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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-32033

TNS, INC.
(Exact Name of Registrant as Specified in Its Charter)

(703) 453-8300
Registrant's telephone number, including area code

          Securities registered pursuant to Section 12(b) of the Act:

          Securities registered pursuant to Section 12(g) of the Act: None

          Indicate by check mark if registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

          Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o    No ý

          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 twelve (12) months (or such shorter period that the Registrant was required to file such report) and (2) has been subject to such filing requirements for the past ninety (90) days. Yes ý    No o

          Indicate by checkmark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o

          Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the 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. o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

          Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

          As of March 14, 2011, 25,465,046 shares of the Registrant's common stock were outstanding. As of June 30, 2010 (the last business day of the Registrant's most recently completed second fiscal quarter), the aggregate market value of such shares held by non-affiliates of the Registrant was approximately $463 million.

DOCUMENTS INCORPORATED BY REFERENCE

          Portions of the Registrant's definitive Proxy Statement relating to the 2011 Annual Meeting of Stockholders, filed with the Securities and Exchange Commission, are incorporated by reference in Part III, Items 10 - 14 of this Annual Report on Form 10-K as indicated herein.

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TNS, INC.
FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2010
INDEX

EXPLANATORY NOTE

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PART I

        Throughout this report, we refer to TNS, Inc., together with its subsidiaries, as "we," "us," "our," "TNS" or "the Company." LEConnect and the TNS logo are our registered trademarks, and TNSLink, TNSConnect, Synapse, FusionPoint by TNS, Dialect and Secure Trading Extranet are our service marks. This report contains trade names, trademarks and service marks of other companies. We do not intend our use or display of other parties' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of, these other parties.

Forward-Looking Statements

        We make forward-looking statements in this report based on the beliefs, expectations, estimates, targets and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations in "Business," "Management's Discussion and Analysis of Financial Condition and Results of Operations" under the headings "Overview," "Results of Operations," and "Liquidity and Capital Resources," and other sections throughout this report. The forward-looking statements are based on current expectations, forecasts and assumptions that are subject to known and unknown risks, uncertainties and other factors, many of which may be beyond our control, that could cause actual results to differ materially from those set forth in, or implied by, the forward-looking statements. The Company has attempted, whenever possible, to identify these forward-looking statements using words such as "may," "will," "should," "projects," "estimates," "expects," "plans," "intends," "anticipates," "believes," and variations of these words and similar expressions. Similarly, statements herein that describe the Company's business strategy, prospects, opportunities, outlook, objectives, plans, intentions or goals are also forward-looking statements.

        Forward-looking statements involve risks, uncertainties and assumptions, including risks described below and other risks that we describe from time to time in our periodic filings with the SEC, and our actual results may differ materially from those expressed in our forward-looking statements. We therefore caution you not to rely unduly on any forward-looking statement. The forward-looking statements in this report speak only as of the date of the report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise. The forward-looking statements should not be relied upon as representing the Company's views as of any date subsequent to the date of this filing. The forward-looking statements in this document are intended to be subject to the safe harbor protection provided by Sections 27A of the Securities Act and 21E of the Securities Exchange Act of 1934, as amended.

Item 1.    Business

Overview

        We are an international data communications company which provides networking, managed connectivity, data communications and value added services to many of the world's leading telecommunication firms, retailers, banks, payment processors and financial institutions. Our services enable secure and reliable transmission of time-sensitive data critical to our customers' operations. Our customers outsource their data communications requirements to us because of our substantial expertise, comprehensive customer support and cost-effective services. We provide services to customers in the United States and increasingly to international customers in over 40 countries including Canada and Mexico and countries in Europe, Latin America and the Asia-Pacific region. We currently maintain operations and/or employees in 26 countries.

        We provide services through our data network, which is designed specifically for data-oriented applications and incorporates multi-protocol label switching, or MPLS, based topology. Our network supports a variety of widely accepted communications protocols and is designed to be scalable,

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interoperable and accessible by multiple methods, including broadband, dedicated, dial-up, wireless and Internet connections.

        In 2010, we reported our revenues from three distinct business divisions. Our Telecommunication Services Division (TSD) principally serves telecommunication customers in North America, but in recent years has started generating revenue outside of North America from certain products. Our Payments Division is focused on the payments industry in North America, Europe and Asia Pacific. Our Financial Services Division (FSD) serves customers in the financial services industry in North America, Europe and Asia Pacific. Prior to 2010, we had a separate International Services Division (ISD) which was focused on selling our payments and financial services outside of North America. In recognition that our business and the customers to whom we provide services had evolved to become more global in scope, our management team determined it was no longer necessary to have a separate ISD business unit and that it was more appropriate to group the ISD payments related business with our North American Payments Division and to group the ISD financial services business with FSD. In 2010, we reorganized our divisional management structure to reflect this decision to operate the company in three business divisions.

        Within TSD we operate the largest unaffiliated Signaling System No. 7 (SS7) network in the United States capable of providing services nationwide, including call signaling and database access services, to the domestic telecommunication industry. We also provide roaming and clearing services to both domestic and international mobile operators. In our Payments Division, we have over a thousand customers and provide services and solutions, both directly and indirectly, to over one million merchants, making us, on the basis of total transactions transmitted, a leading provider of data communications services and other value added services to processors of credit card, debit card and ATM transactions. In FSD, we are a leading provider of secure data network services to the global financial services industry, connecting over 1,700 financial community end-points located at over 625 distinct financial services companies, representing buy and sell-side institutions, market data and software vendors, exchanges and alternative trading venues.

        In each of our divisions, our revenues are generally recurring in nature and we typically enter into multi-year service contracts that require minimum volume or revenue commitments from our customers.

        Our business began operations in 1991 to address the needs of the Point-of-Sale industry in the United States. The strong operating cash flows generated by our business have enabled us to invest in our data network to make our communications services more rapid, secure, reliable and cost efficient. In addition, we have leveraged these investments and used our continued strong operating cash flows to expand our service offerings to related market opportunities in the telecommunications and financial services industries in the United States and abroad. By implementing and executing this strategy, we have grown our revenues every year, from $285,000 for the year ended December 31, 1991, to $527.1 million for the year ended December 31, 2010.

Our Business

Telecommunication Services Division (TSD) Opportunity

        Every wireline and wireless telephone call consists of the content of the call, such as the voice, data or video communication, and the signaling information necessary to establish and close the transmission path over which the call is carried. Currently, most telecommunications carriers in the United States and Canada use Signaling System No. 7, or SS7, as the signaling protocol to identify the network route required to connect individual telephone calls. Additionally, the wireless industry requires signaling information necessary to enable roaming between operators. As a significant number of operators are evolving their networks to next generation IP packet-based networks, the

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interoperability between legacy circuit-based networks and packet-based networks is becoming a critical element of networking solutions.

        SS7 networks are data networks that transport call-signaling information separate from the public switched telecommunication network over which the call content is communicated. Communication service providers require access to an SS7 network connected to the signaling networks of other carriers to be able to provide telecommunication services to their customers. In addition to circuit set-up and tear-down, wireless operators use SS7 signaling to locate and authenticate subscribers, to determine service parameters, and to update location registers. According to Pyramid Research, the market for telecommunication services is expected to grow at a compound annual growth rate, or CAGR, of 2.5% from 2009 to 2014, with most of the growth being attributed to mobile data and IP-based networks. Voice over IP, or VoIP, is expected to grow at a compounded annual growth rate of 18.4% from $8 billion in 2008 to $22 billion in 2014. Mobile broadband is anticipated to be a further source for growth for the United States telecommunications market due to growing popularity of unlimited data and mobile broadband plans. Revenue related to mobile broadband access for laptop computers and Internet access for handsets is estimated to grow rapidly at CAGRs of 28% and 18%, respectively, from 2009 to 2014.

        An opportunity related to the telecommunications industry's evolution to the next generation of Internet protocol, or IP, based networks is the growth of data usage by operators' subscribers. According to Pyramid Research, the telecommunications market in the United States is expected to reach $406 billion in 2014, with mobile data revenue climbing to $94 billion, surpassing fixed voice during the forecast period. This growth is expected to create opportunities associated with the interconnections needed between communication service providers to enable seamless data roaming between disparate operators and networks, and from the focus on applications to drive increased revenue per customer via value-added applications. Additionally, the network evolution of both fixed and mobile service providers next generation networks is expected to provide market participants with new opportunities as the operators will need to extend the life of their current infrastructure in order to experience the benefits of next-generation IP networks.

        SS7 and IP-based networks are also used to retrieve information from centralized databases maintained by communication service providers and other third parties. By accessing this information, communication service providers are able to offer services that enable intelligent network services such as local number portability, line information database, caller identification and toll-free number services, as well as credit card, calling card, third-party billing and collect calling. Companies which provide VoIP and mobility services also use SS7 networks to exchange and maintain subscription and location data on subscribers to support voice and wireless roaming services. Additionally, financial institutions, payment processors, card issuers and others using fraud management and analytical tools to reduce risk rely upon third-party data providers using data obtained from secondary databases not sourced directly from the telecommunications carriers or their representatives. There exists an opportunity for a trusted third-party source to provide that data with the appropriate acceptable use policies in place with telecommunication carriers.

Our TSD Services

        Since our formation of TSD in 1994, we have owned and operated an SS7 network and partnered with other providers to offer services delivered throughout the network. As a result of our acquisition of the Communications Services Group assets from VeriSign, Inc. in May, 2009, we now operate the largest unaffiliated SS7 network in the United States capable of providing call signaling and database access services nationwide. Our SS7 network is connected with the signaling networks of all of the incumbent local exchange carriers and a significant number of wireless operators, competitive local exchange carriers, interexchange carriers, multiple service operators, also known as cable companies, and VoIP service providers. We believe that our independence and neutrality enhance our

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attractiveness as a provider of outsourced SS7 and other network services. Through the acquisition of the Communication Services Group assets we also own proprietary services such as identity and verification, IP-registry and roaming and clearing services.

Network Solutions

        The deployment, operation and maintenance of a nationwide SS7 network connected to all of the major signaling networks and database providers requires significant capital and specific technical expertise. For these reasons, many communication service providers have chosen not to build the networks and applications necessary to satisfy all of their SS7 signaling requirements. Rather, they turn to outsourced SS7 network service providers such as TNS to obtain the call signaling, database access and value-added services critical to their business in an effort to increase speed to market and to remain competitive.

        Despite the market focus on newer technologies, SS7 presently remains the most common signaling protocol for many operators and competition between service providers has made delivering their services in the most cost-efficient manner critical. For this reason, communication service providers are looking for flexible product offerings which decrease investments in legacy infrastructure, achieve economies of scale and increase speed to market. We believe TNS' SS7 connectivity services fit strategically in this increasingly competitive environment.

        With our MPLS backbone network and our SS7 network, we believe we have an opportunity to assist our customers to evolve their networks and maximize the benefits of the next generation IP-based networks as they are deployed. Through our network we are able to help communication service providers in different phases of their transition to next generation networks while minimizing the effort and expense necessary to support legacy infrastructure and diverse connectivity needs. With the large size of the telecommunications industry's installed base in legacy circuit-switched SS7 networks, we believe that the evolution to IP communications will be gradual. Additionally, service providers that operate purely next-generation networks, must be able to terminate traffic on traditional networks using SS7. We believe these service providers will continue to require SS7 connectivity and intelligent database interoperability services into the foreseeable future.

