Deutsche Bank 26 th Annual Leveraged Finance Conference October 2018 - PowerPoint PPT Presentation

Deutsche Bank 26 th Annual Leveraged Finance Conference October 2018 1

Safe Harbor Statement Forward-Looking Statements We have included in this presentation certain "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's beliefs as well as on a number of assumptions concerning future events made using information currently available to management. You are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of risks, uncertainties and other factors, many of which are outside Alaska Communications' control. For further information regarding risks and uncertainties associated with Alaska Communications' business, please refer to the Alaska Communications’ SEC filings, including, but not limited to, our annual report on Form 10 -K, quarterly reports on Form 10-Q filed subsequently, and other filings with the SEC, included under headings such as “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Non-GAAP Measures In an effort to provide investors with additional information regarding our financial results, in particular with regards to our liquidity and capital resources, we have disclosed certain non-GAAP financial information such as Adjusted EBITDA, Adjusted Free Cash Flow and Net Debt, which management utilizes to assess performance and believes provides useful information to investors. The definition of these non- GAAP measures are contained in our quarterly earnings press releases. Adjusted EBITDA and Adjusted Free Cash Flow are non-GAAP measures and should not be considered a substitute for Net Income, Net Cash Provided (Used) By Operating Activities and other measures of financial performance recorded in accordance with GAAP. Reconciliations of our non-GAAP measures to our nearest GAAP measures can be found in our earnings releases. Other companies may not calculate non-GAAP measures in the same manner as Alaska Communications. We do not provide guidance for Net Income and Net Cash Provided (Used) By Operating Activities. 2

ALSK Investment Thesis Robust Broadband Growth Favorable Competitive Dynamics High Quality Fiber Assets Technology Innovation Strategic Customer Relationships 3

Robust Broadband Growth Video Streaming Internet video traffic growth at ~24% CAGR 2016-2021 Gaming, Augmented / Virtual Reality Online gaming traffic growth at ~62% CAGR 2016-2021 Cloud Migration Business IP traffic growth at ~23% CAGR 2016-2021 5G Wireless Backhaul Small cell deployment increase ~35x in next 10 years Distributed Content Delivery Networks Traffic crossing CDN’s growth at ~38% CAGR 2016 -2021 Sources: Cisco Visual Networking Index: Forecast and Methodology, 2016 – 2021, ATLANTIC-ACM, SNL Kagan,, FirstNet, and Management estimates 4

~$1.6B Opportunity in Alaska Offers Significant Runway for Growth Telecom Market: ~$820M Total Market: ~$1.6B All others: ~$203M ALSK: $167M 20% 25% TELECOM IT GCI 50% 50% $450M GCI: $450M 55% • ALSK has grown share in the Enterprise / Carrier market segments with significant growth opportunity ahead • Growth expected from growing the expanding broadband market and further share gain from our competitors • The $836M IT market, represents significant opportunity to grow via gaining share of wallet 5

Favorable Competitive Landscape Alaska Market Dynamics  One primary wireline competitor  Strengthening Oil & Gas industry  Increasing service demand from businesses Differentiators  Own and operate 2 of 4 submarine cables, with only diverse exit from Alaska  Only partnership offering secure cloud connectivity  “No surprises” products – no overages, no data limits  Brand: recognized for local, trustworthy, reliable customer service Opportunities for Growth  Grow with market  Take share  Expand share of wallet – grow with our existing customers as their needs increase 6

High Quality Fiber Assets Extensive Long Haul Fiber Network − Own and operate two diverse submarine routes to the Lower 48, with capacity on other systems for back- up/protection − Fiber assets from partner in the Arctic (North / NW Alaska) High Quality Fiber & Broadband Network − 100G wavelengths in state backbone with diverse routes − All military bases on fiber − Extending fiber footprint into NW Alaska with our partner State of Art Secure ALL IP Network − Juniper IP/Advanced Ethernet core – statewide 2.0 Certified Ethernet services − Widely deployed Metaswitch voice application soft-switch network Recent investments in Fixed Wireless and Satellite capabilities extend network capabilities 7

Technology Leadership and Innovation Select Partnerships Next Generation Products Network Innovation  First SIP product implementation in Alaska:  Fixed Wireless (FiWi) Access ‒ QoS Enabled, Secure, MEF Certified IP ‒ All major metro markets in Alaska Network  P2P mmWave for Fixed Wireless Backhaul  Hosted Voice over Internet:  Extending satellite solutions ‒ HDVoice, Unified Communications, OTT self install ‒ Low Earth Orbit, C-Band, Ku-Band  Secure Cloud Enablement  Converging networking and cloud with SD ‒ Only Microsoft Express Route Certified WAN Provider in Alaska  Firsts in the market: ‒ Only CyrusOne InternetExchange Certified Provider in Alaska ‒ Launch of Metro Ethernet and MPLS ‒ Carrier Ethernet 2.0 certified services  Internet Now for Multi-Dwelling Units ‒ Voice over Internet and SIP next (MDU’s) – Instant turn up, unlimited data generation products ‒ Only company offering Microsoft Express  IT Marketplace to serve small business with Route IT Services 8

Strategic Customer Relationships C ARRIER / F ED O IL & G AS S TATE / L OCAL H EALTHCARE / E DUCATION SMB S TRATEGIC C OMMERCIAL Kodiak Area Native Assoc. 9

Key Services  Cyber security solutions 2012 Revenue Mix  Professional services, help desk services IT Services  Managed Solutions 17% 36%  Only Microsoft ExpressRoute certified provider in Alaska For Business Data Networking  First in Alaska with Carrier Ethernet 2.0 Certified Services 47%  Up to 1Gbps speeds for retail customers Internet Consumer Business/Wholesale Regulatory/Other  10Gbps Wholesale/Service Providers Connectivity  No data caps, no overage charges  Secure hosted voice over internet solutions 2017 Revenue Mix Voice  State of art SIP trunking services Communications 22% 17%  Up to 100Mbps speeds Unlimited For Home  No data caps, no overage charges Internet 61% Consumer Business/Wholesale Regulatory/Other  AK Voice provides simple, affordable and modern VoIP solutions Home Voice 10

Q2 and 1H 2018 Financial Performance TOTAL REVENUE GROWTH 1H Q2 YoY % YoY % Q2 Q2 1H 1H ($ in M) Increase/ ($ in M) Increase/ 2018 2017 2018 2017 Decrease Decrease Business and Business and $37.5 $36.6 2.4% $71.2 $71.1 0.1% Wholesale Wholesale Consumer $9.5 $9.3 2.1% Consumer $18.8 $18.6 1.3% Regulatory $12.6 $12.7 (0.2%) Regulatory $25.5 $25.5 (0.2%) Total Revenue $59.6 $58.5 1.8% Total Revenue $115.6 $115.3 0.2% 11

Historical Financials W IRELINE R EVENUE A DJUSTED EBITDA Sale of Wireless operations $227 $227 $220 $215 $199 W IRELINE C APEX 1 T OTAL N ET D EBT / L EVERAGE Sale of Wireless operations 12 1 2015 excludes the $5.3mm ConocoPhillips fiber purchase

Strategy Drives Shareholder Value Favorable competitive dynamics and strategic customer relationships drive operating Market performance Opportunity High quality fiber assets supported with FiWi and Satellite extensions and partner Technology capabilities drive competitive differentiation Innovation Strategic Exploring strategic actions to drive scale and diversification Actions 13