Alaska Communications Systems 8-K Alaska Communications Systems Reports Second Quarter Results

Exhibit 99.1

For more information, contact:
Alaska Communications Systems Group, Inc. Kevin P. Hemenway Chief Financial Officer (907) 297-3000 www.acsalaska.com	the blueshirt group Chris Danne, Brinlea Johnson (415) 217-7722 chris@blueshirtgroup.com brinlea@blueshirtgroup.com

ALASKA COMMUNICATIONS SYSTEMS REPORTS SECOND QUARTER RESULTS

Successful Offering of Directory Business Results in 2Q Net Income of $92.7 Million

Municipality of Anchorage Approves ACS’ $10.4 Million E911 Proposal

ANCHORAGE, Alaska—Alaska Communications Systems Group, Inc. (“ACS”) (Nasdaq:ALSK) today reported financial results for the second quarter ended June 30, 2003.

Revenues for the second quarter of 2003 increased sequentially to $84.8 million and EBITDA was $29.0 million. This compared to revenues of $92.9 million and EBITDA of $35.9 million for the second quarter of 2002, which included $11.1 million of access revenue as a result of a favorable court ruling related to a dispute. ACS reported net income of $92.7 million, or $3.08 per share for the second quarter of 2003, compared to net income of $3.6 million, or $0.11 per share for the same period in 2002. During the second quarter of 2003, the Company recorded a gain related to the sale of a majority interest in its directories business of approximately $97.6 million.

On May 8, 2003, ACS announced the successful completion of the initial public offering of its directories business. Adjusted for the sale of the directory business, pro forma second quarter revenues were $81.4 million and EBITDA was $27.6 million. This represents a $5.2 million sequential increase in revenues and a $1.8 million increase in EBITDA over the preceding quarter on a pro forma basis.

The Company also announced today that the Anchorage Assembly unanimously approved ACS’ ten-year $10.4 million proposal to upgrade and manage the city’s existing 911 system. The upgrade will include improved network services, improved address and location data, better work stations for dispatchers and enhanced map display equipment for the Anchorage Police Department and the Anchorage Fire Department.

“The second quarter generated strong improvements in our operating and financial results for the Company,” commented Chuck Robinson, Chairman and CEO of ACS. “The successful IPO of our directories business enabled us to pay off over $112 million in debt and increase our cash by over $31 million. Moving forward, we will capitalize on this improved financial position to invest in selected strategic initiatives, like our new innovative service bundling programs introduced this quarter and our advanced CDMA 1X network, offering exciting new customer features and improved coverage rolling out in the second half of the year. We believe these programs will allow us to continue to serve Alaska as the premier telecommunications company offering the most integrated spectrum of services to both consumers and businesses throughout the State.”

“We are pleased with the sequential increase in revenue in the second quarter at each of our business units,” commented Kevin P. Hemenway, Senior Vice President and CFO of ACS. “Most noteworthy was an exceptional performance by our wireless business, with strong revenues, EBITDA, and increasing MOU. Additionally, our local telephone business continued to benefit from the aggressive restructuring program we undertook a year ago, as EBITDA margins were 50.2% for the period. While we continued to experience traditional access line losses as a result of the unbalanced regulatory environment and an erosion of the total number of access lines in the market, this loss of traditional access lines was partially offset by the increase of approximately 6,300 in enterprise telephone lines associated with the State of Alaska. In addition, we made meaningful progress in the operation of the State contract during the quarter as we completed the inventory of units served for the State, resulting in approximately $1.5 million in out-of-quarter revenue and $1.6 million in out-of-quarter costs. The bulk of this labor intensive effort to properly account for the State’s services for which we can bill is now substantially complete, and we expect to see

gradual sequential improvement to EBITDA margins in this segment moving forward, while continuing to address the transformation of the State’s network to our advanced IP platform.”

“During the quarter, we paid off $112.8 million in debt, successfully managed our capital expenditures and, as a result, entered the third quarter with $64.7 million in cash and an available $75 million line of credit,” added Mr. Hemenway. “Additionally, we retain an ownership interest in the directories business currently valued in the market at over $18 million. The successful spin-off of our directories business enabled us to improve our credit profile as our net leverage ratio declined to 4.1x and our interest coverage ratio increased to 2.4x, on a pro forma basis after giving effect to the transaction. With the company’s improved credit profile, we are currently exploring opportunities to raise additional capital to support the future growth of the business and to refinance our senior secured credit facilities with some combination of new senior and senior secured indebtedness.”

