Alaska Communications Systems Reports Fourth Quarter 2011 Results

- Positive Net Income and $125.5 million EBITDA for the year -
- Wireless Net Adds positive for the third consecutive quarter -
- Enterprise Revenue increased over 8% Compared to Prior Year -
- 4G LTE network is in testing phase, with launch scheduled in the first half of 2012 -
- Execution on long term plan to drive growth and free cash flow -

Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ: ALSK - News) today reported financial results for its fourth quarter ended December 31, 2011.

“Our performance for the quarter and full year 2011 was solid. Execution discipline as demonstrated by our 2011 results has been and will remain an important theme as we implement our business plan,” said Anand Vadapalli, ACS president and chief executive officer. “During this past year, we provided updates on two external events – competitive with the proposed entry of a new wireless competitor, and regulatory with the new FCC universal service funding reform. Our business plan provides a path to address both of these external events; by positioning us to grow retail revenues and market share in Alaska, as well as de-levering our balance sheet. The basis of our business plan is our affirmative assessment of the growth potential and our position in the Alaska telecom market. We anticipate growing market share and retail revenues and driving free cash flow based on the following assessment:

1. We have a valuable asset mix of products and services and a differentiated broadband network. The focus of service delivery on this network has been Enterprise and Wireless customers. We will leverage this network to provide broadband solutions to three key customer segments – Enterprise, Small & Medium Business (SMB) and Consumer. Focus on these previously underserved customer segments will present growth opportunities for ACS.

2. In addition to growing our top line, we will improve customer retention by investing in customer service, as the economics of retaining a customer always prevail over the cost of adding a customer.

3. We will relentlessly simplify how we conduct business to drive free cash flow performance. We believe there are continued opportunities to manage costs, and we will invest in experienced process improvement teams and information technology systems upgrades to achieve these benefits.

Our business plan also addresses our balance sheet. Free cash flow will be used to reduce debt over the next three years. The combination of investing in growth, improved service, and simplification while de-levering will drive our financial performance and build on our track record of success,” concluded Vadapalli.

Financial Highlights: Fourth Quarter 2011 Compared to Fourth Quarter 2010

• Revenues of $87.5 million increased by $2.7 million, or 3.2 percent, from $84.8 million in the prior year.
  • Enterprise revenue increased by $1.1 million, or 8.1 percent, with data products representing more than 90 percent of our revenues.
  • Wireless revenue increased by $1.6 million, or 4.6 percent, with higher wholesale and roaming revenue of $2.0 million offset by a decrease of $0.4 million in retail service and equipment revenue.
  • Retail and access wireline revenue was relatively unchanged, with declines in retail revenue offset by higher intrastate access revenues.
• EBITDA of $30.3 million was slightly below prior year of $30.5 million.
  • Wireless EBITDA increased by $1.9 million, or 14.2 percent, to $15.4 million. Revenue growth and lower equipment subsidies resulted in the improvement.
  • Wireline EBITDA declined by $2.1 million, or 12.4 percent, to $14.9 million. Increases in access charges and leased circuits accounted for the decrease.

Metric Highlights: Fourth Quarter 2011 Compared to Third Quarter 2011

• Wireless connections increased to 117,559, representing the third sequential quarter of positive net adds.
• Wireless average monthly retail service revenue per connection (ARPU) increased by 1.4 percent to $53.54.
• Wireless churn of 2.2 percent improved from 2.4 percent.
• Internet subscribers decreased by 756 to 47,618 and ARPU increased by 2.0 percent to $45.92.
• Retail access lines declined by 2,479 to 147,361 and ARPU decreased by 0.4 percent to $18.18.

“Alaska Communications exited the quarter with total cash of $20.5 million and with full access to our $30.0 million revolver facility. For the twelve months ended December 31, 2011 we generated free cash flow of $43.4 million,” said Wayne Graham, ACS chief financial officer.

2012 Business Outlook

ACS provides guidance for 2012 as follows:

• Revenues will be $355 - $365 million in 2012;
• EBITDA will modestly increase from $125 million in 2011;
• Total capital expenditures will be $55 - $60 million; and
• Free cash flow will be approximately $32 -$36 million.

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 877-941-0844 to access the conference call. Parties outside the United States and Canada can access the call at 480-629-9835. The live webcast of the conference call will be accessible from the "Events Calendar" section of the Company's website (www.alsk.com). Also available for the call will be a presentation that will describe the elements of our business plan. The webcast will be archived for a period of 90 days. A telephonic replay of the conference call will also be available two hours after the call and will run until Thursday, March 8, 2012 at midnight ET. To hear the replay, parties in the United States and Canada can call 800-406-7325 and enter pass code 4509940. Parties outside the United States and Canada can call 303-590-3030 and enter pass code 4509940.

Conference Call Presentation

A presentation corresponding with the conference call will be available at alsk.com in the “Events” section.

About Alaska Communications

Headquartered in Anchorage, Alaska Communications Systems Group, Inc. (Nasdaq: ALSK - News), through its subsidiaries, is a leading provider of high-speed wireless, mobile broadband, Internet, local, long-distance and advanced data solutions for businesses and consumers in Alaska. The Alaska Communications network includes the most advanced wireline and wireless data and voice networks and the most diverse undersea fiber optic system connecting Alaska to the contiguous United States. For more information, visit www.alaskacommunications.com or www.alsk.com.

Forward-Looking Guidance

This press release includes information related to management's estimate of EBITDA and Free Cash Flow (FCF) for the year ending December 31, 2012. EBITDA and FCF, as defined by the Company, may not be similar to EBITDA and FCF measures used by other companies are not measurements under generally accepted accounting principles (GAAP), and should not be a considered a substitute for other measures of financial performance recorded in accordance with 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. Similarly, FCF provides useful information about the ability of the Company to pay dividends and reduce its outstanding indebtedness. Due to the difficulty in forecasting and quantifying the amounts that would be required to be included in the most comparable GAAP measure, “net cash provided by operating activities” the Company is not providing an estimate of the year-end 2012 amount for that measure.

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 include, without limitation, Verizon’s entry into the Alaska market, Universal Service Fund reforms, the outcome of on-going IRS audits, adverse national economic conditions, adverse conditions in the credit markets impacting the cost, including interest rates, and/or availability of financing, adverse local economic conditions, including an unexpected downturn in the Alaskan oil and gas or tourism markets, changes in capital expenditures, the effects of competition in our markets, the entry of one or more additional facilities-based carriers into the Alaska market, or other factors affecting the Company's ability to generate sufficient earnings and cash flows to continue to make dividend payments to its stockholders; the Company’s ability to complete, manage, integrate, market, maintain, and attract sufficient customers to the products and services it may derive, adverse changes in labor matters, including workforce levels, labor negotiations, and benefits costs; disruption of our suppliers' provisioning of critical products or services; the impact of natural or man-made disasters; changes in Company's relationships with large carrier or enterprise customers or its roaming partners; changes in revenue from universal service funds; unforeseen changes in public policies; changes in accounting policies, including the Company’s application of regulatory accounting rules, which could result in an impact on earnings; or disruptive technological developments in the telecommunications industry. 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.