**UNITED STATES**

**SECURITIES AND EXCHANGECOMMISSION**

**Washington, D.C. 20549**

** **

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** **

**Form 10-Q**

** **
| **x**                                                 | ** ** | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934**  |
|-------------------------------------------------------|------------|----------------------------------------------------------------------------------------------------------|
| ** **                                            | ** ** | ** **                                                                                               |
| **For the quarterly period ended September 30, 2007** |
| ** **                                            | ** ** | ** **                                                                                               |
| **OR**                                                |
| ** **                                            | ** ** | ** **                                                                                               |
| **o**                                                 | ** ** | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |

** **

**For the transition period from           to           **

** **

**Commission File Number 0-191551**

** **

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** **

**AtlanticTele-Network, Inc.**

(Exact name ofregistrant as specified in its charter)

 

| **Delaware**                                                     | ** ** | **47-0728886**                         |
|------------------------------------------------------------------|------------|----------------------------------------|
| (State  or other jurisdiction of  incorporation or organization) |       | (I.R.S.  Employer  Identification No.) |

 

**10 Derby Square**

**Salem, MA 01970**

**(978) 619-1300**

**(Addressof principal executive offices,**

**includingzip code and telephone**

**numberand area code)**

 

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Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.   Yes x   No o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, or a non-accelerated filer. Seedefinition of “accelerated filer” and “large accelerated filer” in Rule 12b-2of the Exchange Act. (Check One):

 
|  | Large accelerated filer   o | Accelerated filer   x |   | Non-accelerated filer   o |
|--|---------------------------------------|---------------------------------|--------|-------------------------------------|

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act): Yes o No x

 

As of November 9, 2007, the registrant had outstanding15,220,546****shares of its commonstock ($.01 par value).

 

 

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**ATLANTIC TELE-NETWORK, INC.**

 

FORM 10-QQuarter Ended September 30, 2007

 
| CAUTIONARY STATEMENT  REGARDING FORWARD LOOKING STATEMENTS |                                                                                                              |
|------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|
|                                                       |                                                                                                              |
| PART I—FINANCIAL INFORMATION                     |                                                                                                              |
|                                                       |                                                                                                              |   |
| Item 1.                                               | Unaudited Condensed  Consolidated Financial Statements                                                            |   |
|                                                       |                                                                                                              |   |
|                                                       | Condensed Consolidated  Balance Sheets at December 31, 2006 and September 30, 2007                           |   |
|                                                       |                                                                                                              |   |
|                                                       | Condensed Consolidated  Statements of Operations for the three and nine months ended September 30,  2006 and 2007 |   |
|                                                       |                                                                                                              |   |
|                                                       | Condensed Consolidated  Statements of Cash Flows for the nine months ended September 30, 2006 and  2007           |   |
|                                                       |                                                                                                              |   |
|                                                       | Notes to Unaudited Condensed  Consolidated Financial Statements                                                   |   |
|                                                       |                                                                                                              |   |
| Item 2.                                                    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                       |   |
|                                                       |                                                                                                              |   |
| Item 3.                                                    | Quantitative  and Qualitative Disclosures About Market Risk                                                       |   |
|                                                       |                                                                                                              |   |
| Item 4.                                                    | Controls and  Procedures                                                                                          |   |
|                                                       |                                                                                                              |   |
| PART II—OTHER  INFORMATION                       |                                                                                                              |
|                                                       |                                                                                                              |   |
| Item 1.                                                    | Legal Proceedings                                                                                                 |   |
|                                                       |                                                                                                              |   |
| Item 1A.                                                   | Risk Factors                                                                                                      |   |
|                                                       |                                                                                                              |   |
| Item 6.                                                    | Exhibits                                                                                                          |   |
|                                                       |                                                                                                              |   |
| SIGNATURES                                                 |                                                                                                              |
|                                                       |                                                                                                              |
| CERTIFICATIONS                                             |                                                                                                              |
|                                                            |                                                                                                                   |  |  |

 

2

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**Cautionary Statement Regarding Forward-LookingStatements**

** **

This QuarterlyReport on Form 10-Q (or the “Report”) contains forward-looking statementsrelating to, among other matters, the future financial performance and resultsof operations of the Company, including the relative contributions of theCompany’s subsidiaries; demand for our services and industry trends; the paceof our network expansion and improvement, including our realization of thebenefits of capital expenditures; and management’s plans and strategy for thefuture. These forward-looking statements are based on estimates, projections,beliefs, and assumptions and are not guarantees of future events or results.Actual future events and results could differ materially from the events andresults indicated in these statements as a result of many factors, including,among others, (1) significant political and regulatory risk facing ourexclusive license to provide local exchange and long distance telephoneservices in Guyana; (2) any significant decline in the price or volume ofinternational long distance calls to Guyana; (3) increased competition affectingour businesses; (4) the regulation of rates that GT&T may charge for localwireline telephone service; (5) significant tax disputes between GT&T andthe Guyanese tax authorities; (6) the derivation of a significant portion ofour U.S. wireless revenue from a small number of customers; (7) our ability tomaintain favorable roaming arrangements, including the rates Commnet chargesits wholesale customers; (8) economic, political and other risks facing ourforeign political operations; (9) regulatory changes affecting our businesses;(10) rapid and significant technological changes in the telecommunicationsindustry; (11) our reliance on a limited number of key suppliers and vendorsfor timely supply of equipment and services relating to our network infrastructure;(12) any loss of any key members of management; (13) the adequacy and expansioncapabilities of our network capacity and customer service system to support ourcustomer growth; (14) dependence of our wireless and wireline revenues on thereliability and performance of our network infrastructure; (15) the occurrenceof severe weather and natural catastrophes; (16) the possible reduction of oureconomic interest in our Bermuda affiliate in 2008; and (17) our ability torealize the value that we believe exists in businesses that we acquire. Theseand other additional factors that may cause actual future events and results todiffer materially from the events and results indicated in the forward-lookingstatements above are set forth more fully under Item 1A “Risk Factors” of theCompany’s Annual Report on Form 10-K for the year ended December 31, 2006,which is on file with the SEC. The Company undertakes no obligation to updatethese forward-looking statements to reflect actual results, changes in assumptionsor changes in other factors that may affect such forward-looking statements.

 

In this Reportthe words “we,” “our,” “ours” and “us” refer to AtlanticTele-Network, Inc. and its subsidiaries, unless the context indicatesotherwise. This Report also contains other trademarks, service marks and tradenames that are the property of others.

 

Reference todollars ($) refer to U.S. dollars unless otherwise specifically indicated.

 

3

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**PART I—FINANCIALINFORMATION**

 

**Item 1. Unaudited CondensedConsolidated Financial Statements**

 

**ATLANTIC TELE-NETWORK, INC. ANDSUBSIDIARIES**

**CONDENSEDCONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

**(Dollars in thousands, except pershare amounts)**

 
| ** **                                                                                                                                                                                                                                      | ** ** | **December 31,**

**2006** | ** ** | **September 30,  2007** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|------------------------------|------------|
| **ASSETS**                                                                                                                                                                                                                                      |       |                            |       |                         |       |
| **CURRENT ASSETS:**                                                                                                                                                                                                                             | ** ** | ** **                      | ** ** | ** **                   | ** ** |
| Cash and cash equivalents                                                                                                                                                                                                                       |       | $                               | 60,543     |                         | $          | 60,967 |   |
| Accounts receivable, net of allowances of  $1.4 million and $2.2 million, respectively                                                                                                                                                          |       | 20,510                          |       | 25,302                       |       |
| Materials and supplies                                                                                                                                                                                                                          |       | 7,578                           |       | 5,719                        |       |
| Prepayments and other current assets                                                                                                                                                                                                            |       | 2,508                           |       | 3,325                        |       |
| Assets held for sale                                                                                                                                                                                                                            |       | —                          |       | 13,324                       |       |
| Total current assets                                                                                                                                                                                                                            |       | 91,139                          |       | 108,637                      |       |
| **FIXED ASSETS:**                                                                                                                                                                                                                               | ** ** | ** **                      | ** ** | ** **                   | ** ** |
| Property, plant, and equipment                                                                                                                                                                                                                  |       | 237,006                         |       | 260,472                      |       |
| Less accumulated depreciation                                                                                                                                                                                                                   |       | (98,433                         | )          | (114,946                     | )          |
| Net fixed assets                                                                                                                                                                                                                                |       | 138,573                         |       | 145,526                      |       |
| **INTANGIBLE ASSETS:**                                                                                                                                                                                                                          | ** ** | ** **                      | ** ** | ** **                   | ** ** |
| Licenses                                                                                                                                                                                                                                        |       | 20,641                          |       | 14,563                       |       |
| Goodwill                                                                                                                                                                                                                                        |       | 35,583                          |       | 39,326                       |       |
| Customer relationships, net                                                                                                                                                                                                                     |       | 3,509                           |       | 2,628                        |       |
| **INVESTMENT IN AND ADVANCES TO  UNCONSOLIDATED AFFILIATES**                                                                                                                                                                                    |       | 12,004                          |       | 12,168                       |       |
| **OTHER ASSETS**                                                                                                                                                                                                                                |       | 1,165                           |       | 2,605                        |       |
| Total assets                                                                                                                                                                                                                                    |       | $                               | 302,614    |                         | $          | 325,453 |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                                                                                                  | ** ** | ** **                      | ** ** | ** **                   | ** ** |
| **CURRENT LIABILITIES:**                                                                                                                                                                                                                        | ** ** | ** **                      | ** ** | ** **                   | ** ** |
| Accounts payable and accrued liabilities                                                                                                                                                                                                        |       | $                               | 19,252     |                         | $          | 16,669 |   |
| Dividends payable                                                                                                                                                                                                                               |       | 2,146                           |       | 2,460                        |       |
| Accrued taxes                                                                                                                                                                                                                                   |       | 7,301                           |       | 9,977                        |       |
| Advance payments and deposits                                                                                                                                                                                                                   |       | 3,813                           |       | 3,646                        |       |
| Other current liabilities                                                                                                                                                                                                                       |       | 2,529                           |       | 2,961                        |       |
| Liabilities held for sale                                                                                                                                                                                                                       |       | —                          |       | 1,305                        |       |
| Total current liabilities                                                                                                                                                                                                                       |       | 35,041                          |       | 37,018                       |       |
| **DEFERRED INCOME TAXES**                                                                                                                                                                                                                       |       | 12,871                          |       | 13,153                       |       |
| **LONG-TERM DEBT**                                                                                                                                                                                                                              |       | 50,000                          |       | 50,000                       |       |
| Total liabilities                                                                                                                                                                                                                               |       | 97,912                          |       | 100,171                      |       |
| **MINORITY INTERESTS**                                                                                                                                                                                                                          |       | 25,932                          |       | 25,931                       |       |
| **COMMITMENTS AND CONTINGENCIES (See Note 12)**                                                                                                                                                                                                 | ** ** | ** **                      | ** ** | ** **                   | ** ** |
| **STOCKHOLDERS’ EQUITY:**                                                                                                                                                                                                                  | ** ** | ** **                      | ** ** | ** **                   | ** ** |
| Preferred stock, $.01 par value per share;  10,000,000 shares authorized, none issued and outstanding                                                                                                                                           |       | —                          |       | —                       |       |
| Common stock, $.01 par value per share;  50,000,000 shares authorized; 15,651,018 and 15,672,393 shares issued,  respectively, and 15,170,707 and 15,217,421 shares outstanding on  December 31, 2006 and September 30, 2007, respectively |       | 157                             |       | 157                          |       |
| Treasury stock, at cost                                                                                                                                                                                                                         |       | (3,557                          | )          | (3,403                       | )          |
| Additional paid-in capital                                                                                                                                                                                                                      |       | 104,356                         |       | 105,713                      |       |
| Retained earnings                                                                                                                                                                                                                               |       | 79,599                          |       | 98,258                       |       |
| Accumulated other comprehensive loss                                                                                                                                                                                                            |       | (1,785                          | )          | (1,374                       | )          |
| Total stockholders’ equity                                                                                                                                                                                                                 |       | 178,770                         |       | 199,351                      |       |
| Total liabilities and stockholders’ equity                                                                                                                                                                                                 |       | $                               | 302,614    |                         | $          | 325,453 |   |

 

The accompanyingcondensed notes are an integral part of these condensed consolidatedfinancial statements.

 

4

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**ATLANTICTELE-NETWORK, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS**

**FOR THE THREE ANDNINE MONTHS ENDED SEPTEMBER 30, 2006 and 2007**

**(Unaudited)**

**(Dollars inthousands, except per share amounts)**

** **
| ** **                                                                                                                                                                                                                                    | ** ** | **Three Months Ended**

