<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                        
                                   FORM 10-K
                                        
(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 1997
                 OR
[_]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
     1934 [NO FEE REQUIRED] For the transition period from to.

                         COMMISSION FILE NUMBER 0-19551

                                ---------------
                                        
                          ATLANTIC TELE-NETWORK, INC.
             (Exact name of registrant as specified in its charter)

                                                       19 ESTATE THOMAS
           Delaware                                      HAVENSITE
(State or other jurisdiction of                        P.O. BOX 12030
incorporation or organization)                ST. THOMAS, U.S. VIRGIN ISLANDS
                                       (Address of principal executive offices)

           47-0728886                                       00801
(I.R.S. Employer Identification No.)                     (Zip Code)

                                 (340) 777-8000
              (Registrant's telephone number, including area code)

                                ---------------
                                        
          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                        
        Title of each class           Name of each exchange on which registered
        -------------------           -----------------------------------------
Common Stock, Par Value                     American Stock Exchange
   $.01 per Share             

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                                        
    Title of each class
    -------------------
          None
 
                                ---------------

  Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                               Yes [X]     No [_]

  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S) 229.405 of this chapter) is not contained herein, and
will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [_]

  The aggregate market value of the shares of all classes of voting stock of the
registrant held by non-affiliates of the registrant on March 16, 1998, was
approximately $31,319,400 computed upon the basis of the closing sales price of
the Common Stock on that date.  For purposes of this computation, shares held by
directors (and shares held by any entities in which they serve as officers) and
officers of the registrant have been excluded. Such exclusion is not intended,
nor shall it be deemed, to be an admission that such persons are affiliates of
the registrant.

  As of March 16, 1998, there were outstanding 4,909,000 shares of Common Stock,
$.01 par value, of the registrant.

                      DOCUMENTS INCORPORATED BY REFERENCE

  Portions of the proxy statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A for the registrant's 1998 annual meeting
of stockholders are incorporated by reference into Part III of this Form 10-K.

<PAGE>
 
                          ATLANTIC TELE-NETWORK, INC.
                                        
                           ANNUAL REPORT ON FORM 10-K

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997

                                                                          Page

PART I


Item 1.     Business.....................................................   1

Item 2.     Properties...................................................  11

Item 3.     Legal Proceedings............................................  11

Item 4.     Submission of Matters to a Vote of Security Holders..........  11
            Executive Officers of the Registrant.........................  12

PART II                                                                  

Item 5.     Market for the Registrant's Common Equity and Related        
                Stockholder Matters......................................  12

Item 6.     Selected Financial Data......................................  14

Item 7.     Management's Discussion and Analysis of Financial Condition  
                and Results of Operations................................  15

Item 8.     Financial Statements and Supplementary Data..................  20

Item 9.     Changes in and Disagreements with Accountants on Accounting  
                and Financial Disclosure.................................  20
                                                                         

PART III                                                                 
                                                                         

Item 10.    Directors and Executive Officers of the Registrant...........  21

Item 11.    Executive Compensation.......................................  21

Item 12.    Security Ownership of Certain Beneficial Owners and          
                Management...............................................  21

Item 13.    Certain Relationships and Related Transactions...............  21
                                                                         

PART IV                                                                  
                                                                         

Item 14.    Exhibits, Financial Statement Schedules and Reports on       
                Form 8-K.................................................  22

                                       i

<PAGE>
 

                                     PART I
                                        


Item 1.  Business

INTRODUCTION

          The Company was established in 1987 as a holding company to acquire
the Virgin Islands Telephone Corporation from ITT Corporation.  In January 1991
the Company acquired 80% of the stock of the Guyana Telephone & Telegraph
Company Limited ("GT&T").  The Company became a public company in November of
that year.

          On December 30, 1997, the Company was split into two separate public
companies.  One, a new company, Emerging Communications, Inc., contains all of
the Company's telephone operations in the U.S. Virgin Islands and was spun off
to Jeffrey J. Prosser and the public stockholders of the Company.  The other,
the Company, continues to own GT&T.  In connection with the transaction, the
number of outstanding shares of the Company's capital stock was reduced by 60%
(in effect, a reverse stock split of 1:2.5).

          Cornelius P. Prior, Jr., formerly the Co-Chief Executive Officer, is
now Chairman of the Board and Chief Executive Officer of the Company and the
owner of approximately 57% of the outstanding common stock of the Company.

          The Company from time to time evaluates opportunities for establishing
or acquiring other telecommunications business through privatization of
government-owned business or otherwise in the Caribbean area and in developing
countries in other parts of the world, and may make investments in such
businesses in the future.  The Company has focused its attention on wireline and
cellular telephone businesses.  However, there can be no assurance the Company
will be able to acquire or establish any such businesses.

GT&T

          General.  GT&T supplies all public telecommunications service in
          -------                                                         
Guyana.  GT&T is the successor to the Guyana Telecommunication Corporation
("GTC"), a corporation wholly owned by the government of Guyana, which prior to
1991 had been the exclusive provider of telecommunications services in Guyana
for more than 20 years.

          International Traffic.  GT&T's revenues and earnings are highly
          ---------------------                                          
dependent upon international long-distance calls, particularly international
audiotext traffic, other calls originating outside of Guyana and collect calls
from Guyana to foreign points.

          The following table sets forth data with respect to the volume of
GT&T's international traffic for the past three years:

<PAGE>
 

<TABLE>
<CAPTION>
                                                International Traffic
                                              (in thousands of minutes)
                                              -------------------------
                               1995                    1996                   1997
                        ---------------------   ---------------------   ---------------------
<S>                     <C>                     <C>                     <C>
Inbound Paid and         
Outbound Collect           37,920    (24%)         40,350    (21%)         44,456   (27%)
Audiotext                 101,763    (63%)        122,476    (64%)         97,913   (59%)
Total Inbound             139,683    (87%)        162,826    (85%)        142,369   (86%)
Outbound                   20,725    (13%)         29,768    (15%)         24,120   (14%)
  Total                   160,408    (100%)       192,594    (100%)       166,489   (100%)
</TABLE>


          GT&T has agreements with foreign telecommunications administrations
and private carriers covering all international calls into or out of Guyana.
These agreements govern the rates of payment by GT&T to the foreign carriers for
the use of their facilities in connecting international calls billed in Guyana,
and by the foreign carriers to GT&T for the use of its facilities in connecting
international calls billed abroad.  The rates of payment under such agreements
are negotiated with each foreign carrier and are known as "accounting rates."

          The different classes of international traffic described in the above
table produce significantly different profit margins for GT&T.  In the case of
regular inbound traffic and outbound collect traffic, GT&T receives a payment
from the foreign telecommunications carrier equal to one-half of the applicable
"accounting rate" (e.g., in the case of traffic from the United States, a
payment of 85 cents per minute), and GT&T has no significant direct expenses
associated with such traffic except for earth station, satellite and
troposcatter system costs which are applicable to all of GT&T's international
traffic.  In the case of audiotext traffic, GT&T receives a payment from the
foreign carrier equal to one-half of the applicable accounting rate, and GT&T
pays a fee or commission to the audiotext traffic provider at rates which are
negotiated from time to time and are typically more than half of the amount
received by GT&T from the foreign carrier.  In the case of outbound
international traffic, GT&T must pay the foreign carrier one-half of the
applicable international accounting rate, and GT&T collects from its subscriber
a rate which is regulated by the PUC.  In 1995, 1996 and 1997, the amount which
GT&T collected from its subscribers for outbound international traffic was
usually less than the amount which GT&T was required to pay the foreign carrier
(e.g., throughout most of 1997, for the United States, GT&T collected
approximately $.74 per minute and paid the U.S. carrier $.85 per minute).  Since
February 1, 1998, when a temporary rate increase from the PUC went into effect,
outbound international traffic has generally had a positive profit margin (e.g.
on calls to the United States, GT&T has been collecting between $1.00 and $1.41
per minute (including a surcharge of $.30 per minute), depending on the time of
day).  GT&T does not allow a significant volume of collect calls into Guyana.

          Historically, the volume of calls into Guyana from the United States,
Canada and the United Kingdom (including credit card and collect calls from
Guyana) has greatly exceeded the volume of paid outbound calls from Guyana to
these countries.  Except for audiotext traffic, the volume of traffic with other
countries has been more evenly balanced.  Management of GT&T believes that the
disparity in traffic with these countries, which has produced a steady stream of
hard currency revenues for GT&T, stems from the fact that the vast majority of
GT&T's traffic with these countries consists of personal calls between Guyanese
expatriates and their friends and family in Guyana and that the average income
of most Guyanese residents is substantially lower than that of their Guyanese
expatriate friends or relatives in these countries.  There can be no assurance
that, as GT&T expands and improves its local telephone facilities and changes
occur in the Guyanese economy, inbound international traffic will continue to be
as significant a part of GT&T's total revenues. In addition, in August 1997 the
FCC issued a Report and Order requiring significant reductions over the next
four years in the accounting rates used by U.S. carriers in paying GT&T for
terminating U.S. traffic in Guyana.  See  "Business--Regulation."  Any decrease
in the net margin of inbound over outbound traffic or in the accounting rate
applicable to traffic between Guyana and the United States is likely to have an
adverse effect on GT&T's earnings unless GT&T is able to achieve a compensating
increase in its regulated rates for local and outbound international service.

                                       2

<PAGE>
 
          A significant portion of GT&T's international traffic arises from the
provision by GT&T of telecommunications services to audiotext providers in a
number of foreign countries.  GT&T began providing telecommunications services
to audiotext providers in June 1992.  GT&T's audiotext traffic increased
significantly in each year through 1996, but declined sharply in 1997.  GT&T's
profit margins from audiotext also significantly declined in 1997.  Management
attributes these declines to increased competition, changes in the traffic mix,
reduction in some accounting rates, the strength of the U.S. dollar against
certain foreign currencies, and a foreign carrier's mislabeling the origin of
certain traffic.  Also, beginning in late 1996, a foreign carrier required GT&T
to bear part of the risk of non-collection for audiotext calls.  Previously,
this risk was assumed by the sending carrier.  As a result of the decline in
audiotext traffic revenues and profitability, on December 31, 1997, GT&T filed
an application to the PUC for a substantial increase in rates from local service
and outbound international calls and was awarded a significant temporary
increase in the rates effective February 1, 1998.  (See "Regulation").

          Audiotext providers offer telephone information services comparable to
those available in the United States on an area code 900 basis.  By making a
telephone call, the caller can obtain information (generally in the form of a
recorded message) on subjects such as weather, sports, business news or material
of a sexual nature.  Some audiotext providers also establish "chat lines" on
which the callers can talk to one another.  Audiotext traffic utilizes only
excess capacity on GT&T's international circuits and GT&T's main switch in
Georgetown.  No use of GT&T's local network within Guyana is involved, and none
of the telephone numbers assigned to audiotext providers by GT&T can be accessed
by a normal telephone call made in Guyana.

          GT&T competes with many telephone companies around the world that
provide telecommunications services to international audiotext providers.
GT&T's agreements with audiotext providers are subject to termination by either
party on short notice, and an audiotext provider can readily shift its
operations to another foreign telecommunications carrier merely by changing the
telephone numbers in its advertisements, if the other carrier provides better
service or higher compensation.

          At the present time, in the United States and many other countries,
audiotext calls to GT&T or another foreign telecommunications carrier are
treated as ordinary international traffic and are not subject to the regulations
applicable to domestic audiotext traffic.  GT&T's agreements with audiotext
providers obligate such providers to comply with applicable regulations in the
countries in which they advertise their services and to refrain from using
obscene or indecent material.  From time to time a country's regulatory
authorities or national telecommunications carrier have taken steps to restrict
or eliminate international audiotext traffic.

          Domestic Service.  At December 31, 1997, GT&T had approximately 55,000
          ----------------                                                      
subscriber access lines in service.  This number of access lines represents
approximately 8 lines per 100 inhabitants.  Of all lines in service, 50% were in
the area of Georgetown (the nation's capital), and 85% were in the largest urban
areas, consisting of Georgetown, Linden, New Amsterdam, Diamond and
Beterverwagting.  Ninety percent of Guyana's population lives on the coastal
plain where Georgetown, Beterverwagting, and New Amsterdam are located.  Most
rural areas do not have telephone service.

          In the past, GT&T's revenues from local telephone and other services
have not been significant (e.g. in 1997 local service revenues amounted to
approximately $2.9 million).  However, on December 31, 1997, GT&T applied for a
rate increase to enable it to earn a 15% rate of return on its rate base.  This
application contemplates that, GT&T's annual revenues from local service would
increase to approximately $17.7 million.  Effective February 1, 1998, the PUC
granted GT&T temporary rates, pending a final decision on GT&T's application,
designed by the PUC to provide GT&T with approximately $12.9 million in revenues
from local service.  (See "Regulation").  GT&T's revenues for local service are
derived from installation charges for new lines, monthly line rental charges,
monthly measured service charges based on the number and duration of calls and
other charges for maintenance and other customer services.  For each category of
revenues, rates differ for residential and commercial customers.  Residential
and commercial customers have contributed approximately equally to GT&T's
revenues from local service.  During 1997, GT&T's basic monthly charge per
access line was approximately $.25 for residential customers and approximately
$.60 for business customers, and the average monthly bill for residential and
business service (excluding charges for international calls and cellular
service) was $2.07 and 

                                       3

<PAGE>
 
$2.34, respectively. Under the temporary rates put into effect by PUC order on
February 1, 1998, the basic monthly charge per access line was increased to
approximately $3.50 for residential customers and $14.00 for business customers
and a number of new or increased usage-based rates were also put into effect.
See "Business--Regulation."

          GT&T began providing mobile cellular telephone service within a
thirty-mile radius of Georgetown in December 1991, although authorization to
charge for local service was not obtained from the PUC until July 1995.  See
"Business--Regulation." Cellular subscribers are offered various calling plans
and are charged a monthly fee plus airtime based on the selected plan.  GT&T's
current average monthly charge per cellular subscriber is approximately $82
including monthly rental and airtime charges.  As of December 31, 1997, GT&T had
approximately 1,400 active mobile cellular subscribers.

          Expansion Program.  Pursuant to the purchase agreement between the
          -----------------                                                 
government of Guyana and the Company (the "GT&T Agreement") and GT&T's license
from the government of Guyana (the "License"), the Company and GT&T agreed to
implement an expansion plan (the "Expansion Plan"), which required substantially
expanding and improving the service provided by GT&T's predecessor.  Pursuant to
the Expansion Plan, GT&T has significantly expanded and rebuilt its
telecommunications network.  The number of access lines has increased from
approximately 13,000 working lines in January 1991 to approximately 55,000 lines
at December 31, 1997.  Approximately 95% of GT&T's access lines are now
digitally switched lines.  The Intelsat B earth station, which provides the
principal link with Guyana and the rest of the world, was upgraded and
digitalized to increase the number of circuits in operation from 75 in January
1991 to 1,026 currently.  In 1997, GT&T installed a Standard B earth station
which is currently used to provide service through an Intelstat satellite to a
number of localities in the interior of Guyana.  This earth station and the
Intelstat satellite may also be used in the future to provide a second satellite
link from Guyana for international traffic.

          In the second quarter of 1997, GT&T completed a test installation of a
Northern Telecom Proximity I fixed wireless network in a rural area about 60
kilometers west of Georgetown.  GT&T is currently in the process of installing
this wireless telephone service to about 2,000 subscribers in the same area.
GT&T may use this system in lieu of wireline network for a portion of GT&T's
future expansion of its network.  The normal rates for land line telephones
apply to GT&T's fixed cellular and fixed wireless network services.

          GT&T has installed public telephones in over 150 locations across the
country providing telecommunications for both local and international calls to
areas that had not previously enjoyed service.  Currently, in addition to the
public telephones, GT&T maintains three public "telephone centers" at which the
public can, upon payment of the charges in cash to GT&T personnel who staff
these centers, use an ordinary residential-type telephone to make international
and domestic calls.

          GT&T has purchased capacity in two international fiber optic cables--
the Americas I cable, which runs from Brazil to Trinidad, the United States
Virgin Islands and the United States mainland, and the Columbus II cable, which
runs from the Caribbean region to the Azores and Spain.  The Company is
presently participating with other international carriers to build an Americas
II cable that would provide a leg to Guyana, Suriname and French Guyana.

          The Company and GT&T were originally required to complete the
Expansion Plan by January 28, 1994.  With the Government's consent, this date
was extended first to August 28, 1994 and then to February 28, 1995.  The
Company and GT&T repeatedly advised the government that their inability to
obtain adjusted rates fully to compensate for the 1991 devaluation in Guyana's
currency severely hampered their ability to obtain financing needed to complete
the Expansion Plan.  The Company and GT&T also repeatedly sought to negotiate
changes in the Expansion Plan in order to reflect current needs and technology.
Through December 31, 1997, GT&T had expended nearly $93 million on the Expansion
Plan and the Company had advanced an aggregate of approximately $24 million to
GT&T principally for the Expansion Plan.

                                       4

<PAGE>
 
          A proceeding initiated by the government of Guyana with regard to the
noncompletion of the Expansion Plan by its scheduled completion date of February
28, 1995, is pending before the PUC.  See "Business--Regulation."

          Other Services.  GT&T is also licensed to provide various telephone-
          --------------                                                     
related services that extend beyond basic telephone service, including yellow
pages and other directory services, and it has an exclusive license to sell,
lease or service various kinds of telecommunications equipment.  Under the
License, GT&T's rates for most of these services must be specified in a tariff
approved by the PUC.  See "Business--Regulation."

SIGNIFICANT REVENUE SOURCES

          Revenues from the following carriers of international traffic to
Guyana constituted the following percentages of GT&T's revenues in the past
three years:


<TABLE>
<CAPTION>
                                                                                        1995        1996        1997
                                                                                      ---------  ----------  ----------
<S>                                                                                   <C>        <C>         <C>
   AT&T.............................................................................        37%         36%         31%
   MCI..............................................................................        21%         21%         11%
   British Telecom..................................................................        19%         12%          9%
   Teleglobe (Canada)...............................................................        13%         12%         18%
</TABLE>


      A significant portion of GT&T's international long distance revenue
discussed above is generated by certain of GT&T's audiotext providers which
operate as service bureaus or intermediaries for a number of audiotext
information providers.  The following service bureaus accounted for more than
10% of GT&T's total revenues in the years indicated below:


<TABLE>
<CAPTION>
                                                                                          1995       1996       1997
                                                                                       ----------  ---------  --------
<S>                                                                                    <C>         <C>        <C>
   Beylen Telecommunications, Ltd....................................................         60%        57%       33%
   Islands Telephone Company Limited.................................................         10%        14%       15%
</TABLE>


      No other revenue source accounted for more than 10% of GT&T's total
revenues in 1995, 1996 or 1997.

COMPETITION


      Local Service.  Pursuant to a franchise from the government of Guyana,
      -------------                                                         
GT&T has the exclusive right to provide, and is the sole provider of, local
telephone service in Guyana.  See "Business--Regulation--Guyana."

      Long-Distance Service.  GT&T is the exclusive provider of domestic long-
      ---------------------                                                  
distance service and international telephone service in Guyana.  See "Business--
GT&T--International Traffic."

      The provision of telecommunication services to international audiotext
providers is highly competitive. GT&T's contracts with audiotext providers are
all terminable on short notice, and such providers can quickly shift their
traffic to another foreign telecommunications carrier which offers higher
compensation or better services.  See "Business--GT&T--International Traffic."

  Wireless Services.  In Guyana, GT&T has a non-exclusive franchise to provide
  -----------------                                                           
cellular telephone services. Accordingly, there can be no assurance that GT&T's
cellular telephone business will not face competition in Guyana.  At the date of
this Report, there is another company licensed to provide cellular service;
however, the service is not yet commercially available.

  Other Services.  GT&T has the exclusive franchise to provide telephone
  --------------                                                        
directories and directory advertising and to supply a wide variety of
telecommunications equipment in Guyana.  GT&T's revenues from directory
advertising and the sale of telecommunications equipment have not been
significant to the Company.

                                       5

<PAGE>
 
POLITICAL RISK INSURANCE

  At the time of its initial investment in GT&T, the Company obtained political
risk insurance with respect to its investment in GT&T (including its guarantee
of GT&T's obligations to Northern Telecom International Finance, B.V. ("NTIF")
from the Overseas Private Investment Corporation ("OPIC"), an agency of the
United States Government. While OPIC has not formally announced that is has
suspended writing political risk insurance or guarantees for U.S. investments in
Guyana, it is the Company's understanding that since the beginning of 1993 OPIC
has provided no new insurance or guarantees for investments in that country
because of its concern about developments between the Guyana government and two
U.S. companies which had been insured by OPIC. The Company's difficulties in
obtaining rate increases from the PUC was one of OPIC's concerns. Separately, on
December 31, 1996, OPIC terminated the Company's political risk insurance
because of OPIC's objections to GT&T's provision of telecommunication services
to international audiotext providers. Following such termination, the Company
obtained other political risk insurance with respect to its investment in GT&T
in the private insurance market. Under the Company's current insurance policies,
the Company is insured against risks of currency inconvertibility, expropriation
and political violence. The Company's current insurance is limited to 60% of the
book value of the affected property up to a maximum insured amount of $35
million plus 85% of any amounts which the Company is called upon to pay with
respect to its guaranty of GT&T obligations to NTIF as a result of an insured
risk. The insurance policies cover only specified risks and contain a number of
limitations and exclusions. The aggregate insurance coverage is significantly
less than the fair market value of the Company's investment in GT&T.

REGULATION

  Prior to the Company's acquisition of its 80% interest in GT&T in January
1991, the government of Guyana had no experience in regulating a privately-owned
public utility.  GT&T is subject to regulation in Guyana by virtue of the
provisions of the License and of the Guyana Public Utilities Commission Bill
1990 ("PUC Law") and the Guyana Telecommunications Bill 1990
("Telecommunications Law").  Certain provisions of the License, the PUC Law, and
the Telecommunications Law applicable to GT&T are summarized below.

  License.  The License, which was issued on December 19, 1990, grants GT&T an
  -------                                                                     
exclusive franchise to provide in Guyana (i) for a period of 20 years (renewable
for 20 years at the option of GT&T), public telephone, radio telephone (except
private radio telephone systems which do not interconnect with GT&T's network)
and pay station telephone services and national and international voice and data
transmission, sale of advertising in any directories of telephone subscribers
and switched or non-switched private line service; and (ii) for a period of 10
years (renewable for 10 years on a non-exclusive basis at the option of GT&T)
supply of terminal and customer premises equipment and telefax, telex and
telegraph service and telefax network service (without prejudice to the right of
any other person to undertake any of the following operations: (a) sale of
telefax or teleprinter machines, (b) maintenance of telefax or teleprinter
equipment, or (c) operation of any facility for the sending or receiving of
telefax copies or teleprinter messages).  In addition, GT&T was granted a non-
exclusive license to provide, for a period of 20 years (renewable for 20 years
at the option of GT&T), cellular radio telephone service provided that the
license does not prejudice the right of Guyana's Institute of Applied Sciences
and Technology to make provision for, or to provide, any telecommunications
services in the course of, or in connection with, the carrying out of its
functions.

  The Telecommunications Law, the GT&T Agreement and the License include various
provisions under which the License may be terminated before its scheduled
expiration date.  Under the applicable Guyana law and the GT&T Agreement,
Guyana's director of telecommunications may cause early termination of the
License in certain cases, including contravention of any of the provisions of
the Telecommunications Law or the conditions of the License, or the failure of
GT&T to implement the Expansion Plan in a timely fashion.  See "Business--GT&T--
Expansion Program."  If GT&T believes that the License has been terminated
unlawfully, it may appeal to the courts of Guyana.  Pursuant to the GT&T
Agreement, upon non-renewal of the License, the government will be entitled to
purchase the Company's interest in GT&T or the assets of GT&T on such terms as
may be agreed upon by the Company and the government or, upon failure to reach
such agreement, as determined by arbitration conducted by the International
Centre for the Settlement of Investment Disputes.  The PUC is currently holding

                                       6

<PAGE>
 
hearings in a proceeding initiated by the government of Guyana, with regard to
the noncompletion of the Expansion Plan by its scheduled completion date of
February 28, 1995.  Under the PUC Law, GT&T will have the opportunity to explain
why the Expansion Plan is unfinished.  It is GT&T's position that its failure to
receive timely rate increases, to which GT&T was entitled, to compensate for the
devaluation in Guyana currency which occurred in 1991 provides legal
justification for GT&T's delay in completing the Expansion Plan.  If the PUC
concludes that GT&T failed or refused to complete the Expansion Plan in a timely
manner without legal justification, it may impose a fine, which could range from
$71 (G $10,000) up to the cost of completing the Expansion Plan (which GT&T
estimates to be no more than $5 million). The PUC could also recommend to the
government that it cancel the License. The Guyana government is not bound to act
on a PUC recommendation. GT&T will have the right of appeal to the Guyana High
Court from any adverse ruling of the PUC. It is possible that, if the Company
ceased doing business within a short period of time (e.g. six months) after the
consummation of the December 30, 1997 split up of the Company as a result of a
termination of the License, the IRS might revoke the tax ruling which the
Company received with respect to the split up transaction with the result that
the distribution in that transaction of ECI Common Stock might not be tax free
for U.S. federal income tax purposes to the Company and holders of Company Stock
and Class A Common Stock. If the distribution of ECI Common Stock were not tax
free then (i) the Company would be taxable on the gain (computed as the
difference between the fair market value of the ECI Common Stock distributed and
the Company's adjusted basis in such stock) recognized by the Company on the
distribution of ECI Common Stock, (ii) the Company would be entitled to be
indemnified by Emerging Communications, Inc. for 50% of such tax liability, and
(iii) each holder of Company Common Stock who received shares of ECI Common
Stock in the transaction would be treated as if such stockholder received a
taxable distribution from the Company in an amount equal to the fair market
value of the ECI Common Stock received.

  PUC Law and Telecommunications Law.  The PUC Law and the Telecommunications
  ----------------------------------                                         
Law provide the general framework for the regulation of telecommunications
services in Guyana.  The PUC Law provides the basis for setting the rates of a
telecommunications licensee. The PUC is an independent statutory body with the
principal responsibility for regulating telecommunications services in Guyana.
The PUC has broad powers to monitor GT&T's compliance with the License and to
require GT&T to supply it with such technical, administrative and financial
information as it may request.

     Subject to certain limitations, applicable to the years 1991-1994, GT&T is
entitled, pursuant to the GT&T Agreement and the PUC Law, to a minimum return of
15% per annum on its capital dedicated to public use ("rate base"). Absent
mutual agreement by the government of Guyana and ATN (and there has been no such
agreement) on a rate of return methodology, rates are to be calculated on the
basis of GT&T's entire property, plant and equipment pursuant to a rate of
return methodology consistent with the practices and procedures of the United
States Federal Communications Commission.  GT&T believes that its rate base at
December 31, 1997 was approximately $120 million and that return on investment
is to be calculated after deducting all of GT&T's operating expenses (including
income taxes) other than interest expense.  In an October 1995 order, discussed
below, which was voided on other grounds by the Guyana High Court, the PUC
disallowed approximately $6 million of franchise rights which are included in
the foregoing rate base figure, and the PUC also disallowed management fees paid
by GT&T to ATN as an expense for purposes of calculating GT&T return on rate
base.    On December 31, 1997, GT&T filed an application with the PUC seeking
rate increases for local and outbound international traffic, designed to
generate approximately $26 million in additional revenues in 1998, so as to
enable GT&T to earn a 15% return on its rate base.  In January 1998, GT&T was
awarded an interim increase effective February 1, 1998 designed by the PUC to
generate the equivalent of approximately $18 million in additional annual
revenues for GT&T.  In its report to the PUC recommending the interim rate
increase, the staff of the PUC appeared to accept for purposes of calculating
the interim rate increase all of GT&T's calculations of rate base and rate of
return except for the franchise rights and management fees which the PUC had
disallowed in its October 1995 order.  No assurance can be given as to what
permanent rates the PUC will award GT&T or as to what changes the PUC may make
in the current interim rates.

  Since GT&T commenced operations as a subsidiary of the Company in 1991, GT&T
has had difficulties in obtaining from the PUC the rate increases to which it
believed it was entitled.  In February 1991 the official rate of exchange for
Guyanese currency was changed, allowing the currency to float.  This resulted in
a devaluation of 

                                       7

<PAGE>
 
approximately 184 percent, and in April 1991, GT&T filed for a rate increase of
184 percent to compensate for the devaluation. The PUC in November 1991 granted
GT&T, in principle, an increase in rates for international calls which amounted
to approximately 160 percent or less and, in principal, authorized GT&T to
impose a surcharge on these rates in order to recover over a period of not less
than 30 months the approximately $3.5 million difference between the rates
actually in effect from May 1991 through December 31, 1991 and the revenue which
GT&T would have received during this period if the newly approved rates had been
in effect.

  Shortly after the issuance of its initial November 1991 order, the PUC
authorized the collection of the new rates (but not any surcharge) for calls to
the United Kingdom, Canada, the United States and Antigua.  The PUC declined to
authorize any increase in rates to 165 other countries covered by GT&T's
application on the grounds that GT&T had not submitted original documentary
evidence to the PUC regarding the accounting rates then in effect with these
countries.  GT&T's failure to submit such documentation arose because neither it
nor its predecessor, the government-owned telephone company, had such
documentation in their records.

  In October 1992, elections were held in Guyana and a new party came to power.
Shortly thereafter, several changes occurred in the membership of the PUC.
After considerable negotiation with the new government and further applications
to the PUC, in December 1993 the PUC authorized 70 percent of the surcharges
requested by GT&T on calls to the United States, United Kingdom, Canada and
Antigua, and in January 1994 the PUC temporarily authorized rate adjustments in
respect of 83 of the remaining countries which amounted to 70 percent or less of
the rate increases approved in principal by the PUC in its initial November 1991
order.  Later in 1994, the PUC authorized full surcharges as requested by GT&T
for the United Kingdom, Canada, the United States, and Antigua, and in 1995, the
PUC finally authorized full rates and surcharges for the 83 countries covered by
its temporary order of January 1994 and rejected GT&T's application for any rate
increases on the remaining 82 countries.

  In May 1995, GT&T applied to the PUC for substantial increases in all of its
telephone rates to enable it to earn the minimum return of 15% per annum on its
rate base to which it is entitled under the terms of the GT&T Agreement, and the
PUC Law.  On October 11, 1995 the PUC issued an order that rejected GT&T's
application for increased rates and temporarily reduced rates for outbound
international calls by 10%, and during off-peak hours by an additional 50% of
the reduced rate.  GT&T filed a motion against the October 11, 1995 order in the
Guyana High Court and in January 1997 obtained an order voiding the PUC's order
in respect of these rates.  When the PUC thereafter scheduled a hearing to
consider fixing new temporary rates for GT&T and inquiring into the propriety of
GT&T's reinstating its pre-October 11, 1995 rates, the Guyana High Court granted
a further stay of all PUC proceedings on these subjects.  In May 1997, the
Consumer Advisory Bureau (a non-governmental group in Guyana) sought an
injunction from the Guyana High Court, restoring telephone rates to those
imposed by the PUC in its October 1995 order.  The Consumer Advisory Bureau's
application is still pending.  In September 1997, the Guyana High Court denied
an order which the Consumer Advisory Bureau had sought to temporarily enjoin
GT&T from putting into effect a surcharge to recover the approximately $9.5
million of lost revenues from the period October 1995 to January 1997.  GT&T put
such surcharge into effect as of October 1, 1997 pending an ultimate trial on
the merits.

  Since January 1991, the Company has had an agreement with GT&T, which was
approved at its inception by several officials of the Guyana government as well
as the government's representatives on GT&T's Board of Directors, pursuant to
which GT&T paid the Company an advisory fee equal to 6% of GT&T's revenues for a
variety of managerial and advisory services furnished by the Company to GT&T.
On January 2, 1997, the PUC ordered GT&T to cease paying these advisory fees to
the Company and to recover from the Company approximately $25 million of fees
paid under the agreement since January 1991.  GT&T has filed a motion against
the PUC's order in the Guyana High Court and has obtained an order staying the
effectiveness of the PUC's order pending determination of that motion.

  At December 31, 1996, GT&T owed the Company approximately $23 million for
advances made from time to time for working capital and capital expenditure
needs of GT&T.  The PUC law requires permission of the PUC for GT&T to issue any
debentures or any other evidence of indebtedness payable more than one year from
the date of issue.  GT&T's indebtedness to the Company was evidenced by a series
of promissory notes, many of which 

                                       8

<PAGE>
 
through clerical error had a maturity of more than one year from the date of
issue. In March 1997, the PUC rejected GT&T's contention of clerical error and
voided all of the promissory notes then outstanding, with a few in excess of one
year as well as a number which had less than one year maturities which were
issued in consolidation or renewal of earlier notes which had a more than one
year maturity. The total of these voided notes was approximately $21 million.
The PUC ordered that no payments be made on any of the outstanding notes, and
that GT&T recover from the Company all amounts theretofore paid. The order also
provided that the PUC would be willing to authorize the payment for any amounts
properly proven to the satisfaction of the PUC to be due and payable from GT&T
to the Company. GT&T has appealed the PUC's order to the Guyana High Court and
obtained a stay of the PUC's order pending determination of that appeal.

  In late April 1997, the PUC applied to the Guyana High Court for orders
prohibiting GT&T from paying any monies to the Company on account of
intercompany debt, advisory fees or otherwise pending the determination of
GT&T's appeals from the January 1997 and March 1997 PUC orders mentioned above.
The PUC's application is still pending.

  In October 1997, the PUC ordered GT&T to increase the number of telephone
lines in service to a total of 69,278 lines by the end of 1998, 89,054 lines by
the end of 1999 and 102,126 by the end of the year 2000, to allocate and connect
an additional 9,331 telephone lines before the end of 1998 and to provide to
subscribers who request them facilities for call diversion, call waiting,
reminder call and three-way calling by the end of the year 1998.  In issuing
this order, the PUC did not hear evidence or make any findings on the cost of
providing these lines and services, the adjustment in telephone rates which may
be necessary to give GT&T a fair return on its investment or the ways and means
of financing the requirements of the PUC's order.  GT&T has filed a motion
against the PUC's order in the Guyana High Court and has appealed the order on
different grounds to the Guyana Court of Appeal.  No stay currently exists
against this order.  GT&T intends to take such steps to seek a stay or
modification of this order as seem appropriate after the level of demand for
telephone service can be assessed in light of the temporary rates which came
into effect on February 1, 1998.

  FCC Matters.  On August 7, 1997, the FCC issued a Report and Order in a
  -----------                                                            
rulemaking procedure which it initiated in December 1996, in which it adopted
mandatory international accounting and settlement rate benchmarks for many
countries, including Guyana.  The FCC classified countries as low-income,
middle-income or high-income based upon World Bank data.  Guyana is classified
as a low-income country.  The FCC adopted a mandatory settlement rate benchmark
of $.23 per minute for low-income countries and required that settlement rates
between the U.S. and low-income countries be reduced to $.23 per minute by
January 1, 2002.  The FCC stated in the release that it expects U.S. licensed
carriers to negotiate proportionate annual reductions.

  Numerous foreign carriers and Government authorities have opposed the FCC's
proceedings in this area, and GT&T and a number of other carriers have filed an
appeal from the FCC's August 7, 1997 Report and Order to the U.S. Court of
Appeals for the District of Columbia.  In general, those parties believe that
accounting and settlement rates should continue to be established, as they are
today, through bilateral negotiations between carriers.  Opponents of the FCC's
proposal believe that the proposal is contrary to binding treaty obligations of
the United States relating to duly-constituted multilateral organizations, and
that the FCC does not possess the necessary legal authority to adopt such
proposals.  Opponents also believe that the FCC's proposals are legally and
factually deficient in other ways.

  The FCC stated in the release that it encourages foreign governments and
carriers to work with the United States toward an effective international
agreement that achieves lower settlement rates, and that it may refrain from
enforcing its Order if a satisfactory multilateral solution can be reached that
will produce substantially equivalent results in a timely manner.

  The current settlement rate for U.S.-Guyana traffic is $.85 per minute.  AT&T
has previously sought the Company's agreement to a reduction in that settlement
rate.  GT&T has taken the position that the settlement rate was fixed through
bilateral negotiations and sees no reason to change the rate at this time.  GT&T
believes that the rate should remain the same until the parties mutually agree
to change it.  The Company is unable to predict what actions the FCC or U.S.
carriers may take in an effort to secure lower settlement rates on the U.S.-
Guyana route.

                                       9

<PAGE>
 
  Since inbound traffic from the United States to Guyana significantly exceeds
outbound traffic from Guyana to the United States, any significant reduction in
the settlement rate for U.S.-Guyana traffic could have a significant adverse
impact on GT&T's earnings.  Any significant reduction in the settlement rate
also might make it difficult for GT&T to continue to attract audiotext traffic
from the United States on a profitable basis.  Any of these events would provide
GT&T with a basis to seek a rate increase so as to permit GT&T to earn its
contractually provided 15% rate of return.  However, there can be no assurance
as to when or whether GT&T would receive such a rate increase.


  FTC Matters.  The Federal Trade Commission ("FTC") has pending a proceeding in
  -----------                                                                   
which it has asked parties for comments and information as to whether the FTC
should expand the definition of "pay-per-call" services to include audiotext
services such as those which GT&T terminates in Guyana.  The FTC has received
formal comments and conducted a workshop in connection with the proceeding but
has taken no action.  It is unclear what the exact impact would be if the FTC
were to include international audiotext traffic from the United States in the
definition of "pay-per-call."  Two requirements which currently apply in the
United States to area code 900 traffic, but not to international audiotext
traffic which, in general, is treated like any other international telephone
call, are: (i) the caller must receive a short preamble at the beginning of the
call advising the caller of the cost of the call and permitting the caller to
terminate the call without charge if terminated immediately, and (ii) local
telephone companies are not permitted to disconnect a subscriber's telephone
service for failure to pay charges for area code 900 calls.  If the effect of
the FTC's including international audiotext traffic from the United States in
the definition of "pay-per-call" were to apply these requirements to
international audiotext traffic from the United States, it would probably be
technically impossible for recipients of international audiotext traffic, such
as GT&T, to comply with the free preamble requirement.  Moreover, the loss of
the collection advantage which international audiotext has under existing
regulations may make it difficult for international audiotext providers who use
Guyana and other foreign telephone companies to compete on a cost basis with
domestic U.S. providers of area code 900 services.

TAXATION--UNITED STATES

  As a U.S. corporation, the Company is subject to U.S. federal income tax on
its worldwide net income, currently at rates up to 35%.  GT&T is a controlled
foreign corporation ("CFC") for purposes of the Subpart F provisions of the
Internal Revenue Code of 1986, as amended (the "Code").  Under those provisions,
the Company may be required to include in income certain earnings and profits
("E&P") of a CFC subsidiary at the time such E&P are earned by the subsidiary,
or at certain other times, prior to their being distributed to the Company.  At
present, no material amount of such subsidiary E&P is includible in the U.S.
taxable income of the Company before being distributed to it.  Pursuant to the
foreign tax credit provisions of the Code, and subject to complex limitations
contained in those provisions, the Company would be entitled to credit foreign
withholding taxes on dividends or interest received, and foreign corporate
income taxes of its subsidiaries paid with respect to income distributed as
dividends or deemed distributed under Subpart F from such subsidiaries, against
the Company's U.S. federal income tax.

  A U.S. corporation is classified as a Personal Holding Company ("PHC") if (a)
more than 50% of its capital stock is owned directly or indirectly by or for
five or fewer individuals (or pension plans); and (b) at least 60% of its
adjusted ordinary gross income consists of certain types of income (principally
passive income, including interest and dividends) included in the Code
definition of "PHC Income."  For any taxable year that a corporation is a PHC,
the "undistributed personal holding company income" of such corporation for that
year (i.e., the net income of the corporation as reflected on its U.S. corporate
income tax return, with certain adjustments, minus, in general, federal income
tax and dividends distributed or deemed distributed for this purpose) would be
subject to an additional PHC tax of 39.6%.  The Company currently satisfies the
above ownership criterion but the Company believes that it does not satisfy the
income criterion for classification as a PHC.

TAXATION--GUYANA

  In 1991, GT&T's worldwide income was subject to Guyanese tax at an overall
rate of 45%.  The tax rate was reduced to 35% effective for GT&T as of January
1, 1992 and was again increased to 45% effective for GT&T 

                                       10

<PAGE>
 
as of January 1, 1993. The GT&T Agreement provides that the repatriation of
dividends to the Company and the payment of interest on GT&T debt denominated in
foreign currency are not subject to withholding taxes. It also provides that
fees payable by GT&T to the Company or any of its subsidiaries for management
services they are engaged to render shall be payable in foreign currency and
that their repatriation to the United States shall not be subject to currency
restrictions.

