ATN International, Inc. - Annual Report: 2020 (Form 10-K)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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Commission File No. 001-12593

ATN INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

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(978) 619-1300

(Registrant’s telephone

number, including area code)

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

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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 ⌧ No ◻

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 ◻ No ⌧

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 ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

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

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

The aggregate market value of Common Stock held by non-affiliates of the registrant as of June 30, 2020, was approximately $672 million based on the closing price of the registrant’s Common Stock as reported on the Nasdaq Global Select Market.

As of March 1, 2021, the registrant had 15,898,477 outstanding shares of Common Stock, $.01 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Definitive Proxy Statement for the 2021 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Report”) contains forward-looking statements relating to, among other matters, our future financial performance and results of operations, including the impact of the novel coronavirus pandemic on the economies of the markets we serve and on our business and operations; expectations regarding future revenue, operating income, EBITDA and capital expenditures; the competitive environment in our key markets, demand for our services and industry trends; our expectations regarding construction progress under our FirstNet agreement and the effect such progress will have on our financial results; our expectations regarding the benefits and timing of our pending acquisition of Alaska Communications; the impact of federal support program revenues and the FirstNet transaction; our  liquidity; and management’s plans and strategy for the future. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results. Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1) the general performance of our operations, including operating margins, revenues, capital expenditures, and the future growth and retention of our major customers and subscriber base; (2) our ability to maintain favorable roaming arrangements, receive roaming traffic and satisfy the needs and demands of our major wireless customers; (3) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address rapid and significant technological changes in the telecommunications industry; (4) government regulation of our businesses, which may impact our FCC and other telecommunications licenses; (5) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (6) economic, political and other risks and opportunities facing our operations, including those resulting from the pandemic; (7) the loss of or an inability to recruit skilled personnel in our various jurisdictions, including key members of management; (8) our ability to successfully complete our pending acquisition of Alaska Communications and recognize the expected benefits of such acquisition; (9) our ability to find investment or acquisition or disposition opportunities that fit the strategic goals of the Company; (10) the occurrence of weather events and natural catastrophes and our ability to secure the appropriate level of insurance coverage for these assets; (11) increased competition; (12) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (13) our continued access to capital and credit markets; (14) the impact of our investments and acquisitions; and (15) the risk of currency fluctuation for those markets in which we operate. Statements are based on our management’s beliefs and assumptions, which in turn are based on currently available information. These assumptions could be proven inaccurate.

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Please 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 “the Company,” “we,” “our,” “ours,” “us” and “ATN” refer to ATN International, Inc. and its subsidiaries. This Report contains trademarks, service marks and trade names that are the property of, or licensed by, ATN and its subsidiaries.

References to dollars ($) refer to US dollars unless otherwise specifically indicated.

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PART I

ITEM 1. BUSINESS

Overview

We strive to be a leading platform for the operation of, and investment in, smaller and specialty market communications services and technology companies. We have a long track record of delivering critical infrastructure-based solutions to underserved markets. Our majority-owned operating subsidiaries provide facilities-based

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communications services, along with related information technology solutions, in the United States, Bermuda, and the Caribbean. We also have non-controlling investments in several communications and technology companies, and we continue to consider opportunities to make controlling and minority investments in businesses that we believe have the potential for generating substantial and relatively steady cash flows over extended periods of time or have technologies or business models that might prove valuable to our main operating subsidiaries or create significant longer term growth potential for us as a whole.

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At the holding company level, we oversee the allocation of capital within and among our subsidiaries, affiliates, minority investments, and stockholders. We also have developed significant operational expertise and resources that we use to augment the capabilities of our individual operating subsidiaries. Over the past 10 years, we have built a platform of resources and expertise to support our operating subsidiaries and to improve their quality of service, and customer acquisition, retention, and satisfaction while maintaining optimal operating efficiencies. We have a number of shared service functions, including billing, network and engineering and customer service, and the parent company also employs personnel with specialized skills that provide greater economies of scale and expertise than would typically be available at the operating subsidiary level.

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We were incorporated in Delaware in 1987, began trading publicly in 1991 and spun off more than half of our operations to stockholders in 1998. We actively evaluate potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, that we believe have the potential for generating steady excess cash flows over extended periods of time. In addition, we consider non-controlling investments in earlier stage businesses that we consider strategically relevant, and which may offer long-term growth potential for us, either individually, or as research and development businesses that can support our operating subsidiaries in new technology, product, and service development and offerings. We have used the cash generated from our established operating units, and any asset sales, to re-invest in our existing businesses, to return cash to our investors, and to make strategic investments in additional businesses. We provide management, technical, financial, regulatory, and marketing services to our subsidiaries and typically receive a management fee equal to a percentage of their revenues, which is eliminated in consolidation. For further information about our financial segments and geographical information about our operating revenues and assets, see Notes 1 and 15 to the Consolidated Financial Statements included in this Report.

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Through December 31, 2020, we had identified three operating segments to manage and review our operations and to facilitate investor presentations of our results. These three operating segments are as follows:

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On December 31, 2020, we announced that we entered into an Agreement and Plan of Merger (the “Alaska Merger Agreement”) with Freedom 3 Capital, LLC (“Freedom3”) to acquire all of the shares of Alaska Communications Systems Group, Inc. (“Alaska Communications”), a publicly listed company (Nasdaq:ALSK) for approximately $340 million, including the assumption of debt (the “Alaska Transaction”). Following the closing of the Alaska Transaction,

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we will, through our subsidiaries, own and control approximately 51% of Alaska Communications and Freedom3, through its affiliates, will own the remaining 49%. In February 2021, the required waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976 expired, however the Alaska Transaction remains subject to customary closing terms and conditions including (i) the approval of Alaska Communications’ stockholders, (ii) the absence of certain legal impediments, and (iii) obtaining the necessary consents from the Federal Communications Commission (“FCC”) and the Regulatory Commission of Alaska.

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In January 2021, we completed the sale of 67% of the outstanding equity in our business that owns and operates distributed generation solar power projects operated under the Vibrant (“Vibrant”) name in India (the “Vibrant Transaction”). The post-sale results of our ownership interest in Vibrant will be recorded through the equity method of accounting within the Corporate and Other operating segment. As such, our consolidated financial statements will no longer include revenue and operating expenses from Vibrant, but instead, “other income (expense)” within the Corporate and Other operating segment will include our 33% share of Vibrant’s profits or losses. We will continue to present the historical results of our Renewable Energy segment for comparative purposes.

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The operations of Vibrant did not qualify as discontinued operations because the disposition did not represent a strategic shift that had a major effect on our operations and financial results.

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The following chart summarizes the operating activities of our principal subsidiaries, the segments in which we reported our revenue and the markets we served during 2020:

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Our principal corporate offices are located at 500 Cummings Center, Suite 2450, Beverly, Massachusetts, 01915. The telephone number at our principal corporate offices is (978) 619-1300.

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Strategy

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The key elements of our strategy consist of the following:

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Communications Services

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Our International Telecom segment generates Mobility, Fixed, Carrier Services, and Managed Services revenues in Bermuda, the Cayman Islands, Guyana and the US Virgin Islands. Our revenues from our International Telecom segment were approximately 72% and 73% of our consolidated revenues for fiscal years 2020 and 2019, respectively. Our US Telecom segment generates Mobility, Fixed, Carrier Services, and Managed Services revenues in the mainland United States. Our revenues from our US Telecom segment were approximately 27% and 25% of our consolidated revenues for fiscal years 2020 and 2019, respectively.

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International Telecom Segment

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Mobility

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We provide mobile, data, and voice services to retail and business customers in Bermuda under the “One” brand name, in Guyana under the “GTT+” brand name and in the US Virgin Islands under the “Viya” brand name. We also provide roaming services for many of the largest US providers’ customers visiting these locations. As of December 31, 2020, we had approximately 304,000 Mobility subscribers in our International Telecom segment and over 84% of those subscribers were on prepaid plans.

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Products and Services. A significant majority of our customers in our International Telecom segment subscribe to one of our prepaid plans, which require customers to purchase an amount of voice minutes, text messages or data prior to use. A smaller minority of customers subscribe to our postpaid plans that allow customers to select a plan with voice minutes, text messaging, a given amount of data and other features that recur on a monthly basis, which services are billed at the end of the service period.

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Network and Operations: We offer our Mobility services over our 3G (WDCMA) 4G (LTE) wireless network in Bermuda and the U.S. Virgin Islands. In Guyana we offer our Mobility services over our 2G (GSM), 3G (WCDMA and 4G (LTE) wireless network. As of December 2020 we owned and operated a total of 454 wireless base stations in the international markets. All of our Mobility networks have their core supporting facilities in the home network in the US Virgin Islands, Bermuda and Guyana. Our local NOCs provide dedicated monitoring of our network to ensure quality and reliable service to our customers and during off hours, weekends and holidays our NOC in the mainland USA provides extended support to ensure we have 24 hours year round monitoring of all our wireless and wireline markets. In 2021 we will start the deployment of Volte in the markets and also trial and test some 5G wireless network deployments.

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The transport networks in all the markets are primarily fiber based with route diversity provided by the deployment of fiber rings where possible and supplemental microwave deployments. The vast majority of the networks are IP Based utilizing MPLS for redundancy to provide high availability networks. Standby power is provided by back up battery and generators. In the USVI where we have experienced extreme hurricane events lots of network hardening has been added to the network such as building tower structures to 160 MPH ratings and adding underground and alternate routes where ever possible. All the markets connect to the world thought sub-sea fiber networks described in our “International Telecom – Fixed – Network” section below.

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Sales and Marketing. We maintain retail stores in our markets and allow customers to pay their bills and “top up,” or add additional data and/or minutes to their prepaid plans, through payment terminals at local stores, business centers or our website, by purchasing prepaid calling cards, or via mobile or web-based apps. Our handsets, prepaid cards and prepaid accounts are also sold through independent dealers that we pay on a commission basis.

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Handsets and Accessories. We offer a diverse line of wireless devices and accessories designed to meet both the personal and professional needs of our customers. Our device assortment includes a wide range of smartphones including those featuring the Android™ and iOS™ operating systems in addition to a full line of feature phones, wireless hot spots and various wireless solutions for small businesses. To complement our phone offerings, we sell a complete range of original equipment manufacturer and after-market accessories that allow our customers to personalize their wireless experience, including phone protection, battery charging solutions and Bluetooth hands-free kits.

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Competition. We believe we compete for wireless retail customers in our international markets based on features, price, technology deployed, network coverage (including through roaming arrangements), quality of service and customer care. We compete against Digicel and Liberty Latin America in the Caribbean region, other smaller local providers, and in some markets, against one or more US national operators.

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Fixed Services

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High-speed data and related services. We offer high-speed broadband services to both residential and enterprise customers in all our International Telecom markets. We provide a number of broadband internet plans with varying speeds to address different customer needs and price requirements in our various markets. As of December 31, 2020, we had approximately 141,000 high-speed broadband customers across our markets.

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Voice services. We offer Fixed voice services that include local exchange, regional and long distance calling and voice messaging services in Bermuda, Guyana, and the US Virgin Islands. As of December 31, 2020, we had an aggregate of approximately 169,000 access lines in service in our markets, which represent both residential and enterprise subscribers. With respect to our international long-distance business, we also collect payments from foreign carriers for handling international long-distance calls originating from the foreign carriers’ countries and terminating on

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our network. We also make payments to foreign carriers for international calls originating on one of our networks and terminating in the foreign carrier’s countries and collect from our subscribers or a local originating carrier a rate that is market-based or set by regulatory tariff.

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Video services. We offer video services in Bermuda, the Cayman Islands, and the US Virgin Islands. As of December 31, 2020, we had approximately 36,000 video customers across our markets. We have several offerings available to our video customers, including basic and tiered local and cable TV channels grouped into various content categories, such as news, sports and entertainment.

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Network. We also offer our Fixed services over our coaxial cable and fiber-optic networks in our international markets. All of our Fixed access lines are digitally switched from our switching centers in the US Virgin Islands, Bermuda and Guyana. Our switching centers provide dedicated monitoring of our network to ensure quality and reliable service to our customers.

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In Bermuda and the US Virgin Islands, we deliver our services via a hybrid fiber coaxial (“HFC”) cable network and via fiber GPON network in the Cayman Islands and Guyana. In Guyana, we also provide fixed services via DSL and FWA. These networks give us expanded Internet access coverage to an average of 95% of homes across our markets with speeds up to 500 Mbps for residential customers in most markets. Following Hurricanes Irma and Maria in 2017 (collectively, the “Hurricanes”), service to our customers over the HFC network was impacted due to both the loss of power and damage to our network. We have completed remediation efforts to our network such as building tower structures to 160 MPH ratings and adding underground and alternate routes where ever possible.

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Our international voice and data networks are linked with the rest of the world principally through our ownership and investments in six undersea fiber-optic cables in the Caribbean and Atlantic regions. These cables are crucial arteries that supply access to communications services for islands and remote markets like the ones in which we operate. For example, in Guyana we co-own with Telesur, the government-owned telecommunications provider in Suriname, the Suriname-Guyana Submarine Cable System that provides us with more robust redundancy, the capacity to meet growing data demands in Guyana, and the opportunity to provide new and enhanced services such as Internet service. In Bermuda, we own the Challenger Bermuda cable that provides us with capacity from Bermuda to the United States.

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Sales and Marketing. Our businesses utilize four key sales channels: stores, telesales, business-to-business (“B2B”) channels and residential sales (inbound). Certain residential sales are made through inbound communications to customer service representatives who assist with a wide range of inquiries and sell different product offerings to help retain customers or improve their service with upgrades or bundles. Our revenues for our Fixed services are derived from installation charges for new lines, monthly line charges, data and video services and value added services, such as hosting or enterprise voice and data solutions. For our Fixed voice services, rates differ for residential and commercial customers and in certain markets, may be set by regulatory authorities.

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Competition. We compete with a limited number of other providers, including Digicel, with respect to various products. We believe our breadth of services and local economies of scale provide us with a strong competitive position and the ability to win and retain an economically viable share of those markets.

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In Guyana, we have an agreement with the Government of Guyana for the exclusive right to provide domestic fixed and international voice and data services. However, in October of 2020, the Government implemented new legislation to introduce legal competition into the sector.  We believe that our exclusive agreement continues to be valid unless and until such time as we enter into an alternative agreement with the Government. For further discussion regarding the change in competitive landscape following the 2020 Guyana election and new regulatory regime, see “—Guyana Regulation—Regulatory Developments” and “Risk Factors—Our operations in Guyana are subject to significant political and regulatory risk.”

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US Telecom Segment

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Carrier & Mobility Services

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Carrier Services. In the United States, we provide wholesale mobile voice and data roaming services in rural markets to national, regional, local and selected international wireless carriers as part of our Carrier Services as well as tower rental, backhaul and maintenance services. Our largest wholesale networks are located principally in the western United States.