**September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                    | ** ** | **2006**                                                 | ** ** | **2007**                                            | ** ** | **2006** | ** ** | **2007** | ** ** |
| **REVENUE:**                                                                                                                                                                                                                                  | ** ** | ** **                                               | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Wireless                                                                                                                                                                                                                                      |       | $                                                        | 17,050     |                                                | $          | 21,453 |   | $ | 44,595 |   | $ | 58,741 |   |
| Local telephone and data                                                                                                                                                                                                                      |       | 11,532                                                   |       | 11,816                                              |       | 31,574 |   | 35,019 |   |
| International long distance                                                                                                                                                                                                                   |       | 11,833                                                   |       | 12,649                                              |       | 34,513 |   | 37,898 |   |
| Other                                                                                                                                                                                                                                         |       | 932                                                      |       | 1,043                                               |       | 2,682 |   | 3,054 |   |
| Total revenues                                                                                                                                                                                                                                |       | 41,347                                                   |       | 46,961                                              |       | 113,364 |   | 134,712 |   |
| **OPERATING EXPENSES**(excluding  depreciation and amortization unless otherwise indicated):                                                                                                                                                  | ** ** | ** **                                               | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Termination and access fees                                                                                                                                                                                                                   |       | 6,077                                                    |       | 6,811                                               |       | 17,317 |   | 19,740 |   |
| Internet and programming                                                                                                                                                                                                                      |       | 940                                                      |       | 857                                                 |       | 2,571 |   | 2,524 |   |
| Engineering and operations                                                                                                                                                                                                                    |       | 5,013                                                    |       | 5,420                                               |       | 14,000 |   | 16,893 |   |
| Sales and marketing                                                                                                                                                                                                                           |       | 2,487                                                    |       | 3,614                                               |       | 6,328 |   | 12,352 |   |
| General and administrative                                                                                                                                                                                                                    |       | 5,832                                                    |       | 5,804                                               |       | 16,645 |   | 17,292 |   |
| Depreciation and amortization                                                                                                                                                                                                                 |       | 6,133                                                    |       | 6,815                                               |       | 18,033 |   | 19,975 |   |
| Total operating expenses                                                                                                                                                                                                                      |       | 26,482                                                   |       | 29,321                                              |       | 74,894 |   | 88,776 |   |
| Income from operations                                                                                                                                                                                                                        |       | 14,865                                                   |       | 17,640                                              |       | 38,470 |   | 45,936 |   |
| **OTHER INCOME (EXPENSE):**                                                                                                                                                                                                                   | ** ** | ** **                                               | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Interest expense                                                                                                                                                                                                                              |       | (926                                                     | )          | (720                                                | )          | (2,814 | ) | (1,596 | ) |
| Interest income                                                                                                                                                                                                                               |       | 528                                                      |       | 713                                                 |       | 933 |   | 1,814 |   |
| Other income, net                                                                                                                                                                                                                             |       | 21                                                       |       | 24                                                  |       | 619 |   | 2,969 |   |
| Other income (expense), net                                                                                                                                                                                                                   |       | (377                                                     | )          | 17                                                  |       | (1,262 | ) | 3,187 |   |
| **INCOME BEFORE INCOME TAXES, MINORITY  INTERESTS AND EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES**                                                                                                                                       |       | 14,488                                                   |       | 17,657                                              |       | 37,208 |   | 49,123 |   |
| Income taxes                                                                                                                                                                                                                                  |       | 6,286                                                    |       | 7,863                                               |       | 18,976 |   | 21,778 |   |
| **INCOME BEFORE MINORITY INTERESTS AND EQUITY  IN EARNINGS OF UNCONSOLIDATED AFFILIATES**                                                                                                                                                     |       | 8,202                                                    |       | 9,794                                               |       | 18,232 |   | 27,345 |   |
| Minority interests, net of tax of $1.1  million and $0.9 million for the three months ended September 30, 2006 and  2007, respectively and $3.1 million and $2.7 million for the nine months  ended September 30, 2006 and 2007, respectively |       | (1,307                                                   | )          | (1,060                                              | )          | (3,614 | ) | (3,762 | ) |
| Equity in earnings of unconsolidated  affiliates                                                                                                                                                                                              |       | 708                                                      |       | 668                                                 |       | 2,010 |   | 1,766 |   |
| **NET INCOME**                                                                                                                                                                                                                                |       | $                                                        | 7,603      |                                                | $          | 9,402 |   | $ | 16,628 |   | $ | 25,349 |   |
| **NET INCOME PER SHARE:**                                                                                                                                                                                                                     | ** ** | ** **                                               | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Basic                                                                                                                                                                                                                                         |       | $                                                        | 0.53       |                                                | $          | 0.62 |   | $ | 1.27 |   | $ | 1.67 |   |
| Diluted                                                                                                                                                                                                                                       |       | $                                                        | 0.53       |                                                | $          | 0.61 |   | $ | 1.26 |   | $ | 1.66 |   |
| **WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:**                                                                                                                                                                                               | ** ** | ** **                                               | ** ** | ** **                                          | ** ** | ** ** | ** ** | ** ** | ** ** |
| Basic                                                                                                                                                                                                                                         |       | 14,262                                                   |       | 15,175                                              |       | 13,053 |   | 15,162 |   |
| Diluted                                                                                                                                                                                                                                       |       | 14,353                                                   |       | 15,317                                              |       | 13,223 |   | 15,295 |   |
| **DIVIDENDS PER SHARE APPLICABLE TO COMMON  STOCK**                                                                                                                                                                                           |       | $                                                        | 0.14       |                                                | $          | 0.16 |   | $ | 0.38 |   | $ | 0.44 |   |

 

The accompanyingcondensed notes are an integral part of these condensed consolidated financialstatements.

 

5

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**ATLANTICTELE-NETWORK, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**FOR THE NINEMONTHS ENDED SEPTEMBER 30, 2006 AND 2007**

**(Unaudited)**

**(Dollars inthousands)**

** **
| ** **                                                                                             | ** ** | **Nine Months Ended  September 30,** | ** ** |
|--------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                                             | ** ** | **2006**                                            | ** ** | **2007** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                              | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Net income                                                                                             |       | $                                                   | 16,628     |   | $ | 25,349 |   |
| Adjustments to reconcile net income to net  cash flows provided by operating activities:               |       |                                                |       |   |   |
| Depreciation and amortization                                                                          |       | 18,033                                              |       | 19,975 |   |
| Bad debt for amounts due from Bridge  International Communications, Inc.                               |       | 255                                                 |       | — |   |
| Gain on sale of investments in affiliates                                                              |       | —                                              |       | (133 | ) |
| Loss on sale of assets of affiliates                                                                   |       |                                                |       | 258 |   |
| Gain on sale of Commnet Wireless related  assets                                                       |       | —                                              |       | (1,043 | ) |
| Stock-based compensation                                                                               |       | 610                                                 |       | 631 |   |
| Deferred income taxes                                                                                  |       | 1,090                                               |       | 282 |   |
| Minority interests                                                                                     |       | 3,614                                               |       | 3,762 |   |
| Equity in earnings of unconsolidated  affiliates                                                       |       | (2,010                                              | )          | (1,766 | ) |
| Dividends received from Bermuda Digital  Communications, Ltd.                                          |       | 1,244                                               |       | 1,451 |   |
| Changes in operating assets and  liabilities, excluding the effects of acquisitions:                   |       |                                                |       |   |   |
| Accounts receivable, net                                                                               |       | (3,129                                              | )          | (4,792 | ) |
| Materials and supplies, prepayments, and  other current assets                                         |       | (2,988                                              | )          | 1,022 |   |
| Other assets                                                                                           |       | (458                                                | )          | (1,029 | ) |
| Accounts payable and accrued liabilities,  advance payments and deposits and other current liabilities |       | 1,241                                               |       | (1,370 | ) |
| Accrued taxes                                                                                          |       | 1,648                                               |       | 2,073 |   |
| Net cash provided by operating activities                                                              |       | 35,778                                              |       | 44,670 |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                                              | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Capital expenditures                                                                                   |       | (19,862                                             | )          | (31,212 | ) |
| Acquisitions of businesses, net of cash  acquired of $1,687 and $0, respectively                       |       | (20,026                                             | )          | (6,721 | ) |
| Investments made by minority shareholders  in consolidated subsidiaries                                |       | 1,400                                               |       | — |   |
| Proceeds from sale of investments in  affiliates                                                       |       | 1,991                                               |       | 276 |   |
| Proceeds from sale of assets of affiliates                                                             |       | —                                              |       | 522 |   |
| Proceeds from sale of Commnet Wireless  related assets                                                 |       | —                                              |       | 1,507 |   |
| Net cash used in investing activities                                                                  |       | (36,497                                             | )          | (35,628 | ) |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                              | ** ** | ** **                                          | ** ** | ** ** | ** ** |
| Proceeds from underwritten public offering  of common stock, net of expenses                           |       | 46,338                                              |       | — |   |
| Dividends paid on common stock                                                                         |       | (4,512                                              | )          | (6,379 | ) |
| Distributions to minority shareholders                                                                 |       | (3,090                                              | )          | (2,396 | ) |
| Proceeds from stock option exercises                                                                   |       | —                                              |       | 157 |   |
| Proceeds from long-term debt                                                                           |       | 22,000                                              |       | — |   |
| Repayment of long-term debt                                                                            |       | (26,120                                             | )          | — |   |
| Purchase of common stock                                                                               |       | (85                                                 | )          | — |   |
| Net cash provided by (used in) financing  activities                                                   |       | 34,531                                              |       | (8,618 | ) |
| **NET CHANGE IN CASH AND CASH EQUIVALENTS**                                                            |       | 33,812                                              |       | 424 |   |
| **CASH AND CASH EQUIVALENTS, beginning of the  period**                                                |       | 26,493                                              |       | 60,543 |   |
| **CASH AND CASH EQUIVALENTS, end of the  period**                                                      |       | $                                                   | 60,305     |   | $ | 60,967 |   |

 

The accompanyingcondensed notes are an integral part of these condensed consolidatedfinancial statements.

 

6

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**ATLANTIC TELE-NETWORK, INC. ANDSUBSIDIARIES**

**NOTES TOUNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

** **

**1. ORGANIZATION AND BUSINESS OPERATIONS**

 

Atlantic Tele-Network, Inc. (“ATN” or the “Company”)provides wireless and wireline telecommunication services in the Caribbean andNorth America through the following operating subsidiaries and affiliates:

 

•                    GuyanaTelephone & Telegraph Company, Ltd. (“GT&T”), the nationaland international telephone company in the Republic of Guyana and the largestwireless service provider in that country. The Company has owned 80% of thestock of GT&T since January 1991. GT&T generated approximately 58%and 53% of the Company’s consolidated revenues for the three months endedSeptember 30, 2006 and 2007, respectively and approximately 60% and 57% of theCompany’s consolidated revenues for the nine months ended September 30, 2006and 2007, respectively.

 

•                    CommnetWireless, LLC (“Commnet”), an owner and operator of wholesale wireless networksin rural areas of the United States. Commnet provides wireless voice and datacommunications roaming services primarily to national, regional and localwireless carriers. The Company completed its acquisition of 95% of Commnet onSeptember 15, 2005 and the remaining 5% on January 1, 2007.

 

•                    Sovernet, Inc.,(“Sovernet”), a facilities-based integrated voice, broadband datacommunications and dial-up service provider in New England, primarily inVermont. ATN acquired all of the outstanding common stock ofSovernet, Inc. on February 10, 2006 and, at the closing of thetransaction, issued shares of common stock of Sovernet, Inc. amounting to4% of Sovernet’s outstanding capital stock to Sovernet’s Chief ExecutiveOfficer, subject to vesting requirements and other restrictions.

 

•                    BermudaDigital Communications, Ltd. (“BDC”), the largest wireless voice and datacommunications service provider in Bermuda, doing business under the name “CellularOne”. The Company acquired an equity interest in, and signed a managementcontract with, BDC in 1998. The Company currently owns 43% of the equity ofBDC.

 

•                    ChoiceCommunications, LLC (“Choice Communications” or “Choice”), a provider of fixedwireless broadband data and wireless digital television services, as well asdial-up Internet services, to retail and business customers in the U.S. VirginIslands. Choice is a wholly owned subsidiary of the Company.

 

ATN provides management, technical, financial,regulatory and marketing services for its subsidiaries and affiliates andtypically receives a management fee equal to approximately 4% to 6% of theirrespective revenues. Management fees from consolidated subsidiaries areeliminated in consolidation. Management fees from unconsolidated affiliates areincluded in “Other Income” in the accompanying statements of operations.

 

In the third quarter of 2006, the Company completedthe sale of 3.84 million shares of common stock at $19.00 per share in anunderwritten public offering (the “2006 Equity Offering”) consisting of thesale by the Company of an aggregate of 2.64 million shares(2.4 million shares in July 2006 and an additional 0.24 millionshares purchased by the underwriters as a part of their over-allotment optionin August 2006) and 1.2 million shares by our Chairman, Cornelius B.Prior, Jr., and his related entities. The net proceeds to the Company of thisoffering, which were approximately $46.3 million, were used to repay aportion of the Company’s outstanding indebtedness, and will fund capitalexpenditures, acquisitions and/or strategic investments and general corporatepurposes. The Company did not receive any proceeds from the sale of shares ofthe selling stockholders.

 

**2. BASIS OF PRESENTATION**

 

The accompanying condensed consolidated financialstatements have been prepared by the Company pursuant to the rules andregulations of the Securities and Exchange Commission (“SEC”). The financialinformation included herein is unaudited; however, the Company believes suchinformation and the disclosures herein are adequate to make the informationpresented not misleading and reflect all adjustments (consisting only of normalrecurring adjustments) that are necessary for a fair statement of the Company’sfinancial position and results of operations for such periods. The year-endcondensed balance sheet data was derived from audited financial statements, butdoes not include all disclosures required by accounting principles generallyaccepted in the United States of America. Results of interim periodsmay not be indicative of results for

 

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the full year. These condensed consolidated financialstatements and related notes should be read in conjunction with the Company’s2006 Annual Report on Form 10-K.

 

*Consolidation*

 

The consolidated financial statements include theaccounts of the Company, its majority-owned subsidiaries and Commnet ofFlorida, LLC, which is consolidated in accordance with the provisions ofFinancial Accounting Standards Board (“FASB”) Interpretation No. 46, “Consolidationof Variable Interest Entities, an interpretation on Accounting ResearchBulletin No. 51” as revised in December 2003, since it was determinedthat the Company is the primary beneficiary of Commnet of Florida, LLC.

 

Except for the Company’s investment in Commnet ofFlorida, LLC, the equity method of accounting is used for the Company’sinvestments in affiliated entities in which the Company has at least a 20%ownership but does not have management control. The Company accounts forinvestments of less than 20% for which the Company does not have the ability toexert significant influence over the operations by using the cost method ofaccounting.

 

*RecentAccounting Pronouncements*

 

In February 2007, the FASB issued Statement ofFinancial Accounting Standards No. 159, *TheFair Value Option for Financial Assets and Liabilities Including an Amendmentof FASB Statement No. 115*(“SFAS 159”)*.* This standard is effective for periodsbeginning after November 15, 2007, therefore, the Company will adopt theprovisions of the standard on January 1, 2008. SFAS 159 permits theCompany to elect to measure certain of its financial instruments at eitherhistorical cost or fair value. The Company is in the process of determiningwhat method it will choose upon adoption and, once determined, the impact, ifany, adoption will have on the financial results or position of the Company.

 

On January 1, 2007, the Company adopted FASBInterpretation No. 48, *Accounting for Uncertaintyin Income Taxes—an interpretation of FASB Statement No. 109*(“FIN 48”),which clarifies the accounting for uncertainty in tax positions. FIN 48requires that the Company recognize the impact of a tax position in the Company’sfinancial statements if that position is more likely than not of beingsustained on audit, based on the technical merits of the position. The adoptiondid not have a material impact on the results of operations or financialposition of the Company.

 

The Company evaluated its uncertain tax positions relatingto its various tax matters and rulings in Guyana and determined that noadjustment was to be recorded to the estimated settlement amounts previouslyrecorded prior to the adoption of FIN 48. As noted in Note 11 to the 2006 Form10-K, due to various arrangements and relationships in place with thegovernment of Guyana, there is no expectation that interest and penalties willbe assessed upon reaching final settlement of the matters. There is no expectedsettlement date and upon settlement, which might not occur in the near future,the payment may vary significantly from the amounts currently recorded. TheCompany will continue to update amounts recorded as new developments arise.

 

*Reclassifications*

 

Certain conforming revisions have been made to the 2006statement of operations to conform to the 2007 presentation.

 

**3. USE OF ESTIMATES**

 

The preparation of financial statements in conformitywith accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the dates of the financial statements and the reported amountsof revenues and expenses during the reporting periods. The most significantestimates relate to revenue recognition, allowance for doubtful accounts,useful lives of the Company’s fixed and finite-lived intangible assets,allocation of purchase price to assets acquired and liabilities assumed inpurchase business combinations, fair value of indefinite-live intangibleassets, goodwill and income taxes. Actual results could differ significantlyfrom those estimates.

