Alaska Communications Reports Solid Second Quarter 2016 Results

-Posted Total Wireline Revenues of $56.3 million, a 2.8% increase-

-Reported Business and Wholesale Revenue growth of 8.6%-

Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) today reported financial results for the second quarter of 2016.

“We are performing to our business plan, delivering consistent results in-line with our long-term directional guidance. For the second quarter 2016 compared to a year ago, revenue grew 2.8 percent for total wireline and 8.6 percent for business and wholesale. Revenue contribution from Business and Wholesale as a percentage of total wireline revenue has grown from 51.7 percent in the first quarter 2014 to 60.2 percent in the second quarter 2016, reflecting our steady progress as a fiber broadband and managed IT services focused company. With strong customer wins in the quarter, and investments in a flagship Business Technology Center, we remain confident in the growth opportunities ahead of us and look forward to reporting continued progress in upcoming quarters,” Anand Vadapalli, president and CEO of Alaska Communications, said.

Revenue Highlights: Second Quarter 2016 Compared to Second Quarter 2015

Total Wireline revenues:
- Revenue increased to $56.3 million from $54.7 million, up 2.8 percent.
- Total broadband revenue reached $28.4 million from $26.2 million, up 8.4 percent.
Business and wholesale:
- Comprised 60.2 percent of total wireline revenue.
- Revenue grew to $33.9 million from $31.2 million, up 8.6 percent.
- Broadband revenues reached $22.2 million from $19.6 million, up 13.2 percent.
Consumer:
- Comprised 16.9 percent of total wireline revenue.
- Revenue was $9.5 million, down 6.4 percent from $10.1 million.
- Broadband revenue was $6.2 million, down 5.8 percent from $6.6 million.
Regulatory:
- Comprised 22.9 percent of total wireline revenue.
- Revenue was $12.9 million, down 3.6 percent from $13.4 million.

Financial Metrics: Second Quarter 2016 compared to Second Quarter 2015 and Year to Date June 30, 2016

Net income was $0.3 million, compared to a net loss of $4.9 million. Year to date net income was $0.4 million.

Net cash provided by operating activities was $8.7 million, compared to net cash used of $9.6 million. Year to date cash provided by operating activities was $18.9 million.
Capital expenditures were $8.5 million, compared to $20.2 million. Year to date capital expenditures were $13.7 million.

Balance Sheet Metrics: June 30, 2016 compared to December 31, 2015

Cash remained strong at $22.2 million, compared to $36.0 million.
Net debt was $163.8 million, compared to $161.7 million.

Non-GAAP Metrics: Second Quarter 2016 compared to Second Quarter 2015 and Year to Date June 30, 2016

Adjusted EBITDA was $14.0 million, compared to $11.1 million. Year to date Adjusted EBITDA was $28.0 million.
Free cash flow was ($5.0) million, compared to ($6.7) million. Year to date free cash flow was $4.1 million.

Reconciliations of non-GAAP financial measures to GAAP financial measures can be found in tables at the end of this release and on the company’s website at http://www.alsk.com in the investment data section.

Laurie Butcher, Alaska Communications senior vice-president of finance, said, “We are pleased with our results for the quarter, which are aligned with our business plan. We remain committed to growing Adjusted EBITDA and free cash flow and reaffirm our guidance for 2016.”

2016 Guidance:

The company reaffirmed 2016 guidance as follows:

Total Wireline Revenue of approximately $228 million
Adjusted EBITDA of approximately $59 million
Capital Expenditures of approximately $35 million
Free Cash Flow of approximately $5 million

Conference Call

The Company will host a conference call and live webcast on Thursday, Aug. 4, 2016, at 3:00 p.m. Eastern Time to discuss the results. Parties in the United States and Canada can access the call at 1-888-481-2848 and enter pass code 410670. All other parties can access the call at 1-719-325-2219 and use the same code.

The live webcast of the conference call will be accessible from the “Events Calendar” section of the Company’s website (www.alsk.com). The webcast will be archived for a period of 90 days. A telephonic replay of the conference call will also be available two hours after the call and will run until Sept. 3, 2016, at 6:00 p.m. Eastern Time. To hear the replay, parties in the U.S. and Canada can call 1-888-203-1112 and enter pass code 7519974. All other parties can call 1-719-457-0820 and enter pass code 7519974.