  In May 1997, GT&T received a letter from the Guyana Commissioner of Inland
Revenue indicating that GT&T's tax returns for 1992 through 1996 had been
selected for an audit under the direct supervision of the Trade Minister with
particular focus on the withholding tax on payments to international audiotext
providers. In March and April 1997, the Guyanese Trade Minister publicly
announced that he had appointed a task force to probe whether GT&T should pay
withholding taxes on fees paid by GT&T to international audiotext providers. The
Minister announced that if GT&T were found guilty of tax evasion it could owe as
much as $40 million in back taxes. In July 1997, GT&T applied to the Guyana High
Court for an order prohibiting this audit on the grounds that the decision of
the Minister of Trade to set up this task force and to control and direct its
investigation was beyond his authority, violated the provisions of the Guyanese
Income Tax Act, interfered with the independence of the Commissioner of Inland
Revenue and was done in bad faith, and the court issued an order effectively
staying the audit pending a determination by the court of the merits of GT&T's
application.

  In June 1997, GT&T received an assessment of approximately $3.9 million from
the Guyana Commissioner of Inland Revenue for taxes for 1996 based on the
disallowance as a deduction for income tax purposes of five-sixths of the
advisory fees payable by GT&T to the Company and for the timing of the taxation
on certain surcharges to be billed by GT&T.  The deductibility of these advisory
fees and the deferral of these surcharges until they are actually billed for an
earlier year had been upheld in a decision of the High Court in August 1995.  In
July 1997, GT&T applied to the High Court for an order prohibiting the
Commissioner of Inland Revenue from further proceeding with this assessment on
the grounds that the assessment was arbitrary and unreasonable and capriciously
contrary to the August 1995 decision of the Guyana High Court, and GT&T obtained
an order of the High Court effectively prohibiting any action on the assessment
pending the determination by the court of the merits of GT&T's application.

  In November 1997, GT&T received assessments totaling approximately $14 million
from the Guyana Commissioner of Inland Revenue for taxes for the years 1991
through 1996.  It is GT&T's understanding that these assessments stem from the
same audit commenced in May 1997 which the Guyana High Court stayed in its July
1997 order referred to above.  Apparently because the audit was cut short as a
result of the Court's July 1997 order, GT&T did not receive notice of and an
opportunity to respond to the proposed assessments as is the customary practice
in Guyana, and substantially all of the issues raised in the assessments appear
to be based on mistaken facts.  GT&T has applied to the Guyana High Court for an
order prohibiting the Commissioner of Inland Revenue from enforcing the
assessments on the grounds that the origin of the audit with the Minister of
Trade and the failure to give GT&T notice of and opportunity to respond to the
proposed assessment violated Guyana law.  The Guyana High Court has issued an
order effectively prohibiting any action on the assessment pending the
determination by the Court of the merits of GT&T's application.

  There can be no assurance as to the ultimate outcome of any of the above
described pending tax issues.

YEAR 2000 COMPLIANCE

        The inability of computer hardware, software and other equipment 
utilizing microprocessors to recognize and properly process data fields 
containing a 2-digit year is commonly referred to as the Year 2000 Compliance 
issue. As the year 2000 approaches, such systems may be unable to accurately 
process certain data-based information.

        The Company has identified all significant applications in its systems 
that will require modification or replacement to ensure Year 2000 Compliance. 
Internal and external resources are being used to make the required 
modifications and replacements and test Year 2000 Compliance. The modification 
process of all significant applications is under way. The Company plans on 
completing the testing process of all significant applications by December 31, 
1998.

        In addition, the Company has communicated with others with whom it does 
significant business to determine their Year 2000 Compliance readiness and the 
extent to which the Company is vulnerable to any third party Year 2000 issues. 
However, there can be no guarantee that the systems of other companies on which 
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.

        The total cost to the Company of these Year 2000 Compliance activities 
has not been and is not anticipated to be material to its financial position or 
results of operations in any given year. These costs and the data on which the 
Company plans to complete the Year 2000 modification and testing processes are 
based on management's best estimates, which were derived utilizing numerous 
assumptions of future events including the continued availability of certain 
resources, third party modification plans and other factors. However, there can 
be no guarantee that these estimates will be achieved and actual results could 
differ from those plans.

EMPLOYEES

  As of December 31, 1997, GT&T employed approximately 723 persons of whom
approximately 528 are represented by the Guyana Postal and Telecommunications
Workers Union.  GT&T's current contract with this union expires on September 30,
2000.  The Company considers its employee relations to be satisfactory.


I
TEM 2.  PROPERTIES

  At December 31, 1997, GT&T utilized approximately 254,000 square feet of
building space on approximately 41 acres of land in various locations throughout
Guyana, all of which is owned by GT&T.  In 

                                       11

<PAGE>
 
addition, GT&T leases approximately 3,000 square feet of office space in
Georgetown, Guyana. For additional information, see "Business--GT&T--Expansion
Program." GT&T carries insurance against damage to equipment and buildings, but
not to outside plant.


ITEM 3.   LEGAL PROCEEDINGS

  GT&T is involved in various regulatory and court proceedings in Guyana which
are discussed in Item 1. "Business--Regulation."

  The Company is involved in various other litigation, the ultimate disposition
of which, in the opinion of the Company's management, will not have a material
adverse effect on the financial position or operations of the Company.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

  On December 30, 1997, the division of the Company into two separate publicly-
owned companies was approved at a Special Meeting of stockholders.  One, a new
company, Emerging Communications, Inc. ("ECI"), contains all of the Company's
telephone operations in the U.S. Virgin Islands and was spun off to Jeffrey J.
Prosser and the public stockholders of  the Company.  The other, the Company,
continues to own GT&T and is controlled by Cornelius B. Prior, Jr.

  In the split-up transaction, holders of Company Common Stock (other than
Cornelius B. Prior, Jr. and Jeffrey J. Prosser) received one share of ECI Common
Stock and 0.4 shares of Company Common Stock for each share of Company Common
Stock held.  Mr. Prosser received 5,704,231 shares (52%) of ECI Common Stock in
exchange for 3,325,000 shares of Company Common Stock, and Mr. Prior and a trust
of which he is the trustee received 2,807,040 shares (57%) of Company Common
Stock and $17.4 million in cash for 3,692,600 shares of Company Common Stock
held by them prior to the transaction.

EXECUTIVE OFFICERS OF THE REGISTRANT

  Set forth below are the executive officers of the Company as of the date
hereof:


<TABLE>
<CAPTION>
NAME                                     AGE  POSITION
- ----                                     ---  --------
<S>                                      <C>  <C>
Cornelius B. Prior, Jr.                   64  Chief Executive Officer and Chairman of the Board of the
                                               Company; Chairman of the Board of GT&T
Craig A. Knock                            34  Chief Financial Officer, Treasurer and Secretary of the Company
H. William Humphrey                       48  Vice President - Guyana Operations
</TABLE>



  Cornelius B. Prior, Jr. has been Chief Executive Officer and Chairman of the
Board of the Company since December 30, 1997.  From June 30, 1987 to December
1997 he was Co-Chief Executive Officer and President of the Company.  He was
Chairman of the Board of Virgin Islands Telephone Corporation from June 1987 to
March 1997 and became Chairman of the Board of GT&T in April 1997.  From 1980
until June 1987, Mr. Prior was a managing director and stockholder of Kidder,
Peabody & Co. Incorporated, where he directed the Telecommunications Finance
Group.

  Craig Knock has been Chief Financial Officer of the Company since April 1993.
From April 1993 to December 1997 he was also a Vice-President of the Company.
He became the Treasurer of the Company in December 1997 and the Secretary of the
Company in March 1998.  From July 1992 until April 1993, he was an 

                                       12

<PAGE>
 
Assistant Controller of the Company. From 1987 to 1992, Mr. Knock was a C.P.A.
and Audit Manager at Deloitte & Touche LLP, an international accounting firm.

  H. William Humphrey has been Vice President - Guyana Operations since December
1, 1997.  For more than the past five years, prior to his employment with GT&T,
Mr. Humphrey was a self-employed telecommunications consultant providing project
management and consulting services to telecommunications companies domestically
and internationally.  Mr. Humphrey also has more than 20 years of experience
with Southern Bell, where he achieved the position of Manager, Outside Plant
Construction Installation and Maintenance.


                                    PART II
                                        

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

  The Company's Common Stock, $.01 par value, was first listed on NASDAQ on
November 14, 1991 under the symbol ATNI.  As of March 24, 1997, the Company's
Common Stock, $.01 par value, became listed on the American Stock Exchange
("AMEX") under the symbol "ANK".  The following table sets forth quarterly
market price ranges for the Company's Common Stock in 1996 and 1997:


<TABLE>
<CAPTION>
1996 QUARTERS                                                                        High          Low
- -------------                                                                       ------        -----
<S>                                                                               <C>          <C>
   1st..........................................................................      23 1/8      10 5/8
   2nd..........................................................................      27 1/2      20 1/2
   3rd..........................................................................      25 3/4      18
   4th..........................................................................      22          14 5/8
</TABLE>


                                                                               

<TABLE>
<CAPTION>
1997 QUARTERS                                                                        High          Low
- -------------                                                                       ------        -----
<S>                                                                               <C>          <C>
   1st..........................................................................      17 1/22     11
   2nd..........................................................................      13 13/16    10 1/4
   3rd..........................................................................      14 1/4      11
   4th (through December 30, 1997)..............................................      13 3/8      11 3/4
</TABLE>


  All of the foregoing market prices relate to the Company's Common Stock before
the split up transaction on December 30, 1997, in which the Company was divided
into two separate publicly-owned companies.  From December 31, 1997 through
March 16, 1998 the closing price of the Company's Common Stock on the AMEX has
ranged from a low of 7 5/8 to a high of 15 1/2.

  The approximate number of holders of record of Common Stock as of March 16,
1998 was 300.

DIVIDENDS

  The Company has paid no dividends on its Common Stock since June 30, 1993.

  The declaration and payment of dividends is at the discretion of the Board of
Directors of the Company and will be dependent upon the results of operations,
financial condition, capital requirements, contractual restrictions, regulatory
actions, future prospects and profitability of the Company and its principal
subsidiaries and other factors deemed relevant at that time by the Board of
Directors.  There can be no assurance that the Company will pay any dividends at
any time in the future.  See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

                                       13

<PAGE>
 

ITEM 6.  SELECTED FINANCIAL DATA


                       SELECTED HISTORICAL FINANCIAL DATA
                                        
  The following selected historical financial data have been derived from and
are qualified by reference to, the audited combined and consolidated financial
statements of the Company and from the unaudited combined financial statements
of the  Company for the year ended December 31, 1993.  The selected historical
combined financial data should be read in conjunction with the audited combined
and consolidated financial statements and related notes thereto of the Company,
as of December 31, 1996 and 1997 and for each of the three years in the period
ended December 31, 1997.  All dollar amounts are in thousands, except per share
data.


<TABLE>
<CAPTION>
                                                                                        Year Ended December 31,
                                                                          ---------------------------------------------------
                                                                            1993      1994      1995       1996       1997
                                                                          --------  --------  ---------  ---------  ---------
Statement of Operations Data:                                                                  Combined
<S>                                                                       <C>       <C>       <C>        <C>        <C>
 Revenues:                                                              
  Local exchange service................................................  $   566   $   754   $  1,631   $  2,463   $  2,933
  International long-distance revenues..................................   44,299    76,820    128,939    145,080    113,865
  Other revenues........................................................      280       582        600        710        817
                                                                          -------   -------   --------   --------   --------
  Total revenue.........................................................   45,145    78,156    131,170    148,253    117,615
Total expense...........................................................   31,111    57,923     99,879    121,469     99,473
                                                                          -------   -------   --------   --------   --------
Income from continuing operations before interest expense,              
 income taxes and minority interest.....................................   14,034    20,233     31,291     26,784     18,142
Interest expense, net...................................................    1,509     3,137      2,544      1,502      1,117
                                                                          -------   -------   --------   --------   --------
Income from continuing operations before income taxes and               
 minority interest......................................................   12,525    17,096     28,747     25,282     17,025
Income taxes............................................................    5,211     7,411     13,619     10,824      7,718
                                                                          -------   -------   --------   --------   --------
Income from continuing operations before minority                       
 interest...............................................................    7,314     9,685     15,128     14,458      9,307
Minority interest.......................................................   (1,008)   (1,696)    (2,390)    (2,096)    (1,372)
                                                                          -------   -------   --------   --------   --------
Income from continuing operations.......................................  $ 6,306   $ 7,989   $ 12,738   $ 12,362   $  7,935
                                                                          =======   =======   ========   ========   ========
Pro Forma Net Income Per Share (1)......................................                                               $1.69
                                                                                                                    ========
</TABLE>
                                                                
                                                                        

<TABLE>                                                                 
<CAPTION>                                                               
                                                                                        Year Ended December 31,
                                                                          ----------------------------------------------------
                                                                            1993      1994      1995      1996        1997
                                                                          --------  --------  --------  --------  ------------
Balance Sheet Data:                                                                      Combined                 Consolidated
<S>                                                                       <C>       <C>       <C>       <C>       <C>
Fixed Assets, net.......................................................  $ 88,672  $ 91,025  $ 92,102  $ 97,780      $ 36,042
Total assets............................................................   159,297   162,688   185,481   194,493       108,049
Short-term debt (including current portion of                           
 long-term debt)........................................................    10,903    11,515    15,626    11,047         3,298
Long-term debt, net.....................................................    37,830    34,720    25,969    20,398        14,536
Stockholders equity.....................................................    77,537    85,526    98,264   110,626        54,244
</TABLE>

                                                                               
(1) Historical income and dividend per share amounts have not been presented as
    this information is not considered meaningful.

                                       14

<PAGE>
 

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

  The Company's revenues and income from operations are derived principally from
the operations of its telephone subsidiary, GT&T.  GT&T derives almost all of
its revenues from international telephone services.

  The principal components of operating expenses for the Company's telephone
operations are plant specific operations expenses, plant non-specific operations
expenses, customer operations expenses, corporate operations expenses,
international long-distance expenses and taxes other than income taxes.  These
categories are consistent with FCC accounting practices.  Plant specific
operations expenses relate to support and maintenance of telephone plant and
equipment and include vehicle expense, land and building expense, central office
switching expense and cable and wire expense.  Plant non-specific operations
expenses consist of depreciation charges for telephone plant and equipment and
expenses related to telephone plant and network administration, engineering,
power, materials and supplies, provisioning and plant network testing.  Customer
operations expenses relate to marketing, providing operator services for call
completion and directory assistance, and establishing and servicing customer
accounts.  Corporate operations expenses include GT&T's expenses for executive
management and administration, corporate planning, accounting and finance,
external relations, personnel, labor relations, data processing, legal services,
procurement and general insurance.  International long-distance expenses consist
principally of charges from international carriers for outbound international
calls from Guyana and payments to audiotext providers from whom GT&T derives
international audiotext traffic.  Taxes other than income taxes include gross
receipts taxes, property taxes, and other miscellaneous taxes.  General and
administrative expenses consist principally of parent company overheads and
amortization.

  For accounting purposes, the split up transaction of the Company into two
separate publicly held companies (the Company and the Emerging Communications,
Inc.) has been treated as a non pro rata split off of the Company. The Company
has been considered to be the split off entity since Emerging Communications had
a greater market capitalization and greater asset value immediately after the
transaction, retained more of the pre-transaction top management of the Company
and had greater net income in 1997. In accordance with Accounting Principles
Board Opinion No. 29 entitled Accounting for Nonmonetary Transactions and
Emerging Issues Task Force 96-4 entitled Accounting for Reorganizations
Involving a Non-Pro Rata Split-off of Certain Nonmonetary Assets to Owners, the
balance sheet of the Company at December 31, 1997 has been adjusted to 
values determined by the market capitalization of the Company immediately after
the consummation of the transaction. This adjustment includes an approximately
$60 million reduction in the Company's consolidated net fixed assets, and an
approximately $45 million reduction in the Company's consolidated stockholder's
equity. The fair value adjustment reduced the carrying value on the Company's
consolidated financial statements of its fixed assets significantly below their
historical cost and replacement value. Therefore, depreciation expense in the
future not will be a reliable indicator of the Company's cost of replenishing
its assets.

  The financial statements included in this report are the separate financial
statements relating to Atlantic Tele-Network, Inc.'s business and operations in
Guyana including its majority owned subsidiary, GT&T, and ATN's activities as
the parent company of all of its subsidiaries during the periods included
herein.  Except for the consolidated balance sheet at December 31, 1997, these
financial statements do not reflect the fair valuation adjustment arising from
the split up transaction.  Moreover, the statements of operations include
interest income from indebtedness of subsidiaries which were transferred with
such indebtedness to Emerging Communications, Inc. in the split up transaction
and certain expenses for the period from May 1, 1997 to December 31, 1997 which
were reimbursed by Emerging Communications, Inc. as part of the split up
transaction.

  As a result of the decline in 1997 in GT&T's revenues and profits from
audiotext traffic, GT&T filed on December 31, 1997 an application with the PUC
seeking rates designed to generate approximately $26 million in additional
revenues in 1998 for local and outbound international traffic.  In January 1998,
GT&T was awarded an interim increase effective February 1, 1998 designed by the
PUC to generate the equivalent of approximately $18 million in additional annual
revenues for GT&T.  The interim rates are intended to remain in effect while the
PUC holds hearings and reaches a decision on GT&T's application for permanent
rates, although the PUC may increase

                                       15

<PAGE>
 
or decrease these interim rates before reaching a decision on GT&T's permanent
rates.  No assurance can be given as to what permanent rates the PUC will award
GT&T or as to what changes the PUC may make in the current interim rates.

RESULTS OF OPERATIONS

  YEARS ENDED DECEMBER 31, 1996 AND 1997

  Operating revenues for the year ended December 31, 1997 were $117.6 million as
compared to $148.3 million for the corresponding period of the prior year, a
decrease of $30.7 million, or 21%.

  The decrease was principally due to a $44.0 million, or 41%, decrease in
audiotext traffic revenues at GT&T for the year ended December 31, 1997. GT&T's
volume of audiotext traffic fluctuated between 9 and 10 million minutes per
month in 1996. In  1997, the volume of audiotext traffic declined during the
year to approximately 6 million minutes per month in the fourth quarter.  The
reduction in traffic volume is estimated to account for approximately $21.3
million, or 48% of the $44.0 million decrease in audiotext revenues in 1997.
Chargebacks from a carrier for the year ended December 31, 1997 approximated
$6.6 million, representing 15% of the decline in revenues from audiotext
traffic. While subject to change, the Company anticipates that it will
experience chargebacks in the future as a proportion of audiotext revenue
similar to that experienced for the year ended December 31, 1997. The remaining
$16.1 million, or 37% of the decrease in audiotext revenues, results from a
combination of the following: the mislabeling of the origin of certain traffic,
changes in the traffic mix, certain accounting rate reductions, and the strength
of the U.S. dollar against certain foreign currencies. Mislabeling of the origin
of traffic occurs when a carrier reports traffic as coming from one country when
it actually originated in another. Changes in traffic mix refers to the mix
between countries of origins which have different accounting rates, and
accounting rate reductions occur when the Company and a foreign administration
(telephone company) agree to a change in rates. The changes in volume of traffic
and lower accounting rates are subject to a number of influences beyond the
Company's control, and may change significantly in the future, positively or
negatively. As a result of the above factors, GT&T's profit margins from this
traffic also declined. Given the Company's recent experience, the Company
expects the negative trend in audiotext revenues to continue (which could have a
material adverse impact on the Company's total revenues), although the Company
is unable to predict the magnitude of the decline in future revenues with any
degree of certainty.

  GT&T's outbound international revenues for the year ended December 31, 1997
were $26.6 million, an increase of $14.3 million over the prior year even though
traffic volumes were approximately 19% lower in 1997 then in 1996.  See
"Business--Regulatory Considerations" for further discussion.  The increase in
revenues was principally a result of the recognition of $9.5 million in revenues
relating to outbound international long distance revenues at GT&T for the period
from October 1995 to January 1997. The balance of the increase is attributable
to the restoration in January 1997 of the higher rates that were in effect in
October 1995.

  Operating expenses for the year ended December 31, 1997 were $99.5 million, a
decrease of $22.0 million or 18%, from operating expenses of $121.5 million for
the prior year. The decrease was due principally to a decrease in audiotext and
outbound traffic expense at GT&T of $24.4 million for the year ended December
31, 1997, due to decreased traffic volumes. Somewhat offsetting the decrease was
an increase in plant specific and plant non-specific expenses which increased as
a result of increased plant in service. As a percentage of operating revenues,
operating expenses increased to approximately 85% for the year ended December
31, 1997 from approximately 82% for the prior year.

  Income from operations before interest expense, income taxes and minority
interest for the year ended December 31, 1997 was $18.1 million, a decrease of
$8.6 million or 32%, from income from operations before interest expense, income
taxes and minority interest of $26.8 million for the prior year.  This decrease
is principally a result of the factors affecting revenues and operating expenses
discussed above, even though GT&T recognized approximately $9.5 million of
revenues relating to outbound international long distance revenues for the
period October 1995 to January 1997 discussed above.

                                       16

<PAGE>
 
  Net interest expense decreased $385,000 due to reduced debt resulting in
income before income taxes and minority interest for the year ended December 31,
1997 of $17.0 million, a decrease of $8.3 million or 33%, compared to $25.3
million for the prior year.

  The Company's effective tax rate for the year ended December 31, 1997 was
45.3% as compared to 42.8% for the corresponding period of the prior year.

  The minority interest in earnings consists of the Guyana government's 20%
interest in GT&T.

     Pro forma net income per share adjusts the Company's depreciation expense,
interest expense, and shares outstanding as if the split-off Transaction had
occurred on January 1, 1997.  No adjustment is made for any reduction in the
Company's general and administrative expense which may result from the
Transaction or for the interim rate increase awarded to GT&T by the PUC
effective February 1, 1998 or for any further changes in GT&T's rates.


  YEARS ENDED DECEMBER 31, 1995 AND 1996

  Operating revenues for the year ended December 31, 1996 were $148.3 million as
compared to $131.2 million for the prior year, an increase of $17.1 million, or
13%.  The increase was due principally to a $14.9 million increase in audiotext
traffic revenues at GT&T.

  Operating expenses for the year ended December 31, 1996 were $121.5 million as
compared to $99.9 million for the prior year, an increase of $21.6 million, or
22%.  This increase was due principally to increases in audiotext and outbound
traffic expenses at GT&T of $20.1 million due to increased traffic volume.  As a
result of a rate decrease ordered by the Guyana PUC on October 11, 1995, GT&T's
outbound international traffic increased by approximately 44% during the year
ended December 31, 1996 resulting in an approximately $6.5 million increase in
outbound traffic expenses.  An additional factor contributing to the increase in
operating expenses was plant specific expense which increased as a result of
increased plant in service.

  Overall, income from operations before interest expense, income taxes and
minority interest for the year ended December 31, 1996 was $26.8 million as
compared to $31.3 million for the prior year, a decrease of $4.5 million, or
14%.  The decrease occurred principally because of negative margins on outbound
traffic at GT&T which in turn, was caused principally by rate decreases ordered
by the PUC in October 1995.  In January 1997, the Guyana High Court voided the
PUC's order and permitted GT&T to restore its rates for outbound traffic to
their pre-October 1995 level.  While these rates are also less than the
associated outbound expense, had these rates been in effect throughout 1996, the
Company estimates that GT&T's income from telephone operations in 1996 would
have been approximately $8.5 million greater than it was, assuming GT&T's volume
of traffic remained unchanged.  Audiotext traffic increased 20.7 million minutes
and other GT&T inbound paid and outcollect traffic increased 2.4 million minutes
for the year ended December 31, 1996.  However, these revenue increases at GT&T
were more than offset by increased international long distance, plant, and other
operating expenses discussed above.

  GT&T's audiotext traffic increased sharply in the first 8 months of 1995
hitting a peak of 11.7 million minutes for the month of August 1995.  From
August 1995 through December 1996 audiotext traffic fluctuated between
approximately 9 million and 11 million minutes per month.  Profit margins from
this traffic decreased approximately 4% in 1996 principally due to a shift in
traffic mix to less profitable countries and reductions some in accounting
rates.

  Income before income taxes and minority interest for the year ended December
31, 1996 was $25.3 million as compared to $28.7 million for the prior year, a
decrease of $3.5 million, or 12%.  The significant factors that contributed to
this decrease for the year ended December 31, 1996 were the $4.5 million
decrease in income from operations discussed above and the $1.0 million decrease
in net interest expense due to decreased interest rates and lower outstanding
debt.

                                       17

<PAGE>
 
  The Company's effective tax rate for the year ended December 31, 1996 was
42.8% as compared to 47.4% for the prior year.  The $2.8 million decrease in
income tax expense was principally due to lower taxable income.

  The minority interest in earnings consists of the Guyana government's 20%
interest in GT&T.

REGULATORY CONSIDERATIONS

     As is discussed above under "Introduction," GT&T has applied to the PUC for
a significant increase in rates for local and outbound international service and
has received interim rates which substantially increases the rates in effect
during 1997 and earlier years.

  Upon the acquisition of GT&T in January 1991, GT&T entered into an agreement
with the government of Guyana to expand significantly GT&T's existing facilities
and telecommunications operations and to improve service within a three-year
period pursuant to an expansion and service improvement plan (the "Plan").  The
Plan was modified in certain respects and the date for completion of the Plan
was extended to February 1995.  The government has referred to the Guyana Public
Utilities Commission ("PUC") the failure of GT&T to complete the Plan by
February 1995.  The PUC is currently holding hearings on this matter. It is
GT&T's position that its failure to receive timely rate increases, to which GT&T
was entitled, to compensate for the devaluation in Guyana currency which
occurred in 1991 provides legal justification for GT&T's delay in completing the
Expansion Plan.  Failure to timely fulfill the terms of the Plan without legal
justification could result in monetary penalties, cancellation of the License,
or other action by the PUC or the government which could have a material adverse
affect on the Company's business and prospects.

  In October 1995, the Guyana Public Utilities Commission ("PUC") issued an
order that rejected a request of GT&T for substantial increases in all telephone
rates and temporarily reduced rates for outbound long-distance calls to certain
countries.  In most cases, the existing rates were already less than GT&T's
payment obligations to foreign carriers.  In January 1997, on an appeal by GT&T,
the Guyana High Court voided the PUC's order in regard to rates and the rates
were returned to the rates in existence in October 1995.  The lost revenue was
approximately $9.5 million for the period when the order was effective.  GT&T
initially instituted such a surcharge effective May 1, 1997, but temporarily
withdrew it when the Guyana Consumers Advisory Bureau (a non-governmental group
in Guyana) instituted a suit to block it.  In May 1997 the Consumer Advisory
Bureau sought an injunction from the Guyana High Court restoring telephone rates
to those imposed by the PUC in its October 1995 order.  The Consumer Advisory
Bureau's application is still pending.  In September 1997, the Guyana High Court
denied an order which the Consumer Advisory Bureau had sought to temporarily
enjoin GT&T from putting into effect a surcharge to recover the approximately
$9.5 million over a period of 18 months. GT&T put such surcharge into effect on
October 1, 1997 pending an ultimate trial on the merits, and the Company
recognized the approximately $9.5 million of lost revenues in the third quarter
of 1997.

  In January 1997, the PUC ordered GT&T to cease paying advisory fees to the
Company and to recover from the Company approximately $25 million of such fees
paid by GT&T to the Company since January 1991. GT&T has appealed the PUC's
order to the Guyana High Court and obtained a stay of the PUC's order pending
determination of that appeal.

     At December 31, 1996, GT&T owed the Company approximately $23 million for
advances made from time to time for the working capital and capital expenditure
needs of GT&T.  GT&T's indebtedness to the Company was evidenced by a series of
promissory notes.  In March 1997, the PUC voided substantially all of the
promissory notes then outstanding for failure to comply with certain provisions
of the PUC law.  The PUC ordered that no further payments be made on any of the
outstanding notes and that GT&T recover from the Company all amounts theretofore
paid.  The order also provided that the PUC would be willing to authorize the
payment of any amounts properly proven to the satisfaction of the PUC to be due
and payable from GT&T to the Company.  GT&T has appealed the PUC's order to the
Guyana High Court and obtained a stay of the PUC's order pending determination
of that appeal.

                                       18

<PAGE>
 
  In late April 1997, the PUC applied to the Guyana High Court for orders
prohibiting GT&T from paying any monies to the Company on account of
intercompany debt, advisory fees or otherwise pending the determination of
GT&T's appeals from the January 1997 and March 1997 orders mentioned above.  The
PUC's application is still pending.

  In October 1997, the PUC ordered GT&T to increase the number of telephone
lines in service to a total of 69,278 lines by the end of 1998, 89,054 lines by
the end of 1999 and 102,126 by the end of the year 2000, to allocate and connect
an additional 9,331 telephone lines before the end of the 1998 and to provide to
subscribers who request them facilities for call diversion, call waiting,
reminder call and three-way calling by the end of the year 1998.  In issuing
this order, the PUC did not hear evidence or make any findings on the cost of
providing these lines and services, the adjustment in telephone rates which may
be necessary to give GT&T a fair return on its investment or the ways and means
of financing the requirements of the PUC's order.   GT&T has filed a motion
against the PUC's order in the Guyana High Court and has appealed the order on
different grounds to the Guyana Court of Appeal.  No stay currently exists
against this order, but recently the PUC requested further information from GT&T
on this matter.  GT&T intends to take such steps to seek a stay or modification
of this order as seem appropriate after the level of demand for telephone
service can be assessed in light of the temporary rates which came into effect
on February 1, 1998.

  In May 1997, GT&T received a letter from the Guyana Commissioner of Inland
Revenue indicating that GT&T's tax returns for 1992 through 1996 had been
selected for an audit under the direct supervision of the Trade Minister with
particular focus on the withholding tax on payments to international audiotext
providers.  In March and April 1997, the Guyanese Trade Minister publicly
announced that he had appointed a task force to probe whether GT&T should pay
withholding taxes on fees paid by GT&T to international audiotext providers.
The Minister announced that if GT&T were found guilty of tax evasion it could
owe as much as $40 million in back taxes.  In July 1997, GT&T applied to the
Guyana High Court for an order prohibiting this audit on the grounds that the
decision of the Minister of Trade to set up this task force and to control and
direct its investigation was beyond his authority, violated the provisions of
the Guyanese Income Tax Act, interfered with the independence of the
Commissioner of Inland Revenue and was done in bad faith, and the court issued
an order effectively staying the audit pending a determination by the court of
the merits of GT&T's application.

  In June 1997, GT&T received an assessment of approximately $3.9 million from
the Commissioner of Inland Revenue for taxes for 1996 based on the disallowance
as a deduction for income tax purposes of five-sixths of the advisory fees
payable by GT&T to the Company and for the timing of the taxation on certain
surcharges to be billed by GT&T.  The deductibility of these advisory fees and
the deferral of these surcharges until they are actually billed for an earlier
year had been upheld in a decision of the High Court in August 1995.  In July
1997, GT&T applied to the High Court for an order prohibiting the Commissioner
of Inland Revenue from further proceeding with this assessment on the grounds
that the assessment was arbitrary and unreasonable and capriciously contrary to
the August 1995 decision of the Guyana High Court, and GT&T obtained an order of
the High Court effectively prohibiting any action on the assessment pending the
determination by the court of the merits of GT&T's application.

  In November 1997, GT&T received assessments of approximately $14 million from
the Commissioner of Inland Revenue for taxes for the years 1991 through 1996.
It is GT&T's understanding that these assessments stem from the same audit
commenced in May 1997 which the Guyana High Court stayed in its July 1997 order
referred to above.  Apparently because the audit was cut short as a result of
the Court's July 1997 order, GT&T did not receive notice of and an opportunity
to respond to the proposed assessments as is the customary practice in Guyana,
and substantially all of the issues raised in the assessments appear to be based
on mistaken facts.  GT&T has applied to the Guyana High Court for an order
prohibiting the Commissioner of Inland Revenue from enforcing the assessments on
the grounds that the origin of the audit with the Minister of Trade and the
failure to give GT&T notice of and opportunity to respond to the proposed
assessments violated Guyana law.  The Guyana High Court has issued an order
effectively prohibiting any action on the assessments pending the determination
by the Court of the merits of GT&T's application.

  There can be no assurance as to the ultimate outcome of any of the above
described pending tax issues.

                                       19

<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

  The Company has depended upon funds received from its subsidiaries to meet its
capital needs, including servicing existing debt and its ongoing program of
seeking to acquire telecommunications licenses and businesses. As a result of
the split-up of the Company into two separate public companies, the Company's
capital resources have changed significantly, and the Company has fewer
resources and significantly reduced operations.  For the near-term future, the
Company's primary sources of funds will be advisory fees, repayment of loans,
and interest from GT&T. The PUC orders in January, March, and October 1997,
discussed above under " Regulatory Considerations," could have a material
adverse impact on the Company's liquidity.

  GT&T is not subject to any contractual restrictions on the payment of
dividends.  However, GT&T's own capital needs and debt service obligations have
precluded GT&T in recent years, from paying any significant funds to the Company
other than the advisory fees and interest on intercompany debt mentioned above.

  If and when the Company settles outstanding issues with the Guyana government
and the PUC with regard to GT&T's Expansion Plan and its rates for service, GT&T
may require additional external financing to enable GT&T to further expand its
telecommunications facilities.  The Company has not estimated the cost to comply
with the October 1997 PUC order to increase the number of telephone lines in
service, but believes such a project would require significant capital
expenditures that would require external financing.  There can be no assurance
that the Company will be able to obtain any such financing.

  The continued expansion of GT&T's network is dependent upon the ability of
GT&T to purchase equipment with U.S. dollars.  A portion of GT&T's taxes in
Guyana may be payable in U.S. dollars or other hard currencies.  The Company
anticipates that GT&T's foreign currency earnings will enable GT&T to service
its debt and pay its hard currency tax obligations.  There are no Guyana legal
restrictions on the conversion of Guyana's currency into U.S. dollars or on the
expatriation of foreign currency from Guyana.

IMPACT OF DEVALUATION AND INFLATION

  Although the majority of GT&T's revenues and expenditures are transacted in
U.S. dollars or other hard currencies, the results of operations nevertheless
may be affected by changes in the value of the Guyana dollar.  From February
1991 until early 1994, the Guyana dollar remained relatively stable at the rate
of approximately 125 to the U.S. dollar.  In 1994, however, the Guyana dollar
has declined in value to approximately 142 to the U.S. dollar, and it has
remained relatively stable at approximately that rate since 1994. Subsequent to
December 31, 1997, the Guyana dollar has declined in value to approximately 150
to the U.S. dollar.

  The effect of devaluation and inflation on the Company's financial results has
not been significant in the periods presented.


I
TEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

  Consolidated financial statements of the Company and its subsidiary are
submitted as a separate section of this Annual Report.  See Index to Financial
Statements and Schedules which appears on page F-1 hereof.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

  None.

                                       20

<PAGE>
 

                                    PART III
                                        

Item 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

  The information required by this item will be included in the Company's
definitive proxy statement for its 1998 Annual Meeting of Stockholders (the
"Proxy Statement"), or by an amendment to this report to be filed on or before
April 30, 1998, and such information is incorporated herein by reference, except
that the information regarding the Company's executive officers called for by
this item is included in Part I under the heading "Executive Officers of the
Registrant."


ITEM 11.   EXECUTIVE COMPENSATION

  The information required by this item will be included in the Proxy Statement,
and such information is incorporated herein by reference.


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

  The information required by this item will be included in the Proxy Statement,
and such information is incorporated herein by reference.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

  The information required by this item will be included in the Proxy Statement,
and such information is incorporated herein by reference.

                                       21

<PAGE>
 

                                    PART IV
                                        

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

  (a)  1. Financial Statements

     Consolidated financial statements of the Company and its subsidiary are
     submitted as a separate section of this Annual Report. See Index to
     Financial Statements and Schedules which appears on page F-1 hereof.

     2. Financial Statement Schedules

     Financial statement schedules for the Company and its subsidiary are
     submitted as a separate section of this Annual Report. See Index to
     Financial Statements and Schedules which appears on page F-1 hereof.
 
(b)    Reports on Form 8-K

       No reports on Form 8-K were filed during the last quarter of 1997.
 
(c)    Exhibits


<TABLE>
<CAPTION>
  EXHIBIT NO.                                                   DESCRIPTION
  -----------                                                   -----------
<S>    <C>        <C>
3.     (a)        Restated Certificate of Incorporation of the Company. ***
 
       (b)        By-Laws of the Company. ***
 
4.     (a)        Specimen Form of Company's Common Stock Certificate.*
 
10.               Material contracts:
 
       (a)        Subscription Agreement, dated as of August 11, 1997, between the Company and Emerging Communications,
                  Inc.
 
       (b)        Repurchase and Recapitalization Agreement, dated as of August 11, 1997, among the Company, Cornelius B.
                  Prior, Jr., individually and as trustee of the 1994 Prior Charitable Remainder Trust, and Jeffrey J.
                  Prosser.
 
       (c)        Agreement and Plan of Merger, dated as of August 11, 1997, between ATN Merger Co, and the Company.
 
       (d)        Technical Assistance Agreement, dated as of December 30, 1997, among Atlantic Tele-Network, Inc.,
                  Atlantic Tele-Network Co., Virgin Islands Telephone Corporation and Vitelcom Cellular Inc.
 
       (e)        Non-Competition Agreement, dated as of December 30, 1997, among Emerging Communications, Inc., Atlantic
                  Tele-Network, Inc., and Jeffery J. Prosser.
 
       (f)        Indemnity Agreement, dated as of December 30, 1997, among Atlantic Tele-Network, Inc., Emerging
                  Communications, Inc., Cornelius B. Prior, Jr. and Jeffrey J. Prosser.
 
       (g)        Employee Benefits Agreements, dated as of December 30, 1997, between Emerging Communications, Inc. and
                  Atlantic Tele-Network, Inc.
 
       (h)        Tax Sharing and Indemnification Agreement, dated as of December 30, 1997, among Atlantic Tele-Network,
                  Inc., Emerging Communications, Inc., Cornelius B. Prior, Jr. and Jeffrey J. Prosser.
</TABLE>


                                       22

<PAGE>
 

<TABLE>
<CAPTION>
  EXHIBIT NO.                                                   DESCRIPTION
  -----------                                                   -----------
<S>     <C>       <C>
        (i)       Equipment Financing Agreement, dated as of January 28, 1991, among Guyana Telephone and Telegraph
                  Company Limited, Atlantic Tele-Network, Inc. and Northern Telecom International Finance B.V. (excluding
                  exhibits).*
 
        (j)       First Amendment to Equipment Financing Agreement, dated as of January 28, 1991, among Guyana Telephone
                  and Telegraph Company Limited, Atlantic Tele-Network, Inc. and Northern Telecom International Finance
                  B.V.*
 
        (k)       Second Amendment to Equipment Financing Agreement, dated as of November 21, 1991, among Guyana Telephone
                  and Telegraph Company Limited, Atlantic Tele-Network, Inc. and Northern Telecom International Finance
                  B.V.**
 
21.               Subsidiaries of the Company.
</TABLE>

 
  * Filed as an exhibit to the Company's Registration Statement (File No. 33-
    43012) and incorporated herein by reference.
 
**  Filed as an exhibit to the Company's Annual Report on Form 10K for 1991 and
    incorporated herein by reference.
 
*** Filed as an exhibit on Form 8-K dated February 16, 1996 and incorporated
    herein by reference.

                                       23

<PAGE>
 

ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARY

COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997


<TABLE>
<CAPTION>
INDEX
- -----------------------------------------------------------------------------------------

                                                                                     PAGE
<S>                                                                                   <C>
Independent Auditors' Report                                                          F-2

Combined and Consolidated Balance Sheets                                              F-3

Combined Statements of Operations                                                     F-4

Combined Statements of Stockholders' Equity                                           F-5

Combined Statements of Cash Flows                                                     F-6

Notes to Combined and Consolidated Financial Statements                               F-7

Financial Statement Schedules Furnished Pursuant to the Requirements of Form 10-K:

 I. - Combined Condensed Financial Statements of Atlantic Tele-Network, Inc.
    (Parent Company Only)                                                             F-18

 II - Valuation and Qualifying Accounts                                               F-22

</TABLE>



All other schedules are omitted because of they are not applicable or because
 the required information is shown elsewhere herein.

                                      F-1

<PAGE>
 

INDEPENDENT AUDITORS' REPORT

Board of Directors and Stockholders

Atlantic Tele-Network, Inc. and subsidiary

We have audited the accompanying combined balance sheet of Atlantic Tele-
Network, Inc. and subsidiary as of December 31, 1996 and the consolidated
balance sheet of Atlantic Tele-Network, Inc. and subsidiary as of December 31,
1997, and the related combined statements of operations, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1997.  Our audits also included the financial statements schedules listed in the
Index on Item 14.  These financial statements are the responsibility of Atlantic
Tele-Network, Inc. and subsidiary's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such combined and consolidated financial statements present
fairly, in all material respects, the financial position of Atlantic Tele-
Network, Inc. and subsidiary as of December 31, 1996 and 1997, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997, in conformity with generally accepted accounting
principles.  Also, in our opinion, such financial statement schedules, when
considered in relation to the basic financial statements as a whole, present
fairly, in all material respects, the information set forth therein.

