General Communication's (GNCMA) CEO Ronald Duncan on Q2 2014 Results - Earnings Call Transcript

Aug. 7.14 | About: General Communication, (GNCMA)

General Communication, Inc. (NASDAQ:GNCMA)

Q2 2014 Earnings Conference Call

August 07, 2014 02:00 PM ET

Executives

Peter Pounds - CFO

Gregory Chapados - COO

Ronald Duncan - President and CEO

Analyst

Anthony Klarman - Deutsche bank

Liam Burke - Janney

Operator

Welcome and thank you all for standing by. At this time all participants are in listen-only mode. At the end of the presentation we will have a question-and-answer session. (Operator Instructions). Today’s call is being recorded. If you have any objections, you may disconnect at this point.

And now I will turn the meeting over to Peter Pounds, Chief Financial Officer. You may begin.

Peter Pounds

Good morning and thank you for joining us today. I am Pete Pounds, the Company’s Chief Financial Officer. Ron Duncan, our President and CEO will be on the call today as well as our usual supporting cast. We will all be available to participate in the question-and-answer session which will follow my initial comments.

A copy of our detailed press release can be found on our website at gci.com. This conference call is being recorded and will be available for playback for 72 hours beginning at 4 PM Eastern Time today. The playback number is (800) 839-2291 with an access code of 7461. In addition to the conference call, you may access the conference through the internet. To access the call via net conferencing, log on to our Web site at www.gci.com and follow the instructions. The webcast will be available for replay for the next two weeks.

Some of the statements made by GCI in this presentation are forward-looking in nature. Actual results may differ from those projected in forward-looking statements due to a number of factors. Additional information concerning such factors can be found in GCI's filings with the Securities and Exchange Commission.

Second quarter revenues totaled $224 million that’s up approximately $35 million compared to the second quarter of 2013 and $8 million sequentially. The 18% year-over-year growth was largely driven by the AWN transaction while the 4% growth was driven by seasonally higher wireless roaming revenues. Adjusted EBITDA increased by $22 million or 36% compared to the prior year quarter and $10 million or 13% on a sequential basis. The year-over-year increase is largely due to the AWN transaction.

Sequentially we benefited from the seasonally high wireless roaming revenues, increases in our Denali Media advertising revenues and lower SG&A expenses. Our EBITDA margin was over 37% for the quarter, that’s up meaningfully from 33% in the second quarter of 2013 and 35% on a sequential basis.

EBITDA comparability, as we noted during last quarter’s call, our Wireline segment did not ask for about $5.6 million in AWN phone subsidies from our Wireless segment in the first quarter of 2013. We put in place the necessary systems to request the phone subsidies in the second quarter, so the second quarter of 2014 and 2013 are comparable while the first quarter of 2014 had about 5.6 million of cost within wireline that would have been in wireless, had these systems been in place. My comments will normalize the first quarter numbers so that they are comparable.

Wireless segment, wireless continues to perform well. Wireless revenues of $69 million for the quarter, increased 11% compared to the first quarter of 2014 revenues of $63 million. Wireless EBITDA of $40 million, increased $8 million from the first quarter of 2014 adjusted EBITDA of $32 million. The increases were largely due to revenue increases primarily on the roaming and backhaul side.

On a year-over-year basis, revenues and EBITDA were up 33.8 million and 25.8 million respectively. The year-over-year increases are largely due to the AWN transaction. AWN continues to build out the largest and fastest network in the state, during the quarter we added 27 new LTE sites and brought 3G services to Bethel.

Wireline segment, the Wireline segment posted revenues of 155 million for the second quarter of 2014 and that compares with 154 million on both the year-over-year and sequential basis. On a year-over-year basis, we had strength in managed broadband as well as new revenue from Denali Media which were offset by meaningfully lower TNM revenues on the North Slope. If an August ballot initiative preserves current tax policy that has promoted renewed investment in oil production, we expect to see a return to growth in the TNM area.

EBITDA for the quarter was $44.3 million. That’s a 7% decline from 2013 second quarter EBITDA of 47.9 million and a 5% increase sequentially from 42.4 million in adjusted EBITDA. The year-over-year decline was exacerbated by the SG&A allocation which is given primarily to the Wireline segment.

Turning now to the specific customer groups within the Wireline segment. Consumer; consumer revenues of 68.8 million for the quarter were flat on a year-over-year basis and down 2% sequentially due to wireless promotions in the quarter.

