GCI Liberty, Inc. Series A GCI Group Common Stock When Issued

Great, thank you, thank for joining us today. I’m John Lowber the company’s Chief Financial Officer.

I got the usual folks here in town with me, I’ve got mostly accounting and finance folks, Ron and Tina are in Lower 48 and I think Greg our Chief Operating Officer is down in Southeast Alaska for some company meetings. So similar to the last couple of calls we will call on and on if we need to otherwise we will try to address most of your questions here locally.

Okay, if you don’t have a copy of our detailed press release you can find it on our website. The conference call is being recorded.

We’ll be available for playback for 72 hours beginning at 4 P.M. Eastern Time today.

The playback number is 800-967-7626 with an access code of 7461. In addition to the conference call you may access the conference through the Internet.

To access the call via net conferencing log on to our website at www.gci.com and follow the instructions. The webcast will be available for replay for the next two weeks.

Some of the statements made by GCI in this presentation are forward-looking in nature actual results may differ from those projected and forward-looking statements due to a number of factors. Additional information concerning such factors can be found in GCI’s filings with the Securities and Exchange Commission.

The year is off to a great start. We set a new record for revenues and for first quarter adjusted EBITDA.

Revenues of $186.2 million represented an increase of 8.3% year-over-year and 1.4% over the prior quarter. Our net income of $3.2 million and earnings of $0.08 per share were up 127% and 167% respectively over the prior year.

Our adjusted EBITDA totaled $58.6 million as compared to last year’s $54.8 million representing an increase of $3.8 million or 7%. On a sequential basis adjusted EBITDA increased by $5.5 million or approximately 10.4%.

Compared to the prior year net income and EBITDA both benefited by a 2% decrease and SG&A cost as a percentage of revenues. On the operational side we’re continuing to focus on expanding and enhancing our statewide wireless platform.

We completed Phase 1 of our TERRA-Northwest project and we’re continuing to prepare for the eventual closing of the AWN and broadcast television transactions. Just this week we completed our senior debt refinancing which will among other things provide the funds needed to close those transactions.

In part in anticipation of closing the AWN transaction we changed our segment reporting methodology. Effective the first of this year we are now organized in two segments including Wireless and Wireline.

The Wireless segment includes the wholesale services that are contemplated following the AWN closing. The Wireline segment includes the consumer business, business services, which includes the historical commercial and network access segments and managed broadband which now includes the historical managed broadband and regulated services segments.

The consumer and business services lines will continue to report their respective shares of the retail wireless revenues to which they will be contractually entitled consistent with the structure that would be in place following the AWN closing. The comparative figures for 2012 had been recast to be consistent with the new presentation.

First we’ll talk about the wireless, the new Wireless segment. Wholesale wireless revenues were up $4.4 million over the prior year quarter and were up approximately $1.2 million on a sequential basis.

The gross margin percentage was relatively unchanged from a year ago but was up fairly dramatically on a sequential basis. In general roaming and subscriber revenues were up nicely leading to an increase of EBITDA of $2.1 million over the prior year and $3.2 million sequentially.

Non-Lifeline subscriber counts were up 10,300 over the prior year quarter and 1300 on a sequential basis while Lifeline counts were down 8700 versus the prior year but were up 300 on a sequential basis. On a net basis were up 1600 devices on both the year-over-year and the sequential basis.

At quarter’s end we were providing service for 141,600 wireless devices. Consumer, the consumer portion of our new Wireline segment experienced year-over-year growth in wireless and data revenues, they were partially offset by decreases in video and voice revenues.

Overall consumer revenues were up 2% over the prior year quarter and were pretty much flat on a sequential basis. The gross margin percentage was down 196 basis points compared to the year ago quarter but was up 263 basis points sequentially.

Our consumer metrics largely follow the trends we’ve been seeing in recent quarters. Versus the prior year we were down 8100 local access lines including 7400 that were provisioned on our own facilities and 2200 video subs.

We added 6300 cable modem subscribers and homes passed grew by 2600. Our average revenue for cable modem has increased by $5.05 over the last year to $66.53.

During the first quarter we added 1400 cable modems and 1200 homes passed but were down 1700 local access lines and 300 video subscribers. Consistent with industry trends we experienced declines in local lines and long-distance customers as traditional wireline voice services in the Consumer segment are being replaced by wireless service.

Consumer EBITDA totaled $17.1 million for the quarter as compared to $16 million a year ago and $13.8 million in the prior quarter. Business Services, business services had a strong quarter on the top-line with revenues up slightly over 10% versus the prior year quarter.

Business services which includes our former Commercial and Network Access segments and enjoy the increases in all four revenue categories as compared to the prior year. Revenues were up 4.1% on a sequential basis.

Data revenues were up significantly from the prior year largely due to an increase in professional services time and materials revenues that are included in the data category. The large increase and lower margin professional services led to a decrease in the overall gross margin percentage of 589 basis points compared to the prior year and 272 basis points sequentially.

SG&A cost and the EBITDA were pretty much flat on both the year-over-year and sequential basis. With the local access lines which were down 1500 compared to the prior year and 1200 sequentially, business services metrics were up compared to a year ago, cable modems grew by 2100 and video subscribers grew by 600.

