Mike Funk from Bank of America. I lead the telecom infrastructure and software team at the bank. Really happy to have Shenandoah here with us today. I think it's the first time at our conference you guys joined maybe. Thank you again for coming out this year. We have Ed and Jim. I was going to invite them to give a bit of an overview of the company for anyone in the room or online listening who is unfamiliar. Thank you guys again for coming out. Yeah, thank you.
Yeah, definitely appreciate the invitation.
Maybe just for anybody that's unfamiliar with Shenandoah just to give a brief overview of the company. There's a long history to the company. Not to go back the entire way, but maybe just the past five or ten years and the transformation you've taken the company through, also pointing forward to the strategy, your fiber build strategy and how you're executing on that.
Sure. I'll kick things off and then let Jim jump in. We do have a long history. We were founded back in 1902 as a telephone company in the Shenandoah Valley, Virginia. We have evolved into a broadband company, first as a cable company and now a fiber-to-the-home company. When you look at our business, we are projecting over $350 million in revenue this year. We're publicly traded on the NASDAQ. We have a significant regional fiber optic network, 18,000 route-miles of fiber stretching from Chicago to the Washington, D.C. area. We operate in eight contiguous states in the Mid-Atlantic region and the Midwest as well. As far as the split between residential and commercial business, about 75% of our business is residential and about 25% is commercial. On the residential side, we have an incumbent cable broadband business. That's our legacy telephone footprint and our cable footprint.
We pass about 240,000 homes and businesses with hybrid fiber coax networks, DOCSIS 3.1. We offer gigabit service across the board. More recently, we have launched fiber-to-the-home service. In 2019, we started building in new greenfield areas. These are new markets outside of our incumbent cable business. We focused on smaller cities, smaller towns. We now pass about 380,000 homes and businesses with our Glo Fiber fiber-to-the-home service. We're still actively building. We have another roughly 16 months in our build plan, planning to be between 500,000 and 550,000 total passings by year-end 2026. That's a little bit of our background. The main focus right now is successfully completing that construction phase of our Glo Fiber project. We're also really trying to ramp up penetration in our Glo Fiber markets, and we're seeing success there.
Okay. Within your footprint, how many households or potential passings are there? What percentage does that 500,000 - 550,000 represent?
That's the majority of our passings. We're a fiber dominant network at this point. 500,000 and 550,000 is what we're targeting by year end 2026. That's really more than double the number of passings we have in our incumbent broadband markets.
I guess maybe I didn't phrase the question correctly. I apologize. What I was really thinking with, I'm sure there are probably, you know, households or passings that are just too expensive to justify. The economics don't make sense. Trying to figure out what % of your footprint you're actually targeting with fiber, and then how you draw that threshold, whether it's a cost to pass or other factors that help you make that choice about passing with fiber or not passing with fiber.
When we look at the models for these markets, the first thing we target is areas where we're the first fiber provider. We don't want to go in and be the second fiber provider. In the vast majority of our Glo Fiber markets, we are the only fiber provider. That's the first factor. We also consider the cost to pass, whether it's aerial construction or underground construction. We take a close look at the demographics as well. We're factoring in the average revenue per user as well as a target terminal penetration rate. On average, across our markets, we're targeting a 37% terminal penetration rate. When we build these models, we're looking at a 15%+ unlevered IRR within the markets. If we can't get those returns, we won't build an area. If another fiber provider had already started construction there, we won't build that area.
Okay.
Mike, just to add one thing there is when we generally get a franchise agreement in all these municipalities, and generally, since we're the second one in, it's kind of very open-ended. We're not guaranteeing full coverage in the whole market. We can kind of pick and choose, you know, the best demographics, the best households where we think we can get the highest penetration. We have a lot of flexibility. There may be one or two exceptions to that of the 25 markets that we're in, but that's generally the framework, which I think might have been part of what you were asking.
It was a more open-ended question. You both addressed it very, very well. Thank you. Who are the dominant cable providers or provider that you're normally going up against when you're the second entrant?
About two-thirds of our markets we're going up against Comcast, about a third it's a combination of Charter and Cox. A very, very small percentage of actually fiber passing from the LEC. Only about 8% of our passings have a LEC deployed fiber. You know, 92% of the passings, it's a duopoly environment where it's either us with our fiber network or one of the big cable guys that we're going up against.