The second quarter is our most challenging quarter of the year on a subscriber front and while we did experience losses in voice, video and data, in each case the loss was less than we experienced in the same quarter of 2013. During the quarter, we added 1,000 net new wireless subscribers.

We’re making good progress in getting our cable modem network ready for future speed upgrades. There will be one more speed upgrade beyond the current 200 megabits speeds this year.

Customers are valuing the higher speeds and that’s reflected in our ARPU growth for the quarter. Our cable modem ARPU was currently $76.83 that’s an increase of $0.90 per subscriber on a sequential basis and $8.58 on a year-over-year basis.

During the quarter, GCI became the first Alaskan provider to include data on wireless life line balance. Our employees continue to bring innovation to the market. Our initiatives include taking a harder look at streamlining our products and services to make it easier for our customers to do business with us.

While we focus on bringing gigabit speeds to our cable modem customers we’ve eliminated our dial-up internet service. We shut down a legacy voice mail platform last quarter as well, making it easier for our customers and customer service representatives to deal with only one voicemail platform. I’ll be nothing future product in package simplifications on future calls.

Business services, business services revenues of 55 million for the quarter were down 2 million on a year-over-year basis and up $3 million on a sequential basis. The year-over-year decrease was due to a decline in our lower margin time and materials business, partially offset by the growth in video from our new broadcast subsidiary, Denali Media.

The sequential increase in revenues is mostly driven by the growth in our video advertising revenue from this election cycle.

Managed broadband; managed broadband revenues for the quarter totaled $31 million, that’s an increase of 7% over the second quarter of 2013 and flat on a sequential basis. This positive performance is driven in part by the expansion of and increasing demand for the TERRA services in rural Alaska. We are expecting to bring service on TERRA to contribute on the fourth quarter of this year. Additionally, we are expecting to bring TERRA service from Nenana which is close to Fairbanks Alaska, to Galena by the end of the year bringing us closer to our goal of having reading protection on our TERRA network.

Other items of interest, Denali Media from a financial perspective we’re generating meaningfully new revenue and EBITDA streams from Denali Media. The 2004 team political season in Alaska has never expectation thus far on the advertising front. Additionally, we are pleased with the quality of our locally produced programming. We clearly brought competition to the news market in Alaska.

Capital expenditures; on a year-to-date basis we spend approximately $52 million in core cash CapEx. This is significantly below the run rate required to get to our guidance of $170 million for the year. However, we still have significant dollars that we are investing in our core telecom infrastructure to benefit our wireless HFC and TERRA networks which are primarily spent in the summer months.

We are maintaining our guidance of 170 million of core cash capital expenditures, excluding real estate and a satellite capital lease. With 30 million in real estate acquisitions and 10 million in satellite capital leases our total CapEx is expected to be approximately $210 million for the year.

Liquidity; we ended the fourth quarter with $82 million in cash on the balance sheet. In addition to our cash on hand we have $96 million in availability from our senior credit facility, line of credit. With total current maturities of $11 million we have more than adequate liquidity.

With trailing two quarters annualized EBITDA of $380 million our cash interest coverage is 4.4 times. Our leverage on gross debt is 3.7 times and it’s 3.4 times our net debt. Our first significant principle repayments are not due until our senior credit facility matures in April of 2018.

Guidance and economic prospects; for 2014, we anticipate being able to achieve record levels of revenue and EBITDA. However, last quarter we noted the softness in the low margin time and materials business. This continuing softness is causing me to revise our guidance down to 880 million to 900 million in revenues for the year. We have better news on the EBITDA front. Our guidance is 285 million to 305 million for the year. We are not increasing the guidance but we would note that the bottom portion of that guidance is becoming increasingly unlikely.

In conclusion we're pleased with the record high financial results for the quarter but there is no shortage of challenges for the future, but I believe that we have the right network and the right people to handle those challenges.

We will now be happy to answer your questions. Can we open it up for question-and-answer session?

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions). Our first question comes from Mike. Your line is open.

Unidentified Analyst

This is Mike from SunTrust. Congratulations on EBITDA this quarter. So, my question is on the time and materials business that you guys said was the cause for the changing guidance on revenues. Could you just give a little more color on that business and what sort of changed during the year to cause you to change your -- lower your revenue guidance?

Peter Pounds

When you look at that business, the proposition one is on the ballot and that would basically provide some pack certainty for our oil producers in the state of Alaska. And the amount of activity on the slope has really ratcheted down as the producers are looking for some certainty there, so before they go continuing with their capital expenditure product -- projects which we typically take part in, they are waiting to see what will happen on August 19th here. So we will get some better clarity at that point. There is somewhat of a time lag between when the vote occurs and when that change behavior may occur.