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We currently have roaming agreements with approximately 32 United States-based wireless service providers and, as of December 31, 2020, had roaming arrangements with each of the three US national wireless network operators: Verizon Wireless, AT&T, and T-Mobile. Other than these agreements with the national carriers, our standard roaming agreements are usually terminable within 90 days. In 2020, the three national mobile service providers together accounted for a substantial portion of our Carrier Services revenues, with AT&T and Verizon accounting for an aggregate of approximately 15% of our total consolidated revenue for the year.

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The revenue and profits of our Carrier Services business historically were primarily driven by the number of sites and base stations in operation, the amount of voice and data traffic that each of these sites generates, and the rates we receive from our carrier customers on that traffic. Many of our sites are located in popular tourist and seasonal visitor areas, which has historically resulted in higher wholesale revenues in those areas during the summer months.

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We are increasingly providing network infrastructure services as part of our expanded Carrier Services, such as tower leasing and transport facilities to our carrier partners, to supplement our historic revenue base. In July 2019, we entered into a Network Build and Maintenance Agreement (the “FirstNet Agreement”) with AT&T to build a portion of AT&T’s network for the First Responder Network Authority (“FirstNet”) as well as a commercial wireless network in or near its current operating area in the Southwestern United States (the “FirstNet Transaction”). Pursuant to the FirstNet Agreement and subject to certain limitations contained therein, all cell sites must be completed and accepted within a specified period of time, which we jointly agreed to extend with AT&T in August 2020 due to the ongoing coronavirus pandemic and other permitting related delays. We began recording construction revenue in September 2020 and have recorded $10.9 million of construction revenue during the year ended December 31, 2020. We expect to record an additional $75 million through 2022 that will be mainly offset by construction costs as sites are completed. As such, revenues from construction are expected to have minimal impact on operating income. Also pursuant to the FirstNet Agreement AT&T has the option to repay construction costs, with interest, over and eight year period.  Accordingly, we entered into a receivables credit facility with CoBank, ACB (the “Receivables Credit Facility”) in order to assist with this repayment option.  The Receivables Credit Facility provides for a senior secured delayed draw term loan in an aggregate principal amount of up to $75 million with the proceeds being used to acquire the receivables related to the construction costs.

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Following acceptance of a cell site, AT&T will own the cell site and we will assign to AT&T any third-party tower lease applicable to such cell site. If the cell site is located on a communications tower we own, AT&T will pay us pursuant to a separate lease agreement for an initial term of eight years. In addition to building the network, we will provide ongoing equipment and site maintenance and high capacity transport to and from these cell sites for an initial term ending in 2029.

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AT&T will continue to use our wholesale domestic mobile network for roaming services at a fixed rate per site during the construction period until such time as the cell site is transferred to AT&T. Thereafter, revenue from the maintenance, leasing and transport services provided to AT&T is expected to offset revenue from AT&T’s decline in usage of wholesale mobile roaming services, albeit at lower operating income margins due to the increased operating expenses associated with leasing and transport services, as compared to our wholesale mobile roaming services. We began receiving roaming revenue from the FirstNet Transaction in the third quarter of 2019 and expect overall operating income contributions from the FirstNet Transaction to continue to have a relatively steady impact going forward.

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Mobility Services. We also offer Mobility services to customers in certain rural markets already covered by our wholesale networks. In 2018, we invested in a new platform that provides comprehensive in-building cellular solutions

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to enable users and devices to roam across public carrier networks seamlessly and securely. Our private 5G/LTE mobile network offering interconnects seamlessly with major mobile operators, delivering a secure, robust and flexible network and services for private applications and high-performance coverage for tenants and visitors. 

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Network and Operations. Our roaming network offers mobile communications service through a digital wireless voice and data network that utilizes multiple cellular mobile technologies including UMTS/HSPA, CDMA/EvDO and LTE that often will be deployed at a single cell site location in order to maximize revenue opportunities. We provide wireless communications network products and services with owned and leased cellular, PCS, BRS, EBS, AWS, and CBRS spectrum. Our networks comprise base stations and radio transceivers located on owned or leased towers and buildings, telecommunications switches and owned or leased transport facilities. We design and construct our network in a manner that will provide high-quality service to substantially all types of compatible wireless devices. Network reliability is carefully considered and redundancy is employed in many aspects of our network design.

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Route diversity, redundant equipment, ring topologies and the use of emergency standby power are used to enhance network reliability and minimize service disruptions from any particular network element failure. We operate high-capacity, carrier-class digital wireless switching systems that are capable of serving multiple markets through a single mobile telephone switching office. Centralized equipment used for network and data management is located in high-availability facilities supported by multiple levels of power and network redundancy. Our systems are designed to incorporate Internet Protocol (IP) packet-based Ethernet technology, which allows for increased data capacity and a more efficient network. Interconnection between the mobile telephone switching office and the cell sites utilizes Ethernet technology over fiber or microwave links for virtually all of our 4G LTE sites.

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As of December 31, 2020, we owned and operated a total of 1,044 domestic base stations on 453 owned and leased sites, a Network Operations Center (or “NOC”), and a switching center. We also maintained a presence in numerous leased data centers designed to support network virtualization and provide network resiliency. Our NOC provides dedicated, 24-hour, year-round monitoring of our network to ensure quality and reliable service to our customers. In 2020, we continued to expand and improve our network and plan to test and commercially deploy voLTE technology in 2021. voLTE technology allows customers to utilize a 4G LTE network for both voice and data services, and the migration of our wholesale and retail subscribers in the following years to the more efficient 4G technology from 2G/3G technologies will result in increased spectrum availability.

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Competition. With respect to our Carrier Services, we compete with mobile service providers that operate networks in our markets and offer wholesale roaming services. However, the most significant competitive challenge we face in our US wholesale wireless business is the extent to which our carrier customers choose not to roam on our networks or elect to build or acquire their own infrastructure in a market in which we operate, reducing or eliminating their need for our services in those markets. We address this competitive threat mainly by providing a service that would be more costly for the carrier to provide itself, or, at least, a less attractive expenditure than alternative investments in its network or business. With respect to our Mobility services, we compete with other mobile service providers in our retail business and with a variety of providers of private network services.

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Our ability to maintain appropriate capacity and relevant technology to respond to our roaming partners’ needs also shapes our competitive profile in the markets in which we operate. We believe that currently available technologies and appropriate capital additions will allow sufficient capacity on our networks to meet anticipated demand for voice and data services over the next few years. However, increasing retail demand for high-speed data may require the acquisition of additional spectrum licenses to provide sufficient capacity and throughput.

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Fixed Services

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Sales and Marketing. Our wholesale transport customers are predominately communications carriers such as local exchange carriers, wireless carriers, internet service providers and interstate integrated providers.

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Competition. Our wholesale competitors include Zayo, other national fiber providers and regional wholesale providers and cable television companies that operate fiber-optic networks.

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Renewable Energy Services

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On April 7, 2016, we acquired Vibrant, and since that time, have constructed a total of 65 MWp of distributed generation solar power projects in the states of Andhra Pradesh and Telangana based on a commercial and industrial business model, similar to our former US renewable energy operations. On January 27, 2021, we completed the Vibrant Transaction, and we continue to retain a 33% interest in Vibrant. In the Vibrant Transaction we received approximately $21 million at closing and the potential for up to $6.3 million of additional “earn out” consideration upon the satisfaction of certain conditions. The Vibrant Transaction is consistent with our strategy of seeking third party equity capital in order to build a larger portfolio and achieve economies of scale and diversification benefits.

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Services. Historically, our solar projects were in the “commercial and industrial” (“C&I”) sector of the solar market, which is distinguished from utilities and residential customers. Our customers or “offtakers” included high-credit quality corporate entities, utilities, schools, and municipalities, which purchased electricity from us under the terms of long-term power purchase agreements (“PPAs”). In India, we have also executed PPAs with offtakers utilizing a “group captive” construct whereby our offtakers own an equity interest in certain of our projects. This arrangement enables us to extend the term of a PPA for such projects up to twenty five years in duration at predictable and stable prices. As such, we believe the PPAs provide us with high-quality contracted cash flows, which, although our customers may terminate the PPAs with one-year notice, we nevertheless expect will continue over their average remaining life.

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Infrastructure. Our existing facilities are located on land owned by Vibrant and are comprised of ground-mounted solar photovoltaic (“PV”) installations. We manage our facilities through third party operation and maintenance (“O&M”) contracts and our corporate staff tracks the data and services provided by the third-party service provider. We depend on a limited number of key suppliers for the PV modules that we purchase for installation at our facilities, with the majority of facilities constructed with Tier 1 PV modules supplied by GCL Systems, a Tier 1 Chinese module supplier.

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ATN Ventures and Minority Investments

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In addition to our core telecommunications operating companies, we have also made investments in earlier stage businesses, some of which are non-controlling investments whose technology-forward approach we consider strategically relevant and which, in addition to the potential for creating supplemental cash flow as they grow, can also provide a variety of benefits that enhance the potential to expand our more mature businesses. These benefits include providing entry points into emerging sectors of our existing businesses, enhancing our product offerings, providing visibility into newer technologies and establishing and enhancing strategic relationships.

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As a vehicle for our investments, in 2017 we formed ATN Ventures, our corporate venture capital arm that is an active, strategic investor with deep operational expertise seeking to partner with great entrepreneurs to build lasting value. Through ATN Ventures, we invest in services and technology companies that bring synergies to ATN’s operating businesses in the US and internationally.

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To date, we have engaged in the below investments:

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Human Capital

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As of December 31, 2020, we had approximately 1,700 employees, of whom approximately 1,000 were employed by our international subsidiaries, and approximately 700 were employed in the United States (including in the US Virgin Islands). At the holding company level, we employ our executive management team and staff. Approximately half of our Guyana and US Virgin Islands full-time work forces are represented by unions. Approximately 20% of our Bermuda full-time workforce is represented by unions.

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We rely heavily on local management teams to run our subsidiary operating units.  Many of the markets in which we operate are small and remote, and in some cases are subject to government restrictions on granting work visas, all of which makes it difficult to attract and retain talented and qualified managers and staff in those markets.  We work hard to maintain positive and productive working environments and we believe we have good relations with our employees and management teams. 

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It is our objective to maintain a respectful and diverse corporate culture.  Our culture is driven by our core values, including a demonstrated commitment to inclusion and diversity. Across our core businesses in all our markets, approximately 30% of senior management and an additional 40% of middle management identify as persons of color, including Afro-Caribbean, Latinx, Indo-Caribbean and other races or ethnicities and approximately 15% of senior management and an additional 40% of middle management are women. We are also committed to the principal of equal pay for equal work.

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Regulation

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Our wireless and wireline communications and video services operations are subject to extensive governmental regulation in each of the jurisdictions in which we provide services. Our operations in the United States and the US Virgin Islands are governed by the Communications Act of 1934, as amended (“Communications Act”), the implementing regulations adopted thereunder by the FCC, including the Telecommunications Act of 1996, as well as judicial and regulatory decisions interpreting and implementing the Communications Act, and other federal, state, and local statutes and regulations. Our operations are also governed by certain foreign laws and regulations.

The following summary of regulatory developments and legislation does not purport to describe all present and proposed federal, state, local, and foreign regulation and legislation that may affect our businesses. Legislative or regulatory requirements currently applicable to our businesses may change in the future and legislative or regulatory requirements may be adopted by those jurisdictions that currently have none. Any such changes could impose new obligations on us that could adversely affect our operating results.

US Federal Regulation

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Wireless Services

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The FCC regulates, among other things, the licensed and unlicensed use of radio spectrum; the ownership, lease, transfer of control and assignment of wireless licenses; the ongoing technical, operational and service requirements applicable to such licenses; the timing, nature and scope of network construction; the provision of certain services, such as enhanced 911 (“E 911”); and the interconnection of communications networks in the United States.

Licenses. We provide our wireless services pursuant to various commercial mobile radio services (“CMRS”) licenses, including cellular, broadband Personal Communications Services (“PCS”), 600 MHz Band, 700 MHz Band, Advanced Wireless Service (“AWS”), Broadband Radio Service (“BRS”) and Educational Broadband Service (“EBS”) licenses granted by the FCC, and pursuant to leases of licenses from FCC licensed operators. Some of these licenses are site based while others cover specified geographic market areas, e.g., Cellular Market Areas, Basic Trading Areas, and Partial Economic Areas, as defined by the FCC. The specific radio frequencies, the authorized spectrum amounts, and certain of the technical and service rules vary depending on the licensed service. The FCC generally allocates CMRS

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licenses through periodic auctions, after determining how many licenses to make available in particular frequency ranges, the applicable service rules, and the terms on which the license auction will be conducted. Such licenses are also available via secondary market mechanisms, using procedures and regulations set forth by the FCC. The FCC recently conducted auctions of high-band and mid-band spectrum, and is considering holding a further mid-band spectrum auction in 2021. In the FCC’s 2020 auction of Citizens Broadband Radio Service (“CBRS”) Priority Access Licenses (“PAL”) in the 3.5 GHz band, we won licenses in 590 U.S. counties, and expect these licenses to be issued in 2021. There is no certainty as to whether any of these licenses will be used for wireless services competitive with our services or as to the likelihood that we will acquire spectrum licenses made available in any future auction.

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Construction Obligations. The FCC conditions licenses on the satisfaction of certain obligations to construct networks covering a specified geographic area or population by specific dates. The obligations vary depending on the licensed service. Failure to satisfy an applicable construction requirement can result in the assessment of fines and forfeitures by the FCC, a reduced license term, or automatic license cancellation. We are substantially in compliance with the applicable construction requirements that have arisen for the licenses we currently hold and expect to meet our future construction requirements as well.

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License Renewals. Our FCC licenses generally expire between 2021 and 2030 and are renewable upon application to the FCC. License renewal applications may be denied if the FCC determines, after appropriate notice and hearing, that renewal would not serve the public interest, convenience, or necessity. At the time of renewal, we must demonstrate that we have maintained operations (and service in some instances) at or above levels needed to satisfy our construction requirements, that we have not permanently discontinued operations at any time during our prior license term, and that we have substantially complied with the rules and regulations of the FCC and the Communications Act. If we are able to make these certifications, we may claim a license renewal safe harbor. If we cannot make these certifications, we must instead file a license renewal showing how we have used our license during our prior license term, which the FCC has broad discretion to approve or deny. If a renewal showing is denied, our license renewal application will be dismissed, and our license will not be renewed for an additional license term. While our licenses have been renewed regularly by the FCC in the past, there can be no assurance that all of our licenses will be renewed in the future.

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The FCC may deny license applications and, in extreme cases, revoke licenses if it finds that an entity lacks the requisite qualifications to be a licensee. In making that determination, the FCC considers whether an applicant or licensee has been the subject of adverse findings in a judicial or administrative proceeding involving felonies, the possession or sale of unlawful drugs, fraud, antitrust violations, or unfair competition, employment discrimination, misrepresentations to the FCC or other government agencies, or serious violations of the Communications Act or FCC regulations. To our knowledge, there are no activities and no judicial or administrative proceedings involving either us or the licensees in which we hold a controlling interest that would warrant such a finding by the FCC.

