ATN International Inc (ATNI) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Atlantic Tele-Network Q3 earnings conference call and webcast. (Operator Instructions)

I would now like to introduce your host for today's conference, Mr. Justin Benincasa, Chief Financial Officer. Sir, you may begin.

Thank you. Good morning, everyone, and thank you for joining us on our call to review our third-quarter and nine months 2014 results. With me here is Michael Prior, ATN's President and Chief Executive Officer.

And as usual during this call, I will be covering the relevant financial information and certain operational data and Michael will be providing an update on the business.

Before I turn the call over to Michael for his comments, I would like to point out that this call and our press release contain forward-looking statements concerning our current expectations, objectives, and underlying assumptions regarding our future operating results and are subject to risks and uncertainties that could cause actual results to differ materially from those described.

Also in an effort to provide useful information to investors, our comments today include non-GAAP financial measures. For details of these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect our future operating results, please refer to our earnings release on our website, atni.com, or the Form 8-K filing provided to the SEC.

With that, I will turn the call over to Michael for his comments on the quarter.

Thank you, Justin. Good morning, everybody. Well, I am pleased to report that our third-quarter results continued the strong trends we have seen year to date, showing very strong year-on-year comparisons.

And we were particularly encouraged by this performance, as it is in line with what we said a year ago at this time, just after we completed the sale of our Alltel retail wireless business. And that was that our remaining businesses had positive growth prospects and represented an asset portfolio capable of producing solid, sustainable results. This has proven to be the case over the past year and, in fact, the growth was better than we expected.

So for the first nine months of 2014, that growth has been driven by the exceptional performance of our domestic wholesale wireless business and it has been supported by stable results overall from our international wireless business and our domestic and international wireline operations.

As the saying goes, [if a few] expectations are wrong, at least let them be to the upside. So we were not unhappy to see that US Wireless beat our expectations again this quarter.

And that outperformance was for the same reasons that we've talked about in prior quarters, namely the significant increase in domestic data traffic that has been a result of our ongoing investments to upgrade network capacity and coverage. The level of this unit volume growth was hard to predict and we turned out to be too conservative.

Having said all that, we do see a point, likely beginning in the first quarter of 2015, where ongoing price reductions will more than offset the volume growth we have seen this year.

In other areas of our business, the quarter was mixed, with some high points and some other areas that we were focused on improving, but all in all, we are pleased with our results to date and with the opportunities that we see ahead.

So with that, I will turn to some specifics, starting with US Wireless. So as you can see in the release, US Wireless generated 35% revenue growth in the quarter year on year and that brought revenues for the first nine months up to about $110 million, which is up about 37% over the same period of 2013.

The markedly higher data traffic volumes which drove the revenue increase was driven by three main factors. First, upgrading our data capacities and 3G capabilities, including backhaul capacities, expanding our coverage and number of sites and service, and of course, the secular trend of higher data usage per customer that all operators are seeing.

And to provide some further context to this, in the last 18 months, we have increased the number of 3G or higher base stations from about 64 -- well, I guess, precisely 64 to 465. And our capital investment program is continuing that pace for at least the next 2 to 3 quarters.

Some initial metrics. Megabytes billed expanded by about 146% and our total base stations grew from 579 to 716, which is about a 24% increase. Despite that coverage expansion, total voice minutes were up only about 3% from last year. So that once again, it indicates it is really driven by data.

So the other thing you can take away from it, though, is while revenue growth was very impressive, it was well below data unit volume growth and that is because of the price declines we have been talking about for the last few quarters. And we expect more rate reductions as we move forward, affecting the fourth quarter and, more significantly, 2015.

As we mentioned last quarter, we continue to engage in discussions with customers where we would trade new opportunities for lower rates where it makes sense to both us and them. So any -- we don't view this as a negative overall for the business. We just think it is a natural evolution and a requirement that we continue to put together a balanced offering that works for our customers.

And so any further agreement that we do are likely to involve additional rate reductions from current levels, but we will be sure to make sure there are adequate offsetting benefits, such as longer-term contracts, in order to ensure that the estimated risk adjusted returns are attractive in light of the intensive capital investments we have made and expect to continue to make.

