UNITED STATES OF AMERICA

SECURITIES AND EXCHANGE COMMISSION

Washington ~~D.C.~~, D. C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the quarterly period ended September 30, 2012~~

For the quarterly period ended March 31, 2013

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~For the transition period from__________ to __________~~

For the transition period from__________ to __________

Commission File No.: 000-09881

SHENANDOAH TELECOMMUNICATIONS COMPANY

(Exact name of registrant as specified in its charter)

VIRGINIA		54-1162807
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 Shentel Way, Edinburg, Virginia 22824

(Address of principal executive offices) (Zip Code)

(540) 984-4141

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 ~~days~~days. . Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ¨o

Accelerated filer þ

Non-accelerated filer ¨o

Smaller reporting company¨ o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The number of shares of the registrant’s common stock outstanding on ~~October 25, 2012~~April 24, 2013 was ~~23,925,153.~~23,987,634.

SHENANDOAH TELECOMMUNICATIONS COMPANY

INDEX

		Page
		Numbers

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Unaudited Condensed Consolidated Balance Sheets ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012	3-4

	Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	5

	Unaudited Condensed Consolidated Statements of Shareholders’ Equity for the ~~Nine~~Three Months Ended ~~September 30, 2012~~March 31, 2013 and the Year Ended December 31, ~~2011~~2012	6

	Unaudited Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2013 and 2012 ~~and 2011~~	7-8

	Notes to Unaudited Condensed Consolidated Financial Statements	~~9-18~~9-13

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	~~19-36~~14-24

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	3725

Item 4.	Controls and Procedures	3826

PART II.	OTHER INFORMATION

Item 1A.	Risk Factors	3927

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3927

Item 6.	Exhibits	4028

	Signatures	4129

	Exhibit Index	4230

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

ASSETS	September 30, 2012		December 31, 2011		March 31, 2013		December 31, 2012

Current Assets
Cash and cash equivalents	$	94,647	$	15,874	$	67,095	$	71,086
Accounts receivable, net		23,735		21,483		24,566		25,274
Income taxes receivable		-		12,495		2,239		4,705
Materials and supplies		7,249		7,469		7,186		9,789
Prepaid expenses and other		5,076		3,844		5,790		4,749
Assets held for sale		59		2,797
Deferred income taxes		985		502		942		832
Total current assets		131,751		64,464		107,818		116,435

Investments, including $2,074 and $2,160 carried at fair value		8,136		8,305
Investments, including $2,173 and $2,064 carried at fair value						8,448		8,214

Property, plant and equipment, net		319,925		310,754		370,196		365,474

Other Assets
Intangible assets, net		76,210		81,346		73,783		74,942
Cost in excess of net assets of businesses acquired		10,962		10,962
Deferred charges and other assets, net		5,807		4,148		6,483		5,675
Net other assets		92,979		96,456		80,266		80,617
Total assets	$	552,791	$	479,979	$	566,728	$	570,740

See accompanying notes to unaudited condensed consolidated financial statements.

(Continued)

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

LIABILITIES AND SHAREHOLDERS’ EQUITY	September 30, 2012			December 31, 2011		March 31, 2013			December 31, 2012

Current Liabilities
Current maturities of long-term debt	$	2,719		$	21,913	$	1,238		$	1,977
Accounts payable		10,072			11,708		20,500			31,729
Advanced billings and customer deposits		10,730			10,647		11,191			11,190
Accrued compensation		3,439			2,094		2,277			2,671
Liabilities held for sale		-			267
Income taxes payable		12,984			-
Accrued liabilities and other		9,606			8,950		9,597			10,573
Total current liabilities		49,550			55,579		44,803			58,140

Long-term debt, less current maturities		230,200			158,662		230,200			230,200

Other Long-Term Liabilities
Deferred income taxes		46,881			51,675		56,952			57,896
Deferred lease payable		4,620			4,174		5,221			4,903
Asset retirement obligations		5,883			7,610		5,966			5,896
Other liabilities		6,016			4,620		6,570			5,857
Total other liabilities		63,400			68,079		74,709			74,552

Commitments and Contingencies

Shareholders’ Equity
Common stock		23,774			22,043		24,973			24,688
Accumulated other comprehensive loss, net of tax		(1,136	)		-
Accumulated other comprehensive loss							(331	)		(863	)
Retained earnings		187,003			175,616		192,374			184,023
Total shareholders’ equity		209,641			197,659		217,016			207,848

Total liabilities and shareholders’ equity	$	552,791		$	479,979	$	566,728		$	570,740

See accompanying notes to unaudited condensed consolidated financial statements.

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share amounts)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011			Three Months Ended March 31,
													2013			2012

Operating revenues	$	72,876		$	62,657		$	213,077		$	184,640		$	76,010		$	68,823

Operating expenses:
Cost of goods and services, exclusive of depreciation and amortization shown separately below		32,995			25,514			92,067			76,792			30,700			29,029
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		17,680			14,199			47,788			41,438			16,129			15,170
Depreciation and amortization		16,794			13,774			47,860			42,155			13,972			15,807
Total operating expenses		67,469			53,487			187,715			160,385			60,801			60,006
Operating income		5,407			9,170			25,362			24,255			15,209			8,817

Other income (expense):
Interest expense		(2,323	)		(2,003	)		(5,641	)		(6,668	)		(2,152	)		(1,795	)
Gain (loss) on investments, net		212			(250	)		815			(499	)
Gain on investments, net														148			471
Non-operating income, net		169			195			616			703			520			188
Income from continuing operations before income taxes		3,465			7,112			21,152			17,791			13,725			7,681

Income tax expense		2,050			3,497			9,608			8,070			5,374			3,273
Net income from continuing operations		1,415			3,615			11,544			9,721			8,351			4,408
Losses from discontinued operations, net of tax benefits of $29, $392, $97 and $436, respectively		(54	)		(613	)		(157	)		(700	)
Income from discontinued operations, net of tax (expense) of $0 and $(38), respectively														-			58
Net income	$	1,361		$	3,002		$	11,387		$	9,021		$	8,351		$	4,466
Other comprehensive loss:
Unrealized loss on interest rate swap, net of tax		(1,136	)		-			(1,136	)		-

Other comprehensive income:
Unrealized gain on interest rate hedge, net of tax														532			-
Comprehensive income	$	225		$	3,002		$	10,251		$	9,021		$	8,883		$	4,466

Basic and diluted income (loss) per share:	$	0.06		$	0.15		$	0.48		$	0.41
Basic and diluted net income per share:

Net income from continuing operations		-			(0.02	)		(0.01	)		(0.03	)	$	0.35		$	0.19
Losses from discontinued operations	$	0.06		$	0.13		$	0.47		$	0.38
Net income from discontinued operations														-			-
Net income													$	0.35		$	0.19

Weighted average shares outstanding, basic		23,875			23,781			23,858			23,773			23,973			23,843

Weighted average shares, diluted		23,956			23,823			23,905			23,823			24,032			23,868

See accompanying notes to unaudited condensed consolidated financial statements.

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(in thousands, except per share amounts)

	Shares			Common Stock			Retained Earnings			Accumulated Other Comprehensive Loss			Total

Balance, December 31, 2010		23,767		$	19,833		$	170,472		$	-		$	190,305

Net income		-			-			12,993			-			12,993
Dividends declared ($0.33 per share)		-			-			(7,849	)		-			(7,849	)
Dividends reinvested in common stock		51			529			-			-			529
Stock-based compensation		-			1,718			-			-			1,718
Common stock issued through exercise of incentive stock options		5			37			-			-			37
Common stock issued for share awards		19			-			-			-			-
Common stock issued		1			13			-			-			13
Common stock repurchased		(5	)		(92	)		-			-			(92	)
Net excess tax benefit from stock options exercised and stock awards		-			5			-			-			5
																Shares			Common Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balance, December 31, 2011		23,838		$	22,043		$	175,616		$	-		$	197,659			23,838		$	22,043		$	175,616		$	-		$	197,659

Net income		-			-			11,387			-			11,387			-			-			16,303			-			16,303
Other comprehensive loss, net of tax		-			-			-			(1,136	)		(1,136	)		-			-			-			(863	)		(863	)
Dividends declared ($0.33 per share)																	-			-			(7,896	)		-			(7,896	)
Dividends reinvested in common stock																	37			493			-			-			493
Stock based compensation																	-			1,842			-			-			1,842
Common stock issued through exercise of incentive stock options																	55			404			-			-			404
Common stock issued for share awards																	45			-			-			-			-
Common stock issued																	1			10			-			-			10
Common stock repurchased																	(13	)		(143	)		-			-			(143	)
Net excess tax benefit from stock options exercised																	-			39			-			-			39

Comprehensive income		-			-			-			-			10,251
Balance, December 31, 2012																	23,962		$	24,688		$	184,023		$	(863	)	$	207,848

Stock-based compensation		-			1,425			-			-			1,425
Net income																	-			-			8,351			-			8,351
Other comprehensive income, net of tax																	-			-			-			532			532
Stock based compensation																	-			425			-			-			425
Common stock issued for share awards		45			-			-			-			-			37			-			-			-			-
Common stock issued																	-			2			-			-			2
Common stock repurchased		(13	)		(144	)		-			-			(144	)		(11	)		(155	)		-			-			(155	)
Common stock issued through exercise of stock options		55			411			-			-			411
Net tax benefit from stock awards		-			39			-			-			39
Balance, September 30, 2012		23,925		$	23,774		$	187,003		$	(1,136	)	$	209,641
Net excess tax benefit from stock options exercised																	-			13			-			-			13

Balance, March 31, 2013																	23,988		$	24,973		$	192,374		$	(331	)	$	217,016

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended September 30,						Three Months Ended March 31,
	2012			2011			2013			2012

Cash Flows From Operating Activities
Net income	$	11,387		$	9,021		$	8,351		$	4,466
Adjustments to reconcile net income to net cash provided by operating activities:
Non-cash impairment charge		-			645
Depreciation		42,692			33,732			12,808			13,929
Amortization		5,168			8,423			1,164			1,878
Provision for bad debt		2,135			2,559			453			624
Stock based compensation expense		1,425			1,335			425			403
Excess tax benefits on stock option exercises		(106	)		-
Deferred income taxes (benefit)		(4,473	)		6,081
Net (gain) loss on disposal of equipment		64			(1,035	)
Realized (gains) losses on investments		(35	)		27
Unrealized (gains) losses on investments		(250	)		236
Net (gain) loss from patronage and equity Investments		(764	)		13
Write-off of unamortized loan fees		780			-
Excess tax benefits on stock awards								(30	)		-
Deferred income taxes								(1,394	)		(5,304	)
Net loss on disposal of equipment								100			55
Realized (gain) loss on disposal of investments								(3	)		(48	)
Unrealized (gains) on investments								(93	)		(161	)
Net (gain) loss from patronage and equity investments								(171	)		(343	)
Other		1,215			51			696			229
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable		(5,298	)		(2,876	)		230			(704	)
Materials and supplies		220			1,050			2,603			211
Income taxes receivable		12,495			(3,894	)		2,466			11,147
Increase (decrease) in:
Accounts payable		(1,671	)		(4,449	)		(2,815	)		(2,095	)
Deferred lease payable		446			319			318			122
Income taxes payable		12,984			-
Other prepaids, deferrals and accruals		(959	)		3,283			(2,399	)		(1,959	)
Net cash provided by operating activities	$	77,455		$	54,521		$	22,709		$	22,450

Cash Flows From Investing Activities
Purchase and construction of property, plant and equipment	$	(53,611	)	$	(52,505	)	$	(26,024	)	$	(14,831	)
Proceeds from sale of assets		161			1,170
Proceeds from sales of assets								25			1,146
Proceeds from sale of equipment		-			60			128			71
Cash received from sales of Converged Services’ properties		3,265			-
Purchase of investment securities		-			(84	)		(12	)		-
Proceeds from sale of investment securities		1,203			444			45			412

Net cash used in investing activities	$	(48,982	)	$	(50,915	)	$	(25,838	)	$	(13,202	)

(Continued)

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Nine Months Ended September 30,						Three Months Ended March 31,
	2012			2011			2013			2012

Cash Flows From Financing Activities
Principal payments on long-term debt	$	(177,655	)	$	(9,115	)	$	(739	)	$	(5,434	)
Amounts borrowed under debt agreements		230,000			-
Cash paid for debt issuance costs		(2,418	)		-
Excess tax benefits on stock option exercises		106			-
Excess tax benefits on stock awards								30			-
Repurchases of stock		(144	)		(92	)		(155	)		(47	)
Proceeds from exercise of incentive stock options		411			10
Proceeds from sale of stock								2			2

Net cash provided by/(used in) financing activities	$	50,300		$	(9,197	)
Net cash used in financing activities							$	(862	)	$	(5,479	)

Net increase (decrease) in cash and cash equivalents	$	78,773		$	(5,591	)	$	(3,991	)	$	3,769

Cash and cash equivalents:
Beginning		15,874			27,453			71,086			15,874
Ending	$	94,647		$	21,862		$	67,095		$	19,643

Supplemental Disclosures of Cash Flow Information
Cash payments for:
Cash paid (received) for:

Interest	$	4,738		$	5,600		$	2,171		$	1,636

Income taxes (received) paid	$	(11,491	)	$	5,447
Income taxes							$	4,302		$	(2,532	)

During 2013, the Company traded in certain PCS equipment and received credits of $3,160 against the purchase price of new equipment. The decrease in accounts payable for 2013 included $8,414 associated with PCS Network Vision capital expenditures.

See accompanying notes to unaudited condensed consolidated financial statements.

Index

SHENANDOAH TELECOMMUNICATIONS COMPANY AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Basis of Presentation

The interim condensed consolidated financial statements of Shenandoah Telecommunications Company and Subsidiaries (collectively, the “Company”) are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the interim results have been reflected therein. All such adjustments were of a normal and recurring nature. These statements should be read in conjunction with the consolidated financial statements and related notes in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2011.~~2012. The balance sheet information at December 31, ~~2011~~2012 was derived from the audited December 31, ~~2011~~2012 consolidated balance sheet. Operating revenues and income from operations for any interim period are not necessarily indicative of results that may be expected for the entire year.

2. Discontinued Operations

In September 2008, the Company announced its intention to sell its Converged Services operation, ~~and~~ the related assets and liabilities were reclassified as held for sale in the consolidated balance sheet and the historical operating results were reclassified as discontinued ~~operations. Depreciation~~operations, and depreciation and amortization on long-lived assets was ~~also~~ discontinued. ~~As previously reported in prior years, the Company recorded impairment charges.~~

In several transactions during 2011, the Company sold service contracts and related equipment for Converged Services’ properties to third-party purchasers, receiving cash proceeds of $3.0 million (with an additional $2.3 million in proceeds placed in escrow). The total proceeds approximated the carrying value of the assets sold in each transaction.

During 2012, the Company sold service contracts and related equipment for Converged Services’ properties to third party purchasers, receiving cash proceeds of $1.5 million, with an additional $0.4 million placed in escrow. The total proceeds approximated the carrying value of the assets sold. The Company also collected $1.8 million in cash from previously established escrow receivables.

