ATNI

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

Business Context and Reporting Period

This Quarterly Report on Form 10-Q covers the period ended September 30, 2009. ATN International, Inc. provides wireless and wireline telecommunications services in the Caribbean and North America through five operating segments: Integrated Telephony-International (Guyana), Rural Wireless (U.S.), Island Wireless (Bermuda/Turks & Caicos), Integrated Telephony-Domestic (U.S.), and Wireless Data (U.S. Virgin Islands). The company is an accelerated filer and is not a shell company.

Key Financial Metrics

Note: Operating margins are not explicitly stated as a percentage in the text, but operating income represents approximately 35% of revenue for the nine-month period.

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased 17.9% ($10.0 million) for the quarter and 19.9% ($30.3 million) for the nine months compared to the prior year periods.
• Wireless Segment: Wireless revenue surged 41.1% in the quarter and 48.3% year-to-date, driven primarily by the Rural Wireless segment (Commnet) which added base stations and expanded data capabilities.
• International Long Distance: Revenue declined 22.6% in the quarter and 19.9% year-to-date due to illegal bypass activities, the global economic recession, and competition.
• Profitability: Net income attributable to stockholders increased 17.7% for the quarter and 7.7% for the nine months.
• Acquisition Costs: Acquisition-related charges increased significantly to $2.1 million for the quarter and $2.5 million for the nine months, primarily associated with the pending Alltel acquisition.

Guidance, Outlook, and Risks

• Pending Acquisition: ATN has entered into an agreement to acquire wireless assets from Verizon Wireless (formerly Alltel) for approximately $200 million. The transaction is subject to regulatory approvals (DOJ, FCC) and is expected to close in the fourth quarter of 2009. A new credit facility of up to $300 million has been committed to fund this deal.
• Capital Expenditures: The company expects to incur $40 million to $45 million in capital expenditures for the full year 2009, with over half allocated to Commnet's network expansion. An additional $5 million to $10 million is expected for a new submarine fiber optic cable in Guyana.
• Regulatory Risks (Guyana): Significant uncertainty exists regarding GT&T's exclusive license in Guyana, which expires in December 2010. The Government of Guyana is developing legislation to introduce competition. Additionally, a competitor (Digicel) has filed a lawsuit challenging the legality of the exclusive license and notified GT&T of its intent to terminate the interconnection agreement in January 2010.
• Market Risks: The company faces potential revenue loss in its U.S. Rural Wireless segment as Verizon and AT&T build out their own networks in markets currently served by Commnet. Illegal bypass of international calls in Guyana remains a material threat.

Investor Verification Checklist

• Alltel Acquisition Status: Verify the progress of regulatory approvals (DOJ/FCC) required to close the $200 million Verizon/Alltel asset purchase.
• Commnet Revenue Exposure: Assess the specific impact of Verizon and AT&T network build-outs on Commnet's future revenue streams in overlapping rural markets.
• Guyana Regulatory Environment: Monitor the status of the Digicel lawsuit and the Government of Guyana's draft legislation regarding the termination of GT&T's exclusive license.
• Interconnection Agreement: Confirm the outcome of negotiations regarding Digicel's termination of the interconnection agreement effective January 2010.
• Debt Covenants: Review compliance with the 2008 CoBank Credit Agreement covenants (leverage, interest coverage, equity-to-assets) in light of the pending new credit facility.