Alaska Communications Systems Reports Fourth Quarter and Year-End 2006 Results

Alaska Communications Systems Group, Inc. (“ACS”) (Nasdaq:ALSK) today reported financial results for its fourth quarter and year ended December 31, 2006.

Liane Pelletier, ACS president and chief executive officer, stated, “Once again we have proven that with continued focus on fundamentals, we can achieve superior results. 2006 closed with total financial performance above plan, with liquidity in the stock enhanced through the sale of all remaining private equity interests, with a stronger management team and with many operating components significantly enhanced through process improvement. Over the last two plus years, ACS has continued to exceed its revenue and EBITDA targets, and demonstrated the value of its asset mix. The ACS team concluded the year with annual revenue growth of 7.0 percent and annual EBITDA growth of 8.5 percent, driving continued expansion in cash flow per share.”

“A stable incumbent local telephone company has effectively transformed into a growing wireless-wireline company that is driving top line growth while managing costs. As a result, ACS is well positioned to take advantage of further growth opportunities in its market,” commented Pelletier.

“Consistent with the direction conveyed in the last quarter’s earnings release, ACS continues to evaluate certain Alaskan investment opportunities that will position the company for long term shareholder value enhancement. No further update is available as of today, but the Board and the executive team are focused on the evaluation and more will be reported as it is appropriate. In the meantime, the company is pleased to share a 2007 performance outlook that is consistent with what the organization has achieved over the past 3 years: continued growth in recurring revenue, EBITDA and distributable cash flow,” concluded Pelletier.

Financial Highlights: Fourth Quarter 2006 Compared to Fourth Quarter 2005

• Revenues were $91.7 million, representing an 11.2 percent increase.
• Operating income increased to $13.9 million compared to fourth quarter 2005 operating income of $4.7 million.
• The Company posted net income of $6.1 million, or $0.14 per share (diluted). The net loss for the fourth quarter 2005 was $4.9 million or $0.12 per share.
• Net cash provided by operations increased 9.0 percent to $26.5 million.
• EBITDA increased to $31.4 million, up 17.4 percent. EBITDA performance benefited from $2.4 million of out-of-period CETC receipts.

David Wilson, ACS senior vice president and chief financial officer, said, “The strength of our wireless offering continues to drive strong top and bottom line growth. Wireless revenue rose 38.7 percent to $32.7 million compared to $23.6 million a year ago. Our wireless subscribers grew 14 percent annually to 134,000; and ARPU grew by 5.8 percent annually to $60.01. Wireless performance also benefited from foreign roaming revenue of $3.2 million and the receipt of $2.4 million of out of period CETC revenue which helped expand wireless EBITDA margin to just under 50 percent in the quarter.”

“Strong organic top line growth coupled with stringent cost containment continues to drive cash flow expansion, with $90.7 million of cash generated from operating activities in 2006, up 61.1 percent over the prior year. We remain well positioned from a liquidity standpoint and exited the year with cash, restricted cash and investments of $38.6 million, down only $5.3 million in a year where we delevered by $9.0 million and invested $21.0 million in our pre-funded capex program,” added Wilson.

Metric Highlights: Fourth Quarter 2006 Compared to Third Quarter 2006

• Increased the total number of retail customer relationships across all product lines by approximately 7,100 to 446,400.
• Increased wireless subscribers by 3.4 percent, or approximately 4,400, bringing the total to almost 134,000.
• Recorded post-paid churn of 1.8 percent compared to 1.7 percent in the prior quarter. Overall average wireless monthly churn was 2.1 percent compared to 1.9 percent. As expected churn was impacted by the aggressive transition of subscribers from the TDMA to the CDMA network and by troop deployments.
• Recorded wireless ARPU of $60.01, a seasonally consistent shift from $60.77 in Q3, inclusive of CETC revenue of $9.85 and $9.82, respectively.
• Increased long distance subscribers by over 2,000 to approximately 64,000 customers.
• Retail local access lines declined by 0.6 percent to 195,000 while DSL lines increased 5.6 percent to over 44,000 lines. DSL line gains exceeded 2,300 while retail local access lines losses were only 1,200.
• Recorded approximately 252,700 total local network access lines. Total access lines decreased by approximately 6,500 or 2.5 percent.