        Our network solutions include:

•

SS7 network services: We provide switching and transport services throughout the United States as well as in the Caribbean and Latin America. Our SS7 network is connected to the SS7 networks of local exchange carriers, wireless carriers and other service providers through various mated pairs of signal transfer points deployed throughout the country. By connecting to our SS7 network, our customers eliminate their need to implement, operate and maintain numerous, complex connections linking their SS7 switches to the signaling networks of other communications providers. We believe our SS7 network enables us to offer our data communications services more reliably and cost-effectively than our competitors or customers deploying in-house solutions.



•

IP network services: We provide IP transport services over our global MPLS backbone in support of data roaming for wireless operators. We also utilize our IP network services for next-generation signaling solutions (e.g. SIGTRAN, SIP) and VoIP interoperability solutions. By leveraging our network at any interconnection point across our global MPLS backbone, operators are able to access multiple services through a common IP interface. As with our SS7 network services, this solution allows operators to eliminate the need to implement, operate, and maintain numerous complex connections to other operators and next generation applications.

        We believe our network solutions will continue to play a critical role in delivering necessary intelligence for communication service providers to maintain a sustainable market position.

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Furthermore, we believe that significant opportunities exist for service providers and mobile operators with the technical and commercial strategies to capitalize on the convergence of communications networks. Accordingly, TNS' strategy is to deliver network-based intelligence and infrastructure services that enhance the service distribution capabilities of our telecommunication customers.

Identification and Verification Services

        Within our identification and verification services, we offer our customers access to databases maintained internally and to those operated by telecommunications carriers and other third parties. These services allow for communications service providers to develop and maintain databases that store subscriber information, including names and addresses. This information is then used to provide enhanced services such as validating subscriber and billing information, caller identification services and providing real-time telephone call billing validation and fraud control services for calling card, credit card, third-party billing and collect calls for various communication service providers.

        Our suite of identification and verification services include: calling name storage and delivery databases, line information databases and validation and fraud control services.

        As demands for services other than voice continue to grow, we believe there are a number of additional factors that contribute favorably to ongoing demand for our identification and verification services including the use of our calling name storage and delivery databases by wireless operators to identify an incoming caller to a mobile handset with an original equipment manufacturer (OEM)-integrated application from our Cequint platform (see below). Additionally, we believe we are in a unique position to properly use the authoritative telecommunication data, which we have historically used to provide caller name identification, to validate various forms of payment and other transactions in order to eliminate fraud and manage risk associated with card issuing and card-not-present transactions in the payments industry. .

Registry Services

        Within our registry services, we provide for the registration and resolution of addressing information within the telecommunication industry. Wireline and wireless telecommunications carriers are required to provide services that enable a subscriber to change service providers within a particular location and keep the same phone numbers. Telecommunications service providers must access local number portability databases in order to route a call appropriately. Additionally, telecommunications service providers must also access a national database of toll-free numbers in order to route a toll-free call. Our SS7 network provides access to internally managed databases that host all wireline and wireless number portability data and toll-free routing information. As more communication networks are using IP-based connectivity, our carrier electronic numbering service enables applications using IP to communicate with consumer devices addressed by telephone numbers. Our IP-registry is populated with information sourced from industry and regulatory number management systems, along with unique data sourced directly from the mobile virtual network operators (MVNOs) and application service providers delivering text-enabled applications to data only devices. Through a query or number lookup, the IP-registry provides accurate carrier-of-record information and the applicable IP address in order to enable VoIP calls, data messages, and text messages to be terminated to the proper location.

        Our suite of registry services include: Local Number Portability (LNP), Toll-free databases, IP-registry services and LNP Service Order Administration.

        We believe there are a number of additional factors that contribute favorably to ongoing demand for our registry services. The growth of mobile data services requires interoperability between mobile operators' radio networks, private IP networks, and the public Internet. We believe TNS' IP-registry services enable the exchange and accurate routing of mobile data communications between these networks. Additionally, mobile and IP-based communication service providers participate in the porting

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of telephone numbers, which complicates the accurate and efficient routing of communications data. Through our best practices in data management, we believe TNS' IP-registry services resolve these complexities on behalf of service providers in a cost effective and efficient manner.

Roaming and Clearing Services

        We offer a suite of roaming and clearing services to wireless carriers using the ANSI-41 and GSM Mobile Application Part signaling protocols. Our roaming and clearing services allow carriers to provide support for mobile customers of other carriers visiting their service area, referred to as roamers, and for their customers when they roam outside their service area. Our service also manages signaling conversion and implementation anomalies between different countries to provide activation processing, seamless international roaming, and fraud protection. Our roaming data clearinghouse services facilitate financial settlement between carriers. We provide these services in addition to access to a pre-established international roaming footprint. We offer roaming services for carriers utilizing third Generation Packet Radio Services (3GPRS) and Code Division Multiple Access (CDMA) technologies to offer wireless roaming to their subscribers over broadband wireless networks. We also offer a variety of roaming application and value-added services that help wireless operators better manage and maximize the profitability of their roaming operations. Additionally, we are equipping our roaming service to support next generation wireless networks such as Long Term Evolution (LTE), worldwide interoperability for microwave access (WiMax) as well as providing interoperability between mobile networks and established WiFi communities.

Cequint Inc.

        In October 2010, we acquired Cequint, Inc., a privately-held company providing caller identification services to wireless operators. Cequint's patented caller identification feature, which is integrated into the operating system of the mobile phone and is called City ID^TM, automatically displays the city and state associated with the calling party's phone number. Cequint has also developed and plans to launch a new product that enables mobile operators to deploy carrier-grade caller name identification in mobile phones. This patent pending product, Name ID, will utilize a proprietary architecture and technology that will permit wireless operators to overcome certain network and technology challenges in order to deploy mobile caller-name identification similar to that which is currently available to legacy landline users. The technology supporting Name ID will also provide wireless operators with increased revenue opportunities through the ability to develop additional features and functionality. The City ID^TM and Name ID products, which are and will be pre-loaded applications by the OEM at the request of a wireless operator, are and will be offered by Cequint's wireless operator partners to their end user customers.

        For our TSD products and services, we generally enter into multi-year contracts with our customers, many of whom agree to minimum volume commitments. We generally charge fixed monthly fees for network solutions, and per-message fees for our registry services, identification and verification and roaming and clearing. Cequint generates revenue for its products through a revenue share with its wireless operator partners. For the year ended December 31, 2010, we generated $260.7 million of revenue in TSD, which represented 49.5% of our total revenues.

Payments Opportunity

        According to the industry information source, The Nilson Report, the four card-based systems of payments—credit, debit, prepaid, and electronic benefits transfer—generated 69.7 billion transactions, or 47.4% of total payments transactions in the United States in 2009. (© 2010, The Nilson Report) In 2005, these payment types accounted for 38.3% of transaction volume, or 50.1 billion transactions. While these types of payments are growing quickly in the United States, the international market for these payment methods is expanding at an even greater rate. According to Mercator Advisory Group,

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between 2008 and 2009, the total number of general purpose credit and debit card transactions outside of the United States increased by 9.7%, to approximately 77.1 billion transactions. Outside of the United States, the regions with the highest transaction volumes were Europe, Asia-Pacific and Latin America, while Middle East/Africa and Asia-Pacific experienced the fastest growth in 2009. (© 2011, Mercator Advisory Group, Inc.)

        A component of the growth in overall payment transactions is e-commerce. JPMorgan estimates that global e-commerce revenue in 2011 will grow to $680 billion, up 18.9% from 2010 revenue. e-commerce in the U.S. alone is projected to grow 13.2% to $187 billion, and it is forecasted that global e-commerce revenue will reach $963 billion by 2013. From a transaction perspective, the U.S. e-commerce market is expected to grow at a three year CAGR of 8.6% from 2010 to 2013, with transactions growing from 4.3 billion in 2010 to over 5.5 billion in 2013.

        In addition to continued growth in card-based electronic payments, alternative payment methods, such as PayPal, are continuing to gain traction, particularly in the e-commerce channel. While the volumes of alternative payment transactions currently are relatively small compared to other payment methods, they are becoming increasingly significant and represent additional displacement of cash and check transactions, providing incremental growth in electronic payments. Emerging channels such as mobile payments and television commerce are forecasted to contribute to even greater adoption of electronic payments while simultaneously migrating a portion of the existing electronic payments onto newer technologies.

        Along with the growth in electronic transactions, the increase in the number of options for point-of-sale (POS) device connectivity, which now includes wireless, Internet-based and dial-up access, is adding complexity to retailers and processors running large-scale payment networks. Electronic transactions require the two-way transfer of information over a secure, reliable data network. Typically, wherever a credit, debit or ATM card is accepted, whether at a POS and off-premise ATM (an automated teller machine at a location other than a branch office of a financial institution) or online or through mail order-telephone order (MOTO), the customer's account information and transaction amount must be electronically transmitted to a payment processor or financial institution. The payment processor or financial institution then electronically communicates with the entity that issued the card to determine whether to authorize the transaction. After this determination is made, the processor or financial institution returns an authorization or rejection response to the POS, ATM terminal or online or MOTO merchant.

        Financial institutions in the United States and Canada typically outsource the processing of credit and debit card accounts to payment processors who are able to leverage technical expertise and capitalize on economies of scale. Payment processors, in turn, typically have outsourced to third party service providers, such as TNS, the data networking services used to transport transaction data between the processor's host computers and the POS or ATM terminal. Outside of the United States and Canada financial institutions typically process credit and debit card accounts. Recently these institutions have looked to outsource these services to third-party providers.

        POS or off-premise ATM terminals access data network connections to payment processors through a variety of methods, the most common of which are dial-up and dedicated, or leased line, services and increasingly include broadband connections. Dial-up access services allow merchants and off-premise ATMs to connect to payment processors by dialing a telephone number each time a transaction is initiated. Wireless access provides the same capability as dial-up access without a physical connection to the POS device or ATM. A leased line is a dedicated connection provided to a merchant or ATM location for the exclusive purpose of connecting the POS terminal or ATM to the payment processor. Dial-up services are less expensive than leased line services as leased line services impose greater fixed monthly communication service charges, making a leased line economically viable only in high-volume merchant or off-premise ATM locations. A broadband connection such as a digital

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subscriber line, or DSL, or wireless connection is an always-on connection utilized by a merchant or ATM location for various purposes including to connect a POS terminal or ATM to the payment processor. With the introduction of broadband services, merchants and other POS providers have begun to deploy integrated wide-area-network solutions. These solutions may include POS services, inventory management and other back-office solutions utilized by merchants.

        Apart from the payment processors, pre-paid card providers, kiosk operators, loyalty card providers and merchants situated in locations other than brick and mortar stores, such as mobile merchants and merchants on the internet, are expanding their use of electronic transaction processing in an attempt to reduce costs, increase sales through the acceptance of credit and debit cards, and increase the reliability and efficiency of data transmission. As the number of merchants situated in locations other than brick and mortar stores increases, the number of transactions being performed without the cardholder or card present also is increasing, creating a growing need for card-not-present and other gateway services.

