ATN International Inc (ATNI) 2008 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Atlantic Tele-Network conference call. During the presentation all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. (Operator Instructions). As a reminder, this conference is being recorded Thursday, March 5, 2009. I would now like to turn the conference over to Justin Benincasa, Chief Official (sic) Officer. Please go ahead.

I may be official, but thanks. Good morning, everyone, and thank you for joining us on our quarterly investor call as we review our fourth-quarter and full-year results. With me here as usual is Michael Prior, ATN's President and Chief Executive Officer. During this call I'll be covering the relevant financial information for the quarter and Michael will be providing the operational updates.

Let me first start with the cautionary language concerning forward-looking statements. This call may contain forward-looking statements concerning our goals, beliefs, expectations, strategies, objectives, plans, future operating results and underlying assumptions and any other statements that are not of historical facts.

Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including the factors referenced in the earnings press release issued yesterday and those described in Item 1a Risk Factors in our Form 10-K for the year ended December 31, 2007 and in our other SEC filings. We undertake no obligation to update the information contained in this call to reflect subsequently occurring events or circumstances.

So now let me talk a little bit about the financial performance for the quarter. As we mentioned in our press release, the fourth quarter had mixed results. On the positive side we were very pleased that our US rural wireless business finished its year at just over $70 million of revenues and continued strong operating margins. However, on the negative side, Guyana revenues were down from 2007 as we continue to believe that long-distance traffic into Guyana is being impacted by a bypass in the current global economy.

During the fourth quarter we generated revenue of $55.4 million, up $5.8 million or 12% from the same quarter in 2007. Wireless revenue was $30 million for the quarter, up $7.2 million or approximately 32% compared to Q4 2007. Local telephone and data revenue totaled $13.3 million which was an increase of $800,000 or 6% and international long-distance revenue was $11.1 million compared to $13.3 million in 2007 which is a decline of 17% primarily reflecting, we believe, the bypass activities.

For the full year 2008 total revenues grew over 11% from $186.7 million in 2007 to $207.3 million. Wireless revenue was the largest contributor to that growth increasing from $83.5 million in 2007 to $105 million in '08, an increase of $21.5 million or 26%. As we noted in the past, we began consolidating our Bermuda wireless business in the second quarter of this year after we increased our ownership percentage. This consolidation accounted for approximately 14.1 of the year-over-year change -- $14.1 million.

Operating income for the quarter totaled $15.5 million which was down from $20.3 million from the same quarter in 2007. In addition to the net positive one time items that were in our 2007 numbers that were noted in the press release, the major factors behind the decrease in 2008 that we think are worth noting were -- first, we incurred approximately $1 million of legal and related expenses this quarter pursuing an acquisition that never materialized.

Second, we had operating losses of approximately $1 million related to ION in Turks and Caicos which were the early-stage businesses we purchased in the second half of the year we mentioned earlier in our last the third quarter. And last, we had an additional $1 million of depreciation and amortization expense primarily related to our Commnet network expansion.

Non-cash stock-based compensation expense was $222,000 for the quarter. Net income for the quarter declined by approximately 48% from $12.6 million in the fourth quarter of 2007 to $6.6 million this quarter, giving us earnings per share of $0.43 compared to $0.83 in 2007.

Turning to capital expenditures, capital expenditures totaled approximately $12.1 million for the quarter and $46.7 million for the year which was in line with our expectations. Commnet, our US rural wireless business, spent about $8.2 million of the $12.1 million this quarter and Guyana accounted for $2.6 million which made up the majority of the balance.

In the fourth quarter Commnet completed 33 new base stations which, along with the purchase of 46 new sites in Nevada from CC Communication, put the final 2008 numbers at 473 base stations and 365 cell sites. The total increase in base stations from 2007 breaks down as follows -- we had 165 new base stations built, 46 acquired base stations and 41 decommissioned.

Capital expenditures in Guyana ended the year at approximately $16.3 million which included $4.5 million towards the first stage of construction of the submarine cable into Guyana and approximately $6.5 million of continued expansion spent on continued expansion of our wireless network.

