ATNI

ATN International, Inc. (Atlantic Tele-Network, Inc.) 2009 10-K Summary

Business Context and Reporting Period

This Annual Report on Form 10-K covers the fiscal year ended December 31, 2009. Atlantic Tele-Network, Inc. (ATN) provides wireless and wireline telecommunications services in North America and the Caribbean through five principal operating segments: Rural Wireless (U.S.), Integrated Telephony-International (Guyana), Island Wireless (Bermuda/Turks and Caicos), Integrated Telephony-Domestic (U.S.), and Wireless Data (U.S. Virgin Islands). The company is an accelerated filer with common stock traded on the NASDAQ Global Select Market.

Key Financial Metrics

Revenue Mix (2009): Wireless services accounted for 61% of total revenue, while Guyana operations contributed 38% of consolidated revenue (down from 47% in 2008). U.S. operations generated 54% of consolidated revenue.

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 16.6% to $241.7 million, driven primarily by a 40% increase in Wireless revenue ($147.0 million) due to network expansion in the U.S. and full-year consolidation of Bermuda Digital Communications (BDC).
• International Long Distance Decline: Revenue from international long distance services in Guyana fell 20.2% to $38.2 million, attributed to illegal bypass activities and reduced call volumes due to the global economic recession.
• Operating Expenses: Total operating expenses rose 24.8% to $172.0 million. Notably, acquisition-related charges surged to $7.2 million (from $1.1 million in 2008) due to costs associated with the pending Alltel acquisition.
• Profitability: Despite revenue growth, consolidated net income decreased 8.0% to $36.6 million. However, net income attributable to ATN stockholders increased 2.1% to $35.5 million, aided by a significant reduction in net income attributable to non-controlling interests.
• Segment Performance: The Rural Wireless segment became the largest contributor to revenue and operating income. The Island Wireless segment reported a loss of $0.2 million in 2009, compared to a profit of $2.5 million in 2008.

Guidance, Outlook, and Risks

Pending Acquisition (Alltel Assets): ATN is in the process of acquiring wireless assets from Verizon (formerly Alltel) for approximately $200 million. The company expects this acquisition to generate annualized service revenues of $450 million to $500 million in the first twelve months post-closing. EBITDA margins are projected to be below industry standards initially, with normalization expected in 2011.

Regulatory and Political Risks (Guyana): The company faces significant risk regarding its exclusive license to provide domestic fixed and international voice/data services in Guyana, which expires in December 2010. The Government of Guyana is pursuing legislation to introduce competition. ATN has notified the government of its intent to renew the license for 20 years but is open to relinquishing exclusivity as part of a settlement. Additionally, GT&T faces tax disputes with Guyanese authorities totaling approximately $23.5 million.

Competitive Risks: In the U.S., ATN's wholesale wireless business (Commnet) faces the risk of "over-building" by major carriers (AT&T, Verizon) who are acquiring their own infrastructure in rural markets, potentially reducing demand for ATN's roaming services.

Capital Resources: ATN has amended its credit facility to include a new $150 million term loan dedicated to the Alltel acquisition. The company maintains $90.2 million in cash and $75 million in available revolver capacity.

Key Facts for Investor Verification

• Alltel Acquisition Status: Verify the closing date and regulatory approvals (DOJ, FCC) for the $200 million Alltel asset purchase, as this is a primary driver of future growth.
• Guyana License Renewal: Monitor the outcome of negotiations with the Government of Guyana regarding the renewal of the exclusive license and the potential introduction of competition.
• Tax Disputes: Track the resolution of the $23.5 million tax assessment dispute in Guyana, which could materially impact future cash flows.
• Commnet Customer Concentration: Verify the stability of contracts with major carriers (AT&T, Verizon, T-Mobile), which accounted for 81% of Rural Wireless revenues in 2009.
• Capital Expenditure Plan: Confirm the execution of the $45 million to $55 million capital expenditure plan for 2010, including the completion of the new submarine fiber optic cable in Guyana.