Quarter Summary

• Local telephone revenues for the second quarter were up both on a sequential basis and on a normalized basis year-over-year. Due to the effect of the Company’s aggressive cost reduction program, local telephone EBITDA margins increased to 50.2% from 49.1% for the same period last year.

• Access lines ended at 339,397 including 21,169 enterprise telephone lines resulting from the State of Alaska contract. Traditional access lines ended the quarter at 318,228, a sequential decrease of 2,319 as the Company was impacted by the erosion in its access line base from competitive bypass and the elimination of second lines as customers move to broadband and wireless solutions. During the quarter the company launched several new service bundles aimed at winning back local telephone customers, which ACS expects to have an impact on traditional access lines in the third quarter and going forward.

• Local network service revenues were consistent year-over-year.

• Excluding the $11.1 million settlement, access revenues were up 5% compared to the previous year.

• Deregulated and other revenues were up $0.8 million from last year as both rents and billing and collection revenues increased.

• Cellular revenues grew by an impressive 7.0% from the prior year period and the Company added almost 1,800 subscribers. ARPU (Average Revenue per Unit) improved by $1.94 to $48.24 and MOU (Minutes of Use) increased by 19.9% from the same period last year.

• Directory business. On May 8th, 2003, ACS announced the completion of the initial public offering of its directories business through a Canadian income trust fund. The offering raised net proceeds of $142.2 million for ACS. The Company’s retained 12.58% interest carried a market valuation of $18.4 million as of June 30, 2003. Prior to the closing of the IPO, Directory contributed $3.4 million in revenues and $1.6 million in EBITDA during the quarter.

• Internet revenues were up significantly on both a sequential and year-over-year basis. This reflects the success of the Company’s DSL rollout and increased revenues from the Company’s State of Alaska contract, including $1.5 million in retroactive revenue recorded during the second quarter. ACS ended the quarter with over 14,800 DSL subscribers, an increase of approximately 900 subscribers on a sequential basis.

• Interexchange revenues were up sequentially from the preceding quarter and EBITDA margins improved. During the quarter, the Company completed the grooming of its database to remove inactive subscribers, leading to a sequential decrease of approximately 13,400 subscribers.

• Operating expenses for the quarter, before depreciation and amortization and the gain on disposal of assets, were flat with the prior year period but grew by $1.9 million on a sequential basis due to the positive increase in sales and higher costs of sales and expenses related to the Company’s State of Alaska contract.

ACS will host a conference call at 5:00 P.M. Eastern time today to discuss the second quarter results. The access dial-in number for the call is (800) 257-7087 for domestic callers or (303) 205-0033 for international callers. In order to ensure participation by phone, please dial-in 10 minutes prior to the scheduled start time. The Webcast will be available live from the Company’s Investor website at www.alsk.com. An audio replay of the call will also be

available two hours after the call for a period of 48 hours by dialing 800-405-2236 and entering the passcode 544200.

About Alaska Communications Systems —ACS is the leading integrated communications provider in Alaska, offering local telephone service, wireless, long distance, data, and Internet services to business and residential customers throughout Alaska. ACS currently serves approximately 318,000 access lines, 83,000 cellular customers, 44,000 long distance customers and 45,000 Internet customers throughout the State. More information can be found on the Company’s website at http://www.alsk.com.

In addition to historical information, this release includes forward-looking statements, estimates and projections that are based on current expectations only, and are subject to a number of risks, uncertainties and assumptions, many of which are beyond the control of Alaska Communications. Actual events and results may differ materially from those anticipated, estimated or projected if one or more of these risks or uncertainties materialize, or if underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to: rapid technological developments and changes in the telecommunications industries; ongoing deregulation in the telecommunications industry as a result of the Telecommunications Act of 1996 and other similar federal and state legislation and the federal and state rules and regulations enacted pursuant to that legislation; regulatory limitations on the Company’s ability to change its pricing for communications services; the possible future unavailability of SFAS No. 71 to the Company’s wireline subsidiaries; and possible changes in the demand for the Company’s products and services. In addition to these factors, actual future performance, outcomes and results may differ materially because of other, more general, factors including (without limitation) changes in general industry and market conditions and growth rates; changes in interest rates or other general national, regional or local economic conditions; governmental and public policy changes; changes in accounting policies or practices adopted voluntarily or as required by accounting principles generally accepted in the United States of America; and the continued availability of financing in the amounts, at the terms and on the conditions necessary to support the Company’s future business. These and other uncertainties related to the Company’s business are described in greater detail in the Company’s Annual Report on Form 10-K for the year ended December 31, 2002. The information contained in this release is as of July 31,2003. The Company undertakes no obligation to update or revise any of this information whether as a result of new information, future events or developments, or otherwise.

