Alaska Communications Systems Group, Inc. (ALSK)

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Alaska Communications Systems Group Inc. (ALSK)

Q4 2008 Earnings Call

March 5, 2009 5:00 pm ET


David Wilson – Chief Financial Officer

Liane J. Pelletier – President, Chief Executive Officer & Chairman

Leonard A. Steinberg – General Counsel


[Steven Douglas] - Bank of America-Merrill Lynch

Frank Louthan - Raymond James

David Coleman - RBC Capital Markets

Christopher King - Stifel Nicolaus & Company, Inc.



Good afternoon ladies and gentlemen. Thank you for standing by. Welcome to the Alaska Communications Systems fourth quarter 2008 conference call. (Operator Instructions) This conference is being recorded today Thursday, March 5 of 2009.

At this time I’d like to turn the conference over to Mr. David Wilson, Chief Financial Officer. Please go ahead sir.

David Wilson

Thank you. Good afternoon and welcome to the Alaska Communications Systems fourth quarter and year end 2008 conference call. With me today are Liane Pelletier, President, CEO and Chairman of ACS and Leonard Steinberg, General Counsel.

During this call the company’s participants will make forward-looking statements as defined under U.S. Securities law. Forward-looking statements are statements that are not historical facts and may include financial projections, estimates of shareholder returns or other descriptions of the company’s plans, objectives, expectations or intentions. You are cautioned not to put undue reliance on forward-looking statements as actual results could differ materially from expectations as a result of a variety of factors, many of which are outside the company’s control. We discuss these factors in our SEC filings.

Lastly, any non-GAAP measure referred to during this call has been reconciled to the nearest GAAP measure. You may find these reconciliations today’s press release, in our SEC filings on our Investor website at

We will begin with Liane discussing our enterprise and wireless business. Then I will review the details of our operating and financial performance. Liane will then open the call for questions. With that I’d like to turn the call over to Liane. Liane.

Liane J. Pelletier

Thank you David. Welcome and thank you all for participating today. We’ve closed 2008 with revenues and EBITDA meeting guidance that we shared at this time last year and we closed the year with the expected shifts in the business taking a firm hold.

Enterprise and wireless comprised 46% of total revenues, showing that the ACS transformation is well underway. The transformation positions ACS with differentiated solutions in the higher demand and higher quality segments in the telecom space. With many enterprise assets established, ACS can present a competitive alternative to the sophisticated buyers who need in-state and out-of-state data network solutions.

In the enterprise segment we reached several key milestones since our last call; successful testing of the AKORN cable which will be ready for turn up by the end of this month; capacity upgrade of the Crest Northstar cable to OC-192 increments that means these two fibers can be operated as a [ring] providing the most reliable transport to and from Alaska; integration of the Crest operation into ACS; development of the second Anchorage to Fairbanks fiber; and booked revenues sufficient to cover the cash carry cost of AKORN and Northstar.

Further in this quarter and not yet reflected in enterprise revenues are new contracts from two lower 48 carriers that wanted [node] in Alaska to connect their national accounts MPLS networks to the same technology in Alaska.

In the wireless segment a major goal is to drive data revenues. On that front our progress is good. The Blackberry launch has been well received by the market and our existing customer base. Existing customers are upgrading at a very healthy rate and that brings a meaningful ARPU lift for us. Laptop aircards were again close to 20% of total activations. And texting devices like the LG 260 and the Kyocera Lingo loved by teens were among the most popular sales in the quarter.

These together contributed to a 22% sequential gain in data ARPU, $6.10 at the end of the year.

While we enjoyed [concernible] success in driving data adoption and revenues, a dip in retail demand hit us starting in November. So while we had an improvement in churn in Q4 versus Q3, we ultimately saw a decline of about 700 subscribers. Lower churn was not able to mitigate the slowdown in gross adds.

And our experience so far this year followed some of the same things, but with more non-pay as a reason for disconnection. And this of course is a result of the softening economy. So metrics are softer than we would like but we are focused on making the most of good quality growth and our plans are going to keep us on that course. We are relentless about defending our network quality as measured by independent drive tests, and we continue to allocate a significant portion of our CapEx to extend and enhance our 3d EVDO Rev A footprint which will support the growth of mobile data on the ACS network.

The pursuit of high quality growth and revenue has been a hallmark for the ACS team over the last five years. Our pursuit of process improvement and cost containment has also been a hallmark. By persistently adhering to these strategies, we’ve grown revenues each year while reducing headcount.

In the most recent quarter as the latest example, we gained meaningful operating leverage by absorbing 14 employees associated with the Crest operation while also reducing overall headcount by 20.

I’ll now ask David to present fourth quarter operating and financial results, as well as review our liquidity position. David.

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