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

Ric Prentiss - Raymond James Barry McCarver - Stephens Incorporated Hamed Khorsand - BWS Financial Sergey Dluzhevskiy - Gabelli & Company.

Good day, ladies and gentlemen and welcome to the ATN Q3 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] I would now like to turn the conference over to Chief Financial Officer, Justin Benincasa.

Please go ahead..

Good morning, everybody and thank you for joining us on our call to review our third quarter and nine month results. With me here is Michael Prior, ATN’s President and Chief Executive Officer. And during the call, I will be covering the relevant financial information and certain operational data and Michael will be providing update on the business.

Before I turn the call over to Michael for his comments, I would like to point out that this call and our press release contains 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 details 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 with that, I will turn it over to Michael for his comments..

Okay. Thanks, Justin. Good morning. We had mixed results in the third quarter that taken as a whole were ultimately in line with both our expectations and our longer term strategy. There were some bright spots and some less than bright spots, but all-in-all we ended where we thought we would.

The good news is that the combination of our domestic wholesale strategy and the continued investment of our balance sheet positioned us to continue to generate long-term cash flow and to be on track to report strong EBITDA growth in 2016. Third quarter revenues were up 8%, but our margins were lower.

And as a result, EBITDA was down slightly year-on-year. Operating income and net income posted larger declines. The reduced margins were largely related to two businesses, U.S. Wireless and our International Integrated Telephony segment.

In the former, the decline in margins was both expected and we believe here to stay outside some seasonal aspects we will explain further. We also do not think this is a negative development as discussed in previous quarters.

In the latter, we had unusually high expenses in part because of a re-branding and also some significant out-of-pocket legal and consulting expense. We do expect margins to improve in coming quarters in this business.

The larger decline in operating income is mainly due to expenses associated with deal activity and net income was also impacted by the tax accounting associated with the loss taken earlier this year with the sale of the Turks and Caicos operations. The deal activity was the highlight of the quarter for us and occupied a lot of our time.

And while there will undoubtedly be some significant competitive and execution challenges, we are confident that these transactions will prove to be good investments in additions to our telecom operating portfolio. Turning now to some more specifics, starting with U.S.

Wireless, as I said, results for this segment were consistent with our expectations. Revenue was up, but mainly because of growth in the retail wireless business. This, the retail wireless business has lowered capital costs, but higher operating costs and so its growth reduced margins, operating margins in the segment.

The bigger picture of course is the decline in the rates we charge customers for data. We have been and are continuing to work proactively to provide our carrier customers with options to keep costs within an acceptable range for the coverage and services we are providing.

In return, we are looking to ensure the relationships are longer term and strategic. We have discussed this all at some length in previous quarters, but the effect of this trend is starting to be more evident this quarter. And Justin will give you more detail in a few minutes on how to think about the next few quarters of wholesale wireless.

Data volumes were up 147% year-on-year, mainly due to increased volumes per base station, although there was some coverage expansion as well as detailed in our press release. The retail piece of this business is continuing to grow as we have noted, though it’s still a relatively small part to cash flow from this segment.

These are very rural, mostly lower income subscribers, but we have built a base of over 35,000 subscribers as of the end of the quarter. So, it does have a modest impact. And we are happy to be providing a quality and important service to those who in many cases would have few or no alternatives.

Moving to International Wireless, revenues here were down 5% year-on-year due to the sale of the Turks business and because of some lower roaming revenues that are likely here to stay at these levels.

On the other hand, we have gained share, not enormous, but we have gained share in all of these – of those markets and we think there is potential to do better.

In Guyana, while both we and our competitor are awaiting the government release of spectrum for high-speed mobile data services, our team has been working hard to improve our competitive stance in other areas, such as customer care, retail and branding and to optimize our offerings to increase ARPUs.

While we have seen some pickup in mobile revenues from these efforts, the next few quarters will give a better indication of whether we have been successful. Now, on to renewable energy, the quarter for this segment was uneventful in terms of operating results and as we expected very consistent with previous quarters and expectations.

As you know, when we have talked about before, growth in this business at this point is driven by the investment of capital. And at this point, that is likely to either be building new solar PV production facilities or acquiring existing solar production facilities and any related contracts or of course a combination of the two.