Deloitte & Touche LLP

Omaha, Nebraska
March 20, 1998


                                      F-2

<PAGE>
 
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARY

COMBINED AND CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------
                                                           1996        1997
                                                        COMBINED    CONSOLIDATED
ASSETS

Current assets:
  Cash                                                  $  8,182       $ 15,803
  Accounts receivable, net                                49,264         38,077
  Materials and supplies                                   2,642          3,536
  Prepayments and other current assets                       589          1,039
                                                        --------       --------
        Total current assets                              60,677         58,455

Fixed assets:                                            
  Property, plant and equipment                          104,141         39,042
  Less accumulated depreciation                          (17,987)          -    
  Franchise rights and cost in excess of underlying 
    book value, less accumulated amortization of
    $2,301,000 in 1996                                    11,626           -
                                                        --------       --------
        Net fixed assets                                  97,780         39,042

Due from affiliates                                       26,883           -
Uncollected surcharges                                     3,119          5,941
Other assets                                               6,034          4,611
                                                        --------       --------

                                                        $194,493       $108,049
                                                        ========       ========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Notes payable                                         $  5,722       $   -
  Accounts payable                                        14,545         10,382
  Accrued taxes                                            1,776          3,391
  Advance payments and deposits                              627            809
  Other current liabilities                                1,940          2,854
  Current portion of long-term debt                        5,325          3,298
                                                        --------       --------
        Total current liabilities                         29,935         20,734

Deferred income taxes                                     18,835          2,464
Long-term debt, excluding current portion                 20,398         14,536
Minority interest                                         14,699         16,071

Contingencies and commitments (Notes I and J)

Stockholders' equity:
  Preferred stock, par value $.01 per share; 
    10,000,000 shares authorized; none issued
    and outstanding                                         -              -
  Common stock, par value $.01 per share; 20,000,000
    shares authorized; 12,272,500 and 4,909,000 shares
    issued and outstanding                                   123             49
  Paid-in capital                                         81,852         54,195
  Retained earnings                                       28,651           -
                                                        --------       --------
        Total stockholders' equity                       110,626         54,244
                                                        --------       --------
                                                        $194,493       $108,049
                                                        ========       ========

See notes to combined and consolidated financial statements.

                                      F-3


<PAGE>
 
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARY

COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------

                                                  1995        1996       1997

Revenues:
  Local exchange service                        $  1,631    $  2,463   $  2,933
  International long-distance revenues           128,939     145,080    113,865
  Other revenues                                     600         710        817
                                                --------    --------   --------
        Total revenues                           131,170     148,253    117,615

Expenses:
  Plant specific operations                        3,820       4,902      5,707
  Plant nonspecific operations                     5,944       6,017      7,099
  Customer operations                              1,822       2,474      2,538
  Corporate operations                             6,178       5,838      6,061
  International long-distance expenses            74,335      94,457     70,094
  Taxes other than income                            475         574        657
  General and administrative expenses              7,305       7,207      7,317
                                                --------    --------   --------
       Total expenses                             99,879     121,469     99,473
                                                --------    --------   --------

        Income from operations                    31,291      26,874     18,142

Interest Expense and Interest Income:
  Interest expense                                (4,950)     (3,991)    (3,794)
  Interest income                                  2,406       2,489      2,677
                                                --------    --------   --------
        Interest expense, net                     (2,544)     (1,502)    (1,117)
                                                --------    --------   --------

Income before income taxes and 
minority interest                                 28,747      25,282     17,025
Income taxes                                      13,619      10,824      7,718
                                                --------    --------   --------
Income before minority interest                   15,128      14,458      9,307
Minority interest                                 (2,390)     (2,096)    (1,372)
                                                --------    --------   --------

Net income                                      $ 12,738    $ 12,362   $  7,935
                                                ========    ========   ========

Pro forma net income per share                                         $   1.69
                                                                       ========

See notes to combined and consolidated financial statements.

                                      F-4

<PAGE>

 
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARY

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(Columnar Amounts in Thousands)

<TABLE> 
<CAPTION> 
- -------------------------------------------------------------------------------------------------------
<S>                                     <C>                  <C>             <C>                <C> 

                                                                                                Total
                                        Common             Paid-in         Retained         Stockholders'
                                        Stock              Capital         Earnings            Equity

Balance, January 1, 1995                $123               $81,852        $ 3,551           $   85,526

 Net Income                              --                   --           12,738               12,738
                                        ------             --------       --------          ------------

Balance, December 31, 1995               123                81,852         16,289               98,264

 Net income                              --                    --          12,362               12,362
                                        ------             --------       --------          ------------

Balance, December 31, 1996               123                81,852         28,651              110,626

 Net income                              --                    --           7,935                7,935

 Purchase and cancellation of 765,562    
  shares of Company stock                 (8)                  --         (17,392)             (17,400)

 Split-off of subsidiaries and fair 
  valuation of net assets                (66)              (27,657)       (19,194)             (46,917)
                                        ------             --------       ---------         ------------

Balance, December 31, 1997              $ 49               $54,195        $  --             $   54,244
                                        ======             ========       ========          ============
</TABLE>
 
See notes to combined and consolidated financial statements.


                                      F-5

<PAGE>
 

ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARY

COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(Columnar Amounts in Thousands)

<TABLE> 
<CAPTION> 
- -----------------------------------------------------------------------------------------------
<S>                                                     <C>             <C>             <C> 

                                                        1995            1996            1997
Cash flows from operating activities:
 Net income                                         $ 12,738        $ 12,362         $ 7,935
 Adjustments to reconcile net income to net
  cash flows from operating activities:           
   Depreciation and amortization                       4,418           4,890           5,289
   Deferred income taxes                               1,886           3,370           2,961
   Minority interest                                   2,390           2,096           1,372
   Changes in operating assets and liabilities:
    Accounts receivable                              (26,893)           (253)         11,187
    Materials, supplies and other current assets       2,167             215            (894)
    Uncollected surcharges                             2,946           1,220          (2,822)
    Accounts payable                                   3,411           5,350          (4,038)
    Accrued taxes                                      6,387          (4,863)          1,970
    Other                                              3,555              82           2,200
                                                    --------        --------         -------
     Net cash flows from operating activities         13,005          24,469          25,160

Cash flows from investing activities:
 Capital expenditures                                 (5,455)        (10,534)         (7,633)
 Split-off transaction costs                            --              --            (4,509)
 Change in affiliate borrowings                          133            (261)         19,918
                                                    --------        --------         -------
     Net cash flows from investing activities         (5,322)        (10,795)          7,776

Cash flows from financing activities:
 Repayment of long-term debt                          (4,640)         (9,360)         (7,693)
 Repayments on notes                                    --              (790)           (222)
 Purchase of Company stock                              --              --           (17,400)
                                                    --------        --------         -------
      Net cash flow from financing activities         (4,640)        (10,150)        (25,315)
                                                    --------        --------         -------

Net change in cash                                     3,043           3,524           7,621

Cash, beginning of Year                                1,615           4,658           8,182
                                                    --------        --------         -------

Cash, end of Year                                   $  4,658        $  8,182         $15,803
                                                    ========        ========         =======

Supplemental cash flow information:
 Interest paid                                      $  4,665        $  3,611         $ 3,035
                                                    ========        ========         =======

 Income taxes paid                                  $  2,213        $ 11,186         $ 4,093

Non-cash activities:
 Split-off of subsidiaries and fair 
  valuation of net assets                           $   --          $  --            $42,408
                                                    ========        ========         =======

</TABLE>
 
See notes to combined and consolidated financial statements.

                                      F-6



<PAGE>
 
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARY

NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(COLUMNAR AMOUNTS IN THOUSANDS)
- --------------------------------------------------------------------------------

A. SIGNIFICANT ACCOUNTING POLICIES

   BASIS OF PRESENTATION - Effective December 30, 1997, Atlantic Tele-Network,
   Inc. (ATN or the Company) split-off into two separate public companies (the
   Transaction).  One, Emerging Communications, Inc. (ECI), contained all of the
   operations of the Company and its subsidiaries in the U.S. Virgin Islands.
   The other, ATN, continued the business and operations of the Company in
   Guyana, including ownership of its majority owned subsidiary, Guyana
   Telephone & Telegraph Company, Limited (GT&T).  The combined financial
   statements of ATN are the separate financial statements relating to ATN's
   business and operations in Guyana, including its majority owned subsidiary
   GT&T, and ATN's activities as the parent company of all of its subsidiaries.
   ATN's investment in subsidiaries other than GT&T and operations of these
   other subsidiaries have been carved out of the combined financial statements.
   The combined financial statements of ATN present the financial position as of
   December 31, 1996 and the results of operations and cash flows for each of
   the three years in the period ended December 31, 1997 as if the business,
   operations and activities included in the combined financial statements were
   conducted by a separate entity.  All material intercompany transactions and
   balances have been eliminated.

   The Transaction was accounted for as a non-pro rata split-off of ATN from the
   consolidated Company as it previously existed. Accordingly, ATN assets and
   liabilities at December 31, 1997 have been accounted for in accordance with
   Accounting Principles Board Opinion No. 29 entitled Accounting for
   Nonmonetary Transactions and Emerging Issues Task Force 96-4 entitled
   Accounting for Reorganizations Involving a Non-Pro Rata Split-off of Certain
   Nonmonetary Assets to Owners at values as determined by by the market
   capitalization of ATN subsequent to the Transaction. The excess of original
   cost over fair value has been allocated to reduce the values assigned to 
   long-term assets, primarily property, plant and equipment and intangibles.

   USE OF ESTIMATES - The preparation of financial statements in conformity with
   generally accepted accounting principles requires management to make
   estimates and assumptions that affect the reported amount of assets and
   liabilities and disclosure of contingent assets and liabilities at the date
   of the financial statements and the reported amounts of revenues and expenses
   during the reporting period.  Actual results could differ from those
   estimates.

   GENERAL - The Company is engaged principally in providing telecommunications
   services, including local telephone service, long-distance service and
   cellular service in the Cooperative Republic of Guyana and international
   telecommunications service to and from Guyana.  ATN provides management,
   technical, financial and marketing services to GT&T for a management fee
   equal to 6% of GT&T's revenues.  All of GT&T's operations are located in
   Guyana.

   REGULATORY ACCOUNTING - The Company's telephone subsidiary, GT&T, accounts
   for costs in accordance with the accounting principles for regulated
   enterprises prescribed by Statement of Financial Accounting Standards No. 71,
   Accounting for the Effects of Certain Types of Regulation (SFAS 71).  This
   accounting recognizes the economic effects of rate regulation by recording
   cost and a return on investment as such amounts are recovered through rates
   authorized by regulatory authorities.  Accordingly under SFAS 71, plant and
   equipment is depreciated over lives approved by regulators and certain costs
   and obligations are deferred based upon approvals received from regulators to
   permit recovery of such 

                                      F-7

<PAGE>
 
   amounts in future years. GT&T's audiotext revenues are not subject to
   regulation but are never the less taken into account by the regulator in
   setting regulated rates which permit the recovery of GT&T's costs and a
   return on investment. These unregulated revenues and any costs which pertain
   solely to these unregulated revenues are not accounted for under SFAS 71
   principles.

   CASH - For purposes of the statement of cash flows, the Company considers all
   investments with a maturity at acquisition of three months or less to be cash
   equivalents.

   MATERIALS AND SUPPLIES - Materials and supplies are carried in inventory
   principally at weighted average cost.

   FIXED ASSETS - The cost of fixed assets in service and under construction
   includes an allocation of indirect costs applicable to construction.  The
   Company provides for depreciation using the straight-line method.  This has
   resulted in a composite annualized rate of 4.8%, 4.5% and 4.5% for GT&T for
   the years ended December 31, 1995, 1996 and 1997, respectively.  With respect
   to the regulated subsidiary, the cost of depreciable property retired,
   together with removal cost less any salvage realized, is charged to
   accumulated depreciation.  No gain or loss is recognized in connection with
   ordinary retirements of depreciable property.  Repairs and replacements of
   minor items of property are charged to maintenance expense.

   REVENUE - Local exchange service and international long-distance revenues are
   recognized when earned, regardless of the period in which they are billed.
   In determining revenue, the Company estimates usage by foreign exchanges of
   the Company's local exchange network to determine the appropriate rate to
   apply to long distance minutes carried by the Company.  Additionally, the
   Company establishes reserves for possible unreported or uncollectible minutes
   from foreign exchange carriers and doubtful accounts from customers.  The
   amounts the Company will ultimately realize upon settlement could differ
   significantly in the near term from the amounts assumed in estimating these
   revenues and the related accounts receivable.

   FOREIGN CURRENCY TRANSACTIONS - With regard to GT&T operations, for which the
   U.S. dollar is the functional currency, foreign currency transaction gains
   and losses are included in determining net income for the period in which the
   transaction is settled.  At each balance sheet date, balances denominated in
   foreign currency are adjusted to reflect the current exchange rate.
   Transaction gains and (losses), which relate primarily to settlement with
   foreign carriers, approximated $1,808,000, $51,000 and $(1,507,000) for the
   years ended December 31, 1995, 1996 and 1997, respectively.

   IMPAIRMENT OF LONG-LIVED ASSETS - In 1996, the Company adopted Statement of
   Financial Accounting Standards No. 121, Accounting for the Impairment of
   Long-Lived Assets and for Long-Lived Assets to be Disposed of (SFAS 121).
   The Statement establishes accounting standards for the impairment of long-
   lived assets, certain identifiable intangibles and goodwill related to those
   assets.  Under provisions of the Statement, impairment losses are recognized
   when expected future cash flows are less than the assets' carrying value.
   Accordingly, when indicators of impairment are present, the Company evaluates
   the carrying value of property, plant and equipment and intangibles in
   relation to the operating performance and future undiscounted cash flows of
   the underlying business.  The Company adjusts the net book value of the
   underlying assets if the sum of expected future cash flows is less than book
   value.  The adoption of SFAS 121 did not have a material effect on the
   Company's financial statements.

                                      F-8

<PAGE>
 
   PRO FORMA NET INCOME PER SHARE - Historical income per share is not presented
   for the combined statement of operations as the information is not considered
   meaningful.  Pro forma net income per share as if the Transaction had
   occurred January 1, 1997 is calculated as follows:



<TABLE>
<S>                                                                                    <C>
       Net income as reported                                                                 $ 7,935
       Reduction in depreciation                                                                2,712
       Elimination of interest income from subsidiary, net of interest expense        
         on debt transferred to ECI                                                            (1,716)
       Tax effect                                                                                (637)
                                                                                              -------
                                                                                     
       Pro forma net income                                                                   $ 8,294
                                                                                              =======
                                                                                     
       Pro forma shares outstanding                                                             4,909
                                                                                              =======
                                                                                     
       Pro forma net income per share                                                           $1.69
                                                                                              =======
</TABLE>



   RECLASSIFICATIONS - Certain reclassifications have been made to the prior
   year's financial statements to conform to the current year presentation.

B. ACCOUNTS RECEIVABLE

   Accounts receivable consist of the following:



<TABLE>
<CAPTION>
                                                                                    DECEMBER 31,
                                                                        --------------------------------
                                                                               1996            1997
   <S>                                                                    <C>             <C>
   Subscribers, net of allowance for doubtful accounts of $557,000   
     and $502,000                                                                $ 1,670         $ 2,406
   Connecting companies                                                           46,519          29,834
   Uncollected surcharges - current portion                                          632           5,479
   Other                                                                             443             358
                                                                          --------------  -------------- 
                                                                    
                                                                                 $49,264         $38,077
                                                                          ==============  ============== 

C. PROPERTY, PLANT AND EQUIPMENT

   Property, plant and equipment consist of the following:

                                                                                      DECEMBER 31,
                                                                          ------------------------------
                                                                                 1996             1997
   <S>                                                                        <C>             <C>   

     Outside plant                                                             $ 44,759         $ 17,057
     Central office equipment                                                    37,634           13,502
     Land and building                                                            7,562            3,248
     Station equipment                                                            3,766            1,178
     Furniture and office equipment                                               1,977              382
     Construction in process                                                      3,259            3,245
     Other                                                                        5,184              430
                                                                          --------------  -------------- 
                                                                               $104,141         $ 39,042
                                                                          ==============  ============== 
</TABLE>
 

                                      F-9

<PAGE>
 
   As a result of the valuation of net assets in the split-off Transaction in
accordance with Accounting Principles Board Opinion No. 29 entitled Accounting
for Nonmonetary Transactions and Emerging Issues Task Force 96-4 entitled
Accounting for Reorganizations Involving a Non-Pro Rata Split-off of Certain
Nonmonetary Assets to Owners, net property values at December 31, 1997 were
reduced by approximately $49,233,000 from their previous carrying value, which
was based primarily on historical cost. The reduced carrying value of property,
plant and equipment is significantly below replacement value.

D. OTHER ASSETS


   Other assets consist of the following:                              
                                                            

<TABLE> 
<CAPTION> 
                                                                             December 31,
                                                                        --------------------
                                                                         1996          1997
<S>                                                                   <C>           <C> 
     Debt service reserve fund and escrow account                       $3,900       $3,900
     Deferred costs and intangibles, net                                   824         -
     Prepaid pension                                                       -            425
     Other                                                               1,310          286
                                                                        ------       ------
                                                                        $6,034       $4,611
                                                                        ======       ======
</TABLE>
 

E. NOTES PAYABLE

   At December 31, 1996, the Company had in place a $5.5 million line of credit,
   bearing interest at 0.75% over prime rate (9% at December 31, 1996), which
   had expired and was verbally extended to October 1997.  As of December 31,
   1996, $5.5 million was outstanding under this arrangement.  The line of
   credit was transferred to ECI in the split-off Transaction.

   At December 31, 1996, the Company had demand notes payable to a stockholder
   of $222,000 with an interest rate of 9.58%.  The notes were retired in 1997.

F. LONG-TERM DEBT

   Long-term debt consists of the following:


<TABLE> 
<CAPTION> 
                                                                                           December 31,
                                                                                   --------------------------
                                                                                     1996             1997
<S>                                                                                 <C>               <C> 
        Notes payable to Northern Telecom International Finance B.V.         
          (NTIF) by GT&T under a $34 million equipment financing
          agreement (the GT&T Equipment Loan)                                       $21,133           $17,834
        Notes payable to Northern Telecom International Finance B.V.              
          (NTIF) by GT&T under an $11,500,000 supply loan (the GT&T
          Supply Loan) paid in 1997                                                   4,314              -
        Other                                                                           276              -
                                                                                   --------         ---------
        Less current portion                                                         25,723            17,834
                                                                                      5,325             3,298
                                                                                   --------         ---------
                                                                                    $20,398           $14,536
                                                                                   ========         =========
</TABLE>
 

                                      F-10                        

<PAGE>
 
   The GT&T Equipment Loan requires monthly principal payments totaling $275,000
   plus interest with all outstanding balances maturing in 2004.  The interest
   rates on the GT&T Equipment Loan are at fixed rates from 9.17% to 11.29%.

   The GT&T Equipment Loan is guaranteed by ATN and secured by a pledge of all
   the GT&T stock owned by ATN and a security interest in all net toll revenues
   due to GT&T from significant carriers.  GT&T is also required to maintain a
   debt service reserve fund under this loan agreement.  The balance of this
   fund, included in other assets, was $3.9 million at December 31, 1996 and
   1997.

   The annual requirements for principal payments are as follows:

     Years Ending December 31,                                        Total

     1998                                                            $ 3,298
     1999                                                              3,298 
     2000                                                              3,298 
     2001                                                              3,298 
     2002                                                              3,298 
     Thereafter                                                        1,344
                                                                     -------
                                                                     $17,834
                                                                     =======
G. INCOME TAXES

   The following is a reconciliation from the tax computed at statutory income
   tax rates to the Company's income tax expense:


<TABLE> 
<CAPTION> 
                                                                                               Years Ended December 31,
                                                                                            ----------------------------
                                                                                               1995      1996      1997
<S>                                                                                         <C>        <C>       <C> 
     Tax computed at statutory U.S. federal income                                            
       tax rates                                                                             $10,061   $ 8,849   $5,959
     Guyana income taxes in excess of statutory U.S rate                                       2,452     1,965    1,314
     Write off of tax regulatory asset                                                           600      -        -
     Other, net                                                                                  506        10      445
                                                                                             -------   -------   ------
     Income tax expense                                                                      $13,619   $10,824   $7,718
                                                                                             =======   =======  =======
</TABLE>
 
   The components of income tax expense are comprised of the following:


<TABLE> 
<CAPTION>         
                                                                                               Years Ended December 31,
                                                                                             ---------------------------
                                                                                               1995      1996     1997 
<S>                                                                                         <C>       <C>       <C> 
     Current:
      United States                                                                          $   -     $ 1,302   $1,445
      Foreign                                                                                  9,770     4,948    3,312
     Deferred                                                                                  3,849     4,574    2,961
                                                                                             -------   -------   ------
                                                                                             $13,619   $10,824   $7,718
                                                                                             =======   =======  =======
</TABLE>
 

   The components of income tax expense are comprised of the following:

                                      F-11

<PAGE>
 
   The significant components of deferred tax liabilities and assets are as
   follows:

                                                              December 31,
                                                        ------------------------
                                                           1996          1997
     Deferred tax liabilities:                    
      Differences between book and tax basis of  
       property                                          $17,509       $ 1,229
      Revenues not recognized for tax purposes             1,680         1,520
                                                         -------       -------
                                                          19,189         2,749
                                                  
     Deferred tax assets:                         
      Non-deductible expense                                 341           659
      Other                                                   13           -
                                                         -------       -------
                                                             354           659
                                                         -------       -------
                                                  
     Net deferred tax liabilities                        $18,835       $ 2,090
                                                         =======       =======


   At December 31, 1997, unremitted earnings of foreign subsidiaries were
   approximately $47,782,000.  Since it is the Company's intention to
   indefinitely reinvest these earnings, no U.S. taxes have been provided.  The
   determination of the amount of U.S. tax which would be payable if such
   unremitted foreign earnings were repatriated through dividend remittances is
   not practicable in that any U.S. taxes payable on such dividends would be
   significantly offset by foreign tax credits.  Pursuant to the term of the
   purchase agreement with the government of Guyana, there are no withholding
   taxes applicable to distributions from GT&T.

H. RETIREMENT PLANS

   The Company has noncontributory defined benefit pension plans for eligible
   employees of GT&T who meet certain age and employment criteria.
   Contributions are intended to provide not only for benefits attributed for
   service to date, but also for those expected to be earned in the future.  The
   benefits are based on the participants' average salary during the last three
   years of employment and credited service years.

   Net periodic pension cost was:

                                                      Years Ended December 31,
                                                   -----------------------------
                                                    1995        1996       1997

     Service cost                                  $ 103       $ 135      $ 168
     Interest on projected benefit obligation         65         101        131
     Actual return on assets                         (75)        (79)       (10)
     Net amortization and deferral                    45          30        (35)
                                                   -----       -----      -----

     Net periodic pension cost                     $ 138       $ 187      $ 254
                                                   =====       =====      =====


                                      F-12

<PAGE>
 
   The following table sets forth the funded status, the amounts recognized in
   the balance sheet of the Company at December 31, 1996 and 1997, and the
   principal assumptions of the Company's plan:

                                                              December 31, 
                                                        ----------------------- 
                                                           1996         1997
     Actuarial present value of benefit obligations:
       Vested benefits                                   $   317      $   871
       Nonvested benefits                                     79          175
                                                         -------      -------

     Accumulated plan benefits                           $   396      $ 1,046
                                                         =======      =======

     Projected benefit obligation                        $(1,045)     $(2,279)
                                                      
     Fair value of plan assets                               622        1,336
                                                         -------      -------
                                                      
     Plan projected benefit obligation in excess       
       of assets                                            (423)        (943)
                                                      
     Unrecognized net loss                                   152        1,138
     Unrecognized prior service costs                        247          230
                                                         -------      -------
                                                      
     Prepaid (accrued) pension included in the         
       balance sheet                                     $   (24)     $   425
                                                         =======      =======

   The discount rate was 13.0% and 8.25% and the expected rate of return on
   invested assets was 10.0% and 9.25% for the plan at December 31, 1996 and
   1997.

I. REGULATORY MATTERS

   On December 31, 1997, GT&T applied to the Guyana Public Utilities Commission
   (PUC) for a significant increase in rates for local and outbound
   international service and was awarded an interim increase in rates effective
   February 1, 1998 which was a substantial increase over the rates in effect
   during 1997 and earlier years.  The interim rates are intended to remain in
   effect while the PUC holds hearings and reaches a decision on GT&T's
   application, although the PUC may increase or decrease these interim rates
   before reaching a decision on GT&T's permanent rates.

   In October 1995, the Guyana Public Utilities Commission issued an order that
   rejected the request of GT&T for substantial increases in all telephone rates
   and temporarily reduced rates for outbound long-distance calls to certain
   countries. In most cases, the existing rates were already less than GT&T's
   payment obligations to foreign carriers. In January 1997, on an appeal by
   GT&T, the Guyana High Court voided the PUC's order in regard to rates and the
   rates were returned to the rates in existence in October 1995. The lost
   revenue was approximately $9.5 million for the period when the order was
   effective. GT&T initially instituted a surcharge effective May 1, 1997 to
   collect the lost revenue, but temporarily withdrew it when the Guyana
   Consumers Advisory Bureau (a non-governmental group in Guyana) instituted a
   suit to block it. In May 1997 the Consumer Advisory Bureau sought an
   injunction from the Guyana High Court restoring telephone rates to those
   imposed by the PUC in its October 1995 order. The Consumer Advisory Bureau's
   application is still pending. In September 1997, the Guyana High Court denied
   an order which the Consumer Advisory Bureau had sought to temporarily enjoin
   GT&T from putting into effect a surcharge to recover the approximately $9.5
   million over a period of 18 months. GT&T put such surcharge into effect on
   October 1, 1997 pending an ultimate trial on the merits, and the Company
   recognized the approximately $9.5 million of lost revenues in the third
   quarter of 1997.

                                      F-13

<PAGE>
 
   In January 1997, the PUC ordered GT&T to cease paying management fees to the
   Company and to recover from the Company approximately $25 million of such
   fees paid by GT&T to the Company since January 1991. GT&T has appealed the
   PUC's order to the Guyana High Court and obtained a stay of the PUC's order
   pending determination of that appeal.

   At December 31, 1996, GT&T owed the Company approximately $23 million for
   advances made from time to time for the working capital and capital
   expenditure needs of GT&T. GT&T's indebtedness to the Company was evidenced
   by a series of promissory notes. In March 1997, the PUC voided substantially
   all of the promissory notes then outstanding for failure to comply with
   certain provisions of the PUC law. The PUC ordered that no further payments
   be made on any of the outstanding notes and that GT&T recover from the
   Company all amounts theretofore paid.  The order also provided that the PUC
   would be willing to authorize the payment of any amounts properly proven to
   the satisfaction of the PUC to be due and payable from GT&T to the Company.
   GT&T has appealed the PUC's order to the Guyana High Court and obtained a
   stay of the PUC's order pending determination of that appeal.

   In late April 1997, the PUC applied to the Guyana High Court for orders
   prohibiting GT&T from paying any monies to the Company on account of
   intercompany debt, advisory fees or otherwise pending the determination of
   GT&T's appeals from the January 1997 and March 1997 orders mentioned above.
   The PUC's application is still pending.

   In October 1997, the PUC ordered GT&T to increase the number of telephone
   lines in service to a total of 69,278 lines by the end of 1998, 89,054 lines
   by the end of 1999 and 102,126 by the end of the year 2000, to allocate and
   connect an additional 9,331 telephone lines before the end of 1998 and to
   provide to subscribers who request them facilities for call diversion, call
   waiting, reminder call and three-way calling by the end of the year 1998. In
   issuing this order, the PUC did not hear evidence or make any findings on the
   cost of providing these lines and services, the adjustment in telephone rates
   which may be necessary to give GT&T a fair return on its investment or the
   ways and means of financing the requirements of the PUC's order.  GT&T has
   filed a motion against the PUC's order in the Guyana High Court and has
   appealed the order on different grounds to the Guyana Court of Appeal.  No
   stay currently exists against this order, but recently the PUC requested
   further information from GT&T on this matter.  GT&T intends to take such
   steps as seem appropriate after the level of the demand for telephone service
   can be assessed in light of the temporary rates which came into effect on
   February 1, 1998.

J. CONTINGENCIES AND COMMITMENTS

   The Company is subject to lawsuits and claims which arise out of the normal
   course of business, some of which involve claims for damages that are
   substantial in amount.  The Company believes, except for the items discussed
   below for which the Company is currently unable to predict the outcome, the
   disposition of claims currently pending will not have a material adverse
   effect on the Company's financial position or results of operations.

   Upon the acquisition of GT&T in January 1991, ATN entered into an agreement
   with the government of Guyana to expand significantly GT&T's existing
   facilities and telecommunications operations and to improve service within a
   three-year period pursuant to an expansion and service improvement plan (the
   Plan). The Plan was modified in certain respects and the date for completion
   of the Plan was extended to February 1995. The government has referred to the
   PUC the failure of GT&T to complete the Plan by February 1995. The PUC is
   currently holding hearings on this matter. Failure to timely fulfill the
   terms of the Plan could result in monetary penalties, cancellation of the
   License, or other action by the PUC or the government which could have a
   material adverse affect on the Company's business and prospects.

                                      F-14

<PAGE>
 
   In May 1997, GT&T received a letter from the Commissioner of Inland Revenue
   indicating that GT&T's tax returns for 1992 through 1996 had been selected
   for an audit under the direct supervision of the Trade Minister with
   particular focus on the withholding tax on payments to international
   audiotext providers. In March and April 1997, the Guyanese Trade Minister
   publicly announced that he had appointed a task force to probe whether GT&T
   should pay withholding taxes on fees paid by GT&T to international audiotext
   providers. The Minister announced that if GT&T were found guilty of tax
   evasion it could owe as much as $40 million in back taxes. In July 1997, GT&T
   applied to the Guyana High Court for an order prohibiting this audit on the
   grounds that the decision of the Minister of Trade to set up this task force
   and to control and direct its investigation was beyond his authority,
   violated the provisions of the Guyanese Income Tax Act, interfered with the
   independence of the Commissioner of Inland Revenue and was done in bad faith,
   and the court issued an order effectively staying the audit pending a
   determination by the court of the merits of GT&T's application.

   In June 1997, GT&T received an assessment of approximately $3.9 million from
   the Commissioner of Inland Revenue for taxes for the current year based on
   the disallowance as a deduction for income tax purposes of five-sixths of the
   advisory fees payable by GT&T to the Company and for the timing of the
   taxation on certain surcharges to be billed by GT&T. The deductibility of
   these advisory fees and the deferral of these surcharges until they are
   actually billed in an earlier year had been upheld in a decision of the High
   Court in August 1995. In July 1997, GT&T applied to the High Court for an
   order prohibiting the Commissioner of Inland Revenue from further proceeding
   with this assessment on the grounds that the assessment was arbitrary and
   unreasonable and capriciously contrary to the August 1995 decision of the
   Guyana High Court, and GT&T obtained an order of the High Court effectively
   prohibiting any action on the assessment pending the determination by the
   court of the merits of GT&T's application.

   In November 1997, GT&T received assessments of approximately $14 million from
   the Commissioner of Inland Revenue for taxes for the years 1991 through 1996.
   It is GT&T's understanding that these assessments stem from the same audit
   commenced in May 1997 which the Guyana High Court stayed in its July 1997
   order referred to above. Apparently because the audit was cut short as a
   result of the Court's July 1997 order, GT&T did not receive notice of and an
   opportunity to respond to the proposed assessments as is the customary
   practice in Guyana, and substantially all of the issues raised in the
   assessments appear to be based on mistaken facts. GT&T has applied to the
   Guyana High Court for an order prohibiting the Commissioner of Inland Revenue
   from enforcing the assessments on the grounds that the origin of the audit
   with the Minister of Trade and the failure to give GT&T notice of and
   opportunity to respond to the proposed assessments violated Guyana law. The
   Guyana High Court has issued an order effectively prohibiting any action on
   the assessments pending the determination by the Court of the merits of
   GT&T's application.

K. FAIR VALUE DISCLOSURE

   Management has determined the carrying amounts of cash, accounts receivable,
   accounts payable and notes payable are a reasonable estimate of fair value.
   The fair value of long-term debt is estimated using a discounted cash flow
   analysis.  At December 31, 1996 and 1997, the carrying value of long-term
   debt was $25,723,000 and $17,834,000 and the estimated fair value was
   $25,443,000 and $17,834,000, respectively.

                                      F-15

<PAGE>
 
L. CREDIT CONCENTRATIONS AND SIGNIFICANT CUSTOMERS

   Revenues from AT&T, MCI, British Telecom and Teleglobe, consisting of
   international long-distance service, comprised approximately 37%, 21%, 19%
   and 13%, respectively, of total revenues for 1995, 36%, 21%, 12% and 12%,
   respectively, of total revenues for 1996 and 31%, 11%, 9% and 18%,
   respectively, of total revenues for 1997.  No other customers accounted for
   more than 10% of total revenues.  Substantially all of the connecting
   companies accounts receivable are due from these companies.

   A significant portion of the Company's international long-distance revenue
   discussed above is generated by GT&T's audiotext providers, which operate as
   service bureaus or intermediaries for a number of audiotext information
   providers.  One such audiotext provider accounted for $78 million, $83
   million and $39 million of these revenues for the years ended December 31,
   1995, 1996 and 1997, respectively, and another audiotext provider accounted
   for $13 million, $20 million and $18 million of these revenues for the years
   ended December 31, 1995, 1996 and 1997, respectively.

M. TRANSACTIONS WITH AFFILIATES

   Prior to December 30, 1997, the Company previously shared certain general and
   administrative costs with its former affiliate, Atlantic Tele-Network Co.
   These shared costs were allocated in approximately the same proportion as
   operating revenues of the affiliate bore to total operating revenues of the
   Company.  Management believes the allocation methods used were reasonable.
   However, such costs are not necessarily indicative of the costs that would
   have been incurred if the companies had been operated as unaffiliated
   entities.  It is not practical to estimate these costs on a stand-alone
   basis.

   The Company had interest bearing notes receivable from its former affiliates
   of $23,219,000 at December 31, 1996.  The notes bore interest at prime plus
   1.5% which was 9.75% at December 31, 1996.  Interest income for the years
   ended December 31, 1995, 1996 and 1997, was $2,250,000, $2,155,000 and
   $2,228,000, respectively.  Interest was not charged on the remaining notes
   receivable from affiliates.

N. QUARTERLY FINANCIAL DATA (UNAUDITED)

   Following is a summary of the Company's quarterly results of operations for
   the years ended December 31, 1996 and 1997:



<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                         --------------------------------------------------------------------
                                              MARCH 31        JUNE 30       SEPTEMBER 30         DECEMBER 31
<S>                                        <C>             <C>             <C>                 <C>
1997
Revenues                                          $31,742         $27,160         $36,796             $21,917
Expenses                                           26,606          26,229          24,908              21,730
                                                  -------         -------         -------             -------
Income from operations                              5,136             931          11,888                 187
Interest expense, net                                 352             338             252                 175
                                                  -------         -------         -------             -------
Income before income taxes and
  minority interest                                 4,784             593          11,636                  12
Income taxes                                        2,044             347           5,167                 160
                                                  -------         -------         -------             -------
Income before minority interest                     2,740             246           6,469                (148)
Minority interest                                     300               4           1,067                   1
                                                  -------         -------         -------             -------
 
Net income (loss)                                 $ 2,440         $   242         $ 5,402             $  (149)
                                                  =======         =======         =======             =======
</TABLE>


                                      F-16

<PAGE>
 

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                         --------------------------------------------------------------------
                                              MARCH 31        JUNE 30       SEPTEMBER 30         DECEMBER 31
<S>                                        <C>             <C>             <C>                 <C>
1996
Revenues                                          $36,009         $38,991         $39,618             $33,635
Expenses                                           30,888          31,009          31,713              27,859
                                                  -------         -------         -------             -------
Income from operations                              5,121           7,982           7,905               5,776
Interest expense, net                                 453             344             372                 333
                                                  -------         -------         -------             -------
Income before income taxes and
  minority interest                                 4,668           7,638           7,533               5,443
Income taxes                                        2,331           3,375           2,937               2,181
                                                  -------         -------         -------             -------
Income before minority interest                     2,337           4,263           4,596               3,262
Minority interest                                     562             647             570                 317
                                                  -------         -------         -------             -------
 
Net income                                        $ 1,775         $ 3,616         $ 4,026             $ 2,945
                                                  =======         =======         =======             =======
</TABLE>


                                      F-17

<PAGE>
 

ATLANTIC TELE-NETWORK, INC.                                           SCHEDULE I
(Parent Company Only)
 
CONDENSED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 1996 AND 1997
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
 
ASSETS                                                                                            1996                 1997
                                                                                                COMBINED
<S>                                                                                   <C>                  <C>
Current assets:
  Cash                                                                                          $    578              $ 5,482
  Other current assets                                                                               192                  103
                                                                                                --------              -------
                                                                                                     770                5,585
 
Property and equipment                                                                             3,149                  118
  Less accumulated depreciation                                                                   (2,094)                   -
                                                                                                --------              -------
                                                                                                   1,055                  118
 
Investment in and advances to subsidiaries                                                       115,876               52,271
 
Other assets                                                                                       2,044                  164
                                                                                                --------              -------
 
                                                                                                $119,745              $58,138
                                                                                                ========              =======
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
  Notes payable                                                                                 $  5,722   $                -
  Accounts payable                                                                                   827                2,792
  Accrued taxes                                                                                    1,268                  927
  Other current liabilities                                                                        1,026                  175
  Current portion of long-term debt                                                                   88                    -
                                                                                                --------              -------
           Total current liabilities                                                               8,931                3,894
 
Long-term debt, excluding current portion                                                            188                    -
 
Contingencies and commitments
 
Stockholders' equity:
  Preferred stock                                                                                      -                    -
  Common stock                                                                                       123                   49
  Paid-in capital                                                                                 81,852               54,195
  Retained earnings                                                                               28,651                    -
                                                                                                --------              -------
           Total stockholders' equity                                                            110,626               54,244
                                                                                                --------              -------
 
                                                                                                $119,745              $58,138
                                                                                                ========              =======
</TABLE>


See note to combined and consolidated condensed financial statements.

                                      F-18

<PAGE>
 

ATLANTIC TELE-NETWORK, INC.                                           SCHEDULE I
(Parent Company Only)                                                (CONTINUED)
 
COMBINED CONDENSED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(Amounts in Thousands, Except Per Share Amounts)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
 
                                                                                        YEARS ENDED DECEMBER 31,
                                                                        --------------------------------------------------
                                                                                    1995             1996             1997
 
<S>                                                                       <C>              <C>              <C>
Management fees                                                                  $ 7,870          $ 8,895          $ 7,057
Interest income                                                                    4,555            4,490            4,681
                                                                                 -------          -------          -------
                                                                                  12,425           13,385           11,738
Expenses:
  Interest                                                                           893              548              533
  General and administrative                                                       7,305            7,207            7,317
                                                                                 -------          -------          -------
                                                                                   8,198            7,755            7,850
                                                                                 -------          -------          -------
 
Income before income taxes and equity in undistributed earnings
  of subsidiaries                                                                  4,227            5,630            3,888
Income taxes                                                                      (1,049)          (1,651)          (1,445)
                                                                                 -------          -------          -------
 
Income before equity in undistributed earnings of subsidiaries                     3,178            3,979            2,443
Equity in undistributed earnings of subsidiaries                                   9,560            8,383            5,492
                                                                                 -------          -------          -------
 
Net income                                                                       $12,738          $12,362          $ 7,935
                                                                                 =======          =======          =======
 
Pro forma net income per share                                                                                       $1.69
                                                                                                                   =======
</TABLE>

 
 
See note to combined and consolidated condensed financial statements.

                                      F-19

<PAGE>
 
ATLANTIC TELE-NETWORK, INC.                                          SCHEDULE I
(Parent Company Only)                                                (CONTINUED)
 
COMBINED CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(Amounts in Thousands)

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
 
                                                                                        YEARS ENDED DECEMBER 31,
                                                                        --------------------------------------------------
                                                                                    1995             1996             1997
<S>                                                                       <C>              <C>              <C>
Cash flow from operating activities:
  Net income                                                                     $12,738          $12,362         $  7,935
  Adjustments to reconcile net income to net cash flows
    from operating activities:
      Equity in undistributed earnings of subsidiaries                            (9,560)          (8,383)          (5,492)
      Deferred income taxes                                                         (225)            (348)               -
      Depreciation and amortization                                                  752              784              518
      Change in operating assets and liabilities:
        Other assets                                                               1,138           (1,120)           1,727
        Other liabilities                                                          1,267               (7)             895
        Other                                                                        395              138              364
                                                                                 -------          -------         --------
           Net cash flows from operating activities                                6,505            3,426            5,947
 
Cash flows from investing activities:
  Change in affiliate borrowings                                                  (4,844)             669           21,205
  Capital expenditures                                                              (377)               -              (36)
  Split-off transaction costs                                                          -                -           (4,509)
                                                                                 -------          -------         --------
           Net cash flows from investing activities                               (5,221)             669           16,660
 
Cash flows from financing activities:
  Net repayments on notes                                                              -             (790)            (222)
  Issuance of long-term debt                                                         356                -                -
  Repayment of long-term debt                                                       (204)          (4,342)             (81)
  Purchase of Company stock                                                            -                -          (17,400)
                                                                                 -------          -------         --------
           Net cash flows from financing activities                                  152           (5,132)         (17,703)
                                                                                 -------          -------         --------
 
Net change in cash                                                                 1,436           (1,037)           4,904
 
Cash, beginning of year                                                              179            1,615              578
                                                                                 -------          -------         --------
 
Cash, end of year                                                                $ 1,615          $   578         $  5,482
                                                                                 =======          =======         ========
 
Supplemental cash flow information:
  Interest paid                                                                  $ 1,037          $   542         $    515
                                                                                 =======          =======         ========
 
  Income taxes paid                                                              $   260          $   620         $  2,310
                                                                                 =======          =======         ========
 
Non-cash activities:
  Split-off of subsidiaries                                               $  -             $  -                   $ 42,408
                                                                          ==============   ==============         ========
</TABLE>

 
See note to combined and consolidated condensed financial statements.

