Overview
We provide critical infrastructure-based communications and related information technology solutions to remote and historically underserved markets inthe United States ,Bermuda , and theCaribbean . We seek to invest in our existing and new markets for long term growth led by our Glass and Steel and "fiber first" strategies that enables us to bring new or enhanced communications services to markets often overlooked by larger telecommunications providers. At the holding company level, we oversee the allocation of capital within and among our subsidiaries, affiliates, new investments, and stockholders. We also have developed significant operational expertise and resources that we use to augment the capabilities of our individual operating subsidiaries in our local markets. 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 with greater economies of scale and expertise than would typically be available at the operating subsidiary level. We also provide management, technical, financial, regulatory, and marketing services to our operating subsidiaries and typically receive a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. We also actively evaluate potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, and generally look for those that we believe fit our profile of telecommunications businesses and have the potential to complement our Glass and Steel and "fiber first" approach in markets while generating steady excess cash flows over extended periods of time. We use the cash generated from our operations to re-invest in organic growth in our existing businesses, to make strategic investments in additional businesses, and to return cash to our investors through dividends or stock repurchases.
For further information about our financial segments and geographical information about our operating revenues and assets, see Notes 1 and 13 to the Consolidated Financial Statements included in this Report.
As of
Mobility Telecommunications Services. We offer mobile communications services
? and equipment ("Mobility") over our wireless networks to both our business and
consumer subscribers. In certain markets, mobility services also includes
private network services to business customers and municipalities.
Fixed Telecommunications Services. We provide fixed data and voice
telecommunications services ("Fixed") to both our business and consumer
? subscribers in all of our markets. These services include consumer broadband
and high speed data solutions for businesses. For some markets, fixed services
also include video services and revenue derived from support under certain
government programs.
Carrier Telecommunication Services. We deliver services ("Carrier Services")
? such as wholesale roaming, the leasing of critical network infrastructure such
as tower and transport facilities, site maintenance and international
long-distance services to other telecommunications providers.
Managed Services. We provide information technology services ("Managed
? Services") such as network, application, infrastructure and hosting services to
both our business and consumer customers to complement our Fixed Services in
our existing markets.
Through
? Mobility Services, Carrier Services and Managed Services to customers in
38 Table of Contents USVirgin Islands .
? and Managed Services to business and consumer customers in
western
Services and private network services to enterprise and consumer customers.
Renewable Energy. In
? commercial and industrial customers through
of International Solar Business for further details.
The following chart summarizes the operating activities of our principal
subsidiaries, the segments in which we report our revenue and the markets we
served as of
Segment Services Markets Tradenames International Telecom Mobility Services Bermuda, Guyana, US Virgin Islands One, GTT+, Viya Fixed Services Bermuda, Cayman Islands,
Carrier Services Bermuda, Guyana, US Virgin Islands One, GTT+, Viya Managed Services Bermuda, Cayman Islands, US Virgin Islands, Guyana Fireminds, One, Logic, GTT, Viya US Telecom Mobility Services United States (rural markets) Choice, Choice NTUA Wireless, Geoverse Fixed Services United States Alaska Communications, Commnet, Choice, Choice NTUA Wireless Carrier Services United States Alaska Communications, Commnet, Essextel Managed Services United States Alaska Communications, Choice
Renewable Energy (1) Solar India Vibrant Energy (1) See Disposition of International Solar Business for further details.
Acquisition of
OnJuly 22, 2021 , we completed the acquisition ofAlaska Communications Systems Group, Inc. ("Alaska Communications "), a publicly listed company, for approximately$339.5 million in cash, net of cash acquired, (the "Alaska Transaction").Alaska Communications provides broadband telecommunication and managed information technology services to customers in the state ofAlaska and beyond using its statewide and interstate telecommunications network. In conjunction with the Alaska Transaction, we entered into an agreement with affiliates and investment funds managed by Freedom 3Capital, LLC as well as other institutional investors (collectively the "Freedom 3 Investors"). The Freedom 3 Investors contributed$71.5 million in conjunction with theAlaska Transaction (the "Freedom 3 Investment"). The Freedom 3 Investment consists of common and preferred equity instruments in our subsidiary of which holds the ownership ofAlaska Communications . We accounted for the Freedom 3 Investment as a redeemable noncontrolling interest in our consolidated financial statements and we also entered into a financing transaction drawing$220 million on a new credit facility to complete the Alaska Transaction. As a result of theAlaska Transaction, we own approximately 52% of the common equity ofAlaska Communications and control its operations and management. Beginning onJuly 22, 2021 , the results ofAlaska Communications are included in ourUS Telecom segment. 39 Table of Contents
See Liquidity and Capital Resources for a discussion regarding the credit agreement used to help finance the Alaska Transaction.
COVID-19
We are continuing to monitor and assess the effects of the ongoing COVID-19 pandemic on our commercial operations, the safety of our employees and their families, our sales force and customers.