We continue to be very active in the market, looking at potential builds and buys. And at the present time, we are finding more attractive opportunities overseas than in the U.S. Outside the U.S., partners become even more important and so that can lengthen the deal cycle, but we remain optimistic that one or more of these opportunities will ripen.

So, to summarize, the quarter saw a more pronounced impact from the U.S. wholesale rate reductions and we have spoken about for some time. And while the fourth quarter is expected to make that even more apparent, we see this as an important evolution and think there will be opportunities to expand the business further in 2016 and beyond.

And we were happy to sign the KeyTech and innovative transactions, which will be solid EBITDA contributors at the outset and have the potential to enable us to gain further operating efficiencies over time.

It was good to have the right opportunities emerge to put more of our balance sheet to work and we are working hard on pursuing further investments, particularly in the renewable energy sector. With that, I will turn it back over to Justin..

Great, thank you, Michael. For the quarter, total company revenues were up 8% to $96.8 million. This increase reflected the relatively consistent year-on-year performance from our International Wireless and Wireline operations.

The addition of the renewable energy acquisition we completed in late 2014, which added $5.1 million and contributions from our U.S. Wireless retail operations, which Michael had commented on earlier. Revenues in our U.S.

Wireless segment are expected to be down significantly in the fourth quarter as we reached the end of the contract year and the traffic volume growth to-date brings rates down to the lowest tier. As we noted in our release, we expect revenue to rebound in the first quarter of 2016 as rates reset with the start of the new contract year.

Adjusted EBITDA was $39.7 million, equating to a margin of 41%. Higher operating expenses in our Guyana operations and the anticipated margin compression in our U.S. Wireless segment were the key reasons behind the modest year-on-year decline in EBITDA. In the U.S.

Wireless segment, operating expenses reflect the costs associated with the increased number of sites and technologies that we are using the support the roughly 150% increase data traffic volume we have seen from a year ago.

This quarter also marks the conclusion of the transaction service agreement we entered into to provide support services following the sale of our Alltel business. These fees were declining each quarter following the sale and were accounted for an – as an expense offset in prior quarters.

In Guyana, the impact of the expenses that Michael had noted was approximately $2 million this quarter and was comprised of several items, most notably legal and re-branding again as Michael had mentioned.

Operating expenses for the quarter included $1.2 million of non-cash stock-based compensation and that compares to $1 million in the third quarter of last year and also included $2.5 million of acquisition-related charges.

Michael mentioned this as well, that he has noted in the past, our 47% effective tax rate is much higher for the quarter and year-to-date due to the $20 million loss on deconsolidation we have recorded in the first quarter, which has no offsetting tax benefit.

Net income for the quarter was $6.6 million or $0.41 per share, compared to $16.2 million or $1.2 per share reported in the third quarter of last year.

Looking at the balance sheet at the end of September, we had cash and cash equivalents of $398 million and total debt outstanding of $34.4 million and year-to-date the company generated $113 million of cash from operating activities.

For the quarter, we had $18 million of capital expenditures, which puts us at a total of approximately $46 million year-to-date. Approximately $30 million was utilized in our domestic operations and $16 million in our international operations.

And as timing is always a little hard to predict, but we still anticipate telecom capital expenditures for the full year to be between $60 million and $70 million.

I should note that assuming we closed the previously announced pending transactions we will be updating our reportable operating segments to reflect the change in the mix of businesses and align them with the operations of the company.

We currently anticipate that starting in 2016 we will have three reportable segments Domestic Telecom, International Telecom and Renewable Energy. Some additional operational data for the quarter, we ended the quarter with 799 base stations in our U.S. wireless territories and that’s up from 716 a year ago.

And at the end of the quarter, international wireless subscribers totaled 314,700. Fixed lines ended the quarter at approximately 153,000 access lines. And broadband subscribers ended at 38,000. And with that, Jessica I will open the call up for questions..

[Operator Instructions] And our first question comes from Ric Prentiss from Raymond James..

Thanks. Good morning guys..

Good morning Ric..

Okay, sorry. Hi. First, on the deals obviously, you are getting into the bundles is pretty exciting, we – I am actually in Mexico, here America Movil had their Analyst Day yesterday talking a lot about convergence and consolidation, Liberty Global looking at some potential opportunities, down in your neck of the woods in Cali area.

As you think about the new reporting segments, Justin that you just mentioned Domestic, International and Renewable Energy, can you help us understand what the revenues were that you now say when you combine or consolidate the operations you can kind of get in the 20 margins?.

