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

Thank you, Mike. And thank you all for joining us today.

I am Pete Pounds, the Company’s Chief Financial Officer. Ron Duncan, our President and CEO is on the call today, as well as other members of the team.

We will all be available to participate in the question-and-answer session, which will follow my initial comments. This conference call is being recorded and it will be available for playback.

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 in forward-looking statements due to a number of factors.

Additional information concerning these factors can be found in GCI’s filings with the Securities and Exchange Commission. First, I want to highlight two significant items.

As I mentioned previously, we signed long-term roaming agreements, which provide us with a more stable cash flow stream. This is the first quarter that you will see that in our financial statements.

This will substantially reduce the seasonality of our business. Secondly, we recently signed an agreement to sell our urban wireless towers and roof top locations.

The transaction is valued at approximately 20 times tower cash flow or $90 million. We are expecting to close this transaction in mid-2016.

As I mentioned before, this will be accounted for as a financing transaction and not a sale, so debt will increase by the amount of sale proceeds. Put differently, gross debt will increase by $90 million while net debt will remain unchanged.

2016 is off to a great start. We’ve ramped up for a very busy construction season that will see major upgrades to our TERRA network and our North Slope capabilities.

Progress on our 1 gigabit red consumer data rollout has continued with Juneau coming online in early April and Fairbanks later this year. The transition of the former ACS wireless subscribers is now more than 70% complete.

So, we are nearing the conclusion of our subscriber headwinds around the transition. Revenues of $231 million for the quarter were flat on a year-over-year basis and down $10 million, sequentially.

Both comparisons are negatively affected as our reported revenue figure excludes $7.5 million of cash received during the quarter, as a result of the accounting treatment of our new roaming and backhaul agreements. We’ve added this fact to our adjusted EBITDA to reflect the economics of the agreement.

The sequential quarter is also affected by the seasonal decline in wireless handset revenues of $4 million. Our adjusted EBITDA in the quarter was $78 million, up $3 million or 4% compared with the first quarter of last year and up $8 million or 11% compared to the prior quarter.

The sequential growth in EBITDA, in spite of lower revenues was due to growth in higher margin data revenues and declining SG&A costs. We’ve had a lot of changes in our business during the last year with our roaming agreements, acquiring the remaining one-third interest in AWN, the transition cost to move the 87,000 wireless customers onto our network, and the change from subsidized handsets to equipment financing.

These items are in addition to the normal fluctuations of our business. Given these changes and the reduced seasonality that we have, a simple run rate calculation may be helpful in understanding our progress.

Specifically with EBITDA of $78 million for the quarter, we are on a run rate EBITDA for the year of $312 million, slightly over the midpoint of our guidance. Moving onto our segments, first, the wireless segment.

The wireless segment posted revenues of $51 million for the quarter, representing an $8 million decline from the first quarter of 2015 and a $9 million decline from the fourth quarter of 2015. Roaming and backhaul revenues were down 19% year-over-year and 25% sequentially due to our new roaming and backhaul agreements.

Adjusted EBITDA for the quarter was $40 million, which is an increase of $3 million over the first quarter of the prior year and $1 million sequentially. Moving onto the wireline segment, the wireline segment achieved revenues of $180 million for the quarter; that’s an increase of $8 million over the first quarter of 2015 and down $2 million sequentially.

This increase year-over-year was driven by strong data revenues in both consumer and the managed broadband groups. The sequential decline is caused by the seasonal reduction in handset revenue.

Wireline adjusted EBITDA was $38 million in the quarter; that’s flat year-over-year and up $6 million sequentially. EBITDA benefited sequentially from a $3 million increase in data revenues and a $1 million decline in SG&A.

Turning now to the specific customer groups within the wireline segment for more detail. Consumer revenues of $85 million in the first quarter were flat on a year-over-year and down $4 million compared to the fourth quarter of 2015.

Compared with the fourth quarter, handset revenues were down $4 million, accounting for the bulk of the sequentially decline in revenues. The addition of 6,100 data subscribers over last year and 500 during the quarter, helped overcome declines in video and voice revenues.

Business services: Business services had revenues of $52 million which was a $1 million decline over the first quarter of 2015 and flat sequentially. Managed broadband: Revenues in the managed broadband group were $43 million for the quarter, an increase of $9 million over the first quarter of 2015 and up $3 million sequentially.

These gains are due to new healthcare and education customers as well as upgrades from existing customers. Now for other matters of interest, first, capital expenditures.

Our capital expenditures for the quarter totaled $34 million. This will ramp up in the coming quarters, as we enter the summer construction season.

Stock buybacks: We bought back 600,000 shares during the first quarter at a cost of $11 million, and that brings our share count to 38.6 million, a reduction of 5% from a year ago. Future buybacks are contingent on a number of factors; these include leverage, board approval, and other opportunities in the market.

Liquidity: We ended the quarter with $13 million in cash on the balance sheet and a $123 million in availability on our line of credit. With total current maturities of $12 million, I’m satisfied with our liquidity.

Leverage remains within our comfort zone. Our gross leverage is 4.2 times, and our net leverage is 4.16 times.

Guidance and economic prospects: There is no change in our guidance for the year. Adjusted EBITDA remains $295 million to $325 million; revenue between $930 million and $980 million; and capital expenditures of approximately $210 million.

In conclusion, we had a solid and steady quarter. And we will now be happy to answer your questions.

Hi, thanks. Pete, just maybe some clarification on the transaction you announced.

Is that substantially all of the towers that you were looking to sell? And I am assuming that this doesn’t include some of the build out you’ve done on the TERRA project, it’s for just sort of more like a macro cell towers in the larger markets.

