Atlantic Tele-Network

Analyst: Victor Sula, Ph.D. Initial Report May 29th, 2009

ATNI daily

5/28/09

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volume

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MARKET DATA

Share Statistics (05/04/09) Symbol Current price Low/ High 52 weeks Average Volume Market Cap Dil. Shares Outstanding

% Chg

2007

2008

207.3 11.0%

Q1 Q1 2008 2009

% Chg

ATNI

Revenues, $ Mn.

186.7

$22.87

Gross margin

68.0% 67.6% -0.4% 68.6% 67.5% -1.1%

45.6

56.0

22.7%

$13.93 – 35.52 Operating margin 36.0% 33.5% -2.5% 34.3% 30.0% -4.3% 55,351 Net margin 20.3% 16.8% -3.5 17.2% 15.7% -1.5% $347.1 Mn 15.3 Mn

EPS, $

2.42

2.28

-5.8%

0.51

0.58

13.7%

Recommendation The aggressive expansion strategy though both acquisitions and organic growth allowed ANTI’s EPS to grow at an annual rate of approximately 23% on a compounded basis from 2004 to 2008. With a solid balance sheet, large recurring cash flows, and the larger debt facility the Company is well positioned to make further strategic investments and expand its revenue base. The Company continues to add technologies which we expect to be positive contributors to cash flows in the next years. Accordingly we rate ATNI as a Speculative Buy.

Highlights During Q1 2009 revenue increased 23% to $56.0 million, as compared to revenue of $45.6 million for the Q1 2008. Diluted EPS during the same period increased by 14% from 0.51 in Q1 2008 to 0.58 in Q1 2009. The strong, doubledigit revenue growth reported by the Company largely reflects the expansion of the territory covered as well as minutes and megabytes served by the U.S. wireless business and increased ownership of the leading wireless provider Atlantic Tele-Network Inc. (Nasdaq: ATNI)

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Analyst: Victor Sula, Ph.D. Initial Report May 29th, 2009

Atlantic Tele-Network Inc., through its subsidiaries, provides wireless and wireline telecommunications services in North America and the Caribbean. Its principal subsidiaries include: Guyana Telephone and Telegraph Company Ltd., which is the national telephone service provider for all local, longdistance and international services, as well as a wireless service provider in Guyana; Commnet Wireless LLC, which provides voice and data wireless roaming services for U.S. and international carriers in rural areas throughout the United States; Bermuda Digital Communications Ltd., which is the leading provider of wireless voice and data services in Bermuda operating as Cellular One, and an early-stage wireless provider in Turks & Caicos; Sovernet Inc., which provides wireline voice and data services to businesses and homes in New England and high capacity communications network transport services in New York State; and Choice Communications LLC, which provides wireless television and wireless broadband services in the U.S. Virgin Islands.

In addition, ATNI provides international voice and data communications into and out of Guyana through fiber optic cables. The Company was founded in 1987 and is headquartered in Salem, Mass.

in Bermuda.

Through its GT&T subsidiary, ANTI offers wireless telephone service in the majority of populated areas in Guyana, including Georgetown (Guyana’s capital). Due to additional competition from a large regional wireless competitor in Guyana, ATNI’s wireless subscribers decreased by 16%, from about 300,000 subscribers as of March 31, 2008, to about 255,000 subscribers as of March 31, 2009. However, the Company does not expect wireless subscribers in Guyana to continue to decline at this rate, and ATNI even saw a small increase in subscribers from December 31, 2008.

On May 15, 2008, Bermuda Digital Communications (BDC) subsidiary, the largest cellular telephone service provider in Bermuda, completed a share repurchase of its common stock.

As a result, the Company increased its ownership stake from 43% to approximately 58% of BDC’s outstanding common stock. In September 2008, BDC assumed control of Islandcom Telecommunications Ltd., which provides wireless voice service in Turks and Caicos. The consolidation of BDC’s operating results, which began May 15, 2008, contributed $14.1 million of the increase in wireless revenue for 2008.

In addition, the Company provides wholesale wireless voice and data roaming services in the U.S. rural markets to national, regional and local wireless carriers through its Commnet Wireless subsidiary. The Company operates networks with global system for mobile communications (GSM) and code division multiple access (CDMA) technologies in both the 850 megahertz and 1900 megahertz bands. As of December 31, 2008, it owned and operated a total of 473 base stations consisting of 307 GSM and 166 CDMA stations on 365 owned and leased sites. As of March 31, 2009, a total of 484 base stations were deployed.