During the quarter cable modem subscribers grew by 100 and video subscribers by 900. Managed Broadband, managed broadband results were strong with revenues up 14.1% compared to the year ago quarter but were down slightly on a sequential basis.

The managed broadband portion of our new Wireline segment now includes results of our former regulated operations segment. Revenues for the first quarter totaled $28 million as compared to $24.6 million in the same quarter of the prior year.

The managed broadband business recently completed another very successful rural school district contract renewal cycle and is benefiting from additional bandwidth capacity sales on our TERRA-Northwest Phase 1 and TERRA-Southwest terrestrial facilities. Quarterly EBITDA was up $700,000 compared to the year ago quarter and was down $1.1 million on a sequential basis in part due to $3.8 million increase in allocated SG&A cost.

As we continue to invest in and extend our TERRA-Northwest facilities further into Northwest Alaska we expect to see continued strong performance from the managed broadband business. Other items of interest starting with wireless expansion, wireless expansion remains a major focus with capital expenditures of approximately $38 million planned for this year.

Investments are being made to expand geographic coverage and to increase data speeds. We’re also investing in backhaul facilities and trying up additional TurboZone WiFi access points.

We are now offering LTE service in the Anchorage market and expect to have the Juneau LTE network completed during the third quarter and a partial network turned up in Fairbanks by the end of the year. In the last several quarters we discussed our joint agreement with Alaska Communications to combine our wireless assets into a new venture called the Alaska Wireless Network.

The new entity will own and operate the network and we and ACS will sell on services to our respective retail customers. We would like to contribute all of our wireless assets including spectrum licenses, cell sites backhaul facilities, switching systems, and other assets necessary to operate a statewide wireless network.

As we have noted before by combining our assets we expect to benefit from an improved spectrum position, economies of scale and eliminating duplication of effort and network infrastructure. We expect to be able to drive the fastest most geographically extensive and most reasonably priced wireless service in Alaska which will allow us to more effectively compete with the national carriers in the Alaska retail market.

As we have also noted last quarter the transaction requires FCC approval for the transfer of our respective wireless spectrum licenses and is subject to other customary conditions. Subject to securing the required governmental approvals we hope to close the transaction during the second quarter.

In the meantime much work has been done to prepare for the eventual closing of the transaction. We noted last quarter than in order to meet our obligations under the agreement we would need to refinance our senior debt.

We concluded that effort earlier this week. TERRA-Northwest, this $59.3 million project will extend our terrestrial broadband backbone into Northwest Alaska as far as Kotzebue allowing us to directly serve several additional communities and rural Northwest Alaska and setting the stage for future expansion into the surrounding communities.

The project was launched late last year it’s been completed in three phases. The three mountaintop repeaters and two village sites which makeup TERRA-Northwest Phase 1 are now in service.

Phase 2 which includes extension of the network into known is underway with materials being ordered and shelter is being constructed. Mountaintop construction will soon get underway.

Phase 3 which extends the network into Kotzebue was also underway. Civil contract has been awarded and mountaintop construction will begin this summer.

We hope to complete Phase 2 this year and Phase 3 is expected to be completed and in service at the end of 2014. Denali Media we noted last quarter that we entered into asset purchase agreements to acquire over $7.6 million, three broadcast TV stations one of which is located in Anchorage and two of which are located in Southeast Alaska.

Our plan is to provide a new state wide platform for news and information as well as the means to provide unique content and additional value to our video subscribers. The agreement is subject to customary closing conditions including approval from the FCC.

Subject to receipt of the necessary approvals we expect the transactions to close in the second half of this year. Our legal and regulatory team continues to support the company’s efforts including working through the required government processes and connection with our AWN transaction and broadcast acquisitions.

Share repurchase program, the company remained active on the share repurchase front during the first quarter. During the period we acquired 778,000 shares at an average price of $8.63 per share for a total of $6.71 million.

Depending on the company’s performance market conditions, liquidity position and subject to four over site we will likely continue to opportunistically acquire shares in the open market. Guidance and economic prospects, during the last call we noted that we are hesitant to provide any financial guidance in light of the uncertainties surrounding the timing of the closing of the AWN transaction.

Unfortunately that situation remains unchanged. Once we close the AWN transaction have a little bit better visibility into its likely performance, we’ll provide an update with respect to our expectations.

Liquidity and capital expenditures, we ended the quarter with approximately $30 million in cash and investment securities on hand and approximately $54.5 million available draw under our then existing revolving facility. At quarters end we also had $26.8 million of restricted cash on hand, the firm continued construction of TERRA-Northwest and approximately $3.6 million each of grant and loan funds available for TERRA-Southwest related projects.

Our credit facilities and capital leases will require approximately $8.1 million in principal amortization during the next 12 months. We’re still comfortable with our current leverage and we have no significant principal payments due until our new senior credit facility matures in late April of 2018.

As we previously mentioned earlier this week we completed an amendment and restatement of our senior credit facility. The amended facility consists of a $240 million delayed-draw term loan and $150 million revolver.

In closing we borrowed $100 million under the term facility to replay the amounts outstanding under the existing facility and 10 million at the revolver to cover transaction cost and for working capital. We plan to borrow against the delayed-draw term facility to fund the $100 million in asset purchases related to the AWN transaction and we use part of the revolver to provide working capital for AWN post closing.