Okay. Have you seen increased competition from the cable companies in the last six or 12 months? I know they've been leaning a bit more utilizing their bundling strategy with the MVNO wireless product from Verizon. Are you seeing that in your markets too, or are they not as aggressive there?
We've certainly seen aggressive promotional pricing. It seems like that's the way they've been operating, a low introductory rate and then a significant increase once that introductory period expires. More recently, we've seen Comcast go to a five-year price lock guarantee, but we really haven't seen an impact from the mobile bundle in our market. Our sales folks are not saying that they're unable to sell because we don't have a mobile offering. We're not seeing churn because we don't have a mobile offering.
Okay. I'm curious why you think that is because, you know, AT&T last week announced the EchoStar Spectrum transaction and they, you know, their FWA believer is talking about being more aggressive with FWA deployment so they can have a converged offering before they roll out fiber more aggressively. You've heard Verizon talk about their own FWA strategy, whether it's MD or otherwise, T-Mobile. It seems to be a growing consensus that having both products, right, converged opportunity or optionality at least is the right strategy. Why is that not the right strategy for you? Maybe how are your markets different and the demographics different where it might not fit as well?
As far as having a mobile bundle, we don't think we need it right now. Down the road, that may be an option for us. As far as the fixed wireless competition, we view that as a value play. We've seen very little impact from fixed wireless as far as impacting new sales or impacting churn. We were previously a fixed wireless operator within our footprint. Based on our own experience, a lot of our markets have hills, mountains, large trees. Operating a fixed wireless network with mid-band spectrum in those markets is a bit of a challenge in our markets versus some of the other areas throughout the country.
Yeah. The topography affects the propagation of the spectrum and makes it difficult to deploy fixed wireless in some areas, like I presume, like Pennsylvania or West Virginia or some other areas where you operate that have dense foliage and hills and everything.
Right. Yeah. Our largest market right now is in Virginia, where we have plenty of hills, mountains, and dense foliage.
Exactly. You did a recent acquisition in Ohio though to supplement your organic growth strategy. You can talk a bit about that acquisition and why it made sense.
Yeah, I'll kick things off there. We acquired Horizon Telecom based in Chillicothe, Ohio. That really doubled the size of our commercial fiber business. Also, we picked up some leadership on the commercial sales side of our business as well. The former Chief Revenue Officer of Horizon is now leading our commercial fiber business. This really gave us a larger regional fiber optic network. I mentioned 18,000 route miles now. One of the advantages we have with our commercial fiber business is we have unique routes in rural areas and smaller markets, and we're able to connect customers there back to major data centers in metropolitan areas. We have built into data centers in Chicago, Columbus, Ohio, Pittsburgh, the Washington, D.C. area, and Ashburn. That's really a benefit we can offer.
Also, with the larger scale with the Horizon acquisition, we're getting more traction with the wireless providers as far as providing backhaul services. We're able to connect to more cell sites. We're able to connect to more of their switching centers as well.
Okay. Maybe just for a second, Jim, I mean, I'm sure you're really busy and active funding all of the exciting builds that you're doing. How are you addressing the funding? Can you talk a bit about the balance sheet for a second and how much more capacity do you have to drive the build?
Yeah, sure. When we completed the Horizon acquisition last April, April 2024, we upsized our credit facility to $675 million. We also issued about $80 million of preferred equity securities to balance out the capital structure. The credit facility, the first maturities are coming up in June 2027. We are actively exploring refinancing the whole credit facility right now. We're planning to go down the path of using ABS, the asset-backed securitization market. We think this will actually lower our cost of debt by about 100 basis points. When you're looking at about $700 million plus of funded debt, that's pretty material. That'll go right down to the bottom line for free cash flow when we turn. We likely will upsize the credit facilities in total when we complete the refinancing, but in order of magnitude, maybe in the $50 million range above and beyond what we have today.
