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

Thank you, Ryan, and thank you all for joining us today. I’m Pete Pounds, the Company’s Chief Financial Officer.

Ron Duncan, our President and CEO, is on the call today, as well as others on our management team. We will be available to participate in the question-and-answer session, which will follow my initial comments.

This conference call is being recorded and 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 such factors can be found in GCI’s filings in the Securities and Exchange Commission.

First, Liberty transaction. As we previously announced we've entered into an agreement with Liberty Interactive Corporation to combine GCI with certain assets of their Liberty Ventures Group.

Since this was announced we've made significant progress on the required condition to close. Financing, we've received the consent of our bondholders to waive the change of control provision and allow for the combination.

A similar amendment for the senior credit facility is currently in progress and we expect to receive their consent shortly this will complete the financing conditions. Regulatory, we're in the process of completing our submission to the FCC the regulatory commission of Alaska and the Department of Justice.

Moving on to the operations, we've heard your request to simplify our reporting structure and we've done just that. Our former Wireline and Wireless segments have been merged to reflect our focus on our two customer groups, consumer and business.

The revenues from the former Wireless segment are now reported as follows; all wireless plan and usage revenue is now reported in consumer or business dependent on the end customer. Previously a portion of this revenue was reported as wholesale wireless.

Roaming in backhaul revenues are now reported in business as wireless revenue. The High Cost USF support that we receive is now reported in consumer wireless.

Now for the financial overview. We had revenues of $228 million for the quarter, which is down $3 million or 1% from a year-ago, sequentially revenues down $4 million.

This revenue decline is driven primarily by our consumer wireless and video customers. Our first quarter pro forma EBITDA which excludes $4 million in Liberty transaction costs was $73 million that's up $5 million sequentially and $2 million year-over-year.

Our EBITDA margin was 32% up from 29.1% in the fourth quarter and 30.6% a year-ago. We are pleased with some of the early efficiency results increasing our margins and are looking for further progress.

Consumer. Consumer posted revenues of $107 million for the quarter representing a $4 million decline from the fourth quarter of 2016 and down $7 million from the first quarter of 2016.

On a year-over-year basis the reductions were split equally between video subscriber losses and wireless revenue declines and both of these are consistent with national trends. Total wireless subscribers were down 500 sequentially and 4000 year-over-year.

The year-over-year decline was related to the billing system eliminations while the sequential decline was affected by the unlimited plans rolled out by the nationwide carriers. In late March we rolled out our better than unlimited wireless plan to compete with the offerings from the national carriers.

Our non-907 number portability project is on track for rollout later this quarter, which combined with our competitive wireless plans should benefit our subscriber counts. Cable modems were essentially flat in both sequentially and year-over-year reflecting the challenging economy in the state of Alaska.

Business. GCI business revenues of $121 million for the quarter were flat from the fourth quarter and up $4 million from a year-ago declines in voice and video were offset by gains and data revenues.

Other matters of interest, capital expenditures. Our capital expenditures for the quarter totaled $28 million.

Liquidity. We ended up the quarter with $15 million in cash on the balance sheet and $94 million in availability on our line of credit.

With total current maturity of $13 million I'm satisfied with our liquidity. Leverage remains just above our target with net leverage of 4.7 times based on the trailing 12 months operating cash flow.

Guidance. Pro forma EBITDA is expected to be between $300 million and $325 million excluding costs related to the Liberty transaction.

Capital expenditures of approximately $165 million. And Ryan, I would now be happy to open the floor to questions.

Hey, good afternoon. A couple questions, first of all on consumer wireless subscribers.

Pete you mentioned some of the factors you have coming to play you've got a – obviously you start with the best network in Alaska and you've now got a very competitive unlimited plans, you're going to rollout the number porting. Is that enough you think that you can get this business back to at least stable or perhaps growth in the second half of the year?

Yes, this is Ron. I think we can get back on a growth mode, I don’t expect it to be spectacular growth, but the losses last year really had to do with the consolidation of the billing platforms in the merger of multiple subscriber basis into a single unit.

We’ve got almost all billing platform shutdown at this point. We're rapidly integrating on the LTE platform.

We have a consistent set of plans and they are compelling plans in the market. We’re a little late in the first quarter with the launch better than unlimited and we got jumped on by the second round of national price reductions, but I think we got it.

Good plan for the rest of the year. I would expect to see slow, but steady growth in association of the erosion.

And then the other headwind that you facing is obviously the Alaskan economy and we face the risk, potentially population out migration from the state. How much of that are you seeing so far and is that impacting your subscriber numbers in the different business units in consumer?

Conceptionally it has to be impacting subscriber numbers, we lost 8,000 jobs up here and well you are not seeing a collapse in the real estate market yet. There's clearly out migration and people are not taking their cable modems with them.

So it's hard to differentiate where – particularly on the video side and what’s going over the top and what’s actually out migration. I suspect the flat data business represents gradual share growth in the face of declining number of households, but it's really hard to get a handle on how many of those 8,000 jobs have actually translated into people leaving the state, but we’re definitely in an out migration mode.

Now there is probably a bit of pause going on where everybody waits to see whether the state government is going to fix the problem this year if the guys and UNO come through some sort of a solution reflects the whole. I would expect to see the employment losses bottomed out over the next six to 12 months and very gradual recovery if they do what they did last and go home and do nothing.

The likelihood is that employment losses will accelerate..

Okay. That's helpful Ron.

And then my last question is on the business segment results. There's a number of factors driving that, you don't breakout managed broadband anymore, but obviously that was a very strong growth driver with Project TERRA, so presumably that's still driving growth.

On the other hand, we’ve talked about the economy and then ACS is perhaps a bit more competitive than they were several years ago on the business side. So if you could talk about all of those factors and how is each of those impacting results on the business segment?

Yes, I think Barry just an overall view there is that it's our capital expenditures that are driving growth and some of that’s by dragging fiber to new businesses which we've been in the process of doing here particularly over the last couple years, some of that’s from TERRA. But we've found that we’ll spend the capital and we think there's new business to be add and we're not really pointing specifically to which area there that it's coming from.

Okay. Those are my questions.

Thank you very much.

Thank you, Barry.

Good morning to you guys. Just want to ask you about the capital structure a little bit, you have [indiscernible] I mean that’s a relatively high coupon giving the prevailing credit markets.

Those bonds have a call step a month from now where you can take them out one or two in a quarter, is there any thoughts on lowering your interest burden.

So Michael I would say that there has certainly been some bankers that have brought that to our attention. And all I can tell you is that this should be something that would have to be jointly discussed between Liberty and GCI, and we're not really making any comments about where we're going at this point other than the note that we do have the consent that we need on the bond in hand and that the senior credit facilities in process.

Okay. Thanks Peter.

That’s all I had.

Okay. Thank you.

Hey guys, just kind of following up on the bond question. Between now and close early next year you're going to generate a decent bit of cash flow?

Or is that just going to be sitting on the balance sheet while you're waiting for the deal to close or are you allow to repurchase stock while you're waiting or something else?

Yes. So the stock buybacks are prohibited as part of the reorganization agreement and as far as use of that cash probably the most obvious use would be to paydown on the line of credit there.

Perfect. Thanks so much guys.

End of Q&A

All right. Well thank you, Ryan, and thank you all for calling in.

We’ll look forward to talking to you all the first week of August here for the Q2 results.