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License Acquisitions. Prior FCC approval typically is required for transfers or assignments of a controlling interest in any license or construction permit, or of any rights thereunder. The FCC may approve or prohibit such transactions altogether, or approve such transactions subject to certain conditions such as divestitures or other requirements. Non-controlling minority interests in an entity that holds an FCC license generally may be bought or sold without FCC approval, subject to any applicable FCC notification requirements. The FCC permits licensees to lease spectrum to third parties under certain conditions, subject to prior FCC approval, or in some instances, notification to the FCC. These mechanisms provide additional flexibility for wireless providers to structure transactions and create additional business and investment opportunities.

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The FCC no longer caps the amount of CMRS spectrum in which an entity may hold an attributable interest and now instead engages in a case-by-case review of proposed wireless transactions, including spectrum acquired via auction, to ensure that the proposed transaction serves the public interest and would not result in a rule violation or an undue concentration of market power. The FCC utilizes a spectrum aggregation “screen” to determine whether a proposed secondary market transaction requires additional scrutiny. Under this approach, a transaction will be reviewed by the FCC for potential competitive effects if it will result in the acquiring entity having (1) total spectrum holdings generally exceeding approximately one-third of the total amount of suitable and available spectrum in any county (which the FCC raised in 2020 from 240 MHz to 250 MHz) or (2) over 68 MHz of spectrum under 1 GHz. The FCC’s

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additional scrutiny would also be triggered if a proposed transaction results in a material change in the post transaction market share in a particular market as measured by the Herfindahl Hirschman Index. We are well below the spectrum aggregation screen in the majority of geographic areas in which we hold or have access to licenses, and thus we may be able to acquire additional spectrum either from the FCC in an auction or from third parties in private transactions in most locations in which we operate. However, we could trigger the spectrum screen if we attempt to acquire significant additional spectrum in the US Virgin Islands. Similarly, our competitors may be able to strengthen their operations by making additional acquisitions of spectrum in our markets or by further consolidating the industry.

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Other Requirements. The Communications Act and the FCC’s rules impose a number of additional requirements upon wireless service providers. A failure to meet or maintain compliance with the Communications Act and/or the FCC’s rules may subject us to fines, forfeitures, penalties or other sanctions.

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Wireless licensees must satisfy a variety of FCC requirements relating to technical and reporting matters. Licensees must often coordinate frequency usage with adjacent licensees and permittees to avoid interference between adjacent systems. In addition, the height and power of transmitting facilities and the type of signals emitted must fall within specified parameters. For certain licensed services, a variety of incumbent government and non-government operations may have to be relocated before a licensee may commence operations, which may trigger the incurrence of relocation costs by the incoming licensee.

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The radio systems towers that we own and lease are subject to Federal Aviation Administration and FCC regulations that govern the location, marking, lighting and construction of towers and are subject to the requirements of the National Environmental Policy Act, National Historic Preservation Act, and other environmental statutes enforced by the FCC. The FCC has also adopted guidelines and methods for evaluating human exposure to radiofrequency field emissions from radio equipment. We believe that all of our radio systems on towers that we own or lease comply in all material respects with these requirements, guidelines and methods.

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The FCC has adopted requirements for cellular, PCS and other CMRS providers to implement basic 911 and E- 911 services. These services provide state and local emergency service providers with the ability to better identify and locate 911 callers using wireless services, including callers using special devices for the hearing impaired. Because the implementation of these obligations requires that the local emergency services provider have certain facilities available, our specific obligations are set on a market-by-market basis as emergency service providers request the implementation of E-911 services within their locales. As part of an E-911 initiative, the FCC adopted stronger rules regarding E-911 location accuracy and continues to evaluate the potential for improving location accuracy for 911 calls. The extent to which we are required to deploy E-911 services will affect our capital spending obligations. Federal law limits our liability for uncompleted 911 calls to a degree commensurate with wireline carriers in our markets.

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The FCC also has adopted rules requiring wireless carriers and certain other text messaging service providers to provide text-to-911 service and an automatic “bounce back” text message to consumers who try to text 911 where text to 911 is not available, indicating the unavailability of such services. Like E-911 services, the obligation to provide these services is largely tied to requests from emergency service providers for these services. We are currently in compliance with all public safety answering point requests we have received. The FCC has also sought further comment regarding additional regulations pertaining to the provision of text to 911 service.

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In addition to CMRS licenses, our wireless business relies on FCC-licensed spectrum for “Common Carrier Fixed Point to Point Microwave,” referred to as common carrier microwave. We currently operate over 250 licensed microwave links. Common carrier microwave stations are generally used in a point-to-point configuration for cellular site backhaul connections or to connect points on the telephone network that cannot be connected using standard wireline or fiber optic cable because of cost or terrain. The majority of our license grants are for a period of 10 years. The FCC grants license renewal applications in the ordinary course.

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The FCC established a Wireless Emergency Alerts system that allows CMRS providers to transmit emergency alerts to the public. This system is voluntary. We have partially opted in to the service and are currently providing it to all of our retail wireless customers to the extent required by applicable regulations and where technically feasible. The rules governing participation contain many requirements, such as point of sale disclosures, geo-targeting alerts, alert logging,

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maximum message lengths, alert preservation, alerts regarding threats to police officers, and support for non- English messages.

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In 2019, the Telephone Robocall Abuse Criminal Enforcement and Deterrence Act (“TRACED Act”) was signed into law requiring all IP-based voice service providers to implement, by July 2021, the secure telephone identity revisited and signature-based handling of asserted information using tokens (“STIR/SHAKEN”) call authentication standards or take reasonable measures to implement an effective call authentication framework in their non-IP networks or in networks operated by carriers with fewer than 100,000 customers. During 2020, the FCC adopted several Orders to implement the provisions of the TRACED Act.  The Company is taking the steps necessary to comply with the new requirements.

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The FCC’s rules require CMRS providers to offer “roaming” services to other providers. Roaming enables one provider’s customers to obtain service from another provider when the customer is using their wireless device in an area served by the second provider. These rules apply to voice, messaging, and data services, including Internet access, although the roaming rules vary somewhat among these services. We are obligated to offer roaming, and we have the right to seek roaming from other providers, on reasonable terms and conditions. The FCC has identified a variety of factors that are relevant to whether an offer to provide roaming is reasonable, including the price, terms and conditions, and whether the two providers’ networks are technologically compatible. Changes in the FCC’s roaming regulations may affect the terms under which we provide roaming services to third parties and may affect our ability to secure roaming arrangements with other CMRS providers on behalf of our retail wireless customers.

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We are obligated to pay certain annual regulatory fees and assessments to support FCC wireless industry regulation, as well as fees supporting federal universal service programs, number portability, regional database costs, centralized telephone numbering administration, telecommunications relay service for the hearing impaired and application filing fees. These fees are subject to change periodically by the FCC and the manner in which carriers may recoup these fees from customers is subject to various restrictions.

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Wireline Services

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The Communications Act encourages competition in local telecommunications markets by removing barriers to market entry and imposing on non-rural incumbent local exchange carriers (“ILECs”) various requirements related to, among other things, interconnection, access to unbundled network elements, co-location, access to poles, ducts, conduits, and rights of way, wholesale and resale obligations, and telephone number portability. Our ILEC operations in the US Virgin Islands through Viya are exempt from most such federal requirements pursuant to a rural exemption.

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While, to date, the FCC has declined to classify interconnected voice-over Internet protocol (“VoIP”) service as a telecommunications service or information service, it has imposed a number of consumer protection and public safety obligations on interconnected VoIP providers, relying in large part on its general ancillary jurisdiction powers. To the extent that we provide interconnected VoIP service, we are subject to a number of these obligations.

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In recent years, the FCC has taken actions to help expedite the deployment of wireline (and wireless) network infrastructure. Those actions include adopting rules to facilitate the attachment of new facilities to utility poles and eliminating or reducing requirements to provide notice of service discontinuance. We expect these FCC actions will facilitate our ability to expand our wireline network coverage.

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Video Services

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Video services systems are regulated by the FCC under the Communications Act. The FCC regulates our programming selection through local broadcast TV station mandatory carriage obligations, constraints on our retransmission consent negotiations with local broadcast TV stations, and limited regulation of our carriage negotiations with cable programming networks. The FCC and federal laws also impose rules governing, among other things, leased cable set-top boxes, our ability to collect and disclose subscribers’ personally identifiable information, access to inside wiring in multiple dwelling units, cable pole attachments, customer service and technical standards, and disability access requirements. Failure to comply with these regulations could subject us to penalties. The FCC is examining whether it should modernize its video regulations and already has updated or eliminated some requirements, but we cannot predict whether and to what extent the FCC will continue to pursue deregulation in this space.

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Wireless and Wireline Services

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Universal Service. In general, all telecommunications providers are obligated to contribute to the USF, which is used to promote the availability of qualifying telecommunications and broadband service to individuals and families qualifying for federal assistance, households located in rural and high cost areas and to schools, libraries, and rural health care providers. Contributions to the federal USF are based on end-user interstate and international telecommunications revenue. Some states have similar programs that also require contribution. The FCC has suggested that it may examine the way in which it collects carrier contributions to the USF, including a proposal to base collections on the number of telephone numbers or network connections in use by each carrier, and some states have changed or are considering changing their contribution methodologies. We contribute to the USF as required by the rules throughout the US, and receive funds from the USF for providing service in rural areas of the United States, including the US Virgin Islands.

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The collection of USF fees and distribution of USF support is under continual review by state and federal legislative and regulatory bodies, and changes to these programs could affect our revenues. We are subject to audit by the Universal Service Administration Company with respect to our contributions and our receipts of universal service funding. We believe we are substantially compliant with all FCC and state regulations related to the receipt and collection of universal service support.

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In November 2011, the FCC released an order reforming the USF program for high-cost areas in the continental U.S. As part of the USF reforms, the FCC created a new program, the Connect America Fund.

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In August 2018, we were awarded $79.9 million over 10 years under a portion of the Connect America Fund program called the Connect America Fund Phase II Auction. The funding requires us to provide Fixed broadband and voice services to certain eligible areas in the United States. We are subject to operational and reporting requirements under the program. Funding began in the second quarter of 2019 and we record the amounts received as revenue in our financial statements. In the 2020 Rural Digital Opportunity Fund Phase I Auction, pending the FCC’s conclusion of the award process, we expect to receive approximately $20.1 million over 10 years to provide broadband coverage to over 10,000 households. Once confirmed, we will be obligated to provide broadband and voice services to certain eligible areas in the United States.

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Our business in the US Virgin Islands also benefits from USF support. Our US Virgin Islands wireline business has historically received, and continues to receive, annual support of approximately $16.4 million. In addition, after the devastation caused by the Hurricanes in September 2017, the FCC provided approximately $9.7 million in recovery support in November 2017, and an additional $7.3 million in recovery support in August 2018. In 2018, the FCC initiated a proceeding to reform the USF program for high cost in the US Virgin Islands and Puerto Rico in which it proposed to allocate USF funding of up to $18.7 million per year (inclusive of the $16.4 million per year currently allocated to Viya) for 10 years to support fixed voice and broadband services in the US Virgin Islands through a new Connect USVI Fund.

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In September 2019, the FCC adopted an order in this proceeding establishing a new competitive proposal process for awarding the Connect USVI Fund support that will supplant the $16.4 million that Viya currently receives per year. While Viya applied for Connect USVI Fund support allocated for the US Virgin Islands, on November 16, 2020, the FCC announced that Viya was not the recipient of the provisional award and that the FCC had provisionally accepted a bid of approximately $8.6 million per year for a term of 10 years. Viya has challenged this decision and its challenge remains pending before the FCC. If Viya’s challenge is not granted, pursuant to the terms of the program, Viya’s USF support will be reduced, to 2/3 of the legacy total amount, or $10.9 million during the first year following the finalization of the award and to 1/3 of the legacy total amount, or $5.5 million, during the second year. Thereafter, Viya will not receive high-cost USF support.

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Intercarrier Compensation. Under federal and state law, telecommunications providers are sometimes required to compensate one another for originating and terminating traffic for other carriers. Consistent with these provisions, we currently receive compensation from other carriers and also pay compensation to other carriers. In October 2011, the FCC significantly revised its intercarrier compensation regime such that most of these compensation obligations ceased

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by July 1, 2017, and most remaining obligations ceased on July 1, 2020. As a result, this type of intercarrier compensation is no longer material to our business.

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Net Neutrality. In January 2018, the FCC released a decision rescinding various “net neutrality” requirements, which had governed how broadband Internet access providers were permitted to offer broadband service. This decision largely eliminated the FCC’s regulation of our ability to block, throttle, or prioritize specific types of Internet traffic, and put a revised transparency-centered regulatory regime in place. Under the 2018 decision’s approach, broadband Internet access providers still must publicly disclose detailed information regarding their service offerings, Internet traffic management processes, and other practices affecting broadband customers. The FCC also held that states are preempted from enacting their own versions of these or similar requirements. A federal appeals court upheld most of the FCC’s 2018 decision, but it reversed the FCC’s blanket preemption of state broadband rules. The court also (1) held that state broadband laws only may be preempted on a case-by-case basis when they conflict with state or federal policy, and (2) remanded certain issues to the FCC. The court subsequently declined to rehear the case, and no party sought review by the U.S. Supreme Court. In October 2020, the FCC affirmed its 2018 decision after addressing the issues remanded by the court. Meanwhile, a number of states have adopted – or are considering – state-level net neutrality requirements. These efforts include enacted legislation and executive orders dating back to 2018. Some state efforts are currently subject to legal challenge by broadband providers and/or the United States government in federal district court. These legal challenges were paused during the appellate proceedings on the FCC’s 2018 decision, but have now resumed. We cannot predict with any certainty the likely timing or outcome of these or future challenges, or how state or federal efforts to adopt net neutrality requirements will continue to evolve.

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Telecommunications Privacy Regulations. We are subject to federal regulations relating to privacy and data security that impact all parts of our business. Certain federal statutory and regulatory privacy and data security requirements apply to our telecommunications and cable services. Other parts of our business are subject to privacy and data security oversight by other federal regulators, including the Federal Trade Commission. In addition, federal and state regulators have adopted or are considering adopting new privacy laws. For instance, the state of California has enacted two broad new privacy statutes, the first effective January 1, 2020, and the second effective January 1, 2023 although we do not believe that they are applicable to our business. Such state privacy regulations could impact at least some of our operations. In addition, the US Congress is actively discussing establishing a new privacy regime that would impose a uniform privacy framework across the United States and its territories. We believe that we comply with all currently applicable requirements, but we cannot predict the timeline for any future changes of law in this area or the impact of any such changes on our businesses.