The interest rate on the new facility is LIBOR plus 2% to 3% depending on our leverage. The new facility will also facilitate the broadcast television transaction and is expected to provide us the flexibility and liquidity we desire to pursue our business plans for the foreseeable future.

During the quarter we generated $58.6 million in EBITDA recorded $16.9 million in interest expense and $29.3 million in capital expenditures which absent other variables would yield an increase in cash of $12.4 million and approximately $6.7 million of net cash was used to purchase and retire our Class A common stock leaving a theoretical $5.7 million leftover. We invested approximately $29.3 million in capital expenditures during the first quarter.

This compared with $26.6 million we invested during the first quarter of last year approximately $4.5 million was invested in our TERRA-Northwest Microwave project. Capital expenditures during the first quarter excluding those for TERRA-Northwest were made in the following areas.

For our business lines including business services, consumer and managed broadband $5.4 million, for IT projects $3.8 million, for plant expansion and network upgrades, $6.4 million for expansion of our wireless facilities $1.4 million, for our broadcast television facilities $3.5 million, and for all other areas including administrative support items $4.3 million. Expenditures beyond those necessary for maintenance capital were largely discretionary and are expected to generate incremental cash flow.

We noted last quarter that including maintenance capital and excluding investments in TERRA-Northwest which are separately funded out of restricted cash. We are currently planning to invest approximately $150 million in core capital expenditures during 2013.

Non-core investments may include approximately $50 million in capital expenditures and the potential purchase of certain distribution center facilities that we are currently occupying. Our major capital expenditures initiatives for 2013 include approximately $38 million for expansion of our wireless and backhaul facilities, $51 million for HFC plant and facilities expansion, $11.8 million to extend our fiber facilities further into the business community, $16.7 million for broadband projects including GCI funding of TERRA-Northwest and $32.5 million for growth in other projects.

The interest rate was approximately 89% of our debt is fixed and our interest expense continues to run at approximately $70 million per year. Compared to the last two quarters annualized cash flow were approximately $223.5 million, our cash interest coverage is approximately 3.19 times and our leverage at the end of the quarter on net debt is 4.19 times and on gross debt is 4.32 times.

In conclusion we’re pleased with the first quarter’s financial results. In the first quarter it is normally pretty weak but this year it appears to have laid a pretty solid foundation for the rest of the year.

We are eager to get our pending transactions closed and we are looking forward to a pretty exciting year. We will now be happy to answer your questions.

Questions, comments.

Great. Thank you.

I’m curious to get a little more detail on the Denali Media platform there. But there are other broadcast stations and other networks possibly the (indiscernible) Alaska or possibly in the Lower 48 is that something you’re looking at expanding into and then I’ve gotten a follow up.

Thanks.

I think Frank we’ve got our hands full right now just getting into broadcast business here, the idea is to improve the local content that we can put on our table platform we don’t get those benefits by expanding into Lower 48. So we’ll certainly keep an eye on opportunities in this market but I would say for the near-term we’ve got a lot of work to do to get our hand around the existing opportunities, we’ll do that and then down the road we may consider further opportunities so that’s kind of were things stand right now.

Okay, great. And then looking at it Verizon’s entry into the state, any discussion do you have with backhaul for that I think that’s a possibility I think sort of lift your business from getting some backhaul on some of your facilities out there?

Yeah, I think Frank I think we’ve talked in the past about the opportunities for others to acquire backhaul, we’re certainly one of the better position providers for providing those services. And we normally don’t talk about specifics with respect to customers but I think it’s pretty safe to assume that our new carrier in the market that doesn’t have any landline facilities is going to need to buy backhaul and certainly is one of the key providers of that service in the state that you expect and they come to talk to us.

So and I think I’ve also said in the past that we would expect that revenues additional services from backhaul related type activities would help mitigate some of the exposure we might see on the retail side by the new entrance. So yes we expect to be providing a fairly significant amounts of backhaul going forward.

Okay. And can you comment on the current status of the LTE rollouts in the Alaska (indiscernible).

I assume you’re asking about Verizon.

No I was actually asking about what you all are doing in with this regards to joint venture I mean I know ACS has done some of that but you’re able to utilize some of – I thought you were able to utilize some of that spectrum now, what’s the current status of sort of your and/or that joint ventures LTE rollout.

Yeah, I think independent of the AWN transaction we’ve got a degree meant that we’re going to work together to provide the LTE services in this market. And to that end I think I commented that we already are providing service in Anchorage, we’ll be enhancing that service during the remainder of this year I think by the end of this year we expect to have a fairly complete coverage in the Anchorage market but you know I mentioned that we would have that turned up in the third quarter in Fairbanks a partial turn up by the end of the year and probably have completed the network by the end of 2014 for Fairbanks.

So we’re continuing to move to that end and expect to have a pretty well built out LTE platform to compete against others in this market on that time schedule.

Okay, great. Sorry I missed that.

Thank you.

Yeah, no worries. Thanks Frank.

