Ladies and gentlemen, thank you for standing by and welcome to the ATN International Fourth Quarter Earnings and 2020 Conference Call and Webcast. [Operator Instructions]. I would now like to hand the conference over to your speaker today, Mr. Justin Benincasa, Chief Financial Officer. Thank you and go ahead, sir.

Thank you, Operator. Good morning, everyone, and thank you for joining us on our call to review our fourth quarter and full year 2020 results. With me here is Michael Prior, ATN's Chief Executive Officer. As usual, during the call, I'll cover the relevant financial information and Michael will provide an update on the business and outlook. 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 details on these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect our future operating results, I would refer you to our earnings release on our website at atni.com or to the 8-K filing provided to the SEC. And with that, I'll turn the call to you, Michael.

Thank you, Justin. Good morning, all. As I typically do at this time of the year, I will go through the key elements of the most recent quarter as well as for the full year. I will also offer more outlook commentary than usual to provide additional insight into our plans, particularly as they relate to business shifts within our U.S. Telecom segment. To summarize, ATN's telecom businesses delivered good results in 2020, demonstrating significant resilience in a year in which worldwide businesses faced unprecedented challenges. Our core communications operations produced strong EBITDA results and steady cash flow from operations. This could not have been accomplished without the hard work and dedication of our employees and the consistent past investments that we have made in our communications infrastructure assets. There are areas that we still need to address, particularly in our U.S. Telecom business where we need to adapt and work to optimize a changing environment and changing customer needs and to pursue new opportunities. And in 2020, we demonstrated the discipline to exit businesses like Indian renewable energy that while likely write directionally as an investment thesis, did not turn out to be well suited for our capabilities and detention. On the other side of the ledger, this was also a year in which we showed our ability to act quickly to take advantage of that investment opportunities to increase future value. Such was the case with our creative work to reach a definitive agreement to acquire Alaska Communications. This is the type of business and business environment that we know well, and we believe we are well placed to partner with the existing team and our co-investors to drive greater value. More on those subjects to come and I would also encourage you to take note of the…

Okay. Thank you, Michael. For the fourth quarter, total consolidated reported revenues were $123.7 million, up 10% from last year's $112.1 million. Adjusting for construction revenue related to the FirstNet build, revenue was up slightly from last year. Adjusted EBITDA for the quarter was $30.5 million, an increase of 7% over 2019 adjusted EBITDA of $28.5 million. Looking at the segments and starting with International Telecom. Fourth quarter revenues were up slightly to $83.8 million from last year and adjusted EBITDA increased 6% to $28.1 million. The pandemic caused us to quickly pivot to accelerate implementation of new digital solutions and processes within our businesses, including the rollout of electronic bill payment and other automated services across our markets. Thus, we're able to quickly gain operating efficiencies in many of our international markets during the year. This quarter's net income also reflects an increase in our ownership in One Communications, our Bermuda and Cayman Islands company, to approximately 70%, up from 51% following the original transaction. Capital expenditures in this segment totaled $38.9 million for the full year, coming in lower than originally expected as some of our planned capital spending was delayed or slowed due to the pandemic. With adjusted EBITDA for the year totaling $114.3 million and reduced capital expenditures, we saw significant free cash flow generation in this segment in 2020. We expect most of the 2020 delayed capital spending to occur in 2021 and segment capital expenditures to be in the range of $45 million to $55 million for the year. In the U.S. Telecom segment, fourth quarter revenues totaled $38.7 million, up from $27.8 million a year ago, mostly due to the $10.5 million of FirstNet construction revenue I noted earlier. Currently, we expect to complete an additional 50% of the $85 million construction project…

[Operator Instructions]. Our first question is from the line of Mr. Ric Prentiss from Raymond James.

I want to start with Alaska. The purchase price is to pay, obviously, cash for stock and assume the debt. But how do we think about the -- how the funding actually is going to work between yourself and F3C?

The funding is basically roughly 1/2 each on the equity capital needed.

And if I'm right, was that like $193 million that you're paying in cash to take out the equities portion?

It should be a little less than that because we'll probably bring the debt level up.

That's why I was wondering. So I'm trying to think -- so like the debt level maybe goes up. So I'm just trying to think what the cash out the door for you guys would be and then how much it gets contributed. It's complicated with the partnership, I guess.

Yes. I would plan the cash out the door for ATN in the $70 million to $75 million range.

Okay. And how should we think about -- Alaska had given guidance for revenues and EBITDA. You said you think there could be some revenue synergies when you put the companies together. How about also on the CapEx side, how much CapEx will be spent with Alaska coming on board? And you mentioned there could be private networks and other stuff.

I think it will be case, but we don't have specifics on that now, Ric. We'll be planning and we're ongoing planning on that. We're looking at that. They're focused on completing their fiscal year, having a shareholder vote approval. So I don't think we have a pencil sharp enough on that, but we have ideas. And I think it's largely opportunistic items. There is continuation of their existing strategy of building out fiber in a number of areas and they've done that with sort of an anchor tenant-funded model, and we see opportunities to continue to do that. So that's one area of capital expenditure. But the private networks and some of the maybe expansion or acceleration of some fiber, we'll have to revert once we've done more work on it.