        Another significant factor facing the electronic payment processing industry is susceptibility to fraudulent transactions and as the number of electronic payment transactions has increased, the industry's exposure to fraud has increased. Payment processors desire secure and reliable data communications and other transaction related services while merchants desire access to tools to combat fraud. Participants in the electronic payment processing industry which handle payment card information are required to be compliant with industry security standards called the Payment Card Industry Data Security Standard, or PCI-DSS. According to Mercator Advisory Group, the typical mid-size merchant in the United States spends well over one million dollars each year in PCI-DSS compliance efforts. (© 2009, Mercator Advisory Group, Inc.)

Our Payments services

        Our payments division markets services directly to payment processors, financial institutions, card associations and merchants in North America, Europe, and Asia-Pacific. We also market our data communications services to entities responsible for the transmission of state lottery transactions, federal and state electronic benefits transfer, and healthcare transactions as well as directly to select categories of merchants and retailers. Our suite of services includes: network solutions, payment gateway solutions and ATM processing and other solutions:

Network Solutions

        The core service offering in our payment division is network connectivity which enables transmission of card-based payments data between the POS device or off-premise ATM and the processor's host computer.

        Our private and secure data network was designed specifically to address the data communications requirements of the payment processing industry. Our data communication services provide customized routing technology, built-in redundancy and geographic diversity and are configured to provide fast and reliable call connection and efficient network utilization. Our data network is PCI-DSS certified and is used to connect a merchant's POS terminal, an off-premise ATM or an online or MOTO merchant securely to the payment processor's host computer.

        We provide multiple means for the online and MOTO merchant, POS terminal, and off-premise ATM to access our data network. Merchant POS terminals and off-premise ATMs can connect directly to our network using our dial-up service, which utilizes telephone services obtained from interexchange carriers and local exchange carriers. While our customers primarily choose to access our network using our dial-up services, they are increasingly using other methods we provide of connecting to our network, including fixed broadband, wireless and internet connectivity via our TNSLink product line.

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Payment Gateway Solutions

        In addition to our network connectivity services, our payments division provides card-present and card- not-present payment gateway solutions to multi-channel merchants as well as to card associations which offer services over the Internet. We have been providing these services from our operations in Australia since 2007. In 2010, we launched our card-not-present platform in the United States and we plan to launch in Western Europe in 2011. Our payment gateway services enable a merchant (whether they be online, traditional brick and mortar, mail order-telephone order—MOTO, or mobile merchants) to authorize and settle card-based payments or other alternative electronic payment methods. Our payment gateway solutions protect card details by encrypting sensitive information, such as credit and debit card numbers, and securely delivering it to the merchant's payment processor(s). Our payment gateways also provide value-added capabilities, such as card data tokenization, that merchants can use to reduce card-related fraud, improve security, and ease efforts to achieve required industry security compliance certifications. As such, our payment gateway acts as a key enabler and distribution channel for a number of merchant facing and acquirer facing applications

        The following chart illustrates the route of a typical card-not-present transaction from an eCommerce merchant using our payment gateway service. The route of a typical call center transaction, where the card is also not physically present for the merchant, is similar.

1.

Customer inputs credit card information in the merchant's online store.



2.

The payment gateway encrypts data and securely sends it to the merchant's processor.



3.

The transaction is routed via a card association (e.g. American Express) for authorization by the customer's issuing bank.



4.

The result is encrypted and sent back through the gateway to the merchant.

        TNS provides payment gateway services for both cardholder-present and cardholder-not-present merchants through our TNSPay product lines. For "brick and mortar" retail outlets that use ePOS or PC-based payment terminals, TNSPay Retail is our UK-based payment gateway service that enables authorization and settlement of in-store payment transactions. TNSPay Retail also provides other capabilities for merchants, such as support for contactless payments and specialized card encryption security services. Our wireless payment gateway platform, called Synapse, enables merchants to process card transactions using mobile POS terminals or smart-phones that have been adapted to accept payments as well as terminal management and reporting services for independent sales organizations.

        With the increased number of electronic transactions, the increased focus on fraud, evolving compliance requirements, and the need to support an expanding array of payment options, there has been a significant increase in the complexity of the payments industry. Our payment gateway and network connectivity solutions are highly scalable and able to transport and support a wide variety of access methods as well as payment types and channels. With these capabilities, we believe we will be able to increase the number of transactions we transport, the number of connections to our network, and the types of products and services we offer as these and other industries look to outsource the data communications requirements necessary to transmit transactions securely. We believe we have an opportunity to provide services to securely host and manage payments card information on behalf of

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merchants in an effort for the merchants to achieve PCI-DSS compliance and to utilize tools designed to reduce fraud.

ATM Processing and Other Solutions

        In select markets we operate a software platform that helps ATM owners manage their estate of ATMs, including the processing of transactions by customers. We have been providing ATM processing services in the United Kingdom since 1999 and in Canada since 2009.

        Additionally, we provide services to international payment processors that are not used by payment processors in the United States. These include settlement and offline polling services which enable merchants to store transaction data until the payment processor retrieves the data after business hours.

        Our payments division generally enters into multi-year contracts that usually have minimum transaction or revenue commitments. For dial-up network access services, we typically charge our customers a fixed fee per transaction plus a variable time-based charge for transactions that exceed a specified period of time. Generally, our contracts provide for a reduction in the fixed fee per transaction as our customers achieve higher monthly transaction volumes. For our fixed broadband, wireless and internet connectivity services and our payment gateway solutions we typically charge our customers a per-transaction fee, a minimum monthly fee, or a combination of both. We typically charge our customers fixed monthly fees for leased line and broadband services. In our payments division we also generate revenue from usage charges, leased line circuit charges, charges for access to real-time transaction monitoring and charges for ancillary services. For the year ended December 31, 2010, we generated $200.2 million of revenue in the Payments division, which represented 38.0% of our total revenues.

Financial Services Division (FSD) Opportunity

        The securities trading and investment management industry requires high-speed, reliable, secure data communications services to communicate information among industry participants, including commercial banks, mutual funds, pension funds, broker-dealers, alternative trading systems (ATS), electronic communications networks (ECNs) and securities and commodities exchanges. Participants in the securities trading and investment management industry continuously seek opportunities across global markets as transaction volume in the global equity markets increases.

        The emergence of new electronic trading venues such as ECNs and ATSs and regulatory requirements such as the shift to decimalization have placed increasing emphasis on trading and cost efficiencies. In addition, in recent years financial institutions have reduced the size of their staff even though business and trading demands have increased. In order to continue to meet the need for high quality, fast and secure data communications, market participants are increasingly using outsourced data communications service providers. These providers give industry participants access to other participants through a single, managed access point on the service provider's network. These services allow participants to cost-effectively connect to each other to conduct time-sensitive transactions and communicate real-time information.

        Additionally, the growth, automation and globalization of financial markets have led to increased demand for outsourced, secure, reliable data communications services. Prior trading methods are unable to keep pace in an environment where latency is a critical competitive issue. Banks, mutual funds, pension funds, broker-dealers, ATSs, ECNs, securities and commodities exchanges and other market participants all require systems that enable them to react quickly and, thus, increasingly use data communications services to exchange trading information, distribute research and review trading positions.

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Our FSD Services

        Our fast, private, secure and reliable IP data networks are designed specifically to address the data communications requirements of the financial services industry. Our Financial Services Division connects over 1,700 financial community end-points located at over 625 distinct financial services companies, representing buy and sell-side institutions, market data and software vendors, exchanges and alternative trading venues. Our IP network services allow our customers to access multiple financial services companies through a single network connection, thereby eliminating the need for costly dedicated institution-to-institution leased line connections. Additionally, these services facilitate secure and reliable communications between financial services companies by supporting multiple communications standards and protocols, including the Financial Information eXchange (FIX) protocol. Our network has over 100 points of presence and provides services to customers in 40 countries across the Americas, Europe and the Asia Pacific region, with connections to endpoints in many more. Our financial services customers may have one or more access points to our IP network, depending on the location of their offices and other factors.

        We refer to our primary financial service offering as our Secure Trading Extranet. Our Secure Trading Extranet service links financial services companies through our IP network. Through a single physical network connection, a customer is able to virtually connect with any other entity connected to our IP network. Given the large number of industry participants connected to our network, including commercial banks, mutual funds, pension funds, broker-dealers, alternative trading systems, electronic communications networks, multilateral trading facilities and securities and commodities exchanges, a single customer can use its connection to our IP network to conduct seamless, real-time electronic trading and access a variety of content including news, research and market data.

        The growth of electronic trading in the global market continues to present opportunities for our Financial Services Division. There is increasing demand for low latency connectivity to trading venues and higher bandwidth connectivity as firms expand their use to include more trading partners and additional asset classes such as foreign exchange transactions.

        We generate revenue in our Financial Services Division primarily from monthly recurring fees based on the number of customer connections to and through our IP network as well as the amount of bandwidth the customer requires. For the year ended December 31, 2010, we generated $66.2 million of revenue in FSD, which represented 12.5% of our total revenues.

Our Strengths

        We believe our competitive strengths include:

        Recurring revenues and strong operating cash flows.    Our established customer base enables us to generate high levels of recurring revenues and strong operating cash flows. Our business model is based upon the number of transactions and database queries we transport and the number of connections to our networks. We enter into multi-year service contracts that usually have minimum transaction or revenue commitments from our customers. We believe that our recurring revenues and strong operating cash flows will enable us to continue to invest in the development of new products and services and to continue to expand internationally.

        Established customer base.    We have an established customer base of leading industry participants in each division and have experienced limited customer turnover. For the year ended December 31, 2010, we provided payment-related services to more than 2,000 customers. In addition, for the year ended December 31, 2010, we provided services to more than 800 telecommunication services providers and to more than 625 financial services companies. Internationally we generate revenue in over 40 countries and provide services to some of the largest financial institutions, wireless operators and other services providers in those countries and neighboring countries. Additionally, within some elements of

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our business, the value of our network to our customers increases for every new customer we put onto our network. We believe these communities of interests we have established over the last 20 years differentiates us from our competition.

        Well-positioned to continue international growth.    The solutions we have developed to serve customers in our existing geographic markets are applicable to the data communications needs of the payment processing, telecommunication and financial services industries in other regions. We believe that our data communications services and technologies, our technical expertise and our customer relationships with the largest domestic payment processors, telecommunication carriers and global financial institutions strategically position us to take advantage of substantial international opportunities. We have grown our international revenues from $33.1 million for the year ended December 31, 2002 to $150.3 million for the year ended December 31, 2010.

        Highly customized data network.    We operate a highly customized global network designed and configured for the transmission of time-sensitive data. Our network supports multiple communications protocols and access methods and, as a result, is able to support a wide variety of applications. The flexibility and scalability of our network and our technical expertise allow us to rapidly add new services to our existing offerings in response to emerging technologies with limited service disruptions or capital expenditures. We also believe our ability to leverage our fixed cost base provides us with significant economies of scale, resulting in a competitive advantage.

