Justin Benincasa - Chief Financial Officer Michael Prior - President and CEO.

Ric Prentiss - Raymond James Barry McCarver - Stephens, Inc. Hamed Khorsand - BWS Financial.

Good day, ladies and gentlemen, and welcome to the Atlantic Tele-Network Q4 Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer sessions and instructions will follow at that time. [Operator Instructions]. As a reminder, this conference maybe recorded.

I would now like to turn the conference over to host of today’s call, Mr. Justin Benincasa. You may begin..

Thank you, Tania. Good morning, everyone, and thank you for joining us on our call to review our fourth quarter and full year 2014 results. With me here is Michael Prior, ATN’s President and Chief Executive Officer.

During the call, I’ll be covering the relevant financial information and certain operational data; and Michael will be providing an update on the business.

Before I turn the call over to Michael for his comments, I’d like to point out that this call and our press release contain forward-looking statements concerning our current expectations, objectives and underlying assumptions regarding our future operating results and are subject to risks and uncertainties that could cause actual results to differ materially from those described.

Also, in an effort to provide useful information to investors, our comments today include non-GAAP financial measures.

For detail on these measures and reconciliations to comparable GAAP measures, and for further information regarding the factors that may affect our future operating results, please refer to our earnings release on our website at atni.com or to the 8-K filing provided to the SEC. And I’ll turn the call over to Michael for his comments..

Thank you, Justin. Good morning everyone. I’ll start with some highlights for the quarter and for the year, first starting with the quarter. The fourth quarter was a fitting end to a very strong year and the trends behind the results were consistent with what we’ve seen in previous quarters. The main story of course was the growth in U.S.

wireless revenue and EBITDA following a number of quarters of network expansion and upgrades. It is always rewarding to see investments payoff as forecast, but there was a lot of hard work behind that success. And we appreciate the efforts of our team and the trust placed in us by customers. The U.S.

wireless business is our largest in terms of revenue and even more so in terms of profits because of our 100% equity interest. So, the strong year in that segment more than compensated for relatively stable operating revenues and our other businesses in the aggregate. That is not so there were not successes in other areas.

Bermuda managed to hold steady and turned in another strong year following an excellent 2013. Broadband revenues in Guyana increased and U.S. Wireline completed its major fiber builds with strong momentum in bringing in new revenue and customers.

While growth rate in some operations are expected to receive, we see 2015 as a year with great potential for enhancing value, both through improving profitability in a number of operations and in enhancing the long-term prospects and strategic value of others.

Furthermore, we look forward to investing more of our substantial balance sheet capacity and opportunities that we believe have a good chance of delivering attractive risk-adjusted returns on our capital. That is a good position to be in.

In other areas, we ended the year of active review of a number of external investment opportunities after our $103 million initial investment in the renewable space with the purchase of 46 megawatts of solar distributed generation systems.

We have retained the talented team to run the business and look for further investment opportunities in the space. Let’s turn now to some specifics for the fourth quarter, starting with U.S. wireless.

This segment delivered another very strong quarter of growth, particularly when you factor in that as the year went along, we began to see an anticipated decline in prices. While we expected the growth for the year overall in this segment, we thought the rates of growth would decline faster than they did.

And we’re very pleased to report fourth quarter revenue for this segment up 57% against the fourth quarter last year. The drivers of this growth are consistent with past periods. The biggest factors were an increase in the number of 3G base stations and service, including both upgrades to existing sites and new sites built with 3G capabilities.

Growth in usage was also significant contributing factor. To illustrate the trends, megabytes billed more than doubled, while voice minutes which continue to decline on a per base station basis were up about 7%.

For 2015, we expect to see continued expansion of data volumes, although not at the same rate as 2014 because while we continue to add sale sites and upgrade others, the ratio of newly upgraded sites to existing upgraded sites will be much lower than in the 2014 to 2013 comparisons.

More significant to understanding the direction and value of this business is the trend in pricing and other contract terms with our customers.

As noted in our earnings release, we are working on finalizing a new multiyear contract for a major carrier customer that will include a substantial reduction in rates offset by a six-year term and strategic considerations including access to spectrum and other accommodations.

Our goal is to be the long-term network provider for multiple carriers in the truly rural areas of the country. And we think we’re on our way to achieving that. Customers expect coverage virtually everywhere and they expect quality similar to their home areas.

So, carriers need to cover these areas but they need to do it in a cost effective way, given capital needs from much more strategic and higher revenue areas. For our part, we must ensure that we can deliver the quality they want with economics that are favorable to their alternative bills and operating costs.