Financial Analysis The Company is dependent on GT&T and Commnet for a substantial majority of its revenues and profits and for 2008, approximately 81% of ATNI’s consolidated revenue and approximately 96% of its consolidated operating income were generated by these two operating subsidiaries. Overall, in 2008 the Company generated revenue of $207.3 million, up $5.2 million or 12% from 2007. Wireless revenue was $24.8 million, up $4.9 million or approximately 25% compared to 2007. Local telephone and data revenue totaled $12.3 million, which was an increase of $0.9 million or 8%, and International Long Distance revenue was $12.4 million compared to $12.8 million in 2007, which was a decrease of 3%.

Atlantic Tele-Network Inc. (Nasdaq: ATNI)

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Analyst: Victor Sula, Ph.D. Initial Report May 29th, 2009

STOCK PERFORMANCE (%) Price Change

GROWTH (%)

Revenues EPS

3 Mo.

1 Yr.

3 Yr. (Ann)

18.2

-16.5

-17.7

12 Mo.

3 Yr CAGR

11.0 -5.8

26.5 27.5

Last Qtr. 22.6 11.5

As of March 31, 2009, the Company had cash and investments of $84.7 million which include $5.4 million of long-term certificates of deposits that are accounted for in other current assets. The $73 million term loan continues to be the only debt outstanding, leaving ATNI with a net cash position of near $12 million.

On September 10, 2008, ATNI, as borrower, entered into a credit agreement with CoBank, ACB which provides a $75 million term loan as well as a $75 million revolving credit facility. The 2008 Term loan matures on September 10, 2015.

The Company pays cash dividends to its shareholders for more than 10 consecutive years. The latest quarterly dividend of $0.18 per share was payable on April 10, 2009, on all common shares outstanding to stockholders of record as of March 31, 2009.

Industry analysis RETURN ON EQUITY (%)

ATNI

Ind Avg

S&P 500

TTM 5 Yr. Avg.

15.87 15.74

6.92 10.73

21.16 20.04

P/s comparison

Source:Reuters.com

Use of wireless telecommunications devices has increased significantly in the past decade. There are now 4.1 billion mobile subscriptions in the world, a global penetration rate of 61.1%. This compares to 1.270 billion fixed line subscribers, corresponding to a penetration rate of 18.9%. According to Strategy Analytics, the number of worldwide mobile subscribers is expected to reach approximately 5.6 billion in 2013, from 3.9 billion at the end of 2008. The total number of WCDMA subscribers is expected to grow from 340 million at the end of 2008 to over 2.2 billion by the beginning of 2013.

The Latin America and Caribbean region continues to show steady consumer growth with 16% year-on-year growth as subscription numbers are expected to reach in excess of 440 million, equating to 76% penetration.

According to the Wireless Association, the total estimated mobile subscribers in the U.S. had officially passed the 250 million mark - some 81% of the population- reaching an all-time national high.

Growth in subscribers has more than quadrupled over the past 10 years from just more than 55 million at year-end 1997 to more than 258 million today—an increase of 352%. However, Analysys Research predicts that as the market has matured, total annual subscriber growth nationwide could fall to 2% a year by 2012, compared with the 11% to 14% growth posted by the three wireless carriers, AT&T, Verizon Wireless and T-Mobile USA. Developed nations in North America, Europe and East Asia, meanwhile, can expect major mobile technology upgrades in

Atlantic Tele-Network Inc. (Nasdaq: ATNI)

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Analyst: Victor Sula, Ph.D. Initial Report May 29th, 2009

INCOME STATEMENT Net Sales ($mil) Gross profit ($mil) EBITDA ($mil) EBIT ($mil) Net Income ($mil) BALANCE SHEET Cash & Equiv. ($mil) Total Assets ($mil) Total Debt ($mil) Equity ($mil)

FY07

FY08

186.7 126.9 63.3 61.0 37.9

207.3 140.2 67.6 64.5 34.8

Analyst opinion 71.2 352.1 50.0 209.0

79.7 419.8 74.1 228.9

PROFITABILITY EBITDA Margin Operating Margin Assets Turnover Return on Assets Return on Equity

33.9% 36.0% 0.48 10.8% 18.1%

32.6% 33.5% 0.63 8.3% 15.2%

DEBT Current Ratio Debt/Capital Interest Expense ($mil) Interest Coverage

2.7 19.3% 2.3 26.5

2.7 24.5 3.1 20.8

15.3 2.42 13.7 n/a 3,812

15.3 2.28 14.5 53% 3,040

SHARE DATA Dil. Shar. Outst.(mil) EPS Book value / share Institutional Own % Avg Daily Volume

the coming years. Long Term Evolution (LTE), a forthcoming 4G network technology should hit the market in these areas in 2010, and will certainly spill over into other regions shortly thereafter.

