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Atlantic Tele-Network (ATNI) Q4 2018 Earnings Conference Call Transcript

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Atlantic Tele-Network(NASDAQ: ATNI)

Q4 2018 Earnings Conference Call

Feb. 21, 2019 9:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day ladies and gentlemen and welcome to the ATN International fourth-quarter and full-year 2018 conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touchtone telephone.

As a reminder this conference call is being recorded. I would like to introduce your host for today's conference, Justin Benincasa, chief financial officer Mr. Benincasa, you may begin.

Justin Benincasa -- Chief Financial Officer

Great. Thank you, Josh. Good morning everyone, and thank you for joining us on our call to review our fourth-quarter and full-year 2018 results. As you know, Michael Prior is here.

He's AT&T chief executive officer. During the call, I'll cover the relevant financial information, and Michael will provide an update on the business outlook. Before I turn the call over to Michael for his comments. I'd like to point out that this call and our press release contain forward-looking statements concerning our current expectations objectives and underlying assumptions regarding our future operating results.

Motley Fool Transcribing has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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And as a result -- and are subject to risks and uncertainties that could cause actual results to differ materially from those described. Also in an effort to provide useful information to investors, our comments today include non-GAAP financial measures. For details on these measures and reconciliations to comparable GAAP measures and for further information regarding the factors that may affect our future operating results, please refer to our earnings release on our website at atni.com, or the 8-K filing provided to the SEC. And with that, I'll turn it over to Michael for his comments.

Michael Prior -- AT&T, Chief Executive Officer

All right. Thank you, Justin, and good morning everyone. As usual, I will start with some highlights for the quarter and follow with more details. In addition, since this is the fourth quarter review, I will end with some thoughts on the full year and to 2019.

So as is noted in our press release, overall results for the quarter were mixed, and apples-to-apples comparisons in our U.S. telecom and renewable energy segments were made more difficult by asset sales that we successfully completed in 2018. Longer term investors in ATN should be familiar with this situation. Our approach is to make investment and operating decisions entirely based on projected returns on invested capital and the related risks and strategic value.

This can lead to investments in finite revenue scenarios such as the build-to-suit rural network that changed hands in 2018, to dispositions of otherwise healthy businesses or assets such as the US solar sail, and other situations like the mobility fund where there is unanticipated revenue or profit downturn in the future. The good news is that the returns turned out to be quite good in each of the transactions affecting the comparisons for this quarter and in the next few quarters. Of course, results in our U.S. telecom segment also suffered from some negative operating trends, with lower traffic causing a return to seasonality, and a significant decline from the third quarter.

wholesale revenues. On the other hand, international telecoms operating trends were much more positive, with quality growth in fiber broadband customers, the ongoing recovery in the U.S. Virgin Islands, completion of some major network upgrades. And operating improvements in a number of areas.

Outside of the U.S. solar portfolio sale, there were no significant developments in the renewal energy segment, and our intention there is primarily focused on the India business. So now, turn a little more detail on international telecom. As noted, this was a strong quarter for this segment in many respects.

We saw continued benefit from our investment in fiber networks in many of our markets, with consumer broadband subscriber and ARPU growth being major contributors to the 17% year-on-year growth in in segment revenue. And we are pleased with the customer response to our new and enhanced data services. We think there will be continued benefits from these and other recent network investments. The related good news is that as I already alluded to, the bulk of this program network investment was completed in 2018, so we expect to see a major improvement in free cash flow in 2019.

The substantial completion of our network rebuild in the U.S. Virgin Islands will also provide a big benefit to segment cash flow moving forward. There is still work to be done in some of the more difficult areas, but the main focus there is now on revenue recovery. And on that note, information from federal and local authorities indicate that somewhere just shy of 10% of residences in the territory are still without wireline -- sorry, I misspoke, are still unoccupied or not with wireline network connected.

Beyond that, some of the repaired and occupied homes are not reconnecting for the full pre-storm services. This not unexpected cord cutting or cord shaving is mainly impacting landline voice and video services. We believe we will continue to win back some of those customers and service revenues over time, and indeed, excluding the onetime federal subsidies received in 2018, we would expect to see year-on-year revenue growth from this market throughout 2019. And then turning to U.S.

telecom, the story in this segment continues to be one of repositioning. Continued work on the cost structure and the structure of our offerings to our wholesale customers and the profitability and quality of our smaller retail operations, while at the same time, developing new growth opportunities. On the wholesale side, traffic and revenues were down significantly from the third quarter and year on year. Part of this was a change in some service providers' approach with some carriers throttling their subscribers aggressively while others sought to maximize customer experience.

