GCI Liberty, Inc.

Thank you, Andrew. 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 other members of the team. And 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 will be available for playback. To access the call via net conferencing, log onto 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 with the Securities and Exchange Commission.

First, some general commentary. 2015 was a very strong year operationally, financially and strategically.

On the operational front, our operating group stepped up to the challenges presented with the acquisition of 87,000 wireless customers in the AWN transaction. On the network side, we continued our wireless build out and now cover over 80% of the state's population with LTE.

Additionally, we continue to make progress on expanding our 1-gigabit consumer cable modem product and our TERRA network. Financially, we finished the year with record EBITDA and revenue of $330 million and $979 million respectively.

Consumer high-speed data subscribers have grown by 8200 during the year while ARPU has increased by 5%. In managed broadband, we continue to benefit from the capabilities of our TERRA network with additional revenue growth in the quarter.

Roaming and Backhaul was another growth driver with revenues up $13 million for the year. Strategically I have three items that I'd like to highlight.

First, on the Roaming and Backhaul agreements. We mentioned in the third quarter call that we anticipated completing agreements with our major roaming partners that would give us long-term stability for both our revenue and our costs.

We've recently completed the last of these significant agreements which will lower our current EBITDA but we believe will enhance our long-term EBITDA, particularly on a risk-adjusted basis. As part of the agreements, we've gained access to long-term roaming for our customers who roam in lower 48 states at attractive rates.

There are two items of note financially on these agreements. First, as we mentioned in November, these contracts will reduce cash roaming and backhaul revenues by approximately 20% or $25 million in both, revenue and EBITDA in 2016 as compared to 2015.

And secondly, the accounting treatment of these contracts is to take the minimum payments over the length of the contracts and divide it by the length of the contract to get the annual revenue. This treatment is going to cause revenues to drop by an additional $30 million in 2016 as the minimum payments decline overtime.

Since this reduction is non-cash, we will add it back to get adjusted EBITDA. The second strategic item is tower sales.

We're in the process of selling the majority of our urban wireless towers in rooftop locations. These assets are non-core assets and we will be reinvesting the proceeds in core telecom assets.

Since we're still in the sale process, I'll state now and likely repeat in the Q&A session that I'm not going to note metrics like the number of towers, multiples, etcetera other than to note that we're anticipating total proceeds of approximately $90 million. The final strategic item that I want to highlight is our billing system update.

Last year we mentioned that we were looking for a billing system to consolidate our various billing platforms. We recently signed a contract with our vendor and we anticipate converting to the new platform in 2018.

With a single billing system in a simplified rate plan, we expect to see significant cost savings and make it easier for customers to do business with us. As part of the conversion and an addition to capital expenditures, we expect that about $8 million of cost related to the project in 2016 will be operating expenses which will reduce EBITDA.

These costs are similar to capital and that we won't recognize any benefit from them until after the system is in place and operational. Now for the financial review.

We achieved adjusted EBITDA of $330 million for the year, that's an increase of $7 million or 2% over 2014 in the upper end of our guidance range. Looking at quarterly adjusted EBITDA, we attained $71 million which is flat over the fourth quarter of 2014.

Moving on to the wireless segment. The wireless segment posted revenues of $268 million for the year representing a 1% decline year-over-year while fourth quarter revenues of $60 million represented a 3% decline over the same period in 2014.

Roaming and backhaul revenues were up 11% for the year but a change in wholesale wireless revenue allocations between segments caused the revenue to decline in the wireless segment. Adjusted EBITDA for the year was $179 million, this is an increase of $21 million over 2014.

In the fourth quarter adjusted EBITDA was $39 million, an increase of $6 million over the fourth quarter of 2014. These gains are a result of the strong roaming and backhaul revenues that we receive during the year.

Moving on to the wireless, our wireline segment. The wireline segment achieved revenues of $711 million for the year, an increase of $71 million over 2014.

This increase was driven partially by wireless handset sales but also by strong data revenue in both the consumer and managed broadband groups. Fourth quarter revenues of $181 million were up $14 million on a year-over-year basis.

Wireline adjusted EBITDA was $151 million in 2015, which is a decline of $14 million year-over-year. Adjusted EBITDA on the fourth quarter was $32 million, a decline of $6 million from the same period in 2014.

These declines were driven by allocation changes and reduced political advertising revenues in 2015. Turning now to the specific customer groups within the wireline segment for more detail.

First, the consumer group. Consumer revenues of $351 million in 2015 were up $63 million on the year and revenues of $89 million in fourth quarter were up $13 million compared to the fourth quarter of 2014.

This increase over the prior year is attributable to growth in our cable modem business, as well as the change in wireless revenues. Business services, business services have revenues of $210 million, that's a decrease of $16 million over 2014.

Revenues in the fourth quarter of $52 million, representing $7 million decline on a year-over-year basis. The primary drivers of this declines was the robust political advertising campaign in 2014 which did not recur in 2015.

Moving on to Managed Broadband. Revenues in the managed broadband group were $150 million for the year, an increase of $23 million over 2014.