Schedule 1

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three and Six Months Ended June 30, 2003 and 2002
(Unaudited, in Thousands, Except per Share Amounts)

			Three Months Ended						Six Months Ended
			June 30,						June 30,
			2003			2002			2003			2002
Operating revenues:
	Local telephone		$	55,210		$	63,991		$	109,211		$	119,313
	Wireless			11,947			11,162			22,277			20,517
	Directory			3,353			8,381			11,631			17,022
	Internet			9,037			4,551			16,193			8,393
	Interexchange			5,239			4,820			10,005			9,670
		Total operating revenues		84,786			92,905			169,317			174,915
Operating expenses:
	Local telephone			27,487			32,571			55,334			61,569
	Wireless			7,019			7,069			13,583			13,111
	Directory			1,800			3,532			5,249			6,958
	Internet			13,050			7,317			23,186			12,445
	Interexchange			7,124			6,997			13,713			13,612
	Depreciation and amortization			22,091			19,973			44,691			39,232
		Total operating expenses		78,571			77,459			155,756			146,927
Gain (loss) on disposal of assets, net				97,285			(273	)		96,539			(273	)
Operating income				103,500			15,173			110,100			27,715
Other income and expense:
	Interest expense			(15,563	)		(11,620	)		(28,892	)		(25,006	)
	Interest income and other			4,787			548			4,979			1,048
		Total other income (expense)		(10,776	)		(11,072	)		(23,913	)		(23,958	)
Income before income taxes				92,724			4,101			86,187			3,757
Income taxes				—			—			—			—
Income from continuing operations				92,724			4,101			86,187			3,757
Loss from discontinued operations, net of tax				—			(515	)		(52	)		(7,387	)
Loss before cumulative effect of change in accounting principle				92,724			3,586			86,135			(3,630	)
Cumulative effect of change in accounting principle, net of tax				—			—			—			(105,350	)
Net income (loss)			$	92,724		$	3,586		$	86,135		$	(108,980	)
Income (loss) per share — basic and diluted:
	Income from continuing operations		$	3.08		$	0.13		$	2.84		$	0.12
	Loss from discontinued operations, net of tax			—			(0.02	)		(0.00	)		(0.23	)
	Cumulative effect of change in accounting principle, net of tax			—			—			—			(3.32	)
	Net income (loss)		$	3.08		$	0.11		$	2.84		$	(3.43	)
Weighted average shares outstanding:
	Basic			30,095			31,767			30,373			31,755
	Diluted			30,095			31,808			30,373			31,775
EBITDA from continuing operations			$	28,989		$	35,967		$	59,127		$	68,268

Note: Certain reclassifications have been made to the 2002 data to conform with the current presentation.

Schedule 2

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)

					June 30,			December 31,
					2003			2002
				Assets
Current assets:
	Cash and cash equivalents				$	64,560		$	18,565
	Restricted cash					110			3,440
	Accounts receivable-trade, net of allowance of $5,407 and $6,075					46,032			48,820
	Materials and supplies					11,603			11,203
	Prepayments and other current assets					5,753			6,172
	Assets held for sale					—			261
		Total current assets				128,058			88,461
Investments						1,097			—
Property, plant and equipment						1,100,073			1,090,365
Less: Accumulated depreciation and amortization						662,128			625,276
	Property, plant and equipment, net					437,945			465,089
Goodwill						38,403			77,225
Intangible Assets						22,804			23,269
Debt issuance costs, net of amortization of $21,705 and $16,365						16,189			21,529
Deferred charges and other assets						25,850			26,047
Total assets					$	670,346		$	701,620
			Liabilities and Stockholders’ Equity
Current liabilities:
	Current portion of long-term obligations				$	4,625		$	5,649
	Accounts payable-affiliate					3,524			1,319
	Accounts payable, accrued and other current liabilities					41,773			49,796
	Advance billings and customer deposits					9,146			9,804
		Total current liabilities				59,068			66,568
Long-term obligations, net of current portion						492,539			602,114
Other deferred credits and long-term liabilities						30,961			32,930
Commitments and contingencies						—			—
Stockholders’ equity:
	Preferred stock, no par, 5,000 authorized, no shares issued and outstanding					—			—
	Common stock, $.01 par value; 145,000 shares authorized, 33,568 and 33,481 shares issued and 29,956 and 30,745 outstanding, respectively					336			334
	Treasury stock, 3,612 and 2,737 shares, respectively, at cost					(14,224	)		(12,082	)
	Paid in capital in excess of par value					277,945			277,810
	Accumulated deficit					(161,033	)		(247,168	)
	Accumulated other comprehensive loss					(15,246	)		(18,886	)
		Total stockholders’ equity				87,778			8
Total liabilities and stockholders’ equity					$	670,346		$	701,620