And a smaller factor in the decline in traffic. was the proposed large carrier merger. Close to one half of the year-on-year EBITDA decline was related to the previously mentioned Midwestern network sale that we completed in July of last year, the wind down of the FCC mobility fund one program, and higher expenses related to a number of early stage U.S. telecom investments such as the expansion of our in building coverage business.

And we made good progress in a number of areas outside of legacy wholesale, increasing data revenues from consumers carriers and enterprise customers alike, while at the same time improving profitability from the smaller wireless retail business. We think there are additional opportunities in serving these rural communities and our Cap 2 award will help us go after them. In renewable energy. The headline was the closing in early November of the previously announced sale of our entire U.S.

solar production portfolio. Although we are happy that we got the deal closed, it of course reduced revenue and EBITDA for the fourth quarter as title transferred on those facilities. In India, it was a similar story as the previous quarter, a good and consistent operating performance and power production. And we made progress bringing facilities into full production mode under existing power purchasing agreements, and at the same time, the team continued to build a strong pipeline of additional builds and are actively engaging with prospective funding partners.

So looking back is a promise to -- at the year overall and review them looking forward a little bit, when you look at the full year results, it's interesting to note that despite the post hurricane downtime of the Virgin Islands network, the decline in U.S. wholesale traffic and revenue, and to a lesser extent, the sale of the U.S. solar portfolio, we still managed to produce a 28% consolidated adjusted EBITDA margin, which I think indicates the benefits of our fairly diversified portfolio of operating assets. A particular bright spot for the year was the performance of our international telecom operations, with all markets other than the Virgin Islands executing above expectations.

We think this segment is positioned well for continued organic growth in 2019, and of course, a substantial expansion in free cash flow. ATN ventures also had a successful launch in first year, and we are encouraged about the potential of this unit and its early investments to contribute to future growth and investor returns. The India solar business was successfully restructured during the year, and we believe the strategic opportunities will expand in 2019. And we are closely managing our U.S.

telecom segment in the face of some difficult market conditions. We continue to believe that there could be opportunities for us to invest in shared infrastructure as the industry moves to lower costs, and we are optimistic on the longer-term outlook for the business. Lastly, the sale of the U.S. solar portfolio was an example of our team's ability to deliver returns through opportunistic portfolio management and capital allocation.

So to close, it was a challenging year in many respects for ATN, but our teams also had many successes. Growth in broadband and other data revenue, the solar asset sale, securing critical additional government funding for our network rebuild after the hurricanes, improving cost discipline, and winning the Cap 2 award for federal funding for expansion for rural broadband network in the Western United States. And so with that I'll turn it back over to you, Justin.

Justin Benincasa -- Chief Financial Officer

Great. Thank you, Michael. For the fourth quarter total consolidated revenues were $107.8 million, flat with last year's fourth quarter. Higher international telecom segment revenues resulting mainly from the continued hurricane recovery in the U.S.

Virgin Islands, but also from revenue growth in other markets offset decreases in the U.S. telecom segment. Consolidated adjusted EBITDA for the quarter was 23.4 million, compared to 30.8 million in the prior year, which I'll break down further as I go through the segments. The adjusted EBITDA margin was 22% for the quarter and 28% for the full year.

Looking at some specifics around each of the segments and starting with the US telecom segment. Revenues were 24.9 million for the quarter, down from 34.8 million a year ago, and adjusted EBITDA was 6.5 million, down from 16.8 million in the fourth quarter of 2017. As Michael noted, approximately 40% of the revenue declines and 50% of the EBIT decline was accounted for by the sale of 100 sites which we closed in mid 2018. The expiration of the mobility fund one grant and related operating expense offsets, and the additional operating costs from the early stage business investments made this year.

The remaining difference is from overall lower wholesale roaming revenues. In 2019, we expect the U.S. telecom segment revenue to benefit from the Connect America 2 fund beginning in the second half of the year. In the international telecom segment, revenues increased 17% to 78 million, up from 66.9 million last year, and adjusted EBITDA was 23% to 20.

