Net income soars for Alaska Communications after merger
Although Alaska Communications reported a decline in revenue from $367.8 million in 2012 to $348.9 million in 2013, net income for the third and fourth quarters was $41.3 million compared to $17 million the prior year.
The third and fourth quarters represent the portion of 2013 during which the company was part of the new Alaska Wireless Network, or AWN, which began operations last July 23.
ACS discussed its 2013 fourth quarter and full year results during a March 6 investor call. General Communication Inc. and Alaska Communications combined their infrastructure into the Alaska Wireless Network in a deal that received final approval July 22, 2013. The two companies continue to sell separate retail products, however.
Alaska Communications reported a $15.7 million decrease in fourth quarter revenue compared to the prior year, which the company attributed to the AWN transition.
But overall, President and CEO Anand Vadapalli said the company’s performance for the year was strong.
The transaction made comparability of some metrics difficult, Vadapalli said. Other items made it hard to compare the 2012 results such as a major equipment sale and a transaction with another carrier, each valued at $1.5 million.
Alaska Communications will work to align its cost-structure to meet its post-AWN needs, according to Vadapalli, meaning that some reduction in its workforce will occur.
Chief Financial Officer Wayne Graham said that the company will also work to find savings by adjusting incentive compensation, altering promotional activity and managing costs beyond just employee compensation.
Vadapalli said broadband growth was a major driver for 2013, and ACS also continued reduce its debt.
“We are very pleased with our continued broadband growth,” he said.
On the broadband side, the company saw 19 percent fourth quarter growth year-over-year for business revenue, and 15 percent for consumer revenue. Business and consumer broadband connections both increased slightly compared to the prior quarter, although the company had a decrease in wireless subscribers, partially due to more losses in the federal Lifeline program.
Wireless revenue declined by about 5.1 percent to $20.1 million, but consumer service revenue increased about 2.8 percent to $10.1 million.
The company is also working on a multi-year effort to reduce its debt. In 2013, the company paid down $105.6 million in debt, largely as a result of a $100 million transfer from GCI as part of the AWN transaction. At the end of 2013, its long-term debt was $442 million compared to $533.7 million at the end of 2012.
Graham said that the company made all of its debt-reduction payments for 2014 in January, putting it ahead of schedule.
For 2014, the company is doubling-down on its business offerings, and accelerating its managed services offerings, Vadapalli said.
In January, Alaska Communications announced that it acquired TekMate, which will enhance its business service offerings, Vadapalli said.
That’s expected to provide $5 million to $7 million of revenue in 2014, Graham said.
ACS will also work to monetize recent investments and manage costs.
“We have demonstrated that we’re prepared to make bold decisions,” Vadapalli said.
Vadapalli said the company will also work on improvements to help enhance its wireless performance. Network improvements are planned, although Vadapalli declined to provide specific information on the changes, although he noted that it would apply both to products and sales.
Generally, Vadapalli said the company expects the sequential drop in wireless subscribers to end, but did not provide an exact timeline for that.
Graham also provided the company’s 2014 guidance. Revenue is expected to be about $310 million, with an adjusted EBITDA, or earnings before interest, taxes, depreciation and amortization, of $90 million, and capital spending of about $40 million. Graham said free cash flow would be about $20 million for 2014.