ALSK

Alaska Communications Systems Group, Inc. (ALSK)

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Alaska Communications Systems Group Inc. (ALSK)

Q2 2013 Earnings Call

August 1, 2013 5:00 PM ET

Executives

Leonard Steinberg – General Counsel

Anand Vadapalli – President and CEO

Wayne Graham – CFO

Analysts

Frank Louthan – Raymond James

Julia Senior – Bank of America Merrill Lynch

Barry Sine – Drexel Hamilton

Presentation

Operator

Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the Alaska Communications Systems Second 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).

I would now like to turn the conference over to Leonard Steinberg, General Counsel. Please go ahead, Sir.

Leonard Steinberg

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

During this call, we’ll be using a slide deck that we would encourage everyone to have available. For those listening to this call via the webcast the presentation will be presented on your screen and we will move the pages as we talk. For others you can go to our investor site at www.alsk.com click on the events section go to the second quarter 2013 earnings call event and click on the PDF written presentation.

As we go through our prepared remarks we will indicate webpage we are on so that you can track the presentation material with our prepared remarks. In addition please note that Anand will refer to a CEO letter to investors that has also been posted on our investor website.

Now as we get started please review page 2 for our safe harbor statement. During this call, company participants will make forward-looking statements as defined under U.S. securities 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 the actual results could differ materially from expectations as a result of a variety of factors, many of which are outside the Company’s control.

Additionally any non-GAAP measurements referred to during this call have been reconciled to their nearest GAAP measure. You can find these reconciliations in today’s press release. Following our remarks, we will open up the lineup for questions.

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

Anand Vadapalli

Thank you, Leonard. And welcome to everyone joining us on the call today. Today we’ll share with you another quarter of solid results. Now that the Alaska wireless network transaction has closed, we will also provide a longer term view of our business. Please turn to page 4, where I’ll begin by providing some highlights for the quarter.

Our results for the quarter were stellar. I’m particularly pleased that our broadband revenue has experienced nearly 21% year-over-year growth not only that we experienced top-line performance we also have now reduced our debt by $95 million for this year. While $65 million in debt reductions came from closing AWN, the remaining $30 million in debt reduction was accomplished through cash from operations. We are almost to our goal of paying down a $100 million for the year and fully expect to meet this stated objective.

Looking ahead at the rest of 2013, we see us maintaining good momentum in our business performance. We recently commenced work on expanding our broadband capabilities by upgrading parts of our access network with fiber-to-the-node program.

In 2013, this investment is focused on business customers and anchorage, combined with an expansion of our product capabilities we see this as an important element of future growth. So far this year we are pleased with the take rate of our voice-over-internet product launched for business customers earlier this year.

We have a new Ethernet product updates along with new capabilities on our customer portal for our business customers. Our sales funnel is strong, our sales teams are performing well and we see our momentum continuing in broadband growth.

We are supporting our investment in growth with a program to eliminate waste and simplify our business. We had adopting LEAN as a framework to drive service improvements to our customers and grow EBITDA while we grow the top-line.

Turning to page 5, we also achieved a milestone accomplishment by closing the AWN transaction. As a reminder AWN is a wireless infrastructure company that owns and operates the most extensive and advanced wireless network in the State of Alaska. AWN began operations on July 23, 2013 and was formed by combining the wireless networks of Alaska Communications and GCI.

We entered into this transaction to the create economies of scale in a capital intensive business, create predictability of cash flows from our wireless operations and create a strong network in Alaska to better compete against national players.

While AWN operates the network, Alaska Communications and GCI operate independently as the retail entities selling wireless services in the market. On this note Verizon turned on its LTE network in May this year and we believe they are operating about 100 cell sites in urban markets in our state.

At this time, we understand that Verizon’s network is 4G data only and Verizon is not yet in the retail market. We expect that they will begin to change over the next few months, as Verizon introduces their sales efforts to supplement their network turn up.

Read the rest of this transcript for free on seekingalpha.com