 

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**4. ACQUISITIONS**

 

*a)****                                   ****Acquisition of MinorityInterest in Commnet*

 

In connection with the Commnet merger agreement ofSeptember 2005, the Company also entered into a put and call agreement withBrian A. Schuchman, the 5% minority shareholder of Commnet. Under the terms ofthis agreement, the Company was obligated to acquire the remaining 5% ownershipinterest from Mr. Schuchman between April 15, 2007 and October 15,2007. The purchase price was based on a fixed multiple to earnings ascalculated during the 12-month period prior to the exercise of the put and call.The Company reached an agreement with Mr. Schuchman on January 1, 2007 topurchase his ownership interest for $7.1 million, consisting of $6.5million in cash and 21,000 shares of the Company’s common stock, valued atapproximately $0.6 million. Effective January 1, 2007, Commnet is awholly-owned subsidiary of the Company. Effective May 24, 2007, Mr. Schuchmanbecame a member of the Company’s Board of Directors.

 

The acquisition of the 5% minority interest in Commnetwas accounted for using the purchase method. After eliminating the $1.3 millionminority interest in Commnet, the Company allocated $1.7 million to propertyand equipment, $1.1 million to licenses and the residual balance of $3.0million was recorded to goodwill. In accordance with current accountingstandards, the goodwill will not be amortized and will be tested for impairmentat least annually as required by SFAS No. 142, *Goodwill andOther Intangible Assets* (“SFAS 142”). For tax purposes, the Companyelected to step up the basis of Commnet’s assets to fair market value, andtherefore, the goodwill is deductible for tax purposes.

 

*b)**                                    Sovernet, Inc.*

 

On February 10, 2006, the Company completed the acquisition ofSovernet, a facilities-based provider of communications services to businessand residential customers in Vermont, including bundled voice and high-speedInternet access, as well as traditional dial-up Internet services. Inconnection with the acquisition, ATN acquired all of the outstanding commonstock of Sovernet for approximately $13.2 million, including the repaymentof approximately $1.4 million in Sovernet debt and the payment oftransaction expenses of $0.5 million. At the closing of the transaction,the Company issued shares of Sovernet’s common stock amounting to 4% of Sovernet’soutstanding capital stock to Sovernet’s new chief executive, subject to vestingrequirements and other restrictions. The Company funded the transaction througha combination of cash on hand and borrowings under its existing credit facility(see Note 5). The acquisition of Sovernet allows the Company to expand itslocal telephone and data business into the under-served, smaller markets ofVermont and northern New England.

 

The acquisition of Sovernet was accounted for usingthe purchase method and Sovernet’s results of operations sinceFebruary 10, 2006, the date of acquisition, have been included in thefinancial statements of the Company. The total purchase consideration wasallocated to the assets acquired and liabilities assumed at their estimated fairvalues as of the date of acquisition as determined by management. Included inthis allocation was $5.0 million attributable to Sovernet’s relationshipswith its existing customers as of the date of acquisition. The excess of thepurchase price over the amounts allocated to assets acquired and liabilitiesassumed has been recorded as goodwill. The Company originally recorded$8.1 million of goodwill in connection with the acquisition of Sovernet.However, such amount was reduced by $1.7 million (net of tax) during 2006as a result of the Company’s recording of certain transactions which related toa pre-acquisition period. The value of the goodwill from this acquisition canbe attributed to a number of business factors including, but not limited, tothe reputation of Sovernet as a retail provider of Internet and telephoneservices as well as a network operator, Sovernet’s reputation for customercare, the skills and experience of its management and staff and the strategicposition it holds in its marketplace. In accordance with current accountingstandards, the goodwill will not be amortized and will be tested for impairmentat least annually as required by SFAS 142. The customer relationships willbe amortized, on an accelerated basis, over the expected period during whichtheir economic benefits are to be realized over a period of approximatelyfive years. For tax purposes, the goodwill and amortization of thecustomer relationships are not deductible. Proforma information has not beenpresented for this acquisition as it is not considered material.

 

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**5. CREDIT FACILITIES**

 

Long-termdebt includes the following (in thousands):

 
| ** **                                                                            | ** ** | **December 31,  2006** | ** ** | **September 30,   2007** | ** ** |
|---------------------------------------------------------------------------------------|------------|-----------------------------|------------|------------------------------------|------------|
| Note payable to CoBank, ACB under a $50 million  term loan                            |       | $                           | 50,000     |                               | $          | 50,000 |   |
| Line of Credit, payable to CoBank, ACB  under a $20 million revolving credit facility |       | —                      |       | —                             |       |
|                                                                                  |       |                        |       |                               |       |
| Total long term debt                                                                  |       | $                           | 50,000     |                               | $          | 50,000 |   |

 

On September 15, 2005, ATN, as borrower, enteredinto a credit agreement with CoBank, ACB (the “CoBank Credit Agreement”). TheCoBank Credit Agreement provides a $50 million term loan (the “Term Loan”) anda $20 million revolving credit facility (the “Revolver Facility”, together withthe Term Loan, the “Credit Facility”). The Credit Facility is guaranteed by ourCommnet subsidiary and is collateralized by, among other things, a securityinterest in substantially all of the assets of and stock owned by ATN andCommnet. The Term Loan has principal repayments deferred until the maturity ofthe loan on October 31, 2010. Interest on the Term Loan is payable on aquarterly basis at a fixed annual interest rate of 5.85%, less any patronagepayments received by the Company from the bank. Amounts outstanding under theRevolver Facility accrue interest at a rate equal to (at the Company’s option):(i) LIBOR plus a margin ranging from 1.25% to 1.50% or (ii) avariable rate of interest as defined within the Revolver Facility plus 1%.

 

OnAugust 31, 2007, the Company and its lenders under the CoBank Credit Agreementamended the CoBank Credit Agreement to (i) reduce the amount of GT&T stockpledged by ATN, (ii) provide for up to $1.0 million in Letters of Credit underthe Revolver Facility and (iii) increase the amount of investments (includingpermitted acquisitions and dispositions) the Company can make in othercommunications companies without approval by the agent of lenders thereunder.

 

The CoBank Credit Agreement contains certainaffirmative and negative covenants of ATN and its subsidiaries (includingCommnet). Among other things, these covenants restrict ATN’s ability to incuradditional debt in the future or to incur liens on its property. ATN has alsoagreed to maintain certain financial ratios under the facilities, including atotal leverage ratio (debt to EBITDA, as defined) of two to one or less; a debtservice coverage ratio (EBITDA to debt service) of three to one or more; anequity to assets ratio of 0.4 to one or more; and a specified leverage ratiofor Commnet that changes over time. As of September 30, 2007, the Company wasin compliance with the covenants of the CoBank Credit Facility.

 

**6. STOCK-BASED COMPENSATION**

 

During the three months ended September 30, 2006 and2007, the Company recognized $195,000 and $213,000, respectively, of non-cashcompensation expense relating to grants under the 1998 Stock Option Plan and2005 Atlantic Tele-Network Restricted Stock Plan and Incentive Plan (the “ShareBased Plans”). During the nine months ended September 30, 2006 and 2007, theCompany recognized $610,000 and $631,000, respectively, of non-cashcompensation expense relating to grants under the Share Based Plans.

 

In September 2007, the Company’s Board of Directorsapproved the grant, to certain employees, of options to acquire 175,000 sharesof the Company’s common stock at an exercise price equal to the fair value ofthe Company’s common stock on the date of grant. Also in September 2007, theCompany’s Board of Directors approved the issuance of 10,000 shares ofrestricted stock at a price equal to the fair value of the Company’s commonstock at the date of grant to an employee. In connection with the grant of theoptions and the restricted shares, the Company recognized $1.4 million ofdeferred compensation which will be amortized over the vesting period of fouryears.

 

**7. OTHER INCOME**

 

During the second quarter of 2007, Commnet recorded again of $1.0 million in connection with the disposition of certain assets andrecorded other income of $1.25 million for cash received in a licensesettlement. Both of these amounts are included in other income within theaccompanying statement of operations for the nine months ended September 30,2007.

 

During August 2007, the Company sold all of its assetsin Haiti to Access Haiti, S.A., a Haitian company in which the Chairman of theCompany’s Board of Directors is a significant equity holder. After taking intoaccount outstanding claims, legal and other related expenses incurred inconnection with the transaction and the dissolution of the Company's HaitianSubsidiaries the Company recognized a loss of approximately $258,000 which isincluded in other income in the

 

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accompanyingstatement of operations for both the three and nine months ended September 30,2007  (see Note 10).

 

**8. NET INCOME PER SHARE**

 

Net income per share is computed in accordance withStatement of Financial Accounting Standards No. 128, *Earnings PerShare*. Basic net income per share is computed by dividing net incomeby the weighted average number of common shares outstanding during the periodand does not include any other potentially dilutive securities. Diluted netincome per share gives effect to all potentially dilutive securities using thetreasury stock method.

 

For the three and nine months ended September 30, 2006and 2007, the stock options and restricted common shares issued under the ShareBased Plans were the only potentially dilutive securities.

 

The reconciliation from basic to diluted weightedaverage common shares outstanding is as follows (in thousands):

 
| ** **                                                                  | ** ** | **Three Months Ended  September 30,** | ** ** | **Nine Months Ended  September 30,** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------------------------------------|------------|-----------------------------------------------------|------------|
| ** **                                                                  | ** ** | **2006**                                             | ** ** | **2007**                                            | ** ** | **2006** | ** ** | **2007** | ** ** |
| Basic weighted average common shares  outstanding                           |       | 14,262                                               |       | 15,175                                              |       | 13,053 |   | 15,162 |   |
| Unvested shares issued under the Company’s  2005 Restricted Stock Plan |       | 61                                                   |       | 37                                                  |       | 57 |   | 43 |   |
| Stock options issued under the Company’s  1998 Stock Option Plan       |       | 30                                                   |       | 105                                                 |       | 113 |   | 90 |   |
| Diluted weighted average common shares  outstanding                         |       | 14,353                                               |       | 15,317                                              |       | 13,223 |   | 15,295 |   |

 

**9. SEGMENT REPORTING**

 

The Company has four reportable segments which areconsidered material for separate disclosure under Statement of FinancialAccounting Standards No. 131, *Disclosures About Segmentsof and Enterprise Related Information.* Those four segments are:i) Integrated Telephony-International, which generates all of its revenuesin Guyana and has all of its assets located in Guyana (“GT&T”),ii) Integrated Telephony-Domestic, which generates all of its revenues andhas all of its assets located in the United States (“Sovernet”),iii) Wireless Television and Data, which generates all of its revenues inand has all of its assets located in the U.S Virgin Islands (“Choice”), andiv) Rural Wireless, which generates all of its revenues in the UnitedStates and has all of its assets located in the United States (“Commnet”). Theoperating segments are managed separately because each offers differentservices and serves different markets. Certain elements of the 2006 segmentinformation have been revised to conform to the current format of financialinformation reviewed by the Company’s chief operating decision makers.

 

The following tables provide information for eachoperating segment (in thousands):

 
| ** **                                                   | ** ** | **For the Three Months Ended September 30, 2006** | ** ** |
|--------------------------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| ** **                                                   | ** ** | **Integrated  Telephony-  International**                                            | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Television  and Data** | ** ** | **Rural  Wireless** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| Revenues                                                     |       | $                                                                                    | 24,030     |   | $ | 3,812 |   | $ | 1,764 |   | $ | 11,741 |   | $ | — |   | $ | 41,347 |   |
| Depreciation and amortization                                |       | 3,444                                                                                |       | 517 |   | 588 |   | 1,432 |   | 152 |   | 6,133 |   |
| Non-cash stock-based compensation                            |       | —                                                                               |       | 32 |   | — |   | — |   | 163 |   | 195 |   |
| Operating income (loss)                                      |       | 12,646                                                                               |       | 686 |   | (671 | ) | 4,687 |   | (2,483 | ) | 14,865 |   |
| Interest expense                                             |       | —                                                                               |       | — |   | (790 | ) | (170 | ) | 34 |   | (926 | ) |
| Interest income                                              |       | 127                                                                                  |       | 43 |   | — |   | 29 |   | 329 |   | 528 |   |
| Income taxes                                                 |       | 4,648                                                                                |       | 301 |   | (235 | ) | 1,819 |   | (247 | ) | 6,286 |   |
| Equity in earnings of unconsolidated  affiliates, net of tax |       | —                                                                               |       | — |   | — |   | — |   | 708 |   | 708 |   |
| Net income (loss)                                            |       | $                                                                                    | 5,606      |   | $ | 410 |   | $ | (1,333 | ) | $ | 2,551 |   | 369 |   | $ | 7,603 |   |
|                                                              |            |                                                                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                                                   | ** ** | **For the Three Months Ended September 30, 2007** | ** ** |
|--------------------------------------------------------------|------------|--------------------------------------------------------------------------------------|------------|
| ** **                                                   | ** ** | **Integrated  Telephony-  International**                                            | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Television   and Data** | ** ** | **Rural  Wireless** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| Revenues                                                     |       | $                                                                                    | 25,101     |   | $ | 3,661 |   | $ | 2,237 |   | $ | 15,962 |   | $ | — |   | $ | 46,961 |   |
| Depreciation and amortization                                |       | 3,905                                                                                |       | 431 |   | 522 |   | 1,879 |   | 78 |   | 6,815 |   |
| Non-cash stock-based compensation                            |       | —                                                                               |       | 32 |   | — |   | — |   | 181 |   | 213 |   |
| Operating income (loss)                                      |       | 11,479                                                                               |       | 508 |   | (404 | ) | 7,938 |   | (1,881 | ) | 17,640 |   |
| Interest expense                                             |       | —                                                                               |       | — |   | (880 | ) | (195 | ) | 355 |   | (720 | ) |
| Interest income                                              |       | 168                                                                                  |       | 90 |   | — |   | 81 |   | 374 |   | 713 |   |
| Income taxes                                                 |       | 4,768                                                                                |       | 157 |   | (142 | ) | 2,874 |   | 206 |   | 7,863 |   |
| Equity in earnings of unconsolidated  affiliates, net of tax |       | —                                                                               |       | — |   | — |   | — |   | 668 |   | 668 |   |
| Net income (loss)                                            |       | $                                                                                    | 4,394      |   | $ | 283 |   | $ | (1,282 | ) | $ | 4,253 |   | $ | 1,754 |   | $ | 9,402 |   |

 
| ** **                                                   | ** ** | **For the Nine Months Ended September 30, 2006** | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                                                   | ** ** | **Integrated  Telephony-  International**                                           | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Television   and Data** | ** ** | **Rural  Wireless** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| Revenues                                                     |       | $                                                                                   | 68,565     |   | $ | 9,560 |   | $ | 4,970 |   | $ | 30,269 |   | $ | — |   | $ | 113,364 |   |
| Depreciation and amortization                                |       | 10,268                                                                              |       | 1,377 |   | 1,768 |   | 4,162 |   | 458 |   | 18,033 |   |
| Non-cash stock-based compensation                            |       | —                                                                              |       | 85 |   | — |   | — |   | 525 |   | 610 |   |
| Operating income (loss)                                      |       | 35,914                                                                              |       | 1,694 |   | (2,268 | ) | 10,206 |   | (7,076 | ) | 38,470 |   |
| Interest expense                                             |       | —                                                                              |       | — |   | (2,233 | ) | (427 | ) | (154 | ) | (2,814 | ) |
| Interest income                                              |       | 411                                                                                 |       | 55 |   | — |   | 85 |   | 382 |   | 933 |   |
| Income taxes                                                 |       | 14,573                                                                              |       | 717 |   | (795 | ) | 3,951 |   | 530 |   | 18,976 |   |
| Equity in earnings of unconsolidated  affiliates, net of tax |       | —                                                                              |       | — |   | — |   | — |   | 2,010 |   | 2,010 |   |
| Net income (loss)                                            |       | $                                                                                   | 14,576     |   | $ | 991 |   | $ | (4,011 | ) | $ | 5,475 |   | $ | (403 | ) | $ | 16,628 |   |

