ATSI Communications, Inc. (OTCBB: ATSX) is a global Voice over Internet protocol ("VoIP") communications Company based in San Antonio, Texas. The Company operates through its two wholly owned subsidiaries, Digerati Networks, Inc. and Telefamilia Communications, Inc. ATSI also owns a minority interest of a subsidiary in Mexico, ATSI Comunicaciones, S.A. de C.V., which operates under a 30-year government issued telecommunications license similar to those owned by AT&T's and MCI's subsidiaries in Mexico. ATSI is focused on serving high-growth international markets with an emphasis on the Latin American region. ATSI's primary market, Mexico, is the top producer of voice communications traffic with the U.S., making it the most lucrative telecommunications corridor in the world in terms of revenue. Some of the catalysts fueling growth throughout Latin America include the rapid expansion of the Hispanic population in the U.S., the increase in travel between Latin American countries and the U.S., the build-out of local telecommunications networks resulting in an increase in teledensity in Latin countries, and the proliferation of communication devices throughout the region. The Company's customer base includes a variety of carriers, including top tier providers and emerging operators that generate voice traffic to and from the markets served by ATSI.
Digerati Networks provides international communications services that consist primarily of transporting voice traffic across the world via the Internet. Digerati owns and operates its own VoIP network for processing voice communication traffic between the United States and rapidly expanding markets in Asia, Europe, the Middle East, and Latin America. Digerati has established numerous partnerships with foreign carriers and network operators to provide its international services. In its VoIP operations, Digerati receives voice traffic from originating carriers who are interconnected to its network via the Internet and routes that traffic over the Internet to local service providers and carriers in the destination countries with whom the Company has agreements or partnerships to manage the quality and completion of the call. Digerati's global VoIP service enables carriers and other communications service providers to outsource their international voice and fax traffic.
Digerati has developed a solid reputation in the industry for providing high-quality communications services at competitive rates by:
- Forging partnerships with international operators;
- Establishing a state-of-the-art VoIP network developed by Nextone Communications;
- Implementing systems for real-time reporting of VoIP traffic, call quality, revenue, and profitability
- Implementing NexTone's Network Analysis and Reporting System ("NARS") that provides a comprehensive set of management tools for its VoIP network
- Aggressively managing the transmission cost per minute for international voice transport through its partnerships and direct relationships with IP-based foreign carriers in key markets;
- Maintaining low overhead costs as compared to its competitors
The growth of the Internet has delivered a parallel, cost efficient, and more flexible network that will ultimately replace the traditional circuit-switched network for voice communications. Voice over Internet Protocol is growing faster than circuit-switched voice traffic and as a result, is revolutionizing the communications industry. International VoIP traffic grew by 38% in 2005 and accounted for 16% of the 260 billion international voice minutes in the same year. Latin America was the top destination region for VoIP traffic with more than one-third of all the world's international VoIP minutes. The trend is expected to continue as many foreign countries with state-owned telecommunication monopolies or recently deregulated telecommunications industries are still ripe for VoIP growth. The growth in VoIP is driven in part by the growing number of traditional operators migrating towards VoIP to provide services in this lucrative field. Additionally, there are numerous emerging providers launching next generation VoIP networks to deliver services to the consumer and enterprise sectors of the market. This industry shift to VoIP has fueled its explosive growth in recent years. The Company has capitalized on this growth opportunity by tapping into the increased demand for international VoIP services from traditional and emerging telecommunications companies that lack network infrastructure or connectivity in foreign markets. ATSI is well positioned to reap benefits from the VoIP market opportunity through its highly reliable, competitive and low cost Internet communications infrastructure. The Company's competitive edge is a result of its strategic commitment to acquire the proper international licenses, negotiate favorable interconnection agreements, and establish in-country partnerships with various foreign telecommunication companies. From a financial perspective, ATSI is experiencing dramatic revenue growth and improved financial performance, important factors in today's "back to basics" telecom marketplace.
ATSI's other wholly owned subsidiary, Telefamilia Communications, Inc., was formed to capitalize on the opportunities in its largest VoIP market created by the growth of the Latino market in the United States with ties to Mexico. Telefamilia provides Latino consumers with specialized communication services that includes international VoIP calling. U.S. Mexicans spend more than $2 billion a year in telephone calls to Mexico, making U.S./Mexico the world's largest long-distance corridor in terms of yearly revenue. The growth of this ethnic community continues to drive demand for affordable international communication services. The source of the growth includes several industry, demographic and economic factors as well as an increase in market segment size.
As of 2004, there were 40.4 million Hispanics in the U.S., or 14% of the total U.S. population, making Latinos the nation's largest and fastest growing minority group. Mexican-Americans living in the U.S., heavily concentrated in Texas and California, make up 62% or 25 million of the total Hispanic population. U.S. After successfully implementing its retail strategy, ATSI's Telefamilia brand will be used as a pipeline through which additional services such as mobile telephony and cable television can be marketed to this vast Hispanic community.
