations. These estimates are forward-looking and actual results may differ materially. Please see "Special Note from the Company Regarding Forward-Looking Statements." (2) The Company has entered into a new agreement with more favorable terms to provide handset insurance to wireless subscribers, beginning April 1, 2008. Due to the differences in the terms of this new arrangement, it is expected that revenues for handset insurance will no longer be reported on a gross basis, but on a net basis instead. For 2007, the 12-month impact of the changed terms of this agreement would have resulted in a reduction to wireless revenues and wireless cost of sales of approximately $11.2 million. Based on average subscribers for 2007 of 388,788, the 12 month impact to total 2007 ARPU and CCPU would have been a reduction of approximately $2.40. Historical periods will not be restated. (3) Current cash income tax is expected to be between $13 million and $17 million, reflecting the benefit of bonus depreciation provided for by the recently enacted economic stimulus package HR 5140.