Looking ahead into 2009 we expect capital expenditures, not including the additional cost of the cable, to be slightly less than 2008 and to be in the $40 million to $45 million range. We also anticipate spending an additional $10 million to $15 million on the submarine cable and related projects in 2009 with the balance of between $5 million and $10 million on the cable being spent in 2010.

Turning to the balance sheet, as of December 31, 2008 we had cash balances of $82.6 million which includes approximately $2.9 million of longer-term certificates of deposits that are accounted for in other assets. Our $75 million term loan continues to be the only debt we have outstanding leaving us with a net cash position of a little over $7.5 million.

Lastly to give some of the segment information in advance of the 10-K filing, segment revenue and operating results for the quarter were as follows -- our rural wireless segment had revenues of $18.8 million and operating income of $9.2 million, which included $2.7 million of depreciation and amortization; and international integrated telephony generated revenues of $23.8 million and produced operating income of $10.1 million which included $4 million of depreciation and amortization.

Our Island segment which includes Bermuda and Turks and Caicos, had revenues of $6.1 million, operating income of $331,000 and depreciation and amortization expense of $883,000. The domestic telephony segment had revenue of $4.6 million, operating losses of $204,000 and depreciation expense of $705,000. Wireless television and data revenue was $2.1 million, had an operating loss of $592,000 which included depreciation expense of $319,000. And with that let's turn the call over to Michael to give you an update on operations.

Thank you, Justin. Good morning, everybody. Before I get into the operational discussion I'd like to say a few words about 2008 and our sense of 2009 and beyond. In general 2008 was fairly successful for ATN and our performance, aside from the stock market performance, was in line with our expectations. As Justin mentioned, the quarter and year were impacted by our investments in two earlier stage companies and some extra expense transactional fees.

If you're truly disciplined in your deal approach, which we pride ourselves on being, you sometimes have to deal with those costs rather than push an investment that falls outside your requirement. However, we were happy with all the moves we made from Nevada to ION to Turks and Caicos. Here we refer to them as solid singles and if you expand that metaphor, if you're a baseball fan you know you can score a lot of runs if you bunch hit.

Organically we had a positive surprise with the rapidity and quality of the Commnet buildout. We had a negative surprise with the scope of bypass activities in Guyana. But we remain a very financially strong and strategically well-positioned company in my view. Many of the approaches we've stuck to and have been occasionally criticized for in the more heated markets I think look even better in hindsight after the market drop.

We've avoided high leverage; we've avoided investing in assets that while priced well within market didn't look attractive to us based on the fundamentals. We try very hard to make decisions on the basis of returns over time, not what is sexy or hot or what will give your stock or earnings a short-term charge. And that was, I think, a somewhat a [hieratical] view amongst the top people in public companies in recent years and hopefully for all investors that's changed.

But at the same time we're not patting ourselves on the back or smugly sitting back. This is a tough environment, we don't feel that there's any direct dramatic downside to us of the recession, but we share everybody's general concern for the severity of the distress and in the long run nobody will be untouched if the global economy continues to weaken and fails to rebound.

After that let me now move on to the usual operational statistics and details. First, on wireless. Our rural wireless business, the biggest part of this segment, we generated about $121 million MOUs in the US for the quarter. That compares to about $104 million in the fourth quarter of 2007 and that's a 16% increase despite the sale of 59 base stations in late December '07.

The growth in minutes volume is the result of a large year-long buildout of new base stations and Justin gave you those numbers a few minutes ago. On a consecutive quarter basis minute volumes declined by about 8% and that's the typical seasonal strength of the third quarter without dramatic expansion of network, that's something we expect to see in this rural wireless business every year.

We do not expect our base stations to increase at quite this pace in 2009, although, as we've said before in response to questions and generally, the actual amount may differ from expectations as we continually evaluate the market opportunities for this segment and we pride ourselves on being able to move very quickly when we see those opportunities. Investors should also keep in mind for this segment that there are some scheduled rate reductions that will reduce the rate of revenue growth for the full year.

