ORGANIZATION AND BUSINESS OPERATIONS

3 Months Ended

Mar. 31, 2022

ORGANIZATION AND BUSINESS OPERATIONS

ORGANIZATION AND BUSINESS OPERATIONS

1.ORGANIZATION AND BUSINESS OPERATIONS

The Company provides critical infrastructure-based communications and related information technology solutions to remote and historically underserved markets in the United States, Bermuda, and the Caribbean. The Company seeks to invest in its existing and new markets for long term growth led by its Glass and Steel and “fiber first” strategies that enable it to bring new or enhanced communications services to markets often overlooked by larger telecommunications providers.

At the holding company level, the Company oversees the allocation of capital within and among its subsidiaries, affiliates, new investments, and stockholders. The Company also has developed significant operational expertise and resources that it uses to augment the capabilities of its individual operating subsidiaries in its local markets. Over the past 10 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 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. The Company also actively evaluates potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, and generally looks for those that it believes fit the Company’s profile of telecommunications businesses and have the potential to complement its Glass and Steel and “fiber first” approach in markets while generating steady excess cash flows over extended periods of time. The Company uses the cash generated from its operations to re-invest in organic growth in its existing businesses, to make strategic investments in additional businesses, and to return cash to its investors through dividends or stock repurchases.

As of March 31, 2022, the Company offered the following types of services to its customers:

● Mobility Telecommunications Services. The Company offers mobile communications services and equipment over our wireless networks to both its business and consumer subscribers.  In certain markets, mobility services also includes private network services to business customers and municipalities.

● Fixed Telecommunications Services. The Company provides fixed data and voice telecommunications services to both its business and consumer subscribers in all of its markets.  These services include consumer broadband and high speed data solutions for businesses. For some markets, fixed services also include video services and revenue derived from support under certain government programs.

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

● Managed Services. The Company provides information technology services such as network, application, infrastructure and hosting services to both its business and consumer customers to complement its fixed services in its existing markets.

Through March 31, 2022, the Company has identified three operating segments to manage and review its operations and to facilitate investor presentations of its results. These three operating segments are as follows:

● International Telecom. In the Company’s international markets, it offers fixed services, mobility services, carrier services and managed services to customers in Bermuda, the Cayman Islands, Guyana and the US Virgin Islands.

● US Telecom. In the United States, the Company offers fixed services, carrier services, and managed

services to business and consumer customers in Alaska and the western United States. In the western United States, the Company also provides mobility services and private network services to enterprise and consumer customers.

● 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 March 31, 2022:

Segment	Services	Markets	Tradenames
International Telecom	Mobility Services	Bermuda, Guyana, US Virgin Islands	One, GTT+, Viya
	Fixed Services	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 Services	United States (rural markets)	Choice, Choice NTUA Wireless, Geoverse
	Fixed Services	United States	Alaska Communications, Commnet, Choice, Choice NTUA Wireless
	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 accounted for the Freedom 3 Investment as redeemable noncontrolling interests in its consolidated financial statements because the instruments contain put options allowing the holders to sell the instruments to a subsidiary of the Company. The put option is solely the obligation of the Alaska Communications subsidiary and is nonrecourse to the Company. 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 $11.0 million of transaction costs 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 continues 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.

The preparation of the condensed consolidated financial statements requires us to make estimates, judgments and assumptions, which are evaluated on an ongoing basis, that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities.  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 the Company and the unknown future impacts of COVID-19 as of March 31, 2022 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 of the impact of COVID-19 on its operations did not indicate that there was a material adverse impact to its consolidated financial statements as of and for the three months ended March 31, 2022. However, future assessments of the impacts of COVID-19, 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 its 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.