During the fourth quarter, managed broadband achieved $40 million in revenues, gaining $8 million from the fourth quarter of 2014. These gains are the result of customer bandwidth upgrades as they continue to take advantage of our significant and ongoing investments in the TERRA network.

Other matters of interest. Capital expenditures for the year totaled $176 million or approximately guidance of $170 million.

Stock buy backs. We bought back an additional 200,000 shares during the fourth quarter bringing the final tally to the year of 3 million shares.

We ended the year with 38.7 million shares of common stock and net reduction of about 6%. Future buy back are contingent on a number of factors, and these include leverage, board approval and other opportunities in the market.

Liquidity. We ended the quarter with $27 million in cash on the balance sheet and $128 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 with gross leverage of 4.29x and net leverage of 4.21.

Guidance and economic prospects for 2016. Adjusted EBITDA is expected to be between $295 million and $325 million.

The roaming headwind of $25 million and the billing system headwind of $8 million, cost total headwinds of $33 million as we enter 2016. But for this headwinds are core business at the midpoint of guidance is up $13 million or 4%.

Revenue is expected to be between $930 million and $980 million in 2016. Excluding roaming and backhaul, we expect revenues to be up approximately 4%.

However, roaming and backhaul revenues are affected by two factors. First, as I mentioned the actual rate reduction of approximately $25 million, and second, the revenue that we recognize from our roaming and backhaul contracts will be $30 million less than the cash that we receive because of the accounting treatment that I mentioned earlier.

All in roaming and backhaul revenues are expected to be approximately $55 million lower on a year-over-year basis. Capital expenditures are expected to be approximately $210 million in 2016.

We will be reinvesting the proceeds of our tower sale transaction back into the business. The two main projects that these proceeds will fund are diversifiable to the north slope of Alaska and a completion of the ring for our TERRA network.

These projects represent approximately $60 million of our spending in 2016. With that, we will now be happy to answer any questions that you may have.

Andrew, please go ahead and open it up for questions.

Hey, good afternoon. Wanted to ask a couple of questions just about your fiber network and the fiber competitive situation in the state.

First of all maybe you can elaborate a little bit more on what you're doing on the north slope fiber, and then I'm sure you guys are aware, this company Quintillion is out there building offshore fiber and then doing drops on the Western and Northern Coast. Do you see that as an opportunity, maybe you can pick up some wholesale capacity to serve some of those markets?

Do you see that as a threat, vis-à-vis what you're doing with Microwave and TERRA or perhaps neither, you don't really see them as viable? If you can kind of comment on all of the above please.

First on the -- our fiber plans, we're building a redundant route to the slope to increase our ability to support both our own traffic and our carrier customer traffic up there, the slope, in spite of the low oil prices it's still a very important region for us, both for wireless and for commercial customers. It's one of the few places in the state where we have a non-redundant network, and much of our investment this year both on the TERRA Network and on the North Slope fiber designed to eliminate the remaining of pockets of single thread service.

So, that's the reasoning for both of the terrestrial investment this year. You may know more about Quintillion than we do.

Our issues are open there right now. We're not sure how much they're actually doing, when they're going to complete or how to assess their project.

So I think we'll have to postpone the answers on that until we have more clarity on exactly what happens with that situation.

Just on Quintillion, theoretically, would you be open rather than using Microwave or TERRA to perhaps buying wholesale capacity to serve some of the existing markets you serve in those TERRA areas?

I think we'll have to see what the network looks like and how reliable it is and where it really serves. Right now TERRA does a lot of things that I don't think that network will do but we don't even know what it's going to look like, so you're asking for speculation in the face of situation where we have very little information.

Okay, thank you very much for the answers. Thank you.

Thanks, Barry.

Hey, guys, thanks. I just wanted to dive a little bit deeper into the roaming contract changes again.

Am I right to understand that, could you just explain again the difference between the GAAP revenue and the I guess the $30 million ad back.

Yes. So there's two pieces.

It sounds like you're comfortable with understanding that $25 million EBITDA reduction and that that's an actual rate card difference there between 2015 and 2016. The second piece is that the contract has contractual payment amounts that go out into the future, and that's what those payment amounts or what where included in the EBITDA.

GAAP from a revenue perspective takes the entire length of the contract and the entire payment stream of a contract and it amortizes them evenly by year. We've disclosed that this is a declining payment stream and so that causes the difference between the revenue that we will recognize for GAAP purposes and effectively the EBITA or adjusted EBITDA.

So am I right to assume then that you have $55 million declining GAAP revenue but a $30 million ad back below the line to EBITDA in 2016?

That's exactly correct.

And then in future years, will that reverse itself where you'll be taking in less cash than your accounting for under GAAP.

That's correct, Mike.

That's helpful. And then did you mention how long these contracts are?

We mentioned that they were long term, Michael.

All right. And does the seasonality now change because of the way it's accounted for or should we expect the same seasonality for this business?

So there is a few different contracts out there but you should see a meaningful reduction in the seasonality.

That's helpful. Okay, great.

Thanks.

Yes, good morning. On the roaming contract, was Verizon part of the -- one of the carriers you work with and does this impact Verizon's plan to roll out services in Alaska?