I am not when you – say that again Ric I am not sure..

So I think in the press release last night, you talked about how much the two deals are going to add as far as revenues and then you said that the combined company you are going to do margins, I just want to make sure do I know what the right starting revenue point is to add the new revenues to?.

That number – the number is $180 million to $200 million is incremental revenue from the deals. The margin more speaks to combining of businesses with our existing businesses in those markets..

Right.

Is there a way to find out what the existing businesses revenues were, we are just trying to figure out what the right kind of incremental…?.

We had said the – we originally had put on the release the incremental – on the incremental on the USVI deal was I think 20% to 25%, on the incremental. And that’s how we hope that, that probably holds consistent with the other transaction as well..

Okay, so that’s not like margins are changing that dramatically combining existing and the two new ones?.

No and Ric, I am hearing your question, I think to that this may be that we can put that map together for people in the 10-Q in terms of the total, that’s not a promise of the exact total for next year, which is to help people..

Yes. Just so we understand what the additive process is.

On a second note, when you mentioned that you are going to have three reportable segments, if possible it would be great to have the historical by quarters for those segments, prior to reporting 1Q ‘16, just that we can read established models and kind of not during earnings season go through new basket turnovers?.

Yes. No, we are required to do with some of that in any presentations we give, so we hear – we understand the request..

Okay.

And then the final question on – in Guyana you mentioned $2 million for the rebranding and legal what was the legal aspect, what was going on there?.

Say that again Ric, you are not coming through fully.

Were you asking about the Guyana expenses, Guyana legal expenses?.

The $2 million, I think you said..

Well, we are not going to get into a lot of detail there. But there we have a number of issues in terms of basically our license rights and positions and so we – in the past and continue to look at different ways to defend that. And so that’s probably all I am going to say for now..

Right.

And just thinking forward into 4Q, should we expect the legal and rebranding cost to decline a little bit, just trying to think what the run rate thoughts on those items will be?.

Yes. I think the number I gave which was the $2 million is kind of was more one-time in nature..

Okay, great. Thanks guys..

Yes. Sure..

And our next question comes from Barry McCarver from Stephens Incorporated..

Hi, Good morning guys. Thanks for taking my questions.

I guess, first off on the wireless side, I think you are guiding for revenues to decline there as we hit sort of the last tier of the pricing changes, can you give us an idea of the magnitude of the pricing changes, kind of where we are at in that cycle, I just want to gauge how much revenue is going to be off?.

Yes. I mean I think as you know Barry, sometimes for people consternation we try not to give precise quarterly guidance. I think significant is what we will stick with and the qualitative guidance.

And I think the more important thing is, that it’s really as Justin reported, that’s going to be a bit of a dip, because of the way the revenue recognition happens for those pricing tiers in some cases. And the more important thing is really what it means for this business going forward and how do we think about that.

And I think, really what you are going to see is you will see some continued rate reductions, data rate reductions over time. There are still carriers who we are talking to and need to do things for and in some cases that will likely result in volume increases from those carrier subscribers and in some cases not so much.

But really where this business gets to is that, longer term the revenue will very likely in our view moving to a very much flatter and tighter range per site, very like the back haul tower business.

So, there is a little, there is a few differences particularly in the tower business, it will tend to be where the biggest potential for growth once you get to that phase will be in adding site.

And that’s the way we see going forward and when we look, what we put into the business and how we negotiate contracts, we’re were very confident of kind of those long-term views in operating margins and returns.

And so, we like, we actually like handing up them in place have seen that, the place is going to go, you’ll have less spectacular quarters times, but it will also be much more consistent. And to some extent derisked..

Okay.

And then can you give us an idea of what the traffic growth was in the quarter, I’m having a, I’m just wondering if that was kind of played a part and where we got to on pricing, was it particularly strong?.

Yes, it was strong and it’s up a 150% from a year ago. And a year ago it’s pretty good too, if you remember that. So, the traffic has been strong. And just not surprisingly very unusually to appreciate this is, the way carriers are going to look at this is how much does it cost need to get coverage, the certain area.

And they’ve got a number that’s worth it for them and they’ve got a number that’s not worth it to them. And we just have to make sure that, we’re operating very efficiently so we can both deliver for them and make sure it’s a good business..