        Substantial experience in our target markets.    The eleven members of our executive management team have on a combined basis more than 150 years of experience in the transaction services and telecommunications industries as well as experience managing large, multinational corporations, and on average have been employees of the company for more than six years. We have focused on creating data communications services for developing and established markets. We believe this gives us an understanding of the unique needs and risks of our target markets and provides us with a competitive advantage over larger service providers that have a broader market perspective. We also believe our extensive experience provides us with a competitive advantage over service providers of similar or smaller size.

        Proven acquisition strategy.    Our management team has augmented the growth of our business by successfully identifying and integrating strategic acquisitions. We have made a number of acquisitions that have accelerated the growth of the payments and telecommunication services. For example, in 2010 we acquired Cequint, Inc. to expand our caller identification platform to mobile devices. In 2009, we acquired the assets of VeriSign's Communications Services Group (CSG) to increase our market share in call signaling and intelligent database services as well as to expand our product offerings with the addition of identity and verification, wireless roaming and clearing and IP registry services. We also acquired Dialect Payment Technologies in 2007 to provide card-not-present payment gateway services to our customers throughout the world.

Our Strategy

        Our objective is to continue to grow our business and enhance our position as a leading provider of outsourced business-critical data communications services enabling secure and reliable transmission of time-sensitive information for our transaction processing, telecommunications and financial services customers. Key elements of our strategy include:

        Focus on key geographies.    We continue to focus our efforts and resources to expand our business in six countries and their surrounding areas in which we already have operations. These countries are Australia, France, Italy, Spain, the United Kingdom and the United States. We believe concentrating our efforts in this way will enable us to grow our business in these geographic markets as well as in adjacent countries, enabling us to generate growth with less capital investment.

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        Continue to expand our customer base.    We believe our experience, existing customer relationships and our ability to consistently deliver secure and reliable data communications services will enable us to expand our customer base in domestic and international markets. For example, in our payments division we intend to expand our service offerings to certain customer segments in both the traditional and Internet-based retail industries, focusing on selling our broadband managed connectivity solutions and our managed payment gateway products, such as card-not-present services. In our financial services division, we will continue to increase the scope of services and leverage our existing customer base of over 625 financial services companies to acquire new customers. Within our telecommunications division, our expanded set of services including our network evolution, registry, identification and verification and roaming and clearing solutions will help us acquire new customers both domestically and internationally. Additionally our recent acquisition of Cequint expanded our product offerings and we anticipate this will help us acquire new customers.

        Develop new product and service offerings.    We will continue to expand our service offerings to address new markets for secure and reliable transmission of time-sensitive information. We continue to enhance our IP-based network services to payment processors, financial institutions and merchants in connection with the global payment industry's adoption of new technologies. We are currently offering card-not-present payment gateway services to payments division customers through the platforms we have deployed in the Asia-Pacific region and the United States and we intend to launch our card-not-present platform in Western Europe in 2011. In our telecommunication services division we are deploying new products to our customers. Our IP-registry platform is designed to enumerate and resolve IP-traffic for various services including VoIP traffic, SMS and MMS messages and international long distance. Additionally, we are working on several new products that will leverage our existing technology platforms across our payments and telecommunication divisions and focus on revenue-generating products for our customers.

        Increase sales to existing customers.    We will continue our efforts to further expand our existing customer relationships to increase business domestically and abroad. For example, we intend to encourage: our domestic and international payments division customers to increase their number of connections to our networks and to transmit a greater percentage of their transaction volume with us; our telecommunication services customers to increase the number of signaling routes they establish through our SS7 network and to increase the amount of data we store on their behalf in our databases; and our financial services customers to connect more endpoints and virtual connections to, and use greater bandwidth on, our data network.

        Our longstanding relationships with our customers provides us with an opportunity to increase the sales we make to our existing customers as they and we expand internationally. Within payments, our domestic processing customers are looking for growth outside the United States, opening up several new opportunities for cross-border routing of transactions. In TSD, our CSG acquisition gave us several new products and services, such as identity and verification and registry services, roaming and clearing and short messaging services, that we can now offer to our legacy customers on a stand-alone basis or as a bundled service. We also provide managed services to legacy CSG customers, helping them control network costs as they start to focus on building next-generation IP-based networks. We believe we have an opportunity to sell IP-based payment network services along the business chain to new customers currently using the services of our existing TSD customers. We also believe our telecommunication customers will be interested in our managed payment services such as our card-not-present payment gateway. We intend to work closely with our customers to increase our knowledge of their businesses and technical requirements in an effort to identify additional sales opportunities.

        Pursue strategic acquisitions.    We will continue to seek opportunities to acquire businesses that expand our range of services, provide opportunities to increase our customer base and enter into new domestic and international markets. We will need to use operating cash flows or additional financing to

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pursue our strategy. In May 2009 we acquired the CSG assets for $230.7 million. We funded the transaction through a new $230.0 million term loan facility as part of the May 2009 Credit Facility. In October of 2010, we acquired Cequint, Inc. for a potential total purchase price of $102.3 million. We funded the transactions through a new $50 million term loan facility using the accordion feature of the November 2009 Credit Facility.

Our Network

        We operate a highly-customized data network specifically designed and configured for the transmission of time-sensitive data. Our diverse data network architecture supports a variety of widely accepted communications protocols and is accessible through a variety of methods, including dial-up, leased line, wireless and secure Internet connections. We have designed our data network to be scalable and to allow easy adoption of new access technologies. The hardware utilized in our network is installed at 130 points of presence worldwide, 48 of which are in North America. We connect these points of presence with digital circuits leased from multiple telecommunication services providers. In addition, our network control centers allow us to administer our network and enable us to monitor our customers' transactions in real time. We believe that our network provides the following important benefits to our customers:

        Our network is designed specifically to address the data communications needs of our diverse customer base.    Our data network supports multiple communications protocols over our MPLS backbone and includes customized hardware, software and value- added features developed by us or by vendors to our specifications. The following is a description of the various protocols we operate within our network:

•

IP.  Internet protocol, or IP, is a communications technology that routes outgoing data messages and recognizes incoming data messages. Our secure IP infrastructure provides the services offered by our financial services division, the IP-based network solutions offered by our payments division and the IP-based network solutions (wireless data and next generation signaling) and registry services offered by our telecommunication services division. We also use our IP infrastructure for our internal processes, such as accounting functions and network monitoring and management. We have designed and implemented this with a high level of system redundancy, dynamic routing and sophisticated security and authorization technologies.



•

SS7.  SS7 is a communications protocol used to transmit signaling information to support call setup, provide routing information and enable wireless devices to interconnect with various networks. It also provides access to network databases such as caller name and toll-free routing and to support the transmission of transaction related data used by our payments division's customers. Our SS7 infrastructure is accessed using dedicated SS7 links provided by local exchange carriers and interexchange carriers.



•

X.25.  X.25 is a communications protocol used to transmit packets of data. Our domestic and international X.25 protocol transports our customers' POS transactions and is used to provide the validation services offered by our telecommunication services division. This protocol is designed to provide fast call connection times, a high level of system redundancy, dynamic rerouting, wide geographic coverage and value-added features, at a low cost per transaction. Customers may access our X.25 infrastructure using various methods, including dial-up services, leased line services, wireless services, satellite services and secure internet connections.

        Our network is reliable, redundant and secure.    We believe we have configured the major components of our network to eliminate any single point of failure. The reliability of our data network is enhanced significantly because we have deployed our network with redundant hardware installed at geographically diverse facilities connected by multiple telecommunications carriers. Our facilities are deployed with battery back-up and emergency generator power systems. We coordinate the physical

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routing of the digital circuits connecting our facilities with multiple telecommunication service providers to ensure the availability of diverse paths for routing any transaction or data, thereby enhancing network reliability. Due to such physical diversity, minor outages or failures typically do not require the immediate intervention of our technicians. We are able to respond quickly to service problems because the network monitoring, management and troubleshooting systems we use permit our network control centers to correct problems remotely. Our data network contains industry standard firewalls and protections, and security is further enhanced by limiting access. Our network is PCI DSS certified.

        Our IP and X.25 protocols incorporate several customized, value-added features that distinguish our services and performance from our competitors.    We believe that various value-added features we have developed permit our Payments customers accessing our data network through dial-up services to process a greater volume of transactions than other dial-up service providers. These features include:

•

the use of equipment that supports and converts transaction data delivered to our data network in multiple protocols and message formats into the protocols employed by our data network, thereby eliminating the need for our customers to incur the high costs associated with reprogramming POS terminals and host computers and performing continuous network enhancements and software upgrades;



•

real-time call tracking, which enables us to quickly resolve host, terminal or network problems experienced by our customers and to recommend to our customers ways to improve their systems;



•

the ability to convert message protocols within our network, allowing acquiring organizations to bring various transaction types with various message formats into their processing hosts without having to make costly changes within their own infrastructure; and



•

a secure Internet-based transaction monitoring system, which permits our customers to monitor the status of their transactions in real-time using the Internet.

        Our network can accommodate growth in our business.    Our network is deployed with sufficient capacity to accommodate significant growth in transaction volumes without incurring delays relating to the provisioning and deployment of additional hardware and telecommunications circuits. We have also designed the network so that we may easily increase capacity as necessary.

        Our network operations centers continuously monitor and manage our network.    We provide 24-hour, seven days a week network control coverage domestically through our network control centers located in Reston, Virginia and Overland Park, Kansas and internationally through our network control centers located in Sheffield, England and Sydney, Australia. Each of these network control centers serves as the backup network control center for the other control center. Our network control centers are staffed with skilled technicians experienced with the services we offer. Our network control centers remotely monitor the components of our data network and manage our network using sophisticated network management tools we have either developed internally or licensed from others.

Customers

        As of December 31, 2010, we provided our services to more than 2,000 customers in our payments division to more than 800 customers in our telecommunications division and to more than 625 financial services division customers. Historically we have experienced limited customer turnover and attribute that to our strong relationships with those customers. For the year ended December 31, 2010, we derived approximately 18.9% of our total revenues from our five largest customers. No customer accounted for more than 10% of our total revenues for the year ended December 31, 2010. We typically enter into multi-year service contracts with our customers with minimum commitments. The

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contracts with our five largest customers contain minimum transaction or revenue commitments on an annual or contract term basis. The contracts with our five largest customers expire from 2011 to 2012

Sales and Marketing

        We sell our services directly to customers through geographically dispersed sales teams. In our telecommunication service divisions, we have a specialized sales team to sell our TSD products in North America and Asia Pacific. Globally we have a specialized sales team for our financial services division. In our payments division, our sales teams are organized geographically with each team responsible for selling all of our payments services in the country in which the team is based and, in some cases, proximate countries. Our payments sales teams are based in Australia, Canada, France, Germany, Hong Kong, India, Ireland, Italy, Japan, Poland, Romania, Singapore, South Korea, Spain, Thailand, the United Kingdom and the United States. Generally, each sales team includes a managing director or sales manager, account representatives, business development personnel, sales engineers and customer service representatives experienced in the industries of our customers and the services we offer.