About Alaska Communications

Alaska Communications (NASDAQ: ALSK) is the leading provider of advanced broadband and IT managed services for businesses and consumers in Alaska. The company operates a highly reliable, advanced statewide data network with the latest technology and the most diverse undersea fiber optic system connecting Alaska to the contiguous U.S. For more information, visit www.alaskacommunications.com or www.alsk.com.

Non-GAAP Measures

In an effort to provide investors with additional information regarding our financial results, in particular with regards to our liquidity and capital resources, we have disclosed certain non-GAAP financial information such as Adjusted EBITDA, Free Cash Flow and Net Debt, which management utilizes to assess performance and believes provides useful information to investors. The definition of these non-GAAP measures are on Schedules 4 and 5 to this press release. Adjusted EBITDA and Free Cash Flow are non-GAAP measures and should not be considered a substitute for Net Income, Net Cash Provided (Used) By Operating Activities and other measures of financial performance recorded in accordance with GAAP. Reconciliations of our non-GAAP measures to our nearest GAAP measures can be found in the tables at the end of this release or on our website at http://www.alsk.com in the investment data section. Other companies may not calculate non-GAAP measures in the same manner as Alaska Communications. We do not provide guidance for Net Income and Net Cash Provided (Used) By Operating Activities.

Forward-Looking Statements

This press release includes certain “forward-looking statements,” as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management’s beliefs as well as on a number of assumptions concerning future events made using information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside the Company’s control. Such factors include, without limitation, Federal and Alaska Universal Service Fund changes, adverse economic conditions, the effects of competition in our markets, our relatively small size compared with our competitors, the Company’s ability to compete, manage, integrate, market, maintain, and attract sufficient customers for its products and services, adverse changes in labor matters, including workforce levels, our ability to service our debt and refinance as required, labor negotiations, including renegotiating our collective bargaining agreement, employee benefit costs, our ability to control other operating costs, disruption of our supplier’s provisioning of critical products or services, the impact of natural or man-made disasters, changes in the Company’s relationships with large customers, unforeseen changes in public policies, regulatory changes, changes in technology and standards, our internal control over financial reporting, and changes in accounting standards or policies, which could affect reported financial results. For further information regarding risks and uncertainties associated with the Company’s business, please refer to the Company’s SEC filings, including, but not limited to, the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K and quarterly reports on Form 10-Q. Copies of the Company’s SEC filings may be obtained by contacting its investor relations department at (907) 564-7556 or by visiting its investor relations website at www.alsk.com.

Schedule 1 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONSOLIDATED SCHEDULE OF OPERATIONS (Unaudited, In Thousands Except Per Share Amounts) Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Operating revenues: Operating revenues, non-affiliates $ 56,262 $ 55,665 $ 112,590 $ 120,876 Operating revenues, affiliates - - - 575 Total operating revenues 56,262 55,665 112,590 121,451 Operating expenses: Cost of services and sales, non-affiliates 25,543 30,078 51,671 56,383 Cost of services and sales, affiliates - - - 4,961 Selling, general & administrative 17,586 22,611 34,926 50,595 Depreciation and amortization 8,640 8,075 17,160 17,016 Loss (gain) on disposal of assets, net 128 (724 ) 152 (39,386 ) Earnings from equity method investments - - - (3,056 ) Total operating expenses 51,897 60,040 103,909 86,513 Operating income (loss) 4,365 (4,375 ) 8,681 34,938 Other income and (expense): Interest expense (3,852 ) (4,257 ) (7,721 ) (11,676 ) Loss on extinguishment of debt - - (336 ) (2,628 ) Interest income 6 17 11 42 Total other income and (expense) (3,846 ) (4,240 )