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CALEA. Under certain circumstances, federal law also requires telecommunications carriers to provide law enforcement agencies with capacity and technical capabilities to support lawful wiretaps pursuant to the Communications Assistance for Law Enforcement Act (“CALEA”). Federal law also requires compliance with wiretap related record keeping and personnel related obligations. The FCC has adopted rules that apply CALEA obligations to high-speed Internet access and VoIP services. We believe that we are in compliance with all such requirements currently applicable to us. Maintaining compliance with these law enforcement requirements may impose additional capital spending obligations on us to make necessary system upgrades.

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Obligations Due to Economic Stimulus Grants. One of our subsidiaries has received awards from the Broadband Technology Opportunities Program (“BTOP”) of the US Department of Commerce (“DOC”) pursuant to the American Recovery and Reinvestment Act of 2009 (“ARRA”). As a BTOP sub-recipient, we are subject to the various terms and conditions included in the agency’s Notice of Funds Availability published in the Federal Register on July 9, 2009. We are also required to comply with other terms and conditions of the individual DOC grants. We believe that we are currently in material compliance with all BTOP and DOC requirements applicable to our grants.

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US State Regulation

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Wireless Services

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Federal law generally preempts state and local regulation of the entry of, or the rates charged by, any CMRS provider. For this reason, as a practical matter, we are generally free to establish wireless rates and offer new wireless

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products and services, and our wireless businesses are subject to minimal state regulatory requirements. However, the states in which we operate maintain nominal oversight jurisdiction. For example, states may regulate the “terms and conditions” of a CMRS provider’s service other than rates. States and localities also assess taxes and fees on wireless carriers.

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The location and construction of our wireless transmission towers and antennas are subject to state and local environmental regulation, as well as state or local zoning, land use and other regulation. Before we can put a system into commercial operation or expand a system, we must obtain all necessary zoning and building permit approvals for the cell site and tower locations. The time needed to obtain zoning approvals and requisite permits varies from market to market and state to state. Likewise, variations exist in local zoning processes. If zoning approval or requisite state permits cannot be obtained, or if environmental rules make construction impossible or infeasible on a particular site, our network design might be adversely affected, network design costs could increase and the service provided to our customers might be limited.

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In recent years, the FCC has taken actions to help expedite the deployment of wireless network infrastructure. Those actions include limiting state and local regulations governing the construction or modification of towers and the installation of small cells and other facilities within and outside public rights-of-way when the FCC determines those regulations can be barriers to deployment. Among other things, the FCC established new shorter shot clocks for completion of local reviews of small wireless facility applications, and required that fees which states and localities may charge for the location of small cells in rights-of-way must be cost-based. Several of the FCC’s most recent decisions were challenged in court by individual localities and organizations representing local governments. While some of the FCC’s actions have been upheld, others have been vacated or remanded, and others remain subject to petitions for reconsideration or appeal. We cannot predict with certainty the likely timing or outcome of these challenges.

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US Virgin Islands Regulation

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Virgin Islands Public Service Commission

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In addition to the regulations described above, our operations in the US Virgin Islands are also subject to the US Virgin Islands Public Utilities Code, pursuant to which the Virgin Islands Public Service Commission (“PSC”) regulates certain telecommunications and cable TV services that Viya provides in the US Virgin Islands. Among other things, the PSC establishes the rates and fees that we may charge local exchange residential and enterprise customers in the US Virgin Islands for certain wireline telecommunications services. The PSC is required by US Virgin Islands law to review local utility rates every five years. In June 2016, the PSC adopted an order increasing the rates and fees that we may charge subject to certain conditions and future obligations and certain of our subsidiaries entered into a transfer of control agreement with the PSC on July 1, 2016, which imposes certain operational and reporting obligations on the Viya companies. We believe that we have satisfied these requirements. Further, as a condition to Viya’s receipt of USF funds from the FCC, the PSC is required to certify on an annual basis that Viya is in compliance with certain eligible telecommunication carrier (“ETC”) obligations. We believe that we comply with all such obligations but cannot predict the outcome of future PSC proceedings relating to Viya’s ETC status.

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Our subsidiaries provide cable TV service in the US Virgin Islands pursuant to two franchises granted by the PSC. Each franchise was renewed in July 2015 by an order issued by the PSC, but the PSC has not yet issued new franchise agreements memorializing these renewals. We cannot predict what requirements will be included in the renewed franchise agreements. However, we understand that the renewed franchise agreements will likely contain substantially similar terms and conditions as the prior franchise agreements, including a 15-year term. We also believe that the renewed franchise agreements will exclude prior language permitting the PSC to regulate our cable rates. In August 2019, the FCC issued a decision placing some limits on the powers of local cable franchising authorities such as the PSC, including limits on their ability to impose franchise fees and to regulate non-cable services. A number of local franchising authorities have challenged that decision in federal appeals court. We cannot predict the outcome of that appeal, or how the FCC’s actions will impact our business.

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Virgin Islands Research and Technology Park

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Our video, internet and wireless companies in the US Virgin Islands also receive tax benefits as qualifying participants in the US Virgin Islands’ Research & Technology Park (“RTPark”) program. RTPark was chartered with the goal of promoting technology-based economic development in the territory and offering attractive economic incentives to companies that contribute to the development of the Virgin Islands through local employment and sourcing, as well as significant contributions to both the economy and the non-profit sectors of the community. As part of the program, our participating entities currently receive a 100% tax exemption applied against gross receipts, property, and excise taxes as well as a 90% exemption against income taxes and a reduction in customs duties from 6% to 1%. These benefits resulted in tax exemptions of approximately $1.9 million and $1.8 million during the years ended December 31, 2020 and 2019, respectively.

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In order to qualify, we are required to maintain certain capital investments over the first five years of the agreement, pay monthly management fees of 0.4% of tenant company revenue, make annual charitable contributions to the University of the Virgin Islands, purchase products and services locally when feasible and provide in-kind services to RTPark.

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Guyana Regulation

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Our subsidiary, Guyana Telephone & Telegraph Limited (“GTT”), in which we hold an 80% interest, is subject to regulation in Guyana under the provisions of GTT’s License from the Government of Guyana, the Guyana Public Utilities Commission Act of 2016 as amended (or “PUC Law”) and the Guyana Telecommunications Act of 2016 (or “Telecommunications Law”). The Ministry of Telecommunications, an agency of the Government of Guyana, has formal authority over telecommunications licensing and related issues. The Public Utilities Commission of Guyana (or “PUC”) is an independent statutory body with the principal responsibility for regulating telecommunications rates and services in Guyana. The Telecommunications Agency (or “TA”) advises and makes recommendations to the Minister of Telecommunications, implements policy and has principal responsibility for operating licenses and frequency authorizations.

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Licenses. GTT provides domestic Fixed (both wireline and wireless) and international voice and data services in Guyana pursuant to licenses from the Government of Guyana granting GTT the right to provide a variety of domestic Fixed services (both wireline and wireless) and international voice and data services. These licenses were issued in October 2020. Pursuant to the licenses, GTT also provides mobile wireless telephone service in Guyana.

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PUC Law and Telecommunications Law. The PUC Law and the Telecommunications Law, and related regulations adopted in October 2020, provide the general framework for the regulation of telecommunications services in Guyana. As a general matter, the PUC has authority to regulate GTT’s domestic and international telecommunications services and rates and to require GTT to supply certain technical, administrative and financial information as it may request. The PUC claims broad authority to review and amend any of GTT’s programs for development and expansion of facilities or services, although GTT has challenged the PUC’s view on the scope of its authority. For a description of recent actions of the PUC, see Note 14 to the Consolidated Financial Statements included in this Report.

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Regulatory Developments. On October 5, 2020, the Prime Minister of Guyana formally implemented telecommunications legislation previously passed by the Guyana Parliament in 2016 that introduces material changes to many features of Guyana’s existing telecommunications regulatory regime with the stated intention of creating a more competitive market. At that time, we were issued a new license to provide domestic and international voice as well as data services and mobile services in Guyana. Two of our competitors, who had previously provided fixed voice and internet services on an unlicensed basis, were issued service licenses as well. While we have requested details of our competitors’ licenses, such information has not been made public by the Guyana Telecommunications Agency, and we are not yet able to ascertain whether the licenses issued to our competitors permit any competitors to provide services that have been subject to GTT’s exclusive rights contained in its 1990 license.

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On October 23, 2020, the Government of Guyana also brought into effect new telecommunications regulations called for by the telecommunications legislation. The regulations include new requirements for the market as a whole,

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which impact our operations, administrative reporting and services. There can be no assurance that these regulations will be effectively implemented, or that they will be administered in a fair and transparent manner.

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FCC Rule-Making and International Long-Distance Rates. The actions of foreign telecommunications regulators, especially the FCC in the United States, can affect the settlement or termination rate payable by foreign carriers to GTT for incoming international voice calls. While the FCC continues to monitor and evaluate termination rate levels and benchmarks, we cannot predict when and if the FCC will further reduce settlement rates or the effect lower rates will have on revenue in our International Telecom segment.

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Bermuda Regulation

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The Regulatory Authority of Bermuda (the “RA”) is the primary regulator of our operations in Bermuda.  The relevant legislation is the Regulatory Authority Act 2011 and the Electronic Communications Act 2011.  Pursuant to these statutes, the RA is responsible for regulating all electronic communications services in Bermuda, including the broadband, mobile and video services we offer.  The statutory framework provides the RA powers in respect of licensing, consumer protections, ex post competition issues, and the identification and remedying of significant market power concerns.

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On September 1, 2020, the RA completed its second market review and affirmed its determination that we have significant market power in certain broadband and mobile services.  As a consequence, we are subject to, and have initiated a legal challenge of, a series of ex ante remedies that include wholesale obligations, price caps, accounting separation and reporting obligations in addition to the ex post competition rules that generally apply.  The ex-ante remedies are burdensome and, if implemented, will require financial, operational, legal and regulatory resources be allocated to ensure compliance.

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ITEM 1A. RISK FACTORS

In addition to the other information contained in, or incorporated by reference into, this Report, you should carefully consider the risks described below that could materially affect our business, financial condition, or future results. These risks are not the only risks facing us. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial also may materially adversely affect our business, financial condition and/or results of operations.

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Operational Risks

Changes in our relationships with our vendors, changes in import tax policy or trade relations, interruptions in our supply chain or increased commodity or supply chain costs could adversely affect our results of operations.    

A number of our equipment suppliers and vendors are based outside the United States, with China serving as a significant non-US source for our telecommunications and solar equipment. Because a large portion of our equipment is sourced, directly or indirectly, from outside the United States, major changes in tax policy or trade relations, such as the disallowance of tax deductions for imported products or the imposition of additional tariffs or duties on imported products, could adversely affect our business, results of operations, effective income tax rate, liquidity and net income. In addition, governmental restrictions on the procurement of equipment from certain Chinese vendors could result in a costly network replacement build that, if not offset by government support, could adversely affect our results of operations. Although the FCC has initiated proceedings to develop a replacement and reimbursement program, and Congress has appropriated funds for the purpose, if we are not able to access the funds that are necessary to remove equipment from restricted vendors or are unable to complete the removal and replacement in the time frame specified in any final rules, it could adversely our ability to operate, maintain or expand our domestic network infrastructure.

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Failure of network or information technology systems, including as a result of security breaches, could have an adverse effect on our business.

We are highly dependent on our information technology (“IT”) systems for the operation of our network, our facilities, delivery of services to our customers and the compilation of our financial results. Failure of these IT systems, through cyberattacks, breaches of security, or otherwise, may cause disruptions to our operations. There can be no assurance that we will be able to successfully prevent a material security breach stemming from future cyberattacks.  Our inability to operate our network, facilities and back office systems as a result of such events, even for a limited period of time, may result in significant expenses and impact the timely and accurate delivery of our services or other information. Other risks that may also cause interruptions in service or reduced capacity for our customers include power loss, increasing reliance on cloud-storage providers (which may themselves be subject to cyberattack or breach), capacity limitations, software defects and breaches of security by computer viruses, break-ins or otherwise. Specifically, we have seen a rise in ransomware attacks in recent years. Telecommunications providers are increasingly being targeted by cyber criminals not necessarily for data about their own business, but access to the data of market participants in potentially more lucrative industries. Disruptions in our networks and the unavailability of our services or our inability to efficiently and effectively complete necessary technology or systems upgrades, or conversions could lead to a loss of customers, damage to our reputation and violation of the terms of our licenses and contracts with customers. Additionally, breaches of security may lead to unauthorized access to our customer or employee information processed and stored in, and transmitted through, our IT systems. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures arising from operational and security risks, including notification under data privacy laws and regulations, and we may be subject to litigation, regulatory penalties and financial losses.  These failures could also lead to significant negative publicity.

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Inclement weather and changes in meteorological conditions may materially disrupt our operations.

Many of the areas in which we operate have experienced severe weather conditions over the years including hurricanes, tornadoes, blizzards, fires, damaging storms and floods. Such events may materially disrupt and adversely affect our business operations, such as the impacts of the hurricanes in the US Virgin Islands in 2017, which we assessed caused damage and losses to our wireline and wireless networks of approximately $100 million in operating losses and network rebuilding costs prior to insurance and any other recovery assistance. Major hurricanes also passed directly over Bermuda in the past decade, causing damage to our network and to the island’s infrastructure. Guyana and Cayman have suffered from severe rains and flooding in the past as well.  These types of events can also cause major disruption and harm to the communities and markets we serve, which can have a material adverse effect on our business.  We cannot be sure that these types of events will not have an impact in the future or that we can procure insurance coverage against these types of severe weather events under reasonable business terms and conditions, or that any insurance coverage we are able to maintain will adequately compensate us for all damage and economic losses resulting from natural catastrophes.  In addition, it may take significant time to return to pre-storm levels following any such storm or meteorological event.  If we are unable to restore service on a timely and cost-effective basis, it could harm our reputation and have a material adverse effect on our business, financial condition or results of operations through continued loss of revenue and customer attrition to our competitors.

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In addition, the impacts of climate change may exacerbate the risk of significant damage in the areas in which we operate. For example, rising ocean temperatures in the Atlantic Ocean may result in the intensification of hurricanes over time.  Heat waves and severe drought may lead to stronger and more frequent wildfires that could threaten our towers and installed equipment or result in loss of power. Rising sea levels and associated flooding may impact our retail and enterprise customers that operate businesses on the coasts of the United States and in our island markets. As the frequency or duration of more intense weather events increase, the likelihood of significant damage also increases.  After major events such as hurricanes, earthquakes or wild fires, which can cause significant destruction to the power grid, our ability to access sites and facilities, obtain fuel and receive sufficient fuel supplies in order to provide power for stand-by generators is often severely limited, and in many cases, is not possible for extended periods of time. Our ability to access ports in order to obtain relief and supplies for affected areas will also likely be significantly hampered for extended periods of time.

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We may not be able to timely and effectively meet our obligations to AT&T related to its partnership with the First Responder Network Authority.