                                      F-20

<PAGE>
 
                                                            SCHEDULE I
                                                            (CONTINUED)
ATLANTIC TELE-NETWORK, INC.

(PARENT COMPANY ONLY)

NOTE TO COMBINED CONDENSED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997

A. SIGNIFICANT ACCOUNTING POLICIES

   INVESTMENT IN SUBSIDIARIES - Atlantic Tele-Network, Inc.'s investment in
   subsidiary is accounted for using the equity method.

   BASIS OF PRESENTATION - Effective December 30, 1997, Atlantic Tele-Network,
   Inc. (ATN or the Company) split-off into two separate public companies (the
   Transaction).  One, Emerging Communications, Inc. (ECI), contained all of the
   operations of the Company and its subsidiaries in the U.S. Virgin Islands.
   The other, ATN, continued the business and operations of the Company in
   Guyana, including ownership of its majority owned subsidiary, Guyana
   Telephone & Telegraph Company, Limited (GT&T).  The combined financial
   statements of ATN are the separate financial statements relating to ATN's
   business and operations in Guyana, including its majority owned subsidiary
   GT&T, and ATN's activities as the parent company of all of its subsidiaries.
   ATN's investment in subsidiaries other than GT&T and operations of these
   other subsidiaries have been carved out of the combined financial statements.
   The combined financial statements of ATN present the financial position as of
   December 31, 1996 and the results of operations and cash flows for each of
   the three years in the period ended December 31, 1997 as if the business,
   operations and activities included in the combined financial statements were
   conducted by a separate entity.

   The Transaction was accounted for as a non-pro rata split-off of ATN from the
   Company as it previously existed.  Accordingly, ATN's assets and liabilities
   at December 31, 1997 have been accounted for at fair value as evidenced by
   the market capitalization of ATN.  The excess of original cost over fair
   value has been allocated to reduce the values assigned to long-term assets,
   primarily investment in subsidiaries.

                                      F-21

<PAGE>
 

                                                                     SCHEDULE II
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARY
 
VALUATION AND QUALIFYING ACCOUNTS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
 
 
                                                  BALANCE AT        CHARGED TO            NET           BALANCE
                                                   BEGINNING         COSTS AND           CHARGE          AT END
                                                   OF PERIOD         EXPENSES             OFFS         OF PERIOD
 
<S>                                             <C>              <C>                 <C>             <C>
YEAR ENDED DECEMBER 31, 1995:
  Description:
    Allowance for doubtful accounts                      $  886              $ 814             $322          $1,378
                                                ===============  =================   ==============  ==============
 
 
YEAR ENDED DECEMBER 31, 1996:
  Description:
    Allowance for doubtful accounts                      $1,378              $(165)            $656          $  557
                                                ===============  =================   ==============  ==============
 
 
YEAR ENDED DECEMBER 31, 1997:
  Description:
    Allowance for doubtful accounts                      $  557              $ 159             $214          $  502
                                                ===============  =================   ==============  ==============
</TABLE>


                                      F-22

<PAGE>
 

                                   SIGNATURES
                                        
  Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                  ATLANTIC TELE-NETWORK, INC.

March 27, 1998

                                  By:  /s/ Cornelius B. Prior, Jr.
                                       ----------------------------------------
                                           Cornelius B. Prior, Jr.
                                  Chief Executive Officer and Chairman of 
                                   the Board

          Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.



<TABLE>
<CAPTION>
             SIGNATURE                                         TITLE                                  DATE
             ---------                                         -----                                  ----
<S>                                   <C>                                                      <C>
/s/ Cornelius B. Prior, Jr.           Chief Executive Officer and Chairman of the Board        March __, 1998
- ------------------------------------
 Cornelius B. Prior, Jr.
 
 
/s/ Craig A. Knock                    Chief Financial Officer, Secretary and Treasurer         March __, 1998
- ------------------------------------
 Craig A. Knock
 
/s/ James B. Ellis                    Director                                                 March __, 1998
- ------------------------------------
 James B. Ellis
 
/s/ Andrew F. Lane                    Director                                                 March __, 1998
- ------------------------------------
 Andrew F. Lane
 
/s/ Robert A.R. Maclennan             Director                                                 March __, 1998
- ------------------------------------
 Robert A.R. Maclennan
 
/s/ Henry Wheatley                    Director                                                 March __, 1998
- ------------------------------------
 Henry Wheatley
</TABLE>






<PAGE>

                                                                   EXHIBIT 10(a)
 
                            SUBSCRIPTION AGREEMENT
 
  THIS SUBSCRIPTION AGREEMENT (this "Subscription Agreement") is entered into
as of the 11th day of August, 1997 by and between Atlantic Tele-Network, Inc.,
a Delaware corporation (the "Company"), and Emerging Communications, Inc., a
Delaware corporation ("ECI").
 
  WHEREAS, to eliminate corporate disputes and to maximize the value of the
Company for the benefit of the Company and its stockholders, the Company has
entered into a Principal Terms Agreement dated January 29, 1997 among the
Company and its co-chief executive officers and principal stockholders,
Cornelius B. Prior, Jr. ("Prior") and Jeffrey J. Prosser ("Prosser"), which
contemplates the separation of the businesses and assets of the Company in the
manner set forth herein and in the Recapitalization Agreement (as defined
below) and the Merger Agreement (as defined below); and
 
  WHEREAS, in order to accomplish such separation, subject to the terms and
conditions set forth herein, the Company desires to transfer to ECI all of the
capital stock of its wholly owned subsidiaries, Atlantic Tele-Network, Co., a
Virgin Islands corporation ("ATNCo."), and Atlantic Aircraft, Inc., a Delaware
corporation ("Aircraft Corp."), as well as certain other assets
 of the Company
as more fully described herein relating to businesses conducted by ATNCo., its
subsidiaries, Virgin Islands Telephone Corporation, a Virgin Islands
corporation ("VITELCO"), Vitelcom Cellular Inc., a Virgin Islands corporation
("VCI"), and Vitelcom, Inc., a Virgin Islands corporation ("Vitelcom" and,
together with ATNCo., Aircraft Corp., VITELCO and VCI, the "Transferred
Subsidiaries"), and Aircraft Corp. in exchange for 10,959,131 shares of common
stock, par value $0.01 per share (the "ECI Common Stock"), of ECI; and
 
  WHEREAS, in order to accomplish such separation, subject to the terms and
conditions set forth herein, in consideration of the transfer to it of the
Assets (as defined herein), ECI desires to issue to the Company 10,959,131
shares of ECI Common Stock and assume the Assumed Liabilities (as defined
herein); and
 
  WHEREAS, the Company, Prior, individually and as Trustee of the 1994 Prior
Charitable Remainder Trust (the "Trust"), and Prosser have entered into a
Recapitalization Agreement dated of even date herewith attached hereto as
Exhibit A (the "Recapitalization Agreement"), pursuant to which, subject to
the terms and conditions set forth therein, (a) the Company has agreed to
repurchase (the "Repurchase") an aggregate of 765,562 shares of common stock,
par value $.01 per share (the "Company Common Stock"), of the Company owned by
Prior and the Trust, and (b) Prosser has agreed to exchange 3,325,000 shares
of Company Common Stock owned by Prosser and certain members of his family for
3,325,000 shares of a new series of common stock of the Company to be
designated Class A Common Stock and Prior has agreed to exchange 2,927,038
shares of Company Common Stock owned by Prior and certain members of his
family for 2,927,038 shares of a new series of common stock of the Company to
be designated Class B Common Stock (the "Recapitalization"); and
 
  WHEREAS, the Company and ATN MergerCo., a Delaware corporation ("Merger
Sub"), have entered into an Agreement and Plan of Merger of even date herewith
attached hereto as Exhibit B (the "Merger Agreement"), pursuant to which,
subject to the terms and conditions contained therein, Merger Sub will merge
with and into the Company, with each share of Company Common Stock being
converted into one share of ECI Common Stock and 0.4 shares of Company Common
Stock, the outstanding shares of Class A Common Stock will be converted into
an aggregate of 5,704,231 shares of ECI Common Stock and the outstanding
shares of Class B Common Stock will be converted into an aggregate of
2,807,040 shares of Company Common Stock (the "Merger"); and
 
  WHEREAS, the consummation of the Closing (as defined herein) is a condition
to the consummation of the Repurchase and Recapitalization pursuant to the
Recapitalization Agreement and a condition to the consummation of the Merger
pursuant to the Merger Agreement;
 
  NOW, THEREFORE, for and in consideration of the premises and mutual
covenants herein contained and subject to the terms and conditions hereinafter
set forth, the parties hereto hereby agree as follows:
 
                                       1

<PAGE>
 
                                   ARTICLE I
 
                                  DEFINITIONS
 
  Section 1.01. Definitions. As used in this Subscription Agreement, the
following terms shall have the meanings ascribed to them in this Section 1.01
 
  "Aircraft Corp." has the meaning set forth in the recitals hereto.
 
  "Aircraft Receivables" means all indebtedness owing from Aircraft Corp. to
the Company.
 
  "Assets" has the meaning set forth in Section 2.02 hereof.
 
  "Assumed Liabilities" has the meaning set forth in Section 2.05 hereof.
 
  "ATNCo." has the meaning set forth in the recitals hereto.
 
  "Auditor" has the meaning set forth in Section 3.02 hereof.
 
  "Banco Popular Indebtedness" means Indebtedness outstanding under the loan
agreement dated May 29, 1990, as amended February 25, 1993, and as amended
October 6, 1993, between the Company and Banco Popular de Puerto Rico.
 
  "Business Day" shall mean any day, excluding Saturday, Sunday and any day
which shall be in the City of New York a legal holiday or a day on which
banking institutions are authorized or required by law or other governmental
actions to close.
 
  "Cash Equivalents" shall mean (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof), (b) marketable direct
obligations issued by any State of the United States of America or any local
government or other political subdivision thereof, (c) U.S. dollar denominated
time deposits, certificates of deposit and bankers' acceptances, (d)
commercial paper and variable or fixed rate notes maturing within one year of
the Closing Date and (e) repurchase agreements maturing within one year of the
Closing Date.
 
  "Closing" has the meaning set forth in Section 7.01 hereof.
 
  "Closing Date" has the meaning set forth in Section 7.01 hereof.
 
  "Commission" means the Securities and Exchange Commission.
 
  "Company" has the meaning set forth in the first paragraph hereof.
 
  "Company Common Stock" has the meaning set forth in the recitals hereto.
 
  "Company Projects" has the meaning set forth in Section 2.03 hereof.
 
  "Credits" means, collectively, (a) an amount equal to 50% of the cash and
Cash Equivalents of the Company as of April 30, 1997, (b) an amount equal to
50% of all accounts receivable and other receivables of the Company (other
than (w) the principal amount of any Indebtedness owing to the Company by any
of its Subsidiaries, (x) any receivables identified on Schedule 2.02(i)
hereof, (y) the Aircraft Receivables or (z) any receivables (other than
receivables owing from any Subsidiary of the Company) which remain unpaid on
the Closing Date), including, without limitation, all accrued and unpaid
advisory and management fees, intercompany interest and stockholders'
receivables, as of April 30, 1997, (c) an amount equal to 50% of the current
assets of the Company as of April 30, 1997 (other than those included in or
specifically excluded by
 
                                       2

<PAGE>
 
clause (a) or (b) above), (d) an amount equal to 50% of all principal payments
made by Transferred Subsidiaries after December 31, 1996 and on or prior to
April 30, 1997 on Indebtedness owing to the Company, (e) an amount equal to
50% of all dividends paid by Transferred Subsidiaries to the Company after
December 31, 1996 and on or prior to April 30, 1997, (f) an amount equal to
50% of the principal amount of all loans by the Company to, and of all capital
contributions by the Company to, GTT after December 31, 1996 and on or prior
to April 30, 1997, (g) an amount equal to 50% of all costs and expenses
incurred by the Company after December 31, 1996 and on or prior to April 30,
1997 relating to the Company Projects or any potential acquisitions (including
any which may have been abandoned after December 31, 1996) to be consummated
by the Company or any of its Subsidiaries (other than the Transferred
Subsidiaries), (h) an amount equal to 100% of all principal payments made by
the Transferred Subsidiaries after April 30, 1997 and on or prior to the
Closing Date on Indebtedness (other than with respect to the Aircraft
Receivables) owing to the Company, (i) an amount equal to 100% of all
dividends paid by Transferred Subsidiaries to the Company after April 30, 1997
and on or prior to the Closing Date, (j) an amount equal to 100% of all
payments of interest accruing after April 30, 1997 and made by Transferred
Subsidiaries to the Company (other than with respect to the Aircraft
Receivables) after April 30, 1997 and on or prior to the Closing Date on
Indebtedness owing to the Company, (k) an amount equal to 50% of the book
value as of April 30, 1997 of the furniture, fixtures, equipment and leasehold
improvements at the St. Thomas Office, (l) an amount equal to 100% of all
payments received by the Company after April 30, 1997 on any receivables
identified on Schedule 2.02(i) hereof and (m) an amount equal to 100% of the
principal amount of and accrued interest on the Indebtedness listed in
Schedule 2.05(d) as of the Closing Date. Any amounts comprising the Credits
which are denominated in a currency other than U.S. dollars shall be converted
into a U.S. dollar amount using the applicable exchange rate in effect as of
the fifth Business Day prior to the Closing Date, in the case of the Estimated
Statement, and as of the Closing Date, in the case of the Final Statement, as
published in The Wall Street Journal on the next succeeding Business Day.
 
  "Debits" means, collectively, (a) an amount equal to 50% of the Indebtedness
(including Banco Popular Indebtedness) of the Company owing to banks or listed
on Schedule 2.05(d) attached hereto or as of April 30, 1997, (b) an amount
equal to 50% of all other current liabilities of the Company as of April 30,
1997 (other than Excluded Liabilities), (c) an amount equal to 50% of the
total severance payments with respect to the persons set forth on Schedule
5.02 attached hereto, (d) an amount equal to 50% of all principal payments
made by GTT on Indebtedness owing to the Company after December 31, 1996 and
on or prior to April 30, 1997, (e) an amount equal to 50% of all dividends
paid by GTT to the Company after December 31, 1996 and on or prior to April
30, 1997, (f) an amount equal to 50% of the principal amount of all loans by
the Company to, and all capital contributions by the Company to, Transferred
Subsidiaries (other than Aircraft Receivables) after December 31, 1996 and on
or prior to April 30, 1997, (g) an amount equal to 50% of all costs and
expenses incurred by the Company after December 31, 1996 and on or prior to
April 30, 1997 relating to the project for the privatization of the telephone
company for the Republic of Congo or any potential acquisitions (including any
which may have been abandoned after December 31, 1996) to be consummated by
ECI or any of the Transferred Subsidiaries, (h) an amount equal to 100% of the
principal amount of all loans made by the Company to, and of all capital
contributions by the Company to, Transferred Subsidiaries (including Aircraft
Receivables, unless the proceeds relating thereto were used by Aircraft Corp.
to repay third-party Indebtedness) after April 30, 1997 and on or prior to the
Closing Date, (i) an amount equal to 100% of all interest accrued as of April
30, 1997 which has not been paid to the Company on or prior to the Closing
Date on Indebtedness owing by Transferred Subsidiaries (other than with
respect to the Aircraft Receivables) to the Company, (j) an amount equal to
100% of all costs and expenses incurred by the Company after April 30, 1997
and on or prior to the Closing Date relating to the project for the
privatization of the telephone company for the Republic of Congo or any
potential acquisitions (including any which may have been abandoned after
December 31, 1996) to be consummated by ECI or any of the Transferred
Subsidiaries, (k) an amount equal to 100% of all costs and expenses incurred
by the Company after April 30, 1997 and on or prior to the Closing Date
relating to furniture, fixtures, equipment and leasehold improvements at, or
otherwise pertaining to, the St. Croix Office, (l) an amount equal to 50% of
the book value as of April 30, 1997 of the furniture, fixtures, equipment and
leasehold improvements at the St. Croix Office, (m) an amount equal to 100% of
the compensation and other expenses incurred by the Company after April 30,
1997 and on or prior to the Closing Date relating to the employees and
consultants identified on
 
                                       3

<PAGE>
 
Schedule 1.01A attached hereto, (n) an amount equal to 50% of all fees and
expenses incurred by Prior, Prosser, the Company, ECI and their respective
Subsidiaries relating to the Transactions and all agreements, documents and
proceedings in connection therewith, including, without limitation, all fees
and expenses of each counsel set forth on Schedule 1.01B attached hereto,
accountants and investment bankers, filing fees with the Commission and state
securities agencies, stock exchange listing fees, transfer agent fees,
transfer taxes and filing fees with the State of Delaware, it being expressly
understood and agreed that the payment of all such fees and expenses (but, as
to counsel fees and expenses, limited to the counsel named in Schedule 1.01B)
shall be the obligation of the Company, (o) an amount equal to 50% of the
compensation and other expenses incurred by the Company after April 30, 1997
and on or prior to the Closing Date relating to the employees identified on
Schedule 1.01C attached hereto, (p) an amount equal to 50% of (i) the "blue
book" values of the two aircraft owned by Aircraft Corp. as of the latest
"blue book" available to the parties on the third Business Day prior to the
Closing Date less (ii) the amount of all Indebtedness and accrued interest
owing by Aircraft Corp. to third parties as of the Closing Date, (q) an amount
equal to 50% of the carrying value as of April 30, 1997 of the assets
identified on Schedule 2.02(i) hereof, (r) an amount equal to the provision
for Income Tax expense of the Company which would be accrued on a hypothetical
statement of operations of the Company for the period after April 30, 1997 to
and including the Closing Date which statement of operations includes as
revenues or gross income only dividends paid by the Transferred Subsidiaries
to the Company during such period and interest accrued during such period on
Indebtedness of the Transferred Subsidiaries to the Company and includes as
expense only the expenses charged to ECI under clauses (c), (j), (k), (m),
(n), (o) and (s) of this definition of "Debits" (and only to the extent such
charges represent expenses which are deductible for Income Tax purposes), and
(s) an amount equal to 50% of all expenses incurred by the Company after April
30, 1997 and on or prior to the Closing Date (including interest accrued on
Indebtedness listed on Schedule 2.05(d)) to the extent such expenses are of a
type which do not constitute a Credit hereunder or a Debit pursuant to any
other clause of this definition of "Debits." Any amount comprising the Debits
which are denominated in a currency other than U.S. dollars shall be converted
into a U.S. dollar amount using the applicable exchange rate in effect as of
the fifth Business Day prior to the Closing Date, in the case of the Estimated
Statement, and as of the Closing Date, in the case of the Final Statement, as
published in The Wall Street Journal on the next succeeding Business Day.
 
  "ECI" has the meaning set forth in the first paragraph hereof.
 
  "ECI Common Stock" has the meaning set forth in the recitals hereto.
 
  "Estimated Statement" has the meaning set forth in Section 3.01 hereof.
 
  "Exchange Act" means the Securities Exchange Act of 1934, as amended.
 
  "Excluded Assets" has the meaning set forth in Section 2.03.
 
  "Excluded Liabilities" has the meaning set forth in Section 2.06.
 
  "Final Statement" has the meaning set forth in Section 3.02.
 
  "Goods" has the meaning set forth in the Uniform Commercial Code of the
State of New York.
 
  "GTT" has the meaning set forth in Section 2.03.
 
  "Income Tax" has the meaning set forth in the Tax Sharing Agreement.
 
  "Indebtedness" of any person shall mean, without duplication, (a) all
indebtedness of such person for borrowed money, (b) the deferred purchase
price of assets or services which in accordance with generally accepted
accounting principles would be shown on the liability side of the balance
sheet of such person, (c) the face amount of all letters of credit issued for
the account of such person and, without duplication, all drafts drawn
thereunder and (d) all Indebtedness of a second person secured by any lien on
any property owned by such first person, whether or not such Indebtedness has
been assumed by such first person.
 
  "Materials" has the meaning set forth in Section 5.01 hereof.
 
                                       4

<PAGE>
 
  "Merger" has the meaning set forth in the recitals hereto.
 
  "Merger Agreement" has the meaning set forth in the recitals hereto.
 
  "Prior" has the meaning set forth in the recitals hereto.
 
  "Prosser" has the meaning set forth in the recitals hereto.
 
  "Recapitalization" has the meaning set forth in the recitals hereto.
 
  "Recapitalization Agreement" has the meaning set forth in the recitals
hereto.
 
  "Repurchase" has the meaning set forth in the recitals hereto.
 
  "Retained Indebtedness" has the meaning set forth in Section 2.02.
 
  "Retained Names" has the meaning set forth in Section 5.01 hereof.
 
  "Securities Act" means the Securities Act of 1933, as amended.
 
  "Shares" has the meaning set forth in Section 2.01 hereof.
 
  "Special Meeting" has the meaning set forth in the Merger Agreement.
 
  "St. Croix Office" means the office of the Company located at Chase
Financial Center, Orange Grove, Christiansted, St. Croix, U.S. Virgin Islands
00821.
 
  "St. Croix Office Lease" means the current lease between Chase Manhattan
Bank and VITELCO for the St. Croix Office, any and all renewals, extensions or
amendments thereof and any new lease for the St. Croix Office entered into on
or prior to the Closing Date.
 
  "St. Thomas Office" means the office of the Company located at 19 Estate
Thomas, Havensite, St. Thomas, U.S. Virgin Islands 00802.
 
  "St. Thomas Office Lease" means the lease agreement dated October 1, 1992,
as amended July 22, 1993, between the Company and St. Thomas Liquor Co., Ltd.
for the St. Thomas Office.
 
  "Subscription Agreement" has the meaning set forth in the first paragraph
hereof.
 
  "Subsidiary" shall mean, of any person at any time,
 
    (a) any corporation of which a majority (by number of shares or number of
  votes) of any class of outstanding capital stock normally entitled to vote
  for the election of one or more directors (regardless of any contingency
  which does or may suspend or dilute the voting rights of such class) is at
  such time owned directly or indirectly, beneficially or of record, by such
  person or one or more Subsidiaries of such person;
 
    (b) any trust of which a majority of the beneficial interest is at such
  time owned directly or indirectly, beneficially or of record, by such
  person or one or more Subsidiaries of such person; and
 
    (c) any partnership, joint venture or other entity of which ownership
  interests having ordinary voting power to elect a majority of the board of
  directors or other persons performing similar functions are at such time
  owned directly or indirectly, beneficially or of record, by, or which is
  otherwise controlled directly, indirectly or through one or more
  intermediaries by, such person or one or more Subsidiaries of such person.
 
  "Tax" or "Taxes" means any income, gross income, gross receipts, profits,
capital stock, franchise, withholding, payroll, social security, workers
compensation, unemployment, disability, property, ad valorem, stamp, excise,
severance, occupation, service, sales, use, license, lease, transfer, import,
export, value added,
 
                                       5

<PAGE>
 
alternative minimum, estimated or other similar tax (including any fee,
assessment or other charge in the nature of or in lieu of any tax) imposed by
any governmental entity or political subdivision thereof, and any interest,
penalties, additions to tax or additional amounts in respect of the foregoing.
 
  "Transactions" has the meaning set forth in Section 6.02 hereof.
 
  "Transferred Subsidiaries" has the meaning set forth in the recitals hereto.
 
  "Trust" has the meaning set forth in the recitals hereto.
 
  "VCI" has the meaning set forth in the recitals hereto.
 
  "VITELCO" has the meaning set forth in the recitals hereto.
 
  "Vitelcom" has the meaning set forth in the recitals hereto.
 
  Section 1.02. Rules of Construction. Unless the context otherwise requires:
 
    (a) a capitalized term used herein has the meaning ascribed to such term;
 
    (b) "or" is not exclusive;
 
    (c) words in the singular include the plural, and words in the plural
  include the singular; and
 
    (d) "herein," "hereof" and other words of similar import refer to this
  Subscription Agreement as a whole and not to any particular Article,
  Section or other subdivision.
 
                                  ARTICLE II
 
                SUBSCRIPTION FOR AND ACQUISITION OF THE SHARES
 
  Section 2.01. Subscription for the Shares. The Company hereby subscribes for
and, subject to the terms and conditions contained herein, agrees to acquire
at the Closing 10,959,131 shares of ECI Common Stock (the "Shares").
 
  Section 2.02. Acquisition of the Shares. In consideration of the issuance of
the Shares by ECI and the performance of its other obligations hereunder,
subject to the terms and conditions contained herein, the Company agrees to
transfer, convey, assign and deliver, or cause to be transferred, conveyed,
assigned and delivered, at the Closing to ECI the following assets (which are
collectively referred to herein as the "Assets"):
 
    (a) all of the issued and outstanding capital stock of ATNCo.;
 
    (b) all of the issued and outstanding capital stock of Aircraft Corp.;
 
    (c) all Indebtedness of each Transferred Subsidiary owing to the Company
  except the Subordinated Demand Note of ATNCo. payable to the order of the
  Company, which had an unpaid principal amount of $22,031,586 at April 30,
  1997 (the "Retained Indebtedness");
 
    (d) all rights of the Company under the St. Croix Office Lease;
 
    (e) all equipment, furniture, fixtures and leasehold improvements of the
  Company located at the St. Croix Office;
 
    (f) all rights of the Company under any leases of equipment located at
  the St. Croix Office;
 
    (g) all rights of the Company and GTT (including any capitalized costs
  relating thereto) relating to the project for the privatization of the
  telephone company for the Republic of Congo;
 
                                       6

<PAGE>
 
    (h) all books, records and other data and papers held by the Company at
  the Closing relating to the operation of the businesses of the Transferred
  Subsidiaries;
 
    (i) all of the right, title and interest of the Company in the assets set
  forth on Schedule 2.02(i) attached hereto; and
 
    (j) 50% of all receivables of the Company as of April 30, 1997 which
  remain unpaid as of the Closing Date (other than Indebtedness owing to the
  Company by any of its Subsidiaries and any receivables identified on
  Schedule 2.02(i)).
 
  Section 2.03. Excluded Assets. For the avoidance of doubt, each of the
parties hereto acknowledges and agrees that there shall not be included in
Assets to be transferred, conveyed, assigned and delivered to ECI at the
Closing any of the following assets (which are collectively referred to herein
as the "Excluded Assets"):
 
    (a) any of the capital stock of Guyana Telephone & Telegraph Company
  Ltd., a Guyana corporation ("GTT");
 
    (b) any Indebtedness of GTT owing to the Company;
 
    (c) any rights of the Company under the St. Thomas Office Lease;
 
    (d) any equipment, furniture, fixtures and leasehold improvements of the
  Company located at the St. Thomas Offices;
 
    (e) any rights of the Company under any leases of equipment located at
  the St. Thomas Office;
 
    (f) any rights of the Company or GTT (including any capitalized costs
  relating thereto) relating to the projects for the privatization of the
  Suriname telephone company, the purchase of the St. Martin cellular
  operation or the long distance telephone opportunity in Jamaica (the
  "Company Projects"); and
 
    (g) any rights of the Company under any advisory or management agreement
  between GTT and the Company.
 
  Section 2.04. Issuance of the Shares. At the Closing, subject to the terms
and conditions contained herein, ECI agrees to issue and deliver the Shares to
the Company.
 
  Section 2.05. Assumption of Liabilities. In consideration of the transfer,
conveyance, assignment and delivery of the Assets and the performance by the
Company of its other obligations hereunder, subject to the terms and
conditions contained herein, ECI agrees to assume at the Closing in accordance
with their respective terms the following liabilities (which are collectively
referred to herein as the "Assumed Liabilities"):
 
    (a) all obligations of the Company under the St. Croix Office Lease;
 
    (b) all obligations of the Company under all of the leases of equipment
  located at the St. Croix Office and all other leases of equipment located
  at the St. Croix Office entered into by the Company after the date of this
  Subscription Agreement and prior to the Closing;
 
    (c) all obligations of the Company arising out of or relating to the
  Transferred Subsidiaries and the project for the privatization of the
  telephone company for the Republic of Congo;
 
    (d) the obligations of the Company set forth on Schedule 2.05(d);
 
    (e) certain Tax liabilities of the Company as more particularly described
  in the Tax Sharing and Indemnification Agreement; and
 
    (f) except as otherwise provided in the Indemnity Agreement, one-half of
  all liabilities and obligations of the Company, whether known or unknown,
  arising out of events or acts or omissions occurring at or prior to the
  Closing, except for (i) any Tax liabilities, (ii) any liabilities or
  obligations that are taken into account in clauses (b) and (c) of the
  definition of "Debits" for purposes of calculating the Final Closing
  Adjustment and (iii) any liabilities and obligations that are Assumed
  Liabilities pursuant to clauses (a)-(d) of this Section 2.05 or Excluded
  Liabilities pursuant to clauses (a)-(c) of Section 2.06.
 
 
                                       7

<PAGE>
 
  Section 2.06. Excluded Liabilities. For the avoidance of doubt, each of the
parties hereto acknowledges and agrees that ECI does not hereby assume or
agree to assume any of the following obligations or liabilities (which are
collectively referred to herein as the "Excluded Liabilities"):
 
    (a) any obligations of the Company under the St. Thomas Office Lease;
 
    (b) any obligations of the Company under the leases of equipment located
  at the St. Thomas Office; and
 
    (c) any liability or obligation of the Company, whether known or unknown,
  or matured or contingent, arising out of or relating to GTT or the Company
  Projects.
 
  Section 2.07. Restricted Assets. In the event that any Asset is not
assignable or transferable to ECI at the Closing by its terms or under
applicable law (each, a "Restricted Asset"), the Company shall use all
reasonable efforts, and ECI shall cooperate reasonably with the Company, to
promptly obtain the consents and waivers necessary to cause to be assigned or
transferred to ECI such Restricted Asset. After the Closing and continuing for
the duration of the useful life of each Restricted Asset, the Company shall
use reasonable efforts to provide ECI with the benefits of such Restricted
Asset and enforce at the request of ECI, or allow ECI to enforce, any rights
of the Company under such Restricted Asset; provided that the reasonable costs
and expenses of the Company incurred at ECI's request with respect to any such
enforcement shall be reimbursed by ECI.
 
  Section 2.08. Access to Information. Each of the parties shall give to the
other reasonable access to information necessary to consummate the
transactions contemplated by this Subscription Agreement and shall deliver at
its expense all records relating to businesses and operations of the other
party and its Subsidiaries which may inadvertently remain in its possession
after the Closing. Each of the parties shall retain records relating to the
businesses and operations of the other party and its Subsidiaries in its
possession for a period of five years after the Closing Date.
 
                                  ARTICLE III
 
                              CLOSING ADJUSTMENT
 
  Section 3.01. Preliminary Closing Adjustment.
 
    (a) On the third Business Day prior to the Closing Date, the Company
  shall deliver to ECI an estimated statement of the Debits and the Credits
  (the "Estimated Statement"), which Estimated Statement shall be in form and
  substance reasonably satisfactory to ECI. The difference between the Debits
  and the Credits shown on the Estimated Statement is herein called the
  "Closing Date Adjustment." If the Debits exceed the Credits the Closing
  Date Adjustment shall be a positive amount representing the sum resulting
  from the Closing Date Adjustment due by ECI to the Company. If the Credits
  exceed the Debits the Closing Date Adjustment shall be a negative amount
  representing the sum resulting from the Closing Date Adjustment due by the
  Company to ECI.
 
    (b) ECI shall cause ATNCo to pay on the Closing Date, by wire transfer of
  immediately available funds, as a payment of the Retained Indebtedness,
  $17.4 million increased by the sum of the Closing Date Adjustment should
  such adjustment be a positive amount or decreased by the Closing Date
  Adjustment should such amount be a negative amount. If the amount of the
  payment to be made by ATNCo. under this Section 3.01 exceeds the principal
  amount of the Retained Indebtedness, such excess amount shall be paid by
  ECI to the Company.
 
  Section 3.02. Final Closing Adjustment.
 
    (a) As promptly as practicable after the Closing Date, the Company shall
  deliver to ECI a statement of Debits and Credits as of the Closing Date
  (the "Closing Date Statement"). The Company and ECI shall engage the Omaha,
  Nebraska office of Deloitte & Touche LLP (the "Auditor") to perform an
  audit of the Debits and Credits shown on the Closing Date Statement. The
  Auditor shall, within 60 days after the
 
                                       8

<PAGE>
 
  Closing Date, deliver to the parties a report of the calculation of the
  Debits and the Credits (the "Final Statement"). The Final Statement shall
  be conclusive and binding upon the parties, absent fraud or manifest error.
  Each of the parties shall give the Auditor full access to its books,
  records, facilities and employees in connection with the Auditor's audit of
  the Final Statement. The fees and disbursements of the Auditor shall be
  paid equally by the Company and ECI. The amount by which the amount of the
  Debits shown on the Final Statement exceeds the amount of the Credits shown
  on the Final Statement is herein called the "Final Closing Adjustment." If
  the amount of Credits exceeds the amount of Debits, the Final Closing
  Adjustment shall be a negative amount.
 
    (b) If the Final Closing Adjustment exceeds the amount of the Closing
  Date Adjustment, then within three Business Days after receipt of the Final
  Statement by ECI, ECI shall cause ATNCo. to pay to the Company on account
  of the principal amount of the Retained Indebtedness by wire transfer of
  immediately available funds to an account specified by the Company therefor
  an amount in cash in U.S. dollars equal to the amount by which the Final
  Closing Adjustment exceeds the Closing Date Adjustment. If the amount of
  the payment to be made by ATNCo. under this clause (b) exceeds the
  remaining principal amount of the Retained Indebtedness, such excess amount
  shall be paid by ECI to the Company.
 
    (c) If the Final Closing Adjustment is less than the Closing Date
  Adjustment, then within three Business Days after receipt of the Final
  Statement by the Company, the Company shall pay to ECI by wire transfer of
  immediately available funds to an account specified by ECI therefor an
  amount in cash in U.S. dollars equal to the amount by which the Final
  Closing Adjustment is less than the amount of the Closing Date Adjustment.
 
    (d) For the avoidance of doubt, it is hereby acknowledged and agreed that
  a positive amount is always larger than any negative amount (e.g. $10 is
  $110 larger than -$100), that a negative amount is always less than a
  positive amount (e.g. -$100 is $110 less than $10), and that a larger
  negative number is "less than" a smaller negative number (e.g. -$110 is $10
  less than -$100).
 
    (e) Immediately following the payment specified in clause (b) or (c) of
  this Section 3.02, the Company shall note on the promissory note evidencing
  the Retained Indebtedness the aggregate amount of the payments, if any,
  received by it with respect to the Retained Indebtedness pursuant to
  Section 3.01 and this Section 3.02 and assign and deliver the Retained
  Indebtedness to ECI.
 
                                  ARTICLE IV
 
                       NO REPRESENTATIONS OR WARRANTIES;
                       CONDITION OF ASSETS, DISCLAIMERS
 
  Section 4.01. No Representations or Warranties. Each of the parties
understands and agrees that no party is making, in this Subscription Agreement
or in any other agreement or document entered into in connection with the
Transactions, representations or warranties to the other in any way as to the
business or operations of the Company prior to or after the Closing or as to
the business or operations of ECI after the Closing, or as to any consents or
approvals required in connection therewith.
 
  Section 4.02. Condition of Assets, Disclaimers. All Goods to be conveyed
pursuant to this Subscription Agreement are expressly agreed to be conveyed
"AS IS" and "WITH ALL FAULTS." All of the Assets to be transferred and
assigned to ECI pursuant to the provisions of this Subscription Agreement
shall be transferred and assigned to ECI as is, where is, in the condition
thereof and subject to the state of title thereto, the rights of any parties
in possession, and the right of ownership of others therein, and are subject
to all applicable laws, rules, regulations, ordinances, licenses, permits,
franchises, judgments, orders and other governmental actions, whether now in
effect or hereafter taken, and without representations or warranties of any
kind by the Company or any person acting or purporting to act on its behalf.
The Company makes no warranty or representation, express or implied, as to the
title, design, condition, value, operation, workmanship, merchantibility or
suitability for a particular purpose of the Assets, or any portion thereof, or
any other warranty or representation, express or implied, of any kind
whatsoever with respect to the Assets or any portion thereof.
 
                                       9

<PAGE>
 
                                   ARTICLE V
 
                   CERTAIN AGREEMENTS OF THE COMPANY AND ECI
 
  Section 5.01. Use of Retained Names. After the Closing, ECI shall not, and
shall cause its Subsidiaries not to, put into use any products, signs,
purchase orders, sales orders, labels, letterheads, or other materials
(collectively, "Materials") not in existence on the Closing Date that bear the
name "Atlantic Tele-Network, Inc." or "ATN" (the "Retained Names"). After the
Closing, ECI and its Subsidiaries shall be entitled to use any Materials in
existence as of the Closing that bear the Retained Names for a period not
exceeding 30 days.
 
  Section 5.02. Severance. Prior to the Closing, the Company shall terminate
the employment of each of its employees identified on Schedule 5.02 attached
hereto.
 
  Section 5.03. Aircraft Corp. Costs. Effective May 1, 1997, the Transferred
Subsidiaries, the project for the privatization of the telephone company for
the Republic of Congo, the Company Projects, and GTT shall be charged for use
of Aircraft Corp.'s jet aircraft only in an amount equal to the cost incident
to such use computed in the same manner and on the same basis as Prosser and
Prior have heretofore been charged for personal use of such aircraft, and all
remaining expenses of Aircraft Corp. with respect to the jet aircraft for the
period after April 30, 1997 and on or prior to the Closing Date shall be
charged to the Company as an expense to be allocated 50% to ECI pursuant to
clause(s) of the definition of "Debits" in this Subscription Agreement.
 
  Section 5.04. Exchange of Indebtedness. Upon receipt of Indebtedness of
Transferred Subsidiaries pursuant to Section 2.02(c), ECI shall immediately
exchange any such Indebtedness for a promissory note with a term of at least
ten years at a variable rate of interest at least equal to the variable rate
of interest under the senior credit facility between Atlantic Tele-Network,
Co. and Rural Telephone Finance Cooperative and under which the obligor has
the right to prepay such note at any time without premium or penalty.
 
                                  ARTICLE VI
 
                             CONDITIONS TO CLOSING
 
  The obligations of the parties to consummate the purchase and sale of the
Shares, the assumption of the Assumed Liabilities and the other transactions
to be consummated by the parties hereto at the Closing shall be subject to the
satisfaction of the following conditions on or prior to the Closing Date:
 
  Section 6.01. Third-Party Approvals. All consents, approvals,
authorizations, permits and orders with respect to the transactions
contemplated by this Subscription Agreement, the Recapitalization Agreement
and the Merger Agreement and the other agreements to be entered into pursuant
hereto and thereto required from any person, entity or court or governmental
agency, authority or instrumentality, federal, state or local, having or
asserting rights against or jurisdictions over the Company, ECI, or such
transactions (including, without limitation, from the Rural Telephone Finance
Corporation, the Rural Utilities Service, and Northern Telecom International
Finance B.V.) shall have been obtained and be valid and in full force and
effect.
 
  Section 6.02. Registration Statement and Stockholder Approval. The
Registration Statement registering the Shares to be issued to stockholders of
the Company pursuant to the Merger Agreement under the Securities Act shall
have become effective in accordance with the provisions of the Securities Act;
no stop order suspending the effectiveness of such Registration Statement
shall have been issued by the Commission and remain in effect; all necessary
state securities or blue sky authorizations shall have been received. The
approval and adoption of this Subscription Agreement, the Recapitalization
Agreement, the Merger Agreement and the other agreements to be entered into
pursuant hereto and thereto and the transactions contemplated hereby and
thereby (the "Transactions"), by a majority of the outstanding shares of
Company Common Stock shall have been obtained.
 
 
                                      10

<PAGE>
 
  Section 6.03. Internal Revenue Service Ruling. The Company shall have
received rulings from the Internal Revenue Service reasonably acceptable to
the Company and ECI, which rulings shall be in full force and effect as of the
Closing Date, to the effect that:
 
    (i) the transactions contemplated by the Subscription Agreement will be a
  tax-free reorganization as described in Section 368(a)(1)(D) of the Code;
  and
 
    (ii) the distribution of ECI Common Stock to the holders of Company
  Common Stock and the holders of the Class A Common Stock pursuant to the
  Merger Agreement will be tax-free for federal income tax purposes to the
  Company under Section 355(c) or 361(c) of the Code and to the holders of
  Company Common Stock and the holders of the Class A Common Stock under
  Section 355(a) of the Code.
 