So with that mouthful, I will move on to international wireless, where revenues were down $1.3 million in the quarter and up $1 million in the first nine months. In this business, subscriber levels were mixed.

Year to date, we believe we gained significant share in the Island -- in the smaller Island markets within our international wireless portfolio. We think we held steady to positive overall in market share in Bermuda and lost some share in Guyana.

In particular, there is considerable work that needs to be done in Guyana to improve our retail capabilities, strengthen our brand, and improve customer satisfaction. The year-on-year quarterly revenue comparison results was negatively impacted by a number of smaller items, the largest of which is the reduction in roaming revenue, which we do not see recovering.

In wireline operations, total wireline revenues were flat in the third quarter and up 2% for the first nine months of this year. As with the previous quarter, this is largely the case of a shifting mix.

On the one hand, we had expense control issues in Guyana and we have tightening margins and lower revenues for certain of our legacy service offerings, such as voice-based services and our CLEC services to enterprise customers over leased copper lines.

On the other hand, we have been able to offset these declines by the strong growth in wholesale and enterprise fiber capacity -- fiber services and on net data services. And the strong and steady expansion of international broadband revenues following the subsea cable investment that we made some four years ago.

On the domestic side, we just won a multibillion-dollar multiyear contract to provide a major healthcare provider in Vermont with datacenter and telecommunications connectivity services. We are extremely gratified that our Sovernet subsidiary was selected to provide these services and delighted to have such an important anchor tenant for this state-of-the-art datacenter we are completing just outside of Burlington, Vermont.

We expect this to help lead to growth in our datacenter managed service and transport businesses from the larger enterprise market in New York and northern New England.

Turning now to the balance sheet and the questions we always have lingering there. We continue to see fairly full values in the areas we are looking for strategic investments.

While we have been and continue to be very active reviewing deals, we have stayed disciplined and decline to loosen our parameters on the fundamentals, such as fit, structure, governance, and value, in order to get a deal done.

We will keep looking and as I said, we are active at the moment. And meanwhile, we have not been idle on the organic investment side, aggressively building infrastructure where we see the potential for attractive returns.

So in summary, for ATN overall, this was another very strong quarter and first nine months of the year. Our biggest business has done very well and there have been more positive developments than negative with the rest. And I consider it good news that there are areas of opportunity to improve execution.

So with that, I will turn this call back over to Justin for a detailed financial review.

Thank you, Michael. Solo Company revenues for the quarter were up 13% to $89.4 million and for the nine months year-to-date revenues totaled $247.8 million. That's up 15%, which, as Michael noted, reflected the strong year-on-year growth of our US Wireless segment.

Revenues in Guyana were down this quarter compared to a year ago, as broadband revenue growth was offset by revenue declines in our wireless and long-distance -- local and long-distance operations. Similar to the first half, year-on-year revenue comparisons at Guyana were negatively affected by a local currency devaluation, which amounted to approximately $450,000 in the third quarter.

As we anticipated, our Island Wireless segments saw rolling revenues decline this quarter due to overall lower wholesale roaming rates and the new retail roaming offering in Bermuda. Adjusted EBITDA for the quarter increased 17% to $41 million, giving us a consolidated adjusted EBITDA margin of 46%. For the nine months ended September, EBITDA increased 21% to $104 million and our adjusted margin was 42%.

Moving down the income statement, this quarter's operating income was $28.2 million, up 41% from the same quarter in 2013, well outpacing the 13% revenue growth I mentioned earlier. Similar to the second quarter, this strong performance was driven by an over 50% increase in operating income from our US Wireless wholesale wireless business, which more than offset lower operating income in the international telephony and Island wireless segment.

Lower operating income in these two segments was mainly related to the revenue decreases I noted earlier, along with an increased operating expenses in Guyana. We are focusing our attention on cost reductions in those markets, but balancing those efforts with upgrading our competitive positioning.

Operating expenses this quarter included $1 million of non-cash stock-based compensation compared to $900,000 in last year's third quarter. Net income from continuing operations for the quarter was $16.2 million or $1.01 per share.