Schedule 3

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF LOCAL TELEPHONE REVENUES
(Unaudited, in Thousands)

			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2003		2002		2003		2002
Local telephone revenues:
	Local network service		$	25,219	$	25,040	$	49,348	$	50,684
	Network access revenue			25,140		34,929		50,201		59,965
	Deregulated and other			4,851		4,022		9,662		8,664
		Local telephone revenues	$	55,210	$	63,991	$	109,211	$	119,313

Notes: During the second quarter of 2002, the Company recognized as revenue $11,066 of previously deferred interstate access revenues related to a dispute on interstate access rates for the Anchorage market based on a favorable ruling by the District of Columbia Court of Appeals.

Schedule 4

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF EBITDA CALCULATION
(Unaudited, in Thousands)

					Three Months Ended						Six Months Ended
					June 30,						June 30,
					2003			2002			2003			2002
Income from continuing operations					$	92,724		$	4,101		$	86,187		$	3,757
		Add (subtract):
			Interest expense			15,563			11,620			28,892			25,006
			Income tax benefit			—			—			—			—
			Depreciation and amortization			22,091			19,973			44,691			39,232
			Gain on Foreign Exchange			(4,104	)		—			(4,104	)		—
			Gain (loss) on disposal of assets, net			(97,285	)		273			(96,539	)		273
				EBITDA from continuing operations	$	28,989		$	35,967		$	59,127		$	68,268
Pro forma adjustments for the sale of the Company’s
	directory business:
		Add (subtract):
			Directory EBITDA			(1,553	)		(4,849	)		(6,382	)		(10,064	)
			ACS Media, LLC pro forma distributions			199			488			687			976
				Pro forma EBITDA from continuing operations	$	27,635		$	31,606		$	53,432		$	59,180

Notes:

EBITDA is presented as an additional means of evaluating the Company’s financial condition, liquidity and its ability to satisfy rating agency and creditor requirements. The Company incurs significant non-cash charges, including depreciation and amortization, related to the capital assets utilized in its operations. EBITDA is a central measure used in the Company’s compliance with debt covenants related to its senior credit facility. EBITDA as defined by the senior credit facility’s credit agreement is net income before interest expense, provisions for taxes, depreciation expense, amortization expense, other noncash charges, and unusual gains. The credit agreement also calls for excluding the EBITDA of any business disposed of during the period. Using this information along with Income from continuing operations provides for a more complete analysis of results of operations. Income from continuing operations is the most directly comparable GAAP measure.

On May 8, 2003, the Company completed the sale of an 87.42% majority interest in its directory business to a Canadian income fund. The Company’s retained interest of 12.58% is expected to generate cash distributions of approximately $1.9 million annually. Pro forma adjustments to EBITDA are presented to reflect the estimated effect of this sale as if it had occurred at the beginning of the periods presented.

Schedule 5

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS

		As of June 30,
		2003			2002
Local telephone:
	Retail access lines		227,604			246,310
	Wholesale access lines		18,868			24,970
	UNE loop lines		66,864			57,633
	UNE platform lines		4,892			—
	Total local telephone access lines		318,228			328,913
	Enterprise private network lines		21,169			—
	��
	Total access lines		339,397			328,913
	Average local telephone access lines for the quarter		319,388			329,786
	Average local telephone revenue per line for the quarter	$	57.62		$	64.68
	Quarterly growth rate in total access lines		1.2	%		-0.5	%
Wireless
	Covered population		478,413			471,863
	Ending subscribers		82,894			81,109
	Average subscribers for the quarter		82,560			80,354
	Quarterly growth rate		0.8	%		1.9	%
	Activations for the quarter		6,273			6,489
	Deactivations for the quarter		5,604			4,979
	Penetration		17.3	%		17.2	%
	Quarterly Minutes of use (000’s)		60,383			50,359
	Average revenue per subscriber for the quarter	$	48.24		$	46.30
Long Distance:
	Long distance subscribers		44,289			64,958
	Quarterly Minutes of use (000’s)		36,721			38,946
	Average subscribers for the quarter		50,983			65,740
	Average monthly revenue per subscriber for the quarter	$	34.25		$	24.44
Internet:
	DSL subscribers		14,817			9,856
	Dial-Up and other service subscribers		29,787			37,985
	Total Internet subscribers		44,604			47,841
	Average subscribers for the quarter		44,944			47,634
	Average revenue per subscriber for the quarter	$	27.88		$	25.22