Deutsche Bank 25th Annual Leveraged Finance Conference October 2017 - PowerPoint PPT Presentation

Deutsche Bank 25th Annual Leveraged Finance Conference October 2017 alaskacommunications.com 1 | Alaska Communications

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 on Schedules 4, 6, and 9 of our earnings press release. 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 release or on our website at http://www.alsk.com in the investment data section. 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. alaskacommunications.com 2 | Alaska Communications

Alaska Communications Premier fiber broadband and managed IT services provider in Alaska Capturing Well positioned in a growing market with Unique unique competitive dynamics Opportunity Leveraging Differentiated product set and high quality network and Competitive customer service drives retention and acquisition Advantages Creating Record of consistently posting industry leading revenue growth and Shareholder committed to expanding Adjusted EBITDA margins and FCF Value Extensive 100+ fiber network Extensive in-State Years of service Fixed wireless and Proven management Consistent top line and submarine fiber in Alaska satellite expanding team growth network capabilities alaskacommunications.com 3 | Alaska Communications

$1.6B Market, 85%+ Business, Growing 3%-5% a Year Overall Market IT Services Competition: Fragmented Margins: Moderate Growth: High Broadband - Business 30% IT Services Telecom Services 52% 48% Telecom Services Competition: Limited Margins: High Broadband - Consumer Growth: 9% Broadband: High Voice: Low Voice - Business 5% Voice - Consumer 4% Business Consumer Internet IT Services & Voice Unlimited Data Networking Home Voice Connectivity Secure Cloud Communications Internet alaskacommunications.com 4 | Alaska Communications

Opportunity in Business and Wholesale Market  Broadband growth driven by cloud migration ─ Take share of market  ~21% market share ─ Consistent track record of year-over-year growth ─ Agreement with Quintillion Networks creates new opportunities to take share  Managed IT Services allows pursuit of greater share of wallet ─ Fragmented competition ─ Partnerships create capabilities Business and Wholesale represented ~62% of revenue YTD at June 30, 2017 ~8% CAGR expected over next few years alaskacommunications.com 5 | Alaska Communications

Consumer Focus on Stability and Increasing Margins  Increasing focused sales for new opportunity in >=10Mbps broadband service  Margin management with focus on operating model: ─ Online orders now over 35%, up from 5% at the end of 2015 ─ Wireless broadband, online sign up, credit card pre-pay with no paper billing  CAF II provides new platform for growth over 2017 and 2018 ─ $8M to $10M capex to complete engineering and deploy 30% of locations ─ Exploring fixed wireless to meet or exceed speed requirements Consumer ~16% of revenue YTD at June 30, 2017 Stable performance expected to continue alaskacommunications.com 6 | Alaska Communications

High Quality Network Serving Major Population Centers  Deployed pilot projects for fixed wireless broadband service  Positioning to enter new markets with fiber capacity to the North Slope  Developing satellite capabilities to complement terrestrial network alaskacommunications.com 7 | Alaska Communications

Testing Innovative Technology to Create More Opportunity Point to Fixed Wireless using Point to Point (PTP) MultiPoint Satellite Unlicensed / Lightly mmWave Technology (PTMP) Licensed Spectrum • Pilot program in • Up to 3 miles • Up to 7 miles • Earth station turn up progress underway utilizing C band spectrum that • Capital efficient using: • 1-4 Gbps speeds, • 25-50 Mbps speeds, covers all of Alaska - Unlicensed 5Ghz depending on distance expected to increase • Improves cost band structure by removing • Applications: • Applications: - Lightly licensed third-party and allows - “Last Mile” 3.65Ghz band - Backhaul to towers for new sale 70/80Ghz band - Enterprise broadband opportunities customers - Multi-unit dwellings • Pursuing future Low - More CBRS - Backhaul where - CAF II program spectrum in 3.5Ghz fiber is unavailable Earth Orbit (LEO) lightly licensed solutions with band expected in OneWeb 2018-2019 alaskacommunications.com 8 | Alaska Communications

Partnerships & Products Driving Differentiation and Growth Partnerships with blue-chip companies and access to the latest products deliver best-in-class customer experiences Leading Edge Partnership Certification Next Generation Products   First SIP product implementation, Premier partner with Barracuda currently in all major metro  markets in Alaska Microsoft Certifications ‒ Silver, Cloud Platform  Hosted Voice over Internet in all ‒ Gold, Education Partner major metro markets in Alaska ‒ Gold, Small and Midmarket Cloud Solutions  Proactive management of Enterprise Class networks ‒ Customer Portal capabilities for self management and reporting alaskacommunications.com 9 | Alaska Communications

Delivering Industry Leading Performance Q2 1H YoY % YoY % Q2 Q2 1H 1H ($ in M) Increase/ ($ in M) Increase/ 2017 2016 2017 2016 Decrease Decrease Business and Business and $36.6 $33.9 8.1% $71.1 $67.4 5.5% Wholesale Wholesale $9.2 * Consumer $9.5 (2.4%) Consumer $18.6 $19.0 (2.2%) Regulatory $12.7 $12.9 (1.8%) $25.6 * Regulatory $26.2 (2.4%) Total Revenue $58.5 $56.3 4.0% Total Revenue $115.3 $112.6 2.4% Total Broadband Revenue comprises 55% of Total Revenue for the Quarter and YTD ($ in M) ($ in M) $32.4 $63.4 $56.3 $28.4 Consumer Consumer $6.5 $12.9 Broadband Broadband $6.2 $12.4 $8.9 $17.3 Wholesale Wholesale $7.8 $15.4 Broadband Broadband Business Broadband Business Broadband $17.0 $33.2 $28.5 $14.4 Q2 2016 Q2 2017 1H 2016 1H 2017 * Changes from the Q2 2017 earnings presentation reflect rounding. alaskacommunications.com 10 | Alaska Communications

Completed Debt Restructure  Refinanced maturing debt, extending maturities in April 2017 ‒ $120M first lien term loan tranche 1, at LIBOR+5%, maturing in 2022 ‒ $60M first lien term loan tranche 2, at LIBOR+7%, maturing in 2023 ‒ $15M revolving credit facility  Completed cash tender offer for 6.25% convertible notes in April 2017 ‒ Successfully repurchased 89.3% or $84M of the $94M convertible notes ‒ $10M remains in restricted cash account to opportunistically repurchase the remaining convertible notes or settle them upon maturity in May 2018  Net debt of $171.0M and total debt of $187.7M at June 30, 2017 alaskacommunications.com 11 | Alaska Communications