We have deep experience in these areas, and we can use that expertise and knowhow to deliver on those requirements while still earning attractive returns on a very capital intensive business. So, even though we expect this development and trend to reduce the current year revenue and cash flow in our U.S.

wireless segment, we look at the trend towards longer term, more strategic relationships with more attractive economics and operating elements for our carrier customers to be the proverbial win-win. And we see it as an enhancement to the value of this business.

At the end of the day, we think this business has same rational and many of the same features as the third-party fiber backhaul business. And we are excited about the opportunity to drive it forward on that basis. Lastly, worth mentioning in U.S.

wireless is the growth in our small, very rural retail wireless business that fills in gaps where there is limited or no availability from the national carriers. We launched service on tribal lands this past year and the team has rapidly gained subscribers and markets share.

While it’s not a large business for us, we’ve been pleased by the progress and enjoy bringing advanced technologies, extended coverage and better value to communities that suffered under poor alternatives from many years.

Moving on to international wireless, in international wireless revenues, we posted a significant decline as you saw in the release, in the fourth quarter compared to 2013.

And as we noted, there were two main factors driving the poor results, a decline in the Guyana market which also benefited from a one-time gain last year and lower roaming revenues across the Caribbean and Bermuda. The roaming revenue in the region is unlikely to come back up.

Carriers have negotiated lower rates, but there is little elasticity in this area because they continue to charge their subscribers extremely high rates and have been thoroughly conditioning all with the most pricing sensitive travelers to avoid using their device while travelling.

Much like the once overpriced hotel phone, this is a sure way to irrelevance, as subscribers try to restrict all of their usage to Wi-Fi or use local SIM cards or phones. On the other hand, the market share loss is something we can try to fix.

We are making investments in marketing programs and we will be watching for signs of improvement as the year progresses. The island markets were also down slightly as a group with Bermuda flat and the others a mixed bag.

We do think we can improve profitability in the smaller markets in 2015 although Bermuda itself will be more challenging because of significantly higher regulator fees and lower roaming revenue. Nonetheless, across the board, we added subscribers and gained market share in the smaller markets.

In wireline operations, as reported, total revenues were down slightly with legacy voice dominated services in decline and newer data related services like high speed internet for both residential and businesses increasing.

The Vermont business in particular showed good signs, emerging from its recent fiber bills with the rapid ramp up of on net fiber sales to government and enterprise, especially the collages and others in the educational segment of the market.

In other developments, as I mentioned at the outset, we closed on our first investment in the renewable energy space in late December. We are excited about the opportunity to put our balance sheet to work in a segment that we think has the ability to deliver solid returns to our shareholders for a long time to come.

We see these opportunities as coming in both organic form that is capital expenditures towards building new solar PV generation facilities and in inorganic form, acquiring existing renewable energy production facilities. We still are getting a feel for where the best opportunities lie in terms of risk and reward.

And our team is casting a live net at the moment. As the year goes on, I hope we will be able to give investors a better sense of where we see the most attractive investments in this space.

Meanwhile, we are still actively looking at ways to expand our telecom investments and to use our balance sheet to improve returns and prospects for some of our existing properties. So in summary, after a year of exceptional growth in U.S.

wireless, we’re expecting to enter into an extended term agreement that positions ATN in the category of a long-term shared infrastructure solutions provider, a business model that we believe will further increase the value of our wholesale business. This agreement should result in lower U.S.

wireless revenues, likely beginning in this year’s second quarter because of more favorable volume comparisons in the current quarter. The impact will be partially offset in all quarters by continued growth in our wholesale network capabilities, reaching capacity as well as the expansion of some of our other businesses.

Additionally, 2015 results will benefit from the accretive impact on revenue and EBITDA of the Ahana acquisition. And overall, we think there is an opportunity to take significant positive strides strategically in 2015 in our mix of businesses and deployment of capital. With that, I’ll turn the call back over to Justin..

Thank you, Michael. Total company revenues for the quarter were $88.5 million and for the full year $336.3 million, up 15% for both periods from 2013. And as Michael had commented earlier, growth this quarter continued to be driven by our U.S. wireless segment.

Revenues in Guyana were down this quarter compared to a year ago as growth in broadband revenues was offset by revenue declines in our wireless and local and long distance voice operations.

Also impacting this comparison in Guyana was an out of period adjustment recorded in the fourth quarter of 2013 and local currency devaluation which amounted to approximately $1.4 million for the full year.