Moving on to the next biggest piece of wireless in Bermuda, subscribers ended the quarter a bit above 20,000 and that's up slightly from a year earlier as well as on a consecutive quarter basis. The BlackBerry launch helped pick up subscribers, but the launch did not -- we didn't have a hard launch as soon as we wanted to because of issues, technical issues, with the European roaming arrangements. And so once we were able to get those solved it was fairly late in the year and so we're hopeful that will help this year.

Turks and Caicos should also, of course, add to the subscriber count in coming quarters, but we think that will be small in 2009. We're going to concentrate on putting in a really high quality full coverage network and that's the main objective for that business in 2009. And we also are launching UMTS in Bermuda. That's really driven by demand from the corporate community and others, and so we will be a rare dual 3G carrier in that market.

Next is the wireless business in Guyana. Our prepaid subscriber business in Guyana continued to decline, as Justin mentioned; ended the quarter about 250,000 subscribers compared to 330,000 at the end of 2007, that's a 25% decline. The hit to profitability was not as significant because subscriber movements in that market right now are heavily influenced by phone giveaways and subsidies and, again, it's 95%, 98% prepaid, a very high portion prepaid. We do not match our competitor blow for blow on that front because we think the money could be spent better elsewhere.

Moving on to the other elements of our business in Guyana, local and international. On the access lines we ended the year with 139,000 access lines, that compares to 132,000 a year ago, a 5% increase. But as we've cautioned before, given the very low local rates and other capital spending priorities, we do not currently expect to continue adding access lines at that rate going forward. And I think you saw during the year the rate decline a bit as an indication of that.

As to Guyana's international long distance business, traffic declined by 11%. This was discussed maybe ad nauseum in our press release and in Justin's comments, but it is important. We did receive some assistance from the government late in the quarter where the government is forcing the illegal Internet cafe operators to shut down because not only -- and I think the government's concern was more on the revenue side. Because not only did they lack a telecommunications license, but they are not collecting that or, we believe, other taxes and fees. So when you compare that to what GT&T does, there's a very direct and significant loss of revenue for the government.

But in turn, we recognize market realities that we recognize the markets we're in and the demographics, and so what we are doing now is we've been testing a program for the last couple months now to provide high-quality private line wholesale VoIP minutes to those operators which would allow them to stay in business legitimately and serve that segment of the market's needs. But even with that we have hopes that that will work out well, but there are still other underground activities on the bypass front and we have to take other measures and review other options to deal with those.

Turning to New England, our local telephone and data business there, we ended the quarter with about 37,000 business lines, that was an 11% increase year on year and consistent with the recent quarters. Although part of our group for less than two quarters, ION, which is the fiber business, long-haul fiber business and rural fiber business in New York State, performed in line with fairly optimistic expectations we had at the time of our investment and we think it has the potential to do more and better in 2009.

All of [Silver Net], ION and Commnet are also looking hard, and I would add Choice as well in the Virgin Islands, are looking hard at the stimulus spending to see where we can partner with the government, governmental agencies, to extend our rural networks into further underserved areas. There are a lot of people obviously paying attention to this right now, but we feel we're in a good position because we're actually a company that has already pushed hard into these areas. We've got a real track record and I think credibility and reputation with the local politicians and customer base. And so we'd like to be a leader in those areas on these subsidized initiatives as well.

Lastly, in the US Virgin Islands our wireless broadband subscriber base grew by 35% year on year. Believe it or not, that was actually reduced in terms of potential because of off island capacity limitations. We were able to solve that problem recently in the first quarter of this year and so we expect to see continued subscriber growth in 2009, particularly later in the year. Okay, operator, I think that's it for the scripted portion and we'll take some questions, please.

(Operator Instructions). Rick Prentiss, Raymond James.

Good morning, guys. A couple questions. First, on the Commnet side, I think you mentioned you have the scheduled roaming rate cuts coming up in '09. Can you remind us which month those come in or which quarter just so we can keep an eye on it and if there's any kind of a ballpark --?

We had some rate reductions during the year in '08. So those -- some of those happened in mid '08, so those will be reflected right away first quarter on first quarter and second quarter on second quarter. And I think there's another one -- there's a scheduled rate reduction I think in the second quarter, early second quarter of '09 and that should be it in terms of significant (multiple speakers).