6 million from 16.7 million. Much of the year-over-year increases relates to the post hurricane recovery in the U.S. Virgin Islands. In addition, we continue to see strong subscriber revenue growth in Guyana and Cayman where we've been investing and upgrading the expanding -- and expanding our fiber networks.

As Michael mentioned, our business in the USEI showed substantial improvements throughout 2018, but it will take some time to get back to the pre-hurricane levels. In the meantime though, we continue to be very focused on improving overall financial performance in that market. In the renewable energy segment, revenues were 4.9 million in the fourth quarter 2018, down from 5.9 million reported last year. And adjusted EBITDA was 2.9 million for the quarter, compared to 3.6 million in 2017.

Results this quarter reflect the sale of the U.S. portfolio which closed in early November. On a consolidated net income, or I should say our consolidated net income for the full year was 19.8 million or $1.24 per share. Other income statement items to note, EBITDA in the U.S.

telecom segment for the quarter was negatively impacted by approximately 1 million from the inclusion of the early stage initiatives we talked about previously. We had a $12.5 million net gain on the sale of the U.S. renewable portfolio, and the effective tax rate for the quarter was 52% and 35% for the full year. And included in operating income income was 1.3 one million of non-cash stock based compensation expense for the quarter.

Moving to the balance sheet at December 31, we ended the year with total cash of 192.9 million. For the full year 2018, cash from operations amounted to 115.9 million and total debt outstanding with 91 million. Excluding the spending on post hurricane network repairs, capital expenditures for the full year totaled 105.8 million, of which approximately 80 million was incurred by our international telecom segment, 13.4 million by our U.S. telecom operations, and four and a half million in the renewable energy segment.

The full-year spending and telecom was approaching 10 million more than we anticipated from our last guidance as we continue to accelerate network expansion in certain markets where we believe it gives us competitive advantage. Also reflected in the higher number is a reclass of inventory purchases into capital expenditures that was not included in our original guidance. Based on our current portfolio, we expect 2019 to be considerably different with respect to capital spending. In the international telecom segment, we anticipate full-year 2019 CAPEX to be between 50 and 55 million, and in the U.S.

telecom, we're looking at capital expenditure levels similar to those of 2018. The approximate 100-million-plus reduction in total spending should result in significant free cash flow in 2019. And with that, Josh, operator, I'd like to turn the call over for questions. 

Questions and Answers:

Operator

Thank you. [Operator instructions] Our first question comes from Rick Prentiss from Raymond James. You may proceed with your question.

Rick Prentiss -- Raymond James -- Analyst

Thanks. Morning, guys.

Justin Benincasa -- Chief Financial Officer

Good morning.

Rick Prentiss -- Raymond James -- Analyst

Hey, a couple of questions. I want to start on the on the U.S. side. Obviously, there was pressure there you talked to with Michael.

But on a quarter-to-quarter basis, revenues were down like six million, but EBITDA was down by seven million. Obviously, it's high-margin business, but seems really high-margin business. So I guess the question is, I think, Justin, you said the U.S. telecom early stage stuff hit about a million to EBITDA in the quarter, but just trying to think, as we look at that business before Cap 2, how should we think about the margins in that business? Is this the new run rate that we'll see? We'll have seasonality, obviously, but just trying to think through what happened quarter to quarter from third quarter to fourth quarter, and how we should look at it going forward.

Justin Benincasa -- Chief Financial Officer

Yes. I do think margins are probably closer to where they are in the fourth quarter and go forward because the mobility fund was an expense offset. That that closes some of the gap on the EBIT that you were just talking about. So that came through as an operating expense offset for us In prior quarters.

Rick Prentiss -- Raymond James -- Analyst

And can you scale that for us? Was that a couple of million dollars a quarter. I'm just trying to think of how big an item that one was.

Justin Benincasa -- Chief Financial Officer

It was about a million and a half a quarter.

Rick Prentiss -- Raymond James -- Analyst

OK. So that definitely helps. And that was not there in the third quarter as far as going away?

Michael Prior -- AT&T, Chief Executive Officer

Correct. And I...

Rick Prentiss -- Raymond James -- Analyst

Yes, go ahead. Michael.

Michael Prior -- AT&T, Chief Executive Officer

Well I'm just going say, there's always a mix of things too, right. There's other expenses that don't relate to the, you know, brand new businesses started with other initiatives and things like that. So it's not pure. But I agree with Justin directionally.

