Parent company reports $140M drop in GT&T wireless revenue

Atlantic Tele-Network, Inc. (ATN) with an 80 percent share in Guyana Telephone and Telegraph Company (GT&T) has reported that its wireless revenue in Guyana has declined by US$0.7 million ($140M) owing to increased competition.

The competition, which comes from its rival Digicel, an Irish-owned Caribbean mobile operator, led to a decrease in GT&T’s wireless customer base to approximately 248,000 subscribers as of December 31, 2008 from 328,000 at December 31, 2007 and 273,000 at September 30, 2008. This represents a drop of 24.3%.

A press release on Wednesday from ATN which is headquartered in Salem, Massachusetts quoted CEO Michael Prior as saying, “In Guyana the wireless results were disappointing. While the continued loss of subscribers was mainly composed of low-value subscribers, wireless revenues declined significantly in that market. We believe we have the better network and offer better value, but we still need to convince more consumers of that.”

Bypass activity

However, Prior said that more importantly 2008 saw a marked increase in international bypass activities in Guyana as they took additional actions to stem that activity which not only robbed GT&T of revenue and profit but also significantly reduced the government’s VAT and income tax collections.

While acknowledging that governmental authorities had made some effort to assist, the ATN CEO declared, ”We have yet to see a major reduction in bypass activity.”

The release disclosed that international long distance revenue, all of which is generated by GT&T, was US$11.1 million in 2008, a decrease of US$2.2 million, or 17%, from US$13.3 million in 2007.

This decrease is believe to be primarily a result of a considerable increase in illegal bypass activities in the quarter, resulting in lost revenue opportunities and an overall reduction in call volume into Guyana as an outcome of the current worldwide economic slowdown, the release stated.

Meanwhile, operating income declined by US$4.8 million or 24%, from US$20.3 million to US$15.5 million for the quarter and this was due in part to the decrease in Guyana’s international long distance revenue as well as the addition of the early stages businesses of ION and IslandCom.

According to results for the year ended December 31, 2008,  revenue was US$207.3 million, an increase of US$20.6 million, or 11%, as compared to revenue of US$186.7 million for the year ended December 31, 2007. Net income was US$34.8 million for the year as compared to US$37.9 million for the same period in 2007, a decrease of US$3.1 million, or 8%. On a per share basis, net income declined by 8% to US$2.28 per diluted share from US$2.48 per diluted share for the year ended December 31, 2007.

And revenue for the quarter was US$55.4 million, an increase of US$5.8 million, or 12%, as compared to revenue of US$49.6 million for the quarter ended December 31, 2007. Net income was US$6.6 million for the quarter as compared to US$12.6 million for the same period in 2007, a decrease of US$6.0 million, or 48%. On a per share basis, net income declined by 48% to US$0.43 per diluted share from US$0.82 per diluted share for the quarter ended December 31, 2007.

The release also said that local telephone and data revenue grew to US$13.3 million compared to US$12.5 million in 2007, an increase of 6%. Sovernet’s local telephone and data revenue increased US$0.9 million, or 24%, to US$4.6 million from US$3.7 million in 2007 and this increase was mainly due to Sovernet’s acquisition of ION.

In the meantime, ATN’s Guyana subsidiary saw a slight increase in its local telephone and data revenue as access lines increased from 132,000 lines to 139,000 lines, or 5%, but  these increases were offset by a decrease in data revenue at the Virgin Islands subsidiary.

According to Prior, “The results for the quarter and the year were mixed. We are happy with a number of strategic moves we made to position ourselves for continued growth of our businesses.

We invested nearly US$40 million in acquiring or increasing our stakes in operational businesses and an estimated additional US$40.0 million expanding and upgrading our existing networks. With a robust balance sheet and belief in our strategy and team, we looked hard for new investment opportunities.”

However, the ATN CEO noted that before the severe market drop in the last third of the year, they  found valuations for later-stage and larger businesses to be too high and invested instead in two, small early-stage businesses,  the fibre backhaul business in upstate New York and the wireless business in Turks and Caicos, which fitted well with ATN’s existing operations.

While these investments had a negative near-term impact, it is expected that  both will be positive contributors to cash flows in 2010, the release added.

Striking a note of optimism, ATN said that with its net cash position, large recurring cash flows and the larger debt facility they closed just prior to the collapse of the credit markets, it is felt that they are well positioned to make further strategic investments, but will continue to take a long-term view and maintain strict investment parameters in terms of value, strategic fit and risk.

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