UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10‑K

 

Commission File No. 0‑191551

Atlantic Tele‑Network, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

 

Securities registered pursuant to Section 12(g) of the Act:

None

(Title of each class)

 

                         Indicate by check mark if the registrant is a well‑known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

                         Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o  No x

                         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. Yes x  No o

                         Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S‑K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10‑K or any amendment to this Form 10‑K. o

                         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b‑2 of the Exchange Act, (Check one):

Large accelerated filer o        Accelerated filer x        Non‑accelerated filer o

                         Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes o  No x

                         The aggregate market value of Common Stock held by non‑affiliates of the registrant as of June 30, 2006, was approximately $105,094,568 based on the closing price of the registrant's Common Stock as reported on the NASDAQ Global Market.

                         As of March 16, 2007, the registrant had 15,191,707 outstanding shares of Common Stock, $.01 par value.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

                         Portions of the registrant's Definitive Proxy Statement for the Annual Meeting of Stockholders to be held on May 24, 2007 are incorporated by reference into Part III of this Form 10‑K.

 

 

TABLE OF CONTENTS

 

 

 

SPECIAL NOTE REGARDING FORWARD‑LOOKING STATEMENTS

 

                  This Annual Report on Form 10‑K contains statements about future events and expectations, or forward‑looking statements, all of which are inherently uncertain. We have based those forward‑looking statements on our current expectations and projections about future results. When we use words such as "anticipates," "intends," "plans," "believes," "estimates," "expects," or similar expressions, we do so to identify forward‑looking statements. Examples of forward‑looking statements include statements we make regarding future economic and political conditions in Guyana, the competitive environment in the markets in which we operate, legal and regulatory actions and technological changes, our future prospects for growth, our ability to maintain or increase our market share, our future operating results and our future capital expenditure levels. These statements are based on our management's beliefs and assumptions, which in turn are based on currently available information. These assumptions could prove inaccurate. These forward‑looking statements may be found under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as in this Report generally.

 

                  You should keep in mind that any forward‑looking statement made by us in this Report or elsewhere speaks only as of the date on which we make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. In any event, these and other important factors may cause actual results to differ materially from those indicated by our forward‑looking statements, including those set forth in Item 1A of this Report under the caption "Risk Factors." We have no duty to, and do not intend to, update or revise the forward‑looking statements made by us in this Report after the date of this Report, except as may be required by law.

 

 

                  In this Report the words "we," "our," "ours" and "us" refer to Atlantic Tele‑Network, Inc. and its subsidiaries. Also ClearChoice™ is a service mark of one of our subsidiaries. This Report also contains other trademarks, service marks and trade names that are the property of others.

 

 

                  Reference to dollars ($) refer to U.S. dollars unless otherwise specifically indicated.

 

 

                  Information regarding shares of our Common Stock prior to March 31, 2006 set forth in this Report has been retroactively adjusted to reflect our 5‑for‑2 stock split that we effected on that date.

 

PART I

 

ITEM 1.  BUSINESS

 

Overview

 

                  We provide wireless and wireline telecommunications services in the Caribbean and North America. Through our operating subsidiaries and affiliates, we offer the following principal services:

 

·              Wireless.  We offer wireless voice and data services to retail customers in Guyana and Bermuda. In the United States, we offer wholesale wireless voice and data roaming services to national, regional and local wireless carriers in rural markets located principally in Arizona, Colorado, Illinois, Missouri and New Mexico.

 

·              Local Telephone and Data.  Our local telephone and data services include our operations in Guyana, the mainland United States and the U.S. Virgin Islands. We are the exclusive provider of domestic wireline local and long distance telephone services in Guyana. We offer facilities‑based integrated voice and data communications services to residential and business customers in New England, primarily in Vermont. We are a leading Internet access service provider in the U.S. Virgin Islands.