Hi, thanks guys. I have a few questions, John since we’re getting close to the AWN transaction closing, I was wondering if you could just remind us sort of the basic assumptions you think we should be making about just some of the revenue that kind of came up when the call was announced with respect to roaming revenue and the CETC revenue, I know at one point there were some talk about changes in the glide path of CETC, can you just remind us what that is.

And then on the roaming side, I think the comments that were made on the last conference call were that the expectation was that Verizon was going to be coming in really with a data homely product it will continue to use roaming from AWN in that market, is that still the base expectation we should have and have you sort of heard of any other plans that they may have to overlay other voice or launch a multi product?

Okay. I’ll take the second one first.

I think that everything we know about the Verizon entry is all based on their plan to rollout LTE only which is today is data online service and of course as I mentioned before the – their network will be a subset of ours, Verizon has a roaming they’re getting out with ACS today and of course that will become part of the AWN operation once that closes. And then going forward, we would expect that once Verizon turns up their data network we would see a lot of the data roaming come off of the ACS network and then move on to the Verizon subset that obviously where they don’t have facilities we do that roaming would then continue on the data roaming would continue on the those facilities that would be owned by AWN at that point in time.

The voice presumably would continue to be carried on the Roaming Agreement which is provided by ACS today and we would expect that to continue until such time that Verizon rolls out both and I guess the question is when that would happen. I’ve seen references to Verizon planning on rolling out both the as early as some time in 2014 so as if they get to a position where they can do that then I think at that point we would start to see some of the voice start to moving off of the roaming on to the Verizon plan.

But that’s all I can tell you you’re probably better plugged into that (Andrew) than I am so I'm not sure I can give you particularly helpful in that area.

Now understood.

As far as the CETC goes I think that at least for the near term that’s pretty stable, we saw some declines coming from the restructuring that the FCC did here I guess it was a year ago fall and we’ve adopted to that and I think they’re going to stable here until we get out into probably sometime in 2014 or something there is going to be some new regulations in that area. Tina could give us a lot more on that but I'm not sure that she is available or and if you need more I think.

I am on John.

Okay, great, Tina.

And what you’ve stated is accurate that the FCC has provided them stability particularly in Remote Alaska and clarity of the rules due middle of 2014. And there is an ongoing process right now to define what the landscape looks like after that point and one of the proposals is to look at an option process and we and others are certainly discussing whether or not the FCC’s differential approach for Remote Alaska in this – in the first phase of reform continues to apply in the phase of reform and that we’re making processes underway right now.

Thanks. And the John, maybe to follow-up you gave out a leverage numbers of 3.2 times gross and 4.1 times net and I think on the prior call you were asked by someone about what you thought sort of leverage could get to and you mentioned in number of it leverage maybe slipping to 5 times but then coming down thereafter.

Is that expectation sort of based upon some of those puts and takes that you just went through with roaming about how sort of a data revenue would probably come off as the LTE for Verizon was turned up in the areas where they were over building that network, is that what kind of is leading to that leverage change between where we are now and sort of getting to the five times at some point post the close.

Yeah, that’s pretty much right, just to clarify did you say leverage at 3.19 or did you mean interest coverage looking for that.

Sorry, 4.19.

Yeah, the leverage is 4.19 gross and 4.3 times excuse me net and 4.3 times gross. But yeah so I see that we could be creeping up towards five I don’t see any change there, there is certainly a lot of uncertainty surrounding the ultimate performance of AWN we’re just not going to have visibility into that until we get our hands on the assets and the agreements and so on which were still pretty much tied up in company’s confidentiality issues and so on.

So we don’t have the visibility that we want or need for that but as we’ll certainly clarify in terms of the leverage we’re going to acquiring a $100 million of assets from ACS so that will step up the leverage a little bit and then we’ll get to roll in the incremental EBITDA that we’re going to get from the acquisition. So and just – we just don’t have enough visibility to give you a precise numbers in terms of what our expectations are.

Other than to warn you that they could creep up towards five as we get into the process at least temporarily and then hopefully that start coming down after that.

Understood. And final question from me, I think contractually under the agreement you’re required to provide AWN with access to your credit facility, is that what you were sort of referencing in terms of making some working capital available to AWN or will there be an – or will there be an actual credit agreement that the two parties enter into where they become a sub borrower on your credit agreement.

Yeah, we’ll have a separate agreement with the AWN and we have agreed that we would provide them working capital of $50 million in that but they will have access to up to $50 million of our capacity and that is yes that is why revolver went from 75 that we had two weeks ago to 150 that we have today.

Okay, great. Thank you very much.

You’re welcome Anthony.

Good morning John. How are you today?

Doing good, Liam.

Alright. John, you talked about $30 million in the CapEx budget for growth initiatives you also laid out construction and upgrades in wireless, what are in those growth initiatives are?

Well let me speak here I like to add a little color on that. Let’s see things like handing capacity to the core network and are you talking about what we’re spending the money on Liam is that what you’re saying?

Yeah, I mean because I'm thinking in terms of okay wireless and data are driving your growth and obviously you highlighted the wireless expenditure at $38 million additional capacity et cetera et cetera. So I was interested to see above that where the growth initiatives are.

Yeah, okay. The – for example the capacity network capacity say between here and Seattle every once in a while we need to upgrade that capacity, we’ve got several million plugged into by electronics and so on to provide additional capacity there.