At ~~September 30, 2012,~~March 31, 2013, the Company had ~~six~~one remaining ~~properties. The Company is working with the purchasers and owners of four properties~~property under an agreement to ~~complete negotiated sale transactions and is~~sell in the ~~process~~amount of ~~ending its relationship with the remaining two. No additional impairments are anticipated.~~

~~Assets and liabilities held for sale consisted of the following (in thousands):~~

September 30, 2012 December 31, 2011
Assets held for sale:
Property, plant and equipment, net $ 59 $ 2,424
Other assets - 373
$ 59 $ 2,797
Liabilities:
Other liabilities $ - $ 267

~~Index~~

~~Discontinued operations included the following amounts of operating revenue~~$55 thousand, which is expected to be finalized by no later than August 1, 2013. Revenues and income ~~(loss)~~ before ~~income taxes:~~taxes associated with discontinued operations were $769 thousand and $97 thousand, respectively, for the three months ended March 31, 2012. Comparable amounts for 2013 were not significant.

(in thousands)
Three Months Ended
September 30,

2012 2011
Operating revenues $ 96 $ 2,531
Earnings (loss) before income taxes $ (82 ) $ (1,005 )

Nine Months Ended
September 30,

2012 2011
Operating revenues $ 1,065 $ 8,868
Earnings (loss) before income taxes $ (254 ) $ (1,136 )

3. Property, Plant and Equipment

Property, plant and equipment consisted of the ~~following (in thousands):~~following:

	September 30, 2012		December 31, 2011		March 31, 2013		December 31, 2012
Plant in service	$	568,908	$	536,267	$	592,900	$	586,216
Plant under construction		30,437		12,389		29,248		25,469
		599,345		548,656		622,148		611,685
Less accumulated amortization and depreciation		279,420		237,902		251,952		246,211
Net property, plant and equipment	$	319,925	$	310,754	$	370,196	$	365,474

During the first quarter of 2012, the Company entered into agreements with Sprint Nextel and Alcatel-Lucent to begin updating the Company’s Wireless network. The update uses base station equipment acquired from Alcatel-Lucent in conjunction with Sprint Nextel’s wireless network upgrade plan known as Network Vision. Beginning in the second quarter of 2012, the Company began replacing cell site equipment at a number of its cell sites. As of March 31, 2013, 274 sites had been upgraded, and the Company expects to replace substantially all of its existing cell site equipment by the third quarter of 2013. The Company accelerated depreciation on these assets so that net book value at time of trade-in will equal the expected value to be realized upon trade-in. During 2012, the Company recognized approximately $8.4 million of accelerated depreciation expense for Network Vision related activities, including $2.0 million in the first three months of 2012; the first quarter of 2013 included $0.8 million of accelerated depreciation expense.

4. Earnings per share

Basic net income (loss) per share was computed on the weighted average number of shares outstanding. Diluted net income (loss) per share was computed under the treasury stock method, assuming the conversion as of the beginning of the period, for all dilutive stock options. Of ~~668~~725 thousand and ~~511~~600 thousand shares and options outstanding at ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ respectively, ~~346~~341 thousand and ~~363~~424 thousand options were anti-dilutive, respectively. These options have been excluded from the computations of diluted earnings per share for their respective ~~periods.~~period. There were no adjustments to net income for either period.

Index

5. Investments Carried at Fair Value

Investments include ~~$2.1~~$2.2 million and ~~$2.2~~$2.1 million of investments carried at fair value as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011,~~2012, respectively, consisting of equity, bond and money market mutual funds. These investments were acquired under a rabbi trust arrangement related to a non-qualified supplemental retirement plan maintained by the Company. During the ~~nine~~three months ended ~~September 30, 2012,~~March 31, 2013, the Company recognized ~~$35~~$3 thousand in net gains on dispositions of investments, recognized ~~$31~~$12 thousand in dividend and interest income from investments, and recognized net unrealized gains of ~~$250~~$93 thousand on these investments. ~~The Company also received $402 thousand distributed from the rabbi trust in connection with a payout from the non-qualified supplemental retirement plan to a participant.~~ Fair values for these investments held under the rabbi trust were determined by Level 1 quoted market prices for the underlying mutual funds.

6. Financial Instruments

Financial instruments on the consolidated balance sheets that approximate fair value include: cash and cash equivalents, receivables, investments carried at fair value, payables, accrued liabilities, interest rate swaps and variable rate long-term debt.

~~Index~~

7. Derivative Instruments, ~~and~~ Hedging Activities and Accumulated Other Comprehensive Income

The Company’s objectives in using interest rate derivatives are to add stability to cash flows and to manage its exposure to interest rate movements. To accomplish this objective, the Company primarily uses interest rate swaps as part of its interest rate risk management strategy. Interest rate swaps (both those designated as cash flow hedges as well as those not designated as cash flow hedges) involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

The Company initially entered into a pay fixed, receive variable interest rate swap of $63.3 million of notional principal in August 2010. This interest rate swap was not designated as a cash flow hedge. Changes in the fair value of interest rate swaps not designated as cash flow hedges are recorded in interest expense each reporting period. The total outstanding notional amount of interest rate swaps not designated as cash flow hedges was ~~$53.8~~$50.6 million as of ~~September 30, 2012.~~March 31, 2013. This swap expires in July 2013. Changes in fair value recorded in interest expense for the three months ended ~~September 30,~~March 31, 2013 and 2012, ~~and 2011,~~ were a decrease of ~~$55~~$104 thousand and an increase of ~~$162 thousand, respectively; for the nine months ended September 30, 2012 and 2011, the changes were a decrease of $106 thousand and an increase of $537~~$28 thousand, respectively.

The Company entered into a pay fixed, receive variable interest rate swap of $174.6 million of notional principal in September 2012. This interest rate swap was designated as a cash flow hedge. The total outstanding notional amount of cash flow hedges was $174.6 million as of ~~September 30, 2012.~~March 31, 2013.

The effective portion of changes in the fair value of interest rate swaps designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. The Company uses its derivatives to hedge the variable cash flows associated with existing variable-rate debt. The ineffective portion of the change in fair value of the derivative is recognized directly in earnings through interest expense. No hedge ineffectiveness was recognized during any of the periods presented.

Amounts reported in accumulated other comprehensive income related to the interest rate ~~swaps~~swap designated and that ~~qualify~~qualifies as a cash flow ~~hedges~~hedge are reclassified to interest expense as interest payments are accrued on the Company’s variable-rate debt. As of ~~September 30, 2012,~~March 31, 2013, the Company estimates that $1.6 million will be reclassified as an increase to interest expense during the next twelve months due to the interest rate ~~swaps~~swap since the hedge interest rate exceeds the variable interest rate on the debt.

Index

The table below presents the fair value of the Company’s derivative financial instruments as well as its classification on the consolidated balance sheet as of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011~~2012 (in thousands):

								Liability Derivatives
	Liability Derivatives								Fair Value as of
		Fair Value as of						Balance Sheet	March 31,		December 31,
	Balance Sheet Location		September 30, 2012		December 31, 2011			Location	2013		2012
Derivatives not designated as hedging instruments:
Interest rate swaps	Accrued liabilities and other		$	347		$	331	Accrued liabilities and other	$	135	$	239
	Other liabilities			-			121
Total derivatives not designated as cash flow hedges	Total derivatives not designated as cash flow hedges		$	347		$	452		$	135	$	239

Derivatives designated as hedging instruments:	Derivatives designated as hedging instruments:
Interest rate swaps	Accrued liabilities and other		$	1,614		$	-	Accrued liabilities and other	$	1,559	$	1,613
	Other liabilities			288			-	Deferred charges and other assets, net		1,007		177
Total derivatives designated as hedging instruments	Total derivatives designated as hedging instruments		$	1,902		$	-		$	552	$	1,436

~~Index~~

The table below presents the effect of the Company’s derivative financial instruments designated as cash flow hedges on the consolidated income statements for the three and nine months ended September 30, 2012 (in thousands):

Three Months Ended September 30,

Derivative in Cash Flow
Hedging Relationships

Amount of Gain or
(Loss) Recognized
in Other
Comprehensive
Income on Derivative
(Effective Portion)

Location of Gain or
(Loss) Reclassified
from Accumulated
Other
Comprehensive
Income into Income
(Effective Portion)

Amount of Gain or
(Loss) Reclassified
from Accumulated
Other
Comprehensive
Income into Income
(Effective Portion)

2012 Interest rate swap $ (1,964 ) Interest expense $ 62

Nine Months Ended September 30,
Derivative in Cash Flow
Hedging Relationships

Amount of Gain or
(Loss) Recognized
in Other
Comprehensive
Income on Derivative
(Effective Portion)

Location of Gain or
(Loss) Reclassified
from Accumulated
Other
Comprehensive
Income into Income
(Effective Portion)

Amount of Gain or
(Loss) Reclassified
from Accumulated
Other
Comprehensive
Income into Income
(Effective Portion)

2012 Interest rate swap $ (1,964 ) Interest expense $ 62

The fair value of interest rate swaps is determined using a pricing model with inputs that are observable in the market (level 2 fair value inputs).

The table below presents change in accumulated other comprehensive income by component for the three months ended March 31, 2013 (in thousands; amounts in parentheses indicate debits):

	Gains and Losses on Cash Flow Hedges			Taxes			Accumulated Other Comprehensive Income

Balance as of December 31, 2012	$	(1,436	)	$	573		$	(863	)
Other comprehensive income before reclassifications		490			(196	)		294
Amounts reclassified from accumulated other comprehensive income (to interest expense)		394			(156	)		238
Net current period other comprehensive income		884			(352	)		532
Balance as of March 31, 2013	$	(552	)	$	221		$	(331	)

8. Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision makers. The Company has three reportable segments, which the Company operates and manages as strategic business units organized by lines of business: (1) Wireless, (2) ~~Wireline,~~Cable, and (3) ~~Cable.~~Wireline. A fourth segment, Other, primarily includes Shenandoah Telecommunications Company, the parent holding ~~company as well as certain general and administrative costs historically charged to Converged Services that cannot be allocated to discontinued operations.~~company.

Index

The Wireless segment provides digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia, as a Sprint PCS Affiliate of Sprint Nextel. This segment also owns cell site towers built on leased land, and leases space on these towers to both affiliates and non-affiliated service providers.

The Cable segment provides video, internet and voice services in Virginia, West Virginia and ~~Maryland, and leases fiber optic facilities throughout these areas.~~Maryland.

The Wireline segment provides regulated and unregulated voice services, dial-up and DSL internet access, and long distance access services throughout Shenandoah County and portions of northwestern Augusta ~~and Rockingham Counties,~~County, Virginia, and leases fiber optic facilities throughout the northern Shenandoah Valley of Virginia, northern Virginia and adjacent areas along the Interstate 81 corridor, including portions of West Virginia and Maryland.

Selected financial data for each segment is as follows:

Three months ended March 31, 2013 (In thousands)	Wireless		Cable			Wireline		Other			Eliminations			Consolidated Totals
External revenues
Service revenues	$	44,065	$	17,380		$	3,900	$	-		$	-		$	65,345
Other		3,019		2,476			5,170		-			-			10,665
Total external revenues		47,084		19,856			9,070		-			-			76,010
Internal revenues		1,073		49			4,639		-			(5,761	)		-
Total operating revenues		48,157		19,905			13,709		-			(5,761	)		76,010

Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below		17,530		12,289			6,099		-			(5,218	)		30,700
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		8,771		5,438			1,709		754			(543	)		16,129
Depreciation and amortization		6,028		5,564			2,372		8			-			13,972
Total operating expenses		32,329		23,291			10,180		762			(5,761	)		60,801
Operating income (loss)		15,828		(3,386	)		3,529		(762	)		-			15,209

Three months ended March 31, 2012 (In thousands)	Wireless		Cable			Wireline		Other			Eliminations			Consolidated Totals
External revenues
Service revenues	$	38,403	$	16,052		$	3,868	$	-		$	-		$	58,323
Other		3,451		2,456			4,593		-			-			10,500
Total external revenues		41,854		18,508			8,461		-			-			68,823
Internal revenues		815		75			4,449		-			(5,339	)		-
Total operating revenues		42,669		18,583			12,910		-			(5,339	)		68,823

Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below		16,393		12,226			5,229		17			(4,836	)		29,029
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		7,994		5,047			1,717		915			(503	)		15,170
Depreciation and amortization		7,757		5,852			2,173		25			-			15,807
Total operating expenses		32,144		23,125			9,119		957			(5,339	)		60,006
Operating income (loss)		10,525		(4,542	)		3,791		(957	)		-			8,817

Index

Three months ended September 30, 2012

(in thousands)
Wireless

Wireline

Cable

Other

Eliminations

Consolidated
Totals

External revenues
Service revenues $ 41,517 $ 3,741 $ 16,509 $ - $ - $ 61,767
Other 3,307 5,389 2,413 - - 11,109
Total external revenues 44,824 9,130 18,922 - - 72,876
Internal revenues 837 4,597 79 - (5,513 ) -
Total operating revenues 45,661 13,727 19,001 - (5,513 ) 72,876

Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below 19,121 6,302 12,521 2 (4,951 ) 32,995
Selling, general and administrative, exclusive of depreciation and amortization shown separately below 9,651 1,752 6,199 640 (562 ) 17,680
Depreciation and amortization 8,643 2,233 5,908 10 - 16,794
Total operating expenses 37,415 10,287 24,628 652 (5,513 ) 67,469
Operating income (loss) 8,246 3,440 (5,627 ) (652 ) - 5,407

Three months ended September 30, 2011

(In thousands)

Wireless

Wireline

Cable

Other

Eliminations

Consolidated
Totals

External revenues
Service revenues $ 34,403 $ 3,604 $ 14,532 $ - $ - $ 52,539
Other 3,286 4,829 2,003 - - 10,118
Total external revenues 37,689 8,433 16,535 - - 62,657
Internal revenues 800 3,994 83 - (4,877 ) -
Total operating revenues 38,489 12,427 16,618 - (4,877 ) 62,657

Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below 12,667 4,887 12,082 36 (4,158 ) 25,514
Selling, general and administrative, exclusive of depreciation and amortization shown separately below 7,028 1,891 5,271 728 (719 ) 14,199
Depreciation and amortization 5,868 2,156 5,692 58 - 13,774
Total operating expenses 25,563 8,934 23,045 822 (4,877 ) 53,487
Operating income (loss) 12,926 3,493 (6,427 ) (822 ) - 9,170

~~Index~~

Nine months ended September 30, 2012

(in thousands)

Wireless

Wireline

Cable

Other

Eliminations

Consolidated
Totals

External revenues
Service revenues $ 120,107 $ 11,272 $ 48,918 $ - $ - $ 180,297
Other 9,991 15,343 7,446 - - 32,780
Total external revenues 130,098 26,615 56,364 - - 213,077
Internal revenues 2,495 13,803 233 - (16,531 ) -
Total operating revenues 132,593 40,418 56,597 - (16,531 ) 213,077

Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below 52,432 18,048 36,381 25 (14,819 ) 92,067
Selling, general and administrative, exclusive of depreciation and amortization shown separately below 25,746 5,107 16,427 2,220 (1,712 ) 47,788
Depreciation and amortization 23,153 6,691 17,963 53 - 47,860
Total operating expenses 101,331 29,846 70,771 2,298 (16,531 ) 187,715
Operating income (loss) 31,262 10,572 (14,174 ) (2,298 ) - 25,362

Nine months ended September 30, 2011
(In thousands)

Wireless

Wireline

Cable

Other

Eliminations

Consolidated
Totals

External revenues
Service revenues $ 100,413 $ 10,850 $ 43,594 $ - $ - $ 154,857
Other 9,687 13,906 6,190 - - 29,783
Total external revenues 110,100 24,756 49,784 - - 184,640
Internal revenues 2,391 12,021 199 - (14,611 ) -
Total operating revenues 112,491 36,777 49,983 - (14,611 ) 184,640

Operating expenses
Costs of goods and services, exclusive of depreciation and amortization shown separately below 39,671 14,238 35,441 100 (12,658 ) 76,792
Selling, general and administrative, exclusive of depreciation and amortization shown separately below 21,225 5,558 14,134 2,474 (1,953 ) 41,438
Depreciation and amortization 18,242 6,260 17,478 175 - 42,155
Total operating expenses 79,138 26,056 67,053 2,749 (14,611 ) 160,385
Operating income (loss) 33,353 10,721 (17,070 ) (2,749 ) - 24,255

A reconciliation of the total of the reportable segments’ operating income to consolidated income from continuing operations before income taxes is as follows:

Three Months Ended
September 30,

2012 2011

Total consolidated operating income $ 5,407 $ 9,170
Interest expense (2,323 ) (2,003 )
Non-operating income (expense), net 381 (55 )
Income from continuing operations before income taxes $ 3,465 $ 7,112

~~Index~~

	Three Months Ended March 31,
	2013			2012
Total consolidated operating income	$	15,209		$	8,817
Interest expense		(2,152	)		(1,795	)
Non-operating income (expense), net		668			659
Income from continuing operations before income taxes	$	13,725		$	7,681

Nine Months Ended
September 30,

2012 2011

Total consolidated operating income $ 25,362 $ 24,255
Interest expense (5,641 ) (6,668 )
Non-operating income (expense), net 1,431 204
Income from continuing operations before income taxes $ 21,152 $ 17,791

The Company’s assets by segment are as follows:

(in thousands)	September 30, 2012			December 31, 2011
(In thousands)							March 31, 2013			December 31, 2012

Wireless	$	136,396		$	147,093		$	178,049		$	179,929
Cable		209,344			212,683			198,820			202,436
Wireline		85,178			84,456			86,469			88,776
Other (includes assets held for sale)		481,030			381,230			462,428			458,650
Combined totals		911,948			825,462			925,766			929,791
Inter-segment eliminations		(359,157	)		(345,483	)		(359,038	)		(359,051	)
Consolidated totals	$	552,791		$	479,979		$	566,728		$	570,740

9. Income Taxes

The Company files U.S. federal income tax returns and various state and local income tax returns. With few exceptions, years prior to ~~2008~~2009 are no longer subject to examination. The Company is under audit in the state of Maryland for the 2007, 2008 and 2009 tax years, and in the state of Pennsylvania for the 2009 tax year. No other state or federal income tax audits were in process as of ~~September 30, 2012.~~March 31, 2013.

10. Long-Term Debt ~~and Revolving Lines of Credit~~

As of ~~September 30, 2012~~March 31, 2013 and December 31, ~~2011,~~2012, the Company’s outstanding long-term debt consisted of the following:

(inIn thousands)

September
2012

December
2011

CoBank (fixed term loan) $ 2,557 $ 4,524
CoBank Term Loan A 230,000 175,565
Other debt 362 486
232,919 180,575
Current maturities 2,719 21,913
Total long-term debt $ 230,200 $ 158,662

On September 14, 2012, the Company executed an Amended and Restated Credit Agreement with CoBank and with the participation of 16 additional Farm Credit institutions, for the purpose of refinancing the Company’s existing outstanding debt, funding planned capital expenditures to upgrade the Company’s wireless network in conjunction with Sprint Nextel’s wireless network upgrade project known as Network Vision, and other corporate needs.

~~Index~~

The Amended and Restated Credit Agreement provides for three facilities, a Term Loan Facility, a Revolver Facility, and an Incremental Term Loan Facility. The Term Loan Facility totals $232.8 million and was fully drawn for the purposes described above. The Term Loan Facility has two parts, the Fixed Term Loan Facility of approximately $2.6 million in aggregate principal amount, and the Term Loan A Facility of $230 million in aggregate principal amount. The Fixed Term Loan Facility is required to be repaid in monthly installments of approximately $230 thousand of principal, plus interest at 7.37%, from September 2012 through August 2013. The Term Loan A Facility requires quarterly principal repayments of $5.75 million beginning on December 31, 2014, with the remaining expected balance of approximately $120.75 million due at maturity on September 30, 2019. After an initial stub period, the Term Loan A Facility is expected to bear interest at 30-day LIBOR, currently 0.22%, plus a spread determined by the Company’s Total Leverage Ratio, initially 2.75%; the Company may elect to use other rates as the base, but does not currently expect to do so.

The Revolver Facility provides for $50 million in immediate availability for future capital expenditures and general corporate needs. In addition, the Credit Agreement permits the Company to enter into one or more Incremental Term Loan Facilities, or to increase the Revolver Facility, in the aggregate principal amount not to exceed $100 million subject to compliance with certain covenants. No draw has been made or is currently contemplated under either of these facilities. When and if a draw is made, the maturity date and interest rate options would be substantially identical to the Term Loan A Facility. Repayment provisions would be agreed to at the time of each draw under the Incremental Term Loan Facility.

The Credit Agreement contains affirmative and negative covenants customary to secured credit facilities, including covenants restricting the ability of the Company and its subsidiaries, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of the Company’s and its subsidiaries’ businesses.

~~Indebtedness outstanding under any of the facilities may be accelerated by an Event of Default, as defined in the Credit Agreement.~~

The Facilities are secured by a pledge by the Company of its stock in its subsidiaries, a guarantee by the Company’s subsidiaries other than Shenandoah Telephone Company or Shentel Converged Services, Inc. (and, until certain regulatory approvals are received, Shentel Communications, LLC), and a security interest in all of the assets of the guarantors.

~~The Company is subject to certain financial covenants to be measured on a trailing twelve month basis each calendar quarter unless otherwise specified. These covenants include:~~

a limitation on the Company’s total leverage ratio, defined as indebtedness divided by earnings before interest, taxes, depreciation and amortization, or EBITDA, of less than or equal to 3.00 to 1.00 from the closing date through March 31, 2014, then 2.50 to 1.00 from April 1, 2014 through March 31, 2015, and 2.00 to 1.00 thereafter;

a minimum debt service coverage ratio, defined as EBITDA divided by the sum of all scheduled principal payments on the Term Loans and regularly scheduled principal payments on other indebtedness plus cash interest expense, greater than 2.50 to 1.00 at all times;

a minimum equity to assets ratio, defined as consolidated total assets minus consolidated total liabilities, divided by consolidated total assets, of at least 0.30 to 1.00 from the amendment date through December 31, 2013; then at least 0.325 to 1.00 through December 31, 2014, and at least 0.35 to 1.00 thereafter, measured at each fiscal quarter end;

The Amended and Restated Credit Agreement requires the Company to obtain interest rate protection within 90 days of the amendment date for at least 33% of the aggregate principal balance of the Term Loan A then outstanding, for not less than three years after such date. The Company entered into a pay fixed, receive variable interest rate swap (the 2012 swap) agreement covering approximately 76% of the outstanding principal of the Term Loan A balance through its maturity. The 2012 swap effectively fixes the rate on this portion of the debt at 3.88%. The Company has applied hedge accounting to this swap agreement. The Company also has an existing pay fixed, receive variable interest rate swap agreement. This agreement was executed in 2010 and expires in July 2013. As of the amendment date, it covered the remaining approximately 25% of the outstanding principal balance, and effectively fixed the rate on this portion of the debt at 4.00%. The principal covered by this swap will decline quarterly until it expires. The Company did not elect to apply hedge accounting to this swap.

~~The Company wrote-off approximately $0.8 million, pre-tax, of existing unamortized transaction costs associated with replacing certain lenders from the original credit agreement.~~

~~Index~~

	March 2013		December 2012

CoBank (fixed term loan)	$	1,183	$	1,876
Term Loan A		230,000		230,000
Other debt		255		301
		231,438		232,177
Current maturities		1,238		1,977
Total long-term debt	$	230,200	$	230,200

As of ~~September 30, 2012,~~March 31, 2013, the Company was in compliance with the covenants in its ~~credit agreements.~~

~~The aggregate maturities of long-term debt for each of the twelve month periods shown below are as follows:~~

Twelve Months Ended Amount
(in thousands)
September 30, 2013 $ 2,719
September 30, 2014 -
September 30, 2015 23,000
September 30, 2016 23,000
September 30, 2017 23,000
Later years 161,200
$ 232,919

The estimated fair value of fixed rate debt instruments as of September 30, 2012 and December 31, 2011 was approximately equal to its carrying value at each date, given the short term to maturity. The estimated fair value of the variable rate debt is assumed to approximate its carrying value. The fair value of the Company’s interest rate swaps was a liability of $2.2 million and $452 thousand at September 30, 2012 and December 31, 2011, respectively.

~~The Company receives patronage credits from CoBank and certain of its affiliated Farm~~ Credit institutions, which are not reflected in the stated rates shown above. Patronage credits are a distribution of profits of CoBank as approved by its Board of Directors. During both the first quarters of 2012 and 2011, the Company received patronage credits of approximately 100 basis points on its outstanding CoBank debt balance (approximately 40% of the then outstanding balance). The Company accrued 100 basis points in the year ended December 31, 2011, in anticipation of the early 2012 distribution of the credits by CoBank. Patronage credits are typically paid 65% in cash, with the balance paid in shares of CoBank stock.

~~11. Asset Retirement Obligations~~

The Company records the fair value of an asset retirement obligation as a liability in the period in which it incurs a legal obligation associated with the retirement of tangible long-lived assets that results from acquisition, construction, development and/or normal use of the assets. The Company also records a corresponding asset, which is depreciated over the life of the tangible long-lived asset. Subsequent to the initial measurement of the asset retirement obligation, the obligation is adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows underlying the obligation.

During the second quarter of 2012, new information became available regarding the cost to remove cell site improvements. The Company recorded a one-time adjustment to wireless segment asset retirement obligation liabilities to reflect changes in the estimated future cash flows underlying the obligation to remove cell site improvements. As a result of the adjustment, the company recorded a decrease of $2.0 million to asset retirement liabilities and a decrease of $1.1 million to asset retirement obligation asset. Additionally, the Company recognized a $0.9 million decrease in depreciation expense for the quarter. The Company expects to charge asset removal costs associated with network upgrades against the liability established for removal of cell site improvements.

~~Changes in the liability for asset removal obligations for the nine months and twelve months ended September 30, 2012 and December 31, 2011 are summarized below (in thousands):~~

September
2012

December
2011

Balance at beginning of year $ 7,610 $ 6,542
Revisions to previous estimates (1,973 ) -
Additional liabilities accrued 280 556
Liabilities retired (240 ) -
Accretion expense 206 512
Balance at end of period $ 5,883 $ 7,610

~~Index~~

~~12. Lease Commitments~~

The Company leases land, buildings and tower space under various non-cancelable agreements, which expire between the years 2012 and 2039 and require various minimum annual rental payments. These leases typically include renewal options and escalation clauses. In general, tower leases have five or ten year initial terms with four renewal terms of five years each. The other leases generally contain certain renewal options for periods ranging from five to twenty years.

During 2012, particularly during the three months ended September 30, 2012, the Company amended a number of its cell site leases to accommodate changes required to complete the replacement of base station equipment under the Company’s participation in Sprint Nextel’s Network Vision program. Updated lease disclosures affected by these changes are provided below.

Future minimum lease payments under non-cancelable operating leases, including renewals that are reasonably assured at the inception of the lease, with initial variable lease terms in excess of one year as of September 30, 2012 are as

~~follows:~~

Year Ending Amount
(in thousands)
Oct – Dec 2012 $ 2,709
2013 10,901
2014 10,661
2015 10,302
2016 2017 9,872 9,883
2018 and beyond 46,137
$ 100,465
Agreement.

1813

Index

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This management’s discussion and analysis includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions as they relate to Shenandoah Telecommunications Company or its management are intended to identify these forward-looking statements. All statements regarding Shenandoah Telecommunications Company’s expected future financial position and operating results, business strategy, financing plans, forecasted trends relating to the markets in which Shenandoah Telecommunications Company operates and similar matters are forward-looking statements. We cannot assure you that the Company’s expectations expressed or implied in these forward-looking statements will turn out to be correct. The Company’s actual results could be materially different from its expectations because of various factors, including those discussed below and under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, ~~2011.~~2012. The following management’s discussion and analysis should be read in conjunction with the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, ~~2011,~~2012, including the financial statements and related notes included therein.

General

Overview. Shenandoah Telecommunications Company is a diversified telecommunications company providing both regulated and unregulated telecommunications services through its wholly owned subsidiaries. These subsidiaries provide wireless personal communications services (as a Sprint PCS Affiliate of Sprint Nextel), local exchange telephone services, video, ~~internet~~Internet and data services, long distance, fiber optics facilities, and leased tower facilities. The Company has the following three ~~reporting~~reportable segments, which it operates and manages as strategic business units organized by lines of business:

The Cable segment provides video, internet and voice services in franchise areas in Virginia, West Virginia and portions of western Maryland, and leases fiber optic facilities throughout ~~these areas.~~its service area.

The Wireline segment provides regulated and unregulated voice services, dial-up and DSL internet access, and long-distance access services throughout Shenandoah County and portions of Rockingham and Augusta Counties, Virginia, and leases fiber optic facilities throughout the northern Shenandoah Valley of Virginia, northern Virginia and adjacent areas along the Interstate 81 corridor, including portions of West Virginia and Maryland.

A fourth segment, Other, primarily includes Shenandoah Telecommunications Company, the parent holding ~~company, as well as certain general and administrative costs historically charged to Converged Services that could not be allocated to discontinued operations.~~company.

During the first quarter of 2012, the Company entered into agreements with Sprint Nextel and Alcatel-Lucent to begin updating the Company’s Wireless network. The update will use base station equipment to be acquired from Alcatel-Lucent in conjunction with Sprint Nextel’s wireless network upgrade plan known as Network Vision.