        We also have dedicated product development and marketing teams for our payments and telecommunications services divisions that specialize in the industries of our customers and the services we offer. These teams are responsible for working with our customers, prospects and other industry specialists to expand our current suite of solutions to address the evolving demands of the industry they serve. These teams also consider the applicability of our solutions outside of the specific industries to which they are dedicated.

        When a customer initially purchases services from us, the customer may purchase some, but not all, of the services we offer. Our sales teams then strive to increase the services purchased by existing customers and to expand the range of services we provide to our customers. Our sales teams consult with our customers to identify the new business-critical services we may provide.

        Our global marketing group works with our sales teams around the world and the product group to promote interest in our services and to generate new sales prospects. In addition they ensure that any news associated with the company is distributed in a timely manner to all of the company's stakeholders.

Suppliers

        The operation of our networks depends upon the capacity, reliability and security of services provided to us by a limited number of telecommunication service providers. We have no control over the operation, quality or maintenance of those services or whether the vendors will improve their services or continue to provide services that are essential to our business. In addition, telecommunication service providers may increase the prices at which they provide services.

        Some key components we use in our networks are available only from a limited number of suppliers. The number of available suppliers of components for our X.25 networks is particularly limited. The Company has entered into long term contracts with two vendors for the provision of network equipment and the maintenance of hardware and software utilized on our network.

Competition

        Telecommunication services division.    Our telecommunication services division competes on the basis of industry expertise, network service quality and reliability, transaction speed, customer support, cost-efficiency and value-added services. The primary competitors of our telecommunication services division include telecommunication carriers such as Verizon Communications, Inc. and AT&T Corp., and CenturyLink, Syniverse Technologies, Inc., and TARGUSinfo.

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        Payments division.    Our payments division competes on the basis of industry expertise, network service quality and reliability, transaction speed, value-added features, customer support and cost-efficiency. In the United States the primary competitors for our Payments dial-up services are interexchange carriers such as Verizon Business Solutions, an operating unit of Verizon Communications, Inc., AT&T Corp, and Phoenix Managed Networks, Inc. The carriers typically do not aggressively pursue transaction-oriented business as a stand-alone service but rather offer it in conjunction with other products and services. The primary competitors of our payment division's counter-top integration and IP-based network services are Cybera, Inc. and broadband access providers such as MegaPath Networks, Inc. The primary competitor of our payment division's wireless services in the United States is APRIVA. Outside the United States our payment division competes on a similar basis as in the United States. Primary competitors of our payment services are incumbent telephone companies in the geographic location, such as BT Group PLC in the United Kingdom, France Telecom in France, Telecom Italia in Italy, Telefonica in Spain and Telstra in Australia. The primary competitor of our processing services in the United Kingdom is Avantra. The primary competitors of our Payment Division's gateway services are other payment gateway offerings from payment service providers, such as Authorize.Net from Cybersource (Visa).

        Financial services division.    Our financial services division competes on the basis of access to multiple financial services companies, security, support services, cost-efficiency and discrete service offerings. The primary competitors of our financial services division are other private communications networks and telecommunications carriers including AT&T Corp. and BT Group PLC, providers of quote terminals and market data services such as Bloomberg, Reuters and Thomson Financial, and other network service providers such as SAVVIS, Inc.

Government Regulation

        The Federal Communications Commission, or FCC, retains general regulatory jurisdiction over the sale of interstate telecommunications services. We believe that TNS' services in general are properly characterized as "information" or "enhanced" services rather than "telecommunications services." Providers of information services are not required to maintain a certificate of public convenience and necessity with the FCC, to contribute directly to the Universal Service Fund, to file tariffs with the FCC, or to comply with any of the other FCC regulations applicable to telecommunications carriers. The application of the "information" and "telecommunications" categories to particular services and activities is an evolving standard with no bright lines of demarcation. TNS continues to monitor its businesses to ensure that its services remain properly characterized for regulatory purposes.

        Further, the FCC has found information (or enhanced) services to be inherently interstate in nature. In addition, nearly all TNS services cross state boundaries and are thus interstate offerings. Consequently, our services are not subject to state public utility commission regulation.

        Even though we provide unregulated services, federal and state regulations can affect the costs of business for us and our competitors by changing the rate structure for access services purchased from local exchange carriers to originate and terminate calls. Under the Telecommunications Act of 1996 ("the 1996 Act"), the FCC implemented rules and regulations known as Access Charge Reform to reform the system of interstate access charges. The FCC's implementation of these rules increased some components of our costs for access while decreasing others. The FCC is currently considering additional rulemaking proceedings concerning this intercarrier compensation scheme, and we currently cannot predict whether any rule changes will be adopted or the impact these rule changes might have on our access charges if they are adopted. Recent and pending decisions of the FCC and state regulatory commissions may limit the availability and increase pricing used by our suppliers to provide telecommunication services to us. We cannot predict whether the rules will change or, if they do, whether the changes will increase the cost or availability of services we purchase from our suppliers.

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        The third party telecommunications service suppliers for our information services are obligated to contribute directly to the Federal Universal Service Fund. Our telecommunications service suppliers, in turn, recover the cost of their contribution obligations by imposing surcharges on us and our competitors based upon a percentage of their interstate and international end-user telecommunications revenues. If the Federal Universal Service Fund surcharges increase, our telecommunications service suppliers will pass those increased surcharges on to us. We in turn will pass those potential increased Federal Universal Service Fund surcharges on to our customers to the extent permitted under our contracts with them. The United States Congress and the FCC are considering modifying the way in which Federal Universal Service Fund charges are calculated, including considering whether to assess universal service charges on a flat-fee basis, such as a per-line, per-telephone number or per-account charge. We currently cannot predict whether Congress will mandate or the FCC will adopt changes in the calculation of Federal Universal Service Fund contributions or whether these changes, if adopted, would increase our Federal Universal Service Fund surcharges. If the FCC implements any legislation, adopts any proposal or takes any administrative action that increases our Federal Universal Service Fund surcharges, our network operating costs will increase. In addition, if the FCC implements any legislation, adopts any proposal, or takes any administrative action that increases our supplier's Federal Universal Service Fund obligations, these telecommunications service suppliers may seek to pass through cost-recovery charges to us, which would result in an increase in our cost of network services, an increased cost which the Company may or may not be able to pass on to our customers.

Intellectual Property

        Our success is dependent in part upon our proprietary technology. While we own patents with respect to certain of the services we provide, we rely principally upon trade secret and copyright law to protect our technology, including our software and network design. We enter into confidentiality or license agreements with our employees, distributors, customers and potential customers and limit access to and distribution of our software, documentation and other proprietary information. We believe, however, that because of the rapid pace of technological change in the data communications industry, the legal protections for our services are less significant factors in our success than the knowledge, ability and experience of our employees and the timeliness and quality of services provided by us.

Employees

        As of December 31, 2010, we employed 1,237 persons worldwide, of whom 817 were engaged in systems operation, development and engineering, 261 of whom were engaged in sales and sales support, 148 of whom were engaged in finance and administration and 11 comprised executive management. Of our total employees as of December 31, 2010, 781 were employed domestically and the balance were in other countries, including 302 in Europe and 154 in Asia Pacific. None of our employees are currently represented by a labor union. We have not experienced any work stoppages and consider our relationship with our employees to be good.

Internet Address and Company SEC Filings

        Our internet address is www.tnsi.com. On the investor relations portion of our web site, we provide a link to our electronic SEC filings, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any amendments to these reports. All such filings are available free of charge and are available as soon as reasonably practicable after filing. The reference to our website address does not constitute incorporation by reference of the information contained in the website and such information should not be considered part of this report.

Executive Officers of the Registrant

        See Item 10 of this report for information about our executive officers.

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Item 1A.    Risk Factors

        We are subject to various risks that could have a negative effect on the Company and its financial condition. You should understand that these risks could cause results to differ materially from those expressed in forward-looking statements contained in this report and in other Company communications. Because there is no way to determine in advance whether, or to what extent, any present uncertainty will ultimately impact our business, you should give equal weight to each of the following.

We derive a substantial portion of our revenue from a small number of customers. If one or more of our top five customers were to cease doing business with us, or to substantially reduce its dealings with us, our revenues and earnings could decline.

        For the year ended December 31, 2010, we derived approximately 18.9% of our total revenues from our five largest customers. We expect to continue to depend upon a relatively small number of customers for a significant percentage of our revenues. No customers accounted for more than 10% of revenues for the year ended December 31, 2010. The loss of any of our largest customers or a decision by one of them to purchase our services at a reduced level could negatively impact our revenues, earnings and business.

        The contracts with our five largest customers contain minimum transaction or revenue commitments on an annual or contract term basis. Upon meeting these commitments, the customers are no longer obligated to purchase services from us and may elect not to make further use of our services. In addition, our customers may elect not to renew their contracts when they expire. Even if contracts are renewed, the renewal terms may be less favorable to us than under the current contracts. The contracts with our five largest customers expire from 2011 to 2012

We face significant pressure on the prices for our services from our competitors and customers. Our failure to sustain pricing could impair our ability to maintain profitability or positive cash flow.

        Our competitors and customers have caused and may continue to cause us to reduce the prices we charge for services. We may not be able to offset the effects of these price reductions by increasing the number of transactions we transport using our networks or by reducing our costs. The primary sources of pricing pressure include:

•

Competitors offering our customers services at reduced prices. For example, telecommunications carriers may reduce the overall cost of their services by bundling their data networking services with other services such as voice communications.



•

Payments and telecommunication services customers seeking greater pricing discounts during contract negotiations in exchange for maintaining or increasing their minimum transaction or revenue commitments.



•

Consolidation of existing customers resulting in pricing reductions. For example, one of our customers with relatively lower contract prices may acquire another of our customers, enabling the acquired customer's services to receive the benefit of the lower prices. In addition, if an existing customer acquires another customer, the combined transaction volume may qualify for reduced pricing under our contract. Further, consolidation among our customers may cause us to reduce prices in order to avoid losing these customers.

Our Payments and Telecommunications Services businesses are highly dependent upon our customers' transaction volumes and our ability to expand into new markets.

        We already serve most of the largest payment processors in the United States and Europe. Accordingly, our Payments division is highly dependent on the number of transactions transmitted by

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our existing customers through our networks in the United States and the United Kingdom. Factors which may reduce the number of credit and debit card and ATM transactions include economic downturns, acts of war or terrorism and other events that reduce consumer spending. Revenues from our Payments Division have decreased primarily as a result of a decline in transaction volumes which we attribute to the continued softness in the economy, as well as a decrease in revenue per transaction as a result of negotiated price reductions upon renewal of certain contracts.

        We may be unable to increase our business from IP-based network services as well as our payment gateway service offerings that we have identified as potential sources of future growth for our Payments business in the United States and abroad. Factors that may interfere with our ability to expand further into these areas include:

•

market participants' adoption of alternative technologies; and



•

our potential inability to enter into commercial relationships with additional market participants.

        Our Telecommunications Services business is also dependent on our customers' transaction volumes. In the past, consolidation among our TSD customers has caused us to lose transaction volume. In addition, certain of our TSD customers have developed in-house solutions to replace part or all of the services we provide to them. In the future, consolidation among our customers or the decision by existing customers to deploy in-house solutions to replace our services could cause us to lose volume and our revenues to decline.