Rick Prentiss -- Raymond James -- Analyst

OK. And then we should still see some seasonality on the revenues given roaming typically goes up more in the summertime?

Justin Benincasa -- Chief Financial Officer

Yeah. I feel -- Yeah. Yeah. I mean some of the contract structures we had smoothened a little bit, but we are seeing some seasonality.

Rick Prentiss -- Raymond James -- Analyst

OK. And then, Michael, you mentioned adjusted you did as well that the Cap 2 funding, hopefully start seeing some funding coming in the second half of '19. So that's an 80 million over 10-year funding. But how should we think about it scaling up to that that run rate level.

And is there a CAPEX associated with to collect that money.

Michael Prior -- AT&T, Chief Executive Officer

Yeah. I think, you know, the scaling is -- that one, I'm not entirely sure how that all come on because it's a little bit of a process. I think it's relatively -- my understanding is it's relatively steady. So it's relatively evenly apportioned over the period.

So, you know, an eight-year, 10-year period, sorry. But obviously, if it starts in the second half, it won't be evenly appreciated in the 2019. And I think early on, we -- go ahead, Justin.

Justin Benincasa -- Chief Financial Officer

Yeah. So I think I think in in in 2019, there'll be minimal amount of CAPEX associated with it. There will be some as you go. The full 80 will come through as a revenue item for us.

So and then toward the back end, as we -- as the full thing comes up, we will probably have more CAPEX. But we'll help with that as we go, though including it.

Rick Prentiss -- Raymond James -- Analyst

Sure. And then are you expecting any more FCC support in the island area. I think there were times when you thought you might get a little more onetime benefits to help continue to improve the new network down there.

Justin Benincasa -- Chief Financial Officer

I think it's more about the longer term program, so there's a proposal out there that would essentially replace the -- and potentially increase the funding we get today from the high cost fund. So that -- so there's this further high cost support that the the FCC is continuing while they're waiting to put this new regime in place. And there's no guarantees on that, you know, what that amount will be, you know, but we do think that we are, you know, very much the right recipient for the funds and, you know, we're pretty active making the case. But beyond that, we don't we don't know, and we're not exactly sure on the timing of that getting finalized.

I mean, we certainly would expect it to get finalized this year, and certainly would hope it would get finalized in the next couple months. But you know, there have been some delays, thus far.

Rick Prentiss -- Raymond James -- Analyst

OK. The last one just kind of housekeeping for me. On the renewable energy, how much did the U.S. business contribute in the fourth quarter, since the sale was early November? Just trying to think of what we want to look at as far as a good run rate.

Looking into 1Q and beyond 2019.

Justin Benincasa -- Chief Financial Officer

In terms of EBITDA our revenues?

Rick Prentiss -- Raymond James -- Analyst

Yeah, both. Both revenue and EBITDA, how much was the stub period?

Justin Benincasa -- Chief Financial Officer

It's hard to compare exactly the revenue, because there's some moving things on the overhead. But I think the revenue is 3.5 million and pretty pretty high margin.

Michael Prior -- AT&T, Chief Executive Officer

Yeah. Yeah. All right. So a little under three on EBITDA.

Rick Prentiss -- Raymond James -- Analyst

For the partial quarter. And was total EBITDA for renewable energy 2.3 two for the quarter?

Justin Benincasa -- Chief Financial Officer

Total EBITDA for renewable for the quarter?

Rick Prentiss -- Raymond James -- Analyst

Yeah.

Justin Benincasa -- Chief Financial Officer

Three. Wait, hang on. So the U.S. was about [Inaudible] of the EBITDA.

Michael Prior -- AT&T, Chief Executive Officer

Yeah, yeah. India is relatively small.

Rick Prentiss -- Raymond James -- Analyst

Right. Right. OK. Thanks, guys.

Michael Prior -- AT&T, Chief Executive Officer

OK. You're welcome.

Operator

Our next question comes from Allen Klee of Maxim Group. You may proceed with your question.

Justin Benincasa -- Chief Financial Officer

Allen?

Allen Klee -- Maxim Group -- Analyst

Oh. Yes, hi. Could you talk a little more about kind of a little more color on what you've been doing in Bermuda and Guyana, and kind of your outlook for them in '19?