We’ve got an IRU obligation to purchase some additional capacity on a piece of fiber going over the (indiscernible) area. We’ve got IT projects some managed here locally by our IT department and others that are managed by our Cycle30 operation down the Lower 48 we’ve got product development I see a (indiscernible) at $8 million or $9 million just improving the wired plant and so on making – trading out old equipment and replacing with new equipment and so on.

So you sack all those together you end up with $35 million bucks those are some of the key ones, Liam.

Sure. Okay, John.

Thank you. And just taking look at what you have on your plate in terms of the acquisitions the integration and the completion of the construction projects, how do you feel looking 12 months year and a half out as to how you position where the wealth is coming towards you with the demand for data and wireless sort of as voice services saw by the way to.

No, we like our position Liam that’s part of – been part of the strategy as to on the infrastructure and have the best and most robust infrastructure in the market and that’s what we’ve been working on. The year and a half out hopefully we’ll see some of these initiatives starting to mature although I can think of the TERRA-Northwest project there is going to be demand for additional capacity on that eventually and we’re going to need to close that ring to provide additional redundancy out there.

So there maybe some ongoing expenditures and so on there but with looking out into the future I think the strategy was to have all the basis covered, you don’t always know where the market is going but clearly if you own their infrastructure and circling all the stuff and including wireless needs to ultimately get on to a some type of a backbone and we’ve certainly got the backbone to provide that both in Alaska and between Alaska and the Lower 48. So we feel like we’re going to be very well positioned and really it doesn’t matter whether video dies and is replaced by data because we’ll transition from lower margin video and they’re at least today higher margin data so the idea is if you own the infrastructure you got the best network you ought to be able to generate some revenues and some EBITDA offer those investments Liam.

Great. Thanks John.

You’re welcome.

Hello gentlemen. First, the question on the new segmentation reporting just on wireless that’s wholesale only so you’re treating your own internal segments kind of a wholesale customers, is that the way to look at that?

Yeah, I'm glad you asked that, there is going to be some getting used to the new reporting format but the idea going forward is we’re treating our own numbers like we will post closing of AWN transaction so wireless today is the wholesale provider and you can see that we’re still reporting pieces of the business in the wireless business in both the consumer and the business services segments. The idea going forward is that the wholesale business will probably generate somewhere around 70% of the revenues with about 30% going to the retail side, the idea to kind of cover the most of the class of the retail operations in the business services and consumer segments with most of the revenues and EBITDA are generated in the AWN wholesale segment.

So that’s kind of how that structured so you’ll continue to see wireless in both areas the wholesale on one side and the retail on the other.

And just in terms of the potential closing, you’re still saying sometime in 2Q I understand Tina is on the call maybe if you don’t mind going through what are the remaining milestones from a approval standpoint where do we stand with those?

We’re happy to let you address that one.

Sure. We’ve got – we’re still in front of the FCC and then we have the key matter in front of the FCC as ACS has request for an exemption from the Investment Company Act.

And where we standup after those or there any objections or where you can go on track?

Well it is still the case in front of the FCC not to know our position for very late filed late made filing by one of our broadcast friend that clearly is not any traction we’re just going through the some sort of final rounds of discussions with the FCC staff to close up. The couple of issues that they wanted to on further discussion and treatment off.

And one the FCC front that’s in ACS’s hands I think that’s well along but I can’t really comment any detail on that.

Understood. And continuing along on the wireless, your subscriber numbers were pretty good this quarter the additions kick back up, anything you’re doing differently in terms of pricing promotions and set to go on?

I can’t think of anything certainly we’ve been pretty aggressive the last couple of quarters. I guess one thing that’s nice is that most of the turmoil in the Lifeline is quite down at this point, I think that was a concern I think in the last couple of calls is are we going to continue to see the runoff in the Lifeline and I think I led you believe that hopefully that was going to stabilize here this year end it certainly appears to be the case so far.

So I don’t think anything in particular we’re not getting anymore aggressive on pricing but we are working hard on some things like I mentioned in the past our churn investing initiative and some of those type of thing so we’re I think we’re sharpening the pencil and getting better at the wireless business which was our last entry in the competitive market up here but I think we’re making some pretty good progress.

Okay. Thank you.

You’re welcome.

Yeah, hey congratulations on a good quarter. I wanted to ask you a question about the video segment I assume I understand the drop off in the subscriber base based on sort of broadband substitution, is there any opportunity to make up some of those revenues on the ARPU side I mean I notice ARPU declined ever still slightly and I know that the market up there is not as competitive as it is in some other parts of the U.S.

any thoughts on that?

Are you talking about the video ARPU?

Correct.

Yeah, I don’t – we got to be careful with the video product, I think historically its getting priced where, your starting to get some pushback and I don’t know that you gain a whole lot by trying to increase your prices you might just end up running your customers off a little bit quicker. So, we’re being very careful on the pricing side.

So I wouldn’t expect a whole lot of change in the ARPU. What we are trying to do is improve the value for the video customer and we’ve made some progress there where we’re rolling out some new initiatives like the TiVo whole home VCR, DVR and we’ve got some things in the hopper here, which are going to allow us to stream video to iPads and mobile devices and things like that to provide more value to the video subs.

