ALSK

Alaska Communications Systems Group, Inc. (ALSK)

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Industry: Public Utilities
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Alaska Communications Systems Group Inc. (ALSK)

Q1 2013 Earnings Call

May 2, 2013 05:00 PM ET

Executives

Leonard Steinberg - SVP, Legal, Regulatory and Government Affairs

Anand Vadapalli - President and CEO

Wayne Graham - CFO

Analyst

Frank Louthan - Raymond James

Julia Senior - Bank of America Merrill Lynch

Presentation

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Alaska Communications Systems First Quarter 2013 Earnings Conference Call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be opened for questions. (Operator Instructions). This conference is being recorded today, May 2, 2013.

I would now like to turn the conference over to Leonard Steinberg. Please go ahead sir.

Leonard Steinberg

Good afternoon, and welcome to the Alaska Communications first quarter 2013 conference call. I am Leonard Steinberg, General Counsel, and with me today are Anand Vadapalli, President and Chief Executive Officer and Wayne Graham, Chief Financial Officer.

During this call, company participants will make forward-looking statements as defined under U.S. Security laws. 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 business 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. Important risk factors regarding our expected results, such as Verizon's entry into the Alaska market and FCC reforms have substantial disclosures in our most recent SEC filing.

Any non-GAAP measurements referred to during this call have been reconciled to their nearest GAAP measure. You may find these reconciliations in today's Press Release and our SEC filings on our investor website at www.alsk.com. Following our remarks, we will open the line for questions.

With that, I would like to turn the call over to Anand. Anand?

Anand Vadapalli

Thank you, Leonard, and welcome to everyone on the call today. We are off to a solid start this year and our numbers reflect that. Let me start with our wired line broadband business where we have had exceptional performance. Our growth in wired line broadband, both business and consumer is sector leading. I see our performance as continued validation of our business plan and we expect to demonstrate sustained momentum in these areas.

On the consumer side, our performance reflects the attention we are paying to this market segment. Our customers recognize that DSL provides a more consistent performance compared to cable modems. This combined with the fact that we have no data caps for wired line broadband creates a product that is doing well in our market. We also focus on retention and you see that in the reduction in our broadband churn.

There is not one silver bullet. We are selling into the network we have, doing quality marketing work and leveraging the talents of our people in sales, service delivery and support. On the business broadband side we have a much broader toolbox when we go to market. First we continue to lead in technology. We are now only the third carrier in the world to be certified compliant with carrier Ethernet 2.0 standards.

Next we lead an IT Infrastructure products from our partner TekMate. We also expanded our partnerships with both equipment manufacturers and specialized service providers. All these collectively offer our sales team many points of entry into a customer relationship and many points of growth in an existing relationship. In addition our marketing work is getting increasingly sophisticated, producing results in both sales and retention performance. We now have more sales people in the field while we are developing third party channels to help to drive momentum.

Looking ahead we see continued growth and opportunity in our core broadband product. We are investing in the sector that is performing for us by improving our in-state access network and last mile capabilities. We see a business case to programmatic investments to deploy new broadband nodes while upgrading many nodes with fiber to the node.

These investments are directed at business neighborhoods, while providing some limited benefits in residential neighborhoods that we will pass along the way. We will share more details on this program during upcoming calls.

Now moving on to wireless, where we improved from a weak Q4 performance, we are focused on maintaining ground while we drive strong growth in data ARPU. We know that when Verizon begins retail operations, we and others in the market will all loose some share to the new entrant. Additionally roaming and device access will remain challenges for us over the long term.

However we know we can profitably compete by focusing on selective niche market segments in our marketplace. The AWN transaction helps by expanding our coverage in Alaska, the extent of which would be unmatched by any national competitor. This is a good lead into an update on AWN, which is a main mechanism for providing predictability of cash flows from our wireless business.

We are making steady progress on all regulatory matters. While there are a few items still open with the FTC and the SEC, we are targeting closing the transaction in the second quarter. The ultimate date truly based on satisfaction of these remaining conditions to close. Closing AWN of course allows for an immediate and substantial debt reduction when we pay down $65 million of our term loan.

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