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ACS focuses growth strategy on business broadband, services [Alaska Journal of Commerce, Anchorage :: ]
[August 17, 2014]

ACS focuses growth strategy on business broadband, services [Alaska Journal of Commerce, Anchorage :: ]

(Alaska Journal of Commerce (Anchorage) Via Acquire Media NewsEdge) Aug. 13--Alaska Communications Systems Group Inc. saw a decrease in revenue for the second quarter of 2014, while growing some segments of its business.

Revenue for the second quarter of 2014 were $80.5 million, down from $97.7 million in the second quarter of 2013.

Alaska Communications stock closed at $1.76 Aug. 11, less than the $3.79 it was going for on Aug. 12, 2013, and lower than the 52-week high of $3.86.

This is the second quarter in a row of decreased revenue -- during the first quarter of 2014, revenue was down $12.7 million year-over-year, which the company attributed largely to changes from the new Alaska Wireless Network.

ACS and General Communication Inc., or GCI, merged their infrastructure into the Alaska Wireless Network, or AWN, in July 2013, although they still sell separate retail products. The merger has continued to affect the two companies' bottom lines.

GCI owns two-thirds of the company and Alaska Communications owns one-third.

CEO Anand Vadapalli said the company remains focused on creating value by growing broadband revenue and EBITDA and reducing debt, and is successful in all three of those areas.

Vadapalli discussed the company's second quarter results during an Aug. 7 investor call. The quarterly results were announced Aug. 6.

"Overall, we are doing well against our operating plan for the year, and leading the industry in growth," Vadapalli said, referring to broadband.

Business broadband revenue was $11 million for second quarter 2014, about an 11 percent increase compared to the second quarter of 2013. Total business and wholesale revenue also increased, at $27.7 million for the second quarter of 2014, up about 9 percent compared to the second quarter of 2013.

Business broadband connections increased from 19,104 to 19,618 year-over-year.

On the consumer side, total revenue for the quarter was $10.4 million, about a 1 percent increase compared to the second quarter of 2013. Consumer broadband revenue was $6.2 million, about an 11 percent increase compared to the second quarter of 2013.

Consumer broadband connections decreased compared to the prior quarter, with about 39,022 connections as of June 30 this year, compared to 39,468 as of March 31, although they increased year-over-year from 37,611 at the end of second quarter 2013.

CFO Wayne Graham said the change in consumer connections was related to a change in available products.

As it did in the prior quarter, Alaska Communications' net income also decreased. Second quarter 2014 net income was about $1 million, less than the $37.6 million in net income the company reported for the second quarter of 2013. However, it was an improvement from the first quarter of 2014, when net income was a loss of $385,000.

Vadapalli said the company landed multiple contracts during the second quarter that will boost future performance. One was a multi-year contract with a large national carrier to build strategic fiber facilities for a federal customer; that was based on technical superiority and relationships, not on providing the lowest price, he noted.

Alaska Communications also extended a relationship with an Alaska-based financial institution to provide connectivity between its Alaska and Lower 48 data center operations, Vadapalli said. And, the company extended its relationship to provide networks to a rural health care provider, he said.

Vadapalli said the company would look toward the business sector, particularly managed services and its TekMate subsidiary, for future growth. For the second quarter of 2014, Graham said TekMate contributed $900,000 to the company's revenue.

Vadapalli also reaffirmed the company's 2014 performance guidance, although he noted that capital spending would likely by $40 to $45 million instead of $40 million as a result of the fiber project. The payments for that will cover the additional costs, however, he noted, so there will be no impact to free cash flow from the expense.

The other guidance called for revenue of $310 million for the year, an adjusted EBITDA of $90 million and free cash flow of $20 million.

ACS is also continuing its work paying down debt.

Graham said the company has made $17.3 million in debt payments so far this year, with net debt at $411.2 million, down from a high of more than $650 million before the AWN merger with GCI.

In response to an investor question, Graham said the company would also look at possible refinancing when term loans are due in 2016; good debt markets and strong company performance would likely help that, he said.

Molly Dischner can be reached at

___ (c)2014 the Alaska Journal of Commerce (Anchorage, Alaska) Visit the Alaska Journal of Commerce (Anchorage, Alaska) at Distributed by MCT Information Services

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