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Alaska telecoms forge wireless link

by Chris Nolter | Published June 5, 2012 at 3:49 PM

Telecommunications carriers Alaska Communications Systems Group Inc. and General Communication Inc. announced plans for a joint wireless business on Tuesday, June 5.

The new entity, dubbed Alaska Wireless Network LLC, pools the companies' assets in an attempt to compete with larger carriers such as Verizon Wireless and AT&T Inc.

GCI will purchase $100 million of assets from Alaska Communications and fold the holdings into the venture. GCI will fund the deal with its existing senior credit facility, and will have two-thirds of the equity in the venture.

Alaska Communications, with the other one-third of the equity, will use the proceeds to reduce debt and increase its cash holdings.

The venture will have about $120 million in Ebitda.

Anand Vadapalli, the CEO of Alaska Communications, said that delevering is "a top priority" for the telecom, and that the deal would help toward that goal.

In addition to the proceeds from GCI's investment, Alaska Communications will also draw the first $50 million in free cash flow in the first two years of the deal. The remainder would go to GCI.

In the third and fourth years, Alaska Communications would have the first $45 million in free cash flow. Lenders to Alaska Communications will have to approve the agreement.

Standard & Poor's analyst Ketul Gondha suggested in a Tuesday report that the deal would help Alaska Communications to "withstand Verizon's impending entry into the Alaskan market, which we believe will lead to lower roaming revenue, increased pricing pressure, and subscriber losses."

Both companies are based in Anchorage, and have wireline networks in addition to their mobile systems. The carriers will manage the retail part of their wireless businesses independently.

Evercore Partners Inc. bankers Michael Price, Dan Mendelow, Slava Brin, Emily Gopstein and Sam Lerer advised Alaska.

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