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ORGANIZATION AND BUSINESS OPERATIONS

9 Months Ended

Sep. 30, 2021

ORGANIZATION AND BUSINESS OPERATIONS

ORGANIZATION AND BUSINESS OPERATIONS

1.ORGANIZATION AND BUSINESS OPERATIONS

The Company strives to be a leading platform for the operation of, and investment in, connectivity services to remote and underserved markets. The Company’s operating subsidiaries provide critical infrastructure-based solutions and communications services, in the United States, Bermuda, and the Caribbean. At the holding company level, the Company oversees the allocation of capital within and to its subsidiaries, affiliates, new investments, and stockholders. The Company has also developed significant operational expertise and resources that it uses to augment the capabilities of its individual operating subsidiaries. Over the past ten years, the Company has built a platform of resources and expertise to support its operating subsidiaries and to improve their quality of service with greater economies of scale and expertise than would typically be available at the operating subsidiary level.

The Company actively evaluates potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, and generally looks for those that it believes have the potential for generating steady excess cash flows over extended periods of time. The Company has used the cash generated from the operations and disposition of its operating subsidiaries, to re-invest in its existing businesses, to make strategic investments in additional businesses, and to return cash to its investors. The Company also provides management, technical, financial, regulatory, and marketing services to its operating subsidiaries and typically receives a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. For further information about the Company’s financial segments and geographical information about its operating revenues and assets, see Note 13 to the Unaudited Condensed Consolidated Financial Statements included in this Report.

As of September 30, 2021, the Company offers the following types of services to its customers:

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Mobility Telecommunications Services. The Company offers mobile telecommunications services and equipment (“Mobility”) over its wireless networks to both its business and consumer subscribers. In certain markets, Mobility services also includes private network services to business customers and municipalities.

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Fixed Telecommunications Services. The Company provides fixed data broadband, internet and voice telecommunications services (“Fixed”) to both its business and consumer subscribers in all of its markets. For some markets, Fixed services also include video services and support under certain government programs.

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Carrier Telecommunication Services. The Company delivers services to other telecommunications providers (“Carrier Services”) such as wholesale roaming, the leasing of critical network infrastructure such as tower and transport facilities, site maintenance and international long-distance services.

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Managed Services. The Company provides information technology services (“Managed Services”) such as network, application, infrastructure and hosting services to both its business and consumer customers.

Through September 30, 2021, the Company has identified three operating segments to manage and review its operations and to facilitate investor presentations of our results. These three operating segments are as follows:

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International Telecom. In the Company’s international markets, the Company offers Fixed services, Mobility services, Carrier Services and Managed Services to customers in Bermuda, the Cayman Islands, Guyana and the US Virgin Islands. The Company also offers fixed video services in Bermuda, the Cayman Islands, and the US Virgin Islands.

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US Telecom. In the United States, the Company provides Fixed services, Carrier Services and Managed Services to business and consumer customers in Alaska and the Western US where it also provides Mobility and private network services to consumers.

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Renewable Energy. In India, the Company provided distributed generation solar power to commercial and industrial customers through January 27, 2021. See Disposition of International Solar Business for further details.

The following chart summarizes the operating activities of the Company’s principal subsidiaries, the segments in which it reports its revenue and the markets it served during the three months ended September 30, 2021:


Segment		Services		Markets		Tradenames
International Telecom		Mobility		Bermuda, Guyana, US Virgin Islands		One, GTT+, Viya
		Fixed		Bermuda, Cayman Islands, Guyana, US Virgin Islands		One, Logic, GTT+, Viya
		Carrier Services		Bermuda, Guyana, US Virgin Islands		One, GTT+, Viya
		Managed Services		Bermuda, Cayman Islands, US Virgin Islands, Guyana		Fireminds, One, Logic, GTT+, Viya
US Telecom		Mobility		United States (rural markets)		Choice, Choice NTUA Wireless, Geoverse
		Fixed		United States		Alaska Communications, Commnet, Choice, Choice NTUA Wireless, Deploycom
		Carrier Services		United States		Alaska Communications, Commnet, Essextel
		Managed Services		United States		Alaska Communications, Choice
Renewable Energy (1)		Solar		India		Vibrant Energy

(1)

See Disposition of International Solar Business for further details.

For further information about the Company’s financial segments and geographical information about its operating revenues and assets, see Note 13 to the Unaudited Condensed Consolidated Financial Statements included in this Report.

Acquisition of Alaska Communications

On July 22, 2021, the Company completed the acquisition of Alaska Communications Systems Group, Inc. (“Alaska Communications”), a publicly listed company, for approximately $339.5 million in cash, net of cash acquired, (the “Alaska Transaction”). Alaska Communications provides broadband telecommunication and managed information technology services to customers in the State of Alaska and beyond using its statewide and interstate telecommunications network. The Company completed the Alaska Transaction to enter a new market with similar characteristics to its existing operations.

In conjunction with the Alaska Transaction, the Company entered into an agreement with affiliates and investment funds managed by Freedom 3 Capital, LLC as well as other institutional investors (collectively the “Freedom 3 Investors”). The Freedom 3 Investors contributed approximately $71.5 million in conjunction with the Alaska Transaction (the “Freedom 3 Investment”). The Freedom 3 Investment consists of redeemable common and preferred equity instruments in a subsidiary of the Company which holds the ownership of Alaska Communications. The Company will account for the Freedom 3 Investment as redeemable noncontrolling interests in its consolidated financial statements due to the redeemable nature of the equity instruments. The Company also entered into a financing transaction drawing $220 million on a new credit facility to complete the Alaska Transaction. As a result of the Alaska Transaction, the Company owns approximately 52% of the common equity of Alaska Communications and controls its operations and management. The Company incurred $8.1 million of transaction costs, including $0.8 million in 2020, in conjunction with the Alaska Transaction. Beginning on July 22, 2021, the results of the Alaska Transaction are included in the Company’s US Telecom segment.

COVID-19

The Company is continuing to monitor and assess the effects of the ongoing COVID-19 pandemic on its commercial operations, the safety of its employees and their families, its sales force and customers and any potential impact on its revenue in 2021.

The preparation of the condensed consolidated financial statements requires the Company to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates estimates, judgments and methodologies. The Company assessed certain accounting matters and estimates that generally require consideration of forecasted financial information in context with the information and estimates reasonably available to it and the unknown future impacts COVID-19 as of September 30, 2021 and through the date of this report. The accounting matters assessed included, but were not limited to, the allowance for credit losses, the carrying value of goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition.

The Company’s assessment did not indicate that there was a material adverse impact to its consolidated financial statements as of and for the three and nine months ended September 30, 2021. However, future assessments of the impacts of COVID-19 for the remainder of 2021, as well as other factors, including the possible reinstatement of certain COVID-19 travel-related and stay-at-home restrictions, could result in material adverse impacts to the Company’s consolidated financial statements in future reporting periods. For example, the Company may experience difficulty in procuring network or retail equipment, such as handsets for subscribers, as a result of COVID-19 restrictions. Apart from possible government issued travel restrictions, the Company currently cannot assess how COVID-19 may influence subscribers’ procurement behavior for services or how that behavior will impact revenues in the foreseeable future.