On July 31, 2019, the Company, through its wholly owned subsidiary, Commnet Wireless, entered into a Network Build and Maintenance Agreement with AT&T Mobility LLC (“AT&T”), pursuant to which Commnet will engineer, construct, commission, and maintain a radio access network (“RAN”) for AT&T for its commercial use and also in support of AT&T’s public/private partnership with the First Responder Network Authority (“FirstNet Authority”). In connection with the Network Build & Maintenance Agreement, we are required to build a network in portions of several states in accordance with AT&T’s detailed specifications by specified milestone dates and thereafter, to maintain the network in accordance with certain quality metrics. Such services are structured as a set cost agreed upon with AT&T, to be paid over the initial eight year term of the Network Build and Maintenance Agreement.  AT&T has the right to terminate this agreement, including its obligation to pay for ongoing maintenance of the sites, in the event that Commnet fails to meet certain milestones or completion dates with respect to the construction of the sites, or fails to meet certain quality metrics and service level agreements (“SLAs”) with respect to maintenance services for the built sites.

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Our ability to meet required milestones and completion dates and perform the SLAs is dependent on a variety of factors, including:

In addition, construction of the cell sites may be also adversely affected by circumstances outside of our control, including inclement weather, adverse geological and environmental conditions, a failure to receive regulatory approvals or necessary permits on schedule or third-party delays in providing supplies and other materials. Further, our ability to undertake construction activities and the availability of our workforce may be impacted by shutdowns due to COVID-19, or our personnel actually contracting the virus. Any construction setbacks or delays could be costly and have a material adverse effect on our ability to perform under the time conditions and strict budget required under the Network Build and Maintenance Agreement.

If AT&T were to terminate the Network Build & Maintenance Agreement, this could have a material adverse impact on our prospects and results of operations in our US Telecom segment as we would have incurred costs to construct the sites, but might not be fully compensated for the construction of the sites through the initial term of the Agreement.

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The continued impact of COVID-19 may have a material adverse impact on our business, financial condition and results of operations.

In March 2020, the World Health Organization declared a novel strain of coronavirus, now referred to as COVID-19, as a pandemic, as the virus spread globally to multiple countries, including the United States and other countries in which we have substantial operations. The pandemic has resulted in and will likely continue to result in significant disruptions to global business activities and capital markets around the world.

We are continuing to monitor and assess the effects of the COVID-19 pandemic on our commercial operations, including any potential impact on our revenue in 2021. However, the ultimate extent to which this pandemic impacts our business will depend upon the duration of the outbreak, travel restrictions and actions to contain the outbreak or mitigate its impact, as well as the timing and rollout of approved vaccines to combat the spread of COVID-19 and the impact on the economies in which we operate. For example, the local economies of many of our Caribbean markets are tourism-dependent and the ongoing decline in global travel activity resulting from COVID-19 may continue to impact our revenue and cash flows for certain services in these markets as our retail and enterprise customers are impacted, and we may continue to experience a decline in roaming revenue due to lack of travel to and from these markets.

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Additionally, governmental actions in our jurisdictions intended to contain the COVID-19 outbreak have placed restrictions on travel and movement, resulting in significant business interruptions to both our business and that of our customers, delays in receipt of governmental approvals and permits, the acceleration of “population flight” from island markets, and supply chain delays in the procurement process causing delays in our scheduled build plans, including with respect to planned fiber optic installations and maintenance in our Caribbean markets and our ongoing construction pursuant to our FirstNet Agreement with AT&T. Any prolonged interruption could negatively impact our customers’ ability to pay for our services on a timely basis or at all and our ability to expand, as well as the ability of our field technicians to service our (or with respect to FirstNet, our customer’s) telecommunications network. For more information about the risks to our business with respect to failure to perform under our FirstNet Agreement, see “Operational Risks -- We may not be able to timely and effectively meet our obligations to AT&T related to its partnership with the First Responder Network Authority.”

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We may have difficulty meeting the growing demand for data services.

Demand for smartphones and data services continues to grow across all of our wireless markets and we have seen an acute increase for such demand as a result of the COVID-19 pandemic. Our value to our customers in some markets depends in part on our network’s ability to provide high-quality and high capacity network service to smartphone devices. Indeed, much of the revenue growth in our wireless businesses in the past few years has been attributable to increased demand for data services. However, if data usage increases faster than we anticipate and exceeds the then-available capacity of any of our networks, our costs to deliver services may be higher than we anticipate. In the United States, the dearth of available spectrum and/or non-transparent spectrum allocation practices in our other markets means that we cannot guarantee that we will be able to acquire additional spectrum in a timely fashion, at a reasonable cost, or at all to ensure our ability to maintain or grow our business and traffic volumes. As demand for advanced mobile data services continues to grow, we may have difficulty satisfying our retail and wholesale customers’ demand for these services without substantial upgrades and additional capital expenditures and operating expenses, which could have an adverse effect on our results of operations and financial condition.

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Our inability to recruit and retain experienced management and technical personnel could adversely affect our results of operations and ability to maintain internal controls.

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The success of our business depends on the ability of our executive officers and the officers of our operating units to develop and execute on our business plan, and to identify and pursue new opportunities and product innovations, as well as on our ability to attract and retain these officers and other highly qualified technical and management personnel. If our executive officers and the officers of our operating units are not able to execute on our business plan, this could adversely affect our business, financial condition and results of operations.  Furthermore, we believe that there is, and will continue to be, strong competition for qualified personnel in the communications and energy industries and in our markets, and we cannot be certain that we will be able to attract and retain the personnel necessary for the development of our business. We rely heavily on local management to run our operating units.  Many of the markets in which we operate are small and remote, and in some cases are subject to government restrictions on granting work visas, which could make it difficult for us to attract and retain talented and qualified managers and staff in those markets. The loss of key personnel or the failure to attract or retain personnel with the sophistication to run complicated communications equipment, networks and systems could have a material adverse effect on our business, financial condition and results of operations. We do not currently maintain “key person” life insurance on any of our key employees and none of the executives at our parent company have executed employment agreements.

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The shift across the world from in-person to remote working may have both negative and positive impacts on our businesses. On one hand, if we are able to hire more remote workers who do not necessarily have to reside in-market, it will expand our talent pool and broaden our hiring capabilities. On the other hand, the more our workforce shifts to remote workers, new challenges present themselves such as providing adequate training and on-boarding, and keeping staff engaged and connected to their colleagues and the increased risk of recruitment by firms that also offer remote work options. In addition, cultural differences abroad and local practices of conducting business in our foreign operations may not be in line with business practices, recordkeeping and ethics standards in the United States. In order to continue to ensure compliance with foreign and US laws, accounting standards and our own corporate policies, we have

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implemented financial and operational controls, created an internal audit team responsible for monitoring and ensuring compliance with our internal accounting controls, and routinely train our employees, vendors and consultants. However, having substantial foreign operations also increases the complexity and difficulty of developing, implementing and monitoring these internal controls and procedures. If we are unable to manage these risks effectively, it could have a material adverse effect on our business, financial condition and results of operations.

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We may have difficulty securing video services content from third parties desirable to our customers on terms and conditions favorable to us.

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We have secured licensing agreements with numerous content providers to allow our various video services businesses to offer a wide array of popular programming to our subscribers. Typically, we make long-term commitments relating to these rights in advance even though we cannot predict the popularity of the services or ratings the programming will generate. License fees may be negotiated for a number of years and may include provisions requiring us to pay part of the fees even if we choose not to distribute such programming.

The success of our video services operations depends on our ability to access an attractive selection of video programming from content providers on terms and pricing favorable to us. Our ability to provide movies, sports and other popular programming is a major factor that attracts subscribers to our services. Our inability to provide the content desired by our subscribers on satisfactory terms or at all could result in reduced demand for, and lower revenue from, our cable operations that may not offset the typically large subscription fees that we pay for these services. In certain cases, we may not have satisfactory contracts in place with the owners of our distributed content, leading to such parties’ desire for increased renewed contractual pricing or leading to disputes with such parties including claims for copyright or other intellectual property infringement. 

The cost of obtaining programming associated with providing our video services is significant. Many of our programming contracts are for multiple year terms and provide for future increases in the fees we must pay.  In addition, local over-the-air television stations are increasingly seeking substantial fees for retransmission of their stations over our cable networks. Historically, we have absorbed increased programming costs in large part through increased prices to our customers. We cannot assure that competitive and other marketplace factors will permit us to continue to pass through these costs or that we will be able to renew programming agreements on comparable or favorable terms. Also, programming in the Caribbean typically includes Latin American or Spanish programming, while our subscribers typically prefer content in English. An additional risk with respect to video services is increased competition from so-called “over the top” (“OTT”) media service providers. Additionally, more and more content providers have launched their own OTT offerings, for example Netflix, Amazon, HBO, Disney+, and others. As these and other OTT offerings gain market share, it may result in a loss of subscribers across our businesses that offer video services because customers are more attracted to these alternative offerings, or to the extent we are no longer able to offer programming that customers want either due to exclusive licensing arrangements or prohibitive rising costs. To the extent that we are unable to reach acceptable agreements with programmers or obtain desired content, we may be forced to remove programming from our line-up, which could result in a loss of customers and materially adversely affect our results of operations and financial condition.

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We rely on a limited number of key suppliers and vendors for the timely supply of handsets, accessories, equipment and services relating to our network or facility infrastructure. If these suppliers or vendors experience problems or favor our competitors, we could fail to obtain sufficient quantities of the products and services we require to operate our businesses successfully.

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We depend on a limited number of suppliers and vendors for equipment and services relating to our handset lineup, network infrastructure, and our back-office IT systems infrastructure. If these suppliers experience interruptions or other problems delivering these network components and other equipment on a timely basis, our subscriber or revenue growth and operating results could suffer significantly. In addition, the size of our business relative to our competitors puts us at a disadvantage in terms of whether we will get access to the newest technologies at the same time as our competitors, as well as a financial disadvantage in terms of the ability to achieve economies of scale and receive commensurate discounts that may be available to our competitors.

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We source wireless devices for our retail wireless businesses from a small number of handset resellers and to a lesser extent, equipment manufacturers and depend on access to compelling devices at reasonable prices on primary and secondary markets for these devices, as well as timely delivery of devices to meet market demands. The inability to provide a competitive device lineup could materially impact our ability to attract new customers and retain existing customers. Moreover, as we increasingly roll out new products such as voLTE, we will increasingly rely on cooperation from our handset suppliers to ensure interoperability between devices and our network. Without close relationships with suppliers who understand the needs of our business, we may be delayed in deploying the handsets, accessories and equipment that our customers demand. We are also reliant upon a limited number of network equipment manufacturers, including Ericsson and Nokia.

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Strategic Risks

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Rapid and significant technological changes in the telecommunications industry may adversely affect us.

Our industry faces rapid and significant changes in technology that directly impact our business, including the following:

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For us to keep pace with these technological changes and remain competitive, at a minimum we must continue to make significant capital expenditures to add to our networks’ capacity, coverage and technical capability. For example, we have spent considerable amounts adding higher speed and capacity mobile data services to many of our networks in recent years and we think it likely that more such expenditures, including mobile and wireless data capabilities and high capacity, low latency backhaul, will be needed over the next few years.

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We cannot predict the effect of technological changes on our business. Alternative or new technologies may be developed that provide communications services superior to those available from us, which may adversely affect our business. For example, to accommodate the demand from our wireless customers for next-generation advanced wireless products such as high-speed data and streaming video, we may be required to purchase additional spectrum, however, we have had difficulty finding spectrum for sale or on terms that are acceptable to us. In addition, usage of wireless voice or broadband services in excess of our expectations could strain our capacity, cause service disruptions and result in higher operating costs and capital expenditures. In each of our markets, providing more and higher speed data services through our wireless or wireline networks may require us to make substantial investments in additional telecommunications transport capacity connecting our networks to the Internet, and in some cases such capacity may not be available to us on attractive terms or at all. Failure to provide these services or to upgrade to new technologies on a timely basis and at an acceptable cost, or to secure any necessary regulatory approvals to roll out such new technologies on a timely basis all could have a material adverse effect on our ability to compete with carriers in our markets.

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Increased competition may adversely affect growth, require increased capital expenditures, result in the loss of existing customers and decrease our revenues.

We face competition in the markets in which we operate. For example:

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Over the last decade, an increase in competition in many areas of the telecommunications industry has contributed to a decline in prices for communication services, including mobile wireless services, local and long-distance telephone service and data services. Increased competition in the industry may further decrease prices. In addition, increased competition in the telecommunications and renewable energy industries could reduce our customer base, require us to invest in new facilities and capabilities and result in reduced revenues, margins and returns.

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Our International Telecom segment operates in island and other small market locations, where a limited number of providers maintain strong competition. In several of our markets, we hold a dominant position as the local incumbent carrier and in others we may have a competitive advantage in our ability to bundle some combination of voice, data, video and wireless services.  Increased competition, whether from new entrants or increased capital investment by our competitors in their existing networks, will make it more difficult for us to attract and retain customers in our small markets, which could result in lower revenue and cash flow from operating activities.

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We may not be able to timely and effectively execute on several key initiatives across multiple jurisdictions.

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Major business initiatives are underway with respect to improvement in mobile and other retail sales in all markets, digitization of internal processes to allow for quicker response time to customer requirements, modernization of existing internal processes in select markets and revising the strategy of some of our US Telecom businesses to develop additional revenue streams, including the substantial construction and support undertaking of the FirstNet project. Each of these requires significant oversight from senior management to aid in-market teams, and many of these projects are underway simultaneously in different locations. Execution on multiple simultaneous and transformational initiatives will require in depth management attention in multiple jurisdictions in order to capitalize on growth in the US Virgin Islands, economic growth in Guyana and the ongoing shift in business focus in US Telecom.

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We may not be able to effectively transform the business model of our legacy US Telecom business.

Historically, a large portion of our revenue has been derived from Carrier Services revenue in our US Telecom segment. A substantial portion of this revenue was generated from three national wireless service providers in 2020, however, these amounts have declined from $74.6 million in 2019 to $72.6 in 2020. During this time period, revenues from Carrier Services have declined due to our mutual agreement with our carrier customers to lower rates in exchange for pricing certainty in longer term contracts, our customers’ decisions to overbuild our network, and the consolidation of national wireless service providers (thereby eliminating one or more former carrier customers).

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As wholesale roaming revenue in our US Telecom segment has declined, we are increasingly providing network infrastructure services as part of our expanded Carrier Services, such as tower leasing and transport facilities to our carrier partners to supplement our historic revenue base, as with the FirstNet Transaction. During the construction period of the FirstNet Transaction, we will continue to receive payment from AT&T for roaming services at a fixed rate per site until such time as the cell site is transferred to AT&T. Thereafter, AT&T will cease roaming on the majority of our US network and revenue from the maintenance, leasing and transport services provided to AT&T is expected to offset such lost revenue, albeit at lower operating income margins due to the increased operating expenses associated with leasing and transport services, as compared to our wholesale mobile roaming services.