Annual Financial Review

For the year ended December 31, 2006:

• Total revenues were $349.8 million, which represented a 7.0 percent increase over 2005 revenues of $326.8 million.
• Net income for 2006 was $20.0 million, or $0.46 per share (diluted), as compared to a net loss of $41.6 million, or $1.04 per share, in 2005;
• Net cash provided by operating activities for 2006 was $90.7 million as compared to $56.3 million in 2005.
• EBITDA for 2006 was $121.9 million, an increase of 8.5 percent from $112.4 million in 2005. 2006 performance benefited from:

• Investment in construction and capital investments totaled $59.4 million, comprising maintenance capital spend of $37.3 million; investments in pre-funded growth capital expenditures of $21.0 million; and $1.1 million of IRU capacity funded as part of a negotiated settlement.

2007 Business Outlook

For the full year 2007, revenues are expected to be in the range of $350 million to $360 million, and EBITDA is expected to be in the range of $118 million to $122 million. As noted above under the heading “Annual Financial Review,” 2006 EBITDA performance benefited from out of period CETC revenue, a significant vendor credit and network access revenue that was higher than long term trends.

For 2007 ACS expects net cash interest expense to be approximately $27 million and capital expenditures to be approximately $42 million, comprised of maintenance capital expenditures of approximately $37 million; and wireless capacity augmentation in the major tourist corridors of $5 million, funded by excess cash generated in 2006.

Conference Call

The company will host a conference call and live webcast today at 5:00 p.m. Eastern Time to discuss fourth quarter results. For parties in the United States and Canada, call 800-240-2430 to access the earnings call. International parties can access the call at 303-262-2137.

The live webcast of the conference call is accessible from the "Events Calendar" section of the company's website www.alsk.com. The webcast will be archived for a period of 90 days. A telephonic replay of the conference call will also be available 2 hours after the call and will run until Monday, February 26, 2007 at midnight ET. To hear the replay, parties in the United States and Canada should call 800-405-2236 and enter pass code 11083252. International parties should call 303-590-3000 and enter pass code 11083252.

About Alaska Communications Systems

ACS is the leading integrated communications provider in Alaska, offering local telephone service, wireless, long distance, data, and Internet services to business and residential customers throughout Alaska. More information can be found on the company's website at www.acsalaska.com or at its investor site at www.alsk.com.

Forward Looking EBITDA Guidance

This press release includes information related to management's estimate of EBITDA for the year ending December 31, 2007. EBITDA, as defined by the company, may not be similar to EBITDA measures used by other companies and is not a measurement under generally accepted accounting principles (GAAP). Management believes that EBITDA provides useful information to investors about the company's performance because it eliminates the effects of period-to-period changes in costs associated with capital investments, interest and stock-based compensation expense that are not directly attributable to the underlying performance of the company's business operations. Management believes the most directly comparable GAAP measure would be "Net cash provided by operating activities." Due to the difficulty in forecasting and quantifying the amounts that would be required to be included in this comparable GAAP measure, the company is not providing an estimate of year-end net cash provided by operating activities at this time.

Forward Looking Statements

This press release includes certain "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's beliefs as well as on a number of assumptions concerning future events made using information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside ACS' control. Such factors are, without limitation, fluctuations in wireless revenue, including roaming revenue; changes in the company's relationships with its roaming partners; increased competition, including wireline facilities-based competition; changes in capital expenditures, strategic investments, or other factors affecting the company's ability to generate sufficient earnings and cash flows to continue to make dividend payments to its stockholders; changes in revenue from Universal Service Funds; regulatory limitations on the company's ability to change its pricing or bundle its communications services or other public policy changes; the continued availability of financing necessary to support future business; changes in accounting policies or practices; changes in the demand for the company's products and services, retail and wholesale; rapid technological developments in the telecommunications industry; changes in interest rates or other general national, regional or local economic conditions, including changes in tourism in Alaska. For further information regarding risks and uncertainties associated with ACS' business, please refer to the company's SEC filings, including, but not limited to, the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K and quarterly reports on Form 10-Q. Copies of the company's SEC filings may be obtained by contacting its investor relations department at 907-564-7556 or by visiting its investor relations website at www.alsk.com.

All information in this release is as of February 22, 2007. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

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