Similar to last quarter, our island wireless segment, our roaming revenues declined this quarter due to overall lower wholesale roaming rates and a new retail roaming offering in Bermuda. Adjusted EBITDA for the quarter increased 26% to $35.7 million, and our adjusted EBITDA margin was 40%.

For the full year, adjusted EBITDA increased 22% to a $139.8 million and our adjusted EBITDA margin was 42%. Moving down the income statement, this quarter’s operating income adjusted for transaction related charges was $22.2 million, up 38% from the same quarter last year and $88.5 million, up 33% over 2013 for the full year.

The strong performance is driven by 95% increase in operating income from our U.S. wireless business this quarter which more than offset the lower operating income comparisons in our other businesses.

As noted in our press release, we entered into distributed generation solar business late in the fourth quarter and show the stub period results of approximately eight days of operations from that acquisition in the renewable energy segment.

The operating income for that segment was negatively impacted by approximately $2.5 million of transaction cost. Operating expenses this quarter included $1 million of non-cash stock-based compensation expense.

Net income from continuing operations for the quarter was $11.5 million or $0.72 per share and this compares to $6.2 million or $1.02 per share reported in the fourth quarter of last year. I should note that 2013 was positively impacted by a one-time $8.4 million income tax benefit recorded in the fourth quarter of last year.

2014 net income totaled $48.2 million or $3.01 per share. Looking at the balance sheet, at December 31, our cash balances totaled $371 million which includes $39 million of restricted cash related to an indemnity escrow account as part of the Alltel sale agreement, which we expect to be released by the end of this year’s first quarter.

And in the statement of cash flows, cash generated by operating activities was $82 million for the full year 2014. Capital expenditures totaled $16.6 million for the quarter and $58.3 million for the full year. Of the $58.3 million year-to-date, approximately $33.5 million was incurred by our U.S.

wireless business and $10.6 million was incurred by our international telephony segment. In our earnings release, we forecast capital expenditures for the full year 2015 excluding any spending in the renewable energy segment to be between $65 million and $75 million of which our U.S.

wireless segment is expected to spend at similar levels to the past two years or about 50% of that total. Projected capital expenditure for 2015, as I said, we do not include anything related to the renewable energy segment, which as Michael noted are difficult to predict.

However, for planning purposes, we are using an estimate of approximately $30 million, but that number could change depending on the investment opportunities. Some additional operational data for the quarter. We ended the quarter with 764 base stations in our U.S. wireless territories, up from 716 at the end of last quarter and 598 a year ago.

International wireless subscribers totaled 323,900 at the end of the quarter, which was essentially flat to the 324,800 a year ago. In our U.S. wireline segment, the number of business customers decreased 10% from the year ago to approximately 2,400, but business lines increased 60% from 119,700 to 191,500.

Internationally, fixed lines ended the quarter at approximately 159,700 and DSL subscribers ended at 33,500, up 14% from 29,500 a year ago.

I should note that the DSL sub count reflects an adjustment from past quarters as we’ve redefined our definition of an active subscriber limiting the length of period that someone can be inactive or without continued service. And with that Tania, we’ll open the call up for questions..

[Operator Instructions]. And our first question comes from Ric Prentiss of Raymond James. Your line is open..

Hi. Good morning, guys..

Good morning..

I want to bore down a little bit more on the Comnet U.S. wireless business. I’m just trying to frame the guidance or the thoughts. So, it sounds like first quarter 2015, the contract maybe won’t be fully effect. So, you’ll see continuing good volumes, not as much price cuts but then starting in 2Q revenues down year-over-year.

If we kind of look at where levels were in 2013 versus 2014; are we going back towards 2013 levels, are we going in between 2013 and 2014 levels? Just trying to get a sense of where the recalibration is. I know you’re getting long-term contract and you want to earn a return on that but just trying to gauge what we’re looking at..

Yes. I don’t think -- we’re not talking about going back to 2013 but the answer on the first part of what you’re saying is it’s not necessary when the pricing taking effect, it’s that in the first quarter there are bigger comparisons from the point of view of network reach and upgrades and so translated collectively into volumes.

So, I think the offset to the price decline is much more pronounced in the first quarter we expect, then in the next three quarters. And so that’s why we see it happening in that direction..

Okay. And then, in past quarters, you told us how much of your base stations were already with 3G.

Where are you as far as of those 764, how many are 3G?.

We’re about 75% 3G now, Ric..

Okay. And we were just on the call with nTelos, regional operator in the Virginia are, and they were somewhat bemoaning the fact they were late with 4G, LTE even in their more rural environments and West Virginia.