The preparation of the condensed consolidated financial statements requires us to make estimates, judgments and assumptions, which are evaluated on an ongoing basis, that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. 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 of COVID-19 as ofMarch 31, 2022 and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses, the carrying value of goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition. Our assessment of the impact of COVID-19 on our operations did not indicate that there was a material adverse impact to our consolidated financial statements as of and for the three months endedMarch 31, 2022 . However, future assessments of the impacts of COVID-19, as well as other factors, including the possible reinstatement of certain COVID-19 travel-related and stay-at-home restrictions, could result in material adverse impacts to our consolidated financial statements in future reporting periods. For example, we may experience difficulty in procuring network or retail equipment, such as handsets for subscribers, as a result of COVID-19 restrictions. Apart from possible government issued travel restrictions, we currently cannot assess how COVID-19 may influence subscribers' procurement behavior for services or how that behavior will impact revenues in the foreseeable future.
Disposition of International Solar Business
InJanuary 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 name inIndia (the "Vibrant Transaction"). The post-sale results of our ownership interest in Vibrant, representing 33% of Vibrant's profits and losses, will be recorded through the equity method of accounting within the Corporate and Other operating segment. We will continue to present the historical results of our Renewable Energy segment for comparative purposes. 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.
FirstNet Agreement
InJuly 2019 , we entered into a Network Build and Maintenance Agreement withAT&T Mobility, LLC ("AT&T") that we amended inAugust 2020 andMay 2021 (the "FirstNet Agreement"). In connection with the FirstNet Agreement, we are building a portion of AT&T's network for theFirst Responder Network Authority ("FirstNet") in or near our current operating area in theWestern United States . 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. Since inception of the project throughMarch 31, 2022 , we have recorded$48.8 million in construction revenue, including$2.0 million during 2022, and expect to record an additional$31.0 million to$36.0 million in 2022 as sites are completed. In 2022, we also expect to record additional costs of construction revenue, as sites are completed, that will approximate that revenue. Revenues from construction are expected to have minimal impact on operating income. 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. 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 40
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pursuant to a separate lease agreement for an initial term of 8 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.
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 are currently receiving revenue from the FirstNet Transaction and expect overall operating income contributions from the FirstNet Transaction to have a relatively steady impact going forward.
We recognize revenue from several government funded programs including the USF, a subsidy program managed by theFederal Communications Commission ("FCC "), and theAlaska Universal Service Fund ("AUSF"), a similar program managed by theRegulatory Commission of Alaska (the "RCA"). USF funds are disbursed to telecommunication providers through four programs: the High Cost Program; the Low Income Program ("Lifeline Program"); the Schools and Libraries Program ("E-Rate Program"); and the Rural Health Care Support Program. We also recognize revenue from the Connect America Fund Phase II program ("CAF II") which offers subsidies to carriers to expand broadband coverage in designated areas. UnderCAF II , ourUS Telecom segment will receive an aggregate of$27.7 million annually throughDecember 2025 and an aggregate of$8.0 million annually fromJanuary 2026 throughJuly 2028 . Both the USF and CAFII programs are subject to certain operational and reporting compliance requirements. We believe we are in compliance with these requirements as ofMarch 31, 2022 . In 2018, theFCC initiated a proceeding to replace the High Cost Program support received by Viya in the US Virgin Islands with a newConnect USVI Fund . OnNovember 16, 2020 , theFCC announced that Viya was not the recipient of theConnect USVI Fund award and authorized funding to be issued to the new awardee inJune 2021 . Pursuant to the terms of the program and effective inJuly 2021 , Viya's annual USF support was reduced from$16.4 million to$10.9 million . InJuly 2022 , this support will be reduced again to$5.5 million for the annual period throughJune 2023 . Thereafter, Viya will not receive High Cost Program support.
RDOF ("
We expect to receive approximately$20.1 million over 10 years to provide broadband and voice coverage to over 10,000 households inthe United States (not includingAlaska ) under the 2020 Rural Digital Opportunity Fund Phase I Auction ("RDOF"). We recorded$0.5 million of revenue from the RDOF program in the three months endedMarch 31, 2022 . 41 Table of Contents Construction Grants
We have also been awarded construction grants to build network connectivity for eligible communities. The funding of these grants, used to reimburse us for our construction costs, is distributed upon completion of a project. As ofDecember 31, 2021 , we had been awarded approximately$27.9 million of such grants. We were awarded$0.4 million of additional grants and cancelled$2.1 million of previously awarded grants during the three months endedMarch 31, 2022 . Of this$28.3 million of awards, we have completed our construction obligations on$15.0 million of these projects and$11.2 million of such construction obligations remain with completion deadlines beginning inJuly 2022 . Once these projects are constructed, we are obligated to provide service to the participants. We expect to meet all requirements associated with these grants.
CBRS Auction
During the third quarter of 2020, we participated in theFCC '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 throughoutthe 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.
Presentation of Revenue
EffectiveJuly 1, 2021 , we began to categorize Mobility revenue and Fixed revenue as either "consumer" or "business" based upon the characteristics of our subscribers. EffectiveOctober 1, 2021 , the Company's statement of operations separately reflects Construction Revenue. All periods presented have been adjusted to conform to these presentation updates.
Presentation of Operating Expenses
EffectiveJanuary 1, 2021 , we changed our presentation of operating expenses in the Condensed Consolidated Statements of Operations by combining the previously disclosed Termination and Access Fees with Engineering and Operations as the newly represented Cost of communications services and other. In addition, the previously disclosed Sales, Marketing and Customer Service expenses are now combined with the previously disclosed General and Administrative expenses within the newly represented Selling, General and Administrative expenses. The change in presentation was made to better align our results with industry standards. Cost of construction services continues to be broken out separately and all depreciation and amortization continues to be shown separately. 42
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