COMPANY BACKGROUND
From its inception, ATSI's long-term strategy was to position itself to take advantage of business opportunities that the Company felt would arise with the deregulation of the telecommunications industry within Latin America, particularly Mexico. The scheduled demonopolization of Telmex was written into law in 1990 and Telmex was scheduled to lose its monopoly status in August 1996.
The new laws formalized methods by which companies such as ATSI could compete in the Mexican long distance market. Management believed that by establishing its infrastructure in advance of the anticipated demonopolization, it could take maximum advantage of opportunities that it expected would emerge. ATSI began providing network management services between the U.S. and Mexico and call services from Mexico to the U.S. in 1995.
In July 2000, ATSI secured its valuable Long Distance Concession license in Mexico, and officially began operations under the Concession in Mexico as ATSI Comunicaciones, S.A. de C.V. In June 2003, ATSI established a relationship with a group of Mexican investors that subeseuently acquired a 51% interest in its Mexican subsidiary.
ATSI deployed the capital from the sale of its Mexican Subsidiary to deploy a NexTone powered VoIP network and diversify its routes to include other countries in Latin America and other regions of the world. Since deploying its own VoIP network in July 2004, ATSI has experienced dramatic growth and produced record revenues for every quarter through its fiscal year ended July 31, 2006.
Today, ATSI is well positioned to capitalize on the growth opportunities in a rapidly expanding VoIP market. In 2005, VoIP traffic represented 16% or 42 billion of the 260 billion international minutes processed. As a region, Latin America was the most popular destination in the world for VoIP traffic in 2005.
BUSINESS MODEL AND STRATEGY
Upon deploying its own VoIP network, ATSI's focus was on providing carrier and network services to and from the Latin American countries where management had established business relationships. As the Company reached key milestones in the Latin American region, ATSI diversified its international VoIP routes to include countries in Asia, the Middle East, and Europe. In 2005, ATSI formed a wholly owned subsidiary, Digerati Networks, to showcase the Company's growing VoIP business. Through Digerati Networks, ATSI successfully repositioned its brand from being one of a U.S. to Mexico niche provider to that of a cost-effective, full-service international VoIP service provider.
ATSI intends to continue building its global VoIP business while placing an emphasis on higher margin routes and top tier traditional carriers migrating towards VoIP. The Company will also leverage its strength in its core VoIP business and carrier class infrastructure to compete in higher margin consumer and small business IP products. This initiative is evidenced by ATSI's creation of Telefamilia Communications, a strong and unified retail brand for the Latino market in the U.S. Telefamilia commenced operations in 2005 by introducing a variety of highly-specialized communication services, including international VoIP calling to the underserved Latino market in Texas. ATSI's initial retail focus is on serving the 25 million Mexicans in the U.S. - a market segment that is mostly overlooked by large service providers. ATSI believes that by executing its marketing and acquisition strategy, the company could eventually reach a dominant position in this niche market.
ATSI believes it can take advantage of the public company model to gain access to public capital. This could further boost ATSI's growth potential by providing the company with additional capital resources to penetrate the market faster than ever before. ATSI might also be able to leverage its public status to execute synergistic acquisitions or buy companies with complementary services.
VoIP AND ATSI
While the advantages of VoIP are well documented, the Internet must be successfully harnessed for carrier-grade voice transport to reap these advantages on a truly global scale. ATSI has realized this vision. ATSI delivers voice quality of service over the Internet that is equal to or better than voice over the Public Switched Telephone Network. The Company's VoIP services provided via its wholly owned subsidiary, Digerati Networks, include:
- Carrier to Carrier VoIP Voice Termination on a global basis
- VoIP Network Management and Co-location Services
- SIP or H.323 Interconnectivity
- International Toll Free Services from Mexico
- Retail based SIP Phone Origination/Termination
- Nationwide Domestic U.S. and Canadian Directory Assistance
Today there are many carriers who are either migrating their networks from circuit-based to VoIP or are building new networks with VoIP technology. Carriers new to VoIP could simply be using stand-alone gateways to bridge their circuit network to VoIP. Many other carriers are relying heavily on VoIP and have built large distributed VoIP networks controlled by gatekeepers or softswitches.
VoIP inter-networking with ATSI provides these carriers with significant savings in capital and operating expenses, while dramatically reducing the time and costs required to add capacity and new destinations. Earlier generation VoIP to VoIP interconnections required case-by-case custom engineering because of equipment vendor and call control differences and also involved an ongoing technical interdependency that limited independent and secure evolution of each individual network. With ATSI's VoIP inter-networking capability, carriers using VoIP are now able to easily exchange traffic directly with ATSI, independently of the VoIP vendor or call control protocol used.