  Section 6.04. Fairness Opinion. The Board of Directors of the Company shall
have received an opinion from Prudential Securities Inc. dated July 7, 1997
and reaffirmed within five Business Days prior to the date a definitive proxy
statement is mailed to the holders of Company Common Stock under the Exchange
Act to the effect that the Transactions are fair from a financial point of
view to the public stockholders of the Company.
 
  Section 6.05. [Intentionally Omitted]
 
  Section 6.06. Liquidation of Vitelcom. Vitelcom shall be liquidated or
merged into ATN Co. and the business of Vitelcom shall be continued by ATN
Co., which may continue such business as a separate division of ATN Co. but
not as a separate corporate Subsidiary.
 
  Section 6.07. Minimum Borrowing Capacity. Each of the Company and ECI shall
have minimum available borrowing capacity with reputable lenders or available
cash on hand necessary to make and, in ECI's case, to cause ATNCo. to make the
payments expected to be required under Article III hereof.
 
  Section 6.08. No Material Adverse Change. Since the date of this Agreement,
there shall have been no material adverse change in the business to be
conducted by either (a) the Company and its Subsidiaries after the Closing or
(b) ECI and its Subsidiaries after the Closing.
 
  Section 6.09. No Litigation. No action, suit, investigation or other
proceeding shall be pending or threatened before any arbitrator, court or
governmental agency which, in the opinion of at least one-half of the members
of the Board of Directors of either the Company or ECI, presents a substantial
risk of the restriction or prohibition of any material component of the
Transactions, or obtaining material damages or other relief in connection
therewith.
 
  Section 6.10. Agreements in Full Force. Each of the Merger Agreement and the
Recapitalization Agreement shall be in full force and effect and no party
thereto shall be in material breach of any of its obligations thereunder.
 
  Section 6.11. Listing. The Shares issuable in the Merger shall have been
authorized for listing on the American Stock Exchange subject to a final
notice of issuance. The outstanding Common Stock of the Company shall be
listed on the American Stock Exchange, and no proceedings shall be pending or
threatened to delist such stock from such Exchange.
 
  Section 6.12. Performance. Each of the parties shall have performed and
complied in all material respects with all obligations and conditions required
by this Subscription Agreement to be performed or complied with by it at or
prior to the Closing and such party shall furnish to the other an officer's
certificate to evidence such performance and compliance.
 
  Section 6.13. ECI Charter. ECI shall have adopted and filed with the
Secretary of State of Delaware a Restated Certificate of Incorporation
substantially in the form of Exhibit D attached hereto.
 
  Section 6.14. Boards of Directors and Officers. The Board of Directors and
officers of ECI and each Transferred Subsidiary shall consist of those persons
designated in writing by Prosser to the Company on the
 
                                      11

<PAGE>
 
Business Day preceding the Closing Date. The Board of Directors and officers
of the Company and GTT shall consist of those persons designated in writing by
Prior to the Company on the business day preceding the Closing Date.
 
  Section 6.15. Non-Competition Agreement. ECI and Prosser shall have entered
into a Non-Competition Agreement substantially in the form of Exhibit E
attached hereto, and such agreement shall be in full force and effect and no
party thereto shall be in material default of any of its obligations
thereunder.
 
  Section 6.16. Indemnity Agreement. The Company, ECI, Prior and Prosser shall
have entered into an Indemnity Agreement substantially in the form of Exhibit
F attached hereto, and such agreement shall be in full force and effect and no
party thereto shall be in material default of any of its obligations
thereunder.
 
  Section 6.17. Personal Debts. Each of Prior and Prosser shall have repaid
all personal debts owing to the Company or any of its Subsidiaries (including
any Transferred Subsidiaries); and Prior shall have caused the repayment of
all amounts owing by Prior's private wireless cable television business to
Vitelcom as of the Closing Date.
 
  Section 6.18. Employee Benefits Agreement. The Company and ECI shall have
entered into an Employee Benefits Agreement substantially in the form of
Exhibit G attached hereto, and such agreement shall be in full force and
effect and no party thereto shall be in material default of any of its
obligations thereunder.
 
  Section 6.19. Tax Sharing and Indemnification Agreement. The Company and ECI
shall have entered into a Tax Sharing and Indemnification Agreement
substantially in the form of Exhibit H attached hereto (the "Tax Sharing
Agreement"), and such agreement shall be in full force and effect and no party
thereto shall be in material default of any of its obligations thereunder.
 
  Section 6.20. Assumed Liabilities. ECI shall have assumed all obligations of
the Company with respect to the Assumed Liabilities outstanding as of the
Closing Date.
 
  Section 6.21. Technical Assistance Agreement. The Company, ATNCo., VITELCO
and VCI shall have entered into a Technical Assistance Agreement substantially
in the form of Exhibit C attached hereto (the "Technical Services Agreement"),
and such agreement shall be in full force and effect and no party thereto
shall be in material default of any of its obligations thereunder.
 
  Section 6.22. Recapitalization Agreement Closing. Each of the conditions to
the closing under the Recapitalization Agreement (the "Recapitalization
Agreement Closing") shall have been satisfied or, with the consent of each of
the parties hereto waived; and all parties thereto shall appear ready, willing
and able to consummate the transactions therein provided to be consummated at
the Recapitalization Agreement Closing.
 
  Section 6.23. Merger Agreement Closing. Each of the conditions to the
closing under the Merger Agreement (the "Merger Agreement Closing") shall have
been satisfied or, with the consent of each of the parties hereto waived; and
all parties thereto shall appear ready, willing and able to consummate the
transactions therein provided to be consummated at the Merger Agreement
Closing.
 
                                  ARTICLE VII
 
                             CLOSING DATE; CLOSING
 
  Section 7.01. Closing Date; Closing. The closing of the acquisition and
issuance of the Shares hereunder (the "Closing") shall take place on the same
Business Day as the Recapitalization Agreement Closing and the Merger
Agreement Closing and shall be held as soon as reasonably practicable after
satisfaction or waiver by the parties hereto of the conditions set forth in
Article VI hereof. The date on which the Closing occurs is referred to herein
as the "Closing Date." The Closing shall take place at the offices of Cahill
Gordon &
 
                                      12

<PAGE>
 
Reindel, 80 Pine Street, New York, New York 10005. At the Closing, (i) ECI
shall issue the Shares to the Company registered in such names and
denominations as the Company shall request, (ii) the transfer, conveyance,
assignment and delivery of the Assets shall be effected by the delivery by the
Company of such deeds, bills of sale, endorsements, assignments, certificates
or other instruments as ECI shall reasonably request, (iii) the assumption of
the Assumed Liabilities shall be effected by the delivery by ECI of such
instruments of assumption as the Company shall reasonably request and (iv) ECI
shall have consummated or caused ATNCo. to have consummated the wire transfer
contemplated by Section 3.01 hereof.
 
  Section 7.02. Further Assurances. Each of the parties agrees that after the
Closing, upon reasonable request of the other party, it will do, execute,
deliver and acknowledge, and will cause to be done, executed, delivered and
acknowledged, all such further acts, deeds, certificates, assignments,
assumptions, transfers, conveyances, powers of attorney and other documents as
may be reasonably required to consummate the transactions contemplated hereby.
 
                                 ARTICLE VIII
 
                           MISCELLANEOUS PROVISIONS
 
  Section 8.01. Termination. This Subscription Agreement shall terminate upon
the termination of the Recapitalization Agreement or the Merger Agreement. In
addition, this Subscription Agreement may be terminated at any time prior to
the Closing by the Board of Directors of the Company and the Board of
Directors of ECI without the authorization or consent of the Company's or
ECI's stockholders. In the event of any such termination, neither party shall
have any liability of any kind to the other party.
 
  Section 8.02. Entire Agreement. This Subscription Agreement, together with
all other written agreements which may be entered into between the parties in
connection herewith and the transactions contemplated hereby and all other
documents and instruments delivered in connection herewith and therewith and
the transactions contemplated hereby and thereby, set forth the full and
complete understanding of the parties hereto with respect to the transactions
contemplated hereby.
 
  Section 8.03. Governing Law. This Subscription Agreement shall be governed
by and construed in accordance with the laws of the State of New York, without
reference to the conflict of laws rules thereof.
 
  Section 8.04. Headings. The headings in this Subscription Agreement are
intended solely for convenience of reference and shall be given no effect in
the interpretation of this Subscription Agreement.
 
  Section 8.05. Counterparts. This Subscription Agreement may be executed in
two counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
 
  Section 8.06. Benefits. This Subscription Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns, and no other person will have any right or obligation
hereunder.
 
  Section 8.07. Assignment. Neither this Subscription Agreement nor any right
hereunder may be assigned by the parties hereto without the prior written
consent of the other party. Subject to the foregoing, this Subscription
Agreement shall be binding upon and inure to the benefit of the successors,
heirs, representatives and assigns of each party hereto.
 
  Section 8.08. Amendment and Waiver. This Subscription Agreement may be
amended only by an instrument in writing signed on behalf of each of the
parties hereto. Any term, condition or provision of this Subscription
Agreement may be waived (if in writing) at any time by the party or each of
the parties entitled to the benefits thereof.
 
 
                                      13

<PAGE>
 
  Section 8.09. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
given if delivered by hand, or when sent by telex or telecopier (with receipt
confirmed) or by registered mail, return receipt requested, addressed as
follows (or to such other address as a party may designate by notice to the
other):
 
    (a) If to the Company:
 
      Atlantic Tele-Network, Inc.
      Estate Havensight
      P.O. Box 12030
      St. Thomas, U.S. Virgin Islands 00801
      (340) 774-2260 or 777-8000
      Attention: Cornelius B. Prior
      Telecopy: (809) 774-7790
 
    with copies to:
 
      Lewis A. Stern, P.C.
      Fried, Frank, Harris, Shriver & Jacobson
      One New York Plaza
      New York, New York 10004
      (212) 859-8190
      Telecopy: (212) 859-8587
 
    (b) If to ECI:
 
      Atlantic Tele-Network, Inc.
      Chase Financial Center
      P.O. Box 1730
      St. Croix, U.S. Virgin Islands 06821-1730
      (340) 777-7700
      Attention: Jeffrey J. Prosser
      Telecopy: (809) 774-5487
 
    with copies to:
 
      Roger Meltzer, Esq.
      Cahill Gordon & Reindel
      80 Pine Street
      New York, New York 10005
      (212) 701-3851
      Telecopy: (212) 269-5420
 
                                      14

<PAGE>
 
  IN WITNESS WHEREOF, each of the Company and ECI has caused this Subscription
Agreement to be executed on the date first written above.
 
                                          Atlantic Tele-Network, Inc.
 
                                          By: /s/ Cornelius B. Prior
                                             __________________________________
                                            Name: Cornelius B. Prior
                                            Title:Co-Chief Executive Officer
 
                                          By: /s/ Jeffrey J. Prosser
                                             __________________________________
                                            Name: Jeffrey J. Prosser
                                            Title:Co-Chief Executive Officer
 
                                          Emerging Communications, Inc.
 
                                          By: /s/ Jeffrey J. Prosser
                                             __________________________________
                                            Name: Jeffrey J. Prosser
                                            Title:Chief Executive Officer
 
                                      15

<PAGE>
 
                                 SCHEDULE 1.01A
 
                  PROSSER DESIGNATED EMPLOYEES AND CONSULTANTS
 
James J. Heying
 
Sharon Smalls
 
Edwin Crouch
 
Steve Ross
 
Deseree Rodriquez
 
Liz Goggins
 
Eling Joseph
 
Wilhelm Samuel
 
David Stuedell
 
Gary Fisher
 
Kevin Cullwood
 
Ronald Sanders
 
James Dishman
 
Sir Shridath S. Ramphal
 
Paul Singer
 
                                       16

<PAGE>
 
                                 SCHEDULE 1.01B
 
                                    COUNSEL
 
Cahill Gordon & Reindel
 
Fried, Frank, Harris, Shriver & Jacobson
 
Raynor, Rensch & Pfeiffer
 
Richards, Layton & Finger
 
Brown & Wood LLP
 
Kelley Drye & Warren
 
Wiley, Rein & Fielding
 
                                       17

<PAGE>
 
                                 SCHEDULE 1.01C
 
                             UNDESIGNATED EMPLOYEES
 
Pacita Donovan
 
                                       18

<PAGE>
 
                               SCHEDULE 2.02(I)
 
                                CERTAIN ASSETS
 
- --Any loans or advances to or other receivables from Jeffrey J. Prosser or any
 of the persons listed on Schedule 1.01A hereof
 
- --AS400 Computer currently located at the premises of Vitelco
 
- --Key-man life insurance policies on the life of Jeffrey J. Prosser, including
 pre-paid premiums relating thereto
 
- --Rent deposits relating to the St. Croix Office or leases relating to
 equipment located at the St. Croix Office
 
- --Any other prepaid expenses, deposits or similar assets of the Company
 relating to assets to be transferred to ECI under this Agreement, relating to
 assets, liabilities, or operations of any of the Transferred Subsidiaries or
 relating to Jeffrey J. Prosser of any of the person listed on Schedule 1.01A
 hereof.
 
                                      19

<PAGE>
 
                                SCHEDULE 2.05(D)
 
                          CERTAIN ASSUMED LIABILITIES
 
- --Banco Popular Indebtedness
 
- --Indebtedness relating to the AS400 Computer
 
- --Any other indebtedness of the Company that is secured by assets to be
 transferred to ECI or assets of a Transferred Subsidiary
 
                                       20

<PAGE>
 
                                 SCHEDULE 5.02
 
                           EMPLOYEES TO BE TERMINATED
 
Pacita Donovan
 
                                       21



<PAGE>

                                                                   EXHIBIT 10(b)
 
                   REPURCHASE AND RECAPITALIZATION AGREEMENT
 
  THIS REPURCHASE AND RECAPITALIZATION AGREEMENT (this "Recapitalization
Agreement") is entered into as of the 11th day of August, 1997 by and among
Atlantic Tele-Network, Inc., a Delaware corporation (the "Company"), Cornelius
B. Prior, Jr. ("Prior"), individually and as Trustee of the 1994 PRIOR
CHARITABLE REMAINDER TRUST (the "Trust"), and Jeffrey J. Prosser ("Prosser").
 
  WHEREAS, to eliminate corporate disputes and to maximize the value of the
Company for the benefit of the Company and its stockholders, the Company has
entered into a Principal Terms Agreement dated January 29, 1997 among the
Company, Prior and Prosser, which contemplates the separation of the
businesses and assets of the Company in the manner set forth herein and in the
Subscription Agreement (as defined below) and the Merger Agreement (as defined
below); and
 
  WHEREAS, the Company and Emerging Communications, Inc., a Delaware
corporation ("ECI"), have entered into a Subscription Agreement of even date
herewith (the "Subscription Agreement"), pursuant to which in order to
accomplish such separation, subject to the terms and conditions set forth in
the Subscription Agreement, the Company has agreed to
 transfer to ECI all of
the capital stock of its wholly owned subsidiaries, Atlantic Tele-Network,
Co., a Virgin Islands corporation ("ATNCo."), and Atlantic Aircraft, Inc., a
Delaware corporation ("Aircraft Corp."), as well as certain other assets of
the Company as more fully described therein relating to businesses conducted
by ATNCo., its subsidiaries, Virgin Islands Telephone Corporation, a Virgin
Islands corporation, Vitelcom Cellular Inc., a Virgin Islands corporation, and
Vitelcom, Inc., a Virgin Islands corporation, and Aircraft Corp. in exchange
for 10,959,131 shares of common stock, par value $0.01 per share (the "ECI
Common Stock"), of ECI; and
 
  WHEREAS, subject to the terms and conditions set forth herein, (a) the
Company desires to repurchase an aggregate of 765,562 shares of common stock,
par value $.01 per share (the "Company Common Stock"), of the Company owned by
Prior and the Trust, and (b) Prosser desires to exchange 3,325,000 shares of
Company Common Stock owned by Prosser and certain members of his family
(including shares which he holds under an option to purchase) for 3,325,000
shares of a new series of common stock of the Company to be designated Class A
Common Stock and Prior desires to exchange 2,927,038 shares of Company Common
Stock owned by Prior and certain members of his family for 2,927,038 shares of
a new series of common stock of the Company to be designated Class B Common
Stock; and
 
  WHEREAS, the Company and ATN MergerCo., a Delaware corporation ("Merger
Sub"), have entered into an Agreement and Plan of Merger of even date herewith
(the "Merger Agreement"), pursuant to which, subject to the terms and
conditions contained therein, Merger Sub will merge with and into the Company,
with each share of Company Common Stock being converted into one share of ECI
Common Stock and 0.40 shares of Company Common Stock, the outstanding shares
of Class A Common Stock will be converted into an aggregate of 5,704,231
shares of ECI Common Stock and the outstanding shares of Class B Common Stock
will be converted into an aggregate of 2,807,040 shares of Company Common
Stock (the "Merger"); and
 
  WHEREAS, the consummation of the Closing (as defined herein) is a condition
to the consummation of the Merger pursuant to the Merger Agreement;
 
  NOW, THEREFORE, for and in consideration of the premises and mutual
covenants herein contained and subject to the terms and conditions hereinafter
set forth, the parties hereto hereby agree as follows:
 
                                   ARTICLE I
 
                                  REPURCHASE
 
  Section 1.01. Purchase of Shares. Subject to the terms and conditions
contained herein, the Company agrees to purchase at the Closing (as defined
herein) 416,998 shares of Company Common Stock owned by Prior (the "Prior
Repurchase Shares") at a purchase price of $22.7284 per share and 384,564
shares of Company Common Stock owned by the Trust (the "Trust Shares") at a
purchase price of $22.7284 per share.
 

                                       1

<PAGE>
 
  Section 1.02. Sale of Shares. Subject to the terms and conditions contained
herein, (i) Prior agrees to sell and deliver to the Company at the Closing the
Prior Repurchase Shares for a purchase price of $22.7284 per share and (ii)
the Trust agrees to sell and deliver to the Company the Trust Shares for a
purchase price of $22.7284 per share.
 
                                  ARTICLE II
 
                               RECAPITALIZATION
 
  Section 2.01. Issuance of Class A Common Stock. (a) Subject to the terms and
conditions contained herein, the Company agrees to issue and deliver to
Prosser at the Closing 3,325,000 shares of the Company's Class A Common Stock,
par value $0.01 per share (the "Class A Common Stock"), to be authorized
pursuant to the Charter Amendment (as defined herein) in exchange for all of
the 3,325,000 shares of Company Common Stock owned by Prosser and certain
members of his family or as to which Prosser currently holds an option to
purchase (the "Prosser Shares").
 
  (b) Subject to the terms and conditions contained herein, Prosser agrees to
deliver to the Company at the Closing the Prosser Shares in exchange for
3,325,000 shares of the Class A Common Stock.
 
  Section 2.02. Issuance of Class B Common Stock. (a) Subject to the terms and
conditions contained herein, the Company agrees to issue and deliver to Prior
at the Closing 2,927,038 shares of the Company's Class B Common Stock, par
value $0.01 per share (the "Class B Common Stock"), to be authorized pursuant
to the Charter Amendment in exchange for 2,927,038 shares of Company Common
Stock owned by Prior and certain members of his family (the "Prior Exchange
Shares").
 
  (b) Subject to the terms and conditions contained herein, Prior agrees to
deliver to the Company at the Closing the Prior Exchange Shares in exchange
for 2,927,038 shares of the Class B Common Stock.
 
                                  ARTICLE III
 
                             CONDITIONS TO CLOSING
 
  The obligations of the parties to consummate the transactions to be
consummated by the parties at the Closing shall be subject to the satisfaction
of the following conditions on or prior to the Closing Date:
 
  Section 3.01. Subscription Agreement Closing. Each of the conditions to the
closing under the Subscription Agreement (the "Subscription Agreement
Closing") shall have been satisfied or, with the consent of each of the
parties hereto, waived; and the Subscription Agreement Closing shall have been
consummated in accordance with the provisions of the Subscription Agreement.
 
  Section 3.02. Merger Agreement Closing. Each of the conditions to the
Closing under the Merger Agreement (the "Merger Agreement Closing") shall have
been satisfied or with the consent of each of the parties hereto waived; and
all parties thereto shall appear ready, willing and able to consummate the
transactions therein provided to be consummated at the Merger Agreement
Closing.
 
  Section 3.03. Performance. Each of the parties hereto shall have performed
and complied in all material respects with all obligations and conditions
required by this Recapitalization Agreement to be performed or complied with
by it at or prior to the Closing.
 
  Section 3.04. Charter Amendment. The Company shall have adopted and filed
with the Secretary of State of Delaware a Restated Certificate of
Incorporation substantially in the form of Exhibit A attached hereto (the
"Charter Amendment").
 
 
                                       2

<PAGE>
 
                                  ARTICLE IV
 
                             CLOSING DATE; CLOSING
 
  Section 4.01. Closing Date; Closing. The closing of the purchase and sale of
the Prior Repurchase Shares and Trust Shares and, immediately thereafter, the
closing of the exchange of the Prosser Shares for the Class A Common Stock and
the Prior Exchange Shares for the Class B Common Stock hereunder
(collectively, the "Closing") shall take place on the same day as the
Subscription Agreement Closing and the Merger Agreement Closing (and shall
occur after the Subscription Agreement Closing and prior to the Merger
Agreement Closing) and shall be held as soon as reasonably practicable after
satisfaction or waiver by the parties hereto of the conditions set forth in
Article VI hereof. The date on which the Closing occurs is referred to herein
as the "Closing Date". The Closing shall take place at the offices of Cahill
Gordon & Reindel, 80 Pine Street, New York, New York 10005. At the Closing,
(i) the Company shall pay by wire transfer of immediately available funds to
an account specified therefor by Prior the aggregate purchase price for the
Prior Repurchase Shares, (ii) the Company shall pay by wire transfer of
immediately available funds to an account specified therefor by the Trust the
aggregate purchase price for the Trust Shares, (iii) Prior shall deliver to
the Company the Prior Repurchase Shares duly endorsed in blank for transfer or
accompanied by a duly executed stock power assigning the Prior Repurchase
Shares in blank, (iv) the Trust shall deliver to the Company the Trust Shares
duly endorsed in blank for transfer or accompanied by a duly executed stock
power assigning the Trust Shares in blank, (v) the Company shall issue
3,325,000 shares of Class A Common Stock to Prosser registered in such names
and denominations as Prosser shall request, (vi) the Company shall issue
2,927,038 shares of Class B Common Stock to Prior registered in such names and
denominations as Prior shall request, (vii) Prosser shall deliver to the
Company the Prosser Shares duly endorsed in blank or accompanied by a duly
executed stock power assigning the Prosser Shares in blank and (viii) Prior
shall deliver to the Company the Prior Exchange Shares duly endorsed in blank
or accompanied by a duly executed stock power assigning the Prior Exchange
Shares in blank.
 
  Section 4.02. Further Assurances. Each of the parties agrees that after the
Closing, upon reasonable request of the other party, it will do, execute,
deliver and acknowledge, and will cause to be done, executed, delivered and
acknowledged, all such further acts, deeds, certificates, assignments,
transfers, conveyances, powers of attorney and other documents as may be
reasonably required to consummate the transactions contemplated hereby. Each
of Prior, Prosser and the Trust agree to vote all shares of Company Common
Stock owned or controlled by them in favor of the Transactions at the Special
Meeting (as defined in the Merger Agreement).
 
                                   ARTICLE V
 
                           MISCELLANEOUS PROVISIONS
 
  Section 5.01. Termination. This Recapitalization Agreement shall terminate
upon any termination of the Subscription Agreement or the Merger Agreement. In
addition, this Recapitalization Agreement may be terminated at any time prior
to the Closing by mutual written consent of each party hereto. In the event of
any such termination, no party shall have any liability of any kind to any
other party.
 
  Section 5.02. Entire Agreement. This Recapitalization Agreement, together
with all other written agreements which may be entered into between the
parties in connection herewith and the transactions contemplated hereby and
all other documents and instruments delivered in connection herewith and
therewith and the transactions contemplated hereby and thereby, set forth the
full and complete understanding of the parties hereto with respect to the
transactions contemplated hereby.
 
  Section 5.03. Governing Law. This Recapitalization Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without reference to the conflict of laws rules thereof.
 
 
                                       3

<PAGE>
 
  Section 5.04. Headings. The headings in this Recapitalization Agreement are
intended solely for convenience of reference and shall be given no effect in
the interpretation of this Recapitalization Agreement.
 
  Section 5.05. Counterparts. This Recapitalization Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
 
  Section 5.06. Benefits. This Recapitalization Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns, and no other person will have any right or obligation
hereunder.
 
  Section 5.07. Assignment. Neither this Recapitalization Agreement nor any
right hereunder may be assigned by the parties hereto without the prior
written consent of the other parties. Subject to the foregoing, this
Recapitalization Agreement shall be binding upon and inure to the benefit of
the successors, heirs, representatives and assigns of each party hereto.
 
  Section 5.08. Amendment and Waiver. This Recapitalization Agreement may be
amended only by an instrument in writing signed on behalf of each of the
parties hereto. Any term, condition or provision of this Recapitalization
Agreement may be waived (if in writing) at any time by the party or each of
the parties entitled to the benefits thereof.
 
  Section 5.09. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
given if delivered by hand, or when sent by telex or telecopier (with receipt
confirmed) or by registered mail, return receipt requested, addressed as
follows (or to such other address as a party may designate by notice to the
other):
 
  (a)If to the Company or Prior:
 
    Atlantic Tele-Network, Inc.
    Estate Havensight
    P.O. Box 12030
    St. Thomas, U.S. Virgin Islands 00801
    (340) 774-2260 or 777-8000
    Attention: Cornelius B. Prior
    Telecopy: (809) 774-7790
 
  with copies to:
 
    Lewis A. Stern, P.C.
    Fried, Frank, Harris, Shriver & Jacobson
    New York, New York 10004
    (212) 859-8190
    Telecopy: (212) 859-8587
 
  (b)If to Prosser:
 
    c/o Atlantic Tele-Network, Inc.
    Chase Financial Center
    P.O. Box 1730
    St. Croix, U.S. Virgin Islands 06821-1730
    (340) 777-7700
    Attention: Jeffrey J. Prosser
    Telecopy: (809) 774-5487
 
                                       4

<PAGE>
 
  with copies to:
 
    Roger Meltzer, Esq.
    Cahill Gordon & Reindel
    80 Pine Street
    New York, New York 10005
    (212) 701-3851
    Telecopy: (212) 269-5420
 
  (c)If to the Trust:
 
    c/o Cornelius B. Prior
    Atlantic Tele-Network, Inc.
    Estate Havensight
    P.O. Box 12030
    St. Thomas, U.S. Virgin Islands 00801
    (340) 774-2260 or 777-8000
    Telecopy: (809) 774-7790
 
  with copies to:
 
    Lewis A. Stern, P.C.
    Fried, Frank, Harris, Shriver & Jacobson
    One New York Plaza
    New York, New York 10004
    (212) 859-8190
    Telecopy: (212) 859-8587
 
  Section 5.10. Best Efforts. Each of the parties hereto shall use his or its
best efforts to cause the Transactions to be consummated. Without limiting the
generality of the foregoing, (i) Prior, individually and as trustee of the
Trust, and Prosser agree to vote all of their shares of Company Common Stock
in favor of the approval of the Transactions and the adoption of the Merger
Agreement and the Charter Amendment, (ii) each of the parties hereto shall
execute all contracts, documents and instruments, the execution of which is
contemplated as a condition to closing under this Recapitalization Agreement,
the Subscription Agreement or the Merger Agreement, (iii) each of the parties
shall promptly, at the request of counsel to the Company or counsel to ECI,
supply such counsel with letters of representation reasonable under the
circumstances as to facts or statements of intention represented to the
Internal Revenue Service in connection with the Company's application for the
Tax Ruling (as defined in the Subscription Agreement) and (iv) each of the
parties shall take all steps within his or its control to cause the other
conditions to closing of the Transactions to be consummated and shall
generally use his or its best efforts to cause the Transactions to be
consummated.
 
  Section 5.11. Tax Treatment. The Company and Prior, individually and as
trustee of the Trust, agree to report for tax purposes the purchase of the
Prior Repurchase Shares and the Trust Shares pursuant to Article I hereof as
distributions of property to which Section 301 of the Internal Revenue Code of
1986, as amended, applies.
 
                                       5

<PAGE>
 
  IN WITNESS WHEREOF, each of the parties hereto has caused this
Recapitalization Agreement to be duly executed, all as of the date first
written above.
 
                                          ATLANTIC TELE-NETWORK, INC.
 
                                          By: /s/ Cornelius B. Prior
                                             __________________________________
                                            Name: Cornelius B. Prior
                                            Title: Co-Chief Executive Officer
 
 
                                          By: /s/ Jeffrey J. Prosser
                                             __________________________________
                                            Name: Jeffrey J. Prosser
                                            Title: Co-Chief Executive Officer
 
                                          1994 PRIOR CHARITABLE REMAINDER
                                           TRUST
 
 
                                          By: /s/ Cornelius B. Prior
                                             __________________________________
                                            Name: Cornelius B. Prior
                                            Title: Trustee
 
                                          /s/ Cornelius B. Prior
                                            ___________________________________
                                            Cornelius B. Prior
 
                                          /s/ Jeffrey J. Prosser
                                            ___________________________________
                                            Jeffrey J. Prosser
 
 
                                       6

<PAGE>
 
                                                        EXHIBIT A TO
                                                        REPURCHASE AND
                                                        RECAPITALIZATION
                                                        AGREEMENT

 
               AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
                                      OF
                          ATLANTIC TELE-NETWORK, INC.
 
  ATLANTIC TELE-NETWORK, INC., a corporation organized and existing under the
laws of the State of Delaware, does hereby certify as follows:
 
    FIRST: The name of the Corporation is ATLANTIC TELE-NETWORK, INC. (the
  "Corporation"). The original Certificate of Incorporation was filed with
  the Secretary of State of the State of Delaware on August 4, 1989.
 
    SECOND: This Amended and Restated Certificate of Incorporation has been
  duly adopted pursuant to Section 245 of the General Corporation Law of the
  State of Delaware (the "GCL"). The Corporation certifies that amendments
  effected by this Amended and Restated Certificate of Incorporation have
  been adopted in accordance with Section 242 of the GCL.
 
    THIRD: The text of the Corporation's Certificate of Incorporation as
  heretofore amended or supplemented is hereby further amended and restated
  to read in its entirety as follows:
 
                                  ARTICLE ONE
 
                                     NAME
 
  The name of the Corporation is Atlantic Tele-Network, Inc.
 
                                  ARTICLE TWO
 
                               REGISTERED OFFICE
 
  The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
 
                                 ARTICLE THREE
 
                                    PURPOSE
 
  The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
 
                                 ARTICLE FOUR
 
                                 CAPITAL STOCK
 
  1. Authorized Capital Stock. The total number of shares of all classes of
capital stock which the Corporation shall have the authority to issue is
36,252,038 shares divided into two classes of which
 
  (i)   10,000,000 shares, par value $.01 per share, shall be designated
  Preferred Stock,
 
  (ii)  20,000,000 shares, par value $.01 per share, shall be designated Common
  Stock,
 
  (iii) 3,325,000 shares, par value $.01 per share, shall be designated Class
  A Common Stock, and
 
  (iv)  2,927,038 shares, par value $.01 per share, shall be designated Class B
  Common Stock.
 
                                       7

<PAGE>
 
2. Terms of the Preferred Stock
 
  2.1 Issuance. The Board of Directors is expressly authorized, subject to
limitations prescribed by law, to provide for the issuance of shares of
Preferred Stock in one or more series, to establish the number of shares to be
included in each such series, and to fix the designations, powers,
preferences, and rights of the shares of each such series, and any
qualifications, limitations, or restrictions thereof.
 
The authority of the Board with respect to each series shall include, but not
be limited to, determination of the following:
 
  (a) The number of shares constituting that series and the distinctive
      designation of that series;
 
  (b) The dividend rate, if any, on the shares of that series, whether
      dividends shall be cumulative, and, if so, from which date or dates,
      and whether they shall be payable in preference to, or in another
      relation to, the dividends payable to any other class or classes or
      series of stock;
 
  (c) Whether that series shall have voting rights, in addition to the voting
      rights provided by law, and, if so, the terms of such voting rights;
 
  (d) Whether that series shall have conversion or exchange privileges, and,
      if so, the terms and conditions of such conversion or exchange,
      including provision for adjustment of the conversion or exchange rate
      in such events as the Board of Directors shall determine;
 
  (e) Whether or not the shares of that series shall be redeemable, and, if
      so, the terms and conditions of such redemption, including the manner
      of selecting shares for redemption if less than all shares are to be
      redeemed, the date or dates upon or after which they shall be
      redeemable, and the amount per share payable in case of redemption,
      which amount may vary under different conditions and at different
      redemption dates;
 
  (f) Whether that series shall be entitled to the benefit of a sinking fund
      to be applied to the purchase or redemption of shares of that series,
      and, if so, the terms and amounts of such sinking fund;
 
  (g) The right of the shares of that series to the benefit of conditions and
      restrictions upon the creation of indebtedness of the Corporation or
      any subsidiary, upon the issue of any additional stock (including
      additional shares of such series or of any other series) and upon the
      payment of dividends or the making of other distributions on, and the
      purchase, redemption or other acquisition by the Corporation or any
      subsidiary of any outstanding stock of the Corporation;
 
  (h) The right of the shares of that series in the event of voluntary or
      involuntary liquidation, dissolution or winding up of the Corporation
      and whether such rights shall be in preference to, or in another
      relation to, the comparable rights of any other class or classes or
      series of stock; and
 
  (i) Any other power, preference or relative, participating, optional or
      other special rights, qualifications, limitations or restrictions of
      that series.
 
3. Terms of the Common Stock
 
  3.1 Dividends. Subject to the preferential rights, if any, of the Preferred
Stock, the holders of shares of Common Stock, Class A Common Stock and Class B
Common Stock shall be entitled to receive, when and if declared by the Board
of Directors, out of the assets of the Corporation which are by law available
therefor, dividends payable either in cash, in property, or in shares of the
Corporation's capital stock.
 
  3.2 Voting Rights. Subject to the preferential rights, if any, of the
Preferred Stock and except as otherwise provided by applicable law, at every
annual or special meeting of stockholders of the Corporation, every holder of
Common Stock, Class A Common Stock and Class B Common Stock shall be entitled
to one vote, in person or by proxy, for each share of Common Stock, Class A
Common Stock and Class B Common Stock standing in his name on the books of the
Corporation.
 
                                       8

<PAGE>
 
  3.3 Liquidation, Dissolution, or Winding Up. In the event of any voluntary
or involuntary liquidation, dissolution, or winding up of the affairs of the
Corporation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts, if any, to
which the holders of Preferred Stock shall be entitled, the holders of all
outstanding shares of Common Stock, Class A Common Stock and Class B Common
Stock shall be entitled to share ratably in the remaining net assets of the
Corporation.
 
  3.4 Rights of Class A Common Stock and Class B Common Stock. All rights of
the Class A Common Stock and Class B Common Stock shall be identical to the
rights of the Common Stock, except in a merger, consolidation or sale of
assets of the Corporation the Class A Common Stock and the Class B Common
Stock shall have the right to receive separate and distinct consideration from
the Common Stock as determined by the Board of Directors.
 
                                 ARTICLE FIVE
 
                                   DIRECTORS
 
  1. Management. The business and affairs of the Corporation shall be managed
   by or under the direction of the Board of Directors of the Corporation.
 
  2. By-Laws. The board of directors is expressly authorized to adopt, amend,
or repeal the by-laws of the Corporation.
 
  3. No Ballot. Elections of directors need not be by written ballot unless
the by-laws of the Corporation shall otherwise provide.
 
  4. Limitation of Liability. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director; provided, however, that the
foregoing shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is hereafter amended to
permit further elimination or limitation of the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware as so amended. Any repeal or
modification of this Article FIVE shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification.
 
                                  ARTICLE SIX
 
                                   EXISTENCE
 
  The Corporation is to have perpetual existence.
 
                                 ARTICLE SEVEN
 
                           COMPROMISE OR ARRANGEMENT
 
  Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the application of
trustees
 
                                       9

<PAGE>
 
in dissolution or of any receiver or receivers appointed for this Corporation
under the provisions of Section 279 of Title 8 of the Delaware Code order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of this Corporation, as the case may be, to be summoned
in such manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which said application has been made, be binding on all the
creditors or class of creditors, and/or on all of the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.
 
                                 ARTICLE EIGHT
 
                                   AMENDMENT
 
  The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
 
  IN WITNESS WHEREOF, Atlantic Tele-Network, Inc. has caused this Amended and
restated Certificate of Incorporation to be signed and attested by its duly
authorized officers, this       day of October, 1997.

 
                                          Atlantic Tele-Network, Inc.
 
                                          By: _________________________________
                                             Name:
                                             Title:
 
Attest:
 
By: ______________________________________
  Name:
  Title:
 

                                      10



<PAGE>

                                                                   EXHIBIT 10(c)
 
                         AGREEMENT AND PLAN OF MERGER
 
  THIS AGREEMENT AND PLAN OF MERGER (this "Merger Agreement") is entered into
as of the 11th day of August, 1997 by and between Atlantic Tele-Network, Inc.,
a Delaware corporation (the "Company"), and ATN MergerCo., a Delaware
corporation ("Newco").
 
  WHEREAS, to eliminate corporate disputes and to maximize the value of the
Company for the benefit of the Company and its stockholders, the Company has
entered into a Principal Terms Agreement dated January 29, 1997 among the
Company and its co-chief executive officers and principal stockholders,
Cornelius B. Prior, Jr. ("Prior") and Jeffrey J. Prosser ("Prosser"), which
contemplates the separation of the businesses and assets of the Company in the
manner set forth herein and in the Recapitalization Agreement (as defined
below) and the Subscription Agreement (as defined below); and
 
  WHEREAS, in order to accomplish such separation, the Company and Emerging
Communications, Inc., a Delaware corporation ("ECI"), have entered into a
Subscription Agreement of even date herewith (the "Subscription Agreement"),
pursuant to which, subject to the terms and conditions set forth therein, the
Company has agreed to transfer to ECI all of the capital stock of its
 wholly
owned subsidiaries, Atlantic Tele-Network, Co., a Virgin Islands corporation
("ATNCo."), and Atlantic Aircraft, Inc., a Delaware corporation, as well as
certain other assets of the Company as more fully described therein relating
to businesses conducted by ATNCo., its subsidiaries, Virgin Islands Telephone
Corporation, a Virgin Islands corporation ("VITELCO"), Vitelcom Cellular Inc.,
a Virgin Islands corporation, and Vitelcom, Inc., a Virgin Islands
corporation, and Aircraft Corp. in exchange for 10,959,131 shares of common
stock, par value $0.01 per share (the "ECI Common Stock"), of ECI; and
 
  WHEREAS, the Company, Prior, Prosser and the 1994 Prior Charitable Remainder
Trust have entered into a Recapitalization Agreement dated of even date
herewith (the "Recapitalization Agreement"), pursuant to which, subject to the
terms and conditions set forth therein, (a) the Company has agreed to
repurchase an aggregate of 765,852 shares of common stock, par value $.01 per
share (the "Company Common Stock"), of the Company owned by Prior and the
Trust, and (b) Prosser has agreed to exchange 3,325,000 shares of Company
Common Stock owned by Prosser and certain members of his family for 3,325,000
shares of a new class of common stock, par value $0.01 per share, of the
Company denominated Class A Common Stock ("Class A Common Stock") and Prior
has agreed to exchange 2,927,038 shares of Company Common Stock owned by Prior
for 2,927,038 shares of a new class of common stock, par value $0.01 per
share, of the Company denominated Class B Common Stock (the "Class B Common
Stock" and, together with the Company Common Stock and the Class A Common
Stock, the "Common Stock"); and
 
  WHEREAS, Newco desires to merge with the Company and the Company desires to
merge with Newco, all upon the terms and subject to the conditions of this
Merger Agreement.
 
  NOW, THEREFORE, for and in consideration of the premises and mutual
covenants herein contained and subject to the terms and conditions hereinafter
set forth, the parties hereto hereby agree as follows:
 
                                   ARTICLE I
 
                                  THE MERGER
 
  Section 1.01. The Merger. (a) In accordance with the provisions of this
Merger Agreement and the General Corporation Law of the State of Delaware (the
"Delaware Act"), at the Effective Time (as hereinafter defined), Newco shall
be merged (the "Merger") with and into the Company, and the Company shall be
the surviving corporation (hereinafter sometimes called the "Surviving
Corporation") and shall continue its corporate existence under the laws of the
State of Delaware. The name of the Surviving Corporation shall be the same as
that of the Company. At the Effective Time, the separate existence of Newco
shall cease.
 
                                       1

<PAGE>
 
  (b) The Merger shall have the effects on Newco and the Company as
constituent corporations of the Merger as provided under the Delaware Act.
 