Okay, that's perfect. One more high-level question, you know, Ed, before I dig in and more kind of yuckier, you know, specific strategy in the products and in the financials is that, you know, I've been covering telecom for long enough to remember all the LECs back in the day, probably still name more than I should be able to. Over time, we clearly saw, you know, consolidation, right? Whether it was kind of the, you know, the Bell system or even the LECs, you know, consolidating, that was the trend for the last 25 years, right? Where is there a place for, you know, a Shenandoah in the current telecom environment, an independent organic growth company, you know, versus following that trend of consolidation, you know, whether it being a target or even a consolidator, right? We see a lot of private fiber companies doing overbuilds today.
Just trying to get your higher-level thoughts on kind of industry structure and where you fit within it longer term.
We're definitely seeing consolidation. Jim and I have both been in the telecom industry for about 30 years now. Even on the wireless side, turn of the century, there were 20+ publicly traded wireless companies.
All the Sprint affiliates.
There could be three.
Yeah. We were certainly part of the Sprint affiliates arrangement. I think we're definitely going to see some consolidation in the industry. I think there is an opportunity for us to potentially consolidate some of the smaller players within our region. We had a recent Tuck Inn acquisition in Virginia, in addition to the Horizon acquisition last year. We think we can be a player there. We think we've proven that we can actually integrate these acquisitions. The acquisition in Virginia occurred in July. We've already moved them onto our network, onto our billing system. The Horizon acquisition last year, by the end of the year, we completed the migration to our billing system and all the back office systems. We think we can be a player there, and we definitely expect to see consolidation in the industry. It's already started.
Okay. You think we'll be part of that as well, to your point, you know, where appropriate. What have you learned and what processes have you put in place for integration, for the back office of billing? That's always been what's tripped up acquirers in telecom. That's always the stuff that created issues. What have you learned? What processes do you have in place to make sure that you don't face similar hurdles?
For any of these acquisitions, we put a team in place focused on that acquisition. Our Chief Information Officer has actually helped us lead these acquisitions. She's done an outstanding job there. We think we do have the processes in place to consider the billing systems and the back office systems to gain some of the synergies that we've seen with the Horizon acquisition and the more recent Tuck Inn acquisition as well.
Okay. I wanted to shift back to Glo Fiber for a moment and just ask you how your strategy there has evolved over time as you've continued with the fiber build out.
Back in 2019, when we launched Glo Fiber, we were still primarily a wireless company. You mentioned the Sprint affiliate arrangement. We were a Sprint affiliate. When T-Mobile bought Sprint, they had a call option for our wireless business. We reluctantly sold the business. We sold that for almost $2 billion. We paid off all of our debt with the proceeds. We provided a significant special dividend to our shareholders. We used the remainder to fund our Glo Fiber build and really accelerate that Glo Fiber build. That's really helped us. With Glo Fiber, we're really focused on being the first fiber provider to the markets. That strategy has played out for us. When you look at the growth we saw after we launched Glo Fiber, the first three years after that, we saw EBITDA CAGR rates about 18%. This year, we're off to a great start as well.
Year over year, our EBITDA is up more than 20%. We're starting to see some traction as we gain higher penetration rates in these Glo Fiber markets.
Okay. How has the, I guess, customer adoption trended over time? Has it been an education process for the customers in your area? Is it more, you know, is it more of a pull or demand-driven when they find, say, the fiber available? There's tremendous demand for it. What is the education and the marketing process as you roll out fiber into some of these newer areas?
There is a certain group of customers that as soon as they get another option other than the big cable guy, they are going to move. A lot of it is positive word of mouth within the community. When we go into a new community, we are looking for a warm embrace from that municipality. We want to be a partner with them in not only building the network, but offering the services to their constituents. I think there are certainly opportunities for us. We are really focused on market segmentation right now, digital marketing, making sure that we are getting the right offer in front of the right customers. We are basing that on household income, home values. We are starting to see success for that as well. We also have a direct sales team that goes door to door.
They participate in community events, whether it is the local fairs, local festivals, etc. About a third of our sales are coming through the door-to-door sales channel. About a third are coming through our web sales channel. We also have an inbound call center that is handling about a third in combination with retail stores in the local markets.
I think you touched on it. I don't want to skip over it. Your comment about local markets, I think, your customer service approach is different maybe than a lot are used to, and you take advantage of the low CSAT at cable companies. Can you expand on that a bit? How you have a different approach to customer service, community involvement, that allows you to take the share that you were talking about earlier?
