Alaska Communications grows revenue; awarded FCC funds

Alaska Communications Systems Group Inc.’s financials are still smoothing out as the company adjusts to its new focus.

Year-over-year, the company’s net income has dropped, but the new focus of business broadband and managed IT services is starting to make more money after the company got out of the wireless market by selling those assets to GCI in 2014.

Meanwhile, the Federal Communications Commission agreed to give $19.7 million per year over the next 10 years for Alaska Communications to continue developing rural broadband projects.

Net income in the third quarter was $300,000, which is a 75 percent decrease from the $1.2 million it made in 2015, but Alaska Communications increased its total revenue from $54.7 million in 2015 to $56.5 million, a 3.2 percent increase.

This revenue bump came mainly from 8.3 percent growth in the company’s business, wholesale and managed IT services revenues, which have become Alaska Communications’ focus since shedding its wireless connections.

Business broadband revenues shot up more than $2 million over last year, from $12.7 million in 2015 to $15.1 million in 2016. Managed IT services rose from $708,000 in 2015 to $1.1 million this year. Wholesale broadband rose by $1.2 million since last year, from $6.8 million to $8 million.

Alaska Communications is making more money from each business broadband connection than it did a year ago. The amount of consumer broadband connections has stayed flat over the last year, along with the average revenue per user, or ARPU.

Business ARPU, however, has risen from $268.30 in 2015 to $328.83 in 2016.

CEO Anand Vadapalli said the numbers will smooth out as Alaska Communications adjusts to its new focus, he said.

“Voice will continue to decline,” he told an investor during a Nov. 2 earnings call. “This is really a shifting and repositioning of the business that is taking a couple of years to play itself out.”

Alaska Communications spent less on capital projects in the third quarter of 2016 than it did a year ago. Capital expenditures fell from $12.1 million in 2015 to $8.7 million in 2016. 

Vadapalli said this was not conscious decision — the company got lucky and will keep its capital expense guidance steady at $35 million in the next year.

“This year, the nature of sales opportunities that we got required us to spend less capital that we had originally thought,” he said. “This is a little nice surprise for us, a favorable stunt and we’ll take it.”

Capital expenses could potentially rise, however, as the Federal Communications Commission will help Alaska Communication with rural broadband buildout with money from the Connect America Fund Phase II.

The money isn’t new, but rather a continuation of what Alaska Communications already gets from the federal government to enhance rural broadband connectivity.

“The order is generally consistent with our expectations wherein our current level of support of $19.7 million per year will continue for the next 10 years,” said Vadapalli.

“The order covers approximately 31,500 locations and unserved and partially served census blocks in our service area. In exchange for receiving this support, we expect to deploy broadband to about 26,000 new unserved locations over this 10-year period. We have to report detailed deployment plans to the FCC by October 2018.”

DJ Summers can be reached at [email protected].

11/16/2016 - 3:19pm