  Section 1.02. Effective Time. The Merger shall become effective at the time
of filing of, or at such later time specified in, a certificate of merger, in
the form required by and executed in accordance with the Delaware Act, with
the Secretary of State of the State of Delaware in accordance with the
provisions of (S) 251 of the Delaware Act (the "Certificate of Merger"). The
date and time when the Merger shall become effective is herein referred to as
the "Effective Time."
 
  Section 1.03. Certificate of Incorporation and By-Laws of Surviving
Corporation. At the Effective Time, the Certificate of Incorporation shall be
amended and restated in its entirety in the form set forth in Exhibit 1.03
hereto and the Certificate of Incorporation as so amended and the By-Laws of
the Company, as in effect immediately prior to the Effective Time, shall be
the Certificate of Incorporation and By-Laws of the Surviving Corporation
until thereafter amended as provided by law.
 
  Section 1.04. Directors and Officers of Surviving Corporation. The directors
of Newco immediately prior to the Effective Time will be, from and after the
Effective Time, the directors of the Surviving Corporation, and the officers
of the Company immediately prior to the Effective Time will be, from and after
the Effective Time, the officers of the Surviving Corporation, in each case
until their successors are elected and qualified.
 
  Section 1.05. Stockholders' Meeting. The Company will take all action
necessary in accordance with applicable law and its Restated Certificate of
Incorporation and By-Laws to convene a special meeting of its stockholders
(the "Special Meeting") as soon as practicable to consider and vote upon the
approval and adoption of this Merger Agreement and the other components of the
Transactions (as defined in the Subscription Agreement). The Company, through
its Board of Directors, shall recommend to its stockholders approval and
adoption of this Merger Agreement (which recommendation shall be contained in
the related proxy statement) and shall use all commercially reasonable efforts
to solicit from its stockholders proxies in favor of approval and adoption of
this Merger Agreement and the other components of the Transactions.
 
  Section 1.06. Filing of Certificate of Merger. At the Closing (as
hereinafter defined), Newco and the Company shall cause a Certificate of
Merger to be executed and filed with the Secretary of State of the State of
Delaware as provided in (S) 251 of the Delaware Act, and shall take any and
all other lawful actions and do any and all other lawful things to cause the
Merger to become effective.
 
  Section 1.07. Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills
of sale, assignments, assurances or any other actions or things are necessary
or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the constituent corporations
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger or otherwise to carry out this Merger Agreement,
the officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of each of the constituent
corporations or otherwise, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each of the
constituent corporations or otherwise, all such other actions and things as
may be necessary or desirable to vest, perfect or confirm any and all right,
title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Merger Agreement.
 
                                  ARTICLE II
 
                             CONVERSION OF SHARES
 
  Section 2.01. Shares. (a) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into the right to receive (i) 0.40 shares of Common Stock, par value $0.01 per
share, of the Surviving Corporation ("Surviving Corporation Common Stock") and
(ii) one share of ECI Common Stock.
 
                                       2

<PAGE>
 
  (b) The outstanding shares of Class A Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holders thereof, be converted into the
right to receive 5,704,231 shares of ECI Common Stock in the aggregate.
 
  (c) The outstanding shares of Class B Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of the Merger and
without any action on the part of the holder thereof, be converted into the
right to receive 2,807,040 shares of Surviving Corporation Common Stock in the
aggregate.
 
  (d) Each share of Common Stock, par value $0.01 per share, of Newco shall,
by virtue of the Merger and without any action on the part of any holder
thereof, be cancelled and no consideration shall be issued in respect thereof.
 
  (e) All shares of Class A Common Stock, Class B Common Stock, Company Common
Stock and all shares of common stock, par value $0.01 per share, of Newco, by
virtue of the Merger and without any action on the part of holders thereof,
shall no longer be outstanding and shall be canceled and retired and cease to
exist. Each holder of Company Common Stock, Class A Common Stock or Class B
Common Stock immediately prior to the Effective Time shall, after the Merger,
cease to have any rights with respect such Company Common Stock, Class A
Common Stock or Class B Common Stock except the right to receive the
applicable Merger consideration set forth in Section 2.01 upon surrender of
certificates therefor in accordance with Section 2.02.
 
  Section 2.02. Exchange of Shares. Prior to the Effective Time, the Company
shall select The Bank of New York or such other person or persons reasonably
satisfactory to the Company to act as Exchange Agent for the Merger (the
"Exchange Agent"). As soon as practicable after the Effective Time, the
Company shall make available, and each holder of certificates formerly
representing Company Common Stock, Class A Common Stock and Class B Common
Stock (each, a "Company Holder") will be entitled to receive, upon surrender
to the Exchange Agent of one or more certificates representing such stock
("Certificates") for cancellation, certificates representing the number of
shares of Surviving Corporation Common Stock and ECI Common Stock into which
such shares are converted in the Merger and cash in consideration of
fractional shares as provided in Section 2.04. Such shares of Surviving
Corporation Common Stock and ECI Common Stock issued in the Merger shall each
be deemed, for all purposes including the right to receive notices of and to
vote at meetings of stockholders and the right to receive dividends, if any,
to have been issued at the Effective Time.
 
  Section 2.03. Dividends, Transfer Taxes. Notwithstanding Section 2.02
hereof, no dividends or other distributions that are declared or made on
Surviving Corporation Common Stock or ECI Common Stock will be paid to persons
entitled to received certificates representing Surviving Corporation Common
Stock or ECI Common Stock pursuant to this Merger Agreement until such persons
surrender their Certificates formerly representing Company Common Stock. Upon
such surrender, there shall be paid to the person in whose name the
certificates representing such Surviving Corporation Common Stock or ECI
Common Stock shall be issued any dividends or other distributions which shall
have become payable with respect to such stock in respect of a record date
after the Effective Time. In no event shall the persons entitled to receive
such dividends be entitled to receive interest on such dividends. In the event
that any certificates for any shares of Surviving Corporation Common Stock are
to be issued in a name other than that in which the Certificates formerly
representing shares of Company Common Stock surrendered in exchange therefor
are registered, it shall be a condition of such exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer or other
taxes required by reason of the issuance of certificates for such shares of
Surviving corporation Common Stock or ECI Common Stock or shall establish to
the satisfaction of the Exchange Agent that such tax has been paid or is not
applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to a Company Holder for any shares of Surviving
Corporation Common Stock, ECI Common Stock or dividends thereon delivered to a
public official pursuant to any applicable escheat or similar abandoned
property laws.
 
  Section 2.04. No Fractional Shares. Notwithstanding anything herein to the
contrary, no certificates or scrip representing less than one full share of
Surviving Corporation Common Stock or ECI Common Stock shall
 
                                       3

<PAGE>
 
be issued upon the surrender for exchange of Certificates representing Company
Common Stock, Class A Common Stock or Class B Common Stock pursuant to Section
2.02. In lieu of any such fractional share, each Company Holder who would
otherwise have been entitled to a fraction of a share of Surviving Corporation
Common Stock or ECI Common Stock pursuant to Section 2.01 shall be paid upon
surrender of Certificates for exchange pursuant to Section 2.02 cash (without
interest) in an amount equal to such holder's proportionate interest in the
net proceeds from the sale or sales in the open market by the Exchange Agent,
on behalf of all such holders, of the Excess Shares (as defined below). As
soon as practicable following the Effective Date, the Exchange Agent shall
determine the excess of (i) the number of full shares of Surviving Corporation
Common Stock and ECI Common Stock delivered to the Exchange Agent by the
Surviving Corporation over (ii) the aggregate number of full shares of
Surviving Corporation Common Stock and ECI Common Stock to be distributed to
holders of Company Common Stock, Class A Common Stock and Class B Common Stock
(such excess being herein called the "Excess Shares"), and the Exchange Agent,
as agent for each of the former Company Holders, shall sell the Excess Shares
at the prevailing prices on the American Stock Exchange. The sale of the
Excess Shares by the Exchange Agent shall be executed on the American Stock
Exchange through one or more member firms of the American Stock Exchange and
shall be executed in round lots to the extent practicable. The Surviving
Corporation shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with such sale of Excess Shares. Until the net
proceeds of such sale have been distributed to the former Company Holders, the
Exchange Agent will hold such proceeds in trust for each of such former
stockholders (the "Fractional Securities Fund"). As soon as practicable after
the determination of the amount of cash to be paid to former Company Holders
in lieu of any fractional interests, the Exchange Agent shall make available
in accordance with this Merger Agreement such amount to such former
stockholders.
 
                                  ARTICLE III
 
                             CONDITIONS TO CLOSING
 
  The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions:
 
  Section 3.01. Stockholder Approval. This Merger Agreement and the
Transactions (as defined in the Subscription Agreement) shall have been
approved and adopted by the holders of a majority of the outstanding shares of
Company Common Stock.
 
  Section 3.02. Closings. Each of the conditions to the closing under the
Subscription Agreement (the "Subscription Agreement Closing") and the closing
under the Recapitalization Agreement (the "Recapitalization Agreement
Closing") shall have been satisfied or, with the consent of each party hereto,
waived; the Subscription Agreement Closing shall have been consummated in
accordance with the provisions of the Subscription Agreement; and the
Recapitalization Agreement Closing shall have been consummated in accordance
with the provisions of the Recapitalization Agreement.
 
  Section 3.03. Performance. Each of the parties hereto shall have performed
and complied in all material respects with all obligations and conditions
required by this Merger Agreement to be performed or complied with by it at or
prior to the Closing.
 
                                  ARTICLE IV
 
                             CLOSING DATE; CLOSING
 
  Section 4.01. Closing Date; Closing. The closing of the Merger (the
"Closing") shall take place on the same day as the Subscription Agreement
Closing and the Recapitalization Agreement Closing and shall be held
immediately after consummation of such closings as soon as practicable after
satisfaction or waiver by the
 
                                       4

<PAGE>
 
parties hereto of the conditions set forth in Article III hereof. The date on
which the Closing occurs is referred to herein as the "Closing Date." The
Closing shall take place at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005. At the Closing, the Company and Newco shall
cause to be executed and filed with the Secretary of State of Delaware the
Certificate of Merger in accordance with the applicable provisions of the
Delaware Act and shall take any and all other lawful actions and do any and
all other lawful things necessary to cause the Merger to become effective.
 
                                   ARTICLE V
 
                           MISCELLANEOUS PROVISIONS
 
  Section 5.01. Termination. This Merger Agreement shall terminate upon any
termination of the Subscription Agreement or the Recapitalization Agreement.
In addition, this Merger Agreement may be terminated, notwithstanding
stockholder approval hereof, at any time prior to the Effective Time by the
Board of Directors of the Company and the Board of Directors of Newco without
the authorization or consent of the Company's or Newco's stockholders. In the
event of any such termination, neither party shall have any liability of any
kind to the other party.
 
  Section 5.02. Entire Agreement. This Merger Agreement, together with all
other written agreements which may be entered into between the parties in
connection herewith and the transactions contemplated hereby and all other
documents and instruments delivered in connection herewith and therewith and
the transactions contemplated hereby and thereby, set forth the full and
complete understanding of the parties hereto with respect to the transactions
contemplated hereby.
 
  Section 5.03. Governing Law. Except where the laws of the State of Delaware
are by their terms applicable, this Merger Agreement shall be governed by and
construed in accordance with the laws of the State of New York without
reference to the conflict of laws rules thereof.
 
  Section 5.04. Headings. The headings in this Merger Agreement are intended
solely for convenience of reference and shall be given no effect in the
interpretation of this Merger Agreement.
 
  Section 5.05. Counterparts. This Merger Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
 
  Section 5.06. Benefits. This Merger Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns, and no other person will have any right or obligation hereunder.
 
  Section 5.07. Assignment. Neither this Merger Agreement nor any right
hereunder may be assigned by the parties hereto without the prior written
consent of the other party. Subject to the foregoing, this Merger Agreement
shall be binding upon and inure to the benefit of the successors, heirs,
representatives and assigns of each party hereto.
 
  Section 5.08. Amendment and Waiver. This Merger Agreement may be amended
only by an instrument in writing signed on behalf of each of the parties
hereto. Subject to the Delaware Act any term, condition or provision of this
Merger Agreement may be waived (if in writing) at any time by the party or
each of the parties entitled to the benefits thereof.
 
  Section 5.09. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
given if delivered by hand, or when sent by telex or telecopier (with
 
                                       5

<PAGE>
 
receipt confirmed) or by registered mail, return receipt requested, addressed
as follows (or to such other address as a party may designate by notice to the
other):
 
  (a)If to the Company or Newco:
 
    Atlantic Tele-Network, Inc.
    Estate Havensight
    P.O. Box 12030
    St. Thomas, U.S. Virgin Islands 00801
    (340) 774-2260 or 777-8000
    Attention: Cornelius B. Prior
    Telecopy: (809) 774-7790
 
with copies to:
 
    Lewis A. Stern, P.C.
    Fried, Frank, Harris, Shriver & Jacobson
    One New York Plaza
    New York, New York 10004
    (212) 859-8190
    Telecopy: (212) 859-8587
 
      and
 
    Atlantic Tele-Network, Inc.
    Chase Financial Center
    P.O. Box 1730
    St. Croix, U.S. Virgin Islands 00801-1730
    (340) 777-7700
    Attention: Jeffrey J. Prosser
    Telecopy: (809) 774-5487
 
      and
 
    Roger Meltzer, Esq.
    Cahill Gordon & Reindel
    80 Pine Street
    New York, New York 10005
    (212) 701-3851
    Telecopy: (212) 269-5420
 
                                       6

<PAGE>
 
  IN WITNESS WHEREOF, each of the Company and Newco has caused this Merger
Agreement to be executed on the date first written above.
 
                                          Atlantic Tele-Network, Inc.
 
                                          By: /s/ Cornelius B. Prior
                                             __________________________________
                                             Name: Cornelius B. Prior
                                             Title: Co-Chief Executive Officer
 
                                          By: /s/ Jeffrey J. Prosser
                                             __________________________________
                                             Name: Jeffrey J. Prosser
                                             Title: Co-Chief Executive Officer
 
                                          ATN MergerCo.
 
                                          By: /s/ Cornelius B. Prior
                                             __________________________________
                                             Name: Cornelius B. Prior
                                             Title: President
 
                                       7

<PAGE>
 
                                                      EXHIBIT 1.03 TO AGREEMENT
                                                            AND PLAN OF MERGER
 
                     RESTATED CERTIFICATE OF INCORPORATION
                                      OF
                          ATLANTIC TELE-NETWORK, INC.
 
                                  ARTICLE ONE
 
                                     NAME
 
  The name of the Corporation is Atlantic Tele-Network, Inc.
 
                                  ARTICLE TWO
 
                               REGISTERED OFFICE
 
  The address of the Corporation's registered office in the State of Delaware
is Corporation Trust Center, 1209 Orange Street in the City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
 
                                 ARTICLE THREE
 
                                    PURPOSE
 
  The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
the State of Delaware.
 
                                 ARTICLE FOUR
 
                                 CAPITAL STOCK
 
  1. Authorized Capital Stock. The total number of shares of all classes of
capital stock which the Corporation shall have the authority to issue is
30,000,000 shares divided into two classes of which 10,000,000 shares, par
value $.01 per share, shall be designated Preferred Stock and 20,000,000
shares, par value $.01 per share, shall be designated Common Stock.
 
  2. Terms of the Preferred Stock
 
  2.1 Issuance. The Board of Directors is expressly authorized, subject to
limitations prescribed by law, to provide for the issuance of shares of
Preferred Stock in one or more series, to establish the number of shares to be
included in each such series, and to fix the designations, powers,
preferences, and rights of the shares of each such series, and any
qualifications, limitations, or restrictions thereof.
 
  The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
 
  (a) The number of shares constituting that series and the distinctive
  designation of that series;
 
  (b) The dividend rate, if any, on the shares of that series, whether
      dividends shall be cumulative, and, if so, from which date or dates,
      and whether they shall be payable in preference to, or in another
      relation to, the dividends payable to any other class or classes or
      series of stock;
 
  (c) Whether that series shall have voting rights, in addition to the voting
      rights provided by law, and, if so, the terms of such voting rights;

<PAGE>
 
  (d) Whether that series shall have conversion or exchange privileges, and,
      if so, the terms and conditions of such conversion or exchange,
      including provision for adjustment of the conversion or exchange rate
      in such events as the Board of Directors shall determine;
 
  (e) Whether or not the shares of that series shall be redeemable, and, if
      so, the terms and conditions of such redemption, including the manner
      of selecting shares for redemption if less than all shares are to be
      redeemed, the date or dates upon or after which they shall be
      redeemable, and the amount per share payable in case of redemption,
      which amount may vary under different conditions and at different
      redemption dates;
 
  (f) Whether that series shall be entitled to the benefit of a sinking fund
      to be applied to the purchase or redemption of shares of that series,
      and, if so, the terms and amounts of such sinking fund;
 
  (g) The right of the shares of that series to the benefit of conditions and
      restrictions upon the creation of indebtedness of the Corporation or
      any subsidiary, upon the issue of any additional stock (including
      additional shares of such series or of any other series) and upon the
      payment of dividends or the making of other distributions on, and the
      purchase, redemption or other acquisition by the Corporation or any
      subsidiary of any outstanding stock of the Corporation;
 
  (h) The right of the shares of that series in the event of voluntary or
      involuntary liquidation, dissolution or winding up of the Corporation
      and whether such rights shall be in preference to, or in another
      relation to, the comparable rights of any other class or classes or
      series of stock; and
 
  (i) Any other power, preference or relative, participating, optional or
      other special rights, qualifications, limitations or restrictions of
      that series.
 
  3. Terms of the Common Stock
 
  3.1 Dividends. Subject to the preferential rights, if any, of the Preferred
Stock, the holders of shares of Common Stock shall be entitled to receive,
when and if declared by the Board of Directors, out of the assets of the
Corporation which are by law available therefor, dividends payable either in
cash, in property, or in shares of the Corporation's capital stock.
 
  3.2 Voting Rights. Subject to the preferential rights, if any, of the
Preferred Stock and except as otherwise provided by applicable law, at every
annual or special meeting of stockholders of the Corporation, every holder of
Common Stock shall be entitled to one vote, in person or by proxy, for each
share of Common Stock standing in his name on the books of the Corporation.
 
  3.3 Liquidation, Dissolution, or Winding Up. In the event of any voluntary
or involuntary liquidation, dissolution, or winding up of the affairs of the
Corporation, after payment or provision for payment of the debts and other
liabilities of the Corporation and of the preferential amounts, if any, to
which the holders of Preferred Stock shall be entitled, the holders of all
outstanding shares of Common Stock shall be entitled to share ratably in the
remaining net assets of the Corporation.
 
                                 ARTICLE FIVE
 
                                   DIRECTORS
 
  1. Management. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors of the Corporation.
 
  2. By-Laws. The board of directors is expressly authorized to adopt, amend,
or repeal the by-laws of the Corporation.
 
  3. No Ballot. Elections of directors need not be by written ballot unless
the by-laws of the Corporation shall otherwise provide.
 
                                       2

<PAGE>
 
  4. Limitation of Liability. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director; provided, however, that the
foregoing shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the General Corporation Law of the State of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is hereafter amended to
permit further elimination or limitation of the personal liability of
directors, then the liability of a director of the Corporation shall be
eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware as so amended. Any repeal or
modification of this Article FIVE shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such
repeal or modification.
 
                                  ARTICLE SIX
 
                                   EXISTENCE
 
  The Corporation is to have perpetual existence.
 
                                 ARTICLE SEVEN
 
                           COMPROMISE OR ARRANGEMENT
 
  Whenever a compromise or arrangement is proposed between this Corporation
and its creditors or any class of them and/or between this Corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this Corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
Corporation under the provisions of Section 279 of Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which said application has been made, be
binding on all the creditors or class of creditors, and/or on all of the
stockholders or class of stockholders, of this Corporation, as the case may
be, and also on this Corporation.
 
                                 ARTICLE EIGHT
 
                                   AMENDMENT
 
  The Corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Restated Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
 
                                       3



<PAGE>

                                                                   EXHIBIT 10(d)
 
                        TECHNICAL ASSISTANCE AGREEMENT
 
  THIS TECHNICAL ASSISTANCE AGREEMENT (this "Technical Assistance Agreement")
is entered into as of the 30th day of December, 1997 by and among ATLANTIC
TELE-NETWORK, INC., a Delaware corporation (the "Company"), ATLANTIC TELE-
NETWORK CO., a U.S. Virgin Islands corporation ("ATNCo."), VIRGIN ISLANDS
TELEPHONE CORPORATION, a U.S. Virgin Islands corporation ("VITELCO"), and
VITELCOM CELLULAR INC., a U.S. Virgin Islands corporation ("VCI").
 
  WHEREAS, pursuant to an agreement between the Company and Guyana Telephone
and Telegraph Company Limited ("GTT"), dated as of January 28, 1991 (the
"Advisory Contract"), a copy of which is attached as Exhibit A hereto, the
Company has the continuing obligation to provide technical and professional
service, advice and assistance to GTT in the operation by GTT of its telephone
business, which services and assistance will be conducive to the economical
and efficient development and operation of GTT's telephone system and will
enhance its ability to provide dependable, state-of-art telephone service to
its subscribers;
 
  WHEREAS, ATNCo., VITELCO and VCI have personnel at their disposal who are
trained and experienced in the telecommunications field and
 who are familiar
with the economical and efficient organization, development and operation of
telecommunications systems and services and have extensive experience in
finance, law, accounting, regulatory matters and the development of
communications apparatus, equipment and services and the rapidly changing
technological and regulatory environment affecting the telecommunications
industry, and the Company has from time to time in the past called upon ATNCo,
VITELCO and/or VCI to assist the Company in providing services and advice to
GTT pursuant to the Advisory Contract; and
 
  WHEREAS, this Technical Assistance Agreement is being entered into in
connection with and in consideration of the transfer by the Company to
Emerging Communications, Inc., pursuant to the Subscription Agreement dated
August 11, 1997 between them, of all of the outstanding capital stock of
ATNCo., which transfer will provide significant benefits to ATNCo., VITELCO
and VCI by resolving certain management problems which have heretofore
affected such corporations.
 
  NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants herein contained and subject to the terms and conditions hereinafter
set forth, the parties hereto hereby agree as follows:
 
                                   ARTICLE I
 
                                   SERVICES
 
  Section 1.01. Services to be Provided. Subject to the terms and conditions
of this Technical Services Agreement, each of ATNCo., VITELCO and VCI agrees
to make available its employees to the Company at its request from time to
time during the term of this Agreement to assist and support the Company in
carrying out its obligations under the Advisory Contract. Such support and
assistance shall include performing services at the premises of ATNCo.,
VITELCO, VCI, the Company or GTT or their respective affiliates. ATNCo,
VITELCO or VCI, as the case may be, shall determine (in consultation with the
Company) which of its employees will perform any services requested hereunder.
Notwithstanding anything contained in this Technical Services Agreement to the
contrary, (a) none of ATNCo., VITELCO or VCI shall be required to make
available to the Company pursuant to this Technical Assistance Agreement at
any one time more than the greater of 3% of its employees or three employees
in the aggregate for all of them, (b) no employee of ATNCo., VITELCO or VCI
shall be required to be made available to the Company pursuant to this
Technical Assistance Agreement for a period of greater than 20 hours during
any calendar month and (c) none of ATNCo., VITELCO or VCI shall be required to
make available to the Company any employee to the extent that doing so would
interfere in any material respect with the performance of such employee's
duties to ATNCo., VITELCO or VCI, as the case may be, or otherwise cause a
burden to ATNCo., VITELCO or VCI, as the case may be.
 
  Section 1.02. Payment for Services. The Company agrees to reimburse ATNCo.,
VITELCO and VCI, on a monthly basis, (a) for the services of each employee of
ATNCo., VITELCO or VCI, as the case may be,
 
                                       1

<PAGE>
 
who provides services to the Company hereunder during such month, an amount
equal to the product of (i) two times the cost to ATNCo., VITELCO or VCI, as
the case may be, of the salary, wages and benefits of such employee for such
month and (ii) a fraction, the numerator of which is the number of hours such
employee provided services to the Company hereunder and the denominator of
which is the product of (x) eight and (y) the number of days during such month
when ATNCo., VITELCO or VCI, as the case may be, was open for business and (b)
for 100% of all "out-of-pocket expenses," including travel and lodging of any
employee, incurred by ATNCo., VITELCO or VCI, as the case may be, in
performing its obligations hereunder. Payments by the Company pursuant to this
Section 1.02 shall be made within ten days of receipt of an invoice from
ATNCo., VITELCO or VCI, as the case may be, showing in reasonable detail the
amounts due hereunder with respect to any month.
 
  Section 1.03. Requests for Services. ATNCo., VITELCO and VCI shall have no
obligation to perform any services hereunder except such as may be requested
of them by the Company on reasonable notice to them, and they shall not be
entitled to any payments under Section 1.02 from the Company except for
services requested of them by the Company.
 
                                  ARTICLE II
 
                              CERTAIN AGREEMENTS
 
  Section 2.01. Advisory Contract. The Company shall not, without the prior
written consent of each of ATNCo., VITELCO and VCI (which consents shall not
be unreasonably withheld or delayed), enter into any amendment, modification,
waiver, renewal or replacement of the Advisory Contract.
 
  Section 2.02. Indemnity. The Company shall indemnify and hold harmless each
of ATNCo., VITELCO and VCI, each of their respective affiliates and each of
their respective officers, directors, employees, agents and controlling
persons (each an "Indemnified Person") from and against any and all losses,
claims, damages, liabilities and expenses, joint or several, to which any such
Indemnified Person may become subject arising out of or in connection with
this Technical Services Agreement and the services provided hereunder, or any
claim, litigation, investigation or proceedings relating to the foregoing
regardless of whether any of such Indemnified Persons is a party thereto, and
to reimburse such Indemnified Persons for any legal or other out-of-pocket
expenses as they are incurred in connection with investigating or defending
any of the foregoing. The indemnity obligations of the Company under this
Section 2.02 shall be in addition to any liability which the Company may
otherwise have to an Indemnified Party.
 
                                  ARTICLE III
 
                           MISCELLANEOUS PROVISIONS
 
  Section 3.01. Termination. This Technical Services Agreement (other than the
provisions of Sections 1.02, 2.02 and 2.03 which shall survive any
termination) (a) may be terminated (i) by the Company at any time upon written
notice to each of the other parties hereto or (ii) by ATNCo., VITELCO or VCI
upon written notice to the Company if the Company shall have breached or
violated any of the terms or provisions of this Technical Services Agreement
and (b) shall automatically terminate upon (i) the termination of the Advisory
Contract or (ii) a Change of Control (as defined below) of the Company.
 
  As used herein, "Change of Control" means the occurrence of one or more of
the following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all
of the assets of the Company or GTT to any person or group of related persons
for purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") (a "Group"); (ii) the approval by the holders of
capital stock of the Company or GTT, as the case may be, of any plan or
proposal for the liquidation or dissolution of the Company or GTT, as the case
may be; or (iii) the acquisition in one or more
 
                                       2

<PAGE>
 
transactions of "beneficial ownership" (within the meaning of Rules 13d-3 and
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time) by any person, entity or Group (other than a Permitted Holder
(as defined below) or a Group controlled by any Permitted Holder) of any
capital stock of the Company or GTT such that, as a result of such
acquisition, such person, entity or Group either (A) beneficially owns (within
the meaning of Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, more than 50% of then outstanding voting securities of the Company
or GTT entitled to vote on a regular basis in an election for a majority of
the board of directors of the Company or GTT or (B) otherwise has the ability
to elect, directly or indirectly, a majority of the members of the board of
directors of the Company or GTT.
 
  As used herein, "Permitted Holders" means Cornelius B. Prior, Jr. and his
estate, heirs and legatees, and the legal representatives of any of the
foregoing, including, without limitation, the trustee of any trust of which
one or more of the foregoing are the sole beneficiaries.
 
  Section 3.02. Entire Agreement. This Technical Assistance Agreement,
together with all other written agreements which may be entered into between
the parties in connection herewith and the transactions contemplated hereby
and all other documents and instruments delivered in connection herewith and
therewith and the transactions contemplated hereby and thereby, set forth the
full and complete understanding of the parties hereto with respect to the
transactions contemplated hereby.
 
  Section 3.03. Governing Law. This Technical Assistance Agreement shall be
governed by and construed in accordance with the laws of the State of New York
without reference to the conflicts of laws rules thereof.
 
  Section 3.04. Headings. The headings in this Technical Assistance Agreement
are intended solely for convenience of reference and shall be given no effect
in the interpretation of this Technical Assistance Agreement.
 
  Section 3.05. Counterparts. This Technical Assistance Agreement may be
executed in any number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the same
instrument.
 
  Section 3.06. Benefits. This Technical Assistance Agreement will inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns, and no other person will have any right or obligation
hereunder.
 
  Section 3.07. Assignment. Neither this Technical Assistance Agreement nor
any right hereunder may be assigned by the parties hereto without the prior
written consent of the other parties. Subject to the foregoing, this Technical
Assistance Agreement shall be binding upon and inure to the benefit of the
successors, heirs, representatives and assigns of each party hereto.
 
  Section 3.08. Amendment and Waiver. This Technical Assistance Agreement may
be amended only by an instrument in writing signed on behalf of each of the
parties hereto. Any term, condition or provision of this Technical Assistance
Agreement may be waived (if in writing) at any time by the party or each of
the parties entitled to the benefits thereof.
 
  Section 3.09 Notices. All notices, requests, demands, and, other
communications hereunder shall be in writing and shall be deemed to have been
given if delivered by hand, or when sent by telex or telecopier (with
 
                                       3

<PAGE>
 
receipt confirmed) or by registered mail, return receipt requested, addressed
as follows (or to such other address as a party may designate by notice to the
other):
 
  (a) If to the Company:
 
    Atlantic Tele-Network, Inc.
    Estate Havensight
    P.O. Box 6100
    St. Thomas, U.S. Virgin Islands 00801
    (340) 774-2260 or 777-8000
    Attention: Cornelius B. Prior
    Telecopy: (809) 774-7790
 
  with copies to:
 
    Lewis A. Stern, P.C.
    Fried, Frank, Harris, Shriver & Jacobson
    One New York Plaza
    New York, New York 10004
    (212) 859-8190
    Telecopy: (212) 859-8587
 
  (b) If to ATNCo., VITELCO or VCI:
 
    c/o Emerging Communications, Inc.
    Chase Financial Center
    P.O. Box 1730
    St. Croix, U.S. Virgin Islands 06821-1730
    (340) 777-7700
    Attention: Jeffrey J. Prosser
    Telecopy: (809) 774-5487
 
  with copies to:
 
    Roger Meltzer, Esq.
    Cahill Gordon & Reindel
    80 Pine Street
    New York, New York 10005
    (212) 701-3851
    Telecopy: (212) 269-5420
 
                                       4

<PAGE>
 
  IN WITNESS WHEREOF, each of the parties hereto have caused this Technical
Assistance Agreement to be duly executed, all as of the date first written
above.
 
                                          Atlantic Tele-Network, Inc.
 
                                          By: /s/  Cornelius B. Prior  Jr.
                                              ---------------------------------
                                            Name:  Cornelius B. Prior  Jr.
                                            Title: Co-Chief Executive Officer
 
                                          By: /s/  Jeffrey J. Prosser
                                              ---------------------------------
                                            Name:  Jeffrey J. Prosser
                                            Title: Co-Chief Executive Officer
 
                                          Atlantic Tele-Network Co.
 
 
                                          By: /s/  Jeffrey J. Prosser
                                              ---------------------------------
                                            Name:  Jeffrey J. Prosser
                                            Title: Chief Executive Officer
 
                                          Virgin Islands Telephone Corporation
 
 
                                          By:  /s/ Jeffrey J. Prosser
                                              ---------------------------------
                                            Name:  Jeffrey J. Prosser
                                            Title: Chief Executive Officer
 
                                          Vitelcom Cellular Inc.
 
 
                                          By: /s/  Jeffrey J. Prosser
                                              ---------------------------------
                                            Name:  Jeffrey J. Prosser
                                            Title: Chief Executive Officer
 
                                       5



<PAGE>
 
                                                                     EXHIBIT (e)

                           NON-COMPETITION AGREEMENT
 
  THIS NON-COMPETITION AGREEMENT (this "Non-Competition Agreement") is entered
into as of the 30th day of December, 1997 by and among Emerging
Communications, Inc., a Delaware corporation ("ECI"), Atlantic Tele-Network,
Inc., a Delaware corporation (the "Company"), and Jeffrey J. Prosser,
("Prosser").
 
  WHEREAS, to eliminate corporate disputes and to maximize the value of the
Company for the benefit of the Company and its stockholders, the Company and
its co-chief executive officers and principal stockholders, Cornelius B.
Prior, Jr. ("Prior") and Prosser, entered into a Principal Terms Agreement
dated January 29, 1997 which contemplated the separation of the businesses and
assets of the Company; and
 
  WHEREAS, in order to accomplish such separation, the Company and ECI entered
into a Subscription Agreement (the "Subscription Agreement"), the Company,
Prior and Prosser entered into a Recapitalization Agreement (the
"Recapitalization Agreement") and the Company and ATN MergerCo. entered into
an Agreement and Plan of Merger (the "Merger Agreement"), all dated as of
August 11, 1997;
 
  WHEREAS, Prior and the other stockholders of the Company are relying on the
covenants of ECI and Prosser in this Non-Competition
 Agreement in making
and/or retaining their investments in the Common Stock of the Company; and
 
  WHEREAS, the execution and delivery of this Non-Competition Agreement by the
parties hereto is contemplated by the Subscription Agreement and is a
condition to the Closing (as defined in the Subscription Agreement); and
 
  WHEREAS, each of the parties hereto desires to consummate, and will secure
substantial benefits from the consummation of, the Closing.
 
  NOW, THEREFORE, for and in consideration of the covenants herein contained
and subject to the conditions hereinafter set forth, the parties hereto agree
as follows:
 
                                   ARTICLE I
 
                                  DEFINITIONS
 
  Section 1.01. Definitions. Capitalized terms used in this Non-Competition
Agreement without definition shall have the respective meanings ascribed to
such terms in the Subscription Agreement. As used in this Agreement, the
following terms have the meanings assigned to them below:
 
    "Competitive Business" means any business which competes anywhere in the
  world in any material respect with the conduct of the Subject Business by
  the Company or any of its Subsidiaries.
 
    "Confidential Information" means all information of a proprietary nature
  and documents or other tangible items that record information of a
  proprietary nature relating to the Subject Business, including without
  limitation, books, records, customer lists, vendor lists, supplier lists,
  pricing information, cost information, plans, strategies, forecasts,
  financial statistics, budgets and projections, other than any such
  information which is generally within the public domain at the time of
  receipt thereof by ECI or Prosser or at the time of use or disclosure of
  such information by ECI or Prosser (other than as a result of the breach by
  ECI or Prosser of its or his agreement hereunder).
 
    "Subject Business" means the business of providing telecommunications
  services (including carrying and/or terminating telecommunications
  traffic), directly or indirectly through service bureaus or other
  intermediaries, to persons who generate international audiotext
  telecommunications traffic (whether voice or data); provided, however, that
  the Subject Business shall not include the provision of any
  telecommunications services as a common carrier which does not involve the
  installation of special
 
                                       1

<PAGE>
 
  equipment to facilitate the generation of international audiotext
  telecommunications traffic or, directly or indirectly, the payment of any
  fee, commission or other compensation, through sharing of accounting or
  settlement rates, rate discounts or otherwise to persons generating such
  traffic.
 
                                  ARTICLE II
 
                           AGREEMENT NOT TO COMPETE;
                           DISCLOSURE OF INFORMATION
 
  Section 2.01. Agreement Not To Compete. (a) Each of ECI and Prosser
recognizes the highly competitive nature of the Subject Business and agrees
that the value and goodwill of the Company and its Subsidiaries would be
substantially impaired if it or he, as the case may be, failed to comply with
its or his obligations hereunder. Accordingly, each of ECI and Prosser hereby
agrees from the consummation of the Merger that during a period of ten years
thereafter, each of ECI and Prosser shall not, directly or indirectly, on its
or his own behalf, as the case may be, or on behalf of any other person or
entity:
 
    (i) engage in any Competitive Business, whether such engagement shall be
  as an employer, officer, director, owner, employee, partner, advisor,
  consultant, stockholder, investor, agent or other participant in any
  Competitive Business (or in any similar capacity in which it or he, as the
  case may be, derives an economic benefit from a Competitive Business);
 
    (ii) assist others in engaging in any Competitive Business in the manner
  described in the foregoing clause (i);
 
    (iii) solicit, entice or induce any director, employee, consultant or
  other agent of the Company or any current or future Subsidiary of the
  Company materially involved in the Subject Business to terminate his or her
  employment or other relationship with the Company or such current or future
  Subsidiary or to engage in any Competitive Business;
 
    (iv) solicit, entice or induce any vendor or distributor of the Company
  or any current or future Subsidiary materially involved in the Subject
  Business to terminate or materially diminish its relationship with the
  Company or such current or future Subsidiary; or
 
    (v) solicit, entice or induce any subscriber or customer of the Company
  or any current or future Subsidiary of the Company with respect to the
  Subject Business to purchase the products or services of any Competitive
  Business, or to cease purchasing the services of the Subject Business from
  the Company or any current or future Subsidiary of the Company.
 
  (b) Anything contained in this Non-Competition Agreement to the contrary
notwithstanding, no provision of this Agreement shall prohibit (i) ECI or
Prosser from owning, as a passive investment, in the aggregate less than 5% of
a class of publicly-traded securities issued by any person or entity engaged
in a Competitive Business or (ii) the provision of services by ATNCO,
VITELCo or VCI pursuant to terms of the Technical Assistance Agreement.
 
  Section 2.02. Disclosure of Information. From and after the date hereof,
each of ECI and Prosser shall hold in strict confidence and shall not use or
disclose to any person, firm, corporation or other business entity, except as
required by law or judicial process, any Confidential Information for any
reason or purpose whatsoever, nor shall ECI or Prosser make use of any of the
Confidential Information for ECI's or Prosser's purposes or for the benefit of
any person or entity except the Company or any affiliate thereof.
 
  Section 2.03. Acknowledgment. Prosser acknowledges that the provisions of
this Agreement are not designed to prevent Prosser from earning a living or
fostering his own career. The provisions of this Agreement are designed to
prevent any Competitive Business from gaining unfair advantage from Prosser's
and ECI's knowledge of confidential and proprietary information relating to
the Subject Business.
 
 
                                       2

<PAGE>
 
                                  ARTICLE III
 
                           MISCELLANEOUS PROVISIONS
 
  Section 3.01. Remedies. Each of ECI and Prosser acknowledges that a remedy
at law for any breach or threatened breach of the provisions of this Non-
Competition Agreement would be inadequate and therefore agrees that the
Company shall be entitled to injunctive relief; provided, however, that
nothing contained herein shall be construed as prohibiting the Company from
pursuing any other remedies available for any such breach or threatened
breach.
 
  Section 3.02. Benefits. This Non-Competition Agreement and the rights and
obligations of the parties hereto shall bind and inure to the benefit of any
successor or successors of the Company by reorganization, merger or
consolidation or otherwise and any assignee of all or substantially all of its
business and properties.
 
  Section 3.03. Severability, Blue Penciling. It is the desire and intent of
the parties hereto that the provisions of this Non-Competition Agreement shall
be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any particular provision of this Non-Competition Agreement
shall be adjudicated to be invalid or unenforceable, such provision shall be
deemed amended to delete therefrom the portion thus adjudicated to be invalid
or unenforceable, such deletion to apply only with respect to the operation of
such provision in the particular jurisdiction in which such adjudication is
made. In addition, if any one or more of the provisions contained in this Non-
Competition Agreement shall for any reason be held to be excessively broad as
to duration, geographical scope, activity or subject, it shall be construed by
limiting and reducing it so as to be enforceable to the extent compatible with
the applicable law as it shall then appear.
 
  Section 3.04. Notices. All notices or other communications required or
permitted hereunder shall be in writing and sufficient if (a) delivered
personally, (b) sent by nationally-recognized overnight courier or (c) sent by
certified mail, postage prepaid, return receipt requested, addressed as
follows:
 
  if to the Company, to:
 
    Atlantic Tele-Network, Inc.
    Estate Havensight
    P.O. Box 12030
    St. Thomas, U.S. Virgin Islands 00801
    (340) 774-2260 or 777-8000
    Attention: Cornelius B. Prior
    Telecopy: (809) 774-7790
 
  if to ECI or Prosser, to:
    Atlantic Tele-Network, Inc.
    Chase Financial Center
    P.O. Box 1730
    St. Croix, U.S. Virgin Islands 06821-1730
    (340) 777-7700
    Attention: Jeffrey J. Prosser
    Telecopy: (809) 774-5487
 
  with copies to:
    Roger Meltzer, Esq.
    Cahill Gordon & Reindel
    80 Pine Street
    New York, New York 10005
    (212) 701-3851
    Telecopy: (212) 269-5420
 
                                       3

<PAGE>
 
or, in each case, to such other address as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Any such communication shall be deemed to have been given (i) when delivered,
if personally delivered, (ii) on the business day after dispatch, if sent by
nationally-recognized overnight courier and (iii) on the third business day
after dispatch, if sent by mail.
 