Sure. We do focus on providing outstanding local customer service. We hire all of our customer service reps within the markets that we serve.
You are not talking to somebody overseas when you call any customer service and being bounced around. It's all local, and it feels like a warm embrace versus the.
Correct. If you're in Virginia, you're likely going to be talking to a customer service rep in Virginia. If you're in Ohio, you're likely to be talking to a customer service rep in Ohio as well. We make sure that we answer the phone and connect our customers to a live person. We don't believe in endless automated call queues. Our abandoned rate, we've averaged about 6% year- to- date. We think that's among the leaders in the industry. When you look at our average time to answer, it's about two minutes. We're connecting customers to live reps without having the long waits that they may experience with some other providers, some of our competitors.
Do you have any statistics to share that back that up or support that, whether it's your CSAT relative to the cable companies or even churn rates? We'd love to hear comments on churn rates over time as well, maybe how that's trended. Any kind of metrics you can add?
Sure. Our net promoter score is 69. You know, compare that to some of the big cable guys, they're in the single digits or even negative in some cases. We believe that our customers do appreciate the service we're providing. As far as our churn, we've averaged about 1% churn. We think that's among the.
That is the average. I think Verizon was saying around 1% this morning too. You're up there with the larger telco.
Yeah, we think we're up there with the big guys.
Okay. No, it's very impressive. I just mentioned Verizon, you know, made me think AT&T obviously has been talking about a more aggressive fiber build out of their own, right? $60 million +. I thought Sandpath was foreshadowing a bit this morning that they may also talk about an expanded fiber strategy once they get closer to the, you know, to the Frontier deal closing. How does Shenandoah fit into that kind of world where you have AT&T and Verizon that are going to be passing, you know, $100 million + households across the United States, other private also building out?
Do you fear that, you know, you're going to get boxed in or is there an opportunity for you to be part of those expansive fiber strategies at AT&T and Verizon and perhaps help them meet their goals of, you know, more fiber passings to combine with their wireless?
There is certainly potential to work with them, but we focus on smaller markets. A big market for us is 50,000 passings. Most of our markets are 10,000, 15,000 passings. Smaller markets, we've seen very limited activity from the local telephone companies in our markets as far as fiber construction. In a few cases, if they're in an adjacent market to us, we have seen them edge out. When they've done that, we've basically bypassed those neighborhoods where they've built fiber. That is, again, key for us as being the first to fiber in the market.
You think that's a blocking position then if you're the second in, generally another competitor is not going to want to come in and be the third just because your returns fall precipitously.
They do fall precipitously. Once you're the first one in, you're going to take a significant portion of that market share up front. Once you have a customer that's on fiber that has gigabit speeds, is happy with the service, they're very unlikely to churn.
Yeah, with that low churn rate, I'm assuming relatively low move rates in the markets where you operate as well, which is obviously a component of churn over time. Very, very, very sticky cost churn base. Maybe, Jim, just come back to, I don't think we touched on it yet, but a really important metric is the cost to pass. The fear, like I said, the conventional wisdom was that fiber wouldn't get built in some of these less densely populated areas. I'm from Ohio, so I'm kind of familiar with some of these markets. There's a lot of space in between homes. The conventional wisdom was that they're not going to get passed because the cost to pass is just too high. They're going to be fixed wireless, they're going to be DSL, maybe cable.
Maybe talk a bit about your cost to pass and how you're achieving the economics that you talked about earlier.
Yeah, we're generally seeing it. We're generally passing 80- 90 homes per route-mile of fiber. That translates to about $1,000 - $1,400 per passing. I would say we've been doing this for six years. The earlier markets were probably closer to the 90 homes per mile, and the cost to pass was closer to the $1,000. What's left to be built at this stage is probably more on the 80 or even maybe slightly less than that, and the cost of passing is about $1,400. That's one of the key variables when we look at underwriting these markets to a 15% IRR or higher. The cost to pass is significant, that's the cost to enter. What we're seeing is the areas that we're going into are kind of now we're going outside of the town centers, the dense areas, and going more into the suburban sprawl.