This compares to $0.10 per share reported in the third quarter of last year, which did include $2.7 million of transaction-related charges and $10.4 million related to the prepayment of the Company's long-term debt that went in conjunction with our Alltel sale. Year to date, net income totaled $35.5 million or $2.22 per share, up from $0.81 per share last year.

Looking at the balance sheet, at June 30, cash and cash -- at September 30, sorry about that -- cash and cash equivalents increased by approximately $[16] million over the quarter. It is a total of $424 million, which does include $39 million of restricted cash related to an indemnity escrow account as part of the Alltel sale agreement.

Capital expenditures for the quarter were $16.6 million and $41.7 million year to date. Of the $41.7 million year to date, approximately $26.5 million or almost two-thirds was incurred by our US Wireless wholesale business and $6.8 million was incurred in our international telephony segment.

In our earnings release, you will notice we reaffirmed our expectation that capital expenditures for the full year 2014 will be between $60 million and $65 million, of which, again, 50% to 60% of it will be allocated to our domestic wholesale roaming business, which, as you have seen, based on these results to date, this has shown to be a solid investment.

Some additional operating data for the quarter. As Michael noted in his part, we ended the quarter with 716 wholesale base stations in our US Wireless territories, up from 654 at the end of this year's second quarter and 579 a year ago. International wireless subscribers totaled 319,600 at the end of the quarter, down slightly from 327,100 a year ago.

In our US Wireline segment, the number of business customers decreased 9% from the year ago to approximately 2,500, but business lines increased 61% from 106,400 to 171,500. And internationally, fixed lines ended the quarter at approximate 159,000 access lines and DSL subscribers ended at 43,000, up 22% from 35,000 a year ago.

And with that, operator, I will turn the call over for questions.

(Operator Instructions). Ric Prentiss, Raymond James.

Good morning. Couple questions. I'm sorry I had to join in progress. First on the organic site. Obviously, a very strong quarter in the Comnet business. When you look at the seasonality, usually 2Q, 3Q are the spike and then it comes back down a little bit.

It also felt like -- so the first part of the question is should we expect normal seasonality there? And the second part of that question is it seems like the tone in the press release was saying that the expected price declines for this year at least have already been received. Is that a fair assumption?

No. It's not. I think we have had some price declines this year and -- but we will have further impact the fourth quarter. But I think the biggest -- the bigger impact on the fourth quarter would be seasonality.

Okay. And then, Justin, you kind of alluded to it a little bit also that the organic investment activity has been pretty strong in the US Wireless side. Down, I think, almost 120 base stations this year.

When you consider what you might be able to do in the coming years -- I think the press release also said you see additional opportunities out there -- is it pumping up the number of base stations? Is it putting out 4G LTE? I was just trying to think ahead of what those opportunities might mean.

I think it's -- it's first -- it's all of the above, but not quite sure the mix. It is adding base stations. It is continuing to add data capabilities. You know from the numbers we still have -- we still can upgrade quite a few more sites to 3G. And then I think eventually, at some point, it certainly is likely to involve 4G.

In the past, you'd always said that the customers, the roaming, the carriers themselves haven't really been pushing for it, but we're seeing obviously a significant uptake in 4G sales, a big push for smartphones. Are you getting some pressure out there and what would the cost be to roll out 4G? Because obviously, your network's not very population-driven; it's more coverage-driven, so if we're just trying to -- how do we frame what that cost could be?

Yes, I think it's a combination of costs. We do have 4G up, but it's in that retail-oriented joint venture we have in Tribal lands. So we have 4G capability, we have 4G capability in the core. There would be work in the core and there would be potentially in some places backhaul work -- as you probably know, that can be a big part of the cost, particularly if you -- it could be a capital cost if you do microwave or dark fiber, and it could be operating expense if you do it other ways.

So it will be significant. I don't think at this point it would necessarily be as much as the upgrade to 3G, but it depends how and where we roll it out, the speed, and so on. And you're right to recall, Ric, too, that we -- from the carrier point of view, the areas we cover are pretty remote. So their -- you start with -- it's going to lag the dense areas where you're fighting for residential subscribers and it's really in a combination and a coverage.