Michael Prior -- AT&T, Chief Executive Officer

Sure. And actually, you know, one thing I just have made a note I meant to mention it before in Rick, before I answer that, I think I kind of mangled the statement on the you know the Virgin Islands household information. It's -- the information we have indicates that a little less than 10% of homes are awaiting reconstruction under a federal program. So there might be more homes that are awaiting reconstruction.

Some of those people may actually be occupying those homes, and some of them may be off island entirely, but that's the only sort of hard start we have to indicate what's going on there right now and where that recovery is. Going to your question on Guyana and Bermuda, you know, the Bermuda is a pretty mature market. But the teams that are very good job executing. We've had an ongoing program of, you know, kind of instituting new cost discipline and structure, and trying to figure out how to, you know, add productivity to the business.

We're still constantly looking at offerings to customers and things like that. But you know, overall, through that kind of careful management of that, you know, we had good, good year in Bermuda. And in Guyana, it's more -- Guyana is like Cayman, is more about the fiber expansion programs we've had that I mentioned a few times. And you know, that's been seen very good customer take up and, you know, we think there's some ongoing benefits to reap from it.

Allen Klee -- Maxim Group -- Analyst

OK....

Justin Benincasa -- Chief Financial Officer

Does that answer your question, Al?

Allen Klee -- Maxim Group -- Analyst

Yes. Thank you. And then how does -- so is there a way to think about kind of where your EBITDA margins were during the quarter internationally and the revenue base internationally, and what the opportunity is to kind of grow from those levels?

Michael Prior -- AT&T, Chief Executive Officer

I mean, we don't give guidance, as you know, but I think what we're saying is we think there's opportunities to grow. You know, one obvious factor is the Virgin Islands recovery. You know, we don't -- you know, we would expect quarter on quarter, you know, pretty much all year to have good organic growth there. You know, there were some onetime items, those near -- as we call them.

I'm not sure the auditors call them that. But the short term grants, the relief grants from the FCC that we received last year in the second and third quarter. So those might be hard to match. But if you're looking at, you know, organic operating trends, we think we feel there's a number of different areas within this segment where we should continue to grow.

Rick Prentiss -- Raymond James -- Analyst

OK, thank you. And then moving on to renewable energy. If you strip out the U.S. and if you strip out the like 12 and a half million dollar gain from selling the U.S., does that imply that India lost money during the quarter, or am I missing something?

Justin Benincasa -- Chief Financial Officer

India. India on an EBITDA basis, was positive. On a net income basis, they might have -- depreciation and amortization has been down. But it's definitely positive on EBITDA.

Yes. That answers your question.

Allen Klee -- Maxim Group -- Analyst

And could you could you give us a sense of like the amount of megawatts and what you think the opportunity is over the next year to grow that?

Justin Benincasa -- Chief Financial Officer

You know, it's -- I think we have an opportunity to potentially, from a megawatt standpoint, go -- you know, increase multiples on what we have now. I don't want to really say how much it is because so much depends on funding and other factors. I mean, we're -- you know, we believe that the, you know, the -- to prove out that model there, you know, we need to spread the funding of building out on that pipeline, and and we've had a lot of interest from parties, but you know, nothing to talk about at this point. So it really remains to be seen how much we build out there this year or even next year.

Allen Klee -- Maxim Group -- Analyst

OK. And then U.S. telecom, I'm trying to understand a little. You said there was a 40% decline in wholesale traffic.

Is that kind of a run rate that you think would continue? Or do you think that there's something about the market maybe stabilizing at a lower decline rate going forward?

Justin Benincasa -- Chief Financial Officer

Yeah. Just to -- I'll let Michael answer that, but just to clarify, it's not a 40% decline. It's 40% of the decline, or a percentage of the decline. 60% of the decline was from wholesale traffic

Michael Prior -- AT&T, Chief Executive Officer

And revenue.

Justin Benincasa -- Chief Financial Officer

Right. Just to clarify your numbers. But yes, it's a mix of factors. Allen, I think it's tough -- you know, it's quite frankly it's tough right now to handicap the direction of that -- the wholesale side of that business in particular over the next few quarters.

I think there are things we're working on that could improve the trends. There's other things that, you know, could potentially even make it worse. I think we tend to believe it's more likely they get better. But it's also possible that it stays consistent.