Unidentified Analyst

So, like 2015 model should we take into account that change or will things normalize by the next fiscal year?

Peter Pounds

I would wait unit August 19th and that will give us better clarity on what to expect for 2015, Mike.

Unidentified Analyst

Okay and then just as a follow-up question then roaming I guess, was you said it was a seasonally strong quarter. Did you mean that was strong historically on a seasonal basis and if so in another words, was roaming better than you expected and what was the impact from Verizon if you have seen any?

Peter Pounds

So, we are not breaking out roaming by customers. We will have the first really year-over-year comparison here in the third quarter because we closed on the AWN transaction on July 22nd of last year, so they will be relatively comparable then. The comment was really that Alaska’s roaming revenues are driven significantly by the tourists influx during the summer months. And so the month of June, we start to see meaningful numbers of tourists come into this state and that really continues through July and August, so that was basically a seasonal comment as opposed to a year-over-year comment which we won’t really have those comparables until the third quarter.

Unidentified Analyst

Okay and then just is there any other whether it’s anecdotal or any other data that you can give us with respect to the competitive environment on the wireless side?

Peter Pounds

We keep on hearing the job postings and hearing that Verizon's coming. We don’t yet have any open stores that we can point to but eminent is what we continue to hear.

Operator

Thank you. Our next question comes from Ms. Anna Gaskell. Your line is open.

Unidentified Analyst

So we are always waiting for your cash flow statement. So on the increase on the cash balance which is about $29 million sequentially, wanted to understand was that cash flow driven or was there any debt drawn that contributed to that?

Peter Pounds

When you look at the balance sheet there Anna, the accounts receivable is a nice win for the quarter. We did collect some receivables there right at the last days of the quarter there and we expect that to be largely a recurring benefit that we do not expect receivables to bump up. So, almost consider that to be a one-time increase in cash that does not get repaid. So that is the main driver on the cash flow that was about $25 million.

Unidentified Analyst

Okay. So there is no revolver draw or anything like that in the quarter then?

Ronald Duncan

We did have some puts and calls on the debt, I think in looking at the free cash flow calculations here, the net debt is up about 30 million for the year-to-date numbers. And we did make some investments in addition to our CapEx, I think the real estate ones we definitely noted, I think you’re familiar with the 10 investment, but what really drove the cash increase from where it typically would be was a very late in the quarter payment that we received of about 25 million.

Unidentified Analyst

Okay. And then, so on AWN you’ve talked a lot about in the past about planning for integration, the potential for rationalization [indiscernible] sides but wanting to maybe wait on that while you’re focused on driving the business forward. Is there still substantial integration or any kind of integration spending that needs to be done because it seems like it really hasn’t materialized.

Gregory Chapados

This is Greg Chapados, the Chief Operating Officer. On the integration side right now we have two, TV and main networks, we're not looking -- that's a result of the ACS in the GCI legacy networks. We're not really -- we don’t really feel the need to go forward with an immediate integration of those networks, that’s the business is in transition, obviously as we suited technology migration in the industry. So I don’t think you’d see near term any substantial spending on integrating those two networks. And right now I think we are doing well basically operating the two networks in parallel.

Unidentified Analyst

Okay. It’s good to know. And then just on the balance sheet, I think that’s probably asked on this frequently, but you’ve got bonds that are coming that are kind of callable later this fall. I mean is you plan to address those they are pretty high coupon by the higher standards right now, perhaps by higher market standards.

Gregory Chapados

Yes. On let’s say it’s basically it’s a payback analysis. The payback analysis has got a little bit worse over the last 10 years. And we’re well aware that they are callable in November and as we get closer and the tender premium drops we are definitely watching the market on a daily basis to see what the payback analysis looks like.

Operator

Thank you. Our next question comes from Mr. Anthony Klarman. Your line is open.

Anthony Klarman - Deutsche bank

Thanks. Just a follow-up on the question about roaming, I guess when we looked at the prior quarter or the prior season, the seasonal third quarter last year, roaming was up on a year-over-year basis. And I guess I’m just wondering try to frame it, since the third quarter is sort of seasonally important quarter for the business given that you have the influx of the tourism season, could you put some framework around and you’ve talked about the EBITDA being at the high end of the guidance which obviously given we’re half way through, has implications of what you think EBITDA will be for the year.

