ALSK

Alaska Communications Systems Group, Inc. (ALSK)

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

Q4 2013 Results Earnings Conference Call

March 6, 2014 5:00 PM ET

Executives

Leonard Steinberg - General Counsel

Anand Vadapalli - President and CEO

Wayne Graham - Chief Financial Officer

Laurie Butcher - Vice President, Finance

Analysts

Barry Sine - Drexel Hamilton

Frank Louthan - Raymond James

David Barden - Bank of America Merrill Lynch

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Alaska Communications Systems Fourth Quarter and Full Year 2013 Earnings Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator Instructions)

This conference is being recorded today, March 6, 2014. I would now like to turn the conference over to Leonard Steinberg. Please go ahead.

Leonard Steinberg

Good afternoon. And welcome to the Alaska Communications fourth quarter 2013 conference call. I am Leonard Steinberg, General Counsel and with me today are Anand Vadapalli, President and Chief Executive Officer; Wayne Graham, Chief Financial Officer; and Laurie Butcher, Vice President of Finance.

During this call, we’ll be using a slide deck that we’d encourage everyone to have available. For those listening to this call via the webcast, the presentation will be presented on your screen and will move to pages as we talk.

For others you can go to our Investor website www.alsk.com, click on the Events section, go to the Fourth Quarter 2013 Earnings Call Event and click on the PDF version of the presentation.

As we go through our prepared remarks, we will indicate what page we are on so you can track the presentation material. Now as we get started, please review page three for our Safe Harbor statement.

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 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 the line up for questions.

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

Anand Vadapalli

Thank you, Leonard. Good afternoon and thank you for joining us today. I'm pleased to report to you strong performance during an important year for the company. On page five of the deck, we begin with a reminder of how we create value. First, are we growing broadband revenues, second, are we growing EBITDA, and third, are we reducing debt.

We believe that as long as we are consistently answering all three questions affirmatively, we are creating strong shareholder value. For two years in a row now, we clearly answered two of the three questions. We are growing revenues and we are reducing debt. With the AWN transaction closing in 2013, 2014 now becomes the baseline year from which to measure long-term EBITDA growth.

Turning to page six, we delivered on the overall financial results for the year with several important accomplishments in 2013. One, closing the AWN transaction was an important milestone. The transaction contributed $65 million to the $106 million in debt reductions for the year. Additionally, the transaction provides us a predictable stream of cash flows for our wireless business.

Two, we are very pleased with our continued broadband growth, driven by various investments we have made in sales, service, product and network. Our customers want our products and our results show it.

Third, our focus has been and remained the high margin business segment. We have grown well in this area and see continued opportunity for solid performance through 2014 and beyond.

Fourth, we recently announced the acquisition of our remaining ownership interest in TekMate. TekMate is a leading IT services firm in Alaska and we look to extend TekMate’s capabilities to increase our portfolio of managed services for our business customers.

Fifth, we launched an ongoing program to invest in our Access Network. This program will meet the growing bandwidth needs of our customers. It will also deliver improved operating efficiencies from modern network architecture.

Last but not least, we started taking the steps necessary to align our overall cost structures to fit the post-AWN operating model for our business. A few examples of actions already taken include reducing our overall workforce by about 5% in December and certain choices we made about our go-forward spend on consumer marketing and promotional activities.

In 2014, we expect to further realign wireless cost structures to fit our expectations and plans for subscriber metric, while we manage our cost structures related to the consumer significant products. These hard but necessary choices will allow continued investment in our focus area of business broadband.

Turning to page seven, I’d like to talk more about our performance in broadband. We achieved double-digit growth in broadband revenues through the year, with 19% year-over-year growth in business and 15% year-over-year growth in consumer. Sequential growth is also strong, a great indicator as we head into 2014. These results validate the market opportunity and we are taking market share.

Turning to page eight, serving our business customers is our highest priority. We have added experience sales and managed services leadership in this area to further accelerate our capabilities and growth.

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