So this this year, I think there's a lot going on. And my expectation is there will be a lot more clarity as the year develops, good or bad. And you know -- and you know, there are also all these other activities going on in that segment that will potentially impacts the financials for U.S. telecom, particularly as you get later in the year.

Allen Klee -- Maxim Group -- Analyst

OK. And then within U.S. telecom, you touched on that you made investments, emerging investments. I think you spent around a million during the quarter.

Can you give us some thoughts on how you think about spending on that in '19 and what your kind of goals are for '19 and '20 from these businesses?

Justin Benincasa -- Chief Financial Officer

I mean, our goals are to take advantage of these opportunities. I mean, we're pretty, you know, we think -- you know, just to use one example, we think that in building coverage, you know, has great potential as a sector. And we like, you know, we like our offering and our positioning, and so you know, if we see opportunity, you know, to invest in expansion of that, we will. We try to take a clear eye view of it as we go.

But I think that's how we feel about it. You know, we're not going to sort of just dip our toe in the water. If we see opportunity, we'll move fast and aggressively. And I think that stays true a little bit in fiber business and other businesses.

So you know, at this point, we feel pretty good about the prospects of these things really contributing, particularly in 2020. I think, you know, 2019 be more likely to be more of an expense impact than, you know, than any significant revenue impact.

Allen Klee -- Maxim Group -- Analyst

OK. Thank you so much.

Justin Benincasa -- Chief Financial Officer

Sure.

Operator

[Operator instructions] Our next question comes from Hamed Khorsand from BWS Financial. You may proceed with your question.

Hamed Khorsand -- BWS Financial -- Analyst

Hi, good morning. So a couple things. Could you could you quantify the FCC benefit in Q4 and how much you're expecting in 2019?

Justin Benincasa -- Chief Financial Officer

I mean, I think -- well in 2019, as I said, we don't know exactly what's going to happen with that long-term grant. But right now, we're running roughly $4 million a quarter, and for now, we expect that to continue.

Michael Prior -- AT&T, Chief Executive Officer

It's really the longer certainty of that that's the benefit to us as well, you know, under the new program.

Hamed Khorsand -- BWS Financial -- Analyst

OK. Would that help you as far as -- because the U.S. Virgin Islands, like you were saying, is 10% or so on occupied or unconnected. Is that just going to make up the difference for you?

Justin Benincasa -- Chief Financial Officer

No. I don't really see it that way. I think it's more about the, you know, this is a particularly high cost market for in order to deliver the services to the, you know, the vast majority of the population. And so I think the FCC recognizes that.

So there's this program that they've proposed and you know, it's possible. You know, I think it's -- I don't have exact number from this, 186 million or something like that over 10 years. So if you do the math, you know, we could receive an award at or above what we're receiving now. And it's it's pretty necessary, and we also think, as I mentioned, I think we're by far the best way and most effective way to deliver those subs -- for those subsidies to deliver those policy outcomes they want to have, which is, you know, a very high percentage of people connected to a minimum standard of reliable high-speed broadband.

That's that's the main focus of the new funding.

Hamed Khorsand -- BWS Financial -- Analyst

OK. And then in U.S. telecom, is there another price step down this year?

Justin Benincasa -- Chief Financial Officer

I don't know. I mean, you know, there's nothing scheduled.

Hamed Khorsand -- BWS Financial -- Analyst

And as far as your investments go. Has any of them reached the revenue kind of caliber yet to benefit you? Or is it still just early stage?

Justin Benincasa -- Chief Financial Officer

Say again, Hamed?

Hamed Khorsand -- BWS Financial -- Analyst

Those little investments you've made over the past, and you've highlighted in past calls, has any of those businesses reached a stage where they're generating revenue where it's actually beneficial to you at all right now.

Justin Benincasa -- Chief Financial Officer

There are some revenue being generate, particularly in newer business in international telecom on cloud services. But nothing is producing a significant impact, and net net, they're all, you know, collectively, it's a drag to EBITDA.

Michael Prior -- AT&T, Chief Executive Officer

Right. On the U.S. telecom side, it's really the expense of funding the platforms that we're seeing.

Hamed Khorsand -- BWS Financial -- Analyst

OK. All right. Thank you.

Operator

Our next question comes from Rick Prentiss from Raymond James. You may proceed with your question.