  Section 3.05. Complete Agreement; Amendments; Prior Agreements. The
foregoing is the entire agreement of the parties with respect to the subject
matter hereof and may not be amended, supplemented, canceled or discharged
except by a written instrument executed by the parties hereto. This Non-
Competition Agreement supersedes any and all prior agreements among the
parties hereto with respect to the matters covered hereby.
 
  Section 3.06. Governing Law. This Non-Competition Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and performed wholly therein.
 
  Section 3.07. Counterparts. This Non-Competition Agreement may be executed
in any number of counterparts, and each such counterpart shall be deemed to be
an original instrument, but all such counterparts together shall constitute
but one agreement.
 
  Section 3.08. Jurisdiction. Any action or proceeding brought by any party to
this Non-Competition Agreement against any other party hereto with respect to
the enforcement or breach of this Non-Competition Agreement may be brought in
the courts of the State of New York or of the United States for the Southern
District of New York. Each of the parties hereto irrevocably submits to the
jurisdiction of each such court in respect of any such action or proceeding,
irrevocably waives any objection that it may now or hereafter have to the
laying of venue of any such action or proceeding in any such court and any
claim that any such action or proceeding brought in any such court has been
brought in an inconvenient forum, and irrevocably consents that service of
process or other legal summons for purposes of any such action or proceeding
may be served on it by personal service within or without the State of New
York or by mailing a copy thereof by registered mail, or a form of mail
substantially equivalent to registered mail, addressed to such party at its
address as provided for notices hereunder.
 
  Section 3.09. Expenses of Enforcement. In the event of any breach of this
Non-Competition Agreement by any party hereto, any other party hereto which is
aggrieved by such breach (an "Aggrieved Breach") shall be entitled to recover
from the party in breach, any and all costs and expenses, including without
limitation reasonable attorneys' fees, incurred by the Aggrieved Party as a
result of such breach or in connection with enforcing the provisions of this
Non-Competition Agreement with respect to such breach.
 
 
                                       4

<PAGE>
 
  IN WITNESS WHEREOF, this Non-Competition Agreement has been executed and
delivered by the parties hereto as of the date first above written.
 
                                          Atlantic Tele-Network, Inc.
 
 
                                          By: /s/ Cornelius B. Prior, Jr.
                                              ---------------------------------
                                            Name:  Cornelius B. Prior, Jr.
                                            Title: Chief Executive Officer
 
                                          Emerging Communications, Inc.
 
 
                                          By: /s/ Jeffrey J. Prosser
                                              ---------------------------------
                                            Name:  Jeffrey J. Prosser 
                                            Title: Chief Executive Officer
 
                                              /s/ Jeffrey J. Prosser 
                                          -------------------------------------
                                                   Jeffrey J. Prosser
 
                                       5



<PAGE>

                                                                     EXHIBIT (f)
 
                              INDEMNITY AGREEMENT
 
  THIS INDEMNITY AGREEMENT (this ("Indemnity Agreement") is entered into as of
the 30th day of December, 1997 by and among Atlantic Tele-Network, Inc., a
Delaware corporation (the "Company"), Emerging Communications, Inc., a
Delaware corporation ("ECI"), Cornelius B. Prior, Jr. ("Prior") and Jeffrey J.
Prosser ("Prosser").
 
  WHEREAS, the execution and delivery of this Indemnity Agreement by the
parties hereto is contemplated by the Subscription Agreement dated as of
August 11, 1997 (the "Subscription Agreement") between the Company and ECI and
is a condition to the Closing (as defined in the Subscription Agreement); and
 
  WHEREAS, each of the parties hereto desires to consummate, and will receive
substantial benefits from the consummation of, the Closing.
 
  NOW, THEREFORE, for and in consideration of the premises and mutual
covenants herein contained and subject to the conditions hereinafter set
forth, the parties hereto agree as follows:
 
 
                                   ARTICLE I
 
                                  DEFINITIONS
 
  Section 1.01. Definitions. Capitalized terms used in this Indemnity
Agreement without definition shall have the respective meanings ascribed to
such terms in the Subscription Agreement.
 
  "Affiliate" of any person shall mean any other person
 which controls, is
controlled by, or is under common control with such person, and "person" for
purposes hereof means and includes any individual, partnership, limited
liability company, firm, corporation or other entity.
 
                                  ARTICLE II
 
                                INDEMNIFICATION
 
  Section 2.01. Indemnification by Prosser. Subject to the terms and
conditions contained herein, Prosser hereby agrees to indemnify and hold
harmless the Company, its Subsidiaries after the Closing, their respective
officers, directors and agents and Prior, individually and as Trustee of the
1994 Prior Charitable Remainder Trust, from and against any and all losses,
liabilities, damages, costs, and expenses (including, without limitation,
reasonable attorney's fees and any and all expenses whatsoever reasonably
incurred in investigating, preparing or defending any action, suit or
proceeding, commenced or threatened) of any kind and nature (collectively,
"Losses") (A) which relate to or arise out of any action, suit or proceeding
brought by or on behalf of any stockholder of the Company or ECI arising out
of or relating to (i) the repurchase by the Company of shares of Company
Common Stock owned by Prior and/or the Trust pursuant to the Recapitalization
Agreement or (ii) the number of shares of ECI Common Stock to be received by
Prosser pursuant to the Merger Agreement, or (B) which relate to or arise out
of any action, suit or proceeding arising out of relating to an untrue
statement of a material fact or alleged untrue statement of a material fact
contained in the proxy statement/prospectus to be delivered to holders of
Company Common Stock (the "Proxy Statement") or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with respect
to the beneficial ownership of stock of the Company by Prosser and/or members
of his family and his or their Affiliates and biographical information with
respect to Mr. Prosser.
 
  Section 2.02. Indemnification by Prior. Subject to the terms and conditions
contained herein, Prior hereby agrees to indemnify and hold harmless ECI, the
entities which will become its Subsidiaries after the Closing, their
respective officers, directors and agents and Prosser from and against any and
all Losses (A) which
 
                                       1

<PAGE>
 
relate to or arise out of any action, suit or proceeding brought by or on
behalf of any stockholder of the Company or ECI arising out of or relating to
the number of shares of Surviving Corporation Common Stock (as defined in the
Merger Agreement) to be received by Prior pursuant to the Merger Agreement or
(B) an untrue statement of a material fact or alleged untrue statement of a
material fact contained in the Proxy Statement or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with respect
to the beneficial ownership of stock of the Company by Prior and/or members of
his family and his or their Affiliates and biographical information with
respect to Mr. Prior.
 
  Section 2.03. Indemnification by ECI. Subject to the terms and conditions
contained herein, ECI hereby agrees to indemnify and hold harmless the
Company, its Subsidiaries after the Closing, their respective officers,
directors and agents and Prior from and against any and all Losses which
relate to or arise out of, (i) the business or operations conducted by ECI and
the Transferred Subsidiaries before or after the Closing, or any other
Subsidiaries of ECI after the Closing, (ii) the Assumed Liabilities or (iii)
any action, suit or proceeding arising out of or relating to an untrue
statement of a material fact or alleged untrue statement of a material fact
contained in the Proxy Statement or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only with respect to (a) the business,
prospects or planned or proposed activities of ECI and its Subsidiaries after
the Closing Date, (b) activities of ECI or the Transferred Subsidiaries after
April 30, 1997 and (c) prospective acquisitions of businesses or other
transactions not in the ordinary course of business planned or contemplated by
ECI, the Transferred Subsidiaries or Prosser.
 
  Section 2.04. Indemnication by the Company. Subject to the terms and
conditions contained herein, the Company hereby agrees to indemnify and hold
harmless ECI, the entities which will become its Subsidiaries after the
Closing, their respective officers, directors and agents and Prosser from and
against any and all Losses which relate to or arise out of (i) the business
and operations conducted by GTT before or after the Closing or the business
and operations after the Closing of the Company or any other entity which will
be a Subsidiary of the Company after the Closing, (ii) the Excluded
Liabilities or (iii) any action, suit or proceeding arising out of or relating
to an untrue statement of a material fact or alleged untrue statement of a
material fact contained in the Proxy Statement or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, but only with respect
to (a) the business, prospects or planned or proposed activities of the
Company and its Subsidiaries after the Closing Date, (b) activities of GTT and
the Company with respect to GTT after April 30, 1997 and (c) prospective
acquisitions of businesses or other transactions not in the ordinary course of
business planned or contemplated by GTT or Prior.
 
  Section 2.05. No Third Party Rights. Nothing in this Indemnity Agreement,
express or implied, is intended or shall be construed to give to any person,
firm or corporation, other than an Indemnified Party (as defined below), any
rights, remedy, claim or cause of action under or by reason of this Indemnity
Agreement, or any terms, covenants or conditions hereof.
 
  Section 2.06. Indemnification Procedures. (a) If any party or person which
may seek indemnification hereunder (an "Indemnified Party") determines that it
is or may be entitled to indemnification by any party hereto (an "Indemnifying
Party") under this Agreement (other than in connection with any Third Party
Claim (as defined below) subject to clause (b) of this Section 2.06), the
Indemnified Party shall deliver to the Indemnifying Party a written notice
specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. After the Indemnifying Party shall
have been notified of the amount for which the Indemnified Party seeks
indemnification, the Indemnifying Party shall, within 30 days after receipt of
such notice, pay the Indemnified Party such amount in cash or other
immediately available funds (or reach agreement with the Indemnified Party as
to a mutually agreeable alternative payment schedule) unless the Indemnifying
Party objects to the claim for indemnification or the amount thereof. If the
Indemnifying Party does not give the Indemnified Party written notice
objecting to such claim and setting forth the grounds therefor within the same
30 day period, the Indemnifying Party shall be deemed to have acknowledged its
liability for such claim and the Indemnified Party may exercise any and all of
its rights under applicable law to collect such amount.
 
                                       2

<PAGE>
 
  (b) Promptly following the earlier of (i) receipt of notice of the
commencement by a third party of any action, suit or proceeding against or
otherwise involving any Indemnified Party or (ii) receipt of information from
a third party alleging the existence of a claim against an Indemnified Party,
in either case, with respect to which indemnification may be sought pursuant
to this Indemnity Agreement (a "Third-Party Claim"), the Indemnified Party
shall give the Indemnifying Party prompt written notice thereof. The failure
of the Indemnified Party to give notice as provided in this clause (b) shall
not relieve the Indemnifying Party of its obligations under this Indemnity
Agreement, except to the extent that the Indemnifying Party is materially
prejudiced by such failure to give notice. Within 30 days after receipt of
such notice, the Indemnifying Party may (i) by giving written notice thereof
to the Indemnified Party, acknowledge liability for and at its option elect to
assume the defense of such Third-Party Claim at its sole cost and expense or
(ii) object to the claim of indemnification set forth in the notice delivered
by the Indemnified Party pursuant to the first sentence of this clause (b);
provided that if the Indemnifying Party does not within the same 30 day period
give the Indemnified Party written notice objecting to such claim and setting
forth the grounds therefor or electing to assume the defense, the Indemnifying
Party shall be deemed to have acknowledged its liability for such Third-Party
Claim. Any contest of a Third-Party Claim as to which the Indemnifying Party
has elected to assume the defense shall be conducted by attorneys employed by
the Indemnifying Party and reasonably satisfactory to the Indemnified Party,
and the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation, except as provided in the following sentence. The Indemnified
Party shall have the right to participate in the defense against the Third
Party Claim and to be represented by attorneys of its own choosing, but the
fees and expenses of such attorneys shall be at the expense of the Indemnified
Party unless (i) the Indemnifying Party and the Indemnified Party shall have
mutually agreed to the retention of such attorneys by the Indemnified Party or
(ii) representation of both parties by the same counsel in respect of such
Third Party Claim would be inappropriate due to actual or potential differing
interests between them (in which case the Indemnifying Party shall not be
entitled to assume or direct the defense of such proceeding on behalf of the
Indemnified Party); provided that in no event shall the Indemnifying Party be
required to pay the fees and expenses of more than one separate counsel (in
addition to local counsel) in any one proceeding representing the Indemnified
Parties who are parties thereto. If the Indemnifying Party assumes the defense
of a Third-Party Claim, the Indemnifying Party may settle or compromise the
claim without the prior written consent of the Indemnified Party; provided
that without the prior written consent of the Indemnified Party, which consent
shall not be unreasonably withheld, the Indemnifying Party may not agree to
any such settlement or compromise unless such settlement or compromise
includes an unconditional release of the Indemnified Party from all liability
on claims that are or could be the subject matter of such proceeding. If the
Indemnifying Party does not assume the defense of a Third-Party Claim for
which it has acknowledged liability for indemnification as described herein,
the Indemnified Party may require the Indemnifying Party to reimburse it on a
current basis for its reasonable expenses of investigation, reasonable
attorney's fees and reasonable out-of-pocket expenses incurred in defending
against such Third-Party Claim and the Indemnifying Party shall be bound by
the result obtained with respect thereto by the Indemnified Party; provided
that the Indemnifying Party shall not be liable for any settlement effected
without its consent, which consent shall not be unreasonably withheld. The
Indemnifying Party shall pay to the Indemnified Party in cash the amount for
which the Indemnified Party is entitled to be indemnified (if any) within 15
days after the final resolution of such Third-Party Claim (whether by the
final nonappealable judgment of a court of competent jurisdiction or
otherwise) or, in the case of any Third-Party Claim as to which the
Indemnifying Party has not acknowledged liability, within 15 days after such
Indemnifying Party's objection has been resolved by settlement, compromise or
the final nonappealable judgment of a court of competent jurisdiction.
 
  (c) This Section 2.06 shall have no applicability to any claim for
indemnification with respect to any income, gross income, gross receipts,
profits, capital stock, franchise, withholding, payroll, social security,
workers compensation, unemployment, disability, property, ad valorem, stamp,
excise, severance, occupation, service, sales, use, license, lease, transfer,
import, export, value added, alternative minimum, estimated or other similar
tax (including any fee, assessment, or other charge in the nature of or in
lieu of any tax) imposed by any governmental entity or political subdivision
thereof, and any interest, penalties, additions to tax, or additional amounts
in respect of the foregoing (collectively "Taxes"), it being understood that
the procedures for
 
                                       3

<PAGE>
 
indemnification with respect to Taxes are covered in that separate Tax Sharing
and Indemnification Agreement dated the date hereof among the parties hereto.
 
                                  ARTICLE III
 
                            FORBEARANCE; STANDSTILL
 
  Section 3.01. Forbearance. Except with respect to enforcing specific
provisions of an agreement entered into in connection with the Transactions,
including, without limitation, this Indemnity Agreement, (a) Prosser and ECI
hereby agree not to bring any action, suit or proceeding against Prior or the
Company with respect to any of the matters constituting the Transactions, or
arising out or relating to the business, operations or management of the
Company or any of its Subsidiaries prior to and including the Closing and (b)
Prior and the Company hereby agree not to bring any action, suit or proceeding
against Prosser or ECI with respect to any of the matters constituting the
Transactions or arising out of or relating to the business, operations or
management of the Company or any of its Subsidiaries prior to and including
the Closing.
 
  Section 3.02. Standstill.
 
  (a) Each of Prosser and ECI agrees that for a period of ten years after the
Closing Date, he or it, as the case may be, shall not, and shall not permit
his or its, as the case may be, Controlled Affiliates (as defined below) to,
without the prior written consent of the Company, duly authorized by its Board
of Directors:
 
    (i) be the "beneficial owner" (as defined in Rule 13d-3 under the
  Exchange Act) of greater than 5% of the outstanding Voting Securities (as
  defined below) of the Company; or offer or agree to purchase any Voting
  Securities of the Company if, after giving effect to such purchase, he or
  it, as the case may be, would be the beneficial owner of greater than 5% of
  the outstanding Voting Securities of the Company; or
 
    (ii) make, or in any way participate in, any "solicitation" of "proxies"
  (as such terms are defined in Rule 14a-1 under the Exchange Act) with
  respect to Voting Securities of the Company; become a participant in any
  "election contest" (within the meaning of Rule 14a-11 of the Exchange Act)
  with respect to the Company; seek to advise or influence any person with
  respect to the voting of any Voting Securities of the Company; execute any
  written consent in lieu of a meeting of holders of any class or series of
  Voting Securities of the Company; or initiate, propose or otherwise solicit
  holders of Voting Securities of the Company for the approval or rejection
  of a proposal for a vote of holders of Voting Securities of the Company.
 
  (b) Each of Prior and the Company agrees that for a period of ten years
after the Closing Date, he or it, as the case may be, shall not, and shall not
permit his or its, as the case may be, Controlled Affiliates (as defined
below) to, without the prior written consent of ECI, duly authorized by its
Board of Directors:
 
    (i) be the "beneficial owner" (as defined in Rule 13d-3 under the
  Exchange Act) of greater than 5% of the outstanding Voting Securities (as
  defined below) of ECI; or offer or agree to purchase any Voting Securities
  of ECI if, after giving effect to such purchase, he or it, as the case may
  be, would be the beneficial owner of greater than 5% of the outstanding
  Voting Securities of ECI; or
 
    (ii) make, or in any way participate in, any "solicitation" of "proxies"
  (as such terms are defined in Rule 14a-1 under the Exchange Act) with
  respect to Voting Securities of ECI; become a participant in any "election
  contest" (within the meaning of Rule 14a-11 of the Exchange Act) with
  respect to ECI; seek to advise or influence any person with respect to the
  voting of any Voting Securities of ECI; execute any written consent in lieu
  of a meeting of holders of any class or series of Voting Securities of ECI;
  or initiate, propose or otherwise solicit holders of Voting Securities of
  ECI for the approval or rejection of a proposal for a vote of holders of
  Voting Securities of ECI.
 
  (c) As used in this Section 3.02, the following terms have the meanings
assigned to them below:
 
 
                                       4

<PAGE>
 
  "Controlled Affiliate" of any person means any other person under the
control of such person. As used in this definition, "control" means the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person, whether through ownership of
Voting Securities, by contract or otherwise.
 
  "Voting Securities" of any person means securities, the holders of which
are, at the applicable time in question, entitled to vote for the election of
directors of such person.
 
                                  ARTICLE IV
 
                           MISCELLANEOUS PROVISIONS
 
  Section 4.01. Effectiveness. This Indemnity Agreement shall become operative
upon consummation of the Merger.
 
  Section 4.02. Entire Agreement. This Indemnity Agreement, together with all
other written agreements which may be entered into between the parties in
connection herewith and the transactions contemplated hereby and all other
documents and instruments delivered in connection herewith and therewith and
the transactions contemplated hereby and thereby, set forth the full and
complete understanding of the parties hereto with respect to the transactions
contemplated hereby.
 
  Section 4.03. Governing Law. This Indemnity Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
reference to the conflict of laws rules thereof.
 
  Section 4.04. Headings. The headings in this Indemnity Agreement are
intended solely for convenience of reference and shall be given no effect in
the interpretation of this Indemnity Agreement.
 
  Section 4.05. Counterparts. This Indemnity Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same instrument.
 
  Section 4.06. Benefits. This Indemnity Agreement will inure to the benefit
of and be binding upon the parties hereto and their respective successors and
assigns, and no other person (other than an Indemnified Party) will have any
right or obligation hereunder.
 
  Section 4.07. Assignment. Neither this Indemnity Agreement nor any right
hereunder may be assigned by the parties hereto without the prior written
consent of the other parties. Subject to the foregoing, this Indemnity
Agreement shall be binding upon and inure to the benefit of the successors,
heirs, representatives and assigns of each party hereto.
 
  Section 4.08. Amendment and Waiver. This Indemnity Agreement may be amended
only by an instrument in writing signed on behalf of each of the parties
hereto. Any term, condition or provision of this Indemnity Agreement may be
waived (if in writing) at any time by the party or each of the parties
entitled to the benefits thereof.
 
  Section 4.09. Notices. All notices, requests, demands, and other
communications hereunder shall be in writing and shall be deemed to have been
given if delivered by hand, or when sent by telex or telecopier (with
 
                                       5

<PAGE>
 
receipt confirmed) or by registered mail, return receipt requested, addressed
as follows (or to such other address as a party may designate by notice to the
other):
 
  (a) If to the Company or Prior:
    Atlantic Tele-Network, Inc.
    Estate Havensight
    P.O. Box 12030
    St. Thomas, U.S. Virgin Islands 00801
    (340) 774-2260 or 777-8000
    Attention: Cornelius B. Prior
    Telecopy: (809) 774-7790
 
  with copies to:
    Lewis A. Stern, P.C.
    Fried, Frank, Harris, Shriver & Jacobson
    One New York Plaza
    New York, New York 10004
    (212) 859-8190
    Telecopy: (212) 859-8587
 
  (b) If to ECI or Prosser:
    Atlantic Tele-Network, Inc.
    Chase Financial Center
    P.O. Box 1730
    St. Croix, U.S. Virgin Islands 06821-1730
    (340) 777-8000
    Attention: Jeffrey J. Prosser
    Telecopy: (809) 774-5487
 
  with copies to:
    Roger Meltzer, Esq.
    Cahill Gordon & Reindel
    80 Pine Street
    New York, New York 10005
    (212) 701-3851
    Telecopy: (212) 269-5420
 
  Section 4.10. Jurisdiction. Any action or proceeding brought by any party to
this Indemnity Agreement against any other party hereto with respect to the
enforcement or breach of this Indemnity Agreement may be brought in the courts
of the State of New York or of the United States for the Southern District of
New York. Each of the parties hereto irrevocably submits to the jurisdiction
of each such court in respect of any such action or proceeding, irrevocably
waives any objection that it may now or hereafter have to the laying of venue
of any such action or proceeding in any such court and any claim that any such
action or proceeding brought in any such court has been brought in an
inconvenient forum, and irrevocably consents that service of process or other
legal summons for purposes of any such action or proceeding may be served on
it by personal service within or without the State of New York or by mailing a
copy thereof by registered mail, or a form of mail substantially equivalent to
registered mail, addressed to such party at its address as provided for
notices hereunder.
 
  Section 4.11. Expenses of Enforcement. In the event of any breach of this
Indemnity Agreement by any party hereto, any other party hereto which is
aggrieved by such breach (an "Aggrieved Party") shall be entitled to recover
from the party in breach, any and all costs and expenses, including without
limitation reasonable attorneys fees, incurred by the Aggrieved Party as a
result of such breach or in connection with enforcing the provisions of this
Indemnity Agreement with respect to such breach.
 
                                       6

<PAGE>
 
  IN WITNESS WHEREOF, each of the parties hereto has caused this Indemnity
Agreement to be duly executed, all as of the date first written above.
 
                                          Atlantic Tele-Network, Inc.
 
 
                                          By: /s/ Cornelius B. Prior 
                                            _________________________________
                                            Name: Cornelius B. Prior
                                            Title: Co-Chief Executive Officer
 
 
                                          By: /s/ Jeffrey J. Prosser 
                                             _________________________________
                                            Name: Jeffrey J. Prosser
                                            Title: Co-Chief Executive Officer
 
                                          Emerging Communications, Inc.
 
 
                                          By: /s/ Jeffrey J. Prosser 
                                             _________________________________
                                             Name: Jeffrey J. Prosser
                                             Title: Chief Executive Officer
 

                                              /s/ Cornelius B. Prior, Jr.
                                             _________________________________
                                                 Cornelius B. Prior, Jr.
 
                                                
                                                /s/ Jeffrey J. Prosser 
                                          _____________________________________
                                                   Jeffrey J. Prosser

 
                                       7



<PAGE>

                                                                   EXHIBIT 10(g)
 
                          EMPLOYEE BENEFITS AGREEMENT
 
  THIS EMPLOYEE BENEFITS AGREEMENT (this "Employee Benefits Agreement") is
entered into as of the 30th day of December 1997 by and between Emerging
Communications, Inc., a Delaware Corporation (the "ECI"), and Atlantic Tele-
Network, Inc., a Delaware corporation (the "Company" or "ATNI").
 
  WHEREAS, to eliminate corporation disputes and to maximize the value of the
Company for the benefit of the Company and its stockholders, the Company, and
its co-chief executive officers and principal stockholders, Cornelius B.
Prior, Jr. ("Prior") and Jeffrey J. Prosser ("Prosser"), entered into a
Principal Terms Agreement dated January 29, 1997 which contemplated the
separation of the businesses and assets of the Company; and
 
  WHEREAS, in order to accomplish such separation, the Company and New ATN
entered into a Subscription Agreement (the "Subscription Agreement"), the
Company, Prior and Prosser entered into a Recapitalization Agreement (the
"Recapitalization Agreement") and the Company and ATN MergerCo. entered into
an Agreement and Plan of Merger (the "Merger Agreement"), all dated as of
August 11, 1997;
 
  WHEREAS, the execution and delivery of this Employee Benefits Agreement by
the parties hereto is
 contemplated by the Subscription Agreement and is a
condition to the Closing (as defined in the Subscription Agreement); and
 
  WHEREAS, each of the parties hereto desires to consummate, and will secure
substantial benefits from the consummation of, the Closing.
 
  NOW, THEREFORE, for and in consideration of the covenants herein contained
and subject to the conditions hereinafter set forth, the parties hereto agree
as follows:
 
  1. Effective as of the Closing, (i) ECI shall adopt as its own the Atlantic
Tele-Network, Inc. Defined Benefit Plan for Salaried Employees, the Atlantic
Tele-Network, Inc. Management Employees' Savings Plan, and the Atlantic Tele-
Network, Inc. Employees' Stock Ownership Plan (collectively, the "ATNI
Plans"), (ii) each of the trusts (and all assets thereof) forming a part of
the ATNI Plans shall be assumed by ECI, and (iii) ECI and the Company shall
take such action, including amendments to the ATNI Plans (or the trusts
forming a part thereof), as is necessary in order for ECI to be the sponsor
and "Employer" under such ATNI Plans. As of the Closing, employees of the
Company and its subsidiaries shall cease participation in the ATNI Plans
maintained by ECI or any of its subsidiaries.
 
  2. All other employee benefit plans maintained by ATN Co., a U.S. Virgin
Islands corporation ("ATNC"), by Virgin Islands Telephone Corp., a U.S. Virgin
Islands corporation ("Vitelco") or by any of their subsidiaries (the
"ATNC/Vitelco Plans"), including but not limited to the Virgin Islands
Telephone Corporation Pension Plan for Hourly Employees, the United
Steelworkers of America 401(k) Plan for Bargaining Unit Employees of Vitelco,
the Welfare Plan for Salaried Employees and the Welfare Plan for Bargaining
Employees, shall continue to be sponsored by such entities after the Closing.
As of the Closing, employees of the Company and its subsidiaries shall cease
participation in the ATNC/Vitelco Plans maintained by ECI, ATNC, Vitelco or
any of their subsidiaries.
 
  3. Effective as of the Closing, ECI and its subsidiaries shall assume all
employment-related liabilities and obligations of ATNI toward those employees
who prior to the Closing were employed by ATNI and who after the Closing will
be employed by ECI or its subsidiaries. Such employment-related liabilities
and obligations shall include, but are not limited to, liabilities and
obligations with respect to wages, withholding taxes, benefits, accrued
vacation, employee benefit plan contributions and administrative expenses,
whether incurred or accrued before, on or after the Closing and whether or not
reported as of the Closing.
 
                                       1

<PAGE>
 
  4. All notices or other communications required or permitted hereunder shall
be in writing and sufficient if (a) delivered personally, (b) sent by
nationally-recognized overnight courier or (c) sent by certified mail, postage
prepaid, return receipt requested, addressed as follows:
 
  if to the Company, to:
 
    Atlantic Tele-Network, Inc.
    Estate Havensight
    P.O. Box 6100
    St. Thomas, U.S. Virgin Islands 00801
    (340) 774-2260 or 777-8000
    Attention: Cornelius B. Prior
    Telecopy: [(809) 774-7790]
  if to ECI, to:
    Emerging Communications, Inc.
    Chase Financial Center
    P.O. Box 1730
    St. Croix, U.S. Virgin Islands 06821-1730
    (340) 777-7700
    Attention: Jeffrey J. Prosser
    Telecopy: (809) 774-5487
 
  with copies to:
 
    Roger Meltzer, Esq.
    Cahill Gordon & Reindel
    80 Pine Street
    New York, New York 10005
    (212) 701-3851
    Telecopy: (212) 269-5420
 
or, in each case, to such other address as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith.
Any such communication shall be deemed to have been given (i) when delivered,
if personally delivered, (ii) on the business day after dispatch, if sent by
nationally-recognized overnight courier and (iii) on the third business day
after dispatch, if sent by mail.
 
  5. The foregoing is the entire agreement of the parties with respect to the
subject matter hereof and may not be amended, supplemented, canceled or
discharged except by a written instrument executed by the parties hereto. This
Employee Benefits Agreement supersedes any and all prior agreements among the
parties hereto with respect to the matters covered hereby.
 
  6. This Employee Benefits Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and performed wholly therein.
 
  7. This Employee Benefits Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
 
  8. Any action or proceeding brought by any party to this Employee Benefits
Agreement against any other party hereto with respect to the enforcement or
breach of this Employee Benefits may be brought in the courts of the State of
New York or of the United States for the Southern District of New York. Each
of the parties hereto irrevocably submits to the jurisdiction of each such
court in respect of any such action or proceeding, irrevocably waives any
objection that it may now or hereafter have to the laying of venue of any such
action or proceeding
 
                                       2

<PAGE>
 
in any such court and any claim that any such action or proceeding brought in
any such court has been brought in an inconvenient forum, and irrevocably
consents that service of process or other legal summons for purposes of any
such action or proceeding may be served on it by personal service within or
without the State of New York or by mailing a copy thereof by registered mail,
or a form of mail substantially equivalent to registered mail, addressed to
such party at its address as provided for notices hereunder.
 
  9. In the event of any breach of this Employee Benefits Agreement by any
party hereto, any other party hereto which is aggrieved by such breach (an
"Aggrieved Breach") shall be entitled to recover from the party in breach, any
and all costs and expenses, including without limitation reasonable attorneys'
fees, incurred by the Aggrieved Party as a result of such breach or in
connection with enforcing the provisions of this Non-Competition Agreement
with respect to such breach.
 
  IN WITNESS WHEREOF, this Employee Benefits Agreement has been executed and
delivered by the parties hereto as of the date first above written.
 
                                          Atlantic Tele-Network, Inc.
 
 
                                          By: /s/ Cornelius B. Prior, Jr.
                                            __________________________________
                                            Name: Cornelius B. Prior, Jr.
                                            Title: Chief Executive Officer
 
                                          Emerging Communications, Inc.
 
 
                                          By: /s/ Jeffrey J. Prosser
                                            __________________________________
                                            Name: Jeffrey J. Prosser
                                            Title: Chief Executive Officer
 
                                       3



<PAGE>

                                                                   EXHIBIT 10(h)

 
                   TAX SHARING AND INDEMNIFICATION AGREEMENT
 
  This Tax Sharing and Indemnification Agreement is entered into as of 
December 30, 1997 by and among Atlantic Tele-Network, Inc., a Delaware
corporation ("ATN"), Emerging Communications, Inc., a Delaware corporation
("ECI"), Cornelius B. Prior, Jr. ("Prior") and Jeffrey J. Prosser ("Prosser").
Capitalized terms used in this Agreement are defined in Section 1 below. Unless
otherwise indicated, all "Section" references in this Agreement are to sections
of this Agreement.
 
                                   RECITALS
 
  WHEREAS, as of the date hereof ATN is the common parent of an affiliated
group of corporations, including ECI and Atlantic Aircraft, Inc., a Delaware
corporation ("Aircraft Corp."), which has elected to file consolidated Federal
and combined Delaware income tax returns; and
 
  WHEREAS, the execution and delivery of this Agreement by the parties hereto
is contemplated by the Subscription Agreement dated as of August 11, 1997 (the
"Subscription Agreement") between ATN and ECI and is a condition to the
Closing (as defined in the Subscription Agreement); and
 
  WHEREAS, as a result of the Transactions, ECI and Aircraft Corp. will cease
to be members of the affiliated group of which ATN is the common parent as of

the end of the day which is the Closing Date; and
 
  WHEREAS, ATN, ECI, Prior and Prosser desire to provide for and agree upon
the allocation among them of liabilities for Taxes arising prior to and as a
result of the Transactions, and to provide for and agree upon other matters
relating to Taxes;
 
  NOW THEREFORE, in consideration of the mutual agreements contained herein,
ATN, ECI, Prior and Prosser hereby agree as follows:
 
  Section 1. Definition of Terms. For purposes of this Agreement (including
the recitals hereof), the following terms have the following meanings:
 
  "ACCOUNTING CUTOFF DATE" means, with respect to each of ATN and ECI, any
date as of the end of which there is a closing of the financial accounting
records for such entity.
 
  "ACCOUNTING FIRM" shall have the meaning provided in Section 15.
 
  "AFFILIATE" means any entity that directly or indirectly "controls" or is
"controlled" by the person or entity in question. "Control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person, whether through
ownership of voting securities, by contract or otherwise.
 
  "AGREEMENT" means this Tax Sharing and Indemnification Agreement.
 
  "ATN GROUP" means ATN and its Affiliates as determined immediately after the
Transactions.
 
  "CLOSING" means the Closing as that term is defined in the Subscription
Agreement.
 
  "CLOSING DATE" means the Closing Date as that term is defined in the
Subscription Agreement.
 
  "CODE" means the U.S. Internal Revenue Code of 1986, as amended, or any
successor law.
 
  "COMPANIES" means ATN and ECI and "Company" means either ATN or ECI.
 
  "DEBITS" shall have the meaning ascribed to it in the Subscription
Agreement.
 
  "DISTRIBUTION" means the distribution to certain ATN shareholders on the
Closing Date of all of the outstanding stock of ECI owned by ATN.
 
                                       1

<PAGE>
 
  "ECI GROUP" means ECI and its Affiliates as determined immediately after the
Transactions.
 
  "FEDERAL INCOME TAX" means any Tax imposed by Subtitle A of the Code, or to
the extent related to such Tax, any Tax imposed by Subtitle F of the Code.
 
  "FINAL CLOSING ADJUSTMENT" shall have the meaning ascribed to it in the
Subscription Agreement.
 
  "FINAL DETERMINATION" means the final resolution of any Tax liability for a
Tax Period, including any related interest or penalties, by (i) a decision of
the Tax Court or judgment, decree, or other order by a court of competent
jurisdiction, which has become final and unappealable; (ii) IRS Form 870-AD
(or any successor forms thereto), on the date of acceptance by or on behalf of
the Internal Revenue Service, or by a comparable agreement form under other
applicable Tax Laws; except that a Form 870-AD or comparable form that by its
terms reserves the right of the taxpayer to file a claim for refund and/or the
right of the Tax Authority to assert a further deficiency shall not constitute
a final determination; (iii) a closing agreement under Section 7121 of the
Code or under corresponding provisions of any subsequently enacted federal Tax
Laws, or comparable agreements under other applicable Tax Laws; and (iv) any
other final disposition by reason of the expiration of the applicable statute
of limitations.
 
  "FOREIGN INCOME TAX" means any Tax imposed by any foreign country or any
territory or possession of the United States, or by any political subdivision
of any foreign country or United States territory or possession, which is an
income tax as defined in Treasury Regulation Section 1.901-2.
 
  "GROUP" means the ATN Group or the ECI Group, as the context requires.
 
  "GT&T" means Guyana Telephone & Telegraph Company Limited, a Guyana
corporation.
 
  "INCOME TAX" means any Federal Income Tax, State Income Tax, or Foreign
Income Tax.
 
  "INTERCOMPANY TAX ALLOCATION AGREEMENTS" means any written or oral agreement
or any other arrangements relating to allocation of Taxes existing between ATN
and Aircraft Corp. or any other member of the ECI Group in effect as of the
Closing Date (other than this Agreement).
 
  "LETTER REQUEST" means the letter filed by ATN with the Internal Revenue
Service requesting a ruling from the Internal Revenue Service regarding
certain tax consequences of the Transactions, including the job descriptions
of certain officers and employees of ATN attached as Exhibit 9 to such letter
and the Revenue Procedure 96-30 Checklist attached as Exhibit 1 to such letter
and any amendment or supplement to such letter or such exhibits.
 
  "LLC" means a limited liability company organized under the laws of Delaware
of which Prosser is the sole beneficial owner, member and manager and which,
for United States tax purposes and United States Virgin Island tax purposes, is
disregarded as an entity separate from Prosser under Treasury Regulations
Section 301.7701-3.
 
  "PAYMENT DATE" means (i) with respect to any Tax Return relating to Federal
Income Taxes, the due date for any required installment of estimated taxes
determined under Code Section 6655, the due date (determined without regard to
extensions) for filing the Tax Return determined under Code Section 6072, and
the date the Tax Return is filed, and (ii) with respect to any Tax Return
relating to other Taxes, the corresponding dates determined under the
applicable Tax Law.
 
  "PERMITTED PLEDGE" means a bona fide pledge of stock or securities of ATN or
ECI by Prior or Prosser or the LLC to a bank (including, without limitation,
the RTFC) or brokerage firm as collateral for a full recourse loan to Prior or
Prosser or a loan to the LLC with full recourse to Prosser.
 
  "POST-DISTRIBUTION PERIOD" means any Tax Period beginning after the Closing
Date, and, in the case of any Straddle Period, the portion of such Straddle
Period beginning the day after the Closing Date.
 
                                       2

<PAGE>
 
  "PRE-DISTRIBUTION PERIOD" means any Tax Period ending on or before the
Closing Date, and, in the case of any Straddle Period, the portion of such
Straddle Period ending on the Closing Date.
 
  "PRIME RATE" means the base rate on corporate loans charged by Citibank,
N.A., New York, New York from time to time, compounded daily on the basis of a
year of 365 or 366 (as applicable) days and actual days elapsed.
 
  "REPURCHASE AND RECAPITALIZATION AGREEMENT" means that certain repurchase
and recapitalization agreement dated as of August 11, 1997 by and among ATN,
Prior, individually and as Trustee of the 1994 Prior Charitable Remainder
Trust, and Prosser.
 
  "RESPONSIBLE COMPANY" means, with respect to any Tax Return, the Company
having responsibility for preparing and filing such Tax Return under this
Agreement.
 
  "RESTRUCTURING TAX" means any Taxes resulting from any income or gain
recognized as a result of the Transactions including, without limitation, any
Taxes resulting from any income or gain recognized as a result of the
Transactions failing to qualify for tax-free treatment under Code Sections 355
or 361 or other provisions of the Code (as contemplated by the Ruling Request)
and any Taxes resulting from any income or gain recognized under Treasury
Regulations Section 1.1502-13 or 1.1502-19 (or any corresponding provisions of
other applicable Tax Laws) as a result of the Transactions.
 
  "RTFC" means the Rural Telephone Finance Cooperative.
 
  "RULING REQUEST" means the letter filed by ATN with the Internal Revenue
Service requesting a ruling from the Internal Revenue Service regarding
certain tax consequences of the Transactions (including all attachments,
exhibits, and other materials submitted with such ruling request letter) and
any amendment or supplement to such ruling request letter.
 
  "SPECIFIED ACTION" shall have the meaning provided in Section 10.
 
  "STRADDLE PERIOD" means any Tax Period that begins on or before and ends
after the Closing Date.
 
  "STATE INCOME TAX" means any Tax imposed by any State of the United States
or by any political subdivision of any such State which is imposed on or
measured by net income, including state and local franchise or similar Taxes
measured by net income.
 
  "TAINTING ACT" shall have the meaning provided in Section 10.
 
  "TAX" or "TAXES" means any Income Tax, any Tax on gross income, gross
receipts, profits, or capital stock, or any franchise, withholding, payroll,
social security, workers compensation, unemployment, disability, property, ad
valorem, stamp, excise, severance, occupation, service, sales, use, license,
lease, transfer, import, export, value added, alternative minimum, estimated
or other similar tax (including any fee, assessment, or other charge in the
nature of or in lieu of any tax) imposed by any governmental entity or
political subdivision thereof, and any interest, penalties, additions to tax,
or additional amounts in respect of the foregoing.
 
  "TAX AUTHORITY" means, with respect to any Tax, the governmental entity or
political subdivision thereof that imposes such Tax, and the agency (if any)
charged with the collection of such Tax for such entity or subdivision.
 
  "TAX CONTEST" means an audit, review, examination, or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes or any claim for refund or credit of Taxes of any of ATN,
ECI or the Aircraft Corp. (including any administrative or judicial review
thereof) for any Tax Period ending on or before the Closing Date or any
Straddle Period.
 
 
                                       3

<PAGE>
 
  "TAX ITEM" means, with respect to any Income Tax, any item of income, gain,
loss, deduction, or credit.
 
  "TAX LAW" means the law of any governmental entity or political subdivision
thereof relating to any Tax.
 
  "TAX PERIOD" means, with respect to any Tax, the period for which the Tax is
reported as provided under the Code or other applicable Tax Law.
 
  "TAX RECORDS" means Tax Returns, Tax Return workpapers, documentation
relating to any Tax Contests, and any other books of account or records
required to be maintained under the Code or other applicable Tax Laws or under
any record retention agreement with any Tax Authority.
 
