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At Alaska Communications, adaptation is path to profit

  • Author: Sean Doogan
  • Updated: May 31, 2016
  • Published November 9, 2014

With the arrival of national wireless company Verizon in the Alaska market, local wireless providers are facing growing competition for mobile customers. One local telecom company says it's adapting by working to provide services that national competitors like Verizon and AT&T can't offer.

Alaska Communications, which traces its roots to the founding of the Juneau Douglas Telephone company in 1893, has seen many booms and a few busts over the last 120 years but believes it is now in a strong position to compete and succeed in a competitive Alaska market. With more than $300 million in expected revenue for 2014, the company -- better known to many Alaskans as "ACS" -- is experiencing a rebirth of sorts. After rebounding from years of crippling debt, ACS released its third-quarter financial results Wednesday, predicting $92 million in net profit for this year. Faced with increased wireless competition, Alaska Communications is focusing its growth on business and residential broadband Internet services and IT work.

Alaska Communications expects to see as much as 50 percent growth in business broadband and IT services over the next few years. And while it still offers wireless phone service, the company's CEO says its future relies on being strong where Outside companies are weak: local service and Internet solutions.

"When you compete with national providers, it is really important for us to compete in these segments where we add value," president and CEO Anand Vadapalli said.

Vadapalli said Alaska Communications has invested more than $500 million into its network and IT solutions department within the last eight years because the company sees potential in what it estimates to be a $1.9 billion and growing Alaska IT market.

Eight years ago, the company was struggling with hundreds of millions of dollars in debt. While still a profitable business, Vadapalli said most of its profit back then went to pay interest on the debt and to pay shareholder dividends. (ACS is one of only three Alaska-based companies on the Nasdaq stock exchange.) Vadapalli said that began to change about three years ago.

"At end of 2011, the board made the decision to substantially cut our dividend," Vadapalli said. "And we said, 'In the near term we are taking something away from shareholders but in long term it is the right thing to do.'"

Vadapalli said the company has paid down more than $135 million in debt over the last two years alone. That has left Alaska Communications in a good cash position. As a result, the company did not have to take on more debt to pay for $1.2 million in repair work after one of its main undersea fiber optic connections with the Lower 48 was severed by an earthquake in July. Vadapalli said the company paid for the fix with cash.

Alaska Communications is concentrating on increasing its business services over broadband, but the company said that growth will have a positive impact on residential Internet customers as well.

ACS just signed new contracts to provide broadband services for the state of Alaska and the Anchorage School District, for which it will be installing high-speed fiber optic cable into all 92 ASD schools.

"So as we build fiber into these schools, we can go neighborhood by neighborhood throughout the next few years, adding more cable and increasing speeds in the surrounding neighborhoods," Vadapalli said. "What we are doing for ASD is giving us that platform."

Vadapalli said the same thing happened on Kodiak Island after the company installed high-speed Internet cable to the local medical clinic. That job led to increased speeds for the entire area as Alaska Communications simply used the line it put into the clinic to supply the entire neighborhood with a faster connection.

To shore itself up against the national competition, Vadapalli said, ACS is working with its main Alaska competitor, GCI, the largest publicly held company in Alaska. Both companies combined their wireless networks into a jointly owned venture, Alaska Wireless, in June 2012 with the goal of providing wireless coverage for up to 95 percent of Alaskans, including covering many areas that aren't serviced by Verizon or AT&T.

Still, as Alaska Communications continues to find its place in the ever-growing landscape of wireless, phone, Internet and IT services, Vadapalli said that its biggest advantage isn't on its balance sheet.

"Our single biggest asset -- and why we do well -- (is) our people," Vadapalli said. "When I talk to our customers and large clients, invariably they talk about the quality and professionalism of our team."