Alaska Communications Systems Reports Fourth Quarter and Year-end 2007 Results

Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ:ALSK) today reported financial results for its fourth quarter and year ended December 31, 2007.

Liane Pelletier, ACS president and chief executive officer, stated, “Our 2007 performance represents the third consecutive year in which we exceeded revenue and EBITDA targets. Wireless revenue, now 36 percent of company revenues, benefited from revenue growth of 19 percent and lower churn. Wireline revenue also grew, at an overall rate of 6 percent, and 45 percent within the enterprise segment; this growth establishes an important track record and contributes meaningfully to our plans for long term value creation in the $200 million Alaska enterprise market.”

“For 2008, we will continue the company’s transformation and pursue compelling, high ROI and differentiated growth priorities. Our priorities are unambiguous: continue to grow a high quality wireless business by providing the best customer experience; continue to add the building blocks called for by enterprise customers; continue to capture enterprise revenues sufficient to cover the cash carry costs of our long haul fiber facility, the Alaska Oregon Network (AKORN), at launch date; and continue to leverage our resources through process improvement. These represent the most meaningful ways to accelerate shareholder value creation,” concluded Pelletier.

Financial Highlights: Fourth Quarter 2007 Compared to Fourth Quarter 2006

• Revenues were $99.1 million, a 7.9 percent increase over fourth quarter 2006 revenues of $91.9 million.
• EBITDA was $34.0 million, an increase of 7.9 percent, compared to $31.5 million for the year ago period.
• Operating income of $15.0 million was up 27.8 percent from $11.8 million in the prior year.
• Net cash provided by operating activities of $26.6 million was in line with the prior year performance of $26.7 million.
• The company posted net income of $120.4 million, or $2.71 per diluted share, compared to $4.2 million, or $0.10 per diluted share during the fourth quarter of 2006. Fourth quarter 2007 benefited from a one time net tax gain of $111.2 million.

David Wilson, ACS senior vice president and chief financial officer, said, “Solid execution against our strategic plan continues to drive expansion in shareholder cash flow, with $104.9 million of cash generated from operating activities in 2007, up 14.3 percent over the prior year. Our operating performance in 2007 also benefited from higher than run rate wireline network access revenue which benefited from favorable carrier settlements and $6.5 million in regulatory agency settlements.”

“We remain comfortably positioned to fund our long haul fiber investment having closed the quarter with $36.0 million in unrestricted cash and short term investments, down only $0.9 million in a year where we invested $21.6 million in our growth capex program and delevered by $5.1 million; full access to our $45 million revolver; a net debt to EBITDA leverage ratio of only 2.9 times; and an expected dividend payout ratio, inclusive of $6.0M in estimated launch costs for AKORN, of less than 70 percent,” noted Wilson.

“Finally, the numbers reported today exceed revenue and EBITDA expectations of $380 million and $132 million, respectively, that we shared with markets on February 22nd. The increase is primarily attributable to a change in estimate following management’s review of assumptions used in our network access revenue reserving process which resulted in network access revenue increasing by $4.5 million, inclusive of a $3.1 million gain for the first three quarters of 2007,” concluded Wilson.

Metric Highlights: Fourth Quarter 2007 Compared to Third Quarter 2007

• Increased retail wireless subscribers by 2.1 percent, or 2,950, bringing the total to approximately 144,500.
• Average retail wireless monthly churn of 1.5 percent was down from 1.7 percent in the prior quarter.
• Recorded retail wireless ARPU of $64.20, a seasonally consistent shift from $64.43, inclusive of CETC revenue of $11.63 and $10.89.
• DSL lines increased by nearly 1,300 to approximately 47,500 with retail line penetration growing to 25.6 percent.
• Retail local access lines declined by 1.5 percent to 185,700.
• Recorded approximately 226,400 total local access lines. Total local access lines decreased by approximately 5,300 or 2.3 percent.

Annual Financial Review

For the twelve months ended December 31, 2007:

• Total revenues were $385.8 million, which represented a 10.6 percent increase over 2006 revenues of $348.7 million.
• Net income for 2007 was $144.1 million, or $3.26 per share (diluted), as compared to a net income of $13.3 million, or $0.31 per share, in 2006. Net income benefited from a one-time, non-cash, income tax benefit of $111.2 million arising from the release of the Company’s valuation reserve for its deferred tax asset;
• Net cash provided by operating activities for 2007 was $104.9 million as compared to $91.8 million in 2006.
• EBITDA for 2007 was $138.1 million, an increase of 14.0 percent from $121.2 million in 2006. 2007 performance benefited from network access revenue that management estimates was $10 million higher than long term trends and $0.7 million of out-of-period CETC revenue received in the first quarter.
• Investment in construction and capital investments, net of capitalized interest, totaled $60.9 million, comprising maintenance capital spend of $39.3 million; and investments in growth capital expenditures of $21.6 million.

2008 Business Outlook

For the full-year 2008, revenues are expected to be in the range of $385 million to $395 million and EBITDA is expected to be in the range of $130 million to $134 million, excluding $6 million in start-up costs related to our AKORN fiber investment and other building blocks designed to serve the enterprise market. For 2008, ACS expects maintenance capital expenditures of $42 million and $82 million in capital expenditures related to the fiber facility. ACS expects net cash interest to be approximately $30 million.

Pelletier noted, “Our 2008 outlook reflects expected growth in the wireless, data and enterprise segments, as well as specific investments in these areas to assure their long term success. 2008 builds on the transformation begun a few years ago; the company’s proven strategy and execution ability will serve us well as we both manage the current business and build a new high ROI growth engine to deliver shareholder value.”

Restatement of Financial Results

The financial results presented in this release for the periods ended December 31, 2006 have been restated. For detailed information about the restatement, please refer to the company's Annual Report on Form 10-K, which the company expects to file on or before March 21, 2008.

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 800-366-7449 to access the conference call. Parties outside the United States and Canada can access the call at 303-262-2191. 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 2 hours after the call and will run until Wednesday, March 19 2008 at midnight ET. To hear the replay, parties in the United States and Canada can call 800-405-2236 and enter pass code 11110829. Parties outside the United States and Canada can call 303-590-3000 and enter pass code 11110829.

About Alaska Communications Systems

Headquartered in Anchorage, ACS is Alaska’s leading provider of broadband and other wireline and wireless solutions to Enterprise, Carrier and mass market customers. The ACS wireline operations include the state’s most advanced data networks and, to be launched in early 2009, the only diverse undersea fiber optic system connecting Alaska to the contiguous United States. The ACS wireless operations include the only statewide 3G CDMA network, reaching across Alaska from the North Slope to Ketchikan, with coverage extended via best-in-class CDMA carriers in the Lower 49 and Canada. By investing in the fastest-growing market segments and attracting the highest-quality customers, ACS seeks to drive top and bottom-line growth, while continually improving customer experience and cost structure through process improvement. 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, 2008. 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, the company’s ability to complete, manage, integrate, market, maintain, and attract sufficient customers to the products and services it may derive from the construction of the long-haul fiber facility; fluctuations in wireless revenue, including roaming revenue; changes in company's relationships with its roaming partners; increased competition, including from national wireless and local wireline facilities-based competitors; changes in revenue from Universal Service Funds; changes in capital expenditures, or other factors affecting the company's ability to generate sufficient earnings and cash flows to continue to make dividend payments to its stockholders; 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; 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.

Contacts:

Alaska Communications Systems
Corporate Communications:
Mary Gasperlin, 907-297-3000
Director, Corporate Communications
mary.gasperlin@acsalaska.com
or
Investors:
Investor Relations, 907-564-7556
investors@acsalaska.com