GCI quarterly revenue boosted by AWN, television deals

The Alaska Wireless Network and a broadcast subsidiary helped boost the second quarter performance for telecommunications provider General Communication Inc.

GCI, held an investor call Aug. 7 to discuss second quarter results released the day before.

The company reported $224 million in second quarter revenue, an increase both sequentially and year-over-year. During the first quarter of this year, GCI reported $216 in revenue, the company’s best first quarter ever.

GCI’s stock was $11.05 per share Aug. 8, near the 52-week high of $11.75 and up from $9.60 on Aug. 8, 2013.

GCI’s earnings before interest, taxes, depreciation and amortization, or EBITDA, was also up. The second quarter adjusted EBITDA was $84 million, a 13 percent increase compared to the prior quarter and a 36 percent increase year-over-year.

GCI Chief Financial Officer Pete Pounds said that the year-over-year increase was largely driven by the changes from the Alaska Wireless Network.

AWN was formed in July 2013, and merged GCI’s wireless infrastructure with that of Alaska Communications Systems Group Inc., although the two companies continue to sell separate retail products and do not share other infrastructure. GCI owns two-thirds of AWN and ACS owns one-third.

The sequential EBITDA increase was driven by wireless performance and revenue from GCI’s subsidiary Denali Media, a local television broadcaster.

The company’s broadcast subsidiary, Denali Media, has seen strong election cycle ad revenue, Pounds said, and has brought competition to the market.

That partially offset the challenges to that revenue, largely from lower margin time and materials businesses.

Wireless revenue also contributed to the bottom line with $69 million for the second quarter, up 11 percent compared to the first quarter and 95 percent compared to the second quarter of 2013. The large year-over-year change was due to the AWN transaction, Pounds said.

The company now also offers Lifeline data service; Lifeline is the federally-subsidized phone service for qualifying low income individuals.

GCI also saw strong performance in the managed broadband category, Pounds said.

Second quarter managed broadband revenues were $31 million, up 7 percent year-over-year, although down slightly from the prior quarter, he said.

“This positive performance is driven, in part, by expansion of and increasing demand for the TERRA services in rural Alaska,” Pounds said.

TERRA is a multi-year effort to build out terrestrial fiber cables and microwaves towers in much of Southwest and Northwest Alaska to enhance broadband connectivity.

Pounds said the company will add Kotzebue in the fourth quarter of this year, and also plans to bring TERRA service from Nenana to Galena. The company also plans to expand to additional villages in the Norton Sound and Kotzebue Sound regions,

As the network expands, GCI is also seeing increased traffic and demand for connectivity as well.

The call also addressed future performance issues.

Roaming continues to contribute to GCI’s performance, as AWN carries significant roaming traffic, particularly in the summer tourism season.

The company saw about $30 million in roaming and backhaul for the second quarter, up from $13 million for the same quarter of 2013 and $25 million for the first quarter of 2014. Pounds noted that the AWN transaction affects the comparability of those numbers, and the third quarter will give the clearest picture of how that has changed.

Although the network may see diminished roaming revenue as Verizon enters the market, CEO Ron Duncan said that there should be substantial Verizon traffic from legacy networks and from LTE phones that are outside of Verizon’s LTE network.

GCI did not have a breakdown of roaming traffic by providers.

Although Verizon has turned on its LTE network, and has said it will launch voice-over-LTE service this year, Duncan said that would compete more with AT&T than it would GCI, as AT&T is the major national carrier, while much of GCI’s strength is in rural coverage, where Verizon’s network won’t extend.

Duncan said the company didn’t see an immediate need to acquire more spectrum, but that the company will look to see what the opportunities are in the future.

GCI had previously provided guidance expecting annual consolidated revenues between $910 million to $930 million, and adjusted EBITDA between $285 and $305 million. In its second quarter release, the compaby said it expected the annual revenues to come in lower at between $880 and $900 million, but for the EBITDA to come in at the high end of its original prediction.

11/22/2016 - 2:41pm