And the broadcast strategy really fits into that and that we’re trying to develop a platform which can be leveraged and to providing local content with, the University of Alaska and some of the local sports teams and some of those type of things to put that on our network and differentiate ourselves from some of the direct-to-home guys. So beyond that know I would expect ARPU to be fairly steady.

I guess one other thing I need to throw in and something that causes little consternation a year ago, it was a pricing dispute we had with one of the – one of the networks that provided coverage of the mariners up here in Alaska that that affected us a little bit a year ago and we managed to resolve that issue and part with the help of the mariners who enjoyed having their signal carried in Alaska. So we’ve resolved that.

So hopefully the sub-counts well stabilized and the ARPU will hang in there, but I wouldn’t expect a whole to grow going forward. But we will expect to see more growth on the data side.

Okay that’s helpful thanks. And on the wireless side, just a follow-up question on your change in reporting, I read I don’t remember whether it was in your filing on Alaska’s that the - the terms of the agreement with AWN had a 70% contribution margin from on wireless sales and AWN.

And I will get the sort of the breakout of how you guys now have wireless, the wholesale wireless revenues versus consumer and business it doesn’t, and you saw exactly 70%, I mean is that – did I understand that correct or should I assume that.

Yeah, you do but it isn’t the things are nevertheless simple. I think the agreements are like 70-30 on the retail side and then there is handset subsidies and then there is a different treatment I think on the CTC, is that Lifeline is that 100%.

High cost of 100%.

High cost of 100%, to the credit of AWN to the wireless segment. And then inside the wireless segment there is also roaming for example, for example some of the big carriers roam on our network in Alaska and that will show up in that segment as well.

So you can’t just do the 70-30 calculation.

Okay that’s helpful, I appreciate that. So going forward when AWN closes will that wireless segment those revenues will still be there, give us some reporting on those the exact number?

Yeah I think we haven’t obviously we are a little bit ahead of where – ahead of the game here, but the idea is going to be to try to communicate with our investors, so they can understand what’s going there and will figure out what – what the meaningful categories, revenues and so on are for the AWN.

Well I appreciate that. One last question I had was on the wireless side, did your current wireless customers, what percentage of those are Alaska only versus on a nationwide plan?

Anybody know the answer to that one, I am seeing a lot of heads shaking on the horizontal. Why don’t you let’s us dig into that and we’ll correct you down to get the – back to that.

I appreciate it. That’s all I had thanks.

Okay. You’re welcome.

Thanks guys and a good quarter John.

Thanks Del.

My is about the stock buyback naturally, you guys did a great job - you bought three quarters of a million shares at a good price. You still have room under the existing board authorization to continue that pace?

And the last question is because I’m not that knowledgeable about how you’re diversifying your business, but tell me the logic again on buying broadcast TV stations in the local market?

Okay, if I could remember your questions, I think the first one was do we an authorization to continue buying stock back in the urban market, and the answer is yes we do, certainly to the caveats that I throw out there including, what the stock price is and I am not going to divulge to you today what – what we’re willing to pay for the stock, but certainly we will continue to be opportunistic Del in that regard. In terms of the broadcast television, the plan is to get some economies for example and the advertising market as you might expect you know cable TV advertising is a big deal up here.

We can get some synergies out for example combining sales forces and had one sales force which sells, both cable and the broadcast avails and so on. So, we see some synergies there, I think I talked about two of the opportunities to generate some local programming and content and, have our own studio and be able to provide some – some unique programming that we can carry on our cable plan that the direct-to-home guys can’t duplicate that type of thing.

So and also it would be nice to make some money in the process. So, but it’s an opportunity to present it itself we thought it would fit in nicely with what we’re trying to do up here.

In terms of diversification we’re not limiting our efforts to Alaska, I think I’ve talked in the past about the fact that the Board has formed a diversification committee to kind of look at – at least start sticking our toe in the water seeing what’s available in the Lower 48 and seeing what might make sense longer term and the idea is that if you start looking today maybe in a couple of years you might be in a position to do something, but if you don’t start looking today then two years from now you will be no closer to doing a deal then you are today. So the idea is to start – start looking around and paying attention to what might be available down.

So does it answer your question Del.

Yeah on the first one, on the buyback I would just asking about not a price cap but more if you had an authorized number of shares cap at 2011 with?

Not a number of shares, certainly a dollar bucket, but you’re not going to go see us make any big aggressive moves in that area, I think, we’re just going to be opportunistic and enviable way and be responsible in that area. But we don’t, if the right price comes along we’ll certainly jump in and accumulate a little bit more.

Right, thanks a lot guys. I appreciate it.

You’re welcome, Del.

Hi, thanks very much. I just wanted to make a clarifying – a clarification on the structure of the cash flows for AWN once it’s closed.

So my recollection is – is there a preferred dividends that will be paid to Alaska communication $50 million in the first two years out of the JV is that accurate?

That is correct, its actually 50 in the first two and another 45 in the subsequent two. So, 190 over the first four years.

Okay. So hopefully that’s not going to be a problem from the cash flow of the JV, but for the ability to drawn on the revolver so if necessary would you be drawing on the revolver to pay those dividends to Alaska and just wanted to make sure that the revolver capacity that you had for working capital and the dividends is sufficient?

