Q3 2008 Alaska Communications Systems Group Earnings Conference Call - Final.(Broadcast transcript)

OPERATOR: Good afternoon, ladies and gentlemen. Thank you so much for standing by. Welcome to the Alaska Communications Systems third quarter 2008 conference call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (OPERATOR INSTRUCTIONS.) This conference call is being recorded today Thursday, October 30th of 2008.

I would now like to turn the conference over to Melissa Fouts with Alaska Communications Systems. Please go ahead, ma'am.

MELISSA FOUTS, DIRECTOR, IR, ALASKA COMMUNICATIONS SYSTEMS GROUP: Good afternoon, and welcome to the Alaska Communications Systems third quarter 2008 conference call.

With me today are Liane Pelletier, President, Chief Executive Officer and Chairman of ACS; David Wilson, Chief Financial Officer; Anand Vadapalli, Senior Vice President for Network and Information Technology; and Leonard Steinberg, General Counsel.

During this call, Company participants will make forward-looking statements as defined under US Securities laws. Forward-looking statements are statements that are not historical facts and may include financial projections, estimates of shareholder returns or other descriptions of the Company's plans, objectives, expectations or intentions.

You are cautioned not to put undue reliance on forward-looking statements as actual results could differ materially from expectations as a result of a variety of factors, many of which are outside the Company's control. We discuss these factors in our SEC filings.

Lastly, any non-GAAP measurements referred to during this call have been reconciled to their nearest GAAP measure. You may find these reconciliations in today's press release and our SEC filings on our investor website at www.alsk.com.

We will begin the call with Liane discussing the Alaskan economy and our enterprise and wireless businesses. Then, David will review the details of our operating and financial performance and will discuss the Company's position vis-a-vis the capital markets. Liane will then open the call for questions.

With that, I would like to turn the call over to Liane. Liane?

LIANE PELLETIER, PRESIDENT & CEO, ALASKA COMMUNICATIONS SYSTEMS GROUP: Thank you, Melissa. Welcome, and thank you all for participating today.

It's an understatement to say that financial markets and many economies around the world have been hit hard since our second quarter earnings call, but Alaska has been somewhat sheltered and should weather the impacts better than most states.

For example, in housing, Alaska lenders did not broadly participate in subprime lending practices, and so current housing market statistics indicate a stable outlook with single-family home median prices up slightly from the prior year and the annual foreclosure rate of less than 1%, the second lowest in the nation.

In the private sector, oil and gas dominates all other industries and contributes a full third of the state gross product. Even though the price of oil has recently dropped, it remains at historic highs and investment continues to grow.

With energy independence and diversification on the national agenda, decision makers understand that Alaska can play a part in delivering on that policy. And as discussed our prior calls, significant startup efforts are underway in Alaska that will hopefully conclude in the construction of a $30 billion gas pipeline.

Alaska's state budget remains in surplus, even at today's lower prices, and that's relevant because oil royalties contribute nearly 90% of the state's revenues.

As for employment, Alaska's enjoying its 21st consecutive year of statewide job growth and ranks in the top quartile of states in terms of year-over-year job growth.

As for income and spending, Alaskans just benefited from record permanent fund dividends and a separate energy rebate, valued together at $3,300 per residence, or $2 billion overall.

Against this economic backdrop, we continue to transform ACS to capitalize on telecommunications growth opportunities, and in our assessment, those strategic growth areas are wireless and enterprise data.

For this past quarter, ACS grew revenues overall with wireless and enterprise accounting for 48% of the total. We set ambitious goals for the enterprise segment, and we're on track to meet them all.

First, the commercial launch of AKORN, the new ACS submarine fiber-optic cable to the lower 48, the project is …