Could you put a framework around the roaming is -- is the roaming increase that we saw last year sort of moderating, so that as we look into the third quarter that high margin roaming revenue. Are you expecting some of that to come out given that Verizon, even though they might not have retail locations will have turned up some of the data roaming revenue that you might have gotten otherwise?

Ronald Duncan

This is Ron Duncan. I don’t think we have a completely clear picture of what’s going to happen with roaming at it turns out but the network that Verizon was roaming was blocking when we took it over. So last year we probably lost perhaps material amount of roaming revenue from bad network that could have been experienced. That blocking is gone now, and I don’t think we have, I don’t think we’ll get a good year-over-year comparison probably until the fourth quarter of this year to be able to see what’s really happening. Obviously, Verizon LTE traffic has been siphoned off their LTE network there is still substantial residual Verizon traffic both from legacy handsets and from LTE handsets that don’t connect to the LTE network.

And the trade-off really is how fast LTE handsets deploy and how you ubiquitous the LTE footprint. It is compare to how much growth there is year-over-year in subscriber use of the data on their individual handsets including their legacy handsets. The day the roaming seems to be holding up fairly well. We expect overtime to see diminishment in roaming but a substantial portion of where the roaming occurs is currently outside of the Verizon construction footprint as well.

And we’re seeing significant year-over-year growth in demand there, a portion of which relates to removing the blocking and a portion of which clearly relates to the fact that usage per handset keeps going up. So I think it will probably be all the way through this year, before we really have a good handle on how the increased customer usage trades off against the deployment of LTE handsets and network.

Anthony Klarman - Deutsche bank

I am not totally sure I follow exactly what you mean by blocking. Was it that that sort of handsets were trying to look to that network and the network was rejecting the handoff and so you were losing roaming revenue from that perspective?

Ronald Duncan

We did not have enough capacity turned up in the cell sites to handle all the demand that was being requested for data sessions. We were under trunked through the cell sites and we had insufficient numbers of radios and sectors in the cell that during the busy periods which were fairly prolonged, traffic was simply being rejected because it couldn’t get through. This isn’t typically a voice problem it usually gets manifest itself more on the data side of the network but the capacity that's there to handle the demand that was offered and we apparently were turning away material pieces of demand. We've now added capacity through that network in anticipation of that occurring during the pick season; we have not seen any material blocking in the network this year. So, we believe that we are accepting all of the offered capacity from our roaming partners this year.

Unidentified Analyst

A question on spectrum, obviously one of the big advantages of AWN is the spectrum position of, the combined spectrum position of GCI in Alaska relative to the competitors in the market. There are two big spectrum auctions coming up in AWS 3 and in the broadcast incentive auctions. Can you just talk about your views on sort of future needs for spectrum and whether perhaps there is a risk around some of that advantage you have in spectrum now sort of rolling overtime if others are able to get their hands on a mix of sort of mid-band and low-band spectrum between AWS 3 and broadcast?

Ronald Duncan

We are taking a look right now at whether or not we think we need to do anything in either AWS 3 and/or the broadcast options. We feel pretty comfortable with our spectrum position today. We have a good mix between the 800 mgs that we picked up with the legacy network that came to AWN and are very significant 1,900 holdings statewide in the AWS spectrum. We are not pushing the limits of capacity that’s available to us to deploy network today and while the low bandwidth or the low band spectrum is important in most of the areas where we see significant growth, we are going to see shrinking cell sizes and building capacity within building units and those sorts of things, not the sort of thing that you need broadcast macro sales force.

So, I think it’s safe to assume that we don’t feel an urgency to acquire more spectrum that said we will be opportunistic. We will look at the auctions. We will do our analysis and figure out which of either of those we choose to play in.

I don’t anticipate any truly significant spectrum investments in the near future. I think we are pretty comfortable with our spectrum position. We look at spectrum more from the perspective of do we have enough to provide the service we need to provide rather than walking our competitors from acquiring spectrum.

The difficulties of serving up here aren’t related to getting spectrum. Alaska is a small state with lots of spectrum and very small population base with lots of spectrum available. There is simply not a spectrum shortage and if you have enough to provide the service you need to provide, spectrum isn’t the sort of competitive advantage up here than it is in the Lower 48.

Unidentified Analyst

And final question is, were there any preference payments made during the quarter to ALSK for their preferential ownership economics in the first few years and what are the sort of triggers around the timing of those payments on a go forward basis?