Where are you guys at as far as deploying 4G? Every carrier we talk to is just talking about how fast 4G is ramping and how important to customers 4G is.

So, as you look at the long-term six year contract with a customer, is there LTE commitments in it; could that help long-term revenues as well?.

Yes. LTE is contemplated in that agreement and we have LTE -- we would expect to beginning to roll it out more seriously this year. We have some limited deployment now but that’s largely for some of the retail that we talked about. And I think that’s the distinction I would draw is important to retail customers.

I think in a lot of the areas we’re in, they’re truly so remote that the expectations are a little bit different. So, it tends always to lag behind. I mean if you think about when we were deploying 3G, it’s many years after most would have done in a retail environment.

And it’s really driven too by the customer, right? It’s pretty easy for us to do it, to roll it out when we think our carrier customers would like to see it. So, it’s really we don’t hold back..

Okay. And then on the renewable energy side, you guys -- it looks like an attractive offer towards the end of last year, probably because your ability to add quickly, partly because of your ability with the balance sheet area where to have cash ready.

Are there other transactions where your special sauce which is I got cash, I can close quickly but I want a good deal; are there other of those deal types out there in the renewable energy space?.

I hope so. I mean I think right now there is a lot of interest in the space. There is some asset value increase because of the YieldCo phenomenon. So, that kind of trickles down all the way through. Th0ey are buying up assets for these YieldCos and much like we’ve seen in the tower space. But I think there will be those opportunities.

And I think when you look out at the 2016 ITC reduction from 30% to 10% that’s contemplated at the end of the year there that kind of has two effects right now. It has an effect of really a flurry of building, particularly in the utility scale area, so the much larger deployments.

And what I also think we think will happen is that at some point, there is going to be a bit of a crush where people couldn’t quite get into that timeframe or overcommitted and there maybe opportunity there.

Similarly I think an increase in the interest rate environment could start to trickle down too because financing cost is a huge component in this sector..

And as we think about possibly $30 million, probably it sounds like chunky acquisitions or chunky CapEx. What kind of multiples does that get you? I know for Ahana one, you paid about eight times I think enterprise value to EBITDA.

How should we think about what $30 million in CapEx could actually produce in EBITDA and is that the right way to think about it?.

Yes. It’s hard to think about it exactly that way. I mean of course we look at those considerations when we do it. But you can think about what is $30 million of equity value as an overall.

But really you come down to what -- if you take the agreements you are going to get or you are buying the power purchase agreements, you run the numbers and you look at after tax levered returns that are really in the low double-digits these days, so the low teens, maybe to mid teens in a lot of the deals. And so, there is reasons for that.

The risks are very low if it’s a high quality asset, high quality off-taker. But at the same time, we think there still maybe opportunities to be on the upper end of that. And that’s because that will tend to be where we’ll focus..

Okay. Thanks guys..

And our next question comes from Barry McCarver of Stephens, Inc. Your line is open..

Good morning, guys. And thanks for taking my questions. I think you’ve got most of them answered. But just considering expectations for the U.S.

wireless business and then obviously offset by margins from your new acquired business, kind of directionally how do you think EBITDA margin shake out for 2015?.

I think EBITDA margin overall, I’m assuming you’re talking, right?.

Right..

Yes. I think overall -- any impact on the U.S. wireless business definitely impacts that margins. So, I think overall will come down slightly but not dramatically because there is a high margin. I mean like you said, it’s pretty high margin business on the solar business..

Okay..

But somewhat offset by wireless..

And then just continuing on that the question from Ric about the CapEx.

Is that -- the CapEx spend this year kind of depending on level, I know it’s a little bit uncertainty for the renewable business but does that drive revenue pretty quickly and what would be kind of maintenance CapEx for that business, annually?.

It really is very little to -- at many maintenance CapEx if you, it’s pretty small number. So, it’s really that would be….

Are you talking about renewables, Barry?.

Yes..

Okay, renewables. In terms of the CapEx, it depends where that money goes. If it buys a producing project, then it’s a media that it’s something where we’re building it from the ground up; it will take more time obviously to be revenue generating..

The way to think about it maybe is if it’s organic, if it’s truly CapEx probably won’t have a significant impact this year..

Right..

But if it’s not really CapEx but it’s the equity part of investment, it would be very quick..

Okay. That’s helpful. Thanks guys..

Sure..

[Operator Instructions]. And our next question comes from Hamed Khorsand of BWS Financial. Your line is open..

Good morning. I just want to start off on the U.S. wireless. And last year, you were making similar comments about rates declining and you were able to offset that with more base station increase in traffic.