Okay. And the Navajo Nation, it's a good project. Obviously, CARES Act helps, a population could really use that. How should we think about what the opportunity is to then grow the revenues on that? You mentioned you'll have some additional costs coming in. But how do we think about growing the revenues? And how are you going to report it?

It's actually -- that partnership is in our numbers already, right? So that's part of our U.S. business that we have -- we've already had that partnership, so it's an expansion of the network within that partnership. And so we could flow through any subscriber gains, which we certainly expect as part of this will flow through our revenue. But we're kind of coming out of the gate late with all of the costs of it, but not -- we'll need some running time to kind of get the revenues from subscriber growth over the cost level in 2021.

Yes. And how fast do you expect that to lease up? Is there a community commitment? Just trying to think of how fast do the revenues pace up to having put all the sites in place.

There's no contractual commitment, but this is to provide broadband to people who don't have it, right? And by and large, they all want it. So we expect to sign up people pretty rapidly, provision them. And then I'll also add that there are tribal subsidies further and further subsidies envisioned in the plan just released by the Biden administration for a lot of communities like this that would subsidize their purchase of broadband services. So the net of all that is we certainly expect to add customers to the network quickly. That's the whole purpose of building it out for them. And that will include both residential customers and potentially some enterprise and education.

Great. Okay. And you bought out some more of the One Comm stuff. What's the best way for us to think about all the different investment levels you guys have as far as you own X percent in Bermuda, but you own a different percent of different operations, maybe bringing Alaska in at 50-50. Just trying to think of what's the best way for us to look at all the various assets you have and your ownership stakes?

Piece by piece. Well, I think there's 2 things, right? There's the math of sort of proportionate EBITDA and so you can do that. But I think the value to us is a little bit better than the proportionate because we get some benefit from the scale overall of all of those operations. And obviously we're in a control position in all cases. So I think it would be proportionate plus, all right? And it also presents us with opportunities. I mean I think it was an interesting illustration in Bermuda situation, those -- if you look at how ATN is valued even now, those were -- while we're not disclosing the prices, they were highly accretive. They were -- we acquired stakes at values below the implied value the market puts on ATN as a whole. And we think from a risk-reward standpoint, that's certainly a good trade. So -- and as Justin pointed out, we started that deal. We didn't -- we had a combination of merge -- this is Bermuda, we merged our existing operations. We put some additional cash in for new equity to result in this business combination, give us control. And then over time, we increased our level of equity ownership. And so that structure is quite a good one. It allows us to spread our money over multiple investments and -- but still improve that as opportunities kind of go deeper within the investments as opportunities manifest. So I think it's a -- we like that model.

Okay. And speaking of opportunities, last one from me, you mentioned leverage will be under 2x after Alaska. So you still have financial flexibility. It sounds like there's a lot of financial partners out there looking at opportunities. How should we think about the pacing of the ability to put the balance sheet to work? Is this a year '21, as we look into '22 that more -- I mean a lot of investments going on right now. But is this a fact that there's even more to come?

Yes, I think there could be. We don't control that entirely. What we do control, we've talked a bit about, right, which is building out our existing platforms, which we've said before, we find attractive with the high asset values in auctions. We find it more attractive to build out the same assets ourselves. And so we've got a fair amount of spending on that sort of core network infrastructure and also advancing some new businesses. So that's significant. As to doing transactions more in the vein of Alaska, larger platform additions, I think that will partly depend on partners and opportunities. This one was an unusual one and that's why we moved so quickly on it. But we do think we can offer a lot of value to the financial investors. We see some of them going direct and down in buying into assets that maybe have more operational complexity and risk than they're valuing. And we think we could bring something to the table, plus some of the synergies with our core operating capabilities. So we're looking to do it, but we don't exactly control the pacing entirely other than our willingness to continue to do it. The other thing I want to note, though, is when we talk about the leverage, keep in mind that we're expecting the debt -- the acquisition debt, if you will, the debt that goes in part with the Alaska transaction to be recourse only to that Alaska asset. So the capacity at ATN level is a bit higher than might be implied by that consolidated leverage ratio.

And our next question is from the line of Greg Burns from Sidoti.

The $10 million to $12 million of incremental operating expenses you expect next year for the U.S. Telecom segment, what's the split of that between the transition from the AT&T contract and the Navajo Nation sites?

I would say that the bulk of it is more related to the FirstNet sites, but -- so that's it, yes.

Okay. And does that -- I guess, you're not going to have the full FirstNet network constructed next year. So I guess, will there be further like incremental costs on top of that? Or will the expenses continue to grow as you complete that network?

It's a good question. I think you could see expenses continuing to grow as you complete it, but we do -- we're kind of ahead on some of the expenses to where we are in the actual -- on the delivery of the sites. But then there's probably other costs within the existing wholesale that we could start to rationalize as well. So it's hard to predict right now today, but there probably would be an increase in some of the costs.