We've always try to make it such that we will provide all of our wholesale customers needs in Alaska and we've tried to make it economically beneficial for them to continue to use us. And so part of this was making it so that it would be economically beneficial for them to continue to use us long into the future rather than go through a more complicated structure of building further out.

Okay great, on towers what was the lease cost? You received the $90 million, what was the cost?

Yes, as I mentioned in my comments we are pretty much leaving it at this point because we are still in the process that we expect it will come out at about $90 million. Obviously there is a number of things you can move around to the least cost being one of those to change the purchase price, but we are leaving it at this point as $90 million and we will disclose the rest of that at such time as we have the final contract signed.

Okay, two other questions then, could you talk a little bit about then general Alaskan economy and then the last question would be in potential US views starts changing and its impacts on you guys?

The economy is not as strong as we would like it obviously. You can debate whether we have actually entered recession yet, the state labor autonomous contends no, but if we haven't certainly at the end of this quarter we'll see our second quarter declining state output.

The state is struggling with low oil prices both from the perspective of what's happening with the oil industry itself where they are probably accelerating lay-offs in the industry and reductions in industry investments and then more importantly the states grappling with how to deal with the derivative effects of state government dependence on oil revenues and how to fill a very substantial budget deficit that the legislature has to deal with in the next several months. So right now the outlook for the industry is that it's going to see some shrinkage in the economy.

How significant that is really depends upon what happens in June this year with the state budget. This could be a very mild recession and we could have a reset and continue to build a core economy or if the legislature takes a responsible actions and drives the budget off the cliff, you could see much more adverse results on the state economy probably before the end of this year.

And I have no way to predict the politics so what's actually going to happen. And then I think Tina can take U.S.

question.

Sure, thanks Ron. And universal service as you may be aware the commission is considering, right now the expectations of releasing shortly, an order adjusting universal service reforms for way return carriers.

And as part of that process we and the other wireless carriers serving remote Alaska as well as the rate of return carriers have worked together for a comprehensive plan in which support for each provider frozen at relatively current levels with some associated commitments for improvement of broadband services in the locations that they serve. In yesterday's hearing in front of senate commerce, you may have heard the chairman of the SEC and the other four commissioners commit to Senator Sullivan, that a decision on the Alaska proposal would be accepted sometime in second quarter this year and if they were to act on the comprehensive plan that has been provided by the Alaska industry then the US reform would proceed in the way I described as part of the proposal.

Okay. Thank you.

Hi, thanks very much, so if you follow up just on the running agreement because I know that you said the agreement was long term. If you would give us somewhat of an indicator as to what that means to help us in our modelling?

And also, with regards to the step down, any kind of indicator of the magnitude of the expected step-downs are for the contracts and how we can model particularly from 2016, 2017, 2018; so we get a sense of what that's going to look like?

Yes, Ana thanks for the questions. We're at the point where on specific contracts we don't go into information that's competitively sensitive like that and so I won't be able to give you an answer to either of your questions there.

Okay and then, the language then talking about the contract, it could change to the minimum cash payment? I just want an understanding, are these really sort of fixed payments for the most part or how much variability is there based on usage?

There is a lot of factors that we don't know Ana and so I can only characterize it as they are minimum which means that there is possibility for future payments at some point. But at this point I really don't have further information on as to speculating on the chances of those and the size of those.

Okay. And then could you give a time frame on indicative of when you expect to announce the lease back from the towers?

No.

Okay. Is that something that we should expect is going to turn into sort of debt like instrument so that the tower lease payments, well will there be tower lease payments which will be treated as a capital lease an then we will add that to the debt on the balance sheet.

Is that how we should think about that as an instrument?

Yes, so Ana you are persistence has paid off and I can answer this one. So, this will be treated almost certainly not-technically as a lease back transaction.

In spite of the fact that it will be a sale and it will be a leaseback. From accounting perspective it will be treated more than likely as a financing transaction and so yes there will be additional indebtedness in the long term debt section of the balance sheet that will be equivalent to the sale price.

And then we will have the lease payments that we make, will basically be principle or principle and interest payments.

Okay, thank you. Two more which I think you hopefully can answer these so in terms of onetime cost items this year, you have clearly highlighted the billing system, what about other transitional integration expenses related to wireless?

Is there anything that is still running through the expense line on that front?

Ana you are talking about 2016 when you say this year?

Yes.

Yes, so there is basically -- we had a fortunate circumstance last year in 2015 when we had essentially $20 million of transition cost and $20 million benefit from the equipment financing plans on the phones. Similar situation is likely to occur this year, as we are winding down really billing agreements and so, we will have in the neighborhood of $5 million to $6 million of items that you might relate to the transition but we will also get a similar benefit on equipment financing so just like last year those will net.

Okay, thank you. And final question, any updates on how we much should think about the cash tax outlook for this year?

Yes, there will be no cash taxes in 2016. The K would be out there shortly and it's in the $340 million range for NOL's, we did get the benefit of bonus depreciation this year so that did help us out there.

Okay, thanks very much.

Okay, thanks Ana.

Okay. Thank you, Andrew and thank you all for participating in the call.

We'll be back here the first week of so of May to talk about our first quarter results. Thank you very much.