 

·              International Long Distance Voice and Data Services.  We are the exclusive provider of international long distance voice and data communications into and out of Guyana. As part of our infrastructure, we own interests in major international fiber optic cables linking Guyana to, among other places, Suriname, French Guiana, Trinidad, the U.S. Virgin Islands and the mainland United States.

 

Strategy

 

                  The key elements of our strategy consist of the following:

 

·              Focus on Providing Wireless and Wireline Telecommunications Services.We are focused on providing wireless and wireline voice and data services to residential, business and carrier customers across a variety of geographic and demographic markets. We have provided these services to our customers for over fifteen years and have demonstrated our ability to grow both customers and revenues by improving service and increasing the number of wireline and wireless products offered to these customers. We believe these sectors provide significant opportunities for organic and external growth.

 

·              Target Underserved Markets Where We Can Compete Successfully.We operate in smaller, underserved markets where we believe we are or will be one of the leading providers of telecommunications services. Our businesses typically have strong local brand identities and leading market positions. By leveraging these attributes, along with our lower cost of capital and our senior management expertise at the holding company level, we seek to improve and expand available products and services in our targeted markets to better meet the needs of our customers and expand our customer base.

 

·              Partner with Successful Local Owner/Operators.  We partner with local management teams who have demonstrated a successful track record. We believe that strong local management enhances our close relationship with customers and reduces risk. Our geographically diverse businesses are all operated and often partially owned by local managers, employees and investors. We seek to enhance our strong market position by maintaining these partnerships and by leveraging our extensive management experience to assist them in further improving operations.

 

·              Maintain a Disciplined Earnings‑Oriented Approach.  We carefully assess the potential for earnings stability and growth when we evaluate the performance of our subsidiaries, new investment

opportunities and prospective acquisitions. In managing our more mature businesses, we seek to solidify our brands, improve customer satisfaction, add new services, control costs and preserve cash flow. In managing our newer, faster growing businesses, we seek to invest capital to improve our competitive position, increase market share and generate strong revenue and cash flow. We consider new investments and acquisitions on a disciplined return‑on‑investment basis and generally avoid transactions that we do not expect to have a near‑term positive impact on our earnings.

 

                  As a result of these strategies, we have increased our consolidated operating income and earnings per share by approximately 25% and 23%, respectively, on an annually compounded basis from 2002 to 2006. We have also been able to pay cash dividends to our shareholders for 33 consecutive quarters and have increased our quarterly dividend per share by approximately 75% since the beginning of 2002.

 

Our Company

 

                  We conduct our operations in the mainland United States, Guyana, Bermuda, and U.S. Virgin Islands through the following principal operating subsidiaries and affiliate:

 

 

·              Guyana Telephone & Telegraph (or GT&T).  In 1991, we acquired an 80% equity interest in GT&T, which is the exclusive provider of domestic wireline local and long distance telecommunications services in Guyana and the largest service provider in Guyana's competitive wireless telecommunications market. GT&T is the successor to the Guyana Telecommunications Corporation, a corporation wholly owned by the Government of Guyana. The remaining 20% equity interest in GT&T is held by the Government of Guyana.

 

·              Commnet Wireless, LLC.  In 2005, we acquired a 95% equity interest in Commnet, which provides wireless voice and data communications roaming services in the United States. We acquired the remaining 5% equity interest in Commnet in January 2007.

 

·              Sovernet, Inc.  In February 2006, we acquired Sovernet, which provides facilities‑based integrated voice and broadband data communications services in New England, primarily in Vermont. We currently own a 96% equity interest in Sovernet. The remaining 4% equity interest in Sovernet is held by Sovernet management.

 

·              Bermuda Digital Communications, Ltd (or BDC).  In 1998, we acquired a minority equity interest in BDC, which is the largest wireless voice and data communications service provider in Bermuda, operating under the Cellular One brand. We currently own 43% of BDC. The remaining equity holders include BDC's Bermudian management team. We account for our investment under the equity method of accounting.