Our efforts to integrate recent or future acquisitions into our operations could be disruptive, and we may not be able to successfully integrate them on a timely basis. Even if we are able to successfully integrate an acquisition into our operations, we may not realize the anticipated benefits of the acquisition on the timetable contemplated, or at all. Recent or future acquisitions could negatively affect our operating results and could dilute the interests of existing stockholders.

        In October 2010 we acquired Cequint, Inc., a Seattle based company providing caller identification services to wireless operators. Cequint currently provides a caller identification feature for some wireless operators that automatically displays on the wireless handsets of customers of those operators the city and state in which the caller's phone number is registered. In the near future, Cequint also plans to launch a new application of that service together with a network component that allows mobile operators to display the name of the calling party from authoritative telecommunication carrier databases together with the incoming number on the wireless handsets. This new Name ID application will be pre-loaded onto the wireless handsets by its manufacturer at the request of the wireless operator. It will be integrated at the call-handler level on those wireless handsets ranging from entry level cellular handsets to advanced mobile smart phones that will be sold through the wireless operator's normal distribution channels. Upon purchase of the wireless handset, the wireless operator's customer will be automatically provided with a free-trial of that application on the purchased handset. After expiration of the free-trial period, the wireless operator's customer will be prompted with a purchase screen giving the customer the option to purchase the application and be billed on a monthly recurring basis on the wireless operator's bill to that customer at a price established by the wireless operator.

        We have begun to integrate the network Caller ID component of that service with the Caller ID application to be pre-loaded onto the handsets of wireless operators. This integration may prove to be more difficult and may take longer than we currently anticipate for the application to work as intended, which could result in the Cequint business failing to meet expectations. Furthermore, we may experience unanticipated difficulties and delays in the process of having wireless operators request and ensure that our Caller ID application is pre-loaded onto their wireless handsets by their manufacturers. Even if we are successful in integrating our service and having the Name ID application pre-loaded onto wireless operator's handsets, our anticipated revenues from such service are highly dependent on

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adoption rates of the Name ID application by the customers of the wireless operators and the revenue share and pricing to be determined for such application by the wireless operators. We may fail to achieve the revenues anticipated from this Cequint acquisition despite incurring substantial costs of the business, which may adversely affect our future financial position, results of operations, and customer relationships.

        In addition, we expect to continue to seek selective acquisitions and investments as an element of our growth strategy. Recent and future acquisitions could subject us to risks including:

•

If we are not able to successfully integrate acquired businesses in a timely manner, our operating results may decline. We also may incur substantial costs, delays or other operational or financial problems during the integration process.



•

If we are not able to successfully integrate acquired businesses in a timely manner, our operating results may decline, particularly in the fiscal quarters immediately following the completion of such transactions while the operations of the acquired entities are being integrated into our operations. We also may incur substantial costs, delays or other operational or financial problems during the integration process.



•

Acquisitions could result in large, immediate write-offs and assumption of contingent liabilities, either of which could harm our operating results.



•

Acquisitions may divert the attention of senior management from our existing business.



•

Additional indebtedness incurred to finance acquisitions are likely to increase our interest expense, and new debt agreements may involve new restrictive covenants that could reduce our flexibility in managing our business.



•

If we issue additional equity to finance our acquisitions or investments, it could result in dilution for our existing stockholders.

Our strategy to expand internationally may fail, which may impede our growth and harm our operating results.

        During the year ended December 31, 2010, we did not generate positive operating cash flows in 7 out of the 24 countries in which we have operations and provide services outside of North America. In addition, we are planning expansion into new and existing international markets. Key challenges we will face in pursuing our international strategy include the need to:

•

secure commercial relationships to help establish our presence in international markets,



•

obtain telecommunications services from incumbent telecommunication service providers that may compete with us,



•

adapt our services to support varying telecommunications protocols that differ from those markets where we have established operations,



•

hire and train personnel capable of marketing, installing and integrating our data communications services, supporting customers and managing operations in foreign countries,



•

localize our products to target the specific needs and preferences of foreign customers, which may differ from our traditional customer base in the United States and United Kingdom,



•

build our brand name and awareness of our services among foreign customers,



•

implement new systems, procedures and controls to monitor our operations in new markets, and



•

obtain licenses or authorizations that may be required to sell our services internationally.

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        If we fail to address the challenges and risks associated with international expansion, we may encounter difficulties implementing our strategy, which could impede our growth or harm our operating results.

We are subject to risks associated with operating in foreign countries, including:

•

multiple, changing and often inconsistent enforcement of telecommunications, foreign ownership and other laws and regulations that could have a direct or indirect adverse impact on our business and market opportunities,



•

competition with existing market participants which have a longer history in and greater familiarity with the foreign markets we enter,



•

laws and business practices that favor local competitors,



•

fluctuations in currency exchange rates,



•

imposition of limitations on conversion of foreign currencies into U.S. dollars or remittance of dividends and other payments by foreign subsidiaries,



•

changes in a specific country's or region's political or economic conditions,



•

longer payment cycles for customers in some foreign countries,



•

difficulty and expense associated with enforcement of agreements and collection of receivables through legal systems in some foreign countries, and



•

difficulty and expense associated with managing a large organization spread throughout numerous foreign countries.

We face risks related to movements in foreign exchange rates that could have a material adverse effect on our business, financial position and results of operations.

        Our revenues and earnings are affected by fluctuations in the value of the U.S. dollar as compared with foreign currencies, predominantly the Euro, the British Pound and the Australian dollar as the functional currency of each of our foreign subsidiaries is the local currency. To the extent that the U.S. dollar appreciates in value against these currencies, the reported value of our revenues, earnings and financial position may be materially adversely affected.

We conduct business in many international markets with complex and evolving tax rules, which subjects us to international tax compliance risks.

        While we obtain advice from tax and legal advisors as necessary to help ensure compliance with tax and regulatory matters, most tax jurisdictions in which we operate have complex and subjective rules regarding the valuation of inter-company services, cross-border payments between affiliated companies and the related effects on the taxes to which we are subject, including income tax, value-added tax and transfer tax. From time to time our foreign subsidiaries are subject to tax audits and may be required to pay additional taxes, interest or penalties should the taxing authority assert different interpretations, or different allocations or valuations of our services. There is a risk, if one or more taxing authorities significantly disagrees with our interpretations, allocations or valuations, that any additional taxes, interest or penalties which may result could be material and could reduce our income and cash flow from our international subsidiaries.

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Our dependence on third-party providers for network connectivity, network equipment, software, hardware, and hosting or co-location services exposes us to a variety of risks we cannot control.

        To deliver our services successfully, we depend on network connectivity, network equipment, software, hardware, and hosting or co-location services supplied by our vendors and customers. We cannot assure that we be able to continue to purchase all of these necessary components of our services from these third-party vendors on acceptable terms or at all. Our third-party vendors have increased and in the future may increase the prices charged for their services, which have increased and would further increase our costs.

        Our business also depends on the capacity, reliability and security of the network infrastructure owned and managed by third parties, including our vendors and customers. Our payments services, telecommunication services, and financial services, including technology interoperability services, payment processing services, network services, database services, call signaling and roaming and clearing services, all depend to some extent on the capacity, reliability and security of the infrastructure of third parties. We have no control over the operation, quality, or maintenance of a significant portion of that infrastructure and whether these third parties will upgrade or improve their equipment, software and services to meet our and our customers' evolving requirements. We depend on these companies to maintain the operational integrity of our services. If one or more of these companies is unable or unwilling to supply or expand its levels of services to us in the future, our operations and customer services could be negatively impacted or severely interrupted.

Our customers may develop in-house networks and divert part or all of their data communications from our network to their networks.

        As a payment processor's business grows larger and generates a greater number of credit card and debit card transactions, it could become economically advantageous for the processor to develop its own network for transmitting transaction data, including credit card and debit card transactions. Currently, some of the largest processors and some very large merchants globally, such as supermarkets, department stores and major discount stores, operate their own networks to transmit some or all of their transactions. Also, as the number of outsourced providers of network services has decreased, payment processors and large merchants have developed, and may continue to seek to develop, their own networks in order to maintain multiple sources of supply. In addition, our telecommunication services division customers may elect to connect their call signaling networks directly to the call signaling networks of other telecommunications carriers, thus decreasing their need for our services. As a result of any of these events, we could experience lower revenues.

System failures or slowdowns, security breaches and other problems could harm our reputation and business, cause us to lose customers and revenue, and expose us to customer liability.

        Our business is based upon our ability to securely, rapidly and reliably receive and transmit data through our networks. One or more of our networks could slow down significantly or fail, or be breached, for a variety of reasons, including:

•

failure of third party equipment, software or services utilized by us,



•

undetected defects or errors in our software programs, especially when first integrated into a network,



•

unexpected problems encountered when integrating changes, enhancements or upgrades of third party equipment or software with our systems,



•

computer viruses,



•

natural or man-made disasters disrupting power or telecommunications systems generally, and

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•

damage to, or failure of, our systems due to human error or intentional disruption such as physical or electronic break-in, sabotage, acts of vandalism and similar events.

        We may not have sufficient redundant systems or backup telecommunications facilities to allow us to receive and transmit data in the event of significant system failures. Any significant security breach degradation or failure of one or more of the networks on which we rely, including the networks of our vendors and customers could disrupt the operation of our network and cause our customers to suffer delays in transaction processing, which could damage our reputation, increase our service costs, or cause us to lose customers and revenues.

Our customers' inability to successfully implement our services could negatively impact our business.

        Significant technological challenges may arise for our customers when they implement our services. Our customers' ability to support the deployment of our services and integrate them successfully within their operations depends, in part, on our customers' technological capabilities and the level of technological complexity involved. Difficulty in deploying our services could increase our customer service support costs, delay the recognition of revenues received until the services are implemented and reduce our operating margins.

Our capacity limits on current network and application platforms may be difficult to manage and project, and we may not be able to expand or upgrade our systems to meet increased demand or use.

        As customers' usage of our services increase, we will need to expand our network and application platforms. We may not be able to accurately project the rate of increase in usage of our services. In addition, we may not be able to expand and upgrade our systems, networks, and application platforms in a timely manner to accommodate increased usage of our services. If we do not timely and appropriately expand and upgrade our systems, networks, application platforms, we may limit our ability to add new customers or lose customers and our operating performance may suffer.

We depend on a limited number of network equipment suppliers and do not have supply contracts. Our inability to obtain necessary network equipment or technical support could harm our business.

        Some key components we use in our networks are available only from a limited number of suppliers. The number of available suppliers of components and technical support for our X.25 networks are particularly limited. We do not have long-term supply contracts with these or any other limited source vendors, and we purchase data network equipment on a purchase order basis. If we are unable to obtain sufficient quantities of limited source equipment and required technical support, or to develop alternate sources as required in the future, our ability to deploy equipment in our networks could be delayed or reduced, or we may be forced to pay higher prices for our network components. Delays or reductions in supplies could lead to slowdowns or failures of our networks.

We may experience fluctuations in quarterly results because of the seasonal nature of our business and other factors outside of our control, which could cause the market price of our common stock to decline.