 
| ** **                                                   | ** ** | **For the Nine Months Ended September 30, 2007** | ** ** |
|--------------------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                                                   | ** ** | **Integrated  Telephony-  International**                                           | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Television   and Data** | ** ** | **Rural  Wireless** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| Revenues                                                     |       | $                                                                                   | 76,597     |   | $ | 10,987 |   | $ | 6,410 |   | $ | 40,718 |   | $ | — |   | $ | 134,712 |   |
| Depreciation and amortization                                |       | 11,671                                                                              |       | 1,332 |   | 1,608 |   | 5,132 |   | 232 |   | 19,975 |   |
| Non-cash stock-based compensation                            |       | —                                                                              |       | 95 |   | — |   | — |   | 536 |   | 631 |   |
| Operating income (loss)                                      |       | 33,949                                                                              |       | 1,444 |   | (1,255 | ) | 18,134 |   | (6,336 | ) | 45,936 |   |
| Interest expense                                             |       | —                                                                              |       | 7 |   | (2,622 | ) | (530 | ) | 1,549 |   | (1,596 | ) |
| Interest income                                              |       | 483                                                                                 |       | 228 |   | — |   | 165 |   | 938 |   | 1,814 |   |
| Income taxes                                                 |       | 14,133                                                                              |       | 501 |   | (439 | ) | 7,429 |   | 154 |   | 21,778 |   |
| Equity in earnings of unconsolidated  affiliates, net of tax |       | —                                                                              |       | — |   | — |   | — |   | 1,766 |   | 1,766 |   |
| Net income (loss)                                            |       | $                                                                                   | 12,853     |   | $ | 709 |   | $ | (3,861 | ) | $ | 10,304 |   | 5,344 |   | $ | 25,349 |   |
|                                                              |            |                                                                                     |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 
| ** **             | ** ** | **Assets**                                | ** ** |
|------------------------|------------|-------------------------------------------|------------|
| **As of**         | ** ** | **Integrated  Telephony-  International** | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Television   and Data** | ** ** | **Rural  Wireless** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| December 31, 2006 |       | $                                         | 142,670    |   | $ | 20,821 |   | $ | 12,061 |   | $ | 85,310 |   | $ | 41,752 |   | $ | 302,614 |   |
| September 30, 2007     |       | 142,570                                   |       | 21,971 |   | 11,458 |   | 106,310 |   | 43,144 |   | 325,453 |   |
|                        |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

As of September 30, 2007, total assets for theIntegrated Telephony-Domestic and Rural Wireless segments included $7.2 millionand $32.1 million of goodwill, respectively. Of the $32.1 million of goodwillincluded in the Rural Wireless segment, $3.0 million related to the acquisitionof the 5% minority interest of Commnet during the first quarter of 2007 (seeNote 4).

 

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| ** **                                          | ** ** | **Capital Expenditures**             | ** ** |
|-----------------------------------------------------|------------|-------------------------------------------|------------|
| **Nine Months Ended  September 30,** | ** ** | **Integrated  Telephony-  International** | ** ** | **Integrated  Telephony  Domestic** | ** ** | **Wireless  Television   and Data** | ** ** | **Rural  Wireless** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| 2006                                                |       | $                                         | 11,394     |   | $ | 171 |   | $ | 74 |   | $ | 8,207 |   | $ | 16 |   | $ | 19,862 |   |
| 2007                                                |       | 16,752                                    |       | 775 |   | 66 |   | 13,585 |   | 34 |   | $ | 31,212 |   |
|                                                     |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**10.RELATED PARTY TRANSACTION**

 

In 2001, the Company curtailed the operations andfunding of its ATN-Haiti and Transnet S.A. subsidiaries (the “HaitianSubsidiaries”), wrote-down its investment and began exploring strategic alternativesfor the use or disposition of the remaining assets of the Haitian Subsidiaries.In May 2006, the Company’s Board of Directors authorized the Company toenter into discussions to sell, at fair value, subject to review and finalapproval by the Audit Committee, the remaining assets of the HaitianSubsidiaries, consisting primarily of an office building and 13 tower siteslocated in Haiti, to Cornelius B. Prior, Jr., the Company’s ExecutiveChairman, who is also the father of the Company’s Chief Executive Officer.

 

In August 2007, the Company, upon final approval bythe Company’s Board of Directors and Audit Committee, completed the sale of theremaining assets of the Haitian Subsidiaries to Access Haiti, S.A., a Haitiancompany in which Mr. Prior is a significant equity holder, for $750,000 and therelease by Access Haiti, S.A. of certain indebtedness of Transnet S.A. Inconnection with the sale, Mr. Prior has agreed to indemnify the Company for anyclaims made against the Haitian Subsidiaries by creditors and vendors of theHaitian Subsidiaries in excess of $200,000 in the aggregate. In addition, Mr.Prior has agreed to assist the Company in dissolving the Haitian Subsidiaries. Ifthe dissolution is not completed by January 2008, the Company has the right tosell, and Mr. Prior has the obligation to buy, the Company’s equity interestsin the Haitian Subsidiaries for $1.

 

                                                Theimpact of the remaining activities of Haitian Subsidiaries on our results ofoperations for 2002 through August 2007 was not significant to our consolidatedfinancial statements. As of August 2007, the net book value of the Haiti assetswas $655,000. After taking into account outstanding claims, legal and otherrelated expenses incurred in connection with the transaction and the dissolutionof the Haitian Subsidiaries, we recorded a loss of approximately $258,000 whichis included in Other Income within the accompanying Statements of Operations. Inaddition, we cancelled the remaining debt obligations of ATN-Haiti owed to us,which we had previously written off in 2001.

 

**11.ASSETS AND LIABILITIES HELD FOR SALE**

 

In September 2007, Commnet entered into an agreementwith a national carrier to sell 59 base stations, along with spectrum licenses,in two Midwestern states for total consideration of approximately $17.0million. At the same time, Commnet entered into an agreement with this carrierto purchase spectrum , lease additional spectrum and build a network in ruralareas in three states. This new network is expected to consist of at least 70base stations, and, in return for a long-term roaming agreement with thiscarrier, Commnet committed to complete the network build by March 31, 2008. Theagreement also provides the carrier a purchase option on the new base stationsexercisable beginning in 2010 through 2012 at a predetermined price each year.The sale is expected to close in late 2007 or early 2008, however bothtransactions are subject to regulatory approval and certain other customaryconditions to closing. The Company expects to record a pre-tax gain when thesale is consummated between $4.0 and $5.0 million.

 

**12.COMMITMENTS AND CONTINGENCIES**

 

**Regulatoryand Litigation Matters**

 

TheCompany and its subsidiaries are subject to certain regulatory and legalproceedings and other claims arising in the ordinary course of business, someof which involve claims for damages and taxes that are substantial in amount.The Company believes that, except for the items discussed below for which theCompany is currently unable to predict the final outcome, the disposition ofproceedings currently pending will not have a material adverse effect on theCompany’s financial position or results of operations.

 

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***Regulatory***

 

TheCompany’s Guyana subsidiary, GT&T, is subject to regulation in Guyana underthe provisions of its license and under the Guyana Public Utilities CommissionAct of 1999 and the Guyana Telecommunications Act of 1990. GT&T also hascertain significant rights and obligations under the agreement pursuant towhich the Company acquired its interest in GT&T in 1991 and because of thelarge volume of traffic that GT&T has with the United States, GT&T canbe significantly affected by orders of U.S. regulatory agencies.

 

In aletter dated September 8, 2006, the National Frequency Management Unit (“NFMU”)agreed that GT&T’s total spectrum fees should not increase for the years2006 and 2007. However, that letter implied that spectrum fees in 2008 andonward may be increased substantially beyond the amount agreed between GT&Tand the Government. GT&T restated its position in a September 14, 2006letter to the Government that, by agreement with the Government, spectrum feesshould be capped until the NFMU develops a spectrum fee methodology acceptableto all GSM spectrum licenses.  In correspondence to GT&T in June 2007,the NFMU stated, without indicating whether a fee methodology would bedeveloped, that the cap on GSM spectrum fees will be removed in December2007.   In a letter dated July 3, 2007 to the NFMU, GT&T objectedto the NFMU’s proposed action and reiterated its position that an increase infees prior to development of an acceptable methodology would violate theGovernment’s prior agreement.

 

OnJanuary 2, 2007, a value added tax (“VAT”) of 16% on imports and othergoods and services went into effect in Guyana. GT&T successfully arguedthat its contract with the Government of Guyana provides for exemption incertain cases from payment of consumption tax and import duties, including theVAT. The VAT also replaced the telephone tax of 10% and broadened theapplicability to include, for example, rentals and leases. Historically, thetelephone tax applied only to usage. In December 2006, the Guyana RevenueAuthority (“GRA”) expressed its opinion to GT&T that the VAT applied toGT&T’s pre-paid phone cards at the time a GT&T customer purchases thecard. GT&T believes that the VAT should apply in the same manner as thetelephone tax that the VAT replaced, that is, at the time a pre-paid customerinitiates a call. This interpretation conforms to past practice of theGovernment and GT&T’s accounting practice, which does not recognize thepre-paid revenue until a call is initiated by the pre-paid customer. GT&Thas been remitting VAT pursuant to the methodology in effect under thetelephone tax structure. These payments have been accepted by the GRA withoutobjection. GT&T’s experience over the course of 2007 leads the Company tobelieve that the VAT will not have a material adverse affect on GT&T’sfinancial condition or results of operations.

 

OnJanuary 15, 2007, the Public Utilities Commission (the “PUC”) issued aruling that fixed floor and ceiling rates for both the pre-paid and thepost-paid cellular services offered by GT&T and its competition. Inaddition, the PUC ordered the companies to implement per-second billing asopposed to the pre-existing practice of per-minute billing. While these eventshave not had a material adverse effect on GT&T to date, the expansion ofper second billing to non-mobile services, which has been the subject of recentPUC proceedings, could have a material adverse effect on GT&T’s financialcondition or results of operations. The PUC has set a further hearing on thisissue for December 2007.

 

InOctober 1997, the PUC ordered GT&T to increase the number of telephonelines in service to a total of 69,278 lines by the end of 1998; 89,054 lines bythe end of 1999; and 102,126 lines by the end of 2000; to allocate and connectan additional 9,331 telephone lines before the end of 1998; and to provide tosubscribers who request them facilities for call diversion, call waiting,reminder call, and three-way calling by the end of 1998. In issuing this order,the PUC did not hear evidence or make any findings on the cost of providingthese lines and services, the adjustment in telephone rates that may benecessary to give GT&T a fair return on its investment, or the ways andmeans of financing the requirements of the PUC’s order. GT&T has appealedthe PUC’s order to the Guyana Court of Appeal, and that appeal is stillpending. No stay currently exists against this order. GT&T hadapproximately 127,000 access lines in service as of September 30, 2007.

 

InJuly 2004, the FCC revised the spectrum band plan applicable to theBroadband Radio Service and Educational Broadband Service. These are thespectrum bands used by Choice to operate its video and broadband data services.The new rules restructure these spectrum bands and could materially impactChoice customers and operations if Choice is required to transition to the newband plan.  The FCC has stated that it will consider requests for waiverof the new band plan requirements on a case-by-case basis and described thecircumstances under which waivers would be granted. To date, the FCC hasgranted at least three waivers that excuse entities similar to Choice from therebanding requirement.  On April 30, 2007, Choice filed a waiver requestat the FCC that subsequently was contested by Sprint Nextel Corporation, amongothers.  This proceeding remains pending before the FCC.

 

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InAugust 2006 and in January 2007, the Bermuda Ministry ofTelecommunications and E-Commerce issued consultation documents proposing a newregulatory framework for the telecommunications industry. The proposalscontemplate converting existing service-specific licenses to licenses thatpermit any company to offer any type of service. At this time we do not knowwhether the outcome of this proposal will be positive or negative for BDC.

 

***Litigation***

 

InBermuda, our BDC affiliate is subject to Bermuda’s Telecommunications Act of1986, as amended. In November 2005, the Minister of Telecommunications andTechnology directed BDC to cease offering certain data services through its “Bull”branded wireless modem. BDC challenged the directive in Bermuda court claimingthat the directive contravenes BDC’s license to provide data services and BDC’slong history of providing data services. On June 6, 2006, the court ruledin favor of BDC. The ministry has filed an appeal which is expected to be heardin November 2007.

 

Uponthe acquisition of GT&T in January 1991, ATN entered into an agreementwith the government of Guyana to significantly expand GT&T’s existingfacilities and telecommunications operations and to improve service within athree-year period pursuant to an expansion and service improvement plan (the “Plan”).The government agreed to permit rate increases in the event of currencydevaluation within the three-year period, but GT&T was unable to get timelyincreases when the Guyanese currency suffered a sharp decline inMarch 1991. The Plan was modified in certain respects and the date forcompletion of the Plan was extended to February 1995. Since 1995, the PUChas had pending a proceeding initiated by the minister of telecommunications ofGuyana with regard to the failure of GT&T to complete the Plan byFebruary 1995. The PUC last held hearings on this matter in 1998. It isGT&T’s position that its failure to receive timely rate increases incompensation for the devaluation of the currency in 1991 provides legaljustification for GT&T’s delay in completing the Plan. If the PUC were tofind that GT&T was not excused from fulfilling the terms of the Plan byFebruary 1995, GT&T could be subject to monetary penalties,cancellation of its license, or other action by the PUC or the government thatcould have a material adverse effect on the Company’s business and prospects.The requirements of the Plan were substantially completed several years ago.GT&T believes that its obligations have been fulfilled and it has continuedto aggressively develop the telecommunications infrastructure in all areasincluding landline, wireless and data.

 

GT&Tis contesting income tax assessments of approximately $7.3 million that ithas received from the commissioner of Inland Revenue for the years 1991-1996based on the disallowance as a deduction for income tax purposes of five-sixthsof the advisory fees payable by GT&T to the Company. The deductibility ofthese advisory fees was upheld for one of these years by a decision of the HighCourt in August 1995. The Guyana Commission of Inland Revenue has filed aHigh Court Writ seeking an order setting aside that decision on the groundsthat the Commissioner did not have a proper hearing. GT&T has contestedthat Writ. The assessments for the other years are being held in abeyancepending decision on the Writ and GT&T motions to strike. Subsequent toDecember 31, 2001, GT&T received assessments for the years 1997-2000in the aggregate amount of approximately $6.5 million raising the sameissues. GT&T expects that proceedings on these assessments will also beheld in abeyance pending the Court’s decision.