Is that right?

Yes, Anthony, I would characterize this as our urban tower and rooftop portfolio. And while I am not going to tell you that that’s all that we would conceivably sell.

That’s the bulk of the economics and that’s what we’ve gotten off the table. There are no TERRA towers in that package.

And then, if you could talk a little bit -- or Ron as well, just about prioritization around use of proceeds, how you sort of weigh, if you have any mandatory repayments you would have to make and how you weigh debt reduction versus share buybacks and other things that you’ve done over time as well?

So, Anthony, I will start with the mandatory prepayments. And basically the issue there is we either need to make capital investments or we need to payback debt.

We’re making capital investments of approximately $210 million this year, so that more than covers the $90 million bucket there. We’re not really making any forward-looking comments on the use of proceeds at this point.

Right now, we’ve got a term loan A that’s up in two years; I think it’s April 30th of 2018. And so, over the next six months or so, we’ll figure out how we’re going to handle that as far as the proceeds there and how that will wrap into either an amend and extend or refinance on the term loan A.

Great. And then, final one from me is just I guess the rationale behind the roaming agreement.

You talked about it sort of smoothing the volatility or if not vitality, but the seasonality of your business obviously with a very heavily weighted towards the summer months. How do you then marry your sort of underlying network costs when you get that sort of surge in customer traffic during the summer?

Is there any potential for mismatch of sort of when you’re incurring costs on your network vis-à-vis the roaming agreement which now sort of normalizes the trends along the year?

No. Anthony, the cost of the network is primarily capital, not operating.

And so, we’re not going to see -- or put differently, it’s largely fixed cost there of the capital and operating the network. And so, you’re not going to see a meaningful change in the cost of operating the network quarterly, nor at this point are you going to see a meaningful change in the revenues, sequentially.

Hi, thanks very much. So, on the roaming and backhaul contract that exists, is the guidance still that cash roaming or backhaul revenue is supposed to be down by $25 million year-over-year?

That’s right.

Okay. But then, the first quarter, you’re actually up year-over-year on a cash basis.

Is that right?

Yes, so that’s seasonality coming into play there, which unfortunately means that the second and third quarters are going to suffer meaningfully on a year-over-year comparison. And really part of the reason that I talked about the fact that we are reducing our seasonality significantly.

And so an additional way of analyzing us is to simply take run rate. And I think taking the first half of the year and doubling that will give you another reasonable marker for comparing us at the end of next quarter.

Okay. That’s understood then.

And then, just an update on Verizon’s deployment within the state with regard to building a network?

We haven’t seen any changes and I wouldn’t really expect to see changes in the near-term, other than going out in their urban areas. The agreement we have with them should given them adequate coverage for the areas that they are not built in.

So, we would expect to see some densification in the year but today no meaningful change in what they were doing prior to the agreement.

And then, what about with regards to the competitive intensity on the store front or the marketing front?

There really has been no change in the marketplace I think from a competitive perspective in the last 12 to 15 months; it’s sort of been steady. We’re experiencing the same trends that you’re seeing on the national basis; when you see a national promotion, it trickles up here when you see price changes from either AT&T or Verizon responding to their Lower 48 competitors, those up into the market up here.

Presently, pricing and competition levels in the market will go up like they would in Lower 48. And I would be surprised if we varied from that very much going forward.

I just have a couple of questions. I know that the wireless ARPU went down sequentially and year-over-year.

Could you just elaborate on that?

Sure, two things going on there. First of all, wireless ARPU is measured simply on monthly recurring revenues and not on equipment revenues.

And so, as more and more people switch from subsidized handsets to finance devices, the monthly recurring revenues out of wireless will drop. And so, we’re seeing that effect.

Secondly, as we transition customers from ACS onto our billing system, we’re often times reducing the revenues there, bringing them on to more current rate plans there. So, we’re seeing a little bit of ARPU reduction from that.

And could you just -- I believe you said something of about the drops in the lifeline, wireless subs, but could you just remind me what it was? Because it’s a larger drop year-over-year, and I think you were transitioning, moving away from these customers or something like that, but could you please remind me?

Yes, I think the transition, as we move the customers over onto our billing systems, we’ve got some very robust processes that we go through and not all of the customers that came over were able to meet those standards. And so, we just never brought them on.

Two more questions, I promise. Question, so, the whole so wireless revenue, is that impacted by -- because it did drop year-over-year, is this impacted by the roaming contract?

That is not. That’s basically a piece of our retail roaming revenues.

And so as the ARPU drops a little bit and as the sub count has trickled down through the transition a little bit that’s affected wholesale roaming ARPU -- wireless revenues.

And last question, should we expect any cash adjustments for the wireless EBITDA coming in Q2, Q3 and forward or was that just a one-time and then it will normalize?

Yes, you’ll see the same adjustment occur in the second, third and fourth quarters of this year, $7.5 million in each of those quarters.

So, is just that’s the way -- is this the way to contract the structures? There was a change compared to last year, I’m just struggling to understand a little, please help.

Yes. And Boyan, we can take this offline, if you want a little bit more details on it, but we discussed this, I think pretty fully in the year end press release that there is a difference where we have higher cash payments in the early part of the contract and lower cash payments or lower minimum payments in the end of the contract.

But the accounting treatment is such that all of the required payments gets smoothed and then averaged over the period of the contract. And so that’s what causing the differential here.

We’re taking the contractual revenues into EBITDA and not the GAAP revenues into EBITDA.

Alright. Well, thank you Mike and thank you all for listening.

We’ll look forward to doing this again the early part of August. Thank you very much.