We provide critical infrastructure-based communications and related information
technology solutions to remote and historically underserved markets in the
United States, Bermuda, and the Caribbean. 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 March 31, 2022, we offer the following types of services to our customers:
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
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 March 31, 2022, we have identified three operating segments to manage
and review our operations and to facilitate investor presentations of our
results. These three operating segments are as follows:
International Telecom. In our international markets, we offer Fixed Services,
? Mobility Services, Carrier Services and Managed Services to customers in
Bermuda, the Cayman Islands, Guyana and the
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US Virgin Islands.
US Telecom. In the United States, we offer Fixed Services, Carrier Services,
? and Managed Services to business and consumer customers in Alaska and the
western United States. In the western United States, we also provide Mobility
Services and private network services to enterprise and consumer customers.
Renewable Energy. In India, we provided distributed generation solar power to
? commercial and industrial customers through January 27, 2021. See Disposition
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 March 31, 2022:
Segment Services Markets Tradenames
International Telecom Mobility Services Bermuda, Guyana, US Virgin Islands One, GTT+, Viya
Fixed Services Bermuda, Cayman Islands,
Guyana, US Virgin Islands One, Logic, GTT, Viya
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 Alaska Communications
On July 22, 2021, we completed the acquisition of Alaska 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 of Alaska 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 3 Capital, LLC as well as
other institutional investors (collectively the "Freedom 3 Investors"). The
Freedom 3 Investors contributed $71.5 million in conjunction with the Alaska
Transaction (the "Freedom 3 Investment"). The Freedom 3 Investment consists of
common and preferred equity instruments in our subsidiary of which holds the
ownership of Alaska 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 the Alaska
Transaction, we own approximately 52% of the common equity of Alaska
Communications and control its operations and management. Beginning on July 22,
2021, the results of Alaska Communications are included in our US Telecom
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See Liquidity and Capital Resources for a discussion regarding the credit
agreement used to help finance the Alaska Transaction.
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 of March 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
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 ended March 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
In January 2021, we completed the sale of 67% of the outstanding equity in our
business that owns and operates distributed generation solar power projects
operated under the Vibrant name in India (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
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.
In July 2019, we entered into a Network Build and Maintenance Agreement with
AT&T Mobility, LLC ("AT&T") that we amended in August 2020 and May 2021 (the
"FirstNet Agreement"). In connection with the FirstNet Agreement, we are
building a portion of AT&T's network for the First Responder Network Authority
("FirstNet") in or near our current operating area in the Western 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 through March 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
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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.
Universal Service Fund and Connect America Fund Phase II Programs
We recognize revenue from several government funded programs including the USF,
a subsidy program managed by the Federal Communications Commission ("FCC"), and
the Alaska Universal Service Fund ("AUSF"), a similar program managed by the
Regulatory 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. Under CAF II, our US Telecom segment will receive an aggregate
of $27.7 million annually through December 2025 and an aggregate of $8.0 million
annually from January 2026 through July 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 of March 31, 2022.
In 2018, the FCC initiated a proceeding to replace the High Cost Program support
received by Viya in the US Virgin Islands with a new Connect USVI Fund. On
November 16, 2020, the FCC announced that Viya was not the recipient of the
Connect USVI Fund award and authorized funding to be issued to the new awardee
in June 2021. Pursuant to the terms of the program and effective in July 2021,
Viya's annual USF support was reduced from $16.4 million to $10.9 million. In
July 2022, this support will be reduced again to $5.5 million for the annual
period through June 2023. Thereafter, Viya will not receive High Cost Program
RDOF ("Rural Digital Opportunities Fund")
We expect to receive approximately $20.1 million over 10 years to provide
broadband and voice coverage to over 10,000 households in the United States (not
including Alaska) 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 ended March 31, 2022.
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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 of December
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 ended March 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 in July 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.
During the third quarter of 2020, we participated in the FCC's Citizens
Broadband Radio Service (CBRS) auction for Priority Access Licenses (PALs) in
the 3.5 GHz spectrum band. These PALs are licensed on a county-by-county basis
and are awarded for a 10-year renewable term. We were a winning bidder for PALs
located strategically throughout the United States at a total cost of
approximately $20.4 million. In connection with the awarded licenses, we will
have to achieve certain CBRS spectrum build out obligations. We currently expect
to comply with all applicable requirements related to these licenses.
Presentation of Revenue
Effective July 1, 2021, we began to categorize Mobility revenue and Fixed
revenue as either "consumer" or "business" based upon the characteristics of our
subscribers. Effective October 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
Effective January 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.
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