        Credit card and debit card transactions account for a major percentage of the transaction volume processed by our customers. The volume of these transactions on our networks generally is greater in the fourth quarter holiday season than during the rest of the year. Consequently, revenues and earnings from credit card and debit card transactions in the first quarter generally are lower than revenues and earnings from credit card and debit card transactions in the fourth quarter of the immediately preceding year. We expect that our operating results in the foreseeable future will be significantly affected by seasonal trends in the credit card and debit card transaction market.

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        In addition, a variety of other factors may cause our results to fluctuate from one quarter to the next, including but not limited to:

•

varying costs incurred for network expansion,



•

the impact of quarterly variations in general economic conditions,



•

acquisitions made or customers acquired or lost during the quarter,



•

changes in pricing policy by us, our competitors and our third party supplier and service providers during a particular quarter, and



•

foreign currency translation rates, in particular the British pound, Euro and Australian dollar.

We may not be able to adapt to changing technology and our customers' technology needs.

        We face rapidly changing technology and frequent new service offerings by competitors that can render existing services obsolete or unmarketable. Our future success depends on our ability to enhance existing services and to develop, introduce and market, on a timely and cost effective basis, new services that keep pace with technological developments and customer requirements.

We may be unable to protect our proprietary technology, which would allow competitors to duplicate our services. This would make it more difficult for us to compete with them.

        We may not be able to protect sufficiently our proprietary technology, which could make it easier for competitors to develop services that compete with our services. We rely principally on copyright and trade secret laws and contractual provisions to protect our proprietary technology. The laws of some countries in which we sell our services and products may not protect software and intellectual property rights to the same extent as the laws of the United States. If these measures do not adequately prevent misappropriation of our technology, competitors may be able to use and adapt our technology. Our failure to protect our technology could diminish our competitive advantage and cause us to lose customers to competitors.

We may face claims of infringement of proprietary rights, which could harm our business and operating results.

        Third parties may assert claims that we are infringing their proprietary rights. If infringement claims are asserted against us, we could incur significant costs in defending those claims. We may be required to discontinue using and selling any infringing technology and services, to expend resources to develop non-infringing technology or to purchase licenses or pay royalties for other technology. We may be unable to acquire licenses for the other technology on reasonable commercial terms or at all. As a result, we may find that we are unable to continue to offer the services and products upon which our business depends.

We may not have adequate resources to meet demands resulting from growth.

        Growth may strain our management systems and resources. We may need to make additional investments in the following areas:

•

recruitment and training,



•

communications and information systems,



•

sales and marketing,



•

facilities and other infrastructure,



•

treasury and accounting functions,

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•

licensing and acquisition of technology and rights, and



•

employee and customer relations and management.

        If we fail to develop systems, procedures and controls to handle current and future growth on a timely basis, we may be less efficient in the management of our business or encounter difficulties implementing our strategy, either of which could harm our results of operations.

We may lack the capital required to maintain our competitive position or to sustain our growth.

        We have historically relied on cash flow from operations and proceeds from equity and debt to fund our operations, capital expenditures and expansion. If we are unable to obtain sufficient capital in the future, we may face the following risks:

•

We may not be able to continue to meet customer demand for service quality, availability and competitive pricing.



•

We may not be able to expand rapidly internationally or to acquire complementary businesses.



•

We may not be able to develop new services or otherwise respond to changing business conditions or unanticipated competitive pressures.

Our level of debt could adversely affect our financial health.

        As of December 31, 2010, we had $407.5 million in debt outstanding.

        This level of debt could have important consequences. Below, we have identified some of the material potential consequences resulting from this debt:

•

A significant portion of our cash flow from operations must be dedicated to the repayment or servicing of indebtedness, thereby reducing the amount of cash we have available for other purposes, including reinvestment in the company.



•

We may be unable to obtain additional financing for working capital, capital expenditures, acquisitions and general corporate purposes.



•

Our ability to adjust to changing market conditions may be hampered.



•

We may be at a competitive disadvantage compared to our less leveraged competitors.



•

We may be vulnerable to the impact of adverse economic and industry conditions and, to the extent of our outstanding debt under our senior secured credit facility, the impact of increases in interest rates.

        We cannot assure you that we will continue to generate sufficient cash flow or that we will be able to borrow funds under our senior secured credit facility in amounts sufficient to enable us to service our debt, or meet our working capital and capital expenditure requirements. We must satisfy borrowing base restrictions in order to borrow additional amounts under our November 2009 Credit Facility. If we are not able to generate sufficient cash flow from operations or to borrow sufficient funds to service our debt, due to borrowing base restrictions or otherwise, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing debt, or obtain additional financing. We cannot assure you that we will be able to refinance our debt, sell assets or borrow more money on terms acceptable to us, if at all.

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If we do not compete effectively, we may lose market share to competitors and suffer a decline in revenues.

        Many of our competitors have greater financial, technical, marketing and other resources than us. As a result, they may be able to support lower pricing and margins and to devote greater resources to marketing their current and new products and services.

        We face competition in each of our three divisions as follows:

•

The primary competitors of our telecommunication services division include telecommunication carriers such as Verizon Communications, Inc., AT&T Corp., and CenturyLink, Syniverse Technologies, Inc., and TARGUSinfo.



•

The primary competitors of our Payments division are APRIVA, AT&T Corp., Cybera, Inc., Phoenix Managed Networks, LLC, and Verizon Business Solutions, an operating unit of Verizon Communications, Inc. in North America, and BT Group PLC and Avantra in the United Kingdom, France Telecom in France, Telecom Italia in Italy, Telefonica in Spain and Telstra in Australia. The primary competitors of our Payment Division's gateway services are other payment gateway offerings from payment service providers, such as Authorize.Net from Cybersource (Visa).



•

The primary competitors of our financial services division include AT&T Corp., BT Group PLC, Bloomberg, Reuters, The Thomson Corporation (Thomson Financial), and SAVVIS, Inc.

We depend on key personnel.

        Our success depends largely on the ability and experience of a number of key employees, including Henry H. Graham, Jr., our Chief Executive Officer, and Michael Q. Keegan, our Chief Operating Officer. If we lose the services of any of our key employees, our business may be adversely affected.

Our stock price may be volatile.

        The trading price of our common stock could be subject to wide fluctuations in response to various factors, some of which are beyond our control, such as:

•

actual or anticipated variations in quarterly results of operations;



•

fluctuations in foreign exchange rates for the currencies of countries in which we have operations;



•

announcements of technological innovations;



•

pricing by us or our competitors;



•

changes in financial estimates by securities analysts;



•

announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our customers or competitors;



•

additions or departures of key personnel; and



•

generally adverse market conditions.

Regulatory changes may increase our costs or impair our growth.

        Federal and state regulations can affect the costs of business for us and our competitors by changing the rate structure for access services purchased from local exchange carriers to originate and terminate calls, by restricting access to dedicated connections available from local exchange carriers, by changing the basis for computation of other charges, such as universal service charges, or by revising the basis for taxing the services we purchase or provide. The Federal Communications Commission

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("FCC") is currently considering changes to the rate structure for services provided by local exchange carriers, including the rate structure for access services, and we currently cannot predict whether these rule changes will be adopted or the impact these rule changes may have on our charges for access and other services if they are adopted.

        Recent and pending decisions of the FCC may limit the availability and increase pricing of network elements used by our suppliers to provide telecommunications services to us. We cannot predict whether these rule changes will increase the cost of services we purchase from our suppliers. Further, the United States Congress and the FCC is considering modifying the way in which Federal Universal Service Fund charges are calculated, including considering whether to assess universal service charges on a flat-fee basis, such as a per-line, per-telephone number or per-account charge. We currently cannot predict whether Congress will mandate or the FCC will adopt changes in the calculation of Federal Universal Service Fund contributions or whether these changes, if adopted, would increase our Federal Universal Service Fund surcharges. If the FCC implements any legislation, adopts any proposal or takes any administrative action that increases our Federal Universal Service Fund surcharges, our network operating costs will increase. In addition, if the FCC implements any legislation, adopts any proposal, or takes any administrative action that increases our telecommunications service supplier's Universal Service Fund obligations, these suppliers may seek to pass through cost-recovery charges to us. We in turn will pass those potential increased Federal Universal Service Fund surcharges on to our customers to the extent permitted under our contracts with them. An increase in the Federal Universal Service Fund surcharges that we are required to pay would result in an increase in our cost of network services, a cost which the Company may or may not be able to pass on to our customers.

        The business of our telecommunication services division customers is or may become subject to regulation that indirectly affects our business. Many of our telecommunication services division customers are subject to federal and state regulations applicable to the telecommunications industry. Changes in these regulations could cause our customers to alter or decrease the services they purchase from us.

        In addition, the payment processing industry in which our POS division operates may become subject to regulation as a result of recent data security breaches that have exposed consumer data to potential fraud. To the extent this occurs, our POS division customers could impose on us additional technical, contractual or other requirements as a condition to continuing to do business with them. These requirements could cause us to incur additional costs, which could be significant, or to lose revenues to the extent we do not comply with these requirements.

        We cannot predict when, or upon what terms and conditions, further regulation or deregulation might occur or the effect future regulation or deregulation may have on our business. Our operating costs may be increased because our service providers and several services that we offer may be indirectly affected by federal and state regulations. In addition, future services we may provide could become subject to direct regulation.

We face risks related to securities litigation that could have a material adverse effect on our business, financial position and results of operations.

        In the past we have been named as a defendant in a securities class action lawsuit. We are generally obliged, to the extent permitted by law, to indemnify our current and former directors and officers who are named as defendants in lawsuits. Defending against existing and potential securities litigation may divert financial and management resources that would otherwise be used to benefit our operations. Regardless of the outcome, securities litigation can result in significant legal expenses. A materially adverse resolution of a securities lawsuit could have a material adverse affect on our business, financial position and results of operations.

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Due to uncertainties associated with the future performance of acquired businesses and assets, we may not realize the full fair value of associated intangible assets and goodwill. Our financial results may be adversely affected if we have to write-off a material portion of our intangible assets or goodwill.

        As a result of our acquisitions, a significant portion of our total assets consists of intangible assets including goodwill. Goodwill and intangible assets, net of amortization, together accounted for approximately 53% of the total assets on our balance sheet as of December 31, 2010. We may not realize the full fair value of our intangible assets and goodwill. We also expect to engage in additional acquisitions, which may result in our recognition of additional intangible assets and goodwill. Under current accounting standards, we are able to amortize certain intangible assets over the useful life of the asset, while goodwill is not amortized. We evaluate on a regular basis whether all or a portion of our goodwill intangible assets may be impaired. Under current accounting rules, any determination that impairment has occurred would require us to write-off the impaired portion of goodwill and such intangible assets, resulting in a charge to our earnings. Such a write-off could adversely affect our financial condition and results of operations.

The current national and world-wide financial crisis could adversely affect our operating results and stock price in a material manner.