Sure, got it. Now shifting gears over to renewable energy, Michael it certainly sounds like you are feeling much more positive about that potential for per deals from that segment.

I know last quarter, I think it was last quarter maybe two quarters ago you talked about just kind of restructuring that team to be more efficient at looking deals, more rapidly.

I’m wondering is that, your positive outlook, because the team is more efficient and you can bid a little bit more aggressively or if you just looking at more deals and it sounds like obviously looking internationally and that’s I’m just kind of wondering where that’s coming from?.

Yes, I’m not sure, I may have given a misimpression that’s what I said, I think the team acquired is quite efficient and has been quite active. There was some of course, getting on the same page making sure we understand everything and can help and help process in an offensive nature.

But I think mainly it was just to go out and start actively canvassing and build relationships and you start to go down the path on few deals and you realize, what is and is not attractive.

So, I think there is that normal movement in deal flow and the team at a honor was very busy in previous in the year before 2014 with the transaction that they ended up doing with us. And so it’s a little bit of getting back heavy into the market, so the every thought I guess.

But really I think it’s the nature of casting a live net, looking at things and we’re starting to have things a lot more things come through our filter that look attractive. And then of course there is still, it’s still hard to predict, did they stay within your range and get them done or does it take more time..

That’s helpful. Thanks guys..

Sure..

And our next question comes from Hamed Khorsand from BWS Financial..

Hi, good morning.

Just want to get clarification on the comment that you made earlier about the wholesale business, you said the pricing resets in the first quarter, could you provide us some details about that, I mean or is it going to another step down further, how does work?.

I think we are not going to get into too much detail on very contract that different features but what we’re trying to say that in some cases, we have annual pricing tiers. And so….

Based on volumes..

Based on volumes and so we will, if you hit those in the fourth quarter the way, the accounting rules work right now, you don’t anticipate those you account for them as they come. And so that would mean that you start again at the beginning, at zero volume on January 1 in those cases.

And so that’s how we are saying is that there is effectively a piece of seasonality between fourth quarter and first quarter..

Okay.

And then how much opportunity do you see of having base stationed in the coming quarters?.

I think there will be opportunities, I think part of getting to a tighter range and getting – getting rates for technology to place its carrier’s feel they have comfort and visibility into should open up working more with them. But it is always be Hamed a very hard thing to predict, because it’s lumpy and by its nature.

It really depends on what the carriers needs are what else is going on and can we do it in a cost effective way, so that it makes economic sense for both parties, but I do think these changes should open up those conversations more..

Okay.

And should we expect the EBITDA margin to stabilize for the segment as well?.

I think there should be less fluctuation yes, I mean that’s once you get into those tighter range, the fluctuation should get tighter..

It’s somewhat of a keep in mind that’s somewhat of a fixed cost business. So, you will get some more compression when revenues come down, but if you were in a straight line revenue recognition it be pretty consistent..

Okay, alright. Thank you..

[Operator Instructions] And our next question comes from Ric Prentiss from Raymond James..

Hey, couple of questions..

Hi, Ric..

Hey, can you hear me better this time?.

Yes, fine..

Okay, good. Couple of follow up questions, on the renewable energy looking possibly at going outside the U.S.

and to international markets, obviously its been a pretty tough FX year for a lot of companies, as you think about diversification international regions, is there any particular at least regions of the world where you are looking at?.

I’d would rather not get into the regions, I mean we’re looking a lot of places, but I could tell you is we’re looking at OECD type opportunities and we’re looking at developing emerging market type of opportunities. So, in the latter there is probably almost undoubtedly more ForEx risk.

But we take that into account, we take that into account and we look at those things and we have in telecom and both the structure and projected return requirement in evaluating the deal. So, you absolutely have to have that, as part of your assessment..

Sure. As you underwrite those type of transactions, a lot of people that to tower businesses and other businesses do not hedge their operations just because the cost of hedging is pretty prohibitive in a lot of markets.

Have you thought about it in these particular reasons you might look at, is hedging a option or is that just too cost prohibitive?.

Well, I am just going to add to that, but I think you price it what’s interesting in the power industry though Ric, is in lot of places there is a pretty long history and there it is showing power rates rising at or above usual evolve the rate of inflation. And inflation obviously usually correlates pretty well to devaluation.

