By:
Jack Kitzinger, AIM student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Atlantic Tele-Network (NASDAQ:ATNI) provides telecommunications
services to rural markets, mainly in the U.S., Guyana, and Bermuda.
• ATNI provides both
connectivity and roaming services as well as voice and data services in the
Caribbean.
• Pressure continues on
small-cap telecom companies in the U.S. because of the power of the big 4
(Verizon, AT&T, Sprint, and T-Mobile).
ATNI is attempting to acquire
more interest in the Caribbean (Bermuda, Cayman Islands, and the U.S. Virgin
Islands).
• ATNI continues to grow in the
renewable energy market (namely solar).
Key
points: Atlantic Tele-Network has been a strong preforming small-cap
telecom over the past few years. They have found a niche market in providing
services to rural areas and Caribbean islands. This is the most important part
of being able to outperform in a market dominated by the four large national
telecoms in the U.S. However, the power of these companies have been growing,
putting downward pressure on the pricing these small cap companies can sell
their products at. Thus, in order to
keep these contracts, ATNI negotiated reduced rates to have extended contracts
with these companies. This led to a decreased revenue in fourth quarter of 2015
compared to 2014.
One way that ATNI has attempted
to decrease the effect of these large customers is to diversify their business. In late 2014 ATNI acquired Green Lake Capital
LLC and transitioned it to Ahana Renewables, a renewable energy company who
provides solar power to customers in Massachusetts, California, and New Jersey.
On March 8th, bought Armstrong Energy Global, a developer and owner
of Indian solar farms. India is a quickly growing economy that has a deficit in
energy.
The other diversification is to
continue to increase their presence in the Caribbean. ATNI is waiting to close a deal to acquire a
controlling interest in KeyTech Bermuda and Innovative companies with services
in the U.S Virgin Islands. These will offset the issues of operating in the
U.S. The diversification into these different markets will keep ATNI able to
contend with competitors in a market with high capital requirements where scale
greatly helps a company compete.
What
has the stock done lately?
Since the beginning of the
year, ATNI is down from its price of $78.23 to its current price of $73.11.
This is a decrease in 6.5%. Much of that decrease came from missing EPS and
Sales for Q4. The stock price went down 9.8% in two days. Since then, the stock
has appreciated to its current $73.11 price.
Past
Year Performance: ATNI was pitched on March 5, 2015 with a price
target of $84.98. It closed on that date at $66.90. Over the last year, the stock appreciated up
to $83.48 (24.8%) in October, however it has depreciated back to $73.11 since
after two quarters of missed EPS. Overall, this is an increase in 9.3%.
Source:
FactSet
My
Takeaway
In a difficult Telecom
environment, ATNI is a stable, long-term investment. As a whole, the company
has a strong niche environment in the Caribbean. Because of the difficulties
that these small providers have in the U.S. environment, the best way to help
lower risk is to diversify into other countries and businesses. ATNI has
attempted to do both of these and looks to be in a good competitive environment
to be outperform the rest of the small-cap telecommunication companies based in
the U.S.