ATSI has the ability to interconnect using standards-based VoIP protocols such as H.323 and SIP allowing internetworking and operability to multi-vendor gateways, gatekeepers, proxy servers, session border controllers, softswitches, and even IP Phones.
ATSI can rapidly establish VoIP interconnects with international VoIP deployments that are activated in several days in contrast to typical weekly interconnect times to TDM telecommunication carriers.
ATSI offers effective and scalable VoIP interconnects to carriers and providers eliminating the need for increased capital expense associated with fixed TDM circuits, local loops, digital cross-connect switches and gateway ports in global interconnect facilities and data centers.
ATSI's other wholly owned subsidiary, Telefamilia Communications, provides specialized communication service to the Hispanic market in the United States that includes:
- Residential touch tone phone service with unlimited local calling
- Call waiting, caller ID, and 3 way calling
- 911 Emergency Number access
- Domestic long distance service, including VoIP calling
- International VoIP calling at exceptional rates
President and CEO
Arthur L. Smith, Chief Executive Officer and President of ATSI Communications, Inc., has over 16 years of specialized experience in the telecommunications industries within Mexico and the U.S. As the founder of ATSI, Mr. Smith has held various positions within the Company, including Chairman and CEO from June 1996 through July 2002 and President of ATSI de Mexico, S.A. de C.V. from August 2002 through April 2003. Prior to founding ATSI, he served as the Director of International Sales for GeoComm Partners, Inc., an international communications firm based in Los Angeles , California , providing satellite network services to Fortune 500 corporations. Mr. Smith is frequently invited to speak or serve on panels at professional and trade events related to the telecommunications industry in Latin America such as the Simposio Annual ASISAT 2001 organized by the Asociaci?n de la Industria Satelital Mexicana and the Latin America Telecommunications Conference 2002 organized by the North Texas Global Telecommunications Society. Arthur's Mexican heritage affords him fluency in Spanish and knowledge of the Latin culture.
Corporate Controller
Antonio Estrada currently has served as ATSI's Corporate Controller since May 2003. From January 2002 through April 2003, Mr. Estrada served as ATSI's Director of International Accounting and Treasurer. From January 2001 to January 2002, Mr. Estrada served in various roles within ATSI, including International Accounting Manager and General Accountant. Prior to joining ATSI in 1999 he served as a Senior Accountant for the Epilepsy Association of San Antonio and South Texas. Mr. Estrada has more than 9 years' experience in the telecommunications industry, financial reporting, treasury management, internal audit and accounting. Mr. Estrada graduated from the University of Texas at San Antonio, with a Bachelors of Business Administration, with a concentration in Accounting. Mr. Estrada is fluent in Spanish.
Sr. Vice President of Technology and Operations
Ruben R. Caraveo joined ATSI in May 2001 as Vice President of Network Planning and Consumer Operations and s erved as Vice President of Sales and Operations from May 2003 to July 2006. Mr. Caraveo is currently Sr. Vice President of Technology and Operations for ATSI and is also Chief Operations Officer for ATSI's wholly-owned subsidiary, Digerati Networks, Inc. Mr. Caraveo is responsible for VoIP Carrier Sales, Network Operations, MIS, and the delivery of VoIP Carrier Services. Prior to joining ATSI, Mr. Caraveo served as Vice President of Operations and Engineering at Vycera Communications where he was responsible for overseeing all daily operations, including Network Operations, Engineering, Marketing, and the Network Trouble Reporting and Resolution departments. His prior experience also includes positions with Worldtel Interactive, Frontier, and WorldCom. Mr. Caraveo is armed with more than 17 years' telecommunications industry experience, specializing in the areas of Carrier Sales, Network Operations, Engineering, Data and Systems Analysis, Product Marketing, and Systems Development. Mr. Caraveo attended California State University, Northridge, School of Engineering.
Manager of Accounting and Administration
Kathleen Keller currently serves as Manager of Accounting and Administration.
She is responsible for all administrative functions in addition to legal services,
contract administration and day-to-day accounting. Ms. Keller has held several
positions in her eight years with the company including Contract Administrator,
and Operations Administration. Ms. Keller is fluent in Spanish and fully comprehends
the Latin culture as she lived in Mexico almost twenty years. Her computer
proficiency, telecomm experience and over thirty years of diversified experience
in business contributes to the efficiency of the organization.
Manager of VoIP Services
Mr. Sepulveda, joined ATSI and Digerati Networks in late 2004 as Manager of VoIP Services. Jorge's prior experience includes Network Technical Support for Unocal in Houston, Texas, and most recently a Computer Configuration Specialist at Avnet, one of the world's largest Business to Business distributors of semiconductors, interconnect, passive and electromechanical components, enterprise network and computer equipment, and embedded subsystems from leading manufacturers. As Manager of VoIP Services, Jorge is responsible for the management of Digerati's Network Operations Center and Sales Departments.