1914

Index

During the second quarter of 2012, the Company upgraded its wireless switch and began replacing cell site equipment. The Company expects to launch 4G LTE service in portions of its wireless footprint during the fourth quarter of 2012. Through September 30, 2012, the Company had replaced 80 cell sites. The Company expects to replace all of its existing cell site equipment by the end of 2013. The Company has accelerated depreciation on these assets so that net book value at time of trade-in will equal the expected value to be realized upon trade-in. Depreciation expense for the three months and nine months ended September 30, 2012, included approximately $3.2 million and $6.2 million, respectively, of accelerated depreciation on Wireless segment equipment. The Company expects accelerated depreciation expense in the Wireless segment to remain at lower but still elevated levels in the fourth quarter of 2012 and in 2013. In the nine months ended September 30, 2012, the Company recognized a favorable one-time adjustment of $0.9 million to Wireless segment depreciation expense related to changes in estimated asset retirement obligations. The Company also expects Wireless segment operating expenses to increase in the near future as changes to backhaul arrangements and cell site lease agreements related to the Network Vision upgrade take effect. During the three and nine months ended September 30, 2012, renegotiations of approximately 60 cell site leases took effect, and the first Network Vision backhaul arrangements went into effect. Incremental costs related to these activities totaled approximately $0.4 million.

In October 2012, Softbank, a Japanese software and wireless telecommunications provider, announced that it would acquire a 70% stake in Sprint Nextel in a multi-step transaction. The Company does not expect that this transaction will have any impact on the Company’s contractual arrangements with Sprint Nextel.

In September 2008, the Company announced its intention to sell its Converged Services operation, and the related assets and liabilities were reclassified as held for sale in the consolidated balance sheet and the historical operating results were reclassified as discontinued operations. Depreciation and amortization on long-lived assets was also discontinued. During 2009, 2010 and 2011, the Company recorded impairment charges totaling $20.0 million ($12.2 million, net of tax). Most of the impairment charge was recorded in 2009.

In several transactions through September 30, 2012, the Company sold service contracts and related equipment for Converged Services’ properties to several third party purchasers, receiving cash proceeds of $1.5 million with an additional $0.4 million placed in escrow. The total proceeds approximated the carrying value of the assets sold. The Company also collected $1.8 million in cash from previously established escrow receivables. At September 30, 2012, escrow receivables outstanding totaled $0.7 million.

At September 30, 2012, the Company had six remaining properties. The Company is working with the purchasers and owners of four properties to complete negotiated sale transactions and is in the process of ending its relationship with the remaining two. No additional impairments are anticipated.

Results of Operations

Three Months Ended ~~September 30, 2012~~March 31, 2013 Compared with the Three Months Ended ~~September 30, 2011~~March 31, 2012

Consolidated Results

The Company’s consolidated results from continuing operations for the ~~third quarters~~first quarter of ~~2012~~2013 and ~~2011~~2012 are summarized as follows:

~~Index~~

(in thousands)	Three Months Ended March 31,						Change
	2013			2012			$			%

Operating revenues	$	76,010		$	68,823		$	7,187			10.4
Operating expenses		60,801			60,006			795			1.3
Operating income		15,209			8,817			6,392			72.5

Interest expense		(2,152	)		(1,795	)		(357	)		(19.9	)
Other income (expense)		668			659			9			1.4
Income before taxes		13,725			7,681			6,044			78.7
Income tax expense		5,374			3,273			2,101			64.2
Net income from continuing operations	$	8,351		$	4,408		$	3,943			89.5

(in thousands)

Three Months Ended
September 30,
Change
2012 2011 $ %

Operating revenues $ 72,876 $ 62,657 $ 10,219 16.3
Operating expenses 67,469 53,487 13,982 26.1
Operating income 5,407 9,170 (3,763 ) (41.0 )

Interest expense (2,323 ) (2,003 ) (320 ) 16.0
Other income (expense) 381 (55 ) 436 792.7
Income before taxes 3,465 7,112 (3,647 ) (51.3 )
Income tax expense 2,050 3,497 1,447 (41.4 )
Net income from continuing operations $ 1,415 $ 3,615 $ (2,200 ) (60.9 )

Operating revenues

For the three months ended ~~September 30, 2012,~~March 31, 2013, operating revenues increased ~~$10.2~~$7.2 million, or ~~16.3%~~10.4%. Wireless segment revenues increased ~~$7.2~~$5.5 million ~~cable~~compared to the first quarter of 2012. Net postpaid service revenues increased $3.7 million, as data fees on smartphones increased $1.7 million in the 2013 period from 2012’s first quarter, while 5.5% growth in quarter-over-quarter average postpaid subscribers added an additional $2.2 million to net postpaid service revenue. Net prepaid service revenues grew $1.9 million, or nearly 28%, compared to the 2012 first quarter. Average prepaid subscribers increased 18.6% in 2013 over 2012. Cable segment revenues increased ~~$2.4~~$1.3 million due to a 2.3% increase in average revenue generating units and ~~wireline segment revenues increased $0.7 million after eliminations. Postpaid PCS service revenues increased $5.0 million over~~a 5.5% average price increase, compared to the ~~third~~first quarter of 2011, while prepaid PCS service revenues increased $2.1 million. PCS and cable segment service revenue increases reflect subscriber count increases and increases in revenue per subscriber. Wireline revenue increases resulted primarily from increases in circuits in service.2012.

Operating expenses

For the three months ended ~~September 30, 2012,~~March 31, 2013, operating expenses increased ~~$14.0~~$0.8 million, or ~~26.1%~~1.3%, compared to the ~~2011~~2012 period. ~~This increase included $3.0~~Wireless prepaid expenses increased $1.2 million, ~~of additional~~including $0.3 million in higher handset costs, $0.8 million for marketing costs, and $0.1 million in other costs. Wireless segment postpaid depreciation and amortization expense declined $1.5 million primarily due to ~~$3.2~~$2.0 million inof accelerated depreciation associated with Network Vision upgrades in the ~~planned upgrade~~first quarter of ~~the Company’s wireless cell site network to take advantage of fourth generation technology. Costs of goods and services~~2012. Wireline segment operating expenses increased ~~$7.5~~$1.1 million, ~~due to $1.9~~including $0.3 million in ~~additional network~~costs to provide transition services to Converged Services properties sold to third parties, $0.2 million in increased depreciation expense on expanded fiber networks, and ~~backhaul~~$0.6 million in costs ~~associated with providing wireless data capacity and~~to support expanded services ~~in our cable~~to affiliates. Cable segment ~~and to~~operating expenses increased ~~handset costs in the wireless segment. Postpaid handset costs increased $2.1~~$0.2 million, while ~~prepaid handset subsidies~~parent company operating expenses decreased $0.2 million.

Other income (expense)

Changes in other income (expense) included increased ~~$2.3 million~~interest expense on higher outstanding debt balances, partially offset by additional patronage income from CoBank, following the refinancing of debt in the third quarter of 2012, relative to the third quarter of 2011. The increase in postpaid handset costs is largely due to the incremental cost of the iPhone, which the Company began selling in the fourth quarter of 2011. The increase in prepaid handset subsidies is due to an increase in the rate per handset charged by Sprint Nextel. The Company also recognized $1.3 million inas well as lower gains recorded on trade-ins of base stations in the third quarter of 2011, which reduced costs of goods and services. Increases of $3.5 million in selling, general and administrative expenses resulted from $1.6 million of increased costs for prepaid wireless sales and marketing costs, $1.0 million of increased postpaid wireless sales, marketing and customer service costs in the Wireless segment and $0.9 million of increased sales, marketing and customer service costs in the Cable segment.

~~Interest expense~~

The increase in interest expense resulted from the write-off of $0.8 million in unamortized loan costs remaining from the 2010 loan transaction during the third quarter of 2012, offset by changes in the fair value of the Company’s 2010 interest rate swap and lower interest payments on the Company’s outstanding debt due to a combination of lower rates and balances.other investments.

Income tax expense

The Company’s effective tax rate ~~increased~~on income from ~~49.0%~~continuing operations decreased from 42.6% in the ~~third quarter of 2011 to 59.2% in the third~~first quarter of 2012 to 39.2% in the first quarter of 2013 principally due corporate changes undertaken in 2012 to ~~revisions~~simplify the Company’s structure and to ~~estimates utilized during~~changes in the ~~preparation~~mix of taxable income, resulting in a decrease in the ~~2011 year-end~~effective state tax ~~provision.~~rate.

2115

Index

Net income from continuing operations

For the three months ended September 30, 2012, net income from continuing operations decreased $2.2 million from the comparable 2011 period, as growth in subscriber counts and revenue per subscriber in both the Wireless and Cable segments combined with increased revenues for fiber and other facilities in the Wireline segment, were offset by increases in operating expenses incurred in support of this growth and the accelerated depreciation charges associated with the Company’s participation in the Network Vision upgrade program, as well as higher interest expenses and corrections to tax items.

~~Nine Months Ended September 30, 2012 Compared with the Nine Months Ended September 30, 2011~~

~~Consolidated Results~~

~~The Company’s consolidated results from continuing operations for the first nine months of 2012 and 2011 are summarized as follows:~~

(in thousands)

Nine Months Ended
September 30,
Change
2012 2011 $ %

Operating revenues $ 213,077 $ 184,640 $ 28,437 15.4
Operating expenses 187,715 160,385 27,330 17.0
Operating income 25,362 24,255 1,107 4.6

Interest expense (5,641 ) (6,668 ) 1,027 (15.4 )
Other income (expense) 1,431 204 1,227 601.5
Income before taxes 21,152 17,791 3,361 18.9
Income tax expense 9,608 8,070 1,538 19.1
Net income from continuing operations $ 11,544 $ 9,721 $ 1,823 18.8

~~Operating revenues~~

For the nine months ended September 30, 2012, operating revenues increased $28.4 million, or 15.4%. The increase was due to $20.1 million in incremental wireless segment revenues, $6.6 million of additional cable segment revenues, and $1.7 million of additional wireline segment revenues after eliminations. Postpaid wireless service revenues increased $12.5 million in 2012, while prepaid wireless service revenues increased $7.2 million. Subscriber count increases and increases in revenue per subscriber each contributed to the increases in cable segment revenues and both categories of wireless segment service revenues. The increase in wireline revenues resulted primarily from increases in circuits in service.

~~Operating expenses~~

For the nine months ended September 30, 2012, operating expenses increased $27.3 million, or 17.0%, compared to the 2011 period. This included an increase of $5.7 million of depreciation and amortization expense, including $6.2 million in accelerated depreciation associated with the planned upgrade of the Company’s wireless cell site network to take advantage of fourth generation technology, net of the $0.9 million adjustment related to asset retirement obligations. Cost of goods and services increased $15.3 million. Major changes included a $4.5 million increase in costs of postpaid handsets and a $4.2 million increase in prepaid handset subsidies in our wireless segment, as well as $2.3 million in incremental network and backhaul costs primarily in support of wireless data capacity and expanded services in our cable segment. The Company also recognized gains, totaling $1.3 million, in the 2011 period related to trade-ins of wireless base stations, while repair costs related to major storms in our territory added $0.5 million to 2012 expenses. Cable programming costs increased $2.0 million in 2012 over 2011. Selling, general and administrative expenses increased $6.5 million from the 2011 first nine months, including $2.1 million in prepaid wireless sales and marketing costs, $2.2 million in incremental commissions and advertising costs, $1.4 million in additional customer care costs and $0.7 million in other general and administrative costs.

~~Index~~

~~Interest expense~~

The decrease in interest expense resulted from lower outstanding balances (prior to the refinancing in September 2012), reductions in the spread over LIBOR during 2011 and 2012, partially offset by the write-off of $0.8 million of unamortized loan costs remaining from the 2010 loan, reflecting the interest of lenders replaced in the 2012 refinancing.

~~Income tax expense~~

~~The Company’s effective tax rate was 45.4% in both nine month periods.~~

~~Net income from continuing operations~~

~~For the nine months ended September 30, 2012,~~March 31, 2013, net income from continuing operations increased ~~$1.8~~$3.9 million, or 89.5%, reflecting ~~growth in subscriber counts~~higher wireless and ~~revenue per subscriber in both the Wireless and Cable segments, increased~~cable segment revenues ~~for fiber and other facilities in the Wireline segment,~~ partially offset by growth in wireless handset costs and subsidies and wireline segment expenses, and increases in ~~operating expenses incurred in support of this growth~~interest expense and ~~the accelerated depreciation charges associated with the Company’s participation in the Network Vision upgrade program, and lower interest expenses.~~taxes.

Wireless

The Company’s Wireless segment provides digital wireless service to a portion of a four-state area covering the region from Harrisburg, York and Altoona, Pennsylvania, to Harrisonburg, Virginia, through Shenandoah Personal Communications ~~Company~~LLC (“PCS”), a Sprint PCS Affiliate of Sprint Nextel. This segment also leases land on which it builds Company-owned cell towers, which ~~are leased~~it leases to affiliated and non-affiliated wireless service providers, throughout the same four-state area described above, through Shenandoah Mobile ~~Company~~LLC (“Mobile”).

PCS receives revenues from Sprint Nextel for subscribers that obtain service in PCS’s network coverage area. PCS relies on Sprint Nextel to provide timely, accurate and complete information to record the appropriate revenue for each financial period. Postpaid revenues received from Sprint Nextel are recorded net of certain fees totaling 20% of net postpaid billed revenue retained by Sprint Nextel. These fees include an 8% management fee and a 12% net service fee. Sprint Nextel also retains a 6% management fee on prepaid revenues.

During the first quarter of 2012, the Company entered into agreements with Sprint Nextel and Alcatel-Lucent to begin adding 4G LTE service to the Company’s Wireless network. The 4G service uses base station equipment acquired from Alcatel-Lucent in conjunction with Sprint Nextel’s wireless network upgrade plan known as Network Vision. There was no immediate change to the fees paid to Sprint, but the net service fee cap that is currently 12% of net billed revenues will increase to 14% on July 1, 2013. If an analysis of the balance of payments between Sprint and Shentel supports raising the rate, Sprint could increase the net service fee to 14% at that time.

The following tables show selected operating statistics of the Wireless segment as of the dates shown:

	Sept. 30,		Dec. 31,		Sept. 30,		Dec. 31,		Mar. 31,		Dec. 31,		Mar. 31,		Dec. 31,
	2012		2011		2011		2010		2013		2012		2012		2011

Retail PCS Subscribers – Postpaid		258,867		248,620		243,548		234,809		263,957		262,892		250,684		248,620
Retail PCS Subscribers – Prepaid		122,454		107,100		98,272		66,956		134,404		128,177		114,384		107,100
PCS Market POPS (000) (1)		2,390		2,388		2,397		2,337		2,390		2,390		2,388		2,388
PCS Covered POPS (000) (1)		2,056		2,055		2,114		2,049		2,058		2,057		2,055		2,055
CDMA Base Stations (sites)		510		509		508		496		521		516		510		509
LTE-enabled sites										232		200		-		-
LTE-covered POPS (000) (1)										1,450		1,131		-		-
EVDO-enabled sites		438		433		402		381		451		444		434		433
EVDO Covered POPS (000) (1)		2,028		2,027		2,053		1,981		2,032		2,029		2,027		2,027
Towers		149		149		149		146
Towers, Company owned										151		150		149		149
Non-affiliate cell site leases		216		219		219		216		218		216		219		219

	Three Months Ended
	March 31,
	2013			2012

Gross PCS Subscriber Additions – Postpaid		15,824			15,966
Net PCS Subscriber Additions – Postpaid		1,065			2,064
Gross PCS Subscriber Additions – Prepaid		21,422			19,364
Net PCS Subscriber Additions – Prepaid		6,227			7,285
PCS Average Monthly Retail Churn % - Postpaid		1.87	%		1.86	%
PCS Average Monthly Retail Churn % - Prepaid		3.87	%		3.65	%

2316

Index

Three Months Ended Nine Months Ended
September 30, September 30,
2012 2011 2012 2011

Gross PCS Subscriber Additions – Postpaid 18,427 16,126 50,500 46,285
Net PCS Subscriber Additions – Postpaid 3,842 2,686 10,247 8,739
Gross PCS Subscriber Additions – Prepaid 18,777 19,545 53,184 65,579
Net PCS Subscriber Additions – Prepaid 5,384 6,940 15,355 31,316
PCS Average Monthly Retail Churn % - Postpaid 1.89 % 1.85 % 1.77 % 1.69 %
PCS Average Monthly Retail Churn % - Prepaid 3.73 % 4.43 % 3.65 % 4.50 %

POPS refers to the estimated population of a given geographic area and is based on information purchased from third parties. Market POPS are those within a market area which the Company is authorized to serve under its Sprint PCS affiliate agreements, and Covered POPS are those covered by the Company’s network.