So I think it's going to continue to lag, even on 4G.

Okay. And then as we think through, I know you're not ready to give guidance on 2015 or 2016, but as we think through the pressure from pricing but the countervailing just significant demand -- we just got off the American Tower call, and Jim Taiclet did a great job talking about just the increasingly -- data usage doubling every year, that when you see smartphones and then connected devices. So when you have those counterbalancing items on your roaming of price cuts, but then volumes increasing and number of base stations probably increasing, is it fair to assume that we should continue to see revenue growth even with those price cuts as we look out in 2015, and the question is just how much?

No, I don't think it's fair to assume. So I think if you look on a per-site basis, obviously our costs go up significantly as you add data capacities from the voice world. So there is a certain amount of revenue needing to go up. But there is a point at which, from our customers' standpoint, it really can't. It won't make sense for them, right, for their costs to go up.

So we are intently focused on trying to keep the cost per area of coverage as flat as we can. And to do that, you are going to have to continue to, as we've talked about, reduce unit pricing as volumes grow. So it's not a, as you've seen from our discussions about it over the last few years and what's happened, it is not a straight line. It can be lumpy and a step function.

And what you don't see when we do on the P&L is a lot of our expense is of course capital spend. So it precedes that revenue growth. But ultimately, you've got to get back to how do we make sure this continues to work as a long-term solution for carriers.

Right, because obviously the bigger risk is you don't want an overbuild.

Right. At some level, if it keeps going, it starts to make sense for them to build it. I think it's a poor strategic use of funds for them, because it really doesn't change their competitive positioning in any way or introduce new revenue streams. But they also can't have costs spiral out of control.

Right. Okay. Thanks, Michael.

Barry McCarver, Stephens Inc.

Thanks for taking my questions, and good quarter. So I guess, Michael, just for a couple of points of clarification, for the pricing in 2015 on the US wireless side, you're mentioning -- are there specific dates that you have in mind for contracts? Or are you just kind of assuming that, as history has shown us, that there will be some contraction there?

It's a combination, Barry, but it's more of the latter. We look at the, it's the increased volume growth, and it's just the principle I went through in response to the last question, which is we have to figure out a way to make sure that the overall cost per area covered isn't rising beyond what makes sense for the customers.

Yes. Okay. And then just on the capital intensity for that business, you mentioned in the press release going up to 65% 3G or higher on the base stations. Is there opportunity to take that higher over the next 18 months? I guess my question is, was there some low-hanging fruit that was obviously you needed to upgrade over the last 18 months, and going forward it's going to be a little bit more spotty, a little bit more strategic in thinking? Or will that just continue on at pace?

Yes, Barry, it's Justin. There definitely was -- the early stuff was definitely the low-hanging fruit. So I think there's room to expand on that. But it won't -- it's never -- a lot of the low-hanging fruit has been accomplished.

Okay. And then switching segments, on the international wireless, I think you mentioned in your remarks a need to improve service levels in Guyana. Can you talk about that, specifically what you have in mind there, and what that competitive environment looks like today?

Yes, I'll give you a bit of flavor. I think we've, well, we've done a good job over the years in a lot of areas there, growing network capabilities and capacities and indeed put a lot into that. I don't think our retail face and the sales and marketing envelope that accompanies it has kept pace. So that's one area.

So a lot of it is just simply upgrading our retail experience for customers across the board, so everything that implies, whether from the look and feel of stores to the number of locations, whether it's aging our stores to the efficiency and atmosphere of the stores themselves. And then there are other elements of that customer care envelope that also need work.

So it's fairly straightforward stuff, but there's a lot of work to be done.

And for those projects to improve that in place now, or is that something you're going to be doing over the next couple of quarters?

The planning is in place. But I think most of it is going to be done over the next few quarters, yes.

Okay. Thanks a lot, guys.

Hamed Khorsand, BWS Financial.

Just following up on the earlier questions that you were being asked, is there -- do you think it's pricing related or do you think it's the amount of traffic that you are carrying on your network that the carriers want to just keep off their network that's helping you guys out?

