Mail Stop 3561

      							January 31, 2006
Via U.S. Mail and Fax (210.614.7264)
Mr. Antonio Estrada
Corporate Controller and Principal Financial Officer
ATSI Communications, Inc.
8600 Wurzbach, Suite 700W
San Antonio, TX 78240

	RE:	ATSI Communications, Inc.
      Form 10-KSB/A for the Fiscal Year Ended July 31, 2005
		Filed November 2, 2005

   	Form 10-Q for the Fiscal Quarter Ended October 31, 2005
      File No. 1-15687

Dear Mr. Estrada:

      We have reviewed your filing and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and do not intend to expand our review to
other
portions of your documents.  Where indicated, we think you should
revise your documents in response to these comments.  If you
disagree, we will consider your explanation as to why our comment
is
inapplicable or a revision is unnecessary.  Please be as detailed
as
necessary in your explanation.  In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure.  After reviewing this information, we may or may not
raise additional comments.

	Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects.  We welcome
any questions you may have about our comments or on any other
aspect
of our review.  Feel free to call us at the telephone numbers
listed
at the end of this letter.


Form 10-KSB for the Fiscal Year Ended July 31, 2005

Management`s Discussion and Analysis of Financial Condition and
Results of Operations, page 17

Liquidity and Capital Resources, page 21

1. Please revise this discussion to disclose the specific
components
and amount of funds that you will need to continue operating for
the
next twelve months.  Also discuss the impact on your liquidity of
your default on the convertible debentures for non-payment of
quarterly interest.

Consolidated Statement of Operations, page 27

2. Please revise your presentation to parenthetically disclose the
amount of equity-related charge being excluded from the selling,
general and administrative line item, for example, because it is
presented as a separate line item.

Note 1 - Summary of Significant Accounting Policies, page 31

Note receivable, page 32

3. Please tell us why you have not recorded the note receivable
from
Telemarketing de Mexico S.A. de C.V. on your balance sheet.

Note 4 - Notes Payable, page 35

4. Please tell us where the $514,000 in notes payable to Recap
Marketing and Consulting, LLP is presented on your balance sheet
and
the terms of their convertible features.

5. It appears that the conversion feature in your convertible debt
with Franklin Cardwell and Jones, PC, meets the definition of an
embedded derivative under paragraph 12 of SFAS 133 which should be
separated from the debt host and accounted for at fair value,
unless
it meets the scope exception in paragraph 11(a). To determine
whether
the scope exception is met, the conversion feature should be
analyzed
under EITF 00-19.

	The first step in the analysis is to determine whether the
convertible debt meets 	the definition of a conventional
convertible
instrument in paragraph 4 of EITF 00-	19.  If it qualifies as a
conventional convertible instrument, the embedded 	conversion
option is not separated from the convertible debt.  However, if it
does 	not qualify as a conventional convertible instrument,
the
embedded conversion 	feature is required to be analyzed
further
under paragraphs 12-32 of EITF 00-19.

	It appears that your convertible debt is not a conventional
convertible instrument 	based on the conversion terms.  In this
regard, we note that your convertible debt 	has a conversion
provision that the notes have a conversion provision that entitles
	the holder at any time to convert all or any part of the
principal plus accrued 	interest into your common stock, at a per
share price equal to the amount 	converted divided by the
product
of (a) 0.90 times (b) the five-day average of the 	last sales
of
the common stock prior to the conversion day.  With regard to this
	provision, it appears that the convertible notes do not meet
the
definition of 	conventional convertible debt in paragraph 4 of
EITF
00-19 since the debt is 	not convertible into a fixed number of
shares.  As a result, you are required to 	analyze further the
conversion feature under paragraph 12-32 of EITF 00-19.

	Based on further analysis under paragraphs 12-32 of EITF 00-
19,
we note that 	since the notes can be converted into 90% of the
lowest quoted closing bid price 	during the five trading days
immediately preceding the conversion date, it appears 	that the
number of shares that could be required to be delivered upon net-
share 	settlement is essentially indeterminate (paragraph 20 of
EITF 00-19). Accordingly 	net-cash settlement should be
assumed.
Therefore, it appears that you would be 	required to bifurcate
the conversion feature from the debt host and account for the
	feature as a derivative liability with changes in fair value
being recorded in the 	income statement.  Please revise or
advise.

6. Further, given that it appears that the number of shares that
could be required to be delivered upon settlement of your
convertible
debentures is essentially indeterminate, it also appears that you
can
not conclude that you have sufficient shares authorized and
unissued
to net-share or physically settle your other derivative
instruments.
Accordingly, net-cash settlement should be assumed.  Therefore, it
appears that you would also be required to account for your other
derivative instruments (e.g., convertible preferred stock and
warrants) as derivative liabilities with changes in fair value
being
recorded in the income statement.  Please revise or advise.  Also,
we
note the Series D and E Preferred Stocks are classified as a
liability.  Please confirm to us that the period-to-period changes
in
the fair value of these derivative instruments are recognized in
your
income statement.  If not, tell us your basis for your accounting
and
include references to the appropriate accounting literature.

Note 6 - Gain on Disposal of Investment, page 36

7. Please tell us why it was appropriate to recognize a gain on
the
disposal of your investment in fiscal 2005 if the U.S. Bankruptcy
Court approved the sale of your subsidiaries on July 2, 2003 under
Chapter 7.

Note 13 - Earnings (Loss) per Share, page 44

8. Please revise to complete your 2005 weighted average number of
shares presentation.  We note that your diluted earnings per share
does not equal the amount presented on your statement of
operations.
Please revise or advise.

Note 14 - Risks and Uncertainties and Concentrations, page 45

9. Please revise to disclose the impact of not meeting the
concession
requirements will have on your financial results.

Form 10-Q for the Fiscal Quarter Ended October 31, 2005

Note 2 - Stock-based Compensation, page 5

10. For options grant in the quarter ended October 31, 2005,
please
revise to determine the compensation expense related to these
options
based on the closing price of your common stock on each grant
date.

Note 4 - Gain on Disposal of Investment, page 6

11. Please revise to present the gain on the discontinued
operations
in accordance with paragraph 44 of FAS 144.  Also, revise to
disclose
terms of the sale.

Item 3. Controls and Procedures, page 13

12. Please tell us specifically what significant adjustments were
proposed by the independent accounting firm and whether you
recorded
these adjustments.  If the adjustments were not made, disclose the
reasons why such adjustments were not required to be recorded.
Also,
tell us specifically what you are doing to improve controls and
procedures.

* * * * *

      As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response.  You may wish to provide us with marked copies of
the amendment to expedite our review.  Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information.  Detailed cover letters
greatly
facilitate our review.  Please file your cover letter on EDGAR.
Please understand that we may have additional comments after
reviewing your amendment and responses to our comments.

	We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision.  Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.

	In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:

* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;

* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and

* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.

      In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.

      You may contact Bob Carroll, Staff Accountant, at (202) 551-
3362 or Dean Suehiro, Senior Staff Accountant, at (202) 551-3384
if
you have questions regarding comments on the financial statements
and
related matters.  Please contact me at (202) 551-3810 with any
other
questions.

								Sincerely,

								 /s/ Kyle Moffatt for

								Larry Spirgel
								Assistant Director
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Mr. Antonio Estrada
ATSI Communications, Inc.
January 31, 2006
Page 5



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

         DIVISION OF
CORPORATION FINANCE