 

InNovember 1997, GT&T received assessments of the current equivalent ofapproximately $9.7 million from the commissioner of Inland Revenue fortaxes for the years 1991 through 1996. It is GT&T’s understanding thatthese assessments stem from an audit that the Guyana High Court stayed beforeit was completed. Apparently, because the audit was cut short as a result ofthe High Court’s order, GT&T did not receive notice of, and an opportunityto respond to, the proposed assessments as is the customary practice in Guyana,and substantially all of the issues raised in the assessments appear to bebased on mistaken facts. GT&T has applied to the Guyana High Court for anorder prohibiting the commissioner of Inland Revenue from enforcing theassessments on the grounds that the origin of the audit and the failure to giveGT&T notice of, and opportunity to respond to, the proposed assessmentsviolated Guyanese law. The Guyana High Court has issued an order effectivelyprohibiting any action on the assessments pending the determination by the HighCourt of the merits of GT&T’s application.

 

ShouldGT&T be held liable for any of the above tax liabilities, totaling$23.5 million, the Company believes that the government of Guyana would beobligated to reimburse GT&T for any amounts that would reduce GT&T’sreturn on investment to less than 15% per annum for the relevant periods.

 

Inearly 2000, Inet Communications, Inc., an Internet service provider inGuyana, and the Guyana Consumers Association filed a suit in the High Courtagainst the Attorney General of Guyana and GT&T. The suit claims thatGT&T is not entitled to rate increases based on the agreement between theGovernment of Guyana and ATN and that the Civil Law of

 

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Guyana prohibits what isreferred to as GT&T’s monopoly. Inet’s motion was struck down fornon-appearance of counsel. However, Inet’s counsel has applied for the matterto be restored. The Court has not yet taken action on Inet’s application.

 

InJuly 2002, an individual sued the Attorney General of Guyana in the Guyanacourts asking, among other things, for a declaration that the section of theCompany’s 1990 contract with the Government of Guyana granting to GT&T anexclusive right to operate a telecommunications system in Guyana was null andvoid as contrary to law and to the Constitution of Guyana. GT&T has joinedthe suit to contest these claims and this proceeding remains pending. In 2001,the Government of Guyana announced its intention to introduce competition intoGuyana’s telecommunications sector in contravention of the terms of GT&T’slicense. The Company believes that the termination of the exclusivityprovisions of GT&T’s license would require appropriate compensation toGT&T and a rebalancing of rates so that the rates for each servicerepresent the real economic cost of such services. In February 2002,GT&T began negotiations with the Government on these issues and all otheroutstanding issues between GT&T and the Government of Guyana. GT&T hasnot had formal discussions with Government officials regarding rate regulationor the introduction of additional competition since the second quarter of 2002.The President of Guyana has publicly stated that competition in the wirelineand long distance sectors are key objectives of his administration. In recentcorrespondence with GT&T, senior Guyanese officials indicated a desire tore-start negotiations in the near future regarding the exclusivity terms ofGT&T’s license, as well as other outstanding issues, such as certain taxmatters.

 

**Item 2. Management’s Discussion and Analysis ofFinancial Condition and Results of Operations**

 

This discussionshould be read in conjunction with Management’s Discussion and Analysis ofFinancial Condition and Results of Operations included in our 2006 AnnualReport on Form 10-K. Some of the statements in the discussion areforward-looking statements which are subject to risks, uncertainties and otherfactors that could cause actual results to differ materially from futureresults expressed or implied by such forward-looking statements. These riskfactors include those discussed under Item 1A, “Risk Factors” in our 2006Annual Report on Form 10-K and those set forth in this Report under “CautionaryStatement Regarding Forward-Looking Statements.”

 

**OVERVIEW**

 

Weprovide wireless and wireline telecommunications services in the Caribbean andNorth America through the following operating subsidiaries and affiliate:

 

•       Guyana Telephone &Telegraph Company, Ltd. (or GT&T), the national and internationaltelephone company in the Republic of Guyana and the largest wireless serviceprovider in that country. We have owned 80% of the equity of GT&T sinceJanuary 1991.

 

•       CommnetWireless, LLC (or Commnet), an owner and operator of wholesale wirelessnetworks in rural areas of the United States. Commnet provides wireless voiceand data communications roaming services primarily to national, regional andlocal wireless carriers. We acquired 95% of the equity of Commnet in September2005 and the remaining 5% in January 2007.

 

•       Sovernet, Inc.,(or Sovernet), a facilities-based integrated voice, broadband datacommunications and dial-up service provider in New England, primarily inVermont. We acquired Sovernet in February 2006 and granted restricted stockequal to 4% of Sovernet’s outstanding capital stock to Sovernet’s ChiefExecutive Officer.

 

•       BermudaDigital Communications, Ltd. ( or BDC), the largest wireless voice anddata communications service provider in Bermuda, doing business under the nameCellular One. We acquired a minority equity interest in, and signed amanagement contract with, BDC in 1998. We currently own 43% of the capitalstock of BDC.

 

•       ChoiceCommunications, LLC (or Choice), a leading provider of fixed wireless broadbanddata services, wireless digital television services as well as dial-up Internetservices, to retail and business customers in the U.S. Virgin Islands. Weacquired Choice in October 1999 and own 100% of the equity of Choice.

 

As aholding company, we provide management, technical, financial, regulatory, andmarketing services to, and typically receive a management fee equal toapproximately 4% to 6% of revenues from each operating subsidiary and our BDCaffiliate. Because we do not control BDC, we account for our investment in thatentity under the equity method. Earnings from BDC do not appear in our incomefrom operations, but are instead reflected in equity earnings of unconsolidatedaffiliates in the Consolidated Financial Statements included in this Report. InJuly 2008, BDC has the option

 

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to repurchase from usall, but not less than all, of our equity interest in BDC at a price equal tofair market value. We are uncertain as to whether BDC will exercise thisoption. Also in 2008, our management fee arrangement with BDC may be terminatedpursuant to our contract.

 

Thefollowing chart summarizes the operating activities of our subsidiaries and ourBDC affiliate and the markets they serve as of September 30, 2007:

 
| **Services**                 | ** ** | **Segment**                                                                                      | ** ** | **Operating Subsidiary/Affiliate**      | ** ** | **Markets**                                              |
|------------------------------|------------|--------------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------------------|
| Wireless                     |       | Rural Wireless  Integrated Telephony-International                                               |       | Commnet  GT&T  BDC(1)                    |       | United States (rural  markets)  Guyana  Bermuda          |
|                         |       |                                                                                             |       |                                         |       |                                                     |
| Local Telephone and  Data    |       | Integrated  Telephony-International  Integrated Telephony-Domestic  Wireless Television and Data |       | GT&T  Sovernet  Choice (internet access) |       | Guyana  United States (New England)  U.S. Virgin Islands |
|                         |       |                                                                                             |       |                                         |       |                                                     |
| International Long  Distance |       | Integrated  Telephony-International                                                              |       | GT&T                                     |       | Guyana                                                   |
|                         |       |                                                                                             |       |                                         |       |                                                     |
| Other                        |       | Wireless Television and  Data                                                                    |       | Choice (digital  television)                 |       | U.S. Virgin Islands                                      |

 

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(1)             Earningsfrom BDC do not appear in our income from operations but are instead reflectedin equity in earnings of unconsolidated affiliates in the ConsolidatedFinancial Statements included in this Report.

 

Forinformation about our business segments and geographical information about ouroperating revenues and assets, see Note 9 to the Consolidated FinancialStatements included in this Report.

 

In thepast, we generated most of our revenue and operating income from our GT&Toperations. GT&T provides domestic wireline telephone service andinternational long distance service pursuant to an exclusive license from theGovernment of Guyana and provides wireless service on a non-exclusive basis.The rates that GT&T may charge for its services are regulated by the PublicUtility Commission of Guyana (or PUC), an independent regulatory bodyresponsible for regulating telecommunications. See “Business—Regulation of OurGT&T Subsidiary” in the 2006 Annual Report on Form 10-K. The largestcomponent of GT&T’s contribution to our consolidated revenue and profit hasbeen from its international long distance business and that business stillaccounts for roughly half of GT&T’s revenue. Most of these revenues andprofits were from payments by foreign carriers, which are denominated in U.S.dollars, for handling international long distance calls originating by foreigncarriers and terminating in Guyana. The rates at which GT&T collects feesfrom foreign carriers are established by agreements between it and foreign carriers,and can be affected by limits set by foreign telecommunications regulators,especially the U.S. Federal Communications Commission (or FCC). The primarydrivers of the long distance business are the population of Guyanese livingabroad who initiate calls to Guyana, the rate foreign carriers pay GT&T forhandling the incoming international calls, and the number of people in Guyanacapable of receiving international long distance calls, which consist ofwireline telephone customers and all the wireless subscribers in Guyana(including subscribers to competitor wireless service providers). In addition,in recent years, we believe various methods of illegal bypass and alternativeand cheaper media for communication, such as e-mail and text messaging, may havehad a negative impact on both voice traffic and on international long distancerevenues. We have taken a number of measures to counter illegal bypass,including taking action against unlicensed operators in Guyana, introducingspecial outbound call center rates and we are examining automated technicalsolutions as well.

 

In2005 and 2006, we entered new businesses and markets through our acquisitionsof Commnet and Sovernet. These businesses have provided us with new sources ofrevenues and with additional growth opportunities. As a result, while GT&Tcontinues to represent a majority of our revenues and profits, its relativecontribution to our consolidated revenues has declined in recent years.GT&T generated approximately 58% and 53% of our consolidated revenues forthe three months ended September 30, 2006 and 2007, respectively, and 60% and57% of our consolidated revenues for the nine months ended September 30, 2006and 2007, respectively. Commnet generated approximately 69% and 74% of ourwireless revenue for the three months ended September 30, 2006 and 2007,respectively, and approximately 68% and 69% of our wireless revenue for thenine months ended September 30, 2006 and 2007, respectively.  Commnet alsoaccounted for approximately 96% and 74% of the increase in wireless revenueduring the three and nine months ended September 30, 2007 over thecorresponding

 

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periods in 2006. Sovernetgenerated approximately 31% of our local telephone and data revenue for thethree and nine months ended September 30, 2007, respectively.

 

We areactively evaluating additional acquisition opportunities of businesses thatmeet our return-on-investment and other acquisition criteria. As a result ofour underwritten public offering of common stock in July 2006, we raised netproceeds of approximately $46.3 million, of which a portion was used to repayoutstanding indebtedness, and the remainder of which we plan to use to fundcapital expenditures, acquisitions and/or strategic investments and generalcorporate purposes.

 

Whileour GT&T operations continue to grow, we face challenges in Guyana. Since2001, the Government of Guyana has stated its intention to introducecompetition into Guyana’s wireline sector. The President of Guyana has publiclystated in the past that competition in the wireline and long distance sectorsare key objectives of his administration. In recent correspondence withGT&T, senior Guyanese officials indicated a desire to re-start negotiationsin the near future regarding the exclusivity terms of GT&T’s license, aswell as other outstanding issues, such as certain tax matters. GT&T has nothad formal discussions with Government officials regarding these matters sincethe second quarter of 2002. See “Business—Regulation of Our GT&T Subsidiary”in our 2006 Form 10-K. We believe that the introduction of international voiceand data competition would require the termination of the exclusivityprovisions of GT&T’s license, and thus would require appropriatecompensation to GT&T and a likely increase in local wireline service ratesso that those rates reflect the actual cost of providing such services.

 

GT&Tis also in the process of adapting to recent changes in the competitiveenvironment for wireless services in Guyana. Digicel’s entry into the Guyanawireless market in November 2006 through acquisition has significantlyincreased the competition we face in the Guyana wireless market. Since thisentry, Digicel has used aggressive spending to gain market share, includingthrough the use of extensive give-aways and handset subsidies. In turn, wecountered with our own promotions and accelerated the timing of some of ourcapital expenditures on network expansion and upgrades. We believe that networkcoverage and quality of service are some of the most important bases on whichwe compete and represent competitive advantages for us because of oursubstantial investment in our network over time. During the last threequarters, we also increased our efforts to accelerate the migration ofsubscribers from our TDMA network to our GSM network, which allows us to offerricher handset features and certain wireless data services, while increasingour network capacity. We have also modified some of our pricing plans. This heightenedcompetition has resulted in higher marketing expense and a decline in marketshare, though not in our overall subscriber base..

 

InSeptember, Commnet, entered into an agreement with a national carrier to sell59 base stations, along with spectrum licenses, in two Midwestern states fortotal consideration of approximately $17.0 million. At the same time, Commnetentered into an agreement with this carrier to purchase spectrum, leaseadditional spectrum and build a network in rural areas in three states. Thisnew network is expected to consist of at least 70 base stations, and, in returnfor a long-term roaming agreement with this carrier, Commnet committed tocomplete the new network build by March 31, 2008. The agreement also providesthe carrier a purchase option on the new base stations exercisable beginning in2010 through 2012 at a predetermined price each year. The purchase priceconsideration reduces each option year and was determined taking into accountour return on investment targets. We have entered into similar salestransactions and network builds in the past with our major carrier customers;however, the scale of the forgoing sale of assets is significantly larger thanprevious transactions. While we anticipate continued overall growth from ourdomestic rural wireless network over the long-term, we expect that the neteffect of these two transactions in the short-term will be to reduce Commnet’srevenues by approximately $1.0 to $2.0 million per quarter in 2008, dependingon the pace of the new network build and ramp up of traffic on those sites. Thesale is expected to close in late 2007 or early 2008, however both transactionsare subject to regulatory approval and certain other conditions to closing. TheCompany expects to record a pre-tax gain when the sale is consummated between$4.0 and $5.0 million.

