Homer Alaska - Business

Story last updated at 5:18 PM on Wednesday, January 4, 2012

ACS plans to cut dividend

By Andrew Jensen
Morris News Service - Alaska

ANCHORAGE — The board of directors of Alaska Communications voted Dec. 21 to lower its quarterly dividend in a move that will free up nearly $30 million in cash flow annually for the Anchorage-based telecom.

In the near-term, the decision to lower the quarterly dividend from 21.5 cents per share to 5 cents per share sent the ACS price tumbling to a new 52-week low of $3.14 as of Dec. 27.

That continued the sharp slide that started Nov. 9 after the company announced during its third quarter earnings call that dividend changes were under consideration by the board.

Shares of ACS hit a 52-week low that day of $5.60, a one-day drop of 24 percent. Over the last year the stock has declined by nearly 72 percent.

Looking to the long-term, two main factors drove the ACS board of directors to lower the dividend: the expected 2013 entry of Verizon Wireless to the Alaska market and the Oct. 27 Federal Communications Commission announcement that it would be shifting some $4.5 billion from the Universal Service Fund into rural broadband subsidies.

During its March 1 earnings call to report 2011 annual results, Alaska Communications will be unveiling its broader plan moving forward.

"We've been working on a three-year strategy for the company," said Heather Cavanaugh, Alaska Communications director of corporate communications. "This is part of a long-term plan to grow the business in a couple ways. We're looking at investing in the business and investing in customer service, training and development, and paying down debt. It's a smart thing to do financially. It's also a part of planning for some of the changes we are expecting."

The FCC decision will cost ACS between $4 million and $5 million in USF revenue during 2012. Fellow Alaska-based telecom General Communications Inc. expects to lose about $5 million in each of the next two years as a result of the FCC action.

Although investors reacted negatively to the ACS decision, the increase to its cash position will manifest itself quickly. Alaska Communications previously paid out about $9.7 million per quarter in dividends.

The cut in dividend will save the company about $7.5 million per quarter.

ACS has about $564 million in long-term liabilities.