Okay. And do the rates go by carrier or is it by location instead of by carrier? I'm just trying to think --.

It's generally by carrier. The big carriers we negotiate long-term agreements, we renewed one multiyear agreement with one of the big carriers middle of last year and we're almost done with renewing one with another that would take effect this year. I think our relationships there continue to be good. I think we believe that the carriers appreciate what we're doing and the relationship is good. But of course they have pressures on their business and so we feel some of that as well.

And then on the UMTS overbuild in Bermuda, can you walk us through what exactly do you need to put in place? Is it switching equipment then as well as base station equipment? What kind of cost you think it will be to do the overlay either in dollar terms or in per POP terms?

The cost is already reflected in those 2008 numbers, Rick. So all the cost is in there. I don't have my finger on the exact number now, but it is a full parallel network other than sites. So there's really -- other than backhaul and some of the same tower sites it really doesn't utilize anything of our existing EVDO network.

So most of the CapEx related to that we already incurred. Now they're just engineering and tuning.

It's just fine tuning the testing and the launching and that's imminent. So all the key equipment was in last year.

Okay. And you mentioned there were carriers -- some of the similar carriers that you deal with, I guess, on the Commnet side that were wanting to see UMTS show up there in Bermuda?

Yes, I think in general that that's right. I think the carriers in US and Europe that have gone to 3G in places like Bermuda; they'd love to be able to continue the 3G experience for their customers. So that's part of it. But really for us it's driven more by local customer, local market demand.

Okay, so it's not so much that say an AT&T or a T-Mobile wanted to see it down there; you really do believe it's more local driven?

We really do believe that. Our operations down there, which operates under Cellular One, continues to win awards -- best telecommunications provider, best customer care -- but there was an area, particularly in the corporate level, that we weren't able to serve, particularly if they went to Europe a lot. CDMA just doesn't work, we have a world phone but it's not the same. So it's the same thing that drove the BlackBerry launch has driven me UMTS launch and we've always been a technology leader there. So if we were going to launch something on the GSM side we weren't going to use yesterday's technology.

I guess the final question I've got for you is obviously you had the $1 million or so in legal and other fees for the bus dev that didn't pan out. Just curious -- first, what would cause a company going into bankruptcy not to want to get bought? Was it pricing, was it just you guys didn't get comfortable with it? Which side kind of walked away and why from the deal?

And as you look out there, obviously we're all experiencing a pretty historically unprecedented almost crazy market on the equity side. You would think seller expectations would be kind of coming back in line with reality. What are you seeing out there as far as future M&A and what seller expectations are looking like?

I don't want to get too much into a blow-by-blow of that deal. I would say there it's always hard to say who walked away if you reach an impasse. But I think that was a special situation with a lot of risks and I think we absolutely were going to move off a certain number we felt. But we're not sure that that really mattered in the end. So it had a lot to do with some of the creditors and so on in that bankruptcy situation -- and just whether they were really able to execute a true sale.

But in terms of the market in general, I think, Rick, it's a little too soon to be sure. I think that there are -- the longer this goes on the more people will have to adjust their sites and if they've got some balance sheet issues they will need to do deals. And I think we've seen some of that, but then there are others who still hope -- who are going to hunker down and last as long as they can who'd like liquidity, but if they can they're hopeful that multiples will return somewhere close to where they were.

I'm not sure we think that's right, but it may take a while for that to ripple through. But I think we do -- I mean, sitting there obviously with our balance sheet, we kind of said this third quarter last year we kind of this environment should play to our competitive advantages right now.

Very good. Thanks, guys.

Bruce Baughman, Franklin.

Thank you. Could you -- I guess this issue of the bypassing Guyana has been aired before, but would you mind going back and fleshing out the mechanics of how the bypass happens and what you would like to see the government do that it's not already doing to address the situation?

I don't want to be -- build a bomb on television, so I'm not going to get too technical. But there is -- the basic bypass is various ways of using VoIP, right? Now we have an exclusive license for both VoIP and data. And we actually have the technical means to block both, identify VoIP as well as voice. But people can buy VSAT, stay outside our network and try to compress and put a whole lot of traffic over a VSAT thing. Now the quality is very poor, it's poor for a couple reasons.

