As a competitive response to national carriers, Alaska communications companies General Communication (GCI) and Alaska Communications Systems have announced the signing of definitive agreements to form The Alaska Wireless Network (AWN), a limited liability company that will hold and operate both companies' wireless facilities.
GCI, the largest telco in the state with 2011 revenues of $679.4 million, will own two-thirds of AWN, and Alaska Communications, with 2011 revenues of $349.3 million, will own one-third.
AWN will design and operate an Alaska statewide wireless network to provide service plans for both company's wireless customers, but each will continue to market and sell these plans independently to their respective retail customers.
Approved by the boards of directors of each company, the agreement means GCI and Alaska Communications will each contribute to AWN their respective wireless assets, including spectrum licenses, cell sites and backhaul facilities, switching systems and certain other assets necessary to operate a statewide wireless network.
As part of the transaction, GCI will purchase $100 million of wireless assets from Alaska Communications and contribute them to AWN.
AWN will also be managed by GCI under Wilson Hughes, GCI's current COO, who will serve as AWN's first President and CEO. In the interim, before the closing, Wilson Hughes will serve as GCI's EVP, Wireless and lead a GCI team planning the post-closing transition to AWN.
From the launch, AWN will cover more than 95% of Alaska's population. Initially, AWN will serve the more than 250,000 GCI and Alaska Communications urban and rural subscribers and lifeline subscribers.
In its first year of operations, AWN is expected to have EBITDA of approximately $120 million and capital expenditures of approximately $40 million. Synergies from the transaction are expected to total $30 million a year, starting in the second year of operations. The synergies are expected to be split equally between capital and operating expenses.
The AWN transaction, anticipated to close by the second quarter of 2013, requires FCC approval for transfer of each company's wireless spectrum licenses to AWN and is subject to other customary conditions.
Alaska Communications President and CEO, Anand Vadapalli, and GCI President and CEO Ron Duncan, jointly stated:
"The wireless business is capital intensive, requires scale to compete successfully against national carriers, and demands more spectrum than either company individually owns".
"We believe that The Alaska Wireless Network will provide the fastest, most geographically extensive, and most reasonably priced wireless services for Alaska subscribers, allowing us each to compete more effectively in the retail market".