 

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**Resultsof Operations**

 

***Three Months Ended September 30, 2006 and 2007***

** **
| ** **                                                                                              | ** ** | **Three Months Ended  September 30,** | ** ** | **Amount of  Increase** | ** ** | **Percent  Increase** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|------------------------------|------------|-----------------------|------------|
| ** **                                                                                              | ** ** | **2006**                                             | ** ** | **2007**                     | ** ** | **(Decrease)**        | ** ** | **(Decrease)** | ** ** |
| ** **                                                                                              | ** ** | **(In thousands)**                              | ** ** |
| **REVENUE:**                                                                                            |       |                                                 |       |                         |       |                  |       |   |   |
| Wireless                                                                                                |       | $                                                    | 17,050     |                         | $          | 21,453                |       | $ | 4,403 |   | 25.8 | % |
| Local telephone and data                                                                                |       | 11,532                                               |       | 11,816                       |       | 284                   |       | 2.5 |   |
| International long distance                                                                             |       | 11,833                                               |       | 12,649                       |       | 816                   |       | 6.9 |   |
| Other                                                                                                   |       | 932                                                  |       | 1,043                        |       | 111                   |       | 11.9 |   |
| Total revenue                                                                                           |       | 41,347                                               |       | 46,961                       |       | 5,614                 |       | 13.6 |   |
| **OPERATING EXPENSES:**                                                                                 |       |                                                 |       |                         |       |                  |       |   |   |
| Termination and access fees                                                                             |       | 6,077                                                |       | 6,811                        |       | 734                   |       | 12.1 |   |
| Internet and programming                                                                                |       | 940                                                  |       | 857                          |       | (83                   | )          | (8.8 | ) |
| Engineering and operations                                                                              |       | 5,013                                                |       | 5,420                        |       | 407                   |       | 8.1 |   |
| Sales and marketing                                                                                     |       | 2,487                                                |       | 3,614                        |       | 1,127                 |       | 45.3 |   |
| General and administrative                                                                              |       | 5,832                                                |       | 5,804                        |       | (28                   | )          | (0.5 | ) |
| Depreciation and amortization                                                                           |       | 6,133                                                |       | 6,815                        |       | 682                   |       | 11.1 |   |
| Total operating expenses                                                                                |       | 26,482                                               |       | 29,321                       |       | 2,839                 |       | 10.7 |   |
| Income from operations                                                                                  |       | 14,865                                               |       | 17,640                       |       | 2,775                 |       | 18.7 |   |
| **OTHER INCOME (EXPENSE):**                                                                             |       |                                                 |       |                         |       |                  |       |   |   |
| Interest expense                                                                                        |       | (926                                                 | )          | (720                         | )          | 206                   |       | 22.2 |   |
| Interest income                                                                                         |       | 528                                                  |       | 713                          |       | 185                   |       | 35.0 |   |
| Other income, net                                                                                       |       | 21                                                   |       | 24                           |       | 3                     |       | 14.3 |   |
| Other income (expense), net                                                                             |       | (377                                                 | )          | 17                           |       | 394                   |       | 104.5 |   |
| **INCOME BEFORE INCOME TAXES, MINORITY  INTERESTS AND EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES** |       | 14,488                                               |       | 17,657                       |       | 3,169                 |       | 21.9 |   |
| Income taxes                                                                                            |       | 6,286                                                |       | 7,863                        |       | 1,577                 |       | 25.1 |   |
| **INCOME BEFORE MINORITY INTERESTS AND EQUITY  IN EARNINGS OF UNCONSOLIDATED AFFILIATES**               |       | 8,202                                                |       | 9,794                        |       | 1,592                 |       | 19.4 |   |
| Minority interests, net of tax                                                                          |       | (1,307                                               | )          | (1,060                       | )          | 247                   |       | 18.9 |   |
| Equity in earnings of unconsolidated  affiliates, net of tax                                  |       | 708                                                  |       | 668                          |       | (40                   | )          | (5.6 | ) |
| **NET INCOME**                                                                                          |       | $                                                    | 7,603      |                         | $          | 9,402                 |       | $ | 1,799 |   | 23.7 | % |

 

*Wireless revenue.  *Wirelessrevenue includes wholesale voice and data roaming revenue from our rural U.S.operations and retail wireless revenue generated in Guyana, including airtimeand activation fees.

 

Wirelessrevenue increased to $21.5 million for the three months ended September 30,2007 from $17.1 million for the three months ended September 30, 2006, anincrease of $4.4 million, or 26%. Growth in our rural U.S. business wasresponsible for $4.2 million of this increase due primarily to continueddeployment of additional GSM and CDMA wireless base stations. We have deployeda total of 333 base stations as of September 30, 2007, as compared to 261 basestations as of September 30, 2006. Of the total base stations as of September30, 2007, 287 were GSM and CDMA base stations as of September 30, 2007, ascompared to 183 GSM and CDMA base stations as of September 30, 2006. Our ruralwireless revenue also increased as a result of growth in voice and data traffic(minutes and megabytes) at existing sites, growth in data roaming revenue andinternational roaming revenue. We expect that wholesale wireless revenue willcontinue to increase as we continue to expand our GSM and CDMA networks and asminutes of use continue to grow on our existing sites. This will be offset, inpart, by scheduled and any future negotiated reductions in rates, along withthe pending sale of 59 base stations in two Midwestern states (see Note 11, “AssetsHeld For Sale”).

 

Theremaining increase in wireless revenue was attributable to the continued growthof our wireless subscriber base in Guyana. Our wireless subscribers in Guyanaincreased by 69,000 subscribers, or 26%, from 261,000 subscribers to 330,000subscribers as of September 30, 2006 and 2007, respectively. The increase insubscribers was aided by the Company’s increased sales and marketing promotionsthroughout the first three quarters of 2007. GT&T’s wireless revenue was$5.3****million and $5.5 million forthe third quarter of 2006 and 2007, respectively. While we experienced wirelessrevenue and subscriber growth in Guyana, we believe revenue growth was lessthan subscriber growth in part because some of our subscribers also ownhandsets and are subscribers of our competitor, which is common in high prepaidmarket regions and proceeds from handset sales were down in 2007. Approximately307,000 of GT&T’s wireless subscribers were GSM/GPRS subscribers as ofSeptember 30, 2007 as compared to 168,000 as of September 30, 2006. We expectthat the network capacity and coverage we have added will lead to increasedrevenue, although continued competitive pressures may reduce expected growth oreven cause a decline in this revenue. Our nationwide competitor hassignificantly expanded

 

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network capacity andcoverage and launched extensive promotions, particularly handset subsidies. Weexpect their heavy marketing and capital spending to continue through the endof the year and we expect to do the same.

 

*Local telephone and data revenue.*Localtelephone and data revenue is generated by our wireline operations in Guyana,our integrated voice and data operations in Vermont, and our data services inthe U.S. Virgin Islands. This revenue includes basic service fees, measuredservice revenue, and Internet access fees, as well as installation charges fornew lines, monthly line rental charges, long distance or toll charges(excluding international long distance charges in Guyana), maintenance andequipment sales.

 

Localtelephone and data revenue increased by $0.3 million, or 3%, to $11.8 millionfor 2007 from $11.5 million for 2006. While our Guyana operations  grew access lines from approximately 117,000lines as of September 30, 2006 to approximately 127,000 lines as of September30, 2007 (an increase of 9%), revenues increased only slightly as a resultof  decreasing prepaid landline activity.Sovernet also reported a slight decrease in total revenue as compared to 2006,although the 2006 period benefited from a one-time revenue pickup related to acarrier settlement. While Sovernet continues to add business customers for itsvoice and data services, it is being negatively impacted by the decline in itsresidential data business, particularly its dial-up Internet services. Dataservices in the U.S. Virgin islands increased $0.4 million due to continuedstrong growth in wireless broadband customers in the U.S. Virgin Islands. In future periods, we anticipate that local telephone and data revenue willincrease modestly as a result of network and subscriber and access line growthin Guyana, the U.S. Virgin Islands and Vermont including neighboring areas ofNew England.

 

*International long distance revenue.*International long distance revenue is generated by our GT&T subsidiarythrough international telephone calls into and out of Guyana, including callsmade by visitors to Guyana on their mobile phones. Inbound traffic, which madeup 82% of all international long distance traffic and more than three quartersof international long distance revenue for the three months ended September 30,2007, is settled in U.S. dollars.

 

Internationallong distance revenue was $12.6 million during the third quarter of 2007, anincrease of $0.8 million, or 7%, from $11.8 million in 2006. This increasewas primarily driven by continued expansion of our wireline network andincreased traffic as well as a substantial growth in wireless subscriberswithin Guyana (for both GT&T and its competitor, which uses GT&T’sinternational network). We are subject to illegal bypass via Internet callingand compete against alternative and cheaper media for communication, such ase-mail and text messaging. These other modes of communication may cause adecline in both voice traffic and in international long distance revenues infuture periods, although we may see a slight increase in traffic and revenuesif we are effective in combating illegal bypass.

 

*Other revenue*. Other revenue representsrevenue from digital television services in the U.S. Virgin Islands, which increased11% to $1.0 million for 2007 from $0.9 million for 2006. The increase intelevision services was a result of an increase in subscribers, includingadditional hotel rooms and an increase in the price charged for most tiers ofservice. In the near-term, we expect this category of revenue will largely bedriven by our television subscriber base. We do not expect significant growthin television subscribers in the near term.

 

*Termination and access fee expenses.*Terminationand access fee expenses are charges that we pay for voice and data transportcircuits (in particular, the circuits between our rural wireless sites and ourswitches), Internet capacity and other access fees we pay to terminate ouroutbound toll and international calls.

 

Terminationand access fees increased by $0.7 million, or 11%, from $6.1 million to $6.8million from 2006 to 2007, respectively. This increase was primarily due toincreased traffic growth at GT&T.  Overall, termination and accessfees are expected to increase in future periods as we continue to increase theoverall and redundant capacity of GT&T’s international network to providefor increased data traffic and to help minimize the disruption in servicecaused by any future outages of the Americas II cable. These expenses will alsogrow as we continue to expand our rural U.S. wireless operations and ourintegrated voice and data operations in Vermont.

 

*Internet and programming expenses.*Internetand programming expenses include digital television programming costs as wellas most Internet connectivity charges.

 

Internetand programming expenses were $0.9 million in both 2006 and 2007, respectively.In December 2006, we were able to significantly reduce the cost of wholesaleInternet capacity for our U.S. Virgin Island operations which offset partly theincreases related to expanding television and broadband operations.  Weexpect this expense to grow as we add

 

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more capacity in theVirgin Islands and elsewhere, but we expect that internet and programmingexpenses will remain consistent as compared to its related revenue.

 

*Engineering and operations expenses.*Engineeringand operations expenses include the expenses associated with developing,operating, supporting and expanding our networks, including the salaries andbenefits paid for employees directly involved in the development and operationof our networks as well as our local telephone and data operations.

 

Engineeringand operations expenses increased by $0.4 million, or 8%, from $5.0 million to$5.4 million for 2006 to 2007, respectively. This increase is primarily theresult of the expansion of our wireless networks in the United States andGuyana. We expect that engineering and operations will continue to increase tofurther support those networks.

 

*Sales and marketing expenses.*Sales,marketing and customer service expenses include salaries and benefits we payfor sales personnel, customer service expenses, sales commissions and the costsassociated with the development and implementation of our promotion andmarketing campaigns.

 

Salesand marketing expenses increased by $1.1 million, or 44%, from $2.5 million to$3.6 million from 2006 to 2007, respectively. Substantially all of the increaseis attributable to increased sales and marketing efforts at GT&T in orderto address increased wireless competition in Guyana. Such sales and marketingefforts included wireless handset promotions, advertising and increased salescommissions. While sales and marketing expenses in Guyana decreased slightly inthe third quarter of 2007 as compared to the second quarter of 2007, we expectthese expenses, particularly handset promotions, to fluctuate in upcomingquarters, and could increase again as we expect to continue to be aggressive inGT&T’s marketing activities in response to increased competition.

 

*General and administrative expenses.*Generaland administrative expenses include salaries, benefits and related costs forgeneral corporate functions, including executive management, finance andadministration, legal and regulatory, facilities, information technology andhuman resources.

 

Generaland administrative expenses remained unchanged at $5.8 million from 2006 to2007, respectively. We expect that general and administrative expenses willincrease in future periods if our revenues continue to grow.

 

*Depreciation and amortization expenses.*Depreciation and amortization expenses represent the depreciation andamortization charges we record on our property and equipment and on ourintangible assets.

 

Depreciationand amortization expenses increased by $0.7 million, or 11%, from $6.1 millionto $6.8 million for 2006 and 2007, respectively. The increase is primarily dueto the addition of fixed assets at GT&T and Commnet relating to theirexpanding networks. We expect that depreciation and amortization expenses willincrease in the near-term, because of continued capital expenditures to expandour networks.

 

*Interest expense.* Interest expenserepresents interest incurred on our outstanding debt including our $50.0million term loan as well as any outstanding amounts under our $20.0 millionrevolving line of credit.

 

Interestexpense decreased $0.2 million, or 22%, from $0.9 million for 2006 to $0.7million for 2007. This decrease is primarily the result of a decrease in theaverage outstanding balance under our loan facility during 2007 as compared to2006 when we used borrowings from the revolving line of credit to help fundcertain acquisitions. We used a portion of the proceeds from the underwrittenpublic offering of our common stock in July 2006 to repay those borrowings andhad no outstanding borrowings under our revolving line of credit as ofSeptember 30, 2007. The decrease in interest expense was also due to thereceipt of patronage income received from our lender during 2007.

 

*Interest income*. Interest incomerepresents interest earned on our cash and cash equivalent balances.

 

Interestincome increased $0.2 million, or 40%, from $0.5 million to $0.7 million for2006 and 2007, respectively, due to an overall increase in our cash balances asresult of the underwritten public offering of our common stock in July 2006.

 

*Other income (expense).*Other income(expense) represents miscellaneous non-operational income we earned, or expenseswe incurred, including management fees received from BDC and otherunconsolidated affiliates. Other income, which included a $0.3 millionloss on the sale of the Company’s Haiti assets in 2007 and a $0.3 millionincrease in the reserve for amounts due from Bridge InternationalCommunications, Inc. in 2006 stayed constant at $20,000 in 2006 and 2007.

 

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*Income taxes.  *Income taxesrepresent taxes we pay on our net taxable income.

 

Theeffective income tax rate was 43% and 45% for 2006 and 2007, respectively,which represents the statutory U.S. income tax rate plus the Guyanese incometaxes in excess of the statutory U.S. income tax rates as well as certain U.S.state income taxes. The effective tax rate is also impacted by the amortizationof a deferred tax asset, relating to differences between book and tax basis offixed assets, which was recorded in a prior period. The effective rate for 2006was positively impacted by certain adjustments made in connection with thefiling of the Company’s 2005 tax returns. We expect our effective tax rate infuture quarters to be consistent with our effective rate through the ninemonths ended September 30, 2007.

 

*Minority interests.*For 2007, minorityinterests consisted of the Guyana government’s 20% interest in GT&T, aminority shareholder’s 4% interest in Sovernet and other minority shareholders’interests in certain consolidated subsidiaries of Commnet. For 2006, minorityinterests also included a minority shareholder’s 5% interest in Commnet whichwe acquired on January 1, 2007.

 

*Equity in earnings of unconsolidated affiliates.*Equity in earnings of unconsolidated affiliates includes our share of theearnings of BDC as well as our share of the earnings of Commnet’sunconsolidated affiliates. Equity in earnings of unconsolidated affiliatesremained constant at $0.7 million for 2006 and 2007, respectively. Wirelesssubscribers in Bermuda were 22,455 at September 30, 2006 and 20,155 as ofSeptember 30, 2007. The decrease in wireless subscribers in Bermuda largelyreflects a reduction in our pre-paid wireless base. Post-paid subscriber churn,however, remains very low by industry standards and we expect to recognize somefuture benefits from BDC’s recent launch of data roaming.

