Investor Presentation November 2016 alaskacommunications.com | - PowerPoint PPT Presentation

Investor Presentation November 2016 alaskacommunications.com | 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, this presentation includes Adjusted EBITDA, which is a non-GAAP measure. Adjusted EBITDA measures the Company’s primary business activities without regard for the effects of special items and income tax structure. Adjusted EBITDA eliminates the effects of period to period changes in costs that are not directly attributable to the underlying performance of the Company’s business operations and is used by Management and the Company’s Board of Directors to evaluate current operating financial performance, analyze and evaluate strategic and operational decisions and better evaluate comparability between periods. Adjusted EBITDA is a common measure utilized by our peers (other telecommunications companies) and we believe it provides useful information to investors and analysts about the Company’s operating results. The definition of this non-GAAP measure is provided in the Appendix to this presentation. Adjusted EBITDA should not be considered as a substitute for Net Income and other measures of financial performance recorded in accordance with GAAP. The reconciliation of Adjusted EBITDA to Net Income can be found in the Appendix to this presentation. Other companies may not calculate non-GAAP measures in the same manner as Alaska Communications. Presentation Certain prior year financial and other information in this presentation has been reclassified to conform to the current year presentation. alaskacommunications.com | Alaska Communications ii

Company Overview  Founded in 1998 through the combination of three Alaska- based rural local exchange carriers (“RLEC”) the company is the incumbent local exchange carrier (“ILEC”) in Alaska ‒ The Company has successfully re-positioned itself as a business-focused telecom service provider, leveraging its significant fiber network across the state to provide fiber broadband and IT services to Enterprises ‒ Alaska Communications also provides broadband and voice to consumers As the incumbent telecom provider, the Company also provides services under certain regulatory programs, ‒ including Connect America Fund (CAF II)  The Company operates an expansive facilities-based network in Alaska that extends throughout the state and connects to the contiguous states via its two diverse undersea fiber optic cable systems and usage rights on a third undersea system  Alaska Communications is a publicly- traded company, listed on NASDAQ with the ticker “ALSK”  The Company is led by an experienced management team which has over 10+ years experience of working together ‒ Senior management has an average tenure at the Company of 11+ years For the Last Twelve Months Ended (“LTM”) September 30, 2016, the Company generated revenues of $225.7 million and  Adjusted EBITDA of $55.7 million The Company’s Business and Wholesale (“B&W”) segment contributes an increasing share of revenue; ~60% of ‒ total revenues for LTM Q3 2016 with over 9% year-over-year growth in 2014, 2015 and YTD 2016  B&W is expected to be the primary driver of future growth over the next several years, targeting over 8% annual growth going forward alaskacommunications.com | Alaska Communications 1

Current Capitalization ($ in millions) 9/30/2016 Capitalization Amount Ratings Maturity Pricing Floor Cash and Cash Equivalents $21.9 Revolver ($10mm) - 1/2/2018 L+450 bps 1.00% Term Loan B (First Lien) 62.5 NR / NR 1/2/2018 L+450 bps 1.00% Term Loan B (Second Lien) 25.0 NR / NR 3/3/2018 L+850 bps 1.00% Capital Leases and Other Long-Term Obligations 3.6 Total Secured Debt 91.1 Senior Convertible Notes 94.0 NR / NR 5/1/2018 6.250% - Total Debt 185.1 9/30/16 LTM Operating Statistics Revenue $225.7 Adj. EBITDA 55.7 9/30/16 Credit Statistics Total Secured Debt / Adj. EBITDA 1.6x Total Debt / Adj. EBITDA 3.3x Net Debt / Adj. EBITDA 2.9x alaskacommunications.com | Alaska Communications 2

Key Company Milestones Alaska Acquires the Northstar The Juneau and Acquires Fiber Network Telephone Utilities Communications is submarine cable, and builds Douglas Telephone from ConocoPhillips to of the Northland formed as an ILEC AKORN, providing Alaska Company begins allow entry into Oil & begins operations (by combining the 3 diverse submarine routes to operations Gas industry RLECs) the LOWER 48 … … 1893 1921 1949 1998 1999 2008 2013 2015 Launches the AWN Sells its interest in Anchorage JV with GCI to Completes its initial the Alaska Telephone Utility better compete in public offering Wireless Network begins operations competitive to GCI wireless sector RLEC ILEC Alaska Wireless Network ("AWN")  In July 2013, Alaska formed a joint venture with General Communication (“GCI”) through which each entity contributed their respective wireless assets to enable AWN to design, build, and operate a statewide wireless network − Formed to build a wireless network with the necessary scale and spectrum to compete against national carriers  In December 2014, Alaska announced the intended sale of AWN as part of its strategic overhaul to wind down the retail wireless business and refocus on areas of higher return — broadband and managed IT solutions − Transaction closed in February 2015 but Alaska Communications recognized residual revenue until Q2 2015 − Resulted in substantially improved financial profile as net proceeds were used to pay down $240 million of debt − Cost synergies as a result of the sale of AWN were fully realized by Q4 ‘ 15 alaskacommunications.com | Alaska Communications 3

Strong Market Opportunity in An Attractive Market Alaska’s Macro Economic Growth State GDP Growth ($bn) Employment (# of Jobs) +6% 356,311 51.3 $49.4 $41.0 336,659 2014 2024E 2005 2015 2017E Source: Alaska Labor & Workforce Development, Bureau of Economic Analysis Alaska’s Economic Outlook Large and Growing Addressable Market  State goes into Fiscal 2017 with: Broadband ~$54B in State’s Permanent Fund, which will ‒ IT Services continue to generate earnings over time Opportunity: High Opportunity: High ‒ ~$11B in State reserves providing runway Margins: High Margins: Moderate ‒ Projected deficit of ~$3.5B Competition: Limited Competition: Fragmented 27%  Sectors with the greatest exposure to oil prices are the state government and energy sector. Alaska 47% Communications has: $1.5B Low exposure to both sectors – collectively less ‒ 11% Voice than 5% of total revenues Managed Network Opportunity: Low  Growing TAM creates new revenue opportunities for Margins : High 15% Opportunity: High Alaska Communications as customers seek greater Competition: Limited Margins: Moderate value through IT and managed services, and Competition: Limited broadband connectivity alaskacommunications.com | Alaska Communications 4

Investment Highlights  ILEC with Extensive Fiber Infrastructure Capable of Supporting Growth  Attractive Enterprise Customer Base  Comprehensive Suite of Communications Solutions Targeting the Business & Wholesale Market  Growing Business-Focused Segments (Broadband and Wholesale)  Stabilizing Consumer and Predictable Regulatory Businesses  Operating Leverage Driving Strong Free Cash Flow  Highly Experienced and Proven Management Team With Long Tenure of Working Together alaskacommunications.com | Alaska Communications 5

Extensive Fiber Infrastructure Capable of Supporting Growth Historical Investments Have Enhanced Fiber Network and Provided Ample Capacity For Growth Extensive Long Haul Fiber Network - Two diverse submarine routes to the Lower 48 - Key fiber assets on Alaska’s North Slope supporting the oil and gas industry High Quality Fiber & Broadband Network - 100G wavelengths in state backbone with diverse routes - Commencing deployment of GPON access nodes in business areas - All military bases on fiber 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 - CyrusOne InternetExchange and Microsoft ExpressRoute partnerships - New partnerships enhance security for cloud computing alaskacommunications.com | Alaska Communications 6