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We also intend to offset declining wholesale roaming revenue with a more diversified mix of revenue from carrier services, including more tower rental, backhaul and maintenance services and growing enterprise broadband and

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private network services. There can be no assurance, however, that we will be able to successfully transform our legacy US Telecom business to support additional Carrier Services product offerings or expand our retail and commercial subscriber base in our US Telecom segment. If we are unable to offset the continued decline in our Carrier Services revenue by expanding diversifying our sources of revenue it may have a material adverse effect on our results of operations and financial condition.

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We may have difficulty funding multiple growth opportunities across our businesses.

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Historically, we have funded our capital expenditures and transactional matters from a combination of cash on hand, cash from operations, and limited incurrence of debt. As discussed above, our US Telecom segment is in the midst of a business transformation, and may need significant funding as we seek to grow our private LTE and retail businesses. Similarly, we may have other opportunities to inorganically grow our businesses, such as the Alaska Transaction, and our team actively evaluates potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, that have the potential for generating steady excess cash flows over extended periods of time. Any such transactions may be accomplished through the payment of cash, issuance of shares of our capital stock or incurrence of additional debt, or a combination thereof. As of December 31, 2020, we had approximately $105.0 million in cash, cash equivalents, restricted cash, and short term investments and approximately $86.9 million of long-term debt. How and when we deploy our balance sheet capacity will figure prominently in our longer-term growth prospects and stockholder returns. To support multiple simultaneous growth opportunities, we may need to raise additional capital or incur additional debt to fund our future operations or investment opportunities. We cannot provide any assurances that we will be able to secure additional funding from public or private offerings on terms acceptable to us, if at all. If we are unable to obtain the requisite amount of financing, we may have to forgo opportunities to strategically grow our business.

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We are actively evaluating investment, acquisition and other strategic opportunities, which may affect our long-term growth prospects.    

To date we have grown the Company through a mix of organic growth through our operating companies and inorganic growth through targeting acquisition or other business development opportunities. We actively evaluate acquisition, investment, business divestitures and combinations, and other strategic opportunities, both domestic and international, in telecommunications, energy-related and other industries, including in areas that may not be seen by the broader market as timely today, such as our planned acquisition of Alaska Communications. We may focus on opportunities that we believe have potential for long-term organic and strategic growth or that may otherwise satisfy our return and other investment criteria. Similarly, there are risks inherent in the sale of a business or assets, including the potential of a transaction’s failing to close due to last minute negotiations, regulatory issues, or other unpredictable matters that can be costly and disruptive to our operations.  There can be no assurance as to whether, when or on what terms we will be able to invest in, acquire or divest any businesses or assets to continue our historic pattern of inorganic growth or that we will be able to successfully integrate the business or realize the perceived benefits of any acquisition or strategic investment.

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Risks Relating to our Alaska Transaction

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We may not be able to consummate our merger with Alaska Communications on a timely basis or at all.

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On December 31, 2020, we announced that we entered into the Alaska Merger Agreement to consummate the Alaska Transaction. The Alaska Transaction remains subject to customary closing terms and conditions including (i) the approval of Alaska Communications’ stockholders, (ii) the absence of certain legal impediments, and (iii) obtaining the necessary consents from the Federal Communications Commissions and the Regulatory Commission of Alaska.  Although we have received no indication that Alaska Communications stockholders or these regulatory authorities do not plan to grant the required approvals, there can be no guarantee that we will receive such approvals.  

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Moreover, the board of directors of Alaska Communications may change its recommendation that stockholders approve the Alaska Transaction, and the Alaska Merger Agreement may be terminated in certain circumstances if a competing offer for an alternative transaction is made, in which case the transaction would not close and termination fees

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may be payable. Upon termination of the Alaska Merger Agreement under certain circumstances, we may be obligated to pay Alaska Communications a termination fee, including (i) a fee of $7,100,000 if we cannot consummate the Alaska Transaction due to lack of financing, or (ii) a fee of $8,800,000 if we fail to consummate the Alaska Transaction after all other conditions to closing are met.

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In addition, the FCC may impose conditions on any approval, such as requiring the divestiture of certain markets and spectrum licenses. These conditions, if imposed and if sufficiently significant, may permit Alaska Communications not to consummate the transaction or may have other negative impacts on our business. 

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Lawsuits have been filed against us and Alaska Communications, challenging the disclosure made to Alaska Communications stockholders in connection with the solicitation of their vote in favor of the Alaska Transaction. An adverse judgment may result in financial penalties or if any plaintiff successfully seeks to enjoin the Alaska Transaction, then the combination of our business with Alaska Communications may not be consummated at all or within the expected timeframe. If the Alaska Transaction is not consummated or is materially delayed for these or any other reason, our business and operations, and our stock price, may be adversely affected.

Our ability to finance the Alaska Transaction depends on our ability to draw upon a new credit facility.

We have secured committed financing, consisting of a combination of (i) equity financing to be provided by us and Freedom3 and (ii) debt financing to be provided by Fifth Third Bank, National Association, to acquire the shares of Alaska Communications. The equity financing and the debt financing, in the aggregate, will be sufficient for us to pay the amounts required to be paid in connection with the Alaska Transaction and the other transactions contemplated by the Alaska Merger Agreement; however, the Alaska Transaction is not subject to a financing condition. We have also entered into a limited guarantee with Alaska Communications pursuant to which we and Freedom3 will guarantee 52% and 48%, respectively, of the termination fees discussed above in connection with Alaska Communications’ termination of the Alaska Merger Agreement and certain indemnity and recovery costs, if such amounts become due and payable. Our ability to consummate the Alaska Transaction relies on the continued availability of the committed debt financing, according to the terms of our term sheet with Fifth Third Bank.

If we are able to successfully consummate the Alaska Transaction, we may have difficulties integrating its operations and its business, our business, financial condition and results of operations could be adversely affected.

The Alaska Transaction is the largest and most significant acquisition we have undertaken for a number of years. The complexities of the integration and expansion of Alaska Communications’ operations are not yet known. We have devoted and will continue to devote a significant amount of time and attention to integrating these operations with our existing operations teams. Among the challenges we face in doing so are the need to integrate a large number of new employees and integrating and aligning numerous business and work processes, including customer billing, by building and designing our own processes and the information systems necessary to track and handle those processes. If we have other difficulties with the transition process, it could harm our reputation and have a material adverse effect on our business, financial condition or results of operations.

Regulatory Risks

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Changes in USF funding could have an adverse impact on our financial condition or results of operations.

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Viya, our subsidiary operating video, internet, wireless and landline services in the US Virgin Islands, has historically received, through December 31, 2020, high-cost Universal Service Fund (“USF”) support in the US Virgin Islands of approximately $16.4 million per year. In addition, after the devastation caused by the Hurricanes in September 2017, the FCC provided approximately $15.4 million in accelerated USF support and in fixed and mobile recovery support through August 2018. The FCC, in response to the damage caused by the Hurricanes and as part of its general USF reform, established a Connect USVI Fund that replaced the legacy high-cost USF support for the US Virgin Islands that Viya historically has been awarded. In November 2020, the FCC announced that it was provisionally awarding the Connect USVI Fund awards for all of the US Virgin Islands to Viya’s competitor in the amount of approximately $8.6

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million per year for a term of 10 years. Pursuant to the terms of the program, Viya’s USF spending will be reduced, upon finalization of the award, to approximately two-thirds of the legacy total amount, or $10.9 million for one year to approximately one-third of the legacy total amount, or $5.47 million, for the year after. Thereafter, Viya will not be eligible for high-cost USF support.

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This reduction in the overall amount of USF support we receive as a result of the Connect USVI Fund proceeding relative to historical levels of high-cost USF support we have received could negatively affect our efforts to build, maintain and operate networks in the US Virgin Islands and our ability to provide services previously supported by USF funds.  Viya is currently undertaking a review and reassessment of its business plan to consider the extent to which we will provide further investment or operational resources to Viya or the territory. This could have an adverse effect on our business, financial condition or results of operations in our International Telecom segment and there can be no assurance that any revised business plan will offset or reduce the loss of revenue, customer attrition and increased competition as a result of the cessation of high cost USF funding.

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Our operations in Guyana are subject to significant political and regulatory risk.

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Since 1991, pursuant to an agreement with the Government of Guyana, GTT has operated in Guyana pursuant to a license from the Government of Guyana to be the exclusive provider of domestic Fixed and international voice and data services. That license from the Government of Guyana included an initial term ending in December 2010, which was renewable at our sole option for an additional 20-year term. In November 2009, we notified the Government of Guyana of our election to renew our exclusive license for an additional 20-year term expiring in 2030. On December 15, 2010, we received correspondence from the Government of Guyana indicating that our license had been renewed until such time that new legislation was enacted to expand competition within the sector.

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On October 5, 2020, the Prime Minister of Guyana formally implemented telecommunications legislation previously passed by the Guyana Parliament in 2016 that introduces material changes to many features of Guyana’s existing telecommunications regulatory regime with the intention of creating a more competitive market. At that time, we were issued a new license to provide domestic and international voice as well as data services and mobile services in Guyana. Two of our competitors, who had previously provided fixed voice and internet services on an unlicensed basis, were issued service licenses as well. While we have requested details of our competitors’ licenses, such information has not been made public by the Guyana Telecommunications Agency, and we are not yet able to ascertain whether the licenses issued to our competitors permit any competitors to provide services that have been subject to GTT’s exclusive rights contained in its 1990 license.

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On October 23, 2020, the Government of Guyana also brought into effect new telecommunications regulations called for by the telecommunications legislation. The regulations include new requirements for the market as a whole, which impact our operations, administrative reporting and services. There can be no assurance that these regulations will be effectively implemented, or that they will be administered in a fair and transparent manner. We believe our existing, exclusive license continues to be valid unless and until such time as we enter into an alternative arrangement with the Government. Under these circumstances, however, there can be no assurance that our discussions with the Government of Guyana will resume or be concluded, or that such discussions will satisfactorily address our contractual exclusivity rights. While we might seek damages or other compensation for any involuntary termination of our contractual exclusivity rights, we cannot guarantee that we would prevail in any proceedings to enforce our rights.

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Regulatory changes may impose restrictions that adversely affect us or cause us to incur significant unplanned costs in modifying our business plans or operations.

We are subject to US federal, state and local regulations and foreign government regulations, all of which are subject to change. As new laws and regulations are issued or discontinued, we may be required to materially modify our business plans or operations.  We cannot be certain that we can do so in a cost effective manner. Our operations in the United States are subject to the Communications Act and the FCC’s implementing regulations, as well as regulation by state public utility commissions in certain states in which we operate. The interpretation and implementation of the various provisions of the Communications Act and the FCC rules implementing the Communications Act continue to be heavily debated and may have a material adverse effect on our business. Also, there have been indications that Congress

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may substantially revise the Telecommunications Act of 1996 and other regulations in the next few years. Further, the leadership of the FCC changed in January 2021, and the FCC may pursue new and differed regulatory priorities.

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Our international operations are subject to similar regulations, the interpretation and implementation of which are also often debated, and which may have a material adverse effect on our business.  Our interpretations of our obligations may differ from those of regulatory authorities. Both federal and state regulators, as well as international regulators, require us to pay various fees and assessments, file periodic reports and comply with various rules regarding our consumer marketing practices and the contents of our bills, on an on-going basis. If we fail to comply with these requirements, we may be subject to fines or potentially be asked to show cause as to why our licenses to provide service should not be revoked.

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The loss of certain licenses could adversely affect our ability to provide wireless and broadband services.

In the United States, wireless licenses generally are valid for 10 years from the effective date of the license, although recently-issued 600 MHz licenses were issued for a slightly longer initial term to account for the need for broadcast television incumbents to vacate the spectrum before the new wireless licensees could construct. Licensees may renew their licenses (including renewal of 600 MHz licenses) for additional 10 year periods by filing renewal applications with the FCC. Our 600 MHz wireless licenses all expire in 2029. Our other wireless licenses in the US expire between 2021 and sometime after 2030. We intend to renew our licenses expiring this year, and the renewal applications are subject to FCC review and are put out for public comment to ensure that the licensees meet their licensing requirements and comply with other applicable FCC mandates. Failure to file for renewal of these licenses or failure to meet any licensing requirements could lead to a denial of the renewal application and thus adversely affect our ability to continue to provide service in that license area. Furthermore, our compliance with regulatory requirements, such as E-911 and CALEA requirements, may depend on the availability of necessary equipment or software.

In our international markets, telecommunications licenses are typically issued and regulated by the applicable telecommunications ministry. The application and renewal process for these licenses may be lengthy, require us to expend substantial renewal fees, and/or be subject to regulatory or legislative uncertainty, such as we are experiencing in Guyana, as described above. Failure to comply with these regulatory requirements may have an adverse effect on our licenses or operations and could result in sanctions, fines or other penalties.

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Economic Risks

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General economic factors, domestically and internationally, may adversely affect our business, financial condition and results of operations.

General economic factors could adversely affect demand for our products and services, require a change in the services we sell or have a significant impact on our operating costs. Energy costs are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, or weather conditions. Rapid and significant changes in these and other commodity prices may affect our sales and profit margins. General economic conditions can also be affected by the outbreak of war, acts of terrorism, or other significant national or international events, such as the COVID-19 pandemic.

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In addition, an economic downturn in the markets in which we currently operate or in the global market generally may lead to slower economic activity, increased unemployment, concerns about inflation, decreased consumer confidence and other adverse business conditions that could have an impact on our businesses. For example, among other things:

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In 2020 we saw a decrease in tourism in all of our tourism-dependent markets. Government imposed shutdowns and travel restrictions limited the amount of customers roaming onto our network, in addition to depressing demand for our services generally in the hospitality industry (e.g. hotels, bars, and restaurants) that is traditionally supported by the tourism industry. Further, we also started to see population flight from some of our island markets as lockdowns continued. It is unknown what the long-term economic effects of these negative impacts on the tourism industry will be, but our business operations and revenue may certainly be adversely impacted as a result.

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The long-term impact, if any, that these events might have on us and our business, is uncertain.

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Our operations are subject to economic, political, currency and other risks that could adversely affect our revenues or financial position.

Our operations may face adverse financial consequences and operational problems due to political or economic changes, such as changes in national or regional political or economic conditions, laws and regulations that restrict repatriation of earnings or other funds, or changes in foreign currency exchange rates. As new laws and regulations are issued or discontinued to implement an agenda set by the current US administration, we may be required to materially modify our business plans or operations.  For example, some of our markets in our International Telecom segment are cash-based economies where customers come into our stores to pay their bills in cash. Where local governments have imposed lockdowns requiring people to stay home and/or the closure of retail locations, we run the risk of not being able to collect monthly invoices as expected. Any of these changes could adversely affect our revenues or financial position.

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Our debt instruments include restrictive and financial covenants that limit our operating flexibility.

The credit facilities that we and our subsidiaries maintain include certain financial and other covenants that, among other things, restrict our ability to take specific actions, even if we believe such actions are in our best interest. These include restrictions on our ability to do the following:

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Any failure to comply with the restrictions of the credit facilities or any subsequent financing agreements may result in an event of default. Such default may allow our creditors to accelerate the repayment of the related debt and may result in the acceleration of the repayment of any other debt to which a cross-acceleration or cross-default provision applies. In addition, these creditors may be able to terminate any commitments they had made to provide us with further funds.