 

***Nine Months Ended September 30, 2006 and 2007***

** **
| ** **                                                                                              | ** ** | **Nine Months Ended  September 30,** | ** ** | **Amount of  Increase** | ** ** | **Percent  Increase** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------|------------|------------------------------|------------|-----------------------|------------|
| ** **                                                                                              | ** ** | **2006**                                            | ** ** | **2007**                     | ** ** | **(Decrease)**        | ** ** | **(Decrease)** | ** ** |
| ** **                                                                                              | ** ** | **(In thousands)**                             | ** ** |
| **REVENUE:**                                                                                            |       |                                                |       |                         |       |                  |       |   |   |
| Wireless                                                                                                |       | $                                                   | 44,595     |                         | $          | 58,741                |       | $ | 14,146 |   | 31.7 | % |
| Local telephone and data                                                                                |       | 31,574                                              |       | 35,019                       |       | 3,445                 |       | 10.9 |   |
| International long distance                                                                             |       | 34,513                                              |       | 37,898                       |       | 3,385                 |       | 9.8 |   |
| Other                                                                                                   |       | 2,682                                               |       | 3,054                        |       | 372                   |       | 13.9 |   |
| Total revenue                                                                                           |       | 113,364                                             |       | 134,712                      |       | 21,348                |       | 18.8 |   |
| **OPERATING EXPENSES:**                                                                                 |       |                                                |       |                         |       |                  |       |   |   |
| Termination and access fees                                                                             |       | 17,317                                              |       | 19,740                       |       | 2,423                 |       | 14.0 |   |
| Internet and programming                                                                                |       | 2,571                                               |       | 2,524                        |       | (47                   | )          | (1.8 | ) |
| Engineering and operations                                                                              |       | 14,000                                              |       | 16,893                       |       | 2,893                 |       | 20.7 |   |
| Sales and marketing                                                                                     |       | 6,328                                               |       | 12,352                       |       | 6,024                 |       | 95.2 |   |
| General and administrative                                                                              |       | 16,645                                              |       | 17,292                       |       | 647                   |       | 3.9 |   |
| Depreciation and amortization                                                                           |       | 18,033                                              |       | 19,975                       |       | 1,942                 |       | 10.8 |   |
| Total operating expenses                                                                                |       | 74,894                                              |       | 88,776                       |       | 13,882                |       | 18.5 |   |
| Income from operations                                                                                  |       | 38,470                                              |       | 45,936                       |       | 7,466                 |       | 19.4 |   |
| **OTHER INCOME (EXPENSE):**                                                                             |       |                                                |       |                         |       |                  |       |   |   |
| Interest expense                                                                                        |       | (2,814                                              | )          | (1,596                       | )          | 1,218                 |       | 43.3 |   |
| Interest income                                                                                         |       | 933                                                 |       | 1,814                        |       | 881                   |       | 94.4 |   |
| Other income, net                                                                                       |       | 619                                                 |       | 2,969                        |       | 2,350                 |       | 379.6 |   |
| Other income (expense), net                                                                             |       | (1,262                                              | )          | 3,187                        |       | 4,449                 |       | 352.5 |   |
| **INCOME BEFORE INCOME TAXES, MINORITY  INTERESTS AND EQUITY IN EARNINGS OF UNCONSOLIDATED AFFILIATES** |       | 37,208                                              |       | 49,123                       |       | 11,915                |       | 32.0 |   |
| Income taxes                                                                                            |       | 18,976                                              |       | 21,778                       |       | 2,802                 |       | 14.8 |   |
| **INCOME BEFORE MINORITY INTERESTS AND EQUITY  IN EARNINGS OF UNCONSOLIDATED AFFILIATES**               |       | 18,232                                              |       | 27,345                       |       | 9,113                 |       | 50.0 |   |
| Minority interests, net of tax                                                                          |       | (3,614                                              | )          | (3,762                       | )          | (148                  | )          | (4.1 | ) |
| Equity in earnings of unconsolidated  affiliates, net of tax                                  |       | 2,010                                               |       | 1,766                        |       | (244                  | )          | (12.1 | ) |
| **NET INCOME**                                                                                          |       | $                                                   | 16,628     |                         | $          | 25,349                |       | $ | 8,721 |   | 52.4 | % |

 

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Periodto period comparisons are affected by our acquisitions. We acquired Sovernet onFebruary 10, 2006.

 

*Wireless revenue.  *Wirelessrevenue increased to $58.7 million for the nine months ended September 30, 2007from $44.6 million for the nine months ended September 30, 2006, anincrease of $14.1 million, or 32%. Growth in our rural U.S. business wasresponsible for $10.4 million of this increase due primarily to continueddeployment of additional GSM and CDMA wireless base stations. We have deployeda total of 333 base stations as of September 30, 2007 as compared to 261 basestations as of September 30, 2006. Of the total base stations as ofSeptember 30, 2007, 287 were GSM and CDMA base stations as of September 30,2007, as compared to 183 GSM and CDMA base stations as of September 30, 2006.Our rural wireless revenue also increased as a result of growth in voice anddata traffic (minutes and megabytes) at existing sites, growth in data roamingrevenue and international roaming revenue.

 

The remainingincrease in wireless revenue was attributable to the continued growth of ourwireless subscriber base in Guyana and certain non-recurring events during thefirst and second quarters such as Guyana’s hosting of Cricket World Cup matchesand the Rio Group Summit. Our wireless subscribers in Guyana increased by69,000, or 26%, from 261,000 subscribers to 330,000 subscribers as of September30, 2006 and 2007, respectively. Such increase in subscribers was aided by theCompany’s increased sales and marketing efforts, including handset promotions.GT&T’s wireless revenue was $14.3****millionand $18.0 million for the first nine months of 2006 and 2007, respectively.While we experienced wireless revenue and subscriber growth in Guyana, webelieve that some of our subscribers also own handsets and are subscribers ofour competitor, which is common in a region of the world with a high percentageof prepaid subscribers. Approximately 307,000 of GT&T’s wirelesssubscribers were GSM/GPRS subscribers as of September 30, 2007 as compared to168,000 as of Sept 30, 2006 and 274,000 as of June 30, 2007.

 

*Local telephone and data revenue*. Localtelephone and data revenue increased by $3.4 million, or 11%, to $35.0 millionfor 2007 from $31.6 million for 2006. Of the $3.4 million increase, $1.4million derives from the inclusion of a full nine months of results forSovernet, our Vermont based voice and data provider which was acquired inFebruary 2006. The remaining increase of $2.0 million is primarilyattributable to growth in GT&T’s access lines in Guyana from approximately117,000 lines as of September 30, 2006 to approximately 127,000 lines as ofSeptember 30, 2007 (an increase of 9%), growth in broadband data customers inGuyana, and continued strong growth in wireless broadband customers in the U.S.Virgin Islands.

 

*International long distance revenue.*International long distance revenue was $37.9 million during the nine monthsended September 30, 2007, an increase of $3.4 million, or 10%, from $34.5million in 2006. This increase resulted from a substantial growth in wirelesssubscribers within Guyana (for both GT&T and its competitor, which usesGT&T’s international network) and certain non-recurring events during thefirst and second quarters such as Guyana’s hosting of Cricket World Cup matchesand the Rio Group Summit, which helped drive traffic volumes to higher levels.

 

*Other revenue*. Revenue from digitaltelevision services in the U.S. Virgin Islands increased 15% to $3.1 millionfor 2007 from $2.7 million for 2006. The increase in television serviceswas a result of an increase in subscribers, including additional hotel rooms,and, to a lesser extent, an increase in prices which took effect in February2006.

 

*Termination and access fee expenses.*Terminationand access fees increased by $2.4 million, or 14%, from $17.3 million to $19.7 millionfrom 2006 to 2007, respectively. This increase was due to a full nine months ofoperations of Sovernet and increased traffic growth at GT&T and Commnet. Alsoan outage of the Americas II submarine fiber optic cable in May 2007, whichGuyana and its neighboring countries rely on as the primary internationaltelecommunications connection, caused GT&T to temporarily re-routeinternational traffic over more costly high-capacity satellite links.

 

*Internet and programming expenses.*Internetand programming expenses decreased from $2.6 million in 2006 to $2.5 million in2007. This decrease was primarily from growth in our television and broadbanddata subscribers offset by reduced expenses in the U.S. Virgin Islands. InDecember 2006, we were able to significantly reduce the Internet capacityexpenses for our U.S. Virgin Island operations which offset partly theincreases related to expanding television and broadband operations.

 

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*Engineering and operations expenses.*Engineeringand operations expenses increased by $2.9 million, or 21%, from $14.0 millionto $16.9 million for 2006 to 2007, respectively. This increase is primarily theresult of the expansion of our wireless networks in the United States andGuyana.

 

*Sales and marketing expenses.*Sales andmarketing expenses increased by $6.1 million, or 97%, from $6.3 million to$12.4 million from 2006 to 2007, respectively. This increase isattributable to increased sales and marketing efforts at GT&T in order toaddress increased wireless competition in Guyana. Such sales and marketingefforts included wireless handset promotions, advertising and increased salescommissions.

 

*General and administrative expenses.*Generaland administrative expenses increased by $0.7 million, or 4%, from $16.6 millionto $17.3 million from 2006 to 2007, respectively. This increase isprimarily attributable to a full nine months of operations at Sovernet andadditional compensation and overhead costs to support our growth.

 

*Depreciation and amortization expenses.*Depreciation and amortization expenses increased by $2.0 million, or 11%, from$18.0 million to $20.0 million for 2006 and 2007, respectively. The increaseis primarily due to the addition of fixed assets at GT&T and Commnet, aswell as the amortization of intangible assets at Sovernet.

 

*Interest expense.* Interest expensedecreased from $2.8 million for 2006 to $1.6 million for 2007. This decrease isprimarily the result of a decrease in the average outstanding balance under ourloan facility during 2007 as compared to 2006 when we used borrowings from therevolving line of credit to help fund certain acquisitions. We used a portionof the proceeds from the underwritten public offering of our common stock inJuly 2006 to repay those borrowings and had no outstanding borrowings under therevolving line of credit as of September 2007. The decrease in interest expensewas also due to the receipt of patronage income from our lender during 2007.

 

*Interest income*. Interest income increasedfrom $0.9 million to $1.8 million for 2006 and 2007, respectively, due to anoverall increase in our cash balances as a result of the underwritten publicoffering of our common stock in July 2006.

 

*Other income (expense).*Other income(expense) represents miscellaneous non-operational income we earned, orexpenses we incurred, including management fees received from BDC and otherunconsolidated affiliates. Other income increased from $0.6 million in2006 to $3.0 million in 2007 as the result of a gain of $1.0 million on thedisposition of certain assets and a license settlement for $1.25 millionreceived by Commnet.

 

*Income taxes.  *The effectiveincome tax rate was 51% and 44% for 2006 and 2007, respectively, whichrepresents the statutory U.S. income tax rate plus the Guyanese income taxes inexcess of the statutory U.S. income tax rates, as well as certain U.S. stateincome taxes. The effective tax rate is also impacted by the amortization of adeferred tax asset, relating to differences between book and tax basis of fixedassets, which was recorded in a prior period. The reduction in our effectiverate in 2007 is a result of the impact of increased taxable income at U.S. statutoryrates which are significantly lower than the Guyana statutory rates as well asa reduction in the losses in the US Virgin Islands. In the short term, expectthat our effective income tax rate should remain fairly consistent with thefirst three quarters of 2007.

 

*Minority interests.*For 2007, minorityinterests consisted of the Guyana government’s 20% interest in GT&T, aminority shareholder’s 4% interest in Sovernet and other minority shareholders’interests in certain consolidated subsidiaries of Commnet. For 2006, minorityinterests also included a minority shareholder’s 5% interest in Commnet whichwe acquired on January 1, 2007. For 2007, minority interest expense alsoincludes a minority shareholders’ interest in a gain on the disposition of certainassets.

 

*Equity in earnings of unconsolidated affiliates.*Equity in earnings of unconsolidated affiliates includes our share of theearnings of BDC as well as our share of the earnings of Commnet’sunconsolidated affiliates. Equity in earnings of unconsolidated affiliatesdecreased from $2.0 million for 2006 to $1.8 million for 2007, respectively.This decrease was mostly due to a decline in wireless subscribers in Bermudafrom 22,455 at September 30, 2006 to 20,155 as of September 30, 2007.

 

*Segment results.*We have four materialoperating segments, which we manage and evaluate separately: (1) IntegratedTelephony — International; (2) Integrated Telephony — Domestic; (3) WirelessTelevision and Data; and (4) Rural Wireless. Segment results are set forth inNote 9 “Segment Reporting” to the Consolidated Financial Statements included inthis Report.

 

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**Regulatoryand Tax Issues**

 

We areinvolved in a number of regulatory and tax proceedings**.**See Note 12 to the Consolidated FinancialStatements included in this Report. A material and adverse outcome in one ormore of these proceedings could have a material adverse impact on our financialcondition and future operations and cash flows.

 

**Liquidityand Capital Resources**

 

Wehave met our operational liquidity needs through a combination of cash on handand internally generated funds and have funded capital expenditures andacquisitions with a combination of internally generated funds, cash on hand andborrowings under our credit facility.

 

***Uses of Cash***

 

*Capital Expenditures.*A significant use ofour cash has been for capital expenditures relating to expanding and upgradingour networks. For the nine months ended September 30, 2006 and 2007, we spentapproximately $19.9 million and $31.2 million on capital expenditures,respectively.

 

Of the$31.2 million of 2007 capital expenditures, $16.8 million was incurredexpanding the capacity and coverage of our networks in Guyana, bringing thetotal amount invested in our Guyanese telecommunications infrastructure toapproximately $266 million. We also spent approximately $13.6 millionexpanding Commnet’s network by increasing the number of GSM and CDMA basestations including the switching equipment required to support the additionalbase stations, additional radio channels and switching capacity for existingsites, and the purchase of spectrum licenses. We also spent $0.8 million atSovernet and expanded our service areas and switch capabilities.

 

We arecontinuing to invest in expanding our networks in Guyana, Commnet and Sovernetand expect to incur total capital expenditures between $43 million and $48million in 2007, with more than half made in connection with Commnet and mostof the remaining balance invested in Guyana. We expect to fund theseexpenditures from cash generated from our operations or from our pending assetsale of Commnet assets (see Note 11).

 

*Acquisitions.*We have funded our recentacquisitions with a combination of cash on hand and borrowings under our $70 millioncredit facility.

 

DuringJanuary 2007, we purchased the remaining 5% equity interest in Commnet for $6.5million and 21,000 shares of our common stock in satisfaction of our obligation(and in accordance with our right) under and consistent with the terms of theagreement entered into in connection with our acquisition of Commnet inSeptember 2005. We funded this purchase with cash on hand and the reissuance ofshares held in our treasury.

 

Wecontinue to explore opportunities to acquire communications properties orlicenses in the United States, the Caribbean and elsewhere. Such acquisitionsmay require external financing. While there can be no assurance as towhether, when or on what terms we will be able to acquire any such businesses orlicenses, such acquisitions may be accomplished through either theissuance of shares, payment of cash, incurrence of debt or various combinationsof each.

 

*Dividends and Distributions.*We use cashon hand to make dividend payments to our common stockholders when declared byour Board of Directors. For the nine months ended September 30, 2007, ourdividends to our stockholders approximated $6.4 million. We have paid quarterlydividends for the last 36 fiscal quarters. Also our Board of Directors approveda $5.0 million stock buyback plan in September 2004 pursuant to which wehave spent to date $916,130 repurchasing common stock. Although we currently donot have immediate plans to make additional repurchases of common stock underthis plan, we may act to do so in the future, depending on marketconditions and our cash needs.

