GCI grows its third-quarter income

General Communications Inc. had another strong quarter in terms of revenue, particularly broadband subscribers and tourist season roaming fees, but the company is still absorbing last year’s major purchase of wireless business in its bottom line.

GCI reported $19.9 million in net income in the third quarter of 2015 compared to $9.9 million in the third quarter of 2014 following the acquisition of wireless customers and infrastructure from Alaska Communications Systems Group Inc. that was finalized in February.

For the nine months ended Sept. 30, however, GCI reported a net income loss of $12.9 million compared to positive net income of $16.9 million for the first nine months of 2014.

The net income loss is related to expenses from GCI’s purchase of all wireless subscribers and 33 percent of the Alaska Wireless Network from Alaska Communications, as well as the comparative loss of revenue from the 2014 Alaska election season, executives claim.

GCI paid $300 million for the acquisition announced December 2014. In the second quarter of 2015, GCI folded the 87,000 acquired wireless subscribers into its coverage.

The deal has yielded results for GCI’s total revenue. GCI raised third quarter consolidated revenue by 7.4 percent from 2014, from $240.7 million to $258.6 million, and $10 million greater than second quarter 2015.

Transition costs from the Alaska Communications deal bled some of GCI’s numbers where gains could have been even larger.

GCI increased its earnings before interest, taxes, depreciation and amortization, or EBITDA, from to $96.6 million, after deducting $4 million in transition costs from the Alaska Wireless Network purchase.

Despite the $4 million expense, third quarter EBITDA was $3 million greater than same quarter 2014.

In the wireline segment, revenues grew but transition costs still took their toll. Wireline revenue grew to $178 million, up 14 percent year over year. Wireline EBITDA, however, declined $7 million since last year.

Chief Financial Officer Peter Pounds said the “decline is primarily due to $4 million in transition costs, and a $6 million decline in cable advertising revenues.”

The 2014 elections, both for state offices including the governor and in particular the Alaska U.S. Senate race between Mark Begich and Dan Sullivan, produced a $50 million campaign that bolstered GCI’s video revenue, Pounds said. GCI owns KTVA and several broadcast stations around the state.

In a conference call, CEO Ron Duncan attributed much of the overall EBITDA growth to roaming fees. Traditionally, third quarter results incorporate much of the tourist season in late Alaska summer, he said. Roaming and backhaul contributed an overall $45 million in revenue.

Duncan said customers have been increasingly willing to purchase equipment installment plans from GCI, which has benefited the company’s EBITDA numbers but lowered the average revenue per user, or ARPU. GCI has earned $7 million and $8 million in the last two quarters from installment plans, compared to no revenue from such plans in 2014.

The effect was a smaller ARPU for wireless customers by $3.33 year-over-year, from $49.93 to $46.60.

Cable modem ARPU, however, rose from $80.20 to $84.87 year over year, along with video ARPU, which rose from $77.91 to $83.24.

The company said its 2015 guidance numbers will not change. Total revenue will be between $920 million and $970 million. Adjusted EBITDA will be between $310 million and $335 million, excluding the $20 million transaction cost to transition ACS wireless customers.

Core cash capital expenditures will be approximately $170 million, $45 million of which will go to wireless network projects and $85 million on other network and infrastructure projects.

DJ Summers is a reporter for the Alaska Journal of Commerce. He can be reached at daniel.summers@alaskajournal.com.