 

·              Choice Communications, LLC.  In October 1999, we acquired Choice, which provides fixed wireless broadband data services and dial‑up Internet services to retail and business customers in the U.S. Virgin Islands. Through our Choice subsidiary, we also offer fixed wireless digital television services in the U.S. Virgin Islands.

 

                  In addition to our equity interests, we typically receive management fees from our principal operating subsidiaries and affiliate.

 

                  Atlantic Tele‑Network, Inc. was incorporated in the State of Delaware in 1987. Our principal corporate offices are located at 10 Derby Square, Salem, Massachusetts 01970. The telephone number at our principal corporate offices is (978) 619‑1300. We also maintain a small corporate office in St. Thomas, U.S. Virgin Islands.

 

Our Services

 

                  Through our operating subsidiaries and affiliate, we provide wireless, local telephone and data, and international long distance services in Guyana, the mainland United States, U.S. Virgin Islands and Bermuda. For fiscal years 2004, 2005 and 2006, our Guyana operations generated 94%, 85% and 60%, respectively, of our consolidated revenue. For information about our financial segments and geographical information about our operating revenues and long‑lived assets, see Note 13 to the Consolidated Financial Statements included in this Report.

 

Wireless Services

 

                  We provide wireless voice and data communications services in the United States, Guyana and Bermuda.

 

                  U.S. Operations

 

                  Through our Commnet subsidiary, we provide wholesale wireless voice and data roaming services in rural markets to national, regional and local wireless carriers. In 2006, we also began to offer these services to selected international carriers. We provide these services through our own networks in markets located principally in Arizona, Colorado, Illinois, Missouri and New Mexico. We also operate smaller networks in seven other states. Many of our sites are located in popular tourist and seasonal visitor areas, particularly in the southwestern states. This seasonal increase in visitors has resulted in higher call volumes and revenue in those areas during summer months. To date, this increase in traffic in those areas has been offset in large part by lower calling volumes in other parts of our service area, such as towns with a large student population. Roaming is a service offered by most wireless service providers that enables their subscribers to utilize their mobile phone service while traveling outside of their service provider's network coverage area. Roaming enables wireless service providers to offer their customers extended coverage without the need to own a network or spectrum. We design, install and operate our wireless networks in areas where our wholesale customers need extended coverage.

 

                  Network.  We currently operate networks with GSM, CDMA, TDMA and analog technologies in both the 850 MHz and 1900 MHz bands. This mix of technologies and spectrum varies by market. However, we often have at least two technologies deployed at each cell site in order to maximize revenue opportunities. The majority of our GSM sites are also equipped with GPRS and/or EDGE data technologies. Our networks are comprised of telecommunications switches, base stations and radio transceivers located on towers and buildings typically owned by others, and leased transport facilities. As of December 31, 2006, we owned and operated 287 base stations consisting of 167 GSM, 49 CDMA and 71 TDMA/analog stations.

 

                  Sales and Marketing.  Historically, most roaming agreements were cancelable at‑will. In recent years, however, major carriers have been experiencing technological incompatibility with other wholesalers' networks, which has increased carriers' willingness to make longer term commitments in exchange for supporting technologies and features. We have taken advantage of this environment by entering into long‑term, preferred roaming agreements with several major wireless carriers, including AT&T and Verizon. Under these preferred roaming agreements, we typically agree to build a new mobile network at a specified location and offer the preferred carrier long‑term pricing certainty in

exchange for priority designation with respect to their customers' wireless traffic. We believe we have established a track record of building highly‑reliable, feature‑rich network coverage in a variety of technical environments for major wireless carriers on time and at attractive rates. We believe carriers are drawn to our ability to timely meet buildout requirements, the reliability of our networks and our status as a trusted partner that does not compete for retail subscribers. Once we complete building a rural network, we then benefit from existing roaming agreements with other national, regional, and local carriers to supplement our initial revenues. These non‑preferred roaming agreements are usually terminable within 30 days. Because we have no retail subscribers, we do not incur retail distribution or retail marketing costs and our customer service costs are largely limited to technical and engineering support.