To make a -- satellite expense is very expensive and to make it work they pack in a tremendous amount of bits into their pipe and that can result in all kinds of issues with VoIP -- jitter, latency and so on and of course you have the latency from the satellite. And then a lot of these operators are using things like what they call SIM banks which uses SIM cards and GSM through the satellite to try to mask it and try to make calls look local when they connect them through to the local network providers.

So there are various ways to do it. Most of them we can identify and if we were able to go -- move very quickly in court or have the government go down and say you have a VSAT but you're not licensed and shut them down, they could be shut down so that it's a much reduced number. I don't think there would be zero, but the government really had done very little, until they really understood the revenue loss. It really was a case of that's your problem. So that's one issue.

The second issue is just political which is you just have to -- you don't want to be the 800 pound gorilla all the time, so you have to pick your battles and you have to decide where you go after people and where you don't. So that's why we designed this plan that I talked about for those Internet cafe owners. Did that answer your question?

Well yes, but do you feel that the problem is mostly through the Internet cafe operations?

I think that was part of it. I think there are possibilities of -- there are possibilities of another channel which I'd rather not name for legal reasons.

Okay.

But I don't know whether that channel -- how significant that channel is, but I think the Internet cafes are certainly the most visible part of it.

Let's say -- let's presume that the other channel that -- is a problem, is there a way to address it?

There is a way to address it, a potential way to address it. Whether it will be successful or not we'll have to see. But there's going to the courts and forcing action on the part of the government to shut the channel down. But that won't necessarily give us a quick solution even if we're successful.

Okay. Then this is my last question, but in passing, since I don't really have a grounding in these technical issues, is this anything like Skype, what's happening?

Well, no. Skype is part of it. When you talk about bypass there's a variety of things. Bypass can include just shifting to other means. Email in a way is a form of a voice bypass, but it's totally legitimate and Skype is part of what some of those café owners and others would be using, is something like Skype. And people may be using that at home, but the number of people with a broadband connection at home in Guyana is relatively small because it is a relatively small PC penetration in that market today. But somebody is using Skype the chances are they're a customer of ours on broadband data. So it's not as damaging.

Okay. And then finally, does this element of bypass, to the extent it persists as a problem, does it affect the economics of the submarine cable?

Sure. I mean, ultimately any revenue flow internationally affects the economics of the cable. So that bypass clearly affects the VoIP economics and that's one of the concerns we've talked to the government about. I think the government recognizes the importance of the cable for the country and for future development and we do too. I mean, we are still committed to the cable.

We think in the long run data will grow in Guyana and PC penetration will grow in Guyana as it has everywhere else. And we'd love to help stimulate that and speed the growth of that technological development in the country. And I think long term that's what we see the cable doing. We see it participating and helping stimulate what -- economic growth and technological growth in the country.

Okay, thank you.

Hamed Khorsand, BWS Financial.

Good morning. Just wanted to get some understanding, what kind of revenues are we looking at from the Nevada acquisition?

I don't think we have given that number, Justin, have we?

No. But it is 50 base stations.

Are you planning to add more base stations during the year?

We will probably add more during the year, yes, and I don't have an exact number to hand, but we will add more. I don't know that the number is hugely more, but everywhere we go we look hard at improving the coverage and expanding it, and our guys pride themselves on being able to do that well. So I'm sure -- I know we will add to that number this year.

Okay. On the [Silver Net] or your domestic revenues, quarter-over-quarter there was a nice increase. It went from $4.1 million to $4.6 million, but you ended up generating a lower EBITDA and actually posted an operating loss for the segment. Could you explain what happened there operationally?

Yes, Hamed, that is the ION factor coming into play there. ION is -- it it's an up and running business; it's got revenue. So it's contributing to the revenue growth, but it is still an operating loss at this point.

Okay, how many --?

(multiple speakers) Say again?

I was going to ask how many fiber lines were connected with ION?