How much do you feel you could do that this year? Can you add more base stations and tack on more traffic?.

Yes. We didn’t get it right last year. And part of that is timing of some things we saw and part of it was we did such a big build the year before and that year that the added volume was bigger than we have forecast. And that’s always a tricky thing to do. I think this year there are fewer moving parts and much more clear movement on prices.

So, I think the opportunity to be wrong to the upside by the degree which were last year, seems very slim this year. Again, I think this is a good thing.

And as you get the rates down to certain level, I think it just makes this really a nice log-term business because it just makes the long-term economics, not just the short-term economics attractive to the carrier customers..

What kind of impact does this have on the EBITDA margin for the segment?.

We haven’t given a number there. But when we lose revenue because of pricing, we still have a lot of the same cost. So, it definitely will reduce EBITDA margin..

That was obvious, but I was just trying to figure out how much of impact are we talking about when business you use to run around 60% or 70% EBITDA margins; are we looking at half that rate or just slightly lower rate on the EBITDA margin line?.

We just haven’t given a precise number there, Hamed..

Okay, alright.

And then, as far as on the island side where you’re talking about the roaming business going away, are you looking at opportunities as far as revenue -- opportunities in that area, maybe from Wi-Fi service or anything like that?.

Yes, we have done some of that but the convenience factor is different. And there is a lot of the Wi-Fi that tourists will see in the kind of more tourist driven market. It will be driven by hotels; and from a business user, it can be businesses and hotels. So, the opportunities don’t equate to traffic that used to be there.

And I just don’t think -- I think at this point, it’s going on so long, it’s a hard trend to reverse because it’s -- as I said, customers have been at their behavior condition..

Okay. That’s it for me. Thank you..

Yes..

And our last question comes from Ric Prentiss of Raymond James. Your line is open..

Hey guys, a couple of quick follow-ups if I could. On the Comnet business, you talked about also how it makes sense for you guys, John Stanton long ago called it would be the end of roaming swizzle end of roaming, so where you can provide network from multiple people and be agnostic.

What are you at as far as your revenue mix across the big four carriers? Because it would see as LTE becomes more prevalent rolled out, possibly you could see a growing number of carriers come to.

So just trying to gauge how many really carrier customers do you have at your different sites?.

We will most try to typically have all the national carriers but the big two to-date have been disproportionate share of it, not just because of size but because they seem to be more strategic about thinking that’s a worthwhile expense. I think there is opportunity to increase that and that helps us make it attractive for all..

Because when you think about Sprint repurposing the 800 item frequencies, do you have access with spectrum agreements with carriers that could help? T-Mobile’s rolling out 700, Sprint’s rolling out 800 and TELUS talked about rolling out 800.

So, I am just trying to think you talked a little bit about how are you going to lock in some spectrum at the long-term contract, but do you have enough spectrum also to handle these multiple carriers and the right bands?.

Yes, I think without speaking about any specific carriers, I think that there is -- spectrum should not be the problem. It’s always a very important consideration and we have to make sure to secure it. But I think there are ways to achieve that because the reality is there is a lot of available spectrum in terms of not being utilized in these areas.

I mean they’re just so sparsely populated. It’s a very different situation than you have in the more dens areas where subscribers live.

And I think the other point there is that you don’t have to tailor it quite so perfectly on the spectrum for carriers because most customers out there have multiband devices that have some common elements across all four..

Okay. And then minor question; there was a little bump up in the corporate cost in the fourth quarter.

Was that somewhat related to the transaction; should we expect that to come back down in ‘15?.

Yes. That was kind of just -- a lot of the items in there were more kind of more one-time in nature for the quarter..

Including legal..

Yes..

Okay.

So, corporate back down to a more normal level in ‘15?.

Lawyers and taxes Ric, you can’t avoid them..

Yes. Although hopefully the lawyers lead to an M&A environment that we can see that balance sheet. But it sounds like you are optimistic about 2015, being able to put some of that.

And is the target leverage still something that you’d like to get back to positive and maybe one to two times?.

Yes, sure. I mean we know it’s a very inefficient balance sheet. But as you pointed out, it also allows us to be very opportunistic. So, there is some strategic value to it but it’s surely not optimal..

Okay. Thanks guys..

Yes, thank you..

I’m showing no further questions at this time. I’d now like to turn the conference back over to management..

No further comments everybody. Thank you. And we’ll talk to you shortly on first quarter. Take care..

Ladies and gentlemen, this concludes today’s conference. Thank you for your participation. And have a wonderful day..