(8,046 ) (14,262 ) Income before income tax (expense) benefit 519 (8,615 ) 635 20,676 Income tax (expense) benefit (236 ) 3,755 (299 ) (9,319 ) Net income (loss) 283 (4,860 ) 336 11,357 Less net loss attributable to noncontrolling interest (34 ) (19 ) (67 ) (19 ) Net income (loss) attributable to Alaska Communications $ 317 $ (4,841 ) $ 403 $ 11,376 Basic $ 0.01 $ (0.10 ) $ 0.01 $ 0.23 Diluted $ 0.01 $ (0.10 ) $ 0.01 $ 0.22 Weighted average shares outstanding: Basic 51,231 50,252 50,986 50,085 Diluted 52,138 50,252 52,006 51,082 Schedule 2 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONSOLIDATED BALANCE SHEETS (Unaudited, In Thousands Except Per Share Amounts) June 30, December 31, Assets 2016 2015 Current assets: Cash and cash equivalents $ 22,248 $ 36,001 Restricted cash 1,811 1,824 Accounts receivable, net of allowance of $1,215 and $1,693 23,348 25,225 Materials and supplies 4,984 4,674 Prepayments and other current assets 4,280 8,068 Total current assets 56,671 75,792 Property, plant and equipment 1,346,470 1,337,098 Less: accumulated depreciation and amortization (979,952 ) (967,776 ) Property, plant and equipment, net 366,518 369,322 Deferred income taxes 16,063 16,660 Other assets 1,762 1,827 Total assets $ 441,014 $ 463,601 Liabilities and Stockholders' Equity Current liabilities: Current portion of long-term obligations $ 4,018 $ 3,671 Accounts payable, accrued and other current liabilities 38,381 51,275 Advance billings and customer deposits 4,052 4,513 Total current liabilities 46,451 59,459 Long-term obligations, net of current portion 175,483 185,018 Other long-term liabilities, net of current portion 63,622 65,265 Total liabilities 285,556 309,742 Commitments and contingencies Alaska Communications stockholders' equity: Common stock, $.01 par value; 145,000 authorized 513 505 Additional paid in capital 157,954 156,971 Accumulated deficit (1,231 ) (1,634 ) Accumulated other comprehensive loss (2,889 ) (3,086 ) Total Alaska Communications stockholders' equity 154,347 152,756 Noncontrolling interest 1,111 1,103 Total stockholders' equity 155,458 153,859 Total liabilities and stockholders' equity $ 441,014 $ 463,601 Schedule 3 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, In Thousands) Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Cash Flows from Operating Activities: Net income (loss) $ 283 $ (4,860 ) $ 336 $ 11,357

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

Depreciation and amortization 8,640 8,075 17,160 17,016 Gain on wireless sale - (1,421 ) - (41,140 ) Loss on the disposal of assets, net 128 697 152 1,754 Unrealized gain on ineffective hedge - (275 ) - (542 ) Amortization of debt issuance costs and debt discount 1,005 990 2,021 2,043 Amortization of ineffective hedge - 10 - 1,970 Loss on extinguishment of debt - - 336 2,628 Amortization of deferred capacity revenue (855 ) (694 ) (1,702 ) (1,469 ) Stock-based compensation 642 795 1,447 1,279 Deferred income tax expense (benefit) 228 (136 ) 495 (3,394 ) Charge (benefit) for uncollectible accounts 209 (204 ) 77 1,319 Cash distribution from equity method investments - - - 3,056 Earnings from equity method investments - - - (3,056 ) Other non-cash expense, net 197 273 414 543 Income taxes payable (receivable) 8 (5,574 ) (722 ) 8,038 Changes in operating assets and liabilities (1,780 ) (7,303 ) (1,077 ) (9,648 ) Net cash provided (used) by operating activities 8,705 (9,627 ) 18,937 (8,246 ) Cash Flows from Investing Activities: Capital expenditures (8,487 ) (20,233 ) (13,662 ) (26,133 ) Capitalized interest (245 ) (297 ) (548 ) (788 ) Change in unsettled capital expenditures (4,931 ) 5,117 (9,156 ) 674 Proceeds on wireless sale - 1,680 - 278,068 Proceeds on sale of assets - 3,126 2,663 3,126 Return of capital from equity investment - - - 1,875 Net change in restricted cash (86 ) - 13 - Net cash (used) provided by investing activities (13,749 ) (10,607 ) (20,690 ) 256,822 Cash Flows from Financing Activities: Repayments of long-term debt (869 ) (1,119 ) (11,486 ) (242,837 ) Debt issuance costs (7 ) (15 ) (44 ) (1,042 ) Cash paid for debt extinguishment - - (150 ) - Cash paid in acquisition of business - - - (291 ) Cash proceeds from non-controlling interest 75 250 75 250 Payment of withholding taxes on stock-based compensation - (3 ) (472 ) (402 ) Excess tax (expense) benefit from share-based payments - (10 ) (51 ) 733 Proceeds from issuance of common stock 128 135 128 135 Net cash used by financing activities (673 ) (762 ) (12,000 ) (243,454 ) Change in cash and cash equivalents (5,717 ) (20,996 ) (13,753 ) 5,122 Cash and cash equivalents, beginning of period 27,965 57,827 36,001 31,709 Cash and cash equivalents, end of period $ 22,248 $ 36,831 $ 22,248 $ 36,831 Supplemental Cash Flow Data: Interest paid $ 4,562 $ 5,557 $ 6,359 $ 8,941 Income taxes paid, net $ - $ 1,965 $ 577 $ 3,942 Schedule 4 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. ADJUSTED EBITDA (Unaudited, In Thousands) Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Net cash provided (used) by operating activities $ 8,705 $ (9,627 ) $ 18,937 $ (8,246 )

Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:

Non-GAAP Measures:

In an effort to provide investors with additional information regarding the Company's results as determined by GAAP, the Company also discloses certain non-GAAP information which management utilizes to assess recurring performance and believes provides useful information to investors regarding baseline operating results.

The Company has disclosed Adjusted EBITDA as net income before interest, loss on extinguishment of debt, depreciation and amortization, gain or loss on asset purchases or disposals including the gain on the sale of our wireless operations, earnings from equity method investments, taxes, wireless transaction-related costs, loss attributable to noncontrolling interest, stock-based compensation, pension adjustments, and expenses under the company’s long term cash incentive plan (“LTCI”). LTCI expenses are considered part of an interim compensation structure to mitigate the dilutive impact of additional share issuances for executive compensation. Distributions from AWN are included in Adjusted EBITDA.

Schedule 5 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. FREE CASH FLOW (Unaudited, In Thousands) Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Adjusted EBITDA $ 14,023 $ 11,060 $ 27,953 $ 23,525 Less: Capital expenditures excluding acquisition price of North Slope fiber network (8,487 ) (9,233 ) (13,662 ) (15,133 ) Milestone billings for fiber build project for a carrier customer - - - 2,500 Net capital expenditures (8,487 ) (9,233 ) (13,662 ) (12,633 ) Purchase of North Slope fiber network Acquisition price - (11,000 ) - (11,000 ) (Paid) less: 50% due in 2016 (5,500 ) 5,500 (5,500 ) 5,500 Proceeds on sale of fiber to joint venture partner - 2,650 2,650 2,650 Less: other cash proceeds - 400 - 400 Net North Slope purchase (5,500 ) (2,450 ) (2,850 ) (2,450 ) Amortization of GCI/AWN capacity revenue (516 ) (514 ) (1,025 ) (1,129 ) Interest paid (4,562 ) (5,557 ) (6,359 ) (8,941 ) Free cash flow* $ (5,042 ) $ (6,694 ) $ 4,057 $ (1,628 ) * Quarterly FCF fluctuates and should not be viewed as an indicator of annual performance. While onetime events, seasonality of capital spend and the timing of interest payments may result in negative FCF in one or more quarters, we reaffirm our guidance for annual FCF.

Non-GAAP Measures:

Free cash flow ("FCF") is defined as Adjusted EBITDA, less recurring operating cash requirements which include capital expenditures, net of cash received for a fiber build for a carrier customer, less cash interest expense, significant non-cash revenue associated with our interconnection agreement with AWN and GCI, and proceeds on sale of fiber to our joint venture partner.