Okay. And then in terms of the remaining carrier services revenue there that, I guess, the non-AT&T business, what do you -- what is the trajectory of that business? Have they been -- have the contracts been renegotiated recently? Or should we expect -- what pace of decline do you expect in the remaining portion of that business?

I think, overall, over the long term, we expect the decline, which might -- which wouldn't be significant in this year, but in future years, we do, if we don't transition the business. And we do think there's opportunity to fill that by some of that decline within the wholesale side. But if we just took existing contracts and we didn't assume any other successful actions on our part, then it would decline.

Okay. And on the fixed side on the U.S. Telecom, it's pretty good growth year-over-year. What's driving that growth?

On the broadband, basically.

Okay. I think you had mentioned maybe in the prepared remarks, government subsidy -- subsidized government programs. Are there specific projects that we should be aware of and what?

Well, it's a combination. It's retail broadband growth, it's enterprise growth, and it includes government program, things like -- like E-rate, so education area. And we expect more of that in 2021. We're building out a new subsidized fiber route, which will offer new opportunities in all of those buckets as well as some -- we expect to improve penetration in some of the residential broadband.

Okay. And then in terms of the FCC support in the Virgin Islands, I think it's $16 million annually. What happens to that this year and next year?

The way it works is once the program is approved, the other application is approved, it goes for the first year, for us, down to 2/3 of that. For one year and then for a second year it's 1/3 and then it would end. I would note, though, that there -- we were challenging that. And we think it's possible there's a different outcome. But if you just take the outcome to date of the award, that's the way it would work. So that could happen really any month this year; it could start that process.

Okay. And then just lastly on the wireless internationally, what's your market share currently? And what's -- I guess, how much more opportunity is there for you there on the wireless side?

Yes. I think it depends on markets, but we -- and we don't break out the individual markets. But we think when we look at the shares in some of the areas, we think there's significant opportunity to increase share. In some cases, it's because we've launched new capabilities. And in other cases, it's -- we had to basically refresh our approach from a sales and distribution standpoint. And so far, we've seen some early couple of quarters finally seeing real results from those efforts. And I think our expectation is we'll continue that direction and we'll continue to gain share. But I don't want to quantify and it wouldn't make sense as a whole because share is only one piece of it. There's differing ARPUs between the different markets.

[Operator Instructions]. And we have one more question from the line of Hamed Khorsand from BWS Financial.

So just wanted to ask you. What kind of activities in sales and marketing are you doing on the private LTE front? And what are you seeing as far as the revenue bucket is concerned?

Yes. The kind of activities we're doing is we're building out the sales force. We're getting out there. We're building out sales support, sales engineers, and that's ongoing. We're still adding resources. And we have both direct and indirect channels. We have direct in certain areas and we have -- there's a lot of -- as I mentioned, there's a lot of partnerships. There's some of these things like the municipalities or the state and local education area, really all the areas there are different partners. And partners can be other pieces of the solution, which then can include system integrators kind of on the ground to infrastructure owners or funders to technical solutions, so technical partners in delivering a full solution. So we're pursuing both those direct and indirect channels in ramping up the activities. Activities were slow for us and from what we gather for other participants in the market last year. It's, as you can imagine, a bunch of the segments in the market where some of the early interest within areas like hospitality, commercial real estate, and you can see why that probably didn't grow, but it's also -- it's early stage. So getting around, getting people to come in for product demonstrations, those kinds of things are much -- have been much more difficult. But we're driving forward without it. And we think that will start to get a little bit easier in terms of the activity this year. And so we just want to make sure we have the resources to really go after it.

So are the costs pretty much fixed in at this point, so just scale within this?

No. No. We're adding it as we go. So there's -- we're adding it on a monthly basis. Now of course, they'll get a time where we -- if you don't see the sales activity, you stop adding resources, right? So you've got to have the contract wins. But right now we're still in the cost buildup stage, which is why we pointed it out as part of our remarks.

And as far as your remarks about the backhaul for U.S. Telecom, are you seeing any other traction with the customers other than the current FirstNet contract?

Yes. Now in the -- not on a site-by-site basis just, but broadly we've been building in capability -- backhaul capability in the region, in our operating region, in and near, and we have been seeing some. But we're expecting to ramp that because we're still building a lot. But in the past, on a smaller level when we have added capabilities there, we've had a good track record of adding different revenue streams from wholesale to enterprise on new routes and capabilities. And these communities, these rural communities really need that. If you're referring to carrier backhaul, we think there will be that opportunity as well.

Okay. And my last question was just on Alaska, where once this deal closes, how will the reporting look like? And are you -- since you're consolidating it, is it going to be -- all the EBITDA will be associated with you or how are you going to be reporting all of this?

Yes. So it will be consolidated operations. And so yes, all the EBITDA would be shown. And then there's a minority interest back out.

And there are no questions at this time, sir. Turning it back to you, Mr. Benincasa.

Okay. Thank you, everybody, for listening in. And we look forward to updating you more after the first quarter. Take care.

And this concludes today's conference call. Thank you for participating. You may now disconnect.