Three Months Ended ~~September 30, 2012~~March 31, 2013 Compared with the Three Months Ended ~~September 30, 2011~~March 31, 2012

(in thousands)	Three Months Ended September 30,				Change					Three Months Ended March 31,				Change
	2012		2011		$			%		2013		2012		$			%

Segment operating revenues
Wireless service revenue	$	41,517	$	34,403	$	7,114		20.7		$	44,065	$	38,403	$	5,662			14.7
Tower lease revenue		2,286		2,302		(16	)	(0.7	)		2,562		2,251		311			13.8
Equipment revenue		1,436		1,107		329		29.7			1,331		1,530		(199	)		(13.0	)
Other revenue		422		677		(255	)	(37.7	)		199		485		(286	)		(59.0	)
Total segment operating revenues		45,661		38,489		7,172		18.6			48,157		42,669		5,488			12.9
Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		19,121		12,667		6,454		51.0			17,530		16,393		1,137			6.9
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		9,651		7,028		2,623		37.3			8,771		7,994		777			9.7
Depreciation and amortization		8,643		5,868		2,775		47.3			6,028		7,757		(1,729	)		(22.3	)
Total segment operating expenses		37,415		25,563		11,852		46.4			32,329		32,144		185			0.6
Segment operating income	$	8,246	$	12,926	$	(4,680	)	(36.2	)	$	15,828	$	10,525	$	5,303			50.4

Operating revenues

Wireless service revenue increased ~~$7.1~~$5.7 million, or ~~20.7%~~14.7%, for the three months ended ~~September 30, 2012,~~March 31, 2013, compared to the ~~comparable 2011 period.~~2012 first quarter. Net postpaid service revenues increased ~~$5.0~~$3.7 million, as data fees on smartphones increased ~~$2.0~~$1.7 million in the ~~2012~~2013 period from ~~2011’s third quarter, while 6.1%~~2012’s first quarter. A 5.5% growth in quarter-over-quarter average postpaid subscribers ~~and increased rates~~ added an additional ~~$3.0~~$2.2 million to net postpaid service revenue. Net prepaid service revenues grew ~~$2.1~~$1.9 million, or ~~35%~~nearly 28%, compared to the ~~2011 third~~2012 first quarter. Average prepaid subscribers increased ~~26%~~18.6% in ~~2012~~2013 over ~~2011,~~2012, with changes in the mix of subscribers ~~(to those with comparatively higher revenue plans) accounting for the remainder of the increase in prepaid service revenues.~~

~~The increase in equipment revenue resulted primarily from $0.4 million in incremental revenue from sales of higher priced iPhones.~~

~~Index~~

~~Cost of goods and services~~

~~Cost of goods and services increased $6.5 million, or 51.0%, in 2012 from the third quarter of 2011. Postpaid handset costs increased $2.0 million due~~ to the higher cost of iPhones, which were not available in early 2011. Costs of iPhones sold to new and existing postpaid customers increased $1.0 million over the cost of a comparable quantity of smartphones sold in the third quarter of 2011. Handset subsidies associated with prepaid customer acquisitions and upgrades increased $2.3 million due to higher unit costs charged by Sprint Nextel. Network costs increased $1.2 million for backhaul and rent expenses. Network costs are expected to continue to increase due to the temporary need for redundant backhaul circuits during the implementation of the Network Vision plan, and going forward to accommodate the expected increase in data volumes. While there was no trade-in activity in the third quarter of 2012, the 2011 period costs were partially offset by a $1.4 million gain on trade-in of wireless network assets.

~~Selling, general and administrative~~

Selling, general and administrative costs increased $2.6 million, or 37.3%, in the third quarter of 2012 over the comparable 2011 period. Marketing and selling costs charged by Sprint Nextel for the addition of new prepaid customers increased $1.2 million, while costs to support the existing prepaid subscriber base increased $0.5 million primarily as a result of the growth in prepaid subscribers. The remainder of the increase related to advertising and commission expenses associated with postpaid activities, which increased $0.8 million.

~~Depreciation and amortization~~

Depreciation and amortization increased $2.8 million in 2012 over the 2011 third quarter, due to recording $3.2 million of accelerated depreciation on existing assets that will be replaced during Network Vision upgrades. There was a $0.3 million decrease in amortization of the initial purchase cost of prepaid customers acquired in July 2010, which decreases each month in relation to churn in the initial customer base. Network Vision-related accelerated depreciation expenses will remain elevated, though at a lower level, through 2013, when the Company expects to have completely replaced the existing equipment.

~~Nine Months Ended September 30, 2012 Compared with the Nine Months Ended September 30, 2011~~

(in thousands)

Nine Months Ended
September 30,
Change
2012 2011 $ %

Segment operating revenues
Wireless service revenue $ 120,107 $ 100,413 $ 19,694 19.6
Tower lease revenue 6,816 6,677 139 2.1
Equipment revenue 4,307 3,735 572 15.3
Other revenue 1,363 1,666 (303 ) (18.2 )
Total segment operating revenues 132,593 112,491 20,102 17.9
Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below 52,432 39,671 12,761 32.2
Selling, general and administrative, exclusive of depreciation and amortization shown separately below 25,746 21,225 4,521 21.3
Depreciation and amortization 23,153 18,242 4,911 26.9
Total segment operating expenses 101,331 79,138 22,193 28.0
Segment operating income $ 31,262 $ 33,353 $ (2,091 ) (6.3 )

~~Index~~

~~Operating revenues~~

Wireless service revenue increased $19.7 million, or 19.6%, for the nine months ended September 30, 2012, compared to the comparable 2011 period. Net postpaid service revenues increased $12.5 million, as data fees on smartphones increased $6.5 million in the 2012 period over 2011, while 5.8% growth in period-over-period average postpaid subscribers added an additional $6.0 million to net postpaid service revenue. Net prepaid service revenues grew $7.2 million, or nearly 46%, compared to the nine months ended September 30, 2011. Average prepaid subscribers increased 36% in 2012 over 2011, with changes in the mix of subscribers toward higher revenue plans accounting for the remainder of the increase in prepaid service revenues.

~~The increase in tower lease revenue resulted primarily from scheduled escalations in revenue streams.~~

~~The increase in equipment revenue resulted primarily from the incremental revenue from iPhones sold, partially offset by fewer sales of lower priced other devices sold.~~

Cost of goods and services

Cost of goods and services increased ~~$12.8~~$1.1 million, or ~~32.2%~~6.9%, in ~~2012~~2013 from the first ~~nine months~~quarter of ~~2011.~~2012. Postpaid handset costs ~~increased $4.6~~decreased $0.7 million ~~largely~~primarily due to ~~the higher cost of iPhones, which were not available until October 2011.~~fewer handsets sold through Company-controlled channels in 2013. Handset ~~subsidies~~costs associated with prepaid customer acquisitions ~~and upgrades~~ increased ~~$4.3~~$0.2 million due to ~~higher unit costs charged by Sprint Nextel.~~an increase in gross additions. Network costs increased ~~$2.7~~$1.2 million, primarily due to increases in rent and backhaul associated with the Network Vision project. Maintenance expense grew $0.3 million due to ~~additional costs of backhaul and rent expense. Network costs are expected to continue to increase due to~~increases in maintenance contracts that support the temporary need for redundant backhaul circuits during the implementation of the Network Vision plan, as well as the on-going increase to accommodate the expected increase in data volumes. While there was no trade-in activity in the year-to-date 2012 period, the 2011 period costs were partially offset by a $1.4 million gain on trade-in ofupgraded wireless ~~network assets.~~network.

Selling, general and administrative

Selling, general and administrative costs increased ~~$4.5~~$0.8 million, or ~~21.3%~~9.7%, in the first ~~nine months~~quarter of ~~2012~~2013 over the comparable ~~2011~~2012 period. ~~Marketing and selling costs charged by Sprint Nextel for the addition of new prepaid customers increased $1.0 million, while support of~~Costs associated with supporting the existing prepaid subscriber base ~~increased $1.4~~accounted for $0.6 million ~~primarily as a result~~ of the ~~growth in~~increase, while costs to add new prepaid ~~subscribers. The remaining $2.1 million increase related to advertising~~subscribers increased $0.5 million. Advertising and ~~commissions expense~~commission expenses associated with postpaid ~~activities.~~activities decreased a total of $0.3 million.

Index

Depreciation and amortization

Depreciation and amortization ~~increased $4.9~~decreased $1.7 million in ~~2012~~2013 over the ~~nine months ended September 2011,~~2012 first quarter, due primarily to ~~$7.1~~$2.0 million of accelerated depreciation recorded in the first quarter of 2012 on ~~existing~~ assets ~~that will~~to be replaced during Network Vision ~~upgrades, partially offset by~~upgrades. Accelerated depreciation in first quarter 2013 totaled $0.8 million. Also contributing to the decrease was a ~~$0.9~~$0.2 million ~~one-time adjustment of depreciation expense related to a reduction of the estimate for asset retirement costs and by a $1.1 million decrease~~decline in amortization of the initial purchase cost of acquired prepaid customers, which decreases each month in relation to churn in the initial customer base. Network Vision-related accelerated depreciation expenses will remain elevated, though at a lower level, through 2013.customers.

Cable

The Cable segment provides analog, digital and high-definition television service under franchise agreements in Virginia, West Virginia and portions of western Maryland, as well as internet and voice services in these markets.

The Company has been upgrading its cable systems since early 2009, and by December 2010 had completed upgrades to the systems acquired in late 2008, and as of September 30, 2012, has completed all but one of the upgrades to markets acquired in 2010. Upgrades in this remaining market, passing approximately 10 thousand homes, are underway and expected to be completed in late 2012. The Company has rolled out expanded video, internet and voice services to markets as upgrades have been completed.

The following table shows selected operating statistics of the Cable segment as of the dates shown:

	Mar. 31, 2013			Dec. 31, 2012			Mar. 31, 2012			Dec. 31, 2011

Homes Passed (1)		185,099			184,533			182,828			182,156
Customer Relationships (2)
Video customers		59,353			59,089			62,519			62,835
Non-video customers		16,220			15,709			13,611			12,513
Total customer relationships		75,573			74,798			76,130			75,348
Video
Customers (3)		61,257			61,559			64,532			64,979
Penetration (4)		33.1	%		33.4	%		35.3	%		35.7	%
Digital video penetration (5)		39.6	%		39.5	%		39.7	%		39.0	%
High-speed Internet
Available Homes (6)		164,789			163,273			156,791			156,119
Customers (3)		42,479			41,025			38,856			37,021
Penetration (4)		25.8	%		25.1	%		24.8	%		23.7	%
Voice
Available Homes (6)		157,409			154,552			143,907			143,235
Customers (3)		12,840			12,307			10,618			9,881
Penetration (4)		8.2	%		8.0	%		7.4	%		6.9	%
Total Revenue Generating Units (7)		116,576			114,891			114,006			111,881
Total Fiber Miles (8)		40,686			39,418			35,086			34,772
Total Route Miles		2,116			2,077			1,998			1,990

~~Index~~

Sept. 30,
2012

Dec. 31,
2011

Sept. 30,
2011

Dec. 31,
2010

Homes Passed (1) 183,375 182,156 181,351 178,763
Customer Relationships (2)
Video customers 60,443 62,835 64,655 65,138
Non-video customers 14,943 12,513 10,476 9,074
Total customer relationships 75,386 75,348 75,131 74,212
Video
Revenue generating units (3) 62,526 64,979 66,179 67,235
Penetration (4) 34.1 % 35.7 % 36.5 % 37.6 %
Digital video revenue generating units (5) 24,637 25,357 25,083 22,855
Digital video penetration (5) 39.4 % 39.0 % 37.9 % 34.0 %
High-speed Internet
Available Homes (6) 157,338 156,119 155,120 144,099
Revenue generating units (3) 40,387 37,021 35,651 31,832
Penetration (4) 25.7 % 23.7 % 23.0 % 22.1 %
Voice
Available Homes (6) 150,944 143,235 142,236 118,652
Revenue generating units (3) 11,849 9,881 8,842 6,340
Penetration (4) 7.8 % 6.9 % 6.2 % 5.3 %
Total Revenue Generating Units (7) 139,399 137,238 135,755 128,262
Fiber Route Miles (8) 2,029 1,990 1,985 1,389
Total Fiber Miles 37,239 34,772 34,690 31,577

Homes and businesses are considered passed (“homes passed”) if we can connect them to our distribution system without further extending the transmission lines. Homes passed is an estimate based upon the best available information.

Customer relationships represent the number of customers who receive at least one of our services.

Generally, a dwelling or commercial unit with one or more television sets connected to our distribution system counts as one video customer. Where services are provided on a bulk basis, such as to hotels and some multi-dwelling units, the revenue charged to the customer is divided by the rate for comparable service in the local market to determine the number of customer equivalents included in the ~~revenue generating unit~~customer counts shown above.

Penetration is calculated by dividing the number of ~~revenue generating units~~customers by the number of homes passed or available homes, as appropriate.

Digital video ~~revenue generating units~~penetration is calculated by dividing the number of digital video customers by total video customers. Digital video customers are ~~those~~video customers who receive any level of video service via digital transmission. A dwelling with one or more digital set-top boxes counts as one digital video ~~revenue generating unit. Digital video penetration is calculated by dividing the number of digital video revenue generating units by total video revenue generating units.~~customer.

Homes and businesses are considered available (“available homes”) if we can connect them to our distribution system without further extending the transmission lines and if we offer the service in that area. Homes passed in Shenandoah County are excluded from available homes as we do not offer high-speed internet or voice services over our co-axial distribution network in this market.

Index

~~Total revenue~~Revenue generating units are the sum of video, ~~digital video,~~ voice and high-speed internet ~~revenue generating units. Consistent with industry practices, each digital video customer counts as two revenue generating units.~~customers.

Fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance. For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

~~Index~~

Three Months Ended ~~September 30, 2012~~March 31, 2013 Compared with the Three Months Ended ~~September 30, 2011~~March 31, 2012

(in thousands)	Three Months Ended September 30,						Change			Three Months Ended March 31,						Change
	2012			2011			$		%	2013			2012			$			%

Segment operating revenues
Service revenue	$	16,509		$	14,532		$	1,977	13.6	$	17,380		$	16,052		$	1,328			8.3
Equipment and other revenue		2,492			2,086			406	19.5		2,525			2,531			(6	)		(0.2	)
Total segment operating revenues		19,001			16,618			2,383	14.3		19,905			18,583			1,322			7.1

Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		12,521			12,082			439	3.6		12,289			12,226			63			0.5
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		6,199			5,271			928	17.6		5,438			5,047			391			7.7
Depreciation and amortization		5,908			5,692			216	3.8		5,564			5,852			(288	)		(4.9	)
Total segment operating expenses		24,628			23,045			1,583	6.9		23,291			23,125			166			0.7
Segment operating loss	$	(5,627	)	$	(6,427	)	$	800	12.4	$	(3,386	)	$	(4,542	)	$	1,156			25.5

Operating revenues

Cable segment service revenue increased ~~$2.0~~$1.3 million, or ~~13.6%~~8.3%, due to a ~~3.7%~~2.3% increase in average revenue generating units, video price increases averaging 5.5% implemented in the first quarter 2013 driven by rising programming costs, and customers selecting higher priced digital TV ~~packages~~services and higher speed data access ~~packages, and video price increases.~~

Equipment and other revenues increased $0.4 million, or 19.5%, due to increases in revenue from sales of fiber optic services and in a variety of ancillary revenues such as set-top box rental fees, advertising revenues, and other fees billed to customers, each of which generated approximately $0.1 million in incremental revenues.

~~Operating expenses~~

Cable segment cost of goods and services increased primarily due to $0.5 million of repairs that were required after strong storms damaged portions of the network. Cable content cost increases and costs to support the expansion of voice services to upgraded markets have been largely offset by savings in backhaul costs, power and maintenance and repair costs as a result of the network upgrade efforts over the last two years. These savings were created by shifting to a more efficient network design including reducing the number of head ends and migrating off more expensive third party voice and backhaul services.

~~Selling, general and administrative expenses have increased principally due to increased costs for customer service and general administrative functions as a result of serving more customers.~~

~~Index~~

~~Nine Months Ended September 30, 2012 Compared with the Nine Months Ended September 30, 2011~~

Nine Months Ended
September 30,
Change
2012 2011 $ %

Segment operating revenues
Service revenue $ 48,918 $ 43,604 $ 5,314 12.2
Equipment and other revenue 7,679 6,379 1,300 20.4
Total segment operating revenues 56,597 49,983 6,614 13.2

Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below 36,381 35,441 940 2.7
Selling, general and administrative, exclusive of depreciation and amortization shown separately below 16,427 14,134 2,293 16.2
Depreciation and amortization 17,963 17,478 485 2.8
Total segment operating expenses 70,771 67,053 3,718 5.5
Segment operating loss $ (14,174 ) $ (17,070 ) $ 2,896 17.0

~~Operating revenues~~

Cable segment service revenue increased $5.3 million, or 12.2%, due to a 5.4% increase in average revenue generating units, customers shifting to higher priced digital TV packages and higher speed data access packages, and video price increases.

Equipment and other revenues increased $1.3 million, or 20.4%, due to increases in revenue from sales of fiber optic services and in a variety of ancillary revenues such as set-top box rental fees, advertising revenues, and other fees billed to customers, each of which generated approximately $0.2 million in incremental revenues.packages.

Operating expenses

Cable segment cost of goods and services increased ~~largely~~0.5% principally due to ~~$0.5 million~~higher maintenance expenses. Cable programming costs were flat as declining video subscriber counts offset the impact of repairs that were required after strong storms damaged portions of the network. Cable content cost increases and costs to support the expansion particularly of voice services to upgraded markets have been largely offset by savings in backhaul costs, power and maintenance and repair costs as a result of the network re-build efforts over the last two years.rising rates per sub.

Selling, general and administrative expenses have increased principally due to costs of our new brand and allocated costs for customer service ~~and general administrative functions.~~functions, offset partly by lower charges for bad debts.

The decrease in depreciation and amortization expense consists of lower amortization on customer base intangibles established in the cable acquisitions, which were set-up to amortize at accelerated rates that decline with each anniversary of their establishment, partially offset by higher depreciation expense on assets placed in service.

Wireline

The Wireline segment provides regulated and unregulated voice services, dial-up and DSL internet access, and long distance access services throughout Shenandoah County and portions of ~~northwestern~~Rockingham and Augusta ~~and Rockingham~~ Counties, Virginia, and leases fiber optic facilities throughout the northern Shenandoah Valley of Virginia, northern Virginia and adjacent areas along the Interstate 81 corridor, including portions of West Virginia and Maryland.

2919

Index

	Sept. 30,		Dec. 31,		Sept. 30,		Dec. 31,		Mar. 31,		Dec. 31,		Mar. 31,		Dec. 31,
	2012		2011		2011		2010		2013		2012		2012		2011

Wireline Segment
Telephone Access Lines		22,506		23,083		23,288		23,706		22,234		22,297		22,838		23,083
Long Distance Subscribers		10,296		10,483		10,559		10,667		10,116		10,157		10,416		10,483
DSL Subscribers		12,551		12,351		12,242		11,946		12,665		12,567		12,472		12,351
Dial-up Internet Subscribers		1,089		1,410		1,543		2,190		918		996		1,282		1,410
Total Fiber Miles (1)										84,365		84,107		79,225		78,523
Fiber Route Miles		1,402		1,349		1,331		1,267		1,428		1,420		1,356		1,349
Total Fiber Miles (1)		83,385		78,523		76,749		71,118

(1)

Total fiber miles are measured by taking the number of fiber strands in a cable and multiplying that number by the route distance. For example, a 10 mile route with 144 fiber strands would equal 1,440 fiber miles.

Three Months Ended ~~September 30, 2012~~March 31, 2013 Compared with the Three Months Ended ~~September 30, 2011~~March 31, 2012

(in thousands)	Three Months Ended September 30,				Change					Three Months Ended March 31,				Change
	2012		2011		$			%		2013		2012		$			%

Segment operating revenues
Service revenue	$	4,103	$	4,081	$	22		0.5		$	4,245	$	4,129	$	116			2.8
Access revenue		3,310		3,135		175		5.6			3,248		2,993		255			8.5
Facilities lease revenue		5,090		4,520		570		12.6			5,148		5,052		96			1.9
Equipment revenue		9		13		(4	)	(30.8	)
Other revenue		1,215		678		537		79.2
Equipment and other revenue											1,068		736		332			45.1
Total segment operating revenues		13,727		12,427		1,300		10.5			13,709		12,910		799			6.2
Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below		6,302		4,887		1,415		29.0			6,099		5,229		870			16.6
Selling, general and administrative, exclusive of depreciation and amortization shown separately below		1,752		1,891		(139	)	(7.4	)		1,709		1,717		(8	)		(0.5	)
Depreciation and amortization		2,233		2,156		77		3.6			2,372		2,173		199			9.2
Total segment operating expenses		10,287		8,934		1,353		15.1			10,180		9,119		1,061			11.6
Segment operating income	$	3,440	$	3,493	$	(53	)	(1.5	)	$	3,529	$	3,791	$	(262	)		(6.9	)

Operating revenues

~~Operating~~Total operating revenues increased ~~$1.3~~$0.8 million ~~overall~~ in the three months ended ~~September 30, 2012,~~March 31, 2013, up from the comparable ~~2011~~2012 period. The increase in service revenue resulted primarily from contracts to lease fiber facilities and provide internet access to third parties. Access revenue increased primarily due to ~~changes in affiliate billings in~~ the ~~third quarter 2011. Facility lease~~Company’s mid-2012 decision to re-tariff DSL rates. Other revenue increased due to ~~charges~~billings for additional circuits to our Wireless affiliate and third parties for fiber to the tower and similar projects, to support voice services in the acquired cable markets, as well as service contracts to other customers. Other revenue increased as the Company providedtransition services to ~~the new owners~~buyers of Converged ~~Services~~Services’ properties ~~at cost during transition of the properties. The increase in other revenue is offset~~(offset by ~~an increase in cost~~increased costs of goods and ~~services.~~services mentioned below).

Operating expenses

Operating expenses overall increased ~~$1.4~~$1.1 million, or ~~15.1%~~11.6%, in the three months ended ~~September 30, 2012,~~March 31, 2013, compared to the ~~2011~~2012 three month period. The increase in cost of goods and services resulted primarily from the costs of providing service to transitioning Converged Services properties, the costs of obtaining service from third parties to support the provision of additional voice services and facilities leases as mentioned above, as well as approximately $0.3 million in costs to ~~repair facilities following a major summer storm at the end of June 2012. The increase in depreciation resulted from additions~~provide services to switch and circuit equipment required to support the growth in fiber and other service contract revenue mentioned above. The decrease in selling, general and administrative expenses resulted from lower commissions, advertising and bad debt charges, each of which was less than $0.1 million.

~~Index~~

~~Nine Months Ended September 30, 2012 Compared with the Nine Months Ended September 30, 2011~~

(in thousands)
Nine Months Ended
September 30,
Change
2012 2011 $ %

Segment operating revenues
Service revenue $ 12,350 $ 12,057 $ 293 2.4
Access revenue 9,344 10,000 (656 ) (6.6 )
Facilities lease revenue 15,394 12,238 3,156 25.8
Equipment revenue 29 31 (2 ) (6.5 )
Other revenue 3,301 2,451 850 34.7
Total segment operating revenues 40,418 36,777 3,641 9.9
Segment operating expenses
Cost of goods and services, exclusive of depreciation and amortization shown separately below 18,048 14,238 3,810 26.8
Selling, general and administrative, exclusive of depreciation and amortization shown separately below 5,107 5,558 (451 ) (8.1 )
Depreciation and amortization 6,691 6,260 431 6.9
Total segment operating expenses 29,846 26,056 3,790 14.5
Segment operating income $ 10,572 $ 10,721 $ (149 ) (1.4 )

~~Operating revenues~~

Operating revenues increased $3.6 million, or 9.9%, in the nine months ended September 30, 2012, from the comparable 2011 period. The increase in service revenue resulted primarily from contracts to provide internet access to third parties. Access revenue decreased due to changes in affiliate billings in the third quarter of 2011. Facility lease revenue increased due to charges for additional circuits to our Wireless affiliate and third parties for fiber to the tower and similar projects, to support voice services in the acquired cable markets, as well as service contracts to other customers. Other revenue increased as the Company provided services at cost to the new owners of Converged Services properties during transition of the properties. This increase is offset by an increase in cost of goods and services.

~~Operating expenses~~

Operating expenses overall increased $3.8 million, or 14.5%, in the nine months ended September 30, 2012, compared to the 2011 nine month period. The increase in cost of goods and services resulted from the costs of providing service to the new owners of transitioning Converged Services properties. Also driving the increase were the costs of obtaining service from third parties to provide voice services toPCS, Shentel Cable and other customers, related to the increases in ~~service revenue and facilities lease revenue~~revenues shown ~~above, as well as approximately $0.3 million in costs to repair facilities following a major summer storm at the end of June 2012.~~above. The increase in depreciation resulted from additions to switch and circuit equipment in support of fiber and other service contract revenue increases as ~~shown~~discussed above. ~~The decrease in selling, general and administrative expenses resulted from lower commissions, advertising and bad debt charges, each of which was less than $0.2 million.~~

3120

Index

Non-GAAP Financial Measure

In managing our business and assessing our financial performance, management supplements the information provided by financial statement measures prepared in accordance with GAAP with adjusted OIBDA, which is considered a “non-GAAP financial measure” under SEC rules.

Adjusted OIBDA is defined by us as operating income (loss) before depreciation and amortization, adjusted to exclude the effects of: certain non-recurring transactions; impairment of assets; gains and losses on asset sales; and share based compensation expense. Adjusted OIBDA should not be construed as an alternative to operating income as determined in accordance with GAAP as a measure of operating performance.

In a capital-intensive industry such as telecommunications, management believes that adjusted OIBDA and the associated percentage margin calculations are meaningful measures of our operating performance. We use adjusted OIBDA as a supplemental performance measure because management believes it facilitates comparisons of our operating performance from period to period and comparisons of our operating performance to that of other companies by excluding potential differences caused by the age and book depreciation of fixed assets (affecting relative depreciation expenses) as well as the other items described above for which additional adjustments were made. In the future, management expects that the Company may again report adjusted OIBDA excluding these items and may incur expenses similar to these excluded items. Accordingly, the exclusion of these and other similar items from our non-GAAP presentation should not be interpreted as implying these items are non-recurring, infrequent or unusual.

While depreciation and amortization are considered operating costs under generally accepted accounting principles, these expenses primarily represent the current period allocation of costs associated with long-lived assets acquired or constructed in prior periods, and accordingly may obscure underlying operating trends for some purposes. By isolating the effects of these expenses and other items that vary from period to period without any correlation to our underlying performance, or that vary widely among similar companies, management believes adjusted OIBDA facilitates internal comparisons of our historical operating performance, which are used by management for business planning purposes, and also facilitates comparisons of our performance relative to that of our competitors. In addition, we believe that adjusted OIBDA and similar measures are widely used by investors and financial analysts as measures of our financial performance over time, and to compare our financial performance with that of other companies in our industry.

Adjusted OIBDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. These limitations include the following:

it does not reflect capital expenditures;

many of the assets being depreciated and amortized will have to be replaced in the future and adjusted OIBDA does not reflect cash requirements for such replacements;

it does not reflect costs associated with share-based awards exchanged for employee services;

it does not reflect interest expense necessary to service interest or principal payments on indebtedness;

it does not reflect expenses incurred for the payment of income taxes and other taxes; and

other companies, including companies in our industry, may calculate adjusted OIBDA differently than we do, limiting its usefulness as a comparative measure.

In light of these limitations, management considers adjusted OIBDA as a financial performance measure that supplements but does not replace the information reflected in our GAAP results.

The following table shows adjusted OIBDA for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011:~~2012:

(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended March 31,
	2012		2011		2012		2011		2013		2012


Adjusted OIBDA	$	22,636	$	22,231	$	74,560	$	66,710	$	29,635	$	26,709

3221

Index

The following table reconciles adjusted OIBDA to operating income, which we consider to be the most directly comparable GAAP financial measure, for the three ~~and nine~~ months ended ~~September 30, 2012~~March 31, 2013 and ~~2011:~~2012:

Consolidated: (in thousands)	Three Months Ended September 30,					Nine Months Ended September 30,
	2012		2011			2012		2011
(in thousands)											Three Months Ended March 31,
											2013		2012

Operating income	$	5,407	$	9,170		$	25,362	$	24,255		$	15,209	$	8,817
Plus depreciation and amortization		16,794		13,774			47,860		42,155			13,972		15,807
OIBDA		22,201		22,944			73,222		66,410
Plus (gain) loss on asset sales		56		(1,146	)		80		(1,035	)
Adjusted prepaid results												-		1,695
Plus loss on asset sales												82		33
Plus share based compensation expense		379		433			1,258		1,335			372		357
Adjusted OIBDA	$	22,636	$	22,231		$	74,560	$	66,710		$	29,635	$	26,709

Adjusted prepaid results refers to the impact on first quarter 2012 had Sprint Nextel calculated prepaid costs consistent with the adjustment received from Sprint Nextel in the fourth quarter of 2012, related to the previous nine quarters, and recorded in the fourth quarter of 2012.