  "TAX RETURN" means any report of Taxes due, any claim for refund or credit
of Taxes paid, any information return with respect to Taxes, or any other
similar report, statement, declaration, or document required or permitted to
be filed under the Code or other Tax Law, including any attachments, exhibits,
or other materials submitted with any of the foregoing, and including any
amendments or supplements to any of the foregoing.
 
  "TRANSACTIONS" shall have the meaning ascribed to that term in the
Subscription Agreement.
 
  "TRANSFER" shall have the meaning set forth in Section 11(a).
 
  "TREASURY REGULATIONS" means the regulations promulgated from time to time
under the Code as in effect for the relevant Tax Period.
 
  Section 2. Allocation of Tax Liabilities. The provisions of this Section 2
are intended to determine each of ATN's, ECI's, Prior's and Prosser's
liability for Taxes with respect to Pre-Distribution Periods. Once the
liability has been determined under this Section 2, Section 5 determines the
time when payment of the liability is to be made, and whether the payment is
to be made to the Tax Authority directly or to ATN or ECI, as the case may be.
 
  2.01 Taxes of GT&T and the Virgin Islands Subsidiaries. This Agreement does
not allocate liability for Taxes imposed on GT&T, Atlantic Tele-Network Co., a
Virgin Islands corporation, or any of the subsidiaries of Atlantic Tele-
Network Co. (except for any withholding of Foreign Income Taxes imposed with
respect to payments made by any of such companies to ATN) and, as between the
parties to this Agreement, such Taxes and Tax Returns relating to such Taxes
shall be solely the responsibility of the legal entity on which such Taxes are
imposed.
 
  2.02 ATN and ECI Liability.
 
  (a) ATN Liability. Notwithstanding the provisions of Section 2.03, as
between ATN and ECI, ATN shall be liable for, and shall indemnify and hold
harmless the ECI Group from and against:
 
    (i) any Restructuring Taxes which arise from any breach by ATN of its
  representations or covenants under Section 10 or from any Tainting Act by
  ATN or its Affiliates or the inaccuracy of any factual statements or
  representations made in or in connection with the Ruling Request with
  respect to the activities of ATN and its Affiliates after the Closing;
 
    (ii) all Taxes to the extent taken into account in clauses (b) or (r) of
  the definition of "Debits" for purposes of calculating the Final Closing
  Adjustment;
 
    (iii) an amount of Income Tax equal to the provision for income tax
  expense of ATN which would be accrued on a hypothetical statement of
  operations of ATN for the period after April 30, 1997 to and including the
  Closing Date which statement of operations includes as revenues or gross
  income only
 
                                       4

<PAGE>
 
  dividends paid by GT&T to ATN during such period, interest accrued during
  such period on indebtedness of GT&T to ATN and advisory fees payable by
  GT&T to ATN during such period (computed on an accrual basis) and includes
  as expense all expenses of ATN during such period (to the extent such
  expenses are deductible for Income Tax purposes) except for expenses
  charged to ECI under clauses (c), (j), (k), (m), (n), (o), and (s) of the
  definition of "Debits" in the Subscription Agreement;
 
    (iv) any withholding of Foreign Income Taxes imposed with respect to
  payments from GT&T to ATN; and
 
    (v) 50% of all other Taxes (including Restructuring Taxes) of ATN or
  Aircraft Corp. (in each case, whether computed on a separate company or
  consolidated basis) with respect to all Pre-Distribution Periods, except
  for Taxes described in clauses (i), (ii) or (iii) of Section 2.02(b).
 
  (b) ECI Liability. Notwithstanding the provisions of Section 2.03, as
between ATN and ECI, ECI shall be liable for, and shall indemnify and hold
harmless the ATN Group from and against:
 
    (i) Any Restructuring Taxes which arise from any breach by ECI of its
  representations or covenants under Section 10 or from any Tainting Act by
  ECI or its Affiliates or the inaccuracy of any factual statements or
  representations made in or in connection with the Ruling Request with
  respect to the activities of ECI and its Affiliates after the Closing;
 
 
    (ii) 100% of all Taxes of ECI (computed on a separate company basis) for
  all Pre-Distribution Periods;
 
    (iii) any withholding of Foreign Income Taxes imposed with respect to
  payments from Atlantic Tele-Network Co. or any of its subsidiaries to ATN
  except to the extent taken into account in clauses (b) or (r) of the
  definition of "Debits" for purposes of calculating the Final Closing
  Adjustment; and
 
    (iv) 50% of all other Taxes (including Restructuring Taxes) of ATN or
  Aircraft Corp. (in each case, whether computed on a separate company or
  consolidated basis) for all Pre-Distribution Periods, except for Taxes
  described in clauses (i), (ii), (iii) or (iv) of Section 2.02(a).
 
  Section 2.03 Liability of Prior and Prosser.
 
  (a) Prior Liability. Prior shall be liable for, and shall indemnify and hold
harmless the ATN Group and the ECI Group from and against any liability for,
any Restructuring Taxes which arise from (x) any breach of Prior's
representations and covenants under Section 11(a) or (y) the inaccuracy of any
factual statements or representations relating to Prior or members of Prior's
family made in the Letter Request or in any certificate provided by Prior in
connection with the Ruling Request or in connection with an opinion of tax
counsel with respect to the Transactions.
 
  (b) Prosser Liability. Prosser shall be liable for, and shall indemnify and
hold harmless the ATN Group and the ECI Group from and against any liability
for any Restructuring Taxes which arise from (x) any breach of Prosser's
representations and covenants under Section 11(b) or (y) the inaccuracy of any
factual statements or representations relating to Prosser or members of
Prosser's family made in the Letter Request or in any certificate provided by
Prosser in connection with the Ruling Request or in connection with an opinion
of tax counsel with respect to the Transactions.
 
  Section 2.04. Expenses. Each of ATN, ECI, Prior and Prosser shall be liable
for all fees, costs and expenses, including without limitation reasonable
attorneys' fees, arising out of, or incident to, any proceeding before any Tax
Authority, or any judicial authority, with respect to any Taxes for which it
or he (as the case may be) is liable under Section 2.02(a) (in the case of
ATN), 2.02(b) (in the case of ECI), 2.03(a) (in the case of Prior) or 2.03(b)
(in the case of Prosser). In addition, an indemnified party under Section 2.02
or 2.03 shall be entitled to recover from the indemnifying party thereunder
all fees, costs and expenses, including without limitation reasonable
attorneys' fees, incurred by the indemnified party in connection with
enforcement of its rights to indemnification against the indemnifying party.
 
 
                                       5

<PAGE>
 
  Section 3. Proration of Taxes for Straddle Periods.
 
  3.01 General Method of Proration. For purposes of Section 2, in the case of
any Straddle Period, Tax Items shall be apportioned between Pre-Distribution
Periods and Post-Distribution Periods in accordance with the principles of
Treasury Regulation Section 1.1502-76(b). No election shall be made under
Treasury Regulation Section 1.1502-76(b)(2)(ii) (relating to ratable
allocation of a year's items). If the Closing Date is not an Accounting Cutoff
Date, the provisions of Treasury Regulation Section 1.1502-76(b)(2)(iii) will
be applied to ratably allocate the items (other than extraordinary items) for
the month which includes the Closing Date.
 
  3.02 Transaction Treated as Extraordinary Item. In determining the
apportionment of Tax Items between Pre-Distribution Periods and Post-
Distribution Periods, any Tax Item relating to the Transactions shall be
treated as an extraordinary item described in Treasury Regulation Section
1.1502-76(b)(2)(ii)(C) and shall be allocated to Pre-Distribution Periods, and
any Taxes related to any such Tax Item (including Restructuring Taxes) shall
be treated under Treasury Regulation Section 1.1502-76(b)(2)(iv) as relating
to such extraordinary item and shall be allocated to Pre-Distribution Periods.
 
  3.03 Proration of Other Taxes. For purposes of Section 2, in the case of any
Straddle Period, Taxes that are not susceptible to apportionment in the manner
described in Section 3.01 (e.g., real and personal property taxes) shall be
apportioned between Pre-Distribution Periods and Post-Distribution Periods on
a pro rata basis based on the number of days in the relevant Tax Period.
 
  Section 4. Preparation and Filing of Tax Returns.
 
  4.01 General.
 
  (a) All Tax Returns shall be prepared and filed when due (including
extensions) by the person obligated to file such Tax Returns under the Code or
applicable Tax Law. ATN and ECI shall provide, and shall cause their
respective Affiliates to provide, assistance and cooperate with one another in
accordance with Section 6 with respect to the preparation and filing of all
Tax Returns, including, without limitation, providing information required to
be provided in Section 6.
 
  (b) ECI shall, for each Tax Period or portion thereof for which ECI or
Aircraft Corp. is included in a Tax Return required to be filed by ATN,
provide ATN with (i) a true and correct schedule in the form of a separate
Federal Income Tax Return for each of ECI and Aircraft Corp., and (ii) a
reconciliation of book income to federal taxable income for ECI and Aircraft
Corp. ECI hereby agrees to use its best efforts to provide ATN with such
schedules and computations no later than the first day of the sixth month
following the end of the period to which such schedules and computations
relate.
 
  4.02 Manner of Filing.
 
  (a) All Tax Returns filed or caused to be filed by ATN or ECI after the
Closing Date shall be prepared on a basis that is consistent with (i) any IRS
ruling obtained by ATN in connection with the Transactions, (ii) the treatment
of ATN's purchase pursuant to Article I of the Repurchase and Recapitalization
Agreement of 416,998 shares of common stock at ATN owned by Prior and 384,564
shares of common stock of ATN owned by the 1994 Prior Charitable Remainder
Trust as distributions of property to which Section 301 of the Code applies,
and (iii) the treatment of the transactions contemplated by Article II of the
Repurchase and Recapitalization Agreement as tax-free to ATN, Prior and
Prosser for Federal Income Tax purposes by reason of such transactions
qualifying as reorganizations within the meaning of Section 368(a) of the Code
or otherwise (in each case, in the absence of a controlling change in law or
circumstances), and shall be filed on a timely basis by the Responsible
Company.
 
  (b) Except as otherwise agreed in writing by ATN and ECI, and in the absence
of a controlling change in law or circumstances, all Tax Returns filed or
caused to be filed by ATN or ECI after the Closing Date shall be prepared
consistent with past practices, elections, accounting methods, conventions,
and principles of taxation used for the most recent taxable periods for which
Tax Returns involving similar items have been filed prior to the Closing Date,
except that, with respect to any Tax Item not relating to the Transactions,
one party may take
 
                                       6

<PAGE>
 
an inconsistent position without the agreement of the other party only to the
extent such position does not create a Tax detriment to the other party or any
member of such other party's Group.
 
  Section 5. Tax Payments and Intercompany Billings.
 
  5.01 Payment of Taxes With Respect to Pre-Distribution or Straddle Period
Returns Filed After the Distribution Date. In the case of any Tax Return
required to be filed by ATN under Section 4.01 with respect to a Pre-
Distribution Period or Straddle Period the due date for which Tax Return
(including extensions) is after the Closing Date, at least 10 business days
prior to any Payment Date, ATN (i) shall compute the amount of Tax required to
be paid to the relevant Tax Authority (taking into account the requirements of
Section 4.02(b) relating to consistent accounting practices) with respect to
such Tax Return on such Payment Date and (ii) shall send to ECI a written
notice and demand for payment by ECI of its share (if any) of such Tax payment
determined by ATN in accordance with Section 2.02(b) and accompanied by a
statement detailing the Taxes to be paid and describing in reasonable detail
the particulars relating thereto. ECI shall deliver to ATN on or before the
business day immediately preceding such Payment Date a cashier's check made to
the order of the applicable Tax Authority for the amount of ECI's share of
such Tax Payment, and ATN shall remit such check and make the remainder of
such Tax payment to the relevant Tax Authority on or before such Payment Date.
 
  5.02 Payment of Tax Related to Adjustments. ATN shall pay to the relevant
Tax Authority when due any additional Taxes required to be paid as a result of
any adjustment to Taxes with respect to any Pre-Distribution Period. At least
10 business days before such additional Tax payment is due to be paid by ATN,
ATN shall send to ECI, Prior or Prosser, as the case may be, a written notice
and demand from ATN for payment by it or him, as the case may be, of its or
his share (if any) of any such additional Tax payment determined by ATN in
accordance with Section 2 accompanied by a statement detailing the Taxes to be
paid and describing in reasonable detail the particulars relating thereto;
provided, however, that ATN will not make a demand for an indemnification
payment attributable to any Restructuring Taxes under Section 2.02(b)(i) or
2.03 until the liability for such Restructuring Taxes either (i) is
established by a Final Determination or (ii) subject to Section 8.02, is
otherwise agreed to in writing by ATN with the applicable Tax Authority. ECI,
Prior or Prosser, as the case may be, shall pay to ATN, in immediately
available funds, ECI's or his share (if any) of any such additional Tax
Payment on or before the business day immediately preceding the date such
additional Tax is due to be paid by ATN; provided, however, that if any
portion of such additional Tax payment is indemnified by Prior or Prosser
under Section 2.03, (x) ECI may reduce the amount of its payment to ATN under
this Section 5.02 in respect of such additional Tax payment by 50% of the
amount of any indemnification payment in respect of such additional Tax
payment actually received by ATN from Prior or Prosser, as the case may be, on
or prior to the date that ECI is required to make such payment to ATN, and (y)
ATN shall immediately remit to ECI 50% of the amount of any indemnification
payment in respect of such additional Tax payment actually received by ATN
from Prior or Prosser, as the case may be, after ECI actually made a payment
to ATN under this Section 5.02 in respect of such additional Tax payment.
 
  5.03 Indemnification Payments. Without overriding the procedures set forth
in Sections 5.01 and 5.02, if a Company (the "payor") pays to a Tax Authority
a Tax for which the other Company (the "responsible party") is liable under
this Agreement, the responsible party shall reimburse the payor within 10
business days of delivery by the payor to the responsible party of an invoice
for the amount due, accompanied by evidence of payment and a statement
detailing the Taxes paid and describing in reasonable detail the particulars
relating thereto. The reimbursement shall include interest on the Tax payment
computed at the Prime Rate based on the number of days from the date of the
payment to the Tax Authority to the date of reimbursement under this Section
5.03.
 
  Section 6. Assistance and Cooperation.
 
  6.01 General. After the Closing Date, each of ATN and ECI shall cooperate
(and cause their respective Affiliates to cooperate) with each other and with
each other's agents, including accounting firms and legal counsel, in
connection with Tax matters relating to ATN and ECI and their respective
Affiliates including,
 
                                       7

<PAGE>
 
without limitation, (i) preparation and filing of Tax Returns, (ii)
determining the liability for and amount of any Taxes due (including estimated
Taxes) or the right to and amount of any refund of Taxes, (iii) examinations
of Tax Returns, and (iv) any administrative or judicial proceeding in respect
of Taxes assessed or proposed to be assessed. Such cooperation shall include
making all information and documents in their possession relating to the other
Company and its Affiliates reasonably available to such other Company as
provided in Section 7. Each of the Companies shall also make available to each
other, as reasonably requested and available, personnel (including officers,
directors, employees and agents of the Companies or their respective
Affiliates) responsible for preparing, maintaining, and interpreting
information and documents relevant to Taxes, and personnel reasonably required
as witnesses or for purposes of providing information or documents in
connection with any administrative or judicial proceedings relating to Taxes.
Any information or documents provided under this Section 6 shall be kept
confidential by the Company receiving the information or documents, except as
may otherwise be necessary in connection with the filing of Tax Returns or in
connection with any administrative or judicial proceedings relating to Taxes.
 
  6.02 Income Tax Return Information. Each Company will provide to the other
Company information and documents relating to its Group required by the other
Company to prepare Tax Returns. The Responsible Company shall determine a
reasonable compliance schedule for such purpose in accordance with ATN's past
practices. Any additional information or documents the Responsible Company
requires to prepare such Tax Returns will be provided in accordance with past
practices, if any, or as the Responsible Company reasonably requests and in
sufficient time for the Responsible Company to file such Tax Returns timely.
 
  Section 7. Tax Records.
 
  7.01 Retention of Tax Records. Except as provided in Section 7.02, each of
ATN and ECI shall preserve and keep all Tax Records exclusively relating to
the assets and activities of its Group for Pre-Distribution Tax Periods and
all other Tax Records relating to Taxes of the Groups for Pre-Distribution Tax
Periods, for so long as the contents thereof may become material in the
administration of any matter under the Code or other applicable Tax Law, but
in any event until the later of (i) the expiration of any applicable statutes
of limitation, and (ii) seven years after the Closing Date. If, prior to the
expiration of the applicable statute of limitation and such seven-year period,
a Company reasonably determines that any Tax Records which it is required to
preserve and keep under this Section 7 are no longer material in the
administration of any matter under the Code or other applicable Tax Law, such
Company may dispose of such records upon 90 days prior notice to the other
Company. Such notice shall include a list of the records to be disposed of
describing in reasonable detail each file, book, or other record accumulation
to be disposed of. The notified Company shall have the opportunity, at its
cost and expense, to copy or remove, within such 90-day period, all or any
part of such Tax Records.
 
  7.02 State and Foreign Income Tax Returns. Tax Returns with respect to State
Income Taxes and Foreign Income Taxes and workpapers prepared in connection
with preparing such Tax Returns shall be preserved and kept, in accordance
with the guidelines of Section 7.01, by the person responsible for preparing
and filing the applicable Tax Return.
 
  7.03 Access to Tax Records. The Companies and their respective Affiliates
shall make available to each other for inspection and copying during normal
business hours upon reasonable notice all Tax Records in their possession to
the extent reasonably required by the other Company in connection with the
preparation of Tax Returns, audits, litigation, or the resolution of items
under this Agreement.
 
  Section 8. Tax Contests.
 
  8.01 Notice. Each of ATN and ECI shall provide prompt notice to the other
and to Prior and Prosser of any pending or threatened Tax audit, assessment or
proceeding or other Tax Contest of which it becomes aware related to Taxes for
Tax Periods for which it is indemnified by the other or Prior or Prosser, as
the case may be, hereunder. Such notice shall contain factual information (to
the extent known) describing any asserted Tax liability in reasonable detail
and shall be accompanied by copies of any notice and other documents received
 
                                       8

<PAGE>
 
from any Tax Authority in respect of any such matters. If an indemnified party
has knowledge of an asserted Tax liability for which it is to be indemnified
hereunder and such party fails to give the indemnifying party prompt notice of
such asserted Tax liability, such failure to give notice will not relieve the
indemnifying party of its obligations hereunder, except to the extent that the
indemnifying party is materially prejudiced by such failure.
 
  8.02 Control of Tax Contests. Each of ATN and ECI shall have full
responsibility and discretion in handling, settling or contesting any Tax
Contest involving a Tax Return for which it has filing responsibility pursuant
to Section 4 of this Agreement; provided, however, ECI, Prior or Prosser, at
it or his sole cost and expense, may participate in any Tax Contest with
respect to any Restructuring Taxes for which it or he has liability or an
indemnification obligation with respect to such Taxes under this Agreement;
provided, further, that ECI, at its sole cost and expense and employing Cahill
Gordon & Reindel or other counsel reasonably acceptable to ATN, shall be
permitted to jointly share with ATN, employing Fried, Frank, Harris, Shriver &
Jacobson or other counsel reasonably acceptable to ECI, the responsibility and
discretion in handling, settling or contesting any Tax Contest with respect to
any Taxes for which ECI has liability or an indemnification obligation to ATN
with respect to such Taxes, unless ECI fails to provide to ATN a written
acknowledgment of ECI's potential liability for such Taxes or indemnification
obligation to ATN with respect to such Taxes within 10 business days of ECI's
receipt of a written request by ATN therefor. Except as otherwise provided in
Section 2.04 hereof, any costs incurred in handling, settling or contesting
any Tax Contest shall be borne by the party having full responsibility and
discretion thereof.
 
  Section 9. Effective Date; Termination of Prior Intercompany Tax Allocation
Agreements. This Agreement shall be effective on the Closing Date. Immediately
prior to the close of business on the Closing Date, all Intercompany Tax
Allocation Agreements shall be terminated.
 
  Section 10. No Inconsistent Actions.
 
  (a) Each of the Companies covenants and agrees that, except as disclosed in
the Letter Request, it will not take any action, and it will cause its
Affiliates to refrain from taking any action, which may be inconsistent with
the Tax treatment of the Transactions as contemplated in the Ruling Request
(any such action is referred to in this Section 10 as a "Tainting Act"),
unless (i) the Company or Affiliate thereof proposing such Tainting Act (the
"Requesting Party") either (A) obtains a ruling with respect to the Tainting
Act from the Internal Revenue Service or other applicable Tax Authority that
is reasonably satisfactory to the other Company (the "Requested Party")
(except that the Requesting Party shall not submit any such ruling request if
a Requested Party determines in good faith that filing such request might have
a materially adverse effect upon such Requested Party), or (B) obtains an
unqualified opinion, reasonably satisfactory in form and substance to
Requested Party, of Fried, Frank, Harris, Shriver & Jacobson or Cahill Gordon
& Reindel or other independent nationally recognized tax counsel acceptable to
the Requested Party, on a basis of assumed facts and representations
consistent with the facts at the time of such action, that such Tainting Act
will not affect the Tax treatment of the Transactions as contemplated in the
Ruling Request, or (ii) the Requested Party consents in writing to such
Tainting Act, which consent shall be granted or withheld in the sole and
absolute discretion of the Requested Party. Without limiting the foregoing:
 
    (i) Specified Actions. During the two-year period beginning on (and
  including) the Closing Date, unless clause (i) or (ii) of the preceding
  paragraph is satisfied with respect to the applicable action, and except as
  disclosed in the Letter Request, ATN and ECI will not (and neither will
  cause or permit any of its Affiliates to) (A) liquidate or merge with or
  into any other corporation; (B) issue any capital stock that in the
  aggregate exceeds 45%, by vote or value, of its capital stock issued and
  outstanding immediately after the Distribution; (C) redeem, purchase or
  otherwise reacquire its capital stock issued and outstanding immediately
  after the Distribution (other than through stock purchases meeting the
  requirements of section 4.05(1)(b) of Rev. Proc. 96-30); (D) make a
  material disposition (including transfers from one member of a Group to
  another member of that Group) or cessation of operations by means of a sale
  or exchange of assets or capital stock, a distribution to stockholders, or
  otherwise, of the assets constituting the trades or
 
                                       9

<PAGE>
 
  businesses relied upon in the Ruling Request to satisfy Section 355(b) of
  the Code; or (E) discontinue or cause to be discontinued the active conduct
  of the trades or businesses relied upon in the Ruling Request to satisfy
  Section 355(b) of the Code (each of the foregoing, a "Specified Action").
 
    (ii) No Inconsistent Plan or Intent. Each of ATN and ECI represents and
  warrants that it shall, and shall cause each of its Affiliates to, comply
  with each factual statement and representation in the Ruling Request, and
  that neither it nor any of its Affiliates has any plan or intent to take
  any Specified Action or any action which is inconsistent with any factual
  statements or representations in the Ruling Request. Regardless of any
  change in circumstances, each of ATN and ECI covenants and agrees that it
  will not take, and it will cause its Affiliates to refrain from taking, any
  such Specified Action or inconsistent action on or before the last day of
  the calendar year ending after the second anniversary of the Closing Date
  other than as permitted in this Section 10.
 
    (iii) Amended or Supplemental Rulings. Each of ATN and ECI covenants and
  agrees that it will not file, and it will cause its Affiliates to refrain
  from filing, any amendment or supplement to the Ruling Request subsequent
  to the Closing Date without the consent of the other, which consent shall
  not be unreasonably withheld.
 
  (b) Notwithstanding anything to the contrary in this Agreement, each Company
shall be solely liable for, and shall indemnify and hold harmless the other
Company from any Restructuring Tax resulting from a Tainting Act by such first
Company or its Affiliates, regardless of whether clause (i) or (ii) of Section
10(a) was satisfied with respect to such Tainting Act.
 
  Section 11. Certain Representations and Covenants of Prior and Prosser.
 
  (a) Representations and Covenants of Prior.
 
    (i) Transfer Restrictions. Prior represents and warrants that he has no
  plan or intention to sell, exchange, transfer by gift, pledge or otherwise
  dispose of or encumber, whether actually or constructively by means of a
  short sale, equity swap, forward or futures contract, option or otherwise
  (collectively, a "Transfer") any stock or securities of ATN, or any
  beneficial or financial interest therein, after the Transactions except for
  Permitted Pledges. Prior covenants and agrees that during the two-year
  period beginning on (and including) the Closing Date, without the prior
  written consent of ECI (which consent ECI may grant or withhold in its sole
  discretion), he will not Transfer any stock or securities of ATN, or any
  beneficial or financial interest therein, except for Permitted Pledges,
  unless he first obtains either (A) a ruling with respect to the Transfer
  from the Internal Revenue Service or other applicable Tax Authority that is
  reasonably satisfactory to ECI (acting on advice of counsel, such counsel
  to be reasonably satisfactory to ATN) or (B) an unqualified opinion,
  reasonably satisfactory in form and substance to ECI (acting on advice of
  counsel, such counsel to be reasonably satisfactory to ATN), of Fried,
  Frank, Harris, Shriver & Jacobson or other independent nationally
  recognized tax counsel acceptable to ECI, on a basis of assumed facts and
  representations consistent with the facts at the time of such Transfer,
  that such Transfer will not affect the Tax treatment of the Transactions as
  contemplated in the Ruling Request. In order to ensure compliance with the
  requirements of this Section 11(a)(i), during the two-year period beginning
  on (and including) the Closing Date, Prior shall maintain at least a
  majority of the outstanding common stock of ATN (or all stock or securities
  in ATN owned by him if he shall then own less than a majority of the
  outstanding common stock of ATN) in accounts with one or more banks or
  brokerage firms (collectively, "Financial Institutions"), which accounts
  may be margin accounts, provided that each such Financial Institution shall
  deliver a written undertaking to ECI stating that such Financial
  Institution will not permit any Transfer of Mr. Prior's stock or securities
  in ATN from such account without the prior written approval of ECI except
  for (i) sales of such stock or securities made by such Financial
  Institution for the purpose of obtaining repayment of any loans or advances
  made to Prior by such Financial Institution following a default by Prior in
  respect of such loans or advances, and (ii) any Transfer of such stock or
  securities from an account of Prior with such Financial Institution to an
  account of Prior with another Financial Institution which shall have given
  ECI a written undertaking described in this Section 11(a)(i).
  Notwithstanding anything to the contrary in this Agreement, Prior shall be
  liable for, and shall indemnify and hold harmless the ATN Group
 
                                      10

<PAGE>
 
  and the ECI Group from and against any liability for, any Restructuring
  Taxes which arises out of any Transfer of any of his stock or securities in
  ATN or any beneficial or financial interest therein (including, without
  limitation, any sale of stock subject to a Permitted Pledge on foreclosure
  of such pledge) regardless of whether the provisions of this Section
  11(a)(i) were satisfied with respect to such Transfer.
 
    (ii) No Inconsistent Plan or Intent. Prior represents and warrants that
  he has no plan or intent to cause ATN or any of its Affiliates to take any
  Tainting Act (including any Specified Action) or any action inconsistent
  with any factual statement or representation in the Letter Request. Prior
  covenants and agrees that, so long as he owns a majority of the voting
  power of the outstanding capital stock of ATN, he will cause ATN and its
  Affiliates to refrain from taking any Tainting Act (including any Specified
  Action) or any action inconsistent with any factual statement or
  representation in the Letter Request on or before the last day of the
  calendar year ending after the second anniversary of the Closing Date other
  than as permitted in Section 10.
 
  (b) Representations and Covenants of Prosser.
 
    (i) Transfer Restrictions. Prosser represents and warrants that other
  than a Transfer of ECI stock to the LLC, neither he nor the LLC has any
  plan or intention to sell, exchange, transfer by gift, pledge or otherwise
  dispose of or encumber, whether actually or constructively by means of a
  short sale, equity swap, forward or futures contract, option or otherwise
  (collectively, a "Transfer") any ownership interest, stock or securities of
  ECI or the LLC, or any beneficial or financial interest therein, after the
  Transactions except for Permitted Pledges. Prosser covenants and agrees
  that during the two-year period beginning on (and including) the Closing
  Date, without the prior written consent of ATN (which consent ATN may grant
  or withhold in its sole discretion), (x) neither he nor the LLC will
  Transfer any ownership interest, stock or securities of ECI or the LLC, or
  any beneficial or financial interest therein, except for Permitted Pledges,
  (y) Prosser will remain the only beneficial owner, member and manager of
  the LLC and (z) Prosser will not take and will not permit the LLC to take
  any action which would result in the LLC not being disregarded as an entity
  separate from Prosser under Treasury Regulations section 301.7701-3, unless
  he first obtains either (A) a ruling with respect to the Transfer, Prosser
  ceasing to be the only beneficial owner, member and manager of the LLC or
  any such action referred to in the preceding clause (z), as the case may
  be, from the Internal Revenue Service or other applicable Tax Authority
  that is reasonably satisfactory to ATN (acting on advice of counsel, such
  counsel to be reasonably satisfactory to ECI) or (B) an unqualified
  opinion, reasonably satisfactory in form and substance to ATN (acting on
  advice of counsel, such counsel to be reasonably satisfactory to ECI), of
  Cahill Gordon & Reindel or other independent nationally recognized tax
  counsel acceptable to ATN, on a basis of assumed facts and representations
  consistent with the facts at the time of such Transfer, or at the time that
  Prosser ceases to be the sole beneficial owner, member and manager of the
  LLC or takes any action or permits the LLC to take any action referred to
  in the preceding clause (z), as the case may be, that such Transfer,
  Prosser ceasing to be the sole beneficial owner, member and manager of the
  LLC or the taking of any action referred to in the preceding clause (z), as
  the case may be, will not affect the Tax treatment of the Transactions as
  contemplated in the Ruling Request. In order to ensure compliance with the
  requirements of this Section 11(b)(i), during the two-year period beginning
  on (and including) the Closing Date, Prosser, together with the LLC, shall
  maintain at least a majority of the outstanding common stock of ECI (or all
  stock or securities in ECI owned by him and the LLC if he, together with
  the LLC, shall then own less than a majority of the outstanding common
  stock of ECI) in accounts with one or more banks (including, without
  limitation, the RTFC) or brokerage firms (collectively, "Financial
  Institutions"), which accounts may be margin accounts, provided that each
  such Financial Institution shall deliver a written undertaking to ATN
  stating that such Financial Institution will not permit any Transfer of Mr.
  Prosser's or the LLC's stock or securities in ECI from such account without
  the prior written approval of ATN except for (i) sales of such stock or
  securities made by such Financial Institution for the purpose of obtaining
  repayment of any loans or advances made to Prosser or the LLC by such
  Financial Institution following a default by Prosser or the LLC in respect
  of such loans or advances, and (ii) any Transfer of such stock or
  securities from an account of Prosser or the LLC with such Financial
  Institution to an account of Prosser or the LLC with another Financial
  Institution which shall have given ATN a written undertaking described in
  this Section 11(b)(i). Notwithstanding anything to the contrary in
 
                                      11

<PAGE>
 
  this Agreement, Prosser shall be liable for, and shall indemnify and hold
  harmless the ATN Group and the ECI Group from and against any liability
  for, any Restructuring Taxes which arises out of (w) any Transfer of any of
  his ownership interest, stock or securities in ECI or the LLC or any
  beneficial or financial interest therein (including, without limitation,
  any sale of stock subject to a Permitted Pledge on foreclosure of such
  pledge) (x) any Transfer of any of the LLC's stock or securities in ECI or
  any beneficial or financial interest therein including, without limitation,
  any sale of Stock subject to a Permitted Pledge on foreclosure of such
  pledge, (y) Prosser ceasing to be the sole beneficial owner, member and
  manager of the LLC or (z) Prosser taking any action or permitting the LLC
  to take any action which would result in the LLC ceasing to be disregarded
  as an entity separate from Prosser under Treasury Regulations section
  301.7701-3, as the case may be, regardless of whether the provisions of
  this Section 11(b)(i) were satisfied with respect to such Transfer.
 
    (ii) No Inconsistent Plan or Intent. Prosser represents and warrants that
  he has no plan or intent to cause ECI or any of its Affiliates to take any
  Tainting Act (including any Specified Action) or any action inconsistent
  with any factual statement or representation in the Letter Request. Prosser
  covenants and agrees that, so long as he owns a majority of the voting
  power of the outstanding capital stock of ECI, he will cause ECI and its
  Affiliates to refrain from taking any Tainting Act (including any Specified
  Action) or any action inconsistent with any factual statement or
  representation in the Letter Request on or before the last day of the
  calendar year ending after the second anniversary of the Closing Date other
  than as permitted in Section 10.
 
  (c) Upon compliance by Prior or Prosser with the requirements for a Transfer
specified in Sections 11(a)(i) or 11(b)(i), ECI or ATN, as the case may be,
shall promptly give written permission for such Transfer to the Financial
Institution holding the stock or securities proposed to be Transferred).
 
  Section 12. Survival of Obligations. The representations, warranties,
covenants and agreements set forth in this Agreement shall be unconditional
and absolute and shall remain in effect without limitation as to time.
 
  Section 13. Treatment of Payments; Tax Gross Up.
 
  13.01 Treatment of Tax Indemnity Payments. In the absence of any change in
tax treatment under the Code or other applicable Tax Law, any Tax indemnity
payments made by a Company under Section 5 shall be reported for Tax purposes
by the payor and the recipient as distributions or capital contributions, as
appropriate, occurring immediately before the Distribution on the Closing
Date, but only to the extent the payment does not relate to a Tax allocated to
the payor in accordance with Treasury Regulation Section 1.1502-33(d) (or
under corresponding principles of other applicable Tax Laws).
 
  13.02 Tax Gross Up. If notwithstanding the manner in which Tax indemnity
payments were reported, there is an adjustment to the Tax liability of a
Company as a result of its receipt of a Tax indemnity payment in respect of
Restructuring Taxes resulting from a breach of a representation or covenant
made hereunder by the indemnifying party, such payment shall be appropriately
adjusted so that the amount of such payment, reduced by the amount of all
Income Taxes payable with respect to the receipt thereof, shall equal the
amount of the payment which the Company receiving such payment would otherwise
be entitled to receive pursuant to this Agreement.
 
  Section 14. Disagreements. If after good faith negotiations the parties
cannot agree on the application of this Agreement to any matter, then the
matter will be referred to a nationally recognized accounting firm acceptable
to each of the parties (the "Accounting Firm"). The Accounting Firm shall
furnish written notice to the parties of its resolution of any such
disagreement as soon as practical, but in any event no later than 45 days
after its acceptance of the matter for resolution. Any such resolution by the
Accounting Firm will be conclusive and binding on all parties to this
Agreement. In accordance with Section 17, each party shall pay its own fees
and expenses (including the fees and expenses of its representatives) incurred
in connection with the referral of the matter to the Accounting Firm. All fees
and expenses of the Accounting Firm in connection with such referral shall be
shared equally by the parties affected by the matter.
 
                                      12

<PAGE>
 
  Section 15. Late Payments. Any amount owed by one party to another party
under this Agreement which is not paid when due shall bear interest at the
Prime Rate plus two percent, compounded semiannually, from the due date of the
payment to the date paid. To the extent interest required to be paid under
this Section 15 duplicates interest required to be paid under any other
provision of this Agreement, interest shall be computed at the higher of the
interest rate provided under this Section 15 or the interest rate provided
under such other provision.
 
  Section 16. Expenses. Except as provided in Section 14 and Section 2.04,
each party and its Affiliates shall bear their own expenses incurred in
connection with preparation of Tax Returns, Tax Contests, and other matters
related to Taxes under the provisions of this Agreement.
 
  Section 17. General Provisions
 
  17.01 Addresses and Notices. Any notice, demand, request or report required
or permitted to be given or made to any party under this Agreement shall be in
writing and shall be deemed given or made when delivered in party or when sent
by first class mail or by other commercially reasonable means of written
communication (including delivery by an internationally recognized courier
service or by facsimile transmission) to the party at the party's address as
follows:
 
    If to ATN or Prior:
 
      Atlantic Tele-Network, Inc.
      Estate Havensight
      P.O. Box 12030
      St. Thomas, U.S. Virgin Islands 00801
      (340) 774-2260 or 777-8000
      Attention: Cornelius B. Prior
      Telecopy: (809) 774-7790
 
    With a copy to:
 
      Lewis A. Stern, P.C.
      Fried, Frank, Harris, Shriver
      & Jacobson
      One New York Plaza
      New York, New York 10004
      (212) 859-8190
      Telecopy: (212) 859-8587
 
    If to ECI or Prosser:
 
      Atlantic Tele-Network, Inc.
      Chase Financial Center
      P.O. Box 1730
      St. Croix, U.S. Virgin Islands 06821-1730
      (340) 777-8000
      Attention: Jeffrey J. Prosser
      Telecopy: (809) 774-5487
 
    With a copy to:
 
      Roger Meltzer, Esq.
      Cahill Gordon & Reindel
      80 Pine Street
      New York, New York 10005
      (212) 701-3851
      Telecopy: (212) 269-5420
 
                                      13

<PAGE>
 
A party may change the address for receiving notices under this Agreement by
providing written notice of the change of address to the other parties.
 
  17.02 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns.
 
  17.03 Waiver. No failure by any party to insist upon the strict performance
of any obligation under this Agreement or to exercise any right or remedy
under this Agreement shall constitute waiver of any such obligation, right, or
remedy or any other obligation, rights, or remedies under this Agreement.
 
  17.04 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions contained herein
shall not be affected thereby.
 
  17.05 Further Action. The parties shall execute and deliver all documents,
provide all information, and take or refrain from taking action as may be
necessary or appropriate to achieve the purposes of this Agreement, including
the execution and delivery to the other parties and their Affiliates and
representatives of such powers of attorney or other authorizing documentation
as is reasonably necessary or appropriate in connection with Tax Contests (or
portions thereof) under the control of such other parties in accordance with
Section 8.
 
  17.06 Integration. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter of this Agreement and supersedes all
prior agreements and understandings pertaining thereto. In the event of any
inconsistency between this Agreement and any other agreements relating to the
Transactions, the provisions of this Agreement shall control.
 
  17.07 Construction. The language in all parts of this Agreement shall in all
cases be construed according to its fair meaning and shall not be strictly
construed for or against any party.
 
  17.08 No Double Recovery; Subrogation. No provision of this Agreement shall
be construed to provide an indemnity or other recovery for any costs, damages,
or other amounts for which the damaged party has been fully compensated under
any other provision of this Agreement or under any other agreement or action
at law or equity. Unless expressly required in this Agreement, a party shall
not be required to exhaust all remedies available under other agreements or at
law or equity before recovering under the remedies provided in this Agreement.
Subject to any limitations provided in this Agreement, the indemnifying party
shall be subrogated to all rights of the indemnified party for recovery from
any third party.
 
  17.09 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
taken together shall constitute one and the same instrument.
 
  17.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts
executed in and to be performed in that State.
 
                                      14

<PAGE>
 
  IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
the respective officers as of the date set forth above.
 
                                          Atlantic Tele-Network, Inc.
 
                                          By: /s/ Cornelius B. Prior, Jr.
                                               _________________________________
 
                                          Its: Chief Executive Officer
                                               ________________________________
 
                                          Emerging Communications, Inc.
 
                                          By:/s/ Jeffrey J. Prosser 
                                             _________________________________
 
                                          Its: Chief Executive Officer 
                                              ________________________________
 
                                          Cornelius B. Prior, Jr.
                                          /s/ Cornelius B. Prior, Jr. 
                                          -------------------------------------
 
                                          Jeffrey P. Prosser
                                          /s/ Jeffrey P. Prosser 
                                          -------------------------------------
 
                                       15



<PAGE>
 
                                                                      EXHIBIT 21
                                                                                

                          Subsidiaries of the Company
                                        

                                                   Jurisdiction of Incorporation
                                                   -----------------------------
Guyana Telephone and Telegraph Company Limited     Guyana





<TABLE> <S> <C>


<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
*** (COLUMNAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) ***
</LEGEND>
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          DEC-31-1997
<PERIOD-END>                               DEC-31-1997
<CASH>                                          15,803
<SECURITIES>                                         0
<RECEIVABLES>                                   38,077
<ALLOWANCES>                                         0
<INVENTORY>                                      3,536
<CURRENT-ASSETS>                                58,455
<PP&E>                                          39,042
<DEPRECIATION>                                       0
<TOTAL-ASSETS>                                 108,049
<CURRENT-LIABILITIES>                           20,734
<BONDS>                                         14,536
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                            49
<OTHER-SE>                                      54,195
<TOTAL-LIABILITY-AND-EQUITY>                   108,049
<SALES>                                        117,615
<TOTAL-REVENUES>                               117,615
<CGS>                                           99,473
<TOTAL-COSTS>                                   99,473
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                               3,794
<INCOME-PRETAX>                                 17,025
<INCOME-TAX>                                     7,718
<INCOME-CONTINUING>                              7,935
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     7,935
<EPS-PRIMARY>                                     1.69
<EPS-DILUTED>                                     1.69
        

</TABLE>