The demographics tend to be better, and the penetration rates we're underwriting tend to be higher. The ARPUs, we have probably one of the higher ARPUs from a fiber provider side. We were $77 in the second quarter of last year. We can still get to the same returns on investment with higher penetration in these given markets, even if the cost of pass goes up, in this case, 10% or 15%.
Okay. Are most of your markets buried or strung plant?
It's about 50/50.
Do you see a notable difference in the cost to pass for the buried versus the strung?
Typically, the cost to bury is higher. We have a lot of rock in some of our markets in the western part of Virginia and Pennsylvania. One of the challenges we have is even with aerial, costs have increased. That's for the permitting and the make-ready costs, the cost for the power companies to make their poles ready to attach. We've seen the power companies really trying to pass all of the costs on to us for the passings of other attachers.
Oh, interesting.
That is certainly a challenge. If we're disciplined with our CapEx, and if there's a market that's expensive to build because of increased make-ready costs, we're not going to build it unless we can get our returns.
Is that permitting process, is that affecting the pace of your fiber build at all?
It definitely impacts the pace as well. When you look out over the past year, I think the power companies have been really overwhelmed in some cases by all of the broadband projects that are going on. It's taking more time to get permits processed at this point.
Okay.
Seems like that issue has yet to be solved after, what, 20 years of building fiber. We keep coming back to the same issues we had 20 years ago.
No, it never, never, never changes. The permitting process is always painful, I guess. You mentioned very high ARPU in your areas and in targeting specific demographics. What do you view as the potential or the trend for ARPU over time? Do you see that contributing materially to revenue growth over time, or is it going to be more of a Q in the P time? It's a Q equation.
Yeah, we're winning market share. We're going in as the new guys. We're not looking to raise prices. We haven't raised prices in six years. We're looking to take share. The high ARPU is really coming from, we do very well at the middle to the high end of the market. Over 50% of our gross ads each month are taking or buying the gigabit plus plans, which generally start at $80. That is, yeah, we're doing very well in that segment of the market. That's kind of driving the higher ARPU than maybe some of our peers.
Okay. What role has government funding played in your builds? Are you getting any BEAD funding through other government funding that's factored into the builds?
We have been awarded over $100 million in grant funds so far, and that's to build to unserved areas. That's primarily around our incumbent cable markets, and those were through American Rescue Plan Act funds. We have already completed a significant portion of that construction, and we'll be wrapping that up later this year and in 2026. As far as BEAD funding, we don't see a big opportunity in our footprint. We have applied for a BEAD project in Ohio in our local telephone company footprint. Overall, when we looked at the density of those BEAD projects, it didn't make sense for us. As Jim mentioned, in our Glo Fiber greenfield builds, we're passing 80 and 90 homes per mile of fiber. In these unserved areas that would be part of BEAD projects, it would be maybe eight homes passed per mile.
When we looked at the level of effort and the resources required to build that mile of fiber on those BEAD projects versus continuing to build in the greenfield Glo Fiber markets, we decided to focus our efforts on continuing to the greenfield Glo Fiber markets.
Is that the economics don't make sense? You know, the funding relative to the cost and projected revenue, or is it just that we have finite resources and we'd rather put those resources to the Glo Fiber rather than seven or eight homes per mile? Is it a math or a return problem, or is it just, like I said, human capital resources, and not wanting to put them there?
It's a return problem in some cases. We can't get the same returns that we're projecting in the Glo Fiber markets, but in our case, it's also a resource issue.
Do you think they moved the ball? They kind of came back with slight tweaks and changes to the BEAD program, seemed to open it up maybe to some alternative solutions, had the states go back. Do you think maybe they moved the ball and changed that, or did the math never really make sense to you?
I think it moved some around the edges. I don't think, at least the states where we provide service, I don't think there was a material shift in the policy. I do think some of these providers that have taken the BEAD money, they're going to struggle to execute on the build plans. We'll see what happens there.
Why do you think they'll struggle to execute?
Just because of the permitting challenges, because in most cases, they're going to be building aerial in these rural areas.
This goes back to the power company operator wanting them to pay for the alterations to the plant.