Third-generation technologies continue to evolve and the GSM operator today has a clear path towards LTE. In addition to the evolution to LTE by GSM operators, LTE is proving to be the technology choice for CDMA operators as well.

Source: SEC filings; analyst estimates.

As of December 31, 2008, ATNI has invested approximately $300 million in Guyanese telecommunications infrastructure. In addition to its 2009 planned capital expenditures to improve the GT&T network, the Company projects to invest over the next 18-24 months an additional $20 million to $25 million in a new submarine fiber optic cable in Guyana.

The Company’s rural wireless business continued to grow nicely, although at a slower pace than expected. During 2008, the Company invested nearly $40 million in acquiring or increasing stakes in operational businesses, and an estimated additional $40.0 million expanding and upgrading its existing networks.

With 473 base stations at the end of the year (a more than 50% annual increase) and a major new market in Nevada (46 sites of wireless network assets in Nevada acquired in late December), ATNI has solid opportunities to continue to grow its business in the next years.

As a result of its growth strategies, the Company has increased its consolidated operating income and earnings per share at an annual rate of approximately 19% and 23%, respectively, on a compounded basis from 2004 to 2008. ATNI has also been able to pay cash dividends to its shareholders for 41 consecutive quarters and has increased its quarterly dividend per share by approximately 64% since the beginning of 2004.

With a robust balance sheet, solid net cash position, large recurring cash flows and the larger debt facility the Company closed just prior to the collapse of the credit markets, we believe ATNI is well positioned to make further strategic investments to expand its market share. In addition, the fiscal 2009 consensus EPS estimate of $2.40 and 2010 estimate of $2.45 put a forward P/E on ATNI of 9.5 times for 2009 and 9.3 times for 2010, which make the stock undervalued as compared to its peer group.

Atlantic Tele-Network Inc. (Nasdaq: ATNI)

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Analyst: Victor Sula, Ph.D. Initial Report May 29th, 2009

Consensus Estimates ATNI

FY 2009 31-Dec-09

FY 2010 31-Dec-10

EPS, $ Revenue, $Mil

2.40 231.5

2.45 238.1

Consensus estimates are provided by Thomson Reuters;

Rev. consensus estimates, $Mil. Ticker Symbol

161 568 1,054 1,403 1,207 123,218

SHEN NTLS CYCL VM FRP T

Company Name 05/04/09

2010

%Chg

173 590 1,063 1,382 1,104 124,564

8% 4% 1% -1% -9% 1%

Ticker Symbol

Shenandoah SHEN Telecommunications Co. Ntelos Holdings Corp.

NTLS Centennial Communications CYCL Corp.

Virgin Mobile USA Inc. VM Fairpoint Communications FRP Inc. AT&T Inc. T Median Atlantic Tele-Network Inc.

Revenue, $ Mn

2009

Comparative analyses

ATNI

Price per Share, $

P/E Mrkt. Cap. $ Mn 2009 2010

18.04

419.1

16.86

14.67

18.87 8.28

786.4 908.2

12.58 20.70

11.87 15.62

3.68 1.31

235.8 102.0

10.22 6.55

5.94 131.00

24.98

148,916

12.13

11.20

22.87

347

12.35 9.53

13.27 9.33

Source: Thomson Reuters; Yahoo! Finance.

1%

Median 231.5

ATNI

238.1

3%

Source: Thomson Reuters; Yahoo! Finance.

EPS. consensus estimates, $ Ticker Symbol SHEN NTLS CYCL VM FRP T

EPS, $

2009 1.07 1.50 0.40 0.36 0.20 2.06

2010

%Chg

1.23 1.59 0.53 0.62 0.01 2.23

15% 6% 33% 72% -95% 8% 12%

Median ATNI

2.40

2.45

2%

Source: Thomson Reuters; Yahoo! Finance.

Atlantic Tele-Network Inc. (Nasdaq: ATNI)

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Analyst: Victor Sula, Ph.D. Initial Report May 29th, 2009

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We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable.

To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information).

We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www. finra.org.

All decisions are made solely by the analyst and independent of outside parties or influence.

I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report.

Victor Sula, Ph.D. - Senior Analyst Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Productivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.

Atlantic Tele-Network Inc. (Nasdaq: ATNI)

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