Say that again. I'm not sure I understood the question.

(multiple speakers) are typically where they don't have -- Hamed, our networks are typically where they don't have network. That's why they're using our network.

No, I understand that, but you were referencing that -- that's a price related. But my argument is, could it be that purely from a factor that it keeps traffic off their network that they prefer to use you as a third party instead of just putting a tower up, but keep traffic on their network?

No, I don't think we look at it that way, if I'm understanding you correctly. We don't know always what is driving all decisions in the operators, operator customers. But I would say that really what they are looking at is, as I said, these are low-return expenditures for them to build in these areas and have really no strategic value.

So what we have to make sure is that it is a low-turn expenditure. That's really how you turn around and say we have to make sure the price is there. And then there are other aspects. There are speed-to-market occasions, and there's things as simple as where is your field force and how strong are they in those areas.

But ultimately, I think it is a decision, like many outsource decisions, that this is not strategic and ultimately lower cost.

Okay. And I assume that you plan to bring, I think, something like 250 remaining base stations to 3G or higher levels. Do you have any assumptions as to what kind of benefit you would see from a data traffic increase?

It is hard to map that. As you have seen in the past, it is hard to map that precisely. I think the components you have to realize is that it is not a linear, as Justin said before, it is not linear.

So the first 200 you add and then the next 200 are not going to drive the same amount of volumes. And the areas that we have been driven to by customers to add to capacity tend to be the places they needed sooner. So that is going to tend to have higher volumes.

And then you have to look also to what is happening with rates. So I think it would be wrong to take that 65% number and try to extrapolate and say if we do another third, it is going to be half of what we have already seen.

Right.

And my last question is seems like the rest of the business you are facing some sort of competitive threat or other variable. Is it -- are you paying enough attention to it or is Tom not taking up all the attention? Maybe you just explain what is going on on the other side of the business?

Yes. I think -- I don't think it is our wholesale wireless that is diverting us, but I think it is possible we didn't pay enough attention to this, partly when we were dealing with the Alltel acquisition integration and then disposition.

So I think, yes, I think we would have to take a little bit of our marks for saying we could have been paying close attention. But it is pretty limited. It is not all markets, by any means.

When you say competitive threat, I don't think the competitive threat has changed and I think it is quite manageable. I think it is more that we aren't at the top of our game in all places.

Okay, great. Appreciate it. Thank you.

Shoon Huggett, Geosam Capital.

Good morning. A lot of the questions have been surrounding the US wireless and international wireless segments. So I am not going to ask anymore about those, but if you could provide some color on the domestic US wireline segment.

Do you have any idea of the run rate EBITDA of the Sovernet ION network? And is there a press release or is there more that you can allude to on these new contracts that you have signed up for and what they could potentially bring to the earnings of the Company?

Yes, I think on the first one, we don't break that out separately. So there's nothing more we can say there, although I think hopefully we have given you some good qualitative information and you have got some segment information that's helpful.

On the next question, there is press about this in Vermont and it is probably ongoing. We have been -- there has been press about signing a number of customers, because we just, in both places, in both Vermont and New York State, because we just completed major fiber builds and we have been adding a number of larger customers and that includes school systems and it includes enterprise customers such as the one I referenced in the prepared remarks.

So -- and that's -- to us, it was interesting because it's -- we have been adding some larger enterprise customers and they tend to be very demanding, but it is a high-quality customer, tend to be long-term contracts, and so it is -- we are feeling good about that.

It is probably the most misunderstood division, I think, in your Company and the hardest to value. It might be useful to separate its performance from the international wireline segments, the legacy asset copper lease line segments, so that people can see its performance, even if it is limited right now.

And is there any kind of metric that you can give us, as the investor, that will help us determine the use of it, based on these larger contracts coming online, these larger customers? How much data do they -- do you need to transport along on those lines? Is there anything that you can give to us to help us from that standpoint?

I don't want to do it off-the-cuff on the call, but what I would say -- two things I said. We will take it under advisement to see if there's more data we can provide and perhaps there's something we can even add to our quarterly reports, where we have more detail.