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Other Risks

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Our founder is our largest stockholder and could exert significant influence over us.

Cornelius B. Prior, Jr., our founder and the father of our Chairman and Chief Executive Officer, together with related entities, affiliates and family members (including our Chairman and Chief Executive Officer), beneficially owns approximately 26% of our outstanding Common Stock. As a result, he has the ability to exert significant influence over all matters presented to our stockholders for approval, including election and removal of our directors and change of control transactions. His interests may not always coincide with the interests of other holders of our Common Stock.

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Low trading volume of our stock may limit our stockholders’ ability to sell shares and/or result in lower sale prices.

For the three months prior to February 1, 2021, the average daily trading volume of our Common Stock was approximately 49,000 shares. As a result, our stockholders may have difficulty selling a large number of shares of our Common Stock in the manner or at a price that might be attainable if our Common Stock were more actively traded. In addition, the market price of our Common Stock may not be reflective of its underlying value.

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We may not pay dividends in the future.

Our stockholders may receive dividends out of legally available funds if, and when, they are declared by our Board of Directors. We have consistently paid quarterly dividends in the past, but may cease to do so or decrease the dividend amount at any time. Our credit facility sets certain limitations on our ability to pay dividends on, or repurchase, our capital stock. We may incur additional indebtedness in the future that may further restrict our ability to declare and pay dividends. We may also be restricted from paying dividends in the future due to restrictions imposed by applicable state laws, our financial condition and results of operations, capital requirements, management’s assessment of future capital needs and other factors considered by our Board of Directors.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We lease approximately 21,000 square feet of office space at 500 Cummings Center, Beverly, MA 01915 for our corporate headquarters. Worldwide, we utilize the following approximate square footage of space for our operations:

All of the above locations are leased except for the office and technical space within our International Telecom segment, which we own. As of December 31, 2020, we operated fourteen retail stores in our US Telecom segment and twenty two retail stores in our International Telecom segment.

Our offices and technical operations are in the following locations:

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Within our communications operations, we globally own 286 towers, lease an additional 373 towers and have five switch locations within rented locations. In addition, our renewable energy operations own 65 MWp commercial solar projects at six sites. We consider our owned and leased properties to be suitable and adequate for our business operations.

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ITEM 3. LEGAL PROCEEDINGS

GTT holds an exclusive license to provide domestic Fixed services and international voice and data services in Guyana. The license, whose initial term of twenty years expired at the end of 2010, allowed for GTT at its sole option, to extend the term for an additional twenty years, until December 2030. GTT exercised its extension right, in accordance with the terms of its License and its agreement with the Government of Guyana, in November 2009.

On October 5, 2020, the Prime Minister of Guyana formally implemented telecommunications legislation previously passed by the Guyana Parliament in 2016 that introduces material changes to many features of Guyana’s existing telecommunications regulatory regime with the intention of creating a more competitive market. At that time, we were issued a new license to provide domestic and international voice as well as data services and mobile services in Guyana. Two of our competitors were issued service licenses as well. While we have requested details of our competitors’ licenses, such information has not been made public by the Guyana Telecommunications Agency, and we are not yet able to ascertain whether the licenses issued to our competitors permit any competitors to provide services that have been subject to GTT’s exclusive rights contained in its 1990 license.

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On October 23, 2020, the Government of Guyana also brought into effect new telecommunications regulations called for by the telecommunications legislation. The regulations include new requirements for the market as a whole, which impact our operations, administrative reporting and services. There can be no assurance that these regulations will be effectively implemented, or that they will be administered in a fair and transparent manner.

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On May 8, 2009, Digicel filed a lawsuit in Guyana challenging the legality of GTT’s exclusive license rights under Guyana’s constitution. Digicel initially filed this lawsuit against the Attorney General of Guyana in the High Court. On May 13, 2009, GTT petitioned to intervene in the suit in order to defend against Digicel’s claims and that petition was granted on May 18, 2009. GTT filed an answer to the charge on June 22, 2009, and the case is pending. We believe that any legal challenge to GTT’s exclusive license rights granted in 1990 is without merit, and we intend to vigorously defend against such a legal challenge.

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GTT has filed several lawsuits in the High Court of Guyana asserting that Digicel is engaged in international bypass in violation of GTT’s exclusive license rights, the interconnection agreement between the parties, and the laws of Guyana. GTT is seeking injunctive relief to stop the illegal bypass activity and punitive damages caused thereby. Digicel filed counterclaims alleging that GTT has violated the terms of the interconnection agreement and Guyana laws. These suits, filed in 2010 and 2012, have been consolidated with Digicel’s constitutional challenge described above. Prior to the imposition of COVID-19 related travel and business restrictions in Guyana, the consolidated cases were scheduled to proceed to trial in 2020. GTT expects to resume the litigation following the lifting of COVID-19 related restrictions and intends to prosecute these matters vigorously; however, we cannot accurately predict at this time when the consolidated suit will go to trial.

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GTT is also involved in several legal claims regarding its tax filings with the Guyana Revenue Authority dating back to 1991 regarding the deductibility of intercompany advisory fees as well as other tax assessments. We maintain that any liability GTT might be found to have with respect to the disputed tax assessments, totaling $44.1 million, would be offset in part by the amounts necessary to ensure that GTT’s return on investment was no less than 15% per annum for the relevant periods.

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ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS

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The following table sets forth information regarding our executive officers as of March 1, 2021:

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Executive Officers

Michael T. Prior is the chairman of the Board of Directors and has been our President and Chief Executive Officer since December 2005 and an officer of the Company since June 2003. He was elected to the Board in May 2008. Previous to joining the Company, Mr. Prior was a partner with Q Advisors LLC, a Denver based investment banking and financial advisory firm focused on the technology and telecommunications sectors. Mr. Prior began his career as a corporate attorney with Cleary Gottlieb Steen & Hamilton LLP in London and New York. He received a B.A. degree from Vassar College and a J.D. degree summa cum laude from Brooklyn Law School. Mr. Prior currently serves on the Board of Directors of the Competitive Carriers Association. In 2008, Mr. Prior was named Entrepreneur of the Year for the New England Region by Ernst & Young LLP and One of America’s Best CEOs by DeMarche Associates, Inc.

Justin D. Benincasa is our Chief Financial Officer. Prior to joining us in May 2006, Mr. Benincasa was a Principal at Windover Development, LLC since 2004. From 1998 to 2004, he was Executive Vice President of Finance and Administration at American Tower Corporation, a leading wireless and broadcast communications infrastructure company, where he managed finance and accounting, treasury, IT, tax, lease administration and property management. Prior to that, he was Vice President and Corporate Controller at American Radio Systems Corporation and held accounting and finance positions at American Cablesystems Corporation. Mr. Benincasa holds an M.B.A. degree from Bentley University and a B.A. degree from the University of Massachusetts.

Brad Martin is our Executive Vice President, Business Operations. Prior to joining us in 2018, he previously served as Chief Operating Officer for Senet Inc., a leading “low power wide area” network (LPWAN) operator and global service provider. From 2013 through 2015, Mr. Martin served as Senior Vice President and Chief Quality Officer with Extreme Networks, a global leader in software-driven networking solutions for Enterprise and Service Provider customers. Between 2008 and 2013, Mr. Martin served as Vice President of Engineering Operations and Quality with Siemens Enterprise Communications and Enterasys Networks, delivering voice and data networking hardware and software solutions to global enterprises. Mr. Martin holds a Bachelor of Science, Mechanical Engineering from the University of Maine, is a published author and featured industry speaker.

Mary Mabey is our Senior Vice President and General Counsel. Ms. Mabey joined us in 2009 and previously served as our Deputy General Counsel. Prior to joining us, Ms. Mabey was with the law firm of Edwards Angell Palmer & Dodge LLP (now Locke Lord LLP) in Boston, where she advised public and private companies in domestic and international transactions on corporate and securities law matters, merger, acquisition and financing transactions, corporate governance, and other general corporate matters. Ms. Mabey received a B.A. degree from the University of Notre Dame and a J.D. degree from the University of Texas School of Law.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our Common Stock, $.01 par value, is listed on the Nasdaq Global Select Market under the symbol “ATNI.” The number of holders of record of Common Stock as of March 1, 2021 was 95.

Issuer Purchases of Equity Securities in the Fourth Quarter of 2020

On September 19, 2016, our Board of Directors authorized the repurchase of up to $50.0 million of our Common Stock from time to time on the open market or in privately negotiated transactions (the “2016 Repurchase Plan”). As of December 31, 2020, we have $30.9 million remaining authorized to be repurchased under the 2016 Repurchase Plan. We did not repurchase any shares of our Common Stock during the quarter ended December 31, 2020.

Stock Performance Graph

The graph below matches ATN International’s cumulative 5-Year total shareholder return on Common Stock with the cumulative total returns of the Russell 2000 index, the S&P Smallcap 600 index, and the Nasdaq Telecommunications index. The graph tracks the performance of a $100 investment in our Common Stock and in each index (with the reinvestment of all dividends) from 12/31/2015 to 12/31/2020.

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The stock price performance included in this graph is not necessarily indicative of future stock price performance

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ITEM 6. SELECTED FINANCIAL DATA

You should read the selected financial data in conjunction with our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our Consolidated Financial Statements for the years ended December 31, 2020, 2019 and 2018 and the related Notes to those Consolidated Financial Statements included in this Report. The historical results set forth below are not necessarily indicative of the results of future operations. Period to period comparisons are also significantly affected by our significant acquisitions. See Note 6 to the Consolidated Financial Statements included in this Report for a more detailed discussion of our recent acquisitions and discontinued operations.

The selected Consolidated Income Statement data for the years ended December 31, 2020, 2019 and 2018 and the selected Consolidated Balance Sheet data as of December 31, 2020 and 2019 are derived from our Consolidated Financial Statements beginning on page F-1 of this Annual Report on Form 10-K. The selected Consolidated Income Statement data for the years ended December 31, 2017 and 2016 and the selected Consolidated Balance Sheet data as of December 31, 2018, 2017 and 2016 are derived from our Consolidated Financial Statements not included in this Annual Report on Form 10-K.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

We strive to be a leading platform for the operation of, and investment in, smaller and specialty market communications services and technology companies. We have a long track record of delivering critical infrastructure-based solutions to underserved markets. Our majority-owned operating subsidiaries provide facilities-based communications services, along with related information technology solutions, in the United States, Bermuda, and the Caribbean. We also have non-controlling investments in several communications and technology companies, and we continue to consider opportunities to make controlling and minority investments in businesses that we believe have the potential for generating substantial and relatively steady cash flows over extended periods of time or have technologies or business models that might prove valuable to our main operating subsidiaries or create significant longer term growth potential for us as a whole.

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At the holding company level, we oversee the allocation of capital within and among our subsidiaries, affiliates, minority investments, and stockholders. We also have developed significant operational expertise and resources that we use to augment the capabilities of our individual operating subsidiaries. Over the past 10 years, we have built a platform of resources and expertise to support our operating subsidiaries and to improve their quality of service, and customer acquisition, retention, and satisfaction while maintaining optimal operating efficiencies. We have a number of shared service functions, including billing, network and engineering and customer service, and the parent company also employs personnel with specialized skills that provide greater economies of scale and expertise than would typically be available at the operating subsidiary level.

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We were incorporated in Delaware in 1987, began trading publicly in 1991 and spun off more than half of our operations to stockholders in 1998. We actively evaluate potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, that we believe have the potential for generating steady excess cash flows over extended periods of time. In addition, we consider non-controlling investments in earlier stage businesses that we consider strategically relevant, and which may offer long-term growth potential for us, either individually, or as research and development businesses that can support our operating subsidiaries in new technology, product, and service development and offerings. We have used the cash generated from our established operating units, and any asset sales, to re-invest in our existing businesses, to make strategic investments in additional businesses, and to return cash to our investors. We provide management, technical, financial, regulatory, and marketing services to our subsidiaries and typically receive a management fee equal to a percentage of their revenues, which is eliminated in consolidation. For further information about our financial segments and geographical information about our operating revenues and assets, see Notes 1 and 15 to the Consolidated Financial Statements included in this Report.

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Through December 31, 2020, we had identified three operating segments to manage and review our operations and to facilitate investor presentations of our results. These three operating segments are as follows:

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The following chart summarizes the operating activities of our principal subsidiaries, the segments in which we reported our revenue and the markets we served as of December 31, 2020:

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COVID-19

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In March 2020, the World Health Organization declared a novel strain of coronavirus, now referred to as COVID-19, as a pandemic, and the virus has now spread globally to over 200 countries and territories, including the United States and other countries in which we have substantial operations. We are continuing to monitor and assess the effects of the COVID-19 pandemic on our commercial operations, the safety of our employees and their families, our sales force and customers and any potential impact on our revenue in 2021.

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The preparation of the condensed consolidated financial statements requires us to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate estimates, judgments and methodologies. We assessed certain accounting matters and estimates that generally require consideration of forecasted financial information in context with the information and estimates reasonably available to us and the unknown future impacts COVID-19 as of December 31, 2020 and through the date of this report. The accounting matters assessed included, but were not limited to, our allowance for credit losses, the carrying value of our goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition. We assessed the impacts of COVID-19 on our consolidated financial statements as of and for the year ended December 31, 2020, in particular the impacts on lines of revenues, operating expenses as well as the deferral and savings on other operating expenses and capital expenditures. During the year ended December 31, 2020, while our International Telecom segment experienced strengthened demand for both its Mobility and Fixed services, its Carrier Services revenue declined as a result of a reduction in roaming revenue due to pandemic-related travel and stay-at-home restrictions as compared to 2019. Such restrictions also resulted in decreased Mobility and Carrier Services revenues within our US Telecom segment during the year ended December 31, 2020 as compared to the same period of 2019. However, in response to certain anticipated impacts, we were able to implement operating expense savings, particularly with respect to our International Telecom segment, that when coupled with Company-wide travel expense savings and capital expenditure deferrals, acted to offset much of the revenue loss or

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additional credit loss allowances caused by anticipated customer non-payment activity in the year. As a result, our assessment did not indicate that there was a material impact to our consolidated financial statements as of and for the year ended December 31, 2020. However, our future assessments of the impacts of COVID-19 into 2021 or our ability to realize continued operational expense savings, as well as other factors, could result in material impacts to our consolidated financial statements in future reporting periods. For example, the local economies of many of our Caribbean markets are tourism-dependent and the decline in global travel activity resulting from COVID-19 may continue to impact our revenue and cash flows for certain services in these markets as our retail and enterprise customers may be unable to pay for services, and our international roaming revenue may decline as compared to last year. The extent to which the COVID-19 pandemic ultimately impacts our business, financial condition, results of operations, cash flows, and liquidity may differ from our current estimates due to inherent uncertainties regarding the duration and further spread of the outbreak, its severity, actions taken to contain the virus or treat its impact, and how quickly and to what extent economic conditions normalize and more customary operating conditions resume.