Absolutely. You know, not only from having to pay for that, but the timelines as well. It's going to push those completion dates out, I think, significantly in some cases.
Okay. You haven't seen the local regulators step in at all and try to incentivize or at least push the utility companies along and say, "Hey, look, you're impeding a project that's really important to us both locally, but also at a national level, all the way to the FCC and the White House for increasing broadband deployment." You haven't seen any pressure or any movement there?
In West Virginia, for example, we have started to see some movement and some pressure from the state. Other than that, we haven't seen any significant changes at this point.
No, no movement at this point. We've been talking a lot about the residential side. I've been asking about that, but your commercial fiber strategy, can you just talk about what that is or how you think about the commercial part of the business?
Sure. If you look at our commercial business, roughly half of that is the big wireless carriers and wholesale. The other half is mid-market enterprise and education customers. I mentioned the increased scale from Horizon has certainly helped us with the big wireless carriers. We're also getting a lot of traction serving education customers, school systems. We serve over 40 school systems throughout our footprint. We're a big participant in the e-rate program, bringing broadband and data connections to these rural school districts. I mentioned earlier, a key is connecting these smaller markets, these rural areas back to major data centers. Also, when we build out Glo Fiber, our commercial business is very complementary. We have numerous examples where we've built out to residential homes with Glo Fiber.
We've been able to come in and win the business of the school system there and also win service with the local government as well. We view the residential service and our commercial fiber businesses as very complementary.
Okay. You mentioned it a few times, the connectivity back to data centers. Can you just help me understand why that's important to you and to your customers?
Sure. Our customers need to connect to, you know, possibly a corporate office somewhere. If we can get them to that data center, they can connect to the outside world. It also helps us efficiently provide internet service to these businesses as well throughout the network.
Okay. If I'm correct with my map, your acquisition was more in Western Ohio, which is not necessarily contiguous with your legacy plant. How important is it for an acquired plant to be contiguous with existing? How does that change the math around potential synergies, if at all?
The acquisition in Ohio was primarily, you know, Southeastern Ohio. It is contiguous with our network in West Virginia and Pennsylvania. We are connecting those networks, so we will have a continuous network connecting Ohio all the way to the Washington, D.C. area and all the way to Chicago as well. We think that is important to have that connectivity. Also, from an operational standpoint, we're able to operate more efficiently with our teams in West Virginia and Ohio, you know, complementary with each other.
I was definitely wrong with my map then. Embarrassing for a guy from Ohio. I should have known that. Would you consider acquisitions that are not contiguous with your existing plant? Are there other scenarios that would be attractive to you?
I think we would consider it, but there would have to be enough scale for that to make sense. We would not be interested in a lot of little islands that weren't, you know, reasonably geographically adjacent to our current network.
Okay.
Yeah, Michael, I think that is one of the differentiators of Shentel is, you know, we're only in eight states, but seven of the eight states, we provide both residential and commercial services in those states. We think we get much better returns on that fiber investment when we put the fiber in the ground, as opposed to a lot of our peers doing maybe one or the other, but generally aren't doing both. We think that helps us differentiate ourselves a bit from some of the others.
Okay. I asked earlier about cable, and you just brought up the commercial part of the business as well. Cable recently signed an MVNO with T-Mobile that allows them to go after the business customer with wireless, right? Previously, it was only businesses with 20 or fewer employees. With the Verizon agreement, this moves it from 20 employees - 999 employees. Do you see that impacting your commercial businesses as well? Is that any different with the ability to bundle broadband with wireless, or is your view the same as on your residential market?
I view that the same as our residential markets. The big three wireless carriers have strong wireless coverage throughout our footprint and really not any material amount of fiber-to-the-home or broadband service. I think there's plenty of opportunity for customers to buy Shentel or Glo Fiber service, wired service, and bundle that with one of the three big wireless carriers.
Who's the dominant wireless operator in your markets? Is it AT&T, Verizon, T-Mobile? Do you have a sense?
I would say T-Mobile has the best coverage. That's because we built the network before we sold it to them.
Yeah.
All three of them have solid wireless coverage in our markets. I would say Verizon and T-Mobile are probably in the lead though.
