Alaskan cable operator GCI Communications said it has combined its wireless communications assets with Alaska Communications Systems Group to form The Alaska Wireless Network.
According to both companies, AWN will design and operate a statewide wireless network to provide next generation wireless service plans for GCI and Alaska Communications. GCI and Alaska Communications will continue to market wireless services independently to their retail customers.
GCI and Alaska Communications each will contribute their respective wireless assets, including spectrum licenses, cell sites and backhaul facilities, switching systems, and certain other assets to AWN. As part of the transaction, GCI also will purchase $100 million of wireless assets from Alaska Communications and contribute them to AWN. The deal is expected to close in the second quarter of 2013.
"GCI and Alaska Communications are pleased to reach these agreements," said Alaska Communications president and CEO Anand Vadapalli and GCI president and CEO Ron Duncan in a joint statement. "The wireless business is capital intensive, requires scale to compete successfully against national carriers, and demands more spectrum than either company individually owns. By combining our respective wireless assets, GCI and Alaska Communications can provide a state-of-the-art Alaska wireless network owned and operated by Alaskans for Alaskans. 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."
AWN will cover more than 95% of Alaska's population and will initially 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 cash flow 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. Evercore Partners served as financial adviser to Alaska Communications in the transaction.
Alaska Communications will own one-third and GCI will own two-thirds of AWN. During the first four years of AWN's operations, Alaska Communications will be eligible to receive preferential cash distributions totaling $190 million. GCI will receive all remaining available cash distributions over the same period. Following the initial four year period, GCI and Alaska Communications will receive distributions proportional to their ownership interests in AWN. AWN will be managed by GCI. Wilson Hughes, GCI's current chief operating officer, has agreed to serve as AWN's first president and CEO. In the interim before the closing, Hughes will serve as GCI's executive vice president - wireless and lead a GCI team planning the post-closing transition to AWN.
GCI said it has named Greg Chapados to succeed Hughes as executive vice president and chief operating officer of GCI, after the AWN deal closes. In the interim, Hughes will serve as GCI executive vice president - wireless and lead a GCI team planning the post-closing transition to AWN. Hughes has served as chief operating officer of GCI since 1991. Prior to GCI, Hughes served in executive and leadership roles in the communications, aviation, engineering and construction industries in Alaska.
Chapados joined GCI in 2006 as senior vice president and served as lead on several strategic initiatives for the company. Before joining GCI, Chapados was a managing director at two boutique investment banks specializing in the telecommunications and defense industries.
"I am pleased with our transition plan and am confident that this is the best step forward for GCI," Duncan said in a statement. "These two men have proven leadership skills and I thank them both for accepting new challenges."