        General world-wide economic conditions have resulted in slower economic activity, concerns about inflation and deflation, volatility in energy costs, decreased consumer confidence, reduced corporate capital spending, adverse business conditions and liquidity concerns in the wireless communications markets. These conditions make it difficult for our customers, our vendors and us to accurately forecast and plan future business activities, and they could cause U.S. and foreign businesses to slow spending on our services. Furthermore, during challenging economic times, our customers may face issues gaining timely access to sufficient credit, which could impair their ability to make timely payments to us. If that were to occur, we may be required to increase our allowance for doubtful accounts and our accounts receivable outstanding would be negatively impacted. And any future downturn may reduce our revenue or our percentage of revenue growth on a quarter-to-quarter basis. We cannot predict the timing, strength or duration of any economic slowdown or subsequent economic recovery, world-wide, or in the telecommunications industry or the wireless communications markets. If the economy or the markets in which we operate do not improve from their current condition or if they deteriorate, our customers or potential customers could continue to reduce or further delay their use of our services, which would adversely impact our revenues and ultimately our profitability. In addition, we may record additional charges related to the restructuring of our business and the impairment of our goodwill and other long-lived assets, and our business, financial condition and results of operations will likely be materially and adversely affected.

Item 1B.    Unresolved Staff Comments

        None.

Item 2.    Properties

        Our principal executive offices are located in Reston, Virginia and consist of approximately 46,157 square feet of office space under a lease expiring in February 2013. Our primary network control center is also located in Reston, Virginia and consists of approximately 44,500 square feet of separate office

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space under a lease expiring in June 2013. In addition, we lease the following additional principal facilities:

        We also lease and occupy regional sales offices in various cities. We house our remote network switching equipment in facilities owned and maintained by some of our digital telecommunications circuit providers and also in leased telecommunications point-of-presence facilities located in various cities. These leases total approximately 48,088 square feet and expire on dates ranging from April 2011 to June 2018. We believe that our existing facilities are adequate to meet current requirements and that suitable additional space will be available as needed to accommodate the expansion of our operations and development.

        In addition, we also own approximately 67,500 square feet of office space in Lacey, Washington, which is being used for Operations and Development. This property was acquired through our acquisition of the Communication Services Group from VeriSign, Inc. on May 1, 2009.

Item 3.    Legal Proceedings

        We are from time to time a party to other legal proceedings, which arise in the normal course of business. We are not currently involved in any material litigation the outcome of which could, in management's judgment based on information currently available, have a material adverse effect on our results of operations or financial condition. Management is not aware of any material litigation threatened against us.

Item 4.    [Removed and Reserved]

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PART II

Item 5.    Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

        Our common stock trades on The New York Stock Exchange ("NYSE") under the symbol "TNS". The following tables reflect the range of high and low sale prices for the period indicated as reported by the NYSE.

        As of March 11, 2011, there were 37 stockholders of record of our common stock, excluding shares held in street name by various brokerage firms. We estimate that there are approximately 3,000 beneficial owners of our common stock.

        We do not anticipate paying any regular cash dividends in the foreseeable future. Under our senior secured credit agreement, we are subject to restrictions on paying dividends.

        During the period covered by this report, we did not sell any equity securities without registration under the Securities Act.

Issuer Purchases of Equity Securities

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Item 6.    Selected Consolidated Financial Data

        The following selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes included elsewhere in this report. The consolidated statement of operations data for the years ended December 31, 2008, 2009 and 2010, and the consolidated balance sheet data as of December 31, 2009 and 2010, are derived from our consolidated financial statements, which are included elsewhere in this report. The consolidated statement of operations data for the years ended December 31, 2006 and 2007, and the balance sheet data as of December 31, 2006, 2007, and 2008 are derived from our consolidated financial statements, which are not included in this report.

        The historical results are not necessarily indicative of the results to be expected for any future period.

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Selected Consolidated Financial Data
(In thousands, except per share and transaction data)

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

Executive Overview

Financial Highlights

        Total revenues increased $52.3 million, or 11.0%, to $527.1 million for the year ended December 31, 2010, from $474.8 million for the year ended December 31, 2009. Foreign exchange translation increased revenues by $1.2 million. Excluding the positive effect of foreign exchange rates, total revenues increased $51.1 million, or 10.8%, to $525.9 million for the year ended December 31, 2010.

        Revenues from the payments division increased $3.4 million, or 1.7%, to $200.2 million for the year ended December 31, 2010, from $196.8 million for the year ended December 31, 2009. The positive effect of foreign exchange translation on a year-over-year basis was $0.8 million. Excluding the positive effect of foreign exchange rates, payments revenue increased $2.6 million, or 1.3%, to $199.4 million for the year ended December 31, 2010. The growth in our payments division was driven primarily by gains outside of North America in our key international markets of the UK, Australia, France, Italy and Spain. In the UK and Australia the primary driver of growth were our IP-based network services and our payment gateway products. The primary drivers of growth in France, Italy and Spain were gains in market share of dial-up network services and growth in IP-based network services. During the fourth quarter of 2009 and the first quarter of 2010 we made decisions to focus our product portfolio and as a result we discontinued selling our ATM processing software product, Sonic, and our UK terminal logistics service. Revenues from these products were $0.4 million for the year ended December 31, 2010 compared to $4.1 million for the same period in 2009.

        In 2010 we continued to face challenges in the majority of our markets, in particular the U.S., Australia and Spain, with respect to our existing customers that utilize our dial-up network service. Our dial-up network customers are primarily the merchant processors, however the end users of the service are typically small merchants. During the course of 2009 and the first half of 2010 we saw reductions in the number of dial-up terminals accessing our network, which resulted in a reduction in the total number of dial-up transactions we delivered to our existing merchant processor customers from small merchants. We attribute these reductions primarily to the impact that the global recession has had on small merchants. During the second half of 2010, we saw the number of dial-up terminals accessing our network from existing customers stabilize in most of our markets. In the U.S., we have seen recent increased competition for our dial-up network services and as a result we are anticipating our revenue per transaction will decrease and, depending on the number of dial-up transactions we transport, our dial-up revenues may continue to decrease. We currently estimate the impact of these pricing concessions to reduce our U.S. dial-up revenues by $4 million to $5 million in 2011. As part of our strategy to accelerate growth in this division, we have made selected investments in our IP-based network services as well as our payment gateway offerings and plan to introduce these product sets across all of our key markets over time. For example, in the second half of 2010 we introduced our card-not-present payment gateway into the North American market and plan to introduce this offering in Europe in the second half of 2011.

        Revenues from the telecommunication services division increased $48.0 million, or 22.5% to $260.7 million for the year ended December 31, 2010, from $212.7 million for the year ended December 31, 2009. Revenue growth in this division was primarily driven by the contribution of revenues from the CSG acquisition which we acquired on May 1, 2009 and more recently from the Cequint, Inc. acquisition we acquired on October 1, 2010 (see Note 3 to the consolidated financial statements included elsewhere in this Annual Report). In connection with the CSG acquisition, we acquired several customer contracts that contained pricing that was well above current market prices. We successfully re-negotiated these contracts to current market rates during the second half of 2009 and through the first quarter of 2010. In addition, through the acquisition we acquired certain assets

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that enabled us to compete directly for caller-id services rather than using a third party service provider. As a result, the third-party provider with whom we contracted to deliver caller-id services to our customers prior to the CSG acquisition began to remove its traffic from our network during the first quarter of 2009 completing the migration by the end of the first quarter of 2010. We also subsequently lost a customer to this provider in May 2010. Finally, we acquired a contract through the CSG acquisition to provide services to Alltell which, prior to our acquisition of CSG in May 2009, had been acquired by Verizon in January 2009. Verizon completed the migration of the services we provided Alltell off of our network by the end of the first quarter of 2010.

        As a result of the above mentioned factors, the revenues that we reported in our telecommunications services division decreased from the third quarter of 2009 through the second quarter of 2010 (see table below). We believe we have taken the appropriate actions to stabilize the revenues in this division and have made and will continue to make selected investments in our wireless roaming and clearing platform, IP registry platform, identity and verification services and next-generation IP network services that we believe will help drive future revenue growth in this division. In addition, by the end of 2010 we substantially completed the integration of the legacy CSG network into the TSD network and stabilized and enhanced the roaming and clearing and IP registry platforms that we acquired through the CSG acquisition. As part of our strategy to develop solutions that drive revenue for our telecommunications carrier customers, we closed the Cequint, Inc. acquisition on October 1, 2010 and will integrate this business into our telecommunications services division. Cequint provides carrier—grade caller ID products and enhanced services in partnership with top U.S.-based mobile operators through an embedded software client on certain mobile phone handsets. Cequint will leverage the caller-id capabilities that we provide to wireline operators through our identity and verification services. The table below shows the revenue we recognized in our telecommunications services division from the third quarter of 2009 (the first full quarter of the inclusion of CSG's results) through the fourth quarter of 2010 (in thousands):

        Revenues from the financial services division increased $1.0 million, or 1.5%, to $66.2 million for the year ended December 31, 2010, from $65.2 million for the year ended December 31, 2009. Foreign exchange translation increased revenues by $0.4 million for the year ended December 31, 2010. Excluding the positive effect of foreign exchange rates, financial services revenue increased $0.6 million, to $65.8 million as of December 31, 2010. Coming into 2010, we were facing challenges in our North American financial services business following the economic downturn in the financial services industry in late 2008 and throughout 2009 which resulted in consolidation among our existing customer base as well as a reduction in the number of market participants (e.g. hedge funds) that utilize our secure trading extranet. In addition, due to changes in the competitive environment for providing low-latency market data exchange services in North America we have experienced significant declines for this service offering. These factors resulted in revenue declines of $6.7 million in North America. As of the end of 2010, we believe we have seen the majority of the consolidation in the financial services industry that has negatively impacted our business. These decreases were more than offset by the increases in revenue from new customer endpoints and to a lesser extent from the introduction of bandwidth based services to our new and existing customers. Revenues increased $4.6 million in North America (not including the $6.7 million in decreases mentioned above), $1.4 million in Europe and $1.3 million in

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Asia Pacific. Revenue increased in North America primarily through growth in endpoints and bandwidth based services to participants in the foreign exchange markets. Revenue growth in Europe was primarily driven by market share gains and the introduction of our bandwidth based services. Revenue growth in Asia Pacific was primarily driven by our expansion efforts to capture the growth opportunities in this region for electronic trading.

        Net income increased $10.6 million to $8.5 million for the year ended December 31, 2010 from a net loss of $2.1 million for the same period in 2009. Diluted earnings per share was $0.32 for the year ended December 31, 2010 compared to a net loss per diluted share of ($0.08) for the same period in 2009. Adjusted net income (a non-GAAP measure) increased $2.8 million, or 5.2%, to $57.2 million for the year ended December 31, 2010 compared to $54.4 million for the same period in 2009. Adjusted net income per share was $2.15 per share for the year ended December 31, 2010 compared to $2.10 per share for the same period in 2009. EBITDA before stock compensation expense (a non-GAAP measure) increased $13.2 million, or 10.6%, to $137.1 million for the year ended December 31, 2010 from $123.9 million for the same period in 2009.

        Adjusted net income and related per share amounts, EBITDA before stock compensation expense and revenue comparisons at constant exchange rates are not measures prepared in accordance with U.S. GAAP. See Additional Information for an explanation of management's use of these non-GAAP measures. The following is a reconciliation of our results of operations prepared in accordance with U.S. GAAP to those adjusted results considered by management:

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(1)

International services division