Net Customer Losses Sting Allied Wireless Results (updated)

Atlantic Tele-Network Inc.’s wireless subsidiary, Allied Wireless (Alltel), struggled in the fourth quarter of 2010 capping off a transitional period that at least one telecom analyst described as "disappointing."

For the quarter, ATNI posted net income of $3.3 million on total revenue of $194.7 million. Wireless revenues accounted for about 84% of the company’s revenue – a byproduct of its acquisition of several divested markets from Verizon’s buyout of Alltel in 2009.

For the full year the Beverly, Mass.-based telecom recorded net income of $38.4 million on revenue of $619.1 million. ATNI’s wireless subsidiary, Allied Wireless, which operates under the Alltel brand, is headquartered in Little Rock and run by former Alltel executives.

“Fourth quarter operating results were similar to those of the third quarter," said ATNI CEO Michael Prior. "Revenue growth was driven primarily by our recent acquisition of certain former Alltel wireless assets, net of the anticipated customer attrition."

ATNI continued to warn that its financials will be impacted by transition costs and expected customer attrition through the middle of 2011. Those warnings provided little comfort to industry analysts closely watching the firm’s moves.

Barry McCarver, a telecom analyst with Little Rock-based Stephens Inc., issued a memo on Wednesday morning lowering future expectations for ATNI.

"We are downgrading Atlantic Tele-Networks to Equal-Weight from Overweight and lowering our price target to $35 (was $50). Overall, ATNI put up a disappointing quarter," said McCarver.

"While churn was slightly better than we expected, gross adds for both post paid and prepaid U.S. wireless customers came in well short of expectations. It is apparent that management is taking the necessary steps to retain customers and extend subscriber contracts to two-year terms by issuing new handsets at subsidized prices, but this process is proving to be much more costly than we originally anticipated," he noted.

McCarver also singled out declining revenue from the company’s wholesale division, which fell further than expected.

UPDATE: ATNI’s stock is performing poorly today on news of yesterday’s quarterly and annual earnings report. In midday trading, shares of ATNI are down more than 11% to $33.24.