ACS, GCI wait for regulatory approval on new network

Alaska Journal of CommerceMay 19, 2013 

Alaska Communications and General Communication, Inc. are working toward merging their infrastructure as the Alaska Wireless Network, a deal meant to better position both companies when Verizon Wireless enters the Alaska market.

The new network, or AWN, is still pending regulatory approval from the Federal Communications Commission and the Securities and Exchange Commission.

Infrastructure mergers are uncommon in the US, making for a slow process, said ACS President and CEO Anand Vadapalli in the company's first quarter investor call May 2.

Vadapalli said the ACS has been making steady progress on regulatory matters related to the AWN transaction, and the company is still targeting second quarter closing.

The two parties wrote a letter to the FCC March 28 asking for expedited consideration so that the network can take advantage of Alaska's short construction season, which is quickly approaching.

In GCI's call, also held May 2, GCI General Counsel Tina Pidgeon said the merger is in "final rounds" of discussion with the FCC, and that ACS is working on one piece of the process specifically.

If approved, the two companies will share infrastructure but market their products separately.

Opposition to the deal was late-filed, and officials said it was not likely to change or slow the regulatory process any further.

Fireweed Communications filed a petition to deny the deal in February, after GCI announced that it was also seeking to purchase certain television stations. The two projects combined raised questions about the company's dominance in the market, and the possibilities of a monopoly.

Both companies have said the new network is the best way to provide a competitive rate and comprehensive coverage and services for Alaska.

ACS is working on some issues with regulators, while GCI was focused more internally on preparing for the deal this past quarter.

GCI Chief Financial Officer John Lowber said GCI was also making progress toward certain metrics as part of the transaction, including recently finishing its senior debt refinancing.

As planned, ACS will receive cash from GCI and preferential distributions at the beginning of the merger. Over time, GCI will receive the larger chunk of profits from the network.

Both companies also spoke about Verizon's upcoming entrance to the Alaska market, which will affect their individual operations and the new network.

Verizon has not made any announcements about its rollout plans recently, but spokesman Scott Charlston said the company is excited to enter the Alaska market.

"We're continuing to work very hard to build a super reliable wireless network," Charlston said.

The company should have more info about its timeline in the future.

Vadapalli said ACS will likely lose some of the market when Verizon enters, particularly due to the loss of roaming traffic. But it'll retain a focus on the niche markets it serves, including the business community, he said.

Vadapalli said ACS expects Verizon to enter in the summer, but that it is unknown whether the company will enter as a retailer player, or simply switch on their own network.

Even with the new network, Verizon would likely still need to rely on other carriers for coverage in some parts of the state.

When any major player enters Alaska, the new network will also be poised to acquire additional backhaul traffic, which could offset other customer losses, Lowber said during the May 2 call.

GCI expects to be providing fairly significant amounts of backhaul in the future.

Because Verizon's network is largely long term equivalent, or LTE, which is a data network, the company will still need to use voice services from existing carriers, Lowber said. That roaming will be a subset of the AWN network, and should help with the Alaska companies financials until Verizon rolls out it's own voice, which Lowber said was likely in 2014.

Despite their progress, both companies said in investor calls that they were waiting to provide guidance for the rest of 2013 until the AWN transaction closed.

With both that and Verizon's entrance looming, too many pieces were considered moving parts to make any estimates of how their financials will pencil out at the end of the year.

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