I will say that what would really drive more data would be for it to be larger in relation to the whole. And so it's part of it; it's just -- we are proud of the progress, but it is a very small business from the whole.

Just to clarify, too, the US wireless segment, there -- it is just US in there, no international. Wireline, I'm sorry, is what you meant to say. So it does include traditional CLEC operations in there, but there's no international.

Okay. Understood. And then one last thing, have you been in -- you mentioned that you have seen that any acquisition opportunities have been at full value, but has that deterred you from even talking to potential targets?

Have you had discussions with them? Have you sat down at the table with anybody to suggest that you really are committed to acquiring a business or failing that, when is the potential opportunity arise when you determine you should distribute the money instead of looking for opportunities?

Well, it is really a -- to answer the first part of that first, it's really a mix. So we do see many things that we look at, call it a desktop review, and say not very compelling, not worth the time to investigate further.

But we have investigated a number further and sat down with parties and gotten into details on terms. And structure and so on. And -- but what happens is you are -- the number of those things that you are doing is limited in the -- your cushion to accept changes that come along in that process, whether it is diligence that turns up some negative information you weren't aware of when you started, whether it's concerns about fit or other risks that appear, or structure.

You don't -- we don't have the same leash we would in another case to say all right, let's -- there is a way to fix this because we are at a full price point.

So I think it -- those things do combine, but we don't say there's no possibility of us doing something. We would -- we wouldn't be active in the market if we thought that.

And from a return standpoint to -- if you think about taking the money -- sending the money back to shareholders in a special dividend, for example, there's a pretty big tax inefficiency there, right.

So the shareholder getting that money now has to recover the tax hit before they can even approach the returns it would get in our hand. So as long as we think that there is potential to invest that in earned equity returns, we are going to keep looking.

Okay. One last thing, because that made me think of something else. You mentioned the tax hits. Why haven't you -- if you see companies at full value that is preventing you from making acquisition, I think if you were to ask a lot of investors, they would think that your stock is undervalued. That is why we've invested our money into it.

What is stopping you from doing a normal [quiz issue] bid or substantial issuer bid to buy back shares, which will not only increase the value for the remaining shareholders, but reduce the amount of dividends you have to pay out on a per-share basis?

It is a good question and it is one of those things we always look at. I mean, we do -- it is something to be considered. There are problems with going and using up your money for buyback if it turns out that there is a deal around the corner. But I think you're right in saying that there definitely tax benefits and the pricing looks right.

So it is something we will continue to evaluate. What we have said repeatedly about this is nothing is static and we are open to all ideas and we do discuss all those ideas.

Okay. Thanks a lot.

Sergey Dluzhevskiy, Gabelli & Co.

Good morning, guys. Just a question on interconnect opportunities. Could you remind us which sectors are you primarily looking at on your evaluations of those opportunities? And also are there any new areas that you are looking at now compared to a year ago when you started this process?

And also on the US wireless side, another question, obviously there was very strong volume growth across your whole footprint, but I was wondering if you could call out particular areas, maybe where you saw even more significant growth, I guess, which regions were driving that momentum, if any.

Okay. Let me answer the last one first, because it is easier. I think it is generally in our main operating area that we have seen it, which is the Southwest. The American Southwest has been the driver. So it has really been the same traditional areas and I am not sure I could pin it down more within that.

As to the question about what we were looking at. We are looking at -- really, we have looked at across-the-board opportunities in telecommunication services. We have looked at other related infrastructure businesses. We are -- the closer it is to our current operating assets, the easier it is for us to evaluate.

So those things tend to be top of the list. But we have had a history of branching out into other things after careful study. So we continue to look at those opportunities as well.

So beyond that, I am not going to get into specifics unless and until we have something to say that we have gotten ourselves to the point where we are ready to move on it.

Thank you.

(Operator Instructions). Ric Prentiss, Raymond James.

Just a couple quick follow-ups. Not sure if it was mentioned in the prepared remarks, but is there a size, I mean, given, $400 million something if you include the escrow amount, no leverage on the balance sheet.