Okay. Makes sense. I want to leave a minute or two in case anyone in the audience has any questions here for the guys. If you do, just please let me know. Otherwise, I'm just going to kind of roll forward here a bit. Another kind of big part for traditional telecom investors is the return of capital, right? You've been focused very much on deploying capital to build out the network. How should we think about potential strategy for returning capital to investors over time? What's your framework on that?
Yeah, we're very disciplined in our capital allocation. As Ed was mentioning with regards to BEAD, we just don't see the returns on investment there. We're not really seeing many new markets to build into from a greenfield market approach where we can be a duopoly with good density and strong demographics. I think our capital allocation will change. We're about to hit an inflection point in 2027. When we complete the build in 2026, we should flip to free cash flow positive. We've been free cash flow negative for a couple of years here because we were building out Glo Fiber and we were under levered due to the T-Mobile transaction that we started with a clean balance sheet four years ago. At this stage, we're very focused on hitting that inflection point as a publicly traded company.
We think it's important to get back to free cash flow to get a wider investor base and interest. As we've done different IR events over my six years here, we have a lot of fans out there who may be on the sidelines right now because they can't invest in negative free cash flow, you know, small cap companies right now.
Sure. Sorry, Ana, did you raise here? Yeah, I think one more quick one. Can you just remind me, Jim, what your current leverage, your leverage, your leverage target is, just so we have those numbers? It's to kind of dig into my private question a little bit more. How do you think about the benefits of either, whether it's dividend, stock buyback over time when you finally do hit the leverage target and have more optionality?
Yeah, today our net leverage is about 3.7 x.
Okay.
We'll probably have another turn of leverage by the time we complete the build. It would probably be 4.5x- 4.75 x by the end of 2026. With turning free cash flow in 2027, that's where our debt should cap at the end of 2026. As we keep growing EBITDA, we're going to delever naturally just through higher EBITDA levels delevering. We should be back under 3x by the 2028, 2029 timeframe based upon that. Once we get into the free cash flow positive scenario again, I would say generally we've always, Shentel's been doing this for a long, long period of time. We generally look to always reinvest in the business first. As I mentioned, we're finding less and less opportunities to do so. I think we would turn to potentially returning value to the shareholders.
That could be through, we have an annual dividend today, which is only about a 1% yield. It's something that's important to the retail shareholders that we're planning to continue, but we could potentially increase that or potentially do a share buyback. We have a preferred equity out there. That could be another use of funds. If we decided that we wanted to eliminate that down the road, we should have the cash proceeds and the cash flow to do something along those lines as well.
Okay. Great. Thank you. Ana, did you have a?
Yeah. I just wanted to clarify your earlier comments on the debt capital structure strategy. Currently, you largely have loans. You said you intended to tap the ABS market. Timing on that, number one. Number two, were you referring to sort of like an entire company ABS? Would that be your entire capital structure, or is it still going to be a balance between ABS and loans or other kinds of corporate bonds?
Yeah, we're planning to access the ABS market probably late this year, early next year, depending upon we need to get some state regulatory approvals to move forward with it. We're only planning to, one, put our fiber assets in there. The commercial business and the fiber-to-the-home residential business will be contributed to that. Cable will stay outside of the securitization. We're debating what classes of ABS to issue. We don't need an unlimited amount of money. I need roughly around $700 million +s to refinance what I have and what my future needs are going to be. We may just end up accessing the investment grade tranches of ABS. We are preparing, you know, to have access to all tranches if we have a need to do so. We expect to complete that in, like I said, late this year, you know, early next year.
We will put a small revolving credit facility on essentially on the cable side of the business. I don't expect that to be utilized much. As we go forward in a year or two, I believe all the debt of the company will be on the fiber side of the business, and cable will be essentially unlevered at that stage of the game. Yeah, one of the benefits of ABS is once you put the structure in place, every quarter, every month, when we're adding customers, we're increasing the borrowing base. We'll have what they call a VFN or variable funding note facility. It's kind of like a revolver on the securitization that we could borrow against if we needed additional funds down the road at more favorable investment grade rates than what we're getting today.
Okay, great. Hey guys, thank you so much for coming out. Really appreciate it. All right.
Thanks, Mike.
Thanks, guys.