Alaska Communications continues to have net operating losses and is not a significant taxpayer on ordinary income. Income taxes paid in 2015 and 2016 are related to the Wireless retail sale and are not included in free cash flow. See Schedule 3 for Net cash provided (used) by operating activities, Net cash (used) provided by investing activities, and Net cash used by financing activities. Schedule 6 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. REVENUE GROWTH FROM CONTINUING OPERATIONS (Unaudited, In Thousands) Three Months Ended Six Months Ended June 30, June 30, 2016 2015 2016 2015 Business and wholesale revenue Business broadband $ 14,392 $ 12,618 $ 28,572 $ 24,420 Business voice and other 7,022 7,240 14,112 14,175 Managed IT services 818 810 1,899 1,539 Equipment sales and installations 2,097 1,305 3,684 2,853 Wholesale broadband 7,791 6,984 15,389 13,600 Wholesale voice and other 1,743 2,216 3,758 4,566 Total business and wholesale revenue 33,863 31,173 67,414 61,153 Growth in business and wholesale 8.6% 10.2% Consumer revenue Broadband 6,234 6,621 12,376 13,259 Voice and other 3,259 3,519 6,641 7,126 Total consumer revenue 9,493 10,140 19,017 20,385 Total business, wholesale, and consumer revenue 43,356 41,313 86,431 81,538 Growth in business, wholesale and consumer revenue 4.9% 6.0% Growth in broadband revenue 8.4% 9.9% Regulatory revenue Access 7,986 8,471 16,158 17,057 High cost support 4,920 4,920 10,001 9,841 Total regulatory revenue 12,906 13,391 26,159 26,898 Total wireline revenue 56,262 54,704 112,590 108,436 Growth in wireline revenue 2.8% 3.8% Total wireless & AWN related revenue - 961 - 13,015 Total revenue $ 56,262 $ 55,665 $ 112,590 $ 121,451 Schedule 7 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. KEY OPERATING STATISTICS (Unaudited) Three Months Ended June 30, March 31, June 30, 2016 2016 2015 Voice: Business access lines 75,646 76,302 78,544 Consumer access lines 35,600 36,567 40,888 Voice ARPU business $ 23.79 $ 23.35 $ 23.53 Voice ARPU consumer $ 28.61 $ 28.39 $ 26.73 Broadband: Business connections (1) 15,347 15,189 15,781 Consumer connections 33,913 33,850 34,895 Broadband ARPU business (1) $ 314.31 $ 309.36 $ 267.97 Broadband ARPU consumer $ 60.91 $ 60.59 $ 61.28 Churn: Business voice 1.0% 1.0% 0.8% Consumer broadband 2.5% 2.2% 2.9% Consumer voice 1.5% 1.6% 1.8% (1) How we calculate broadband connections has changed to exclude certain internal use circuits. Historical amounts have been restated to reflect appropriate comparisons period over period. Schedule 8 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. Long Term Debt and Net Debt (Unaudited, In Thousands) June 30, December 31, 2016 2015 2015 senior secured credit facilities due 2018 $ 88,250 $ 89,750 Debt issuance costs - 2015 senior secured credit facilities due 2018 (2,584 ) (3,406 ) 6.25% convertible notes due 2018 94,000 104,000 Debt discount - 6.25% convertible notes due 2018 (3,240 ) (4,641 ) Debt issuance costs - 6.25% convertible notes due 2018 (685 ) (1,010 ) Capital leases and other long-term obligations 3,760 3,996 Total debt 179,501 188,689 Less current portion (4,018 ) (3,671 ) Long-term obligations, net of current portion $ 175,483 $ 185,018 Total debt $ 179,501 $ 188,689 Plus debt discounts and debt issuance costs 6,509 9,057 Gross debt 186,010 197,746 Cash and cash equivalents (22,248 ) (36,001 ) Net debt $ 163,762 $ 161,745

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Alaska Communications Systems Group, Inc.Investor Contact:Tiffany Dunn, 907-297-3103Manager, Board and Investor Relationsinvestors@acsalaska.comorMedia Contact:Hannah Blankenship, 907-564-1326Associate Manager, Corporate CommunicationsHannah.Blankenship@acsalaska.com

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