The following tables reconcile adjusted OIBDA to operating income by major segment for the three months ended March 31, 2013 and ~~nine months ended September 30, 2012 and 2011:~~2012:

Wireless Segment:
(in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011

Operating income $ 8,246 $ 12,926 $ 31,262 $ 33,353
Plus depreciation and amortization 8,643 5,868 23,153 18,242
OIBDA 16,889 18,794 54,415 51,595
Plus (gain) loss on asset sales - (1,280 ) 4 (1,264 )
Plus share based compensation expense 110 121 365 371
Adjusted OIBDA $ 16,999 $ 17,635 $ 54,784 $ 50,702
Wireless Segment:

(in thousands)	Three Months Ended March 31,
	2013		2012

Operating income	$	15,828	$	10,525
Plus depreciation and amortization		6,028		7,757
Adjusted prepaid results		-		1,695
Plus loss on asset sales		90		4
Plus share based compensation expense		108		104
Adjusted OIBDA	$	22,054	$	20,085

Cable Segment:
(in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011

Operating income (loss) $ (5,627 ) $ (6,427 ) $ (14,174 ) $ (17,070 )
Plus depreciation and amortization 5,908 5,692 17,963 17,478
OIBDA 281 (735 ) 3,789 408
Plus loss on asset sales 27 12 6 87
Plus share based compensation expense 160 164 531 499
Adjusted OIBDA $ 468 $ (559 ) $ 4,326 $ 994
Cable Segment:

(in thousands)	Three Months Ended March 31,
	2013			2012

Operating loss	$	(3,386	)	$	(4,542	)
Plus depreciation and amortization		5,564			5,852
Plus (gain) loss on asset sales		(19	)		9
Plus share based compensation expense		162			149
Adjusted OIBDA	$	2,321		$	1,468

Wireline Segment:

(in thousands)	Three Months Ended March 31,
	2013		2012

Operating income	$	3,529	$	3,791
Plus depreciation and amortization		2,372		2,173
Plus loss on asset sales		12		20
Plus share based compensation expense		78		82
Adjusted OIBDA	$	5,991	$	6,066

3322

Index

Wireline Segment:
(in thousands)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2012 2011 2012 2011

Operating income $ 3,440 $ 3,493 $ 10,572 $ 10,721
Plus depreciation and amortization 2,233 2,156 6,691 6,260
OIBDA 5,673 5,649 17,263 16,981
Plus loss on asset sales 28 122 69 142
Plus share based compensation expense 87 96 290 296
Adjusted OIBDA $ 5,788 $ 5,867 $ 17,622 $ 17,419

Liquidity and Capital Resources

The Company has four principal sources of funds available to meet the financing needs of its operations, capital projects, debt service, investments and potential dividends. These sources include cash flows from operations, existing balances of cash and cash equivalents, the liquidation of investments and borrowings. Management routinely considers the alternatives available to determine what mix of sources are best suited for the long-term benefit of the Company.

Sources and Uses of Cash. The Company generated ~~$77.5~~$22.7 million of net cash from operations in the first ~~nine~~three months of ~~2012,~~2013, compared to ~~$54.5~~$22.5 million in the first ~~nine~~three months of ~~2011.~~2012. Net income increased from the ~~2011~~2012 period to ~~2012,~~2013, including the effects of non-cash items such as depreciation, amortization, deferred income taxes and provisions for bad debt. ~~Tax refunds received~~A smaller decrease in income taxes receivable in the first ~~nine~~three months of 2013 compared to 2012 ~~also contributed to~~offset the ~~increase~~improvements in net ~~cash from operations.~~income described above.

Indebtedness. As of ~~September 30, 2012,~~March 31, 2013, the Company’s indebtedness totaled ~~$232.9~~$231.4 million, with an annualized overall weighted average interest rate of approximately ~~4.09% including the effect of interest rate swap contracts, or 3.01% before the effects of interest rate swap contracts.~~2.97%. The Company has $50 million available under the Revolving Facility, and the right to borrow up to $100 million under one or more Incremental Term Loan facilities, subject to certain restrictions. The Revolving Facility and Incremental Term Loan Facility are both subject to the terms of the ~~Amended~~Restated and ~~Restated~~Amended Credit Agreement entered into in September 2012.

The Company is bound by certain financial covenants under ~~the Amended and Restated~~its Credit ~~Agreement dated September 14, 2012.~~Agreement. Noncompliance with any one or more of the debt covenants may have an adverse effect on our financial condition or liquidity in the event such noncompliance cannot be cured or should we be unable to obtain a waiver from the lenders. As of ~~September 30, 2012,~~March 31, 2013, the Company was in compliance with all debt covenants, and ratios at ~~September 30, 2012~~March 31, 2013 were as follows:

		Actual		Covenant Requirement at ~~September 30, 2012~~March 31, 2013
Total Leverage Ratio			~~2.41~~1.97		3.00 or Lower
Debt Service Coverage Ratio			~~4.16~~6.65		2.50 or Higher
Equity to Assets Ratio	38.3%		~~37.9~~	%	30.0% or Higher

In accordance with the ~~Amended and Restated~~ Credit Agreement, the total leverage and debt service coverage ratios noted above are based on the twelve months ended ~~September 30, 2012.~~March 31, 2013. In addition to the covenants above, the Company is required to supply the lender with quarterly financial statements and other reports as defined by the Credit Agreement. The Company was in compliance with all reporting requirements at ~~September 30, 2012.~~March 31, 2013.

The Company has no off-balance sheet arrangements (other than operating leases) and has not entered into any transactions involving unconsolidated, limited purpose entities or commodity contracts.

~~Index~~

Capital Commitments. Capital expenditures ~~originally~~ budgeted for ~~2012 totaled approximately $138 million; however,~~2013 total $125.2 million. Planned spending contemplates the ~~Company now expects to spend approximately $115 million~~replacement of remaining base stations in ~~2012. The major portion~~our wireless network as part of ~~the 2012 planned spending, approximately $60 million originally and now revised to $55 million~~Sprint Nextel’s Network Vision project started in 2012, spending, consisted of spending for the Company to mirror the Sprint Nextel network upgrade project, Network Vision, across portions of our network. Spending directly related to Network Vision is expected to be completed across the entire network in 2013. Capital spending in 2012 also includes spending to addas well as adding capacity ~~and network coverage~~ to our PCS network, new towers to support ~~expanded~~the expansion of PCS network ~~coverage,~~capacity, and on-going spending to expand and upgrade our fiber networks and information technology capabilities. Cable segment capital spending for ~~2012 was budgeted to total $34 million, including~~2013 included spending for upgrades of the last ~~of the~~ acquired Cable ~~markets. The Company currently projects this segment’s capital spending to total approximately $24 million. Other~~markets, extensions of current systems and other continuing cable segment ~~spending is expected to be approximately $5 million under budget.~~expenditures.

For the first ~~nine~~three months of ~~2012,~~2013, the Company spent ~~$53.6~~$26.0 million on capital projects, compared to ~~$52.5~~$14.8 million in the comparable ~~2011~~2012 period. Spending related to Wireless projects accounted for ~~$24.1~~$20.0 million in the first ~~nine~~three months of ~~2012,~~2013, primarily for ~~data capacity~~base station upgrades, ~~and Network Vision preparatory work,~~ while Cable projects accounted for $2.9 million primarily for network upgrades to support new services or customers. Wireline projects accounted for ~~$8.4~~$1.9 million ~~across a variety of projects~~primarily for fiber builds and ~~network capacity. Cable capital spending of $16.1 million related to plant and headend upgrades,~~switching/routing capability, and other projects ~~totaled $5.0~~accounted for $1.2 million, largely related to information technology ~~projects and vehicle acquisitions.~~projects.

The Company received ~~$3.3~~$1.1 million in cash from sales of Converged Services properties completed during the first ~~nine months~~quarter of 2012.

The Company believes that cash on hand, ~~of $94.6 million at September 30, 2012, and~~ cash flow from operations and borrowings expected to be available under the Company’s existing credit facilities will provide sufficient cash to enable the Company to fund planned capital expenditures, make scheduled principal and interest payments, meet its other cash requirements and maintain compliance with the terms of its financing agreements for at least the next twelve months. ~~Our participation in the Network Vision plan will require significant capital expenditures and result in increased operating costs through 2013.~~ Thereafter, capital expenditures will likely continue to be required to provide increased capacity to meet the Company’s expected growth in demand for its products and ~~services and complete planned upgrades to the cable networks.~~services. The actual amount and timing of the Company’s future capital requirements may differ materially from the Company’s estimate depending on the demand for its products and new market developments and opportunities.

Index

The Company’s cash flows from operations could be adversely affected by events outside the Company’s control, including, without limitation, changes in overall economic conditions, regulatory requirements, changes in technologies, demand for its products, availability of labor resources and capital, changes in the Company’s relationship with Sprint Nextel, and other conditions. The Wireless segment’s operations are dependent upon Sprint Nextel’s ability to execute certain functions such as billing, customer care, and collections; the subsidiary’s ability to develop and implement successful marketing programs and new products and services; and the subsidiary’s ability to effectively and economically manage other operating activities under the Company's agreements with Sprint Nextel. The Company's ability to attract and maintain a sufficient customer base, particularly in the acquired cable markets, is also critical to its ability to maintain a positive cash flow from operations. The foregoing events individually or collectively could affect the Company’s results.

~~Contractual Commitments.~~ The Company is obligated to make future payments under various contracts it has entered into, including amounts pursuant to its various long-term debt facilities, and non-cancelable operating lease agreements for retail space, tower space and cell sites. Expected future minimum contractual cash obligations for the next five twelve month periods ended September 30, and in the aggregate at September 30, 2012, are as follows:

~~Index~~

~~Payments due by periods~~

(in thousands)
Total
Less than 1
year
1-3 years 4-5 years After 5 years

Long-term debt principal (1) $ 232,919 $ 2,719 $ 23,000 $ 46,000 $ 161,200
Interest on long–term debt (1) 40,248 7,087 13,516 11,208 8,437
“Pay fixed” obligations (2) 12,420 2,502 4,044 3,349 2,525
Operating leases (3) 100,465 10,901 20,963 19,755 48,846
Purchase obligations (4) 59,556 59,556 - - -
Total obligations $ 445,608 $ 82,765 $ 61,523 $ 80,312 $ 221,008

~~Includes estimated principal payments and estimated interest payments on the Term Loan A loan based upon outstanding balances and rates in effect at September 30, 2012.~~

~~Represents the maximum interest payments we are obligated to make under our derivative agreements. Assumes no receipts from the counterparties to our derivative agreements.~~

~~Amounts include payments over reasonably assured renewals. See Note 12 to the consolidated financial statements appearing elsewhere in this report for additional information.~~

~~Represents open purchase orders at September 30, 2012. Commitments to our primary Network Vision vendor represent $49 million of this amount.~~

~~The Company has no other off-balance sheet arrangements and has not entered into any transactions involving unconsolidated, limited purpose entities or commodity contracts.~~

Recently Issued Accounting Standards

There were no recently issued accounting standards, not adopted by the Company as of ~~September 30, 2012,~~March 31, 2013, that are expected to have a material impact on the Company’s results of operations or financial condition.

3624

Index

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company’s market risks relate primarily to changes in interest rates on instruments held for other than trading purposes. The Company’s interest rate risk generally involves three components. The first component is outstanding debt with variable rates. As of ~~September 30, 2012,~~March 31, 2013, the Company had $230.0 million of variable rate debt outstanding, bearing interest at a rate of 2.95%~~, based upon one month LIBOR. The Company has two interest rate swap agreements that, combined, cover all but~~ as determined on a small portion of this variable rate debt, fixing our interest exposure at a blended rate of approximately 3.97%. One swap agreement expires in July 2013. Upon its expiration, approximately $56 million of our variable rate debt will no longer have interest rate protection, but the remaining variable rate debt will continue to be fixed at 3.89% under the second interest rate swap agreement, which expires at maturity of the outstanding variable rate debt in September 2019. Thus, until September 2013, anmonthly basis. An increase in market interest rates of 1.00% would ~~have little impact on our~~add approximately $2.3 million to annual interest expense, ~~and subsequently,~~excluding the ~~impact would be limited to the unprotected $56 million~~effect of ~~debt. Interest expense on this portion of our debt would increase approximately $0.6 million for each 1.00% increase in~~ interest ~~rates. The remaining approximately $3.0~~rate swaps. An additional $1.2 million of the Company’s outstanding debt has a fixed ~~rates~~rate of 7.37% through maturity in August ~~2013.~~2013; the remaining $0.3 million of outstanding debt bears no interest. Due to the relatively short time frame to maturity of ~~this~~the fixed rate debt, market value approximates carrying value of the fixed rate debt. The Company entered into two swap agreements that, through the maturity of the 2010 swap agreement on July 31, 2013, cover notional principal equal to nearly all of the outstanding variable rate debt to pay a blended fixed rate of just over 1.00% and receive a variable rate based on one month LIBOR; subsequently, the 2012 swap agreement covers notional principal equal to approximately 76% of the outstanding variable rate debt through maturity in 2019, requiring the Company to pay a fixed rate of 1.13% and receive a variable rate based on one month LIBOR, to manage a portion of its interest rate risk. The 2012 swap currently adds approximately $1.6 million to annual interest expense, based on the spread between the fixed rate and the variable rate currently in effect on our debt.

The second component of interest rate risk consists of temporary excess cash, which can be invested in various short-term investment vehicles such as overnight repurchase agreements and Treasury bills with a maturity of less than 90 days. The cash is currently invested in a combination of a commercial checking account that has limited interest rate ~~risk.~~risk and two treasury bills with face amounts of $5 million each which will mature at par in April and May of 2013. Management ~~continually evaluates~~continues to evaluate the most beneficial use of these funds.

The third component of interest rate risk is marked increases in interest rates that may adversely affect the rate at which the Company may borrow funds for growth in the future. ~~At this time~~If the Company ~~does not expect~~should borrow additional funds under any Incremental Term Loan Facility to ~~utilize~~fund its capital investment needs, repayment provisions would be agreed to at the additional borrowing capacity available under its Amended and Restated Credit Agreement. However, if the Company did need to use such availability and if interest rates on that debt exceed the ratestime of each draw under the ~~outstanding~~Incremental Term Loan Facility. If the interest rate margin on any draw exceeds by more than 0.25% the applicable interest rate margin on the Term Loan A ~~loan,~~Facility, the applicable interest rate margin on the Term Loan A Facility shall be increased to equal the interest rate margin on the Incremental Term Loan Facility. If interest rates increase generally, or if the rate applied under the Company’s Incremental Term Loan Facility causes the Company’s outstanding debt to be repriced, the Company’s future interest costs could increase.