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Pending Acquisition of Alaska Communications System Group, Inc.

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On December 31, 2020, we announced that we entered into an Agreement and Plan of Merger (the “Alaska Merger Agreement”) with Freedom 3 Capital, LLC (“Freedom3”) to acquire all of the shares of Alaska Communications Systems Group, Inc. (“Alaska Communications”), a publicly listed company (Nasdaq:ALSK) for approximately $340 million, including the assumption of debt (the “Alaska Transaction”). Following the closing of the Alaska Transaction, we will, through our subsidiaries, own and control approximately 51% of Alaska Communications and Freedom3, through its affiliates, will own the remaining 49%. In February 2021, the required waiting period under the Hart Scott Rodino Antitrust Improvements Act of 1976 expired, however the Alaska Transaction remains subject to customary closing terms and conditions including (i) the approval of Alaska Communications’ stockholders, (ii) the absence of certain legal impediments, and (iii) obtaining the necessary consents from the Federal Communications Commissions (“FCC”) and the Regulatory Commission of Alaska.

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Sale of Renewable Energy Operations

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International Solar Operations

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In January 2021, we completed the sale of 67% of the outstanding equity in our business that owns and operates distributed generation solar power projects operated under the Vibrant (“Vibrant”) name in India (the “Vibrant Transaction”). The post-sale results of our ownership interest in Vibrant will be recorded through the equity method of accounting within the Corporate and Other operating segment. As such, our consolidated financial statements will no longer include revenue and operating expenses from Vibrant, but instead, “other income (expense)” within the Corporate and Other operating segment will include our 33% share of Vibrant’s profits or losses. We will continue to present the historical results of our Renewable Energy segment for comparative purposes.

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The operations of Vibrant did not qualify as discontinued operations because the disposition did not represent a strategic shift that had a major effect on our operations and financial results.

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US Solar Operations

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On November 6, 2018, we completed the sale of our US Solar Operations business that owned and managed distributed generation solar power projects operated under the Ahana name in Massachusetts, California and New Jersey (the “US Solar Transaction”). The US Solar Transaction had a total value of approximately $122.6 million, which included a cash purchase price of $65.3 million and the assumption of approximately $57.3 million in debt, and is subject to certain other post-closing adjustments. Approximately $6.5 million of the purchase price was held in escrow for a period of twelve months after the closing to secure our indemnification obligations. We received the escrow in November 2019.

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The operations sold in connection with the US Solar Transaction did not qualify as discontinued operations because the disposition did not represent a strategic shift that had a major effect on our operations and financial results.

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FirstNet Agreement

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In July 2019 and August 2020, we entered into a Network Build and Maintenance Agreement (the “FirstNet Agreement”) and First Amendment to that agreement with AT&T Mobility, LLC (“AT&T”), respectively, to build a portion of AT&T’s network for the First Responder Network Authority (“FirstNet”) as well as a commercial wireless network in or near our current operating area in the Southwestern United States (the “FirstNet Transaction”).  Pursuant to the FirstNet Agreement and subject to certain limitations contained therein, all cell sites must be completed and accepted within a specified period of time.  We expect to recognize construction revenue of approximately $80 million to $85 million through 2022 that will be mainly offset by construction costs as sites are completed. Revenues from construction are expected to have minimal impact on operating income. Also pursuant to the FirstNet Agreement AT&T has the option to repay construction costs, with interest, over and eight year period.  Accordingly, we entered into a receivables credit facility with CoBank, ACB (the “Receivables Credit Facility”) in order to assist with this repayment option.  The Receivables Credit Facility provides for a senior secured delayed draw term loan in an aggregate principal amount of up to $75 million with the proceeds being used to acquire the receivables related to the construction costs. The network build portion of the FirstNet Agreement has continued during the COVID-19 pandemic but the overall timing of the build schedule has been delayed.  Subject to ongoing delays caused by COVID-19 related restrictions, we currently expect construction revenues to continue through 2022.

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Following acceptance of a cell site, AT&T will own the cell site and we will assign to AT&T any third-party tower lease applicable to such cell site.  If the cell site is located on a communications tower we own, AT&T will pay us pursuant to a separate lease agreement for an initial term of eight years. In addition to building the network, we will provide ongoing equipment and site maintenance and high capacity transport to and from these cell sites for an initial term ending in 2029. 

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AT&T will continue to use our wholesale domestic Mobility network for roaming services at a fixed rate per site during the construction period until such time as the cell site is transferred to AT&T.  Thereafter, revenue from the maintenance, leasing and transport services provided to AT&T is expected to generally offset revenue from wholesale Mobility roaming services.  We began receiving revenue from the FirstNet Transaction in the third quarter of 2019 and expect overall operating income contributions from the FirstNet Transaction to have a relatively steady impact going forward.

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See Sources of Cash below for a discussion regarding our March 26, 2020 credit agreement providing the ability to finance the assets built under the FirstNet Agreement.

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Universal Service Fund

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The Federal Universal Service Fund (“USF”) is a subsidy program managed by the FCC. USF funds are disbursed to telecommunication providers through four programs: the High Cost Program; Low Income Program (“Lifeline Program”); Schools and Libraries Program (“E-Rate Program”); and Rural Health Care Support Program. We participate in the High Cost Program, Lifeline Program, E-Rate Program, and Rural Health Care Support Program as further described below. All of these funding programs are subject to certain operational and reporting compliance requirements. The Company believes it is in compliance with all applicable requirements.

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During the years ended December 31, 2020, 2019 and 2018, we recorded $16.4 million, $16.4 million, and $16.5 million, respectively, of revenue from High Cost Support in our International Telecom segment for its US Virgin Islands operations under the “Viya” name. In addition, we recorded revenue of $15.5 million during the year ended December 31, 2018, from additional funding authorized by the FCC following the Hurricanes. In 2018, the FCC initiated a proceeding to reform the High Cost Program in the US Virgin Islands and Puerto Rico in which it proposed to allocate USF funding of up to $18.7 million per year (inclusive of the $16.4 million per year currently allocated to Viya) for 10 years to supplant the $16.4 million that Viya currently receives per year. While Viya applied for Connect USVI Fund support allocated for the US Virgin Islands, on November 16, 2020, the FCC announced that Viya was not the recipient of the provisional award and that the FCC had provisionally accepted a bid of approximately $8.6 million per year for a term of 10 years. Viya has challenged this decision and its challenge remains pending before the FCC. If Viya’s challenge is not granted, pursuant to the terms of the program, Viya’s USF support will be reduced, to two-thirds

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of the legacy total amount, or $10.9 million, during the first year following the finalization of the award and to one-third of the legacy total amount, or $5.5 million, during the second year. Thereafter, Viya will not receive high-cost USF support.

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Also, during each year ended December 31, 2020, 2019 and 2018, we recorded $1.2 million of High Cost Support revenue in our US Telecom segment. We are subject to certain operational, reporting and construction requirements as a result of this funding and we believe that we are in compliance with all of these requirements.

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In August 2018, we were awarded $79.9 million over 10 years under the Connect America Fund Phase II Auction. In connection with this award, we are required to provide Fixed broadband and voice services to certain eligible areas in the United States. We are also subject to operational and reporting requirements under the program and we expect to incur additional capital expenditures to comply with these requirements. We have determined the award is a revenue grant, and as a result we will record the funding as revenue upon receipt. The Company recorded $7.6 million and $5.3 million of revenue in the years ended December 31, 2020 and 2019, respectively, from the Connect America Fund Phase II program.

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We also receive construction grants to build network connectivity for eligible communities.  The funding is used to reimburse construction costs and is distributed upon completion of a project.  As of December 31, 2020, we were awarded approximately $15.8 million of grants. We were awarded an additional construction grant of $1.0 million in 2020. As of December 31, 2020, we have completed our construction obligations on $10.2 million of these projects and $6.6 million of such construction obligations remain with completion deadlines beginning in September 2021.  Once these projects are constructed, we are obligated to provide service to the participants. We receive funds upon construction completion. During 2020, we received $2.9 million, which was used to offset operating activities. During 2019, we received $5.4 million, of which $3.1 million was a reimbursement of capital expenditures and $2.3 million offset operating activities. We expect to meet all requirements associated with these grants.

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We also receive funding to provide discounted telecommunication services to eligible customers under the E-Rate, Lifeline, and Rural Health Care Support Programs. During the years ended December 31, 2020, 2019, and 2018, we recorded revenue of $10.0 million, $6.1 million, and $8.2 million, respectively, in the aggregate from these programs. We are subject to certain operational and reporting requirements under the above mentioned programs and we believe that we are in compliance with all of these requirements.

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CARES Act

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During the fourth quarter of 2020, we received $16.3 million of funding under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The funding was utilized to construct network infrastructure in our US Telecom segment. The construction was completed in the fourth quarter of 2020 and was recorded as a reduction to property, plant and equipment and subsequently will be recorded as a reduction to depreciation expense.

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Tribal Bidding Credit

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As part of the broadcast television spectrum incentive auction, the FCC implemented a tribal lands bidding credit to encourage deployment of wireless services utilizing 600 MHz spectrum on the lands of federally recognized tribes.  We received a bidding credit of $7.4 million under this program in 2018.  A portion of these funds will be used to offset network capital costs and a portion will be used to offset the costs of supporting the networks.  We currently estimate that we will use $5.8 million to offset capital costs, consequently reducing future depreciation expense and $1.6 million to offset the cost of supporting the network which will reduce future operating expense.  Through December 31, 2020, we have spent $5.8 million on capital expenditures and have recorded $0.2 million in offsets to the cost of supporting the network. The credits are subject to certain requirements, including deploying service by January 2021 and meeting minimum coverage metrics.  If the requirements are not met the funds may be subject to claw back provisions.  We currently expect to comply with all applicable requirements related to these funds.

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CBRS Auction

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During the third quarter of 2020, we participated in the FCC’s Citizens Broadband Radio Service (CBRS) auction for Priority Access Licenses (PALs) in the 3.5 GHz spectrum band. These PALs are licensed on a county-by-county basis and are awarded for a 10-year renewable term. We were a winning bidder for PALs located strategically throughout the United States at a total cost of approximately $20.4 million. In connection with the awarded licenses, we will have to achieve certain CBRS spectrum build out obligations. We currently expect to comply with all applicable requirements related to these licenses.

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Platform Investment

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During the second quarter of 2018, we invested in a new platform, based in the United States, to develop in-building wireless network technology that enables building owners to capitalize on the growing demand for better indoor wireless solutions.

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RDOF

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In the 2020 Rural Digital Opportunity Fund Phase I Auction (“RDOF”), pending the FCC’s conclusion of the award process, we expect to receive approximately $20.1 million over 10 years to provide broadband coverage to over 10,000 households. Once confirmed, we will be obligated to provide broadband and voice services to certain eligible areas in the United States.

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Impact of Hurricanes

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During September 2017, the US Virgin Islands economy, our customer base and our operations were severely impacted by Hurricanes Irma and Maria (collectively, the “Hurricanes”). Our wireless and wireline networks and commercial operations were all severely damaged by these storms and as a result of the significant damage to the wireline network and the lack of consistent commercial power in the territory, we were unable to provide most of our wireline services, which comprise the majority of our revenue in this business, from mid-September 2017 and through most of 2018.

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During the year ended December 31, 2018, the Company received $15.5 million in one-time additional funding from the FCC’s USF to further subsidize its operations in the US Virgin Islands.  This amount was recorded as revenue during the year ended December 31, 2018.  

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During the years ended December 31, 2019 and 2018, we spent $0.1 million and $80.2 million, respectively, for network restoration and resiliency enhancements that allowed the reconnection of a significant majority of affected US Virgin Islands households and businesses.

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Presentation of Revenue

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Effective January 1, 2020, we changed our presentation of revenue in the Consolidated Income Statements and in the Selected Segment Financial Information tables. This change is intended to better align our financial performance with the views of management and industry competitors, and to facilitate a more constructive dialogue with the investment community.

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Specifically, the previously disclosed revenue categories of wireless and wireline revenue are being represented as Mobility, Fixed and Carrier Services revenue within our segment information and are included within communications services revenue within our Income Statements. Managed Services revenue, which was previously a component of wireline revenue, is now included in other revenue along with revenue from our Renewable Energy operations.

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Selected Segment Financial Information

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The following represents selected segment information for the years ended December 31, 2020 and 2019 (in thousands):

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A year-to-date comparison of our segment results is as follows:

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International Telecom.  Revenues within our International Telecom segment increased $4.1 million, or 1.3%, to $328.6 million from $324.5 million for the year ended December 31, 2020 and 2019, respectively, as a result of an increase in broadband services in many of our international telecom markets which more than offset the impact of the

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reduction in Carrier Services and Mobility services (including handset sale revenues) as a result of COVID-19 related travel and stay-at-home restrictions.

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Operating expenses within our International Telecom segment decreased by $7.1 million, or 2.6%, to $270.5 million from $277.6 million for the year ended December 31, 2020 and 2019, respectively. The decrease was primarily the result of the impact of COVID-19 and other cost reduction measures which reduced roaming, advertising, contract labor and facility costs throughout all of our markets within this segment.

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As a result, our International Telecom segment’s operating income increased $11.2 million, or 23.9%, to $58.1 million from $46.9 million for the year ended December 31, 2020 and 2019, respectively.

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US Telecom.  Revenue within our US Telecom segment increased by $13.7 million, or 12.6%, to $122.3 million from $108.6 million for the year ended December 31, 2020 and 2019, respectively, primarily as a result of an increase in construction revenue from the FirstNet Transaction and an increase in Fixed revenues, including broadband services and funding from the Connect America Fund Phase II program.

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Operating expenses within our US Telecom segment increased $14.4 million, or 14.3%, to $114.9 million from $100.5 million for the year ended December 31, 2020 and 2019, respectively, as a result of construction costs and other expenses being incurred in connection with the FirstNet Transaction partially offset by the impact of COVID-19 related travel and stay-at-home restrictions.

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As a result of the above, our US Telecom segment’s operating income decreased $0.7 million, or 8.6%, to $7.4 million from $8.1 million for the year ended December 31, 2020 and 2019, respectively.

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Renewable Energy.  Revenue within our Renewable Energy segment decreased $0.9 million, or 16.4%, to $4.6 million from $5.5 million for the year ended December 31, 2020 and 2019, respectively, primarily as a result of a decrease in production as a result of the impact of COVID-19.

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Operating expenses within our Renewable Energy segment increased to $28.3 million from $6.2 million for the year ended December 31, 2020 and 2019 as a result of the loss recorded on the Vibrant Transaction of $21.5 million.

As a result of the above, our Renewable Energy segment’s operating loss increased to $23.7 million for the year ended December 31, 2020 as compared to a loss of $0.7 million for the year ended December 31, 2019.

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The following represents a year over year discussion and analysis of our results of operations for the years ended December 31, 2020 and 2019 (in thousands):