Rick Prentiss -- Raymond James -- Analyst

Hey, guys. Want to throw a couple of follow ups in there on a busy earnings day. I just want to confirm the, Cap 2 funding that you mentioned, that is additive, right? That wasn't a good -- a lot of people get confused on all the different FCC programs out there, but Cap 2, the 80 million over 10 year is additive?

Justin Benincasa -- Chief Financial Officer

Yes. Yes, it's a totally new program, and nothing it's replacing.

Rick Prentiss -- Raymond James -- Analyst

Exactly. OK. Next one is how does the Sprint team merge -- T-Mobile merger affect you guys? Was that something that you might have been alluding to an earlier question?

Justin Benincasa -- Chief Financial Officer

Yeah. I mean, yes, I was, but I don't want to get into detail because we don't want to talk about carriers, you know, our customers traffic patterns too much. But just suffice it to say, it had you know, it was a factor. Not a major factor, but a factor.

Rick Prentiss -- Raymond James -- Analyst

OK. And we'll monitor that. And a bunch of quickie ones. Are you guys in the millimeter wave auction?

Justin Benincasa -- Chief Financial Officer

I don't -- I'm not a 100% sure, so I better not answer.

Rick Prentiss -- Raymond James -- Analyst

If you were, your attorneys would probably already tell you, but ...

Justin Benincasa -- Chief Financial Officer

That's what I think. That's what I think. But I'd rather stick with the answer is neither confirm nor deny.

Rick Prentiss -- Raymond James -- Analyst

OK. One would expect though that millimeter wave is not as conducive in your rural areas, but there could be some interest for in building systems. So I'm just wondering what frequencies you're looking in the indoor DAS space.

Justin Benincasa -- Chief Financial Officer

In the indoor space, we're very focused on CBRS, as well as some of the, you know, the existing carrier frequencies that it really depends partly on the customer and the situation. But the whole platform from the beginning that we're building, and -- is really is very much focused on that CBRS band..

Rick Prentiss -- Raymond James -- Analyst

Makes sense. And then final one for me is, a lot of talk on 5G. What do you guys think 5G means for the industry, and what does it mean for you guys?

Michael Prior -- AT&T, Chief Executive Officer

Well, you know, you're right. There is a lot of talk about it. And you know I think there's 0at the very basic level, there's the similar G move where you have -- you know, more capacity for a band of spectrum, for per cell site, etc, and you know, in faster speeds. And I think that maybe is not the most significant thing.

I think the most significant thing that we see is the fact that you now -- a lot of the different carry on things, which means you can have a lot of -- a lot more devices connected to a node than previously and at a lot lower latency. And so if you look at -- and there's some other things that people are lumping in with 5G, network slicing and other technologies that are pretty interesting in terms of the applications you might have. And you know, when we look at things like the in building business, we think some of those technologies and solutions are very interesting indeed and, you know, provide potential real new use cases. I think some of the more traditional use cases, I don't -- you know, I don't see a big use for us in the near future.

You know, we've just done a lot of upgrades. We have, you know, in most areas we have a lot of capacity and, you know, speeds that are adequate for what the market is. So it really -- a lot of it depends on what what kind of use cases get developed in bigger markets, which is often the way we've done it in our rural markets and island markets, is see what's going on, what does this enable for the customer base, and then does that make sense for us to invest in and on what timeline. But I wouldn't say there's, you know, a major 5G investment coming anytime soon for us from where we're looking at it right now.

Rick Prentiss -- Raymond James -- Analyst

Except for maybe on the indoor stuff us.

Michael Prior -- AT&T, Chief Executive Officer

That's right. That's right.

Rick Prentiss -- Raymond James -- Analyst

OK. That helps. Thanks Michael.

Michael Prior -- AT&T, Chief Executive Officer

Sure. Operator, any other questions?

Operator

There no further questions at this time.

Justin Benincasa -- Chief Financial Officer

OK. We'd just like to thank everybody, and we'll see you at the end of Q1.

Operator

[Operator signoff]

Duration: 42 minutes

Call Participants:

Justin Benincasa -- Chief Financial Officer

Michael Prior -- AT&T, Chief Executive Officer

Rick Prentiss -- Raymond James -- Analyst

Allen Klee -- Maxim Group -- Analyst

Hamed Khorsand -- BWS Financial -- Analyst

More ATNI analysis

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