 

***Sources of Cash***

 

*Total Liquidity at September 30, 2007.* Asof September 30, 2007, we had approximately $61.0 million in cash and cashequivalents, an increase of $0.5 million from the December 31, 2006 balance of$60.5 million. We believe our existing cash balances and other capitalresources, including the $20 million available under our revolving line ofcredit included in our credit facility, are adequate to meet our currentoperating and capital needs.

 

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*Cash Generated by Financing Activities.*Inthe third quarter of 2006, we completed the sale of 3.84 million shares ofcommon stock at $19.00 per share in an underwritten public offering, consistingof the sale by us of an aggregate of 2.64 million shares (2.4 millionshares in July 2006 and an additional 0.24 million shares purchased by theunderwriters as a part of their over-allotment option in August 2006) and 1.2million shares by our Executive Chairman Cornelius B. Prior, Jr. and relatedentities. Our net proceeds of this offering, which were approximately $46.3million, were used to repay a portion of our outstanding indebtedness, and willfund capital expenditures, acquisitions and/or strategic investments andgeneral corporate purposes. We did not receive any proceeds from the sale ofshares by the selling stockholders.

 

*Cash Generated by Operations.*Cashprovided by operating activities was $44.7 million for the nine months endedSeptember 30, 2007 compared to $35.8 million for the nine months endedSeptember 30, 2006. Substantially all of the $8.9 million increase was aresult of an increase in the Company’s net income.

 

*Credit Facility.*On September 15,2005, Atlantic Tele-Network entered into a Credit Agreement with CoBank, ACBproviding for a credit facility consisting of a $50 million term loan and a $20million revolving credit facility. Under the term loan, repayments of principalare deferred until the maturity of the loan on October 31, 2010. Intereston the term loan is payable on a quarterly basis at a fixed annual interestrate of 5.85%. Because CoBank is a cooperative financial institution, we expectto receive patronage payments annually, and at the end of the term, from CoBankwhich reflect our portion of CoBank’s profits, if any. These payments, ifreceived, are expected to reduce our effective interest expense on the termloan. For 2006 and 2007, our patronage payments approximated $148,000 and$500,000, respectively. Half of these patronage amounts was received in cashwhile the remaining half was received as equity in our lending institution.

 

OnAugust 31, 2007, the Company and its lenders under the CoBank Credit Agreementamended the CoBank Credit Agreement to (i) reduce the amount of GT&T stockpledged by ATN, (ii) provide for up to $1.0 million in Letters of Credit underthe Revolver Facility and (iii) increase the amount of investments (includingpermitted acquisitions and dispositions) the Company can make in othercommunications companies without approval by the agent of lenders thereunder.

 

***Factors Affecting Sources of Liquidity***

 

*Internally Generated Funds.  *Thekey factors affecting our internally generated funds are demand for ourservices, competition, regulatory developments, economic conditions in themarkets where we operate our businesses and industry trends within thetelecommunications industry. For a discussion of tax and regulatory risks inGuyana that could have a material adverse impact on our liquidity, see “Business—RiskFactors—Risks Relating to Our Wireless and Wireline Services in Guyana,” and “—Regulationof Our GT&T Subsidiary” in our 2006 Form 10-K and Note 12 to theConsolidated Financial Statements included in this Report.

 

*Guyana—U.S. Foreign Currency Exchange.  *Historically,the Guyana dollar has been considerably devalued relative to the U.S. dollar.The current exchange rate is approximately $205 Guyana dollars to $1 U.S.dollar. We use U.S. dollars to make GT&T capital expenditures, to paycertain GT&T liabilities and to value our GT&T assets for the purposeof making our Guyanese rate of return calculation. Unfavorable changes in theGuyana dollar- U.S. dollar exchange rate would reduce our purchasing power inthese areas. The continued expansion of GT&T’s network is dependent uponthe ability of GT&T to purchase equipment with U.S. dollars.

 

Whilecurrently a significant portion of GT&T’s revenues are transacted in U.S.dollars, this circumstance could change in the future. As a result of thegrowth of GT&T’s wireless and local exchange operations and the generaltrend toward lower international settlement rates, it is likely that anincreasing portion of our revenues will be earned in Guyanese currency. Whilethere are no legal restrictions on our conversion of Guyanese currency intoU.S. dollars or other hard currencies, or on expatriation of Guyanese currencyor foreign currency from Guyana, there are risks associated with the conversionof Guyanese dollars to U.S. dollars due to limited liquidity in the Guyanaforeign currency markets. Nevertheless, this limited liquidity has notprevented us from converting Guyanese currency into U.S. dollars within a giventhree month period or from converting at a price that reasonably approximates thereported exchange rate.

 

Whilewe believe that GT&T has, and will continue to have, adequate cash flowsdenominated in U.S. currency to meet its current operating and capitalrequirements, there can be no assurance that GT&T will be able to convertits Guyana currency earnings into the U.S. currency needed to meet suchobligations. As of September 30, 2007, we had $3.2 million of cash held inGuyanese dollars. See “Quantitative and Qualitative Disclosures about MarketRisk.”

 

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*Restrictions Under Credit Facility.  *Ourcredit facility contains four financial tests with which Atlantic Tele-Networkmust comply:

 

•       atotal leverage ratio (debt to EBITDA) of 2.00 to 1.00 or less;

 

•       adebt service coverage ratio (EBITDA to debt service) of 3.00 to 1.00 or more;and

 

•       anequity to assets ratio of 0.40 to 1.00 or more.

 

Inaddition, Commnet must comply with a leverage ratio test (debt of AtlanticTele-Network and its subsidiaries, net of pledged cash, to EBITDA of Commnetand its subsidiaries) of 5.00 to 1.00. As of September 30, 2007, we were incompliance with the covenants of the credit facility.

 

*Capital Markets.  *Our abilityto raise funds in the capital markets depends on, among other things, generaleconomic conditions, the conditions of the telecommunications industry, ourfinancial performance and the state of the capital markets. In June 2006, theSecurities and Exchange Commission declared effective a “universal” shelfregistration statement filed by us. This shelf registration statementregistered the potential future offerings by us, from time to time of up to anaggregate of $200 million of our securities, consisting potentially of commonstock, debt securities, and other equity and convertible securities andcombinations of the foregoing. Following our July 2006 equity offering whichwas conducted pursuant to the shelf registration statement, we haveapproximately $150 million of securities registered for potential offerings.

 

***Inflation***

 

We donot believe that inflation has had a significant impact on our consolidatedoperations in any of the periods presented in the Report.

 

***Recent Accounting Pronouncements***

 

InFebruary 2007, the Financial Accounting Standards Board (“FASB”) issuedStatement No. 159, *The Fair ValueOption for Financial Assets and Liabilities Including an Amendment of FASBStatement No. 115*(“SFAS 159”). This standard is effective forperiods beginning after November 15, 2007, therefore, we will adopt theprovisions of the standard on January 1, 2008. SFAS 159 permits us toelect to measure certain of our financial instruments at either historical costor fair value. We are in the process of determining what method we will chooseupon adoption and, once determined, the impact, if any, adoption will have onour financial results or position.

 

OnJanuary 1, 2007, we adopted FASB Interpretation No. 48, *Accounting for Uncertainty in Income Taxes—aninterpretation of FASB Statement No. 109* (“FIN 48”), which clarifiesthe accounting for uncertainty in tax positions. FIN 48 requires us torecognize the impact of a tax position in our financial statements if thatposition is more likely than not of being sustained on audit, based on thetechnical merits of the position. The adoption did not have a material impacton our results of operations or financial position.

 

Weevaluated our uncertain tax positions relating to its various tax matters andrulings in Guyana and determined that no adjustment was to be recorded to theestimated settlement amounts previously recorded prior to the adoption of FIN48. As noted in Note 11 to the 2006 Form 10-K, due to various arrangements andrelationships in place with the government of Guyana, there is no expectationthat interest and penalties will be assessed upon reaching final settlement ofthe matters. There is no expected settlement date and upon settlement, whichmight not occur in the near future, the payment may vary significantly from theamounts currently recorded. We will continue to update amounts recorded as newdevelopments arise.

 

**Item 3. Quantitative and QualitativeDisclosures about Market Risks**

 

Although a significant portion of our Guyana subsidiary’s revenues andexpenditures are currently transacted in U.S. dollars, the results of futureoperations nevertheless may be affected by changes in the value of theGuyana dollar. From February 1991 until early 1994, the Guyana dollarremained relatively stable at the rate of approximately $125 to the U.S.dollar. In 1994 the Guyana dollar declined in value to approximately $142 tothe U.S. dollar. It remained relatively stable at approximately that ratethrough 1997. From December 31, 1997, through December 31, 1998 theGuyana dollar further

 

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declined in value to approximately $180 to the U.S. dollar and itremained relatively stable until late 2003. In the fourth quarter 2003, theGuyana dollar declined in value to approximately $195 to the U.S. dollar and toapproximately $205 during the first quarter of 2004. Since the first quarter of2004 through September 2007, the value of the Guyana dollar has remained at$205 Guyana dollars to one U.S. dollar.

 

A substantial majority of our consolidated cash balances are kept inU.S. dollar denominated short term investments. GT&T generally endeavors tomaintain a balance between its Guyana dollar cash deposits and localreceivables which are denominated in Guyana dollars and its local tax and otherpayables which are also denominated in the Guyana dollar. As of September 30,2007, GT&T maintained $3.2 million of its cash balances in Guyana dollars.

 

GT&T’s functional currency has been the U.S. dollar because asignificant portion of GT&T’s revenues and expenditures have beentransacted in U.S. dollars. Accordingly, in our view, GT&T is currentlyentitled to its agreed upon minimum 15% return on rate base computed in U.S.dollars on a U.S. dollar historical cost rate base and therefore devaluationsof the Guyana dollar should have had no long-term impact on the value ofGT&T’s earnings in U.S. dollars. The Guyana Public Utility Commission hasneither approved nor disapproved of our position. Moreover, with the decline ininternational settlement rates and the increases that GT&T has had in localrevenue, it is possible that the Guyana dollar will become GT&T’sfunctional currency at some time in the future. See “Management’s Discussionand Analysis of Financial Condition and Results of Operations” above.

 

We maintain a portion of our cash and cash equivalents in short-termfinancial instruments that are subject to interest rate fluctuations. Due tothe relatively short duration of such instruments and the fact that we have novariable rate debt, we believe that fluctuations in interest rates will notmaterially affect our financial condition or results of operations.

 

**Item 4. Controls and Procedures**

 

*Evaluation of disclosure controls andprocedures.*Our management, with the participation ofour principal executive officer and principal financial officer, evaluated theeffectiveness of our disclosure controls and procedures as of September 30,2007. The term “disclosure controls and procedures,” as defined inRules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls andother procedures of a company that are designed to ensure that informationrequired to be disclosed by a company in the reports that it files or submitsunder the Exchange Act is recorded, processed, summarized and reported, withinthe time periods specified in the SEC’s rules and forms. Disclosure controlsand procedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by a company in the reportsthat it files or submits under the Exchange Act is accumulated and communicatedto the company’s management, including its principal executive and principalfinancial officers, as appropriate to allow timely decisions regarding requireddisclosure. Management recognizes that any controls and procedures, no matterhow well designed and operated, can provide only reasonable assurance ofachieving their objectives and management necessarily applies its judgment inevaluating the cost-benefit relationship of possible controls and procedures.Based on the evaluation our disclosure controls and procedures as of September30, 2007, our principal executive officer and principal financial officerconcluded that, as of such date, our disclosure controls and procedures wereeffective at the reasonable assurance level.

 

*Changes in internal control over financialreporting.*There was no change in the internal controlover financial reporting that occurred during the three months ended September30, 2007 that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.

 

**PART II—OTHERINFORMATION**

 

**Item 1. Legal Proceedings**

 

See Note 12 to the Consolidated Financial Statementsincluded in this Report.

 

**Item 1A. Risk Factors**

 

There have been no material changes from the factorsdiscussed in Part I, “Item 1A. Risk Factors” of our 2006 Annual Report on Form10-K. In addition to the other information set forth in this Report, you shouldcarefully consider these factors discussed in our 2006 Annual Report on Form10-K which could materially affect our business, financial condition or futureresults. The risks described in our 2006 Annual Report on Form 10-K arenot the only risks facing our

 

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Company. Additional risks and uncertainties notcurrently known to us or that we currently deem to be immaterial alsomay materially adversely affect our business, financial condition and/oroperating results.

 

**Item 6. Exhibits-**

 
| 3.1    |   | Restated Certificate of  Incorporation (incorporated by reference to Exhibit 4.1 to the Company’s  Registration Statement on Form S-8 (File No. 333-62416) filed on  June 6, 2001)                                                                                                        |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                               |
| 3.2    |   | Certificate of  Amendment to the Restated Certificate of Incorporation, as filed with the  Delaware Secretary of State on August 14, 2006 (incorporated by  reference to Exhibit 3.2 of the Company’s Quarterly Report on  Form 10-Q (File No. 001-12593) filed on August 14, 2006)  |
|   |   |                                                                                                                                                                                                                                                                                                               |
| 10.1   |   | Atlantic Tele-Network,  Inc. 1998 Stock Option Plan (as amended May 24, 2007) (incorporated by  reference to Appendix A to Atlantic Tele-Network, Inc.’s Proxy Statement on  Schedule 14A (File No. 001-12593) filed on April 30, 2007)                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                               |
| 10.2   |   | Amended and Restated  Credit Agreement dated as of August 31, 2007, among Atlantic Tele-Network,  Inc., as Borrower, CoBank, ACB, as Administrative Agent, Arranger, an Issuing  Lender and a Lender, Banco Popular de Puerto Rico as and Issuing Lender and a  Lender, and the other Lenders referred to therein. |
|   |   |                                                                                                                                                                                                                                                                                                               |
| 31.1   |   | Certification of Chief  Executive Officer pursuant to Rule 13a-14(a) of the Securities  Exchange Act of 1934, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                               |
| 31.2   |   | Certification of Chief  Financial Officer pursuant to Rule 13a-14(a) of the Securities  Exchange Act of 1934, as adopted pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002                                                                                                                 |
|   |   |                                                                                                                                                                                                                                                                                                               |
| 32.1   |   | Certification of Chief  Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                               |
| 32.2   |   | Certification of Chief  Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                      |

** **

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** **

**SIGNATURES**

** **

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|                        | Atlantic  Tele-Network, Inc.      |
|------------------------|----------------------------------------|
|                   |                                   |
| Date: November 9, 2007 | /s/ Michael T. Prior                   |
|                   | Michael T. Prior                       |
|                   | President and Chief  Executive Officer |
|                   |                                   |
| Date: November 9, 2007 | /s/ Justin D. Benincasa                |
|                   | Justin D. Benincasa                    |
|                   | Chief Financial Officer  and Treasurer |

 

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