Well number one we would expect the dividend to come out of free cash flow the joint venture, so we wouldn’t have to borrow to pay it. If we did borrow to pay it we would be limited to the $50 million facility between AWN and GCI, we’re not allowed to go beyond that.

So well we would have to make deal with that availability. So but, the key question is, whether or not we would expect to borrow and I think the plan is no that we wouldn’t.

But you do expect to borrow for working capital?

Yeah that’s right, it just provide working capital.

Okay. And then in case that had there was a year where you had high CapEx or big working capital you so for any reason you didn’t have enough free cash flow and revolver capacity to pay that dividend does it is accumulative does it just roll over the next year?

Yes it is accumulative.

Okay, okay thank you very much.

You’re welcome, Ana.

Hey thanks for taking the questions. I was curious could you go over the CapEx guidance again, I think you said 150 on the fourth quarter call I think you reiterated that but then you added some other things on top of that.

I think I could tell that was in the 150 or not you talked about potential distribution centers (indiscernible).

Hard to get anything past you guys, here Kevin. Yeah I think I characterized is $150 million in core CapEx that would be items that we would expect to use in the core business and items which would be - had to be funded out of currently generated EBITDA, if it doesn’t (count) for example if we drew down some restricted cash for example through other TERRA-Northwest project that would be a separate addition.

And I think a new item that I threw in this time was we were in discussions with the owners of one of the one of our key distribution facilities that we may end up buying that instead of continuing to lease it, but I don’t have any color on that just yet. So there would be 150 in the core maybe another 15 for other non-core items and then perhaps this building purchase.

And the money for the TERRA-Northwest that would come out of restricted cash that you receive grants for already or is that…

Yeah there is a little bit of grant money and then a lot of new markets tax credit money I think what I’ve described in the past was that TERRA-Northwest is about $60 million project about 40 of that is being funded with new markets tax credit money and RCA, Regulatory Commission of Alaska grant money and 20 of that will come from GCI. And for the most part we’ve been funding the early dollars of that with the grant and new markets tax credit money but the – ultimately we will be taking $20 million out of our own pockets here over the next two years to complete that project.

Okay. And then more of a detailed thing.

Is there anything in the quarter of significant ones that you would consider to be one-time either in the revenue or expense numbers either help or hurt?

Nothing material. We had as usual there was a couple of things that, that always occur in the given quarter but for the most part offset each other.

So there were no particular charges, no particular benefits in this last quarter.

Okay. And then what about on the competitive front I mean aside from potentially whatever Verizon is going to do.

Have you seen any changes in the competitive environment on the video side or on the commercial side or anyone getting more competitive, anyone changing kind of what they’re doing if you talk about just the competitive environment in general?

I would describe it as really fairly stable. I think the big question is what impact Verizon is going to have when they come into the market, but we are doing our best to position ourselves to make sure that that’s not going to have a significant impact on us.

Do you expect anything on the commercial side because I think I’ve read that ACS has talked about getting more aggressive, what that mean…

Yeah ACS has talked quarter-after-quarter about getting aggressive and getting some traction on the commercial side. But I think they had made some minor inroads here and there but for the most part we’re doing very well on maintaining and growing our commercial business.

So we just – we just had not seen much disruption on the commercial side. Having said that we see a little bit of margin compression every time new circuit comes up for rebid and that type of thing.

So we are always fighting with the margin issues, but there is always seems like additional demand for new capacity that’s offsetting the most of the rate compression and so on. So but no I won’t describe it as stable and I would say we are holding our own and like I said earlier we’ve got some pretty darn good facilities up here and we’ve got some great people and we pay attention to the Alaska market and I think it shows in terms of our results.

Okay. And then I guess this is kind of lot of stuff into one here.

But on one hand I know that the first quarter was good, there is a lot of pieces of the businesses that are growing nicely, but then on the other side you talked earlier about there is a little bit of uncertainty around what the wireless joint venture is going to look like. With the 150 core CapEx plus up to maybe 50 more, it’s hard for me to envision you guys generate cash this year and then you target – you bought back stock in the quarter potentially buying back more stock.

I guess I’m trying to think about what your – how you think about free cash flow relative stock buybacks leverage, how you think about your ratings because I know you I think you are negative by both agencies kind of when you put all that together and you think about being post close of the joint venture, how you guys are kind of thinking about constraints in terms of buybacks and leverage and free cash flow et cetera?

Well I guess that there is not a formula, it’s an art and the idea is to have a responsible balance. We’re – it’s hard to give you a whole lot of guidance without giving any guidance and we’re really constrained in that area right now.

But our behavior is going to be a function of what kind of cash flows we do generate if the business doesn’t generate the EBITDA that we think that we’re going to generate then the first thing that we’re going to do is start throttling back CapEx and so on. So we will react to whatever we need to deal within the marketplace.

On the stock buyback situation I think you could describe our behavior in the past is fairly responsible in that area, we are not doing any major shareholder friendly actions and I would expect that to continue. So it’s really kind of a balancing act keeping all those variables that you mentioned in mine making sure leverage doesn’t go out of lack making sure the risk profile doesn’t get out of lack.

