The American Samoa Hawai’i Cable (ASH-Cable) LLC., owner and operator of the undersea fiber optic cable, in which ASG is a minority shareholder, had a net profit of over $1 million in fiscal year 2013, ending Dec. 31 last year, according to the company’s FY 2013 audit report that Gov. Lolo Matalasi Moliga submitted last week to the Fono.

ASG invested $9 million in the company, which is majority owned by Florida-based eLandia International, whose local affiliates includes AST Telecom LLC, operating under Bluesky Communications. ASH-Cable connects American Samoa to Hawai’i and to Samoa.

According to the audit report, the company’s revenues totaled $5.80 million in FY 2013 compared to $4.87 million in FY 2012. Operating expenses totaled $1.53 million in 2013  and $1.62 million in FY 2012.

However, adding on other expenses — such as depreciation at $2.05 million — total expenses stand at $2.70 million, giving the company a net of $1.56 million for FY 2013, compared to a net income of $853,432 in FY 2012.

In his cover letter to Fono leaders that accompanied the report, financial statement and future plans for the company,  Lolo said no decision has been made on the the status of the ASG investment and the declaration of dividends.

“The recommendation has been made to roll over any income earned to facilitate accommodation of plans regarding the extending of the life of the existing cable,” Lolo said,  adding that such decisions will be discussed first with the Fono leaders “prior to disclosure of our position” when the ASH-Cable board meets.

According to the governor, he is submitting the audit report and business review for 2013 and 2014 to the Fono in compliance with “our collaborative commitment to advancing accountability and transparency...”

MANAGEMENT AND SERVICES

Financial statements included in the report, outline management and service agreements. For example, the company entered into a management agreement with AST Telecom to provide operation and administrative management.

The agreement is for three years, with one year renewals if not terminated, commencing June 1, 2010 at a monthly fee of $11,350 increased annually by 4.5%. In April 2011, the management fee increased to $19,246 per month.

The company also entered into a marine maintenance agreement with Alcatel-Lucent Submarine Networks for repair and maintenance of the cable, and the annual agreement for this requires quarterly payments of $90,000.

A third agreement— a landing party agreement with AT&T Corporation— is for use of AT&T’s cable station at Keawaula, Hawai’i including the infrastructure and maintenance of the connection of AT&T cable to the company’s undersea cable and ASH Cable’s station equipment.

The agreement is for ten years or upon the requirement the retirement of the cable system, whichever comes first, commencing June 4, 2008 and requiring an annual fee of $150,000.

At the end of FY 2013, the company paid $230,952 in management fees and $171,420 in rent to related parties.

CREDIT FACILITIES

In June 2009, the company obtained two loans from ANZ Amerika Samoa Bank: $10 million and $6.67 million respectively, both with a term of seven years, bearing interest at 2% over the bank’s base rate, with 'interest only' payments for the first seven months and monthly payments of $112,355 and $74,963, respectively, thereafter.

According to the report, balloon payments of about $4.02 million (for the $10 million loan) and $2.03 million (for the second loan) are due June 3, 2016. Both loans are secured by the company’s current and fixed assets and guaranteed by eLandia and its subsidiary companies.

INCOME STATEMENT

The income statement states that the company continues “to grow revenue, however, at a slower pace as... Bluesky is [the] only customer buying capacity” while the American Samoa Telecommunications Authority opted not to sign up for a 4th DS3 line.

In FY 2013, the report says, the company received $3.27 million in revenue from its affiliated companies. (The affiliated companies include Bluesky and ASTCA)

It also says that the company’s revenues comprise a handful of customers — AST Telecom, ASTCA, Bluesky Samoa, Digicel Samoa, Wimax Samoa Limited and AT&T. However, AST Telecom and Bluesky Samoa together comprise 55% of the company’s revenues and continue to become larger as the other customers are not buying additional capacity.

Furthermore, Bluesky revenue increased significantly versus other customers in 2013, while it was about the same in 2012.

The income statement points out that revenue increases in February were attributed to the new DS3 acquired by AST Telecom, while the increase in December is attributed to the adjustment for treatment of lease revenues.

Samoa News will report later on the company’s FY 2014 business plan.