I don't think we look at it that way. I think there are now four rings interconnected with the commodity routes, the interstate routes, if you will, in New York State, and I believe the number is about 2000 kilometers; true route miles, not fiber miles, not multiplying the strands by the miles but true miles covered. It is a pretty big network. It covers most of Upstate New York, and that is a very big area.

Okay. Could you provide a little bit more insight into what kind of OpEx should we expect going into '09? If we take out the $1 million of legal expenses, is everything else pretty steady or should we see some improvement in operating losses in your segments?

I think you are going to see -- take out the million dollars, I think you will see pretty much to a certain sense steady state, maybe a little bit better in there. The fourth quarter included a few items that were just small, not really worth noting. But I think we think the impact of ION will get better, probably not until late in the second half part of the year.

And in Turks and Caicos, it's relatively small, but that is probably the same scenario. Towards the end of the year, it will get better, but I think in the early first couple of quarters of '09, the kind of drag of the million-dollar range that we laid out in this quarter will be continual.

Okay. On the fiber line, the submarine line that you are setting in Guyana, it looks like you guys are going -- doing this alone instead of partnering with anyone. Is there a financial benefit with that? Are you able to expand upon your revenues with that new line?

We actually are partnering with Telesur, which is the incumbent telephone company in Suriname, which is the country to the east of Guyana. And we are interconnecting with two separate long-haul submarine fiber networks I believe in Trinidad, so we are working with others. But in terms of -- we have the capital and we felt it was the right long-term investment to make. So there really wasn't anyone else building a big cable that was planning on landing in Guyana, so we had to push the market along.

There is always people talking about things like that in the cable business, but if you know the submarine cable business, talk doesn't mean much. They talk about landing just about everywhere for years and years and years, and it became clear that we need to make it happen.

But just to be clear there too, the capital outlay for that whole project between us and Telesur is a lot more than our $24 million. So that is just our portion of it that we are paying for.

Okay. Thank you.

Chris King, Stifel Nicolaus.

Good morning. Just a couple of quick questions for you. First of all, just was wondering to the extent that the bypass issue in Guyana is a focal point or not, I guess, of kind of the broader government negotiations with respect to your long-distance license in the country.

Secondly, also on Guyana, just was a little curious as to strategically how you think about the wireless business there longer term? You guys obviously said that you weren't going to follow the uneconomic pricing that your competitor has put in place there. Do you think it is more of a marketing issue that you guys need to focus on going forward, or is it something else?

Then lastly, just real quickly to follow up on Rick's question on the M&A front. With valuations having come in really globally, you guys are obviously currently allocating more capital to the US operations of particularly Commnet than you were the international business. But you have made a couple of nice acquisitions certainly in both over the last year or so. Do valuations seem more attractively, or have they come in in your mind a little more internationally, I guess, than they have in the US, or has your geographic focus over the last several quarters shifted in any way? Thanks.

Sure. First, on the international bypass and affecting the sort of exclusivity discussions, I think was the first part of your question, I think -- it is hard to say. I mean, it is really hard to say how that affected. I guess in one way it shows a little bit -- some of that loss of international revenue kind of gives you an indication of how it flows through were exclusivity to change.

So I guess to some extent, there is that phenomenon, but in terms of how it affects the talks, I don't think so. I think the government gets it on the revenue side and they get it on the quality side. The other problem with bypass operators is it is a small country, Guyana, and if people make calls to Guyana and have hard times getting through or the quality is bad, they assume that is a reflection of the telecommunications infrastructure in the country. So that reflects poorly on both us and the government, and it is not true. It's simply a grey market operator and a wholesaler sending traffic that way.

So I think to some extent, it helps the government understand what is at stake, so maybe that is helpful, but beyond that it is hard to say.

As to the Guyana cellular or wireless market dynamic, I think you sort of said the answer in your question. I think it is marketing. We actually believe that we have the better network. We believe that the average bill is lower. We tend to have lower everyday rates and they have more promotions and giveaways. But they are very good at it, so we have had to get better at that too. And I think we still have room to improve on the marketing side.