Peter Pounds

Anthony, the triggers are basically in the early part of each month. We send a cheque for one-twelfth of the annual payment that is due to ACS and that’s I think 4.166 million that goes out in the first week or two of each month to ACS. So, during the quarter we made three of those payments for a total $12.5 million in the quarter. And we basically got three years to go at this time point with that stepping down slightly in the last two years.

Unidentified Analyst

So, just in addition to Anna’s earlier question about cash. The cash balance that you are reporting is fully loaded for having made those three payments and already nothing fell into like let’s first day of the next quarter.

Peter Pounds

There is no accrual issues. We had one payment that was effectively accrued from the last month of the previous quarter and we ended this quarter with effectively one payment accrued to be paid in the first week of the third quarter. So, we made cash payments of 12.5 million during the quarter.

Operator

Thank you. Our next question comes from Mr. Liam Burke. Your line is open.

Liam Burke - Janney

Peter, you had very nice year-over-year and sequential movement on revenue per cable modem, now you report them together on the -- with the business side. Is this just higher speed sales that are driving growth through the revenue per cable and is it primarily on the residential side?

Peter Pounds

So, the subscriber base is definitely pretty heavily tilted towards the consumer side, the business side generally takes advantage of a little bit different products that would direct fiber connections as opposed to cable modem but on the small business side they are basically experiencing the same thing that the consumer side is experiencing and basically people have been very responsive to the read announcement where we announced in December that we were increasing our highest speed from 50 megs to a 100 megs and that was part of a process, whereby we would get to 1 gig in Anchorage year in 2015.

We'll subsequently increase from 100 to 200 and we’ve got one more increase this year, but really it was the effect of number one, being seen as the innovator in the market, being the first cable provider committing to go to a gig that got people excited about our speeds. And we experienced an awful lot of upgrades as people went from the, call it 10 to 12 meg plan to the 25, 50 and 100 megs plans out there.

So we’re migrating the speeds up, the people that are on are on top speeds pay a $174.99 and as we increase speed they will just get more speed for that same price until we end up at a gig here next year in Anchorage but basically faster speeds Liam.

Unidentified Analyst

Ron I got a longer term question for you. Your video revenue is down slightly obviously, has content shifts to the internet. You’re well positioned on the data side long term how are you viewing traditional videos, a source of cash and how do you see that’s stabilizing?

Ronald Duncan

Traditional video is a challenge business for all that very largest cable operators I am afraid hidden there that’s going to be margin pressure. We bear the bonds of programs price increases compare to over the top alternatives and we have to deal the programmers who sell their programming not only to us very high rate but then put some of it available through, over the top mechanisms.

The good news is that part of what you’re seeing in the growth of the data revenues is the migration to over the top. And at this point from a margin perspective we’re probably just as happy when our customer decides to bring their own programming and be over the top is when they buy a linear cables subscription because we’re about in different in what they have to buy more bandwidth when they spend all their time through over the top deliveries that somebody completely delivered the linear program completely the lead is a liner programming and we’re totally over the top let see a material increase and the data consumption.

And it sort of comes out in the wash, I think overtime what you’ll see is continued steps up in data speeds in average data revenues per user. And continued step downs in video margins, whether that hits the wall in four or five years, we completely change the paradigm of the video business that’s hard to say. But you don’t have to look any further than what’s happening with sports and programming rights, when every time your contracting news that doubles in price to understand what’s driving the margins in that business.

And at the end of that pipe is the same person over and over its the consumer, regardless of how it gets there when major league baseball gets 100% increase, when the NFL gets a 200% increase, when the NBA gets 150% increase in the television contracts it all comes out of the consumer's pocket. And they are going to pay it through the cable bill or through the over the top bill and at some point you question how much is affordable.

Operator

Thank you. Our next question comes from Mr. Barry Asin. Your line is open.

Unidentified Analyst

You mentioned wireless promotional activity during the quarter. I was hoping you could just go over what you did from a promotional activity. And then what is your current wireless promotional activity at the market today?

Ronald Duncan

We’re pretty much matching what we have to do to stay competitive in the market. I think everybody is aware that T-Mobile has provided substantial disruption to the national wireless market. Our principle competition today is AT&T, our M&A competition is probably Verizon. And AT&T doesn’t differentiate this pricing by region of the country, it has nationwide plans, so what’s we’ve seen is free phones, $100 credit, no sign-up fees, paid to switch contracts, and to remain competitive we need to match that in the market, sometimes