As you look out there, what size transactions are you looking at? Is it a bunch of small, is it medium, is it large? What should we think about as making its way through the review process?

Sure. I think we prefer larger. And that doesn't necessarily we want one deal necessarily, although if it was an attractive one, that would be good. And we do for obvious reasons, which is it is just -- there's a limit to the number of businesses we think we can monitor carefully and add value to. So that definitely influences us.

Now there are smaller deals that we call -- [I'd call] bolt-ons. There are transactions, such as the one we did in Bermuda a few years ago. Those kinds of transactions we would -- if they are there, we would do many of those.

But primarily, when we are out there thinking about putting the balance sheet to work, we are looking for larger deals. And so you can do the math to see our capacity is quite large, even if we wish to stay within conservative leverage levels.

We would certainly like to have some leverage, though, so the ability to use some debt capital in the mix would be ideal and implies doing bigger deals.

Okay. And then you mentioned Bermuda. In the press release, it talked a little bit about the retail versus the wholesale roaming. Remind us again, I think Bermuda is kind of a -- third quarter is the spike or when is the spike for Bermuda in the roaming seasonality?

Yes. It is more the third quarter is the -- second, third quarter versus the other islands, which are more first quarter.

Right. And so that price reductions in roaming, did it just take effect in the third quarter? Was it somewhere there and was it somewhat there in the second quarter?

It was somewhat there, but it started ramping in the third quarter. There was -- it was rolled out in second quarter, but it is starting to get a little bit of wheels behind it in the third.

Okay. And then on the US Wireless business, customer concentration, when you think about other potential users of your network out in the whitespace area, Sprint has got a program looking at trying to get people on board. T-Mobile has had some discussions trying to think about how to improve their network coverage.

Any update as far as discussions with other carriers using your network? Or what is the typical number of carriers that you see on your base stations?

Yes, I think the -- we have multiple carriers on most base stations. The biggest two carriers are the most important customers in the sense that they have the most need and the most subscribers, which translates into that need.

But we -- the model works best for all, including the two biggest customers, the more we can make it a fully shared infrastructure. So we are always open to doing things there.

And we have to treat the highest volume customers accordingly, and -- but that doesn't mean we can't make attractive offers to as many other carriers. And so we are always looking at that and I think we feel we are better than anybody in putting and doing a cost-effective quality builds in these types of areas. These whitespaces. So we see it as an opportunity.

Yes, because if you think about the overbilled risk and the revenue pressure, that was all that discussion was on. If it gets too expensive for one customer, but the concept of hey, this is an area where nobody wants to build by themselves, other carriers should come on board.

So if we do see Sprint or T-Mobile or the non-big two become more interested in increasing their coverage, there might be the room for some better growth longer-term on the rural business in the US?

That's right. And -- but for each carrier, what it takes is a strategic commitment to say I think this coverage is important. So when a carrier decides, for instance, even to say I am going to go to 2G to 3G capability in these areas, there's some cost associated with that.

And so a lot of it is for the carrier to decide if it is really important for their brand and for their overall strategy that they have coverage in these areas or higher-speed coverage in these areas. And that is -- that part we really can't make those decisions. That is for the carriers to make. But I think you should also realize that is part of the equation as well.

Sure. Any need for you to pick up spectrum to provide services out in those markets?

Always. Always. It is like every other carrier -- you don't want to be passing up against your spectrum. And so you are looking forward. You know you can put more to work.

Now in the areas we operate, there is a ton of unutilized spectrum. But it is really getting access to it. So we are always looking for that and that's an implicit cost and also asset value in that business.

Is that something you capitalize or is that -- I am trying to think where on the balance sheet we would see that spending.

Yes. We capitalize it as part --

Okay. And I don't think I saw -- you guys are not in the AWS-3 auction, though, right?

You know what, we are so scared of our lawyers. We know the answer, but we are not going to answer. (laughter)

Okay. Fair enough. Thanks, guys.

I'm showing no additional questions from our phone line. I now would like to call back over to management for any closing remarks.

No closing remarks, everyone. That concludes our call and we will talk to you at the end of the year. Take care.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a wonderful day.