But I think there are basically two national networks, us and our competitor, and I think if we see the financials, if we see the financial returns looking right, we have an ability to invest more and to expand share in various ways. But we are also -- we just try to be very disciplined and we really don't care about share at this level and that kind of thing where we have the full capacity to reach the market. We are a fully known brand. We care about revenue and profits, and we care about maintaining the strength of the brand and improving the brand.

Lastly on the M&A side, it is sort of the question I think Rick asked before. I think you're asking a different way, but I will say that the talk out there is about numbers that we think are right, that are reflective of being able to get reasonable returns and reasonable value from telecom. I think we felt that the high amount of leverage a lot of people were able to put on it, particularly private equity players, distorted the real value and we just could not chase those values. So we did very little for a couple of years on only kind of small things that didn't fit the big private equity or strategic players.

So I think those values have come down. I think consolidating moves will still carry higher values, because the big consolidators in telecom can realize more synergies. But we really do think that is one of our strategic strengths right now. You can't predict M&A, but we are bullish about our ability to continue to grow our business through M&A and to hopefully continue to make the right moves in that department.

Thank you.

(Operator Instructions). Rick Prentiss.

One follow-up, guys. Obviously, Verizon Alltel has now closed. I guess they are still setting up the Spinco, because we still see Alltel advertisements out there tweaking the big guys. What are your thoughts as far as how the Alltel Verizon deal will play out, how it will affect you? Is there positives, are there negatives; just what do you think now that the deal is done but maybe not completely wrapped up as far as what happens to the spin-out property?

Right, right. It is a good question. I think in the near term, there are some not huge but there are some negatives in areas where Verizon may have been a customer of ours and Alltel is, but that's not significant. And we still, obviously, don't know what happens to the remaining assets that need to be divested that you referred to.

I think there are a number of scenarios that still could be good, because I believe -- that could be more positive to us in the long term. Because I think what we do in sort of really being an outsourced solution for the big carriers, I think the landscape of that need becomes a little clearer as the final consolidating moves take place. And I continue to believe the bigger they get, the more value we can add to them in various areas.

It is just a matter of if they are running their business right and focusing on the things that move the needle, we should be able to run our business right and provide value to them. So I think longer term more bullish. There might be some near-term hits in certain areas.

Then back to the rural broadband for a second, what do you think the timing is as far as any kind of ability to understand what is really happening there?

Did you say the royal broad -- are you talking about the stimulus?

Yes, the stimulus package where Obama really wants to get rural broadband supported; there has been a lot of people pushing in. It seems like on both the wireline and wireless side, you guys might have some upside there, as you mentioned. I'm just trying to figure out what is the path? How does this thing become more clear, other than just this great pie in the sky plan?

I think that is what a lot of people are trying to figure out, but I think there is a sincere message. From our discussions with both federal and state officials, there is an absolute priority on money getting spent quickly, like as soon as later this year, and the process is still working out its kinks. There is a couple of federal agencies, as you know, and then there is the partnering with state agencies in the states. So everybody is still trying to figure it out, and I think as a taxpayer you're hopeful also that they're figuring out -- there could be a lot of white elephants if you string fiber from point A to point B and there is really no traffic for it.

But there's also opportunity, and I think the general thing they're trying to is get the underserved, and I think the underserved are rural and they are also, I think, low income. And I think we can help in both areas, but definitely people are trying to figure out -- one of the problems, Rick, is that as you know just from telecom in general, it is one thing to have -- you can give somebody an upfront boost, but if the demand isn't there, the demand isn't there. And eventually, that is going to go sideways.

So that is one of the things people are trying to figure out, to what extent is there a USF mechanism. The government certainly talked about that, but it is still unclear. I guess we just go back to, look, we know how to operate in these areas. We can show everybody our badges and our scars to show we have. We have the capital to deploy along side a subsidy and technical expertise. So I think we should be in a good position to participate in this, and we do see the need.

Yes, and just hopefully you don't build the ring to nowhere.

No, no. Again, we look very long term, so it's nothing to us to build something that in the long run is not going to work, so that is the challenge.

Okay, thanks, guys.

There are no further questions at this time.

Okay, operator, we are all set.

Thank you.

Ladies and gentlemen, that will conclude our conference call for today. We thank you for your participation and ask that you please disconnect your lines.