And then being – making sure that you are in a position to react to external things that may come up in adjusting forum. So just that’s called management I guess.

Yeah I guess the point to that though is if you buyback stock now and then let’s say something changes and the business gets tougher and you have to throttle back CapEx. It seems like then I would think that would then potentially change returns on the business going forward that’s – if there is uncertainty around what’s going to happen post the JV and everything I would think that you’d be more, you’d be better off potentially keeping that liquidity in that incremental leverage capacity for doing stuff after you get more visibility into what everything is going to look like post the close I guess that’s what…

Yeah those are certainly points well taken. And I think if we were significantly concerned about some of those uncertainties not going the right way then I think we certainly get a lot more conservative in terms of some of the discretionary spending that including stock buyback.

So we are not anticipating any significant disruptions in the business plan going forward, we think we’ve got an idea what how this thing is going to come together and like I said we’re going to be positioning ourselves and part of the deal, the new bank deal (provide us) liquidity and flexibility going forward to see us through the uncertainty that’s in front of us. So we’re just going to manage around it.

Okay. And then one last one just get on – with the credit rating itself you guys have certain ratings that you want to maintain as a minimum for or is it more kind of what you need to do and then it’s going to that fall out where it is.

Yeah I think the rating agencies probably are not going to be happy with the new bank deal, they’ve had us on negative watch I would expect that we may get whacked by the rating agencies but we don’t run the business for the rating agencies, we run the business for what we think makes the most sense on a long-term basis and we haven’t really deviated from that and probably won’t. So sometimes the rating agencies like what we are doing and sometimes they don’t.

And we will just off of the consequences of what how they view what we’re doing currently.

Okay, thanks.

I know the bondholders may not like that but nor the equity holders sometimes the street likes what we are doing and sometimes they don’t but like I said we run the business with a long-term view what’s best on a long-term basis and we’ve done that for 25 years and I think we’ll keep doing that.

Okay.

Okay.

Thank you very much. Hi John how are you doing?

I’m doing good, (Burn), good to hear from you.

It’s been a long time, it’s been a long time.

That’s been a while.

First of all I want to congratulate you guys on rational behavior I mean the fact that you are looking at thinking about the business long-term is maybe something a little overlooked, 2007 you promised EBITDA to be over $200 million and you kept your word on that and the company is basically thrived. So I’m kind of thinking about understanding business (101) back in 2004 Verizon held a 10% to 13% position in the company subsequently sold the position and now seven or eight years later the stock is selling for 25% less than where they sold it for.

So I’m trying to figure out what makes the environment in Alaska different today than eight or nine years ago that has prompted Verizon to come back into the market since it does from what I understand what I read it takes five years to build out a network. So I’m trying to - I guess my question is I’m asking you guys to put some color on this, how should I think about that as an investor, why eight or nine years later they’re coming back into the market and what did they see about the environment that’s different today than it was eight years ago?

Well, I guess first of all I think Verizon inherited their position in GCI, I they didn’t actually make an investment I think that dated back to (cro-magnon days) when I think there was MCI that we had a relationship with and MCI maybe investment in GCI and of course we were partners in the sense that we were carrying all their traffic in and out of the state and so on so that’s what led to that investment.

Okay.

And of course then MCI became WorldCom and ultimately somehow the stock ended up in the hands of Verizon which was a completely different animal compared to whether the MCI relationship and I think Verizon found the investment to be non-strategic and basically monetized at which probably made sense for them. So that was really how they got into the stock.

And I think probably you’d have to ask them in terms of what they’re thinking in terms of this market but AT&T Mobility is up here and how these guys are I mean Lowes and Home Depot one is on one side of the street the other one feels like they need to build on the other side, it’s probably no difference in the national wireless carriers they’d probably want us taken the ground up here. Plus I think with the growth in roaming and the growth in roaming data and so on and probably made sense or may have made sense, I don’t know not having seen the business plan but they may have thought it made sense for them to own their own facilities rather than to continue to pay roaming cost up there.

So I can understand if I stretch why they’d want to come up here, but it’s a speculation on my part, (indiscernible).

Right. Thanks John.

Second question that which is not related on – do you guys have any relationship with Clearwire as far as the 4G LTE network, is that something that you guys would be looking into I don’t even know if Clearwire is up in Alaska, has their capacity up there?

Clearwire had been up here and I think they’d withdraw and they may have a little bit of residual business up here but they’re certainly not doing anything actively in the Alaskan market and no I don’t think we’ve got any particular relationship with Clearwire.

Okay. Thank you.

That clarifies it for me thinking about different things. Thank you.

You bet, you bet.

Anyway, congratulations on the quarter, John.

Thanks (Burn).

And a great management team and appreciate it.

I appreciate all those wonderful acolytes, we’ve been in short supply over the last few years if you’re missing (Burn).

Well, you promise on what you delivered I mean you promised in 2007 $200 million in EBITDA and it’s you’re closing at a $240 million, $250 million and you’re growing your business I mean…

We try, we try.

The earnings are going to come and strong we are the better we are so.

Appreciate it, (Burn).

Okay. Thank you.

Okay, then I'm not going to ask for any more, we’ll call that a wrap. Thank you all very much for your participation and we’ll get back to work here and so on.