Without state budget solution, GCI plans to roll back capital expenditures

Alaska telecommunications giant GCI said it will slash its 2017 capital expenditures by about one-fourth because of the state government's inability to adopt a long-term fiscal plan to fix its deficit.

"The state government has not been able to adopt a workable long term fiscal plan in 2016," the company said in its second-quarter earnings report, filed Tuesday. "As a result, we have announced that we will be reducing 2017 capital expenditures by 20 to 25 percent from our 2016 forecast of $210 million. This implies 2017 capital expenditures of $158 to $168 million."

Facing a state budget deficit of about $4 billion, state lawmakers adjourned a special session last month without voting on Gov. Bill Walker's proposals to bridge the gap.

The budget hole is linked to the price of oil, which has dropped significantly since 2014.

Last year, GCI leadership started campaigning to businesses and organizations in the state about the importance of coming up with a solution to the crisis.

The company also said in its earnings report that it has executed an agreement to buy Kodiak Kenai Cable Co., the owner of the Kodiak Kenai Fiber Link, for $20 million.

Buying KKCC "enhances our long-term abilities to expand broadband in and around the Kenai Peninsula," said company spokesman David Morris in an email.


He also said that the company hasn't yet identified areas that will be hit by the spending cuts but that "they will likely be foregone growth opportunities."

GCI reported a net income of $3.3 million on a revenue of $234 million in the second quarter. That's compared to a $15.8 million loss on a revenue of $247.5 million during the second quarter of 2015.

The company also closed a sale-and-leaseback transaction of its urban wireless tower and rooftop sites to Vertical Bridge on Monday, and received about $90 million in that transaction, GCI said in a release.

GCI's wireless segment profits were down 21 percent year-over-year, from $68 million in the second quarter of 2015 to $54 million in the second quarter of this year. Revenue for the company's wireline segment — including traditional phone customers, cable TV, cable internet and cellphone plans with GCI — was $180 million in the second quarter of 2016, essentially flat from the same period last year.

Annie Zak

Annie Zak was a business reporter for the ADN between 2015 and 2019.