Alaska Communications Systems Reports Second Quarter 2011 Results

Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ: ALSK) today reported financial results for its second quarter ended June 30, 2011.

“Alaska Communications second quarter results reflect progress in our initiatives to stabilize our wireless business. With sales and retention efforts showing results during the quarter, we also launched tiered data plans repositioning our postpaid offering, and completely refreshed our prepaid plans. With our announcement to build a 4G LTE wireless network in Alaska, we build on our track record of providing advanced and differentiated wireless service for Alaskans,” said Anand Vadapalli, ACS president and chief executive officer.

“We remain focused on driving top line growth for our Enterprise business and our results reflect year over year growth of seven percent for the quarter. We are pleased with our sales performance for the first half of the year, which will contribute to continued growth in this line of business through the remainder of the year. We continue to see good traction in our sales funnel reflecting the value and competitive positioning of our Connect/Host/Manage® model,” noted Vadapalli.

“Our operating performance reflects strength from diverse revenue streams and strong cash flows – all reflecting a customer-focused and execution oriented organization,” concluded Vadapalli.

Financial Highlights: Second Quarter 2011 Compared to Second Quarter 2010

• Revenues of $84.9 million increased by $0.4 million, or 0.5 percent, from $84.5 million in the prior year:
  • Wireless revenue increased by $1.7 million, or 4.9 percent. Declines in service revenue of $1.1 million and equipment revenue of $0.5 million were offset by $3.3 million in higher wholesale, roaming and other revenue.
  • Enterprise revenue increased by $0.8 million, or 6.9 percent, with higher data revenue driving growth.
  • Retail, wholesale and access wireline revenues declined by $2.1 million, or 5.6 percent, with growth in Internet products partially offsetting continued revenue declines caused by erosion in the traditional wireline business.
• EBITDA of $30.7 million decreased by $0.8 million, or 2.7 percent, from $31.5 million in the prior year.
  • Wireless EBITDA was $16.2 million in the second quarter. Equipment subsidies impacted EBITDA by $1.7 million compared to the prior year.
  • Wireline EBITDA declined by $0.8 million, or 5.3 percent, to $14.5 million. Lower access revenue of $1.4 million was significantly offset by a non-recurring favorable settlement of a previous contact dispute.

• Net loss of $3.7 million, or $0.08 per share, compared to net loss of $27.7 million, or $0.62 per share in the prior year. Prior year losses were impacted by a non-cash charge to income tax expense of $29.7 million.

Metric Highlights: Second Quarter 2011 Compared to First Quarter 2011

• Wireless subscribers increased by 436 to 116,679, representing the first quarterly growth since third quarter 2008 and average monthly retail service revenue per subscriber increased by 1.4 percent to $53.39.
• Postpaid wireless data ARPU increased by 8.8 percent to $16.08.
• Wireless subscriber churn of 2.1 percent improved from 2.7 percent.
• Internet subscribers decreased by 451 to 49,276 and ARPU increased by 3.2 percent to $44.16.
• Retail access lines declined by 1,933 to 152,553 and ARPU increased by 1.0 percent to $18.24.

“We continue to be pleased with the cash flow generated by our business and our disciplined approach that generates attractive dividend yields for our shareholders. With the closing of our convertible note offering in the quarter, we extended the maturity for over 95 percent of our outstanding long-term debt until 2016. Cash balances now exceed $20 million, giving us headroom to fund the recently announced 4G LTE wireless network initiatives,” said Wayne Graham, ACS chief financial officer.

2011 Business Outlook

As previously reported, ACS confirms its guidance for the year:

• Revenues will modestly exceed 2010 levels of $342 million;
• EBITDA will be in line with 2010 levels of $126 million; and
• Maintenance Capital expenditures to be in line with 2010, at approximately $37 million.

Adjusting guidance in two categories:

• In conjunction with our convertible note offering our previous guidance for interest expense increases from $33 million to $34 million; and
• With the announcement of our statewide 4G LTE build, our growth capital guidance for the year increases from $12 million to $15 - $20 million.

Conference Call

The company will host a conference call and live webcast today at 5:00 p.m. Eastern Time. Parties in the United States and Canada can call 877-941-0844 to access the conference call. Parties outside the United States and Canada can access the call at 480-629-9645. The live webcast of the conference call will be 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 two hours after the call and will run until Thursday, August 4, 2011 at midnight ET. To hear the replay, parties in the United States and Canada can call 800-406-7325 and enter pass code 4456030. Parties outside the United States and Canada can call 303-590-3030 and enter pass code 4456030.

About Alaska Communications

Headquartered in Anchorage, Alaska Communications Systems Group, Inc. (Nasdaq: ALSK), through its subsidiaries, provides Alaska Communications services and is a leading provider of high-speed wireless, mobile broadband, Internet, local, long-distance and advanced data solutions for businesses and consumers in Alaska and the Pacific Northwest. The Alaska Communications network includes the most advanced wireline and wireless data and voice networks and the most diverse undersea fiber optic system connecting Alaska to the contiguous United States. For more information, visit www.alaskacommunications.com or 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, 2011. 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 2011 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, adverse national economic conditions, adverse conditions in the credit markets impacting the cost, including interest rates, and/or availability of financing, adverse local economic conditions, including an unexpected downturn in the Alaskan oil and gas or tourism markets, changes in capital expenditures, the effects of competition in our markets, the entry of one or more additional facilities-based carriers into the Alaska market, or other factors affecting the company's ability to generate sufficient earnings and cash flows to continue to make dividend payments to its stockholders; the company’s ability to complete, manage, integrate, market, maintain, and attract sufficient customers to the products and services it may derive, adverse changes in labor matters, including workforce levels, labor negotiations, and benefits costs; disruption of our suppliers' provisioning of critical products or services; the impact of natural or man-made disasters; changes in company's relationships with large carrier or enterprise customers or its roaming partners; changes in revenue from universal service funds; unforeseen changes in public policies; changes in accounting policies, including the company’s application of regulatory accounting rules, which could result in an impact on earnings; or disruptive technological developments in the telecommunications industry. 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.