And so that’s an interesting fact right, which can do two things meaning, maybe you don’t need to hedge, but it also means that hedging should be less expensive..

And then a follow-up question on the U.S. when you think about the roaming business in the flatter, tighter range, becoming more like backhaul or tower business which is very stylish, escalators as you go along.

One thing the tower companies have is just you know from American Tower is, if you had augment the tower a lot of times, a large chunk of that money gets paid for by the carrier.

And we are moving with this question is, if you deploy or asked to deploy 4G LTE there is a commitment to invest on your part, but if the return is in a flat tighter range, how do you get the return on that.

So, just wondering is there augmentation compensation potential in this tighter range or how would you handle that return on capital deploying 4G LTE?.

Ric, very good. It’s good question, because it’s very much part of the discussion.

And we tend to handle in very openly, everybody knows roughly, that is going to cost more and then you have to think through, you can deal it with the two ways, what we tend to deal with it in term of contract and in terms of length of contracts, so that are assured we’ll get to our minimum return requirements.

And also we deal with some strategic situations, we have discussions about spectrum and the like which can help, because that’s just another part of the equation. We don’t tend to look at things with NRCM..

Yes, if investors required return on investment is definitely part of the discussion with the customers?.

Right..

Okay, thanks..

And our next question comes from Sergey Dluzhevskiy from Gabelli & Company..

A couple of questions.

In terms of future acquisitions obviously you mentioned that and investments you mentioned that, you are becoming more optimistic about renewable energy, and it relates to your telecom workflow, could you talk a little about future investment or acquisition opportunities in that space and are you going to be looking more – for more kind of solutions like the deals that you just announced?.

Yes, I think let me take the first part. Right now I would say in the crystal ball which can certainly be wrong on the deal front, I think that, in the short-term our main focus on additional investments in telecom is that the deals we signed and getting those proved and done.

And I think there is some potential organic strategic related investment in with respect to those deals. So that’s probably, we never say never, we keep our door open and we look at things and because, we had success being opportunistic, but I think in the short-term that that would be the main focus on the telecom investment side.

Longer term it’s the same as always we evaluate where we think risk and we were at are, and our ability, do good assessment. So, I think telecom would be something we’ll really look at, because I think we haven’t, we know how to look at it..

Alright.

In terms of leverage obviously, you guys still have net cash position following those, the closing of those deals, whether it is, given the profile of the business given the cash flow generation power of your business assuming it doesn’t change dramatically, what kind of leverage could your business support for the, if you see right acquisition opportunities?.

I think that we typically, I think we will – I guess to answer that is, we’re well leveraged solar probably higher than we’re willing to leverage telecom. And so in telecom we’ve kind of always been more on that two times range, but I think the solar business allows you to leverage that much more a lots of risk.

And so I think that the answer to that question overall would be depending on the mix of what we have in each one of segments..

And I would add to that Sergey, couple of points. One is that, on the solar side and the renewable energy side, the intensity project leverage, right non-recourse for the most part and so that, that also changes how you look at it.

But, our goal is certainly to put our balance sheet to work better than we’ve been able to in recent year two and we think we have opportunities to continue to do that.

And so that’s we’re very much focused on that, but at the same time we’ve also made succeeded strategically by keeping a certain amount of dry powder and not getting ourselves too levered. So, we tend to like to be in that on a consolidated basis on the light end of that, not negative..

Right..

On the lighter end of that, so that we can move on opportunities..

And last question for me, so broadcast and spectrum auction is coming up here in the U.S., what are your thoughts on that auction, what are your thoughts on those, do you plan to participate, is it meaningful to your existing business or do you see it as a future opportunity..

Yes, I mean I think we – I have to be careful, because there is all sorts of SEC rules around, what you say and what you don’t, we’re not into the really sensitive period yet. But, we certainly look at every auction and seriously contemplate participating and I think this one is no different.

I think sitting here today we would probably expect to participate in someway. We well there is actually a lot of unused spectrum in most of our areas, in all of our areas. There is some kind of data that lower band that feel strategic and so we’ll certainly look at it..

Thank you..

Sure..

I am showing no further questions at this time. I would now like to turn the call back over to management for any closing remarks..

No closing remarks everybody. We’ll see you at the end of the fourth quarter. Take care..

Ladies and gentlemen, thank you for participating in today’s conference. This concludes today’s program. You may all disconnect. Have a great day..