Management ~~does not view~~views market risk as having a potentially significant impact on the Company's results of operations, ~~unless~~as future results could be adversely affected if interest rates were to increase significantly for an extended period, or if the ~~Company would~~Company’s need for additional external financing ~~that~~ resulted in increases to the interest rates applied to all of its new and existing debt. The Company will have approximately $55 million of variable rate debt with no interest rate protection outstanding after August of 2013. The Company’s investments in publicly traded stock and bond mutual funds under the rabbi trust, which are subject to market risks and could experience significant swings in market values, are offset by corresponding changes in the liabilities owed to participants in the Executive Supplemental Retirement Plan. General economic conditions affected by regulatory changes, competition or other external influences may pose a higher risk to the Company’s overall results.

As of ~~September 30, 2012,~~March 31, 2013, the Company has ~~$6.1~~$6.3 million of cost and equity method investments. Approximately $2.1 million ~~was~~is invested in privately held companies ~~directly or~~ through investments with portfolio managers. Most of the companies are in an early stage of development and significant increases in interest rates could have an adverse impact on their results, ability to raise capital and viability. The Company’s market risk is limited to the funds previously invested.

3725

Index

ITEM 4.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management, with the participation of our President and Chief Executive Officer, who is the principal executive officer, and the Vice President - Finance and Chief Financial Officer, who is the principal financial officer, conducted an evaluation of our disclosure controls and procedures, as defined by Rule 13a-15(e) under the Securities Exchange Act of 1934. The Company's principal executive officer and its principal financial officer concluded that the Company's disclosure controls and procedures were effective as of ~~September 30, 2012.~~March 31, 2013.

Changes in Internal Control Over Financial Reporting

During the ~~third~~first quarter of ~~2012,~~2013, there were no changes in the Company's internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal control over financial reporting.

Other Matters Relating to Internal Control Over Financial Reporting

Under the Company’s agreements with Sprint Nextel, Sprint Nextel provides the Company with billing, collections, customer care, certain network operations and other back office services for the PCS operation. As a result, Sprint Nextel remits to the Company approximately ~~56%~~58% of the Company’s total operating revenues. Due to this relationship, the Company necessarily relies on Sprint Nextel to provide accurate, timely and sufficient data and information to properly record the Company’s revenues, and accounts receivable, which underlie a substantial portion of the Company’s periodic financial statements and other financial disclosures.

Information provided by Sprint Nextel includes reports regarding the subscriber accounts receivable in the Company’s markets. Sprint Nextel provides the Company with monthly accounts receivable, billing and cash receipts information on a market level, rather than a subscriber level. The Company reviews these various reports to identify discrepancies or errors. Under the Company’s agreements with Sprint Nextel, the Company is entitled to only a portion of the receipts, net of items such as taxes, government surcharges, certain allocable write-offs and the 20.0% of revenue retained by Sprint Nextel. Because of the Company’s reliance on Sprint Nextel for financial information, the Company must depend on Sprint Nextel to design adequate internal controls with respect to the processes established to provide this data and information to the Company and Sprint Nextel’s other Sprint PCS affiliate network partners. To address this issue, Sprint Nextel engages an independent registered public accounting firm to perform a periodic evaluation of these controls and to provide a “Report on Controls Placed in Operation and Tests of Operating Effectiveness” under guidance provided in Statements on Standards for Attestation Engagements No. 16 (“SSAE 16”). The report is provided to the Company on an annual basis and covers a nine-month period. The most recent report covered the period from January 1, ~~2011~~2012 to September 30, ~~2011.~~2012. The most recent report indicated there were no material issues which would adversely affect the information used to support the recording of the revenues provided by Sprint Nextel related to the Company’s relationship with them.

3826

Index

PART II.

OTHER INFORMATION

ITEM 1A.

Risk Factors

As previously discussed, our actual results could differ materially from our ~~forward looking~~forward-looking statements. ~~There~~Except as described below, there have been no material changes in the risk factors from those described in Part 1, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, ~~2011.~~2012.

On April 15, 2013, Dish Network Corporation announced that it had made an offer to acquire Sprint Nextel for $25.5 billion, competing with Softbank Corporation’s previously announced offer to acquire 70% of Sprint Nextel for $20.1 billion. The terms of these proposed transactions, or delays in consummating a transaction, could affect Sprint Nextel’s business in a way that could be adverse to us.

ITEM 2.

Unregistered Sales of Equity Securities and Use of Proceeds

The Company maintains a dividend reinvestment plan (the “DRIP”) for the benefit of its shareholders. When shareholders remove shares from the DRIP, the Company issues a certificate for whole shares, pays out cash for any fractional shares, and cancels the fractional shares purchased. In conjunction with exercises of stock options and distributions of vested share awards, the Company periodically repurchases shares from recipients to cover some of the exercise price of the options being exercised or taxes payable associated with the distribution of shares. The following table provides information about the Company’s repurchases of shares during the three months ended ~~September 30, 2012:~~March 31, 2013:

Number of Shares
Purchased

Average Price
Paid per Share

July 1 to July 31 2 $ 14.84
August 1 to August 31 3 $ 15.67
September 1 to September 30 3 $ 16.98

Total 8 $ 15.86

	Number of Shares Purchased		Average Price Paid per Share
January 1 to January 31		5	$	15.06
February 1 to February 28		3	$	14.49
March 1 to March 31		3	$	14.76

Total		11	$	14.82

3927

Index

ITEM 6.

Exhibits

(a) The following exhibits are filed with this Quarterly Report on Form 10-Q:

~~3.3~~

~~Amended and Restated Bylaws of Shenandoah Telecommunications Company, effective September 17, 2012, filed as Exhibit 3.3 to the Company’s Current Report on Form 8-K dated September 18, 2012.~~

~~10.53~~10.43

Addendum ~~XIII~~XV dated ~~September 14, 2012~~as of March 11, 2013, to Sprint PCS Management Agreement by and among Sprint Spectrum, L.P., WirelessCo, L.P., APC PCS, LLC, PhillieCo, L.P., Sprint Communications Company L.P. and Shenandoah Personal ~~Communications, LLC, filed as Exhibit 10.53 to the Company’s Current Report on Form 8-K dated September 17, 2012.~~

~~10.54~~

Consent and Agreement dated September 14, 2012 related to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., WirelessCo, L.P., APC PCS, LLC, PhillieCo, L.P., Sprint Communications Company L.P. and Shenandoah Personal Communications, LLC, filed as Exhibit 10.54 to the Company’s Current Report on Form 8-K dated September 17, 2012.

~~10.55~~

Amended and Restated Credit Agreement dated as of September 14, 2012, among Shenandoah Telecommunications Company, CoBank, ACB, and other Lenders, filed as Exhibit 10.55 to the Company’s Current Report on Form 8-K dated September 17, 2012.communications, LLC.

31.1	Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

31.2	Certification of Vice President - Finance and Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

32	Certifications pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. § 1350.

(101)

Formatted in XBRL (Extensible Business Reporting Language)

101.INS

XBRL Instance Document

101.SCH

XBRL Taxonomy Extension Schema Document

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

4028

Index

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SHENANDOAH TELECOMMUNICATIONS COMPANY
	(Registrant)

	/s/Adele M. Skolits
	Adele M. Skolits
	Vice President - Finance and Chief Financial Officer
	Date: ~~November 5, 2012~~	May 3, 2013

4129

Index

EXHIBIT INDEX

Exhibit No.

Exhibit



~~3.3~~	~~Amended and Restated Bylaws of Shenandoah Telecommunications Company, effective September 17, 2012, filed as Exhibit 3.3 to the Company’s Current Report on Form 8-K dated September 18, 2012.~~

~~10.53~~ 10.43	Addendum ~~XIII~~XV dated ~~September 14, 2012~~as of March 11, 2013, to Sprint PCS Management Agreement by and among Sprint Spectrum, L.P., WirelessCo, L.P., APC PCS, LLC, PhillieCo, L.P., Sprint Communications Company L.P. and Shenandoah Personal ~~Communications, LLC, filed as Exhibit 10.53 to the Company’s Current Report on Form 8-K dated September 17, 2012.~~communications, LLC.


~~10.54~~	Consent and Agreement dated September 14, 2012 related to Sprint PCS Management Agreement by and among Sprint Spectrum L.P., WirelessCo, L.P., APC PCS, LLC, PhillieCo, L.P., Sprint Communications Company L.P. and Shenandoah Personal Communications, LLC, filed as Exhibit 10.54 to the Company’s Current Report on Form 8-K dated September 17, 2012.

~~10.55~~	Amended and Restated Credit Agreement dated as of September 14, 2012, among Shenandoah Telecommunications Company, CoBank, ACB, and other Lenders, filed as Exhibit 10.55 to the Company’s Current Report on Form 8-K dated September 17, 2012.

31.1	Certification of President and Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.


31.2	Certification of Vice President - Finance and Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.


32	Certifications pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. 1350.


(101)	Formatted in XBRL (Extensible Business Reporting Language)

	101.INS	XBRL Instance Document

	101.SCH	XBRL Taxonomy Extension Schema Document

	101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document

	101.DEF	XBRL Taxonomy Extension Definition Linkbase Document

	101.LAB	XBRL Taxonomy Extension Label Linkbase Document

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

4230

	September 30, 2012		December 31, 2011
Assets held for sale:
Property, plant and equipment, net	$	59	$	2,424
Other assets		-		373
	$	59	$	2,797
Liabilities:
Other liabilities	$	-	$	267

Three Months Ended September 30,		Derivative in Cash Flow Hedging Relationships		Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)		Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)
2012		Interest rate swap		$	(1,964	)	Interest expense		$	62

Nine Months Ended September 30,		Derivative in Cash Flow Hedging Relationships		Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivative (Effective Portion)			Location of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)		Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income (Effective Portion)
2012		Interest rate swap		$	(1,964	)	Interest expense		$	62

	September 2012		December 2011

CoBank (fixed term loan)	$	2,557	$	4,524
CoBank Term Loan A		230,000		175,565
Other debt		362		486
		232,919		180,575
Current maturities		2,719		21,913
Total long-term debt	$	230,200	$	158,662

Twelve Months Ended	Amount
	(in thousands)
September 30, 2013	$	2,719
September 30, 2014		-
September 30, 2015		23,000
September 30, 2016		23,000
September 30, 2017		23,000
Later years		161,200
	$	232,919

	September 2012			December 2011

Balance at beginning of year	$	7,610		$	6,542
Revisions to previous estimates		(1,973	)		-
Additional liabilities accrued		280			556
Liabilities retired		(240	)		-
Accretion expense		206			512
Balance at end of period	$	5,883		$	7,610

Year Ending	Amount
	(in thousands)
Oct – Dec 2012	$	2,709
2013		10,901
2014		10,661
2015		10,302
2016 2017		9,872 9,883
2018 and beyond		46,137
	$	100,465

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011

Gross PCS Subscriber Additions – Postpaid		18,427			16,126			50,500			46,285
Net PCS Subscriber Additions – Postpaid		3,842			2,686			10,247			8,739
Gross PCS Subscriber Additions – Prepaid		18,777			19,545			53,184			65,579
Net PCS Subscriber Additions – Prepaid		5,384			6,940			15,355			31,316
PCS Average Monthly Retail Churn % - Postpaid		1.89	%		1.85	%		1.77	%		1.69	%
PCS Average Monthly Retail Churn % - Prepaid		3.73	%		4.43	%		3.65	%		4.50	%

	Sept. 30, 2012			Dec. 31, 2011			Sept. 30, 2011			Dec. 31, 2010

Homes Passed (1)		183,375			182,156			181,351			178,763
Customer Relationships (2)
Video customers		60,443			62,835			64,655			65,138
Non-video customers		14,943			12,513			10,476			9,074
Total customer relationships		75,386			75,348			75,131			74,212
Video
Revenue generating units (3)		62,526			64,979			66,179			67,235
Penetration (4)		34.1	%		35.7	%		36.5	%		37.6	%
Digital video revenue generating units (5)		24,637			25,357			25,083			22,855
Digital video penetration (5)		39.4	%		39.0	%		37.9	%		34.0	%
High-speed Internet
Available Homes (6)		157,338			156,119			155,120			144,099
Revenue generating units (3)		40,387			37,021			35,651			31,832
Penetration (4)		25.7	%		23.7	%		23.0	%		22.1	%
Voice
Available Homes (6)		150,944			143,235			142,236			118,652
Revenue generating units (3)		11,849			9,881			8,842			6,340
Penetration (4)		7.8	%		6.9	%		6.2	%		5.3	%
Total Revenue Generating Units (7)		139,399			137,238			135,755			128,262
Fiber Route Miles (8)		2,029			1,990			1,985			1,389
Total Fiber Miles		37,239			34,772			34,690			31,577

Wireless Segment: (in thousands)	Three Months Ended September 30,					Nine Months Ended September 30,
	2012		2011			2012		2011


Operating income	$	8,246	$	12,926		$	31,262	$	33,353
Plus depreciation and amortization		8,643		5,868			23,153		18,242
OIBDA		16,889		18,794			54,415		51,595
Plus (gain) loss on asset sales		-		(1,280	)		4		(1,264	)
Plus share based compensation expense		110		121			365		371
Adjusted OIBDA	$	16,999	$	17,635		$	54,784	$	50,702

Cable Segment: (in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011


Operating income (loss)	$	(5,627	)	$	(6,427	)	$	(14,174	)	$	(17,070	)
Plus depreciation and amortization		5,908			5,692			17,963			17,478
OIBDA		281			(735	)		3,789			408
Plus loss on asset sales		27			12			6			87
Plus share based compensation expense		160			164			531			499
Adjusted OIBDA	$	468		$	(559	)	$	4,326		$	994

Wireline Segment: (in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011


Operating income	$	3,440	$	3,493	$	10,572	$	10,721
Plus depreciation and amortization		2,233		2,156		6,691		6,260
OIBDA		5,673		5,649		17,263		16,981
Plus loss on asset sales		28		122		69		142
Plus share based compensation expense		87		96		290		296
Adjusted OIBDA	$	5,788	$	5,867	$	17,622	$	17,419

(in thousands)	Total		Less than 1 year		1-3 years		4-5 years		After 5 years

Long-term debt principal (1)	$	232,919	$	2,719	$	23,000	$	46,000	$	161,200
Interest on long–term debt (1)		40,248		7,087		13,516		11,208		8,437
“Pay fixed” obligations (2)		12,420		2,502		4,044		3,349		2,525
Operating leases (3)		100,465		10,901		20,963		19,755		48,846
Purchase obligations (4)		59,556		59,556		-		-		-
Total obligations	$	445,608	$	82,765	$	61,523	$	80,312	$	221,008

	Number of Shares Purchased		Average Price Paid per Share
July 1 to July 31		2	$	14.84
August 1 to August 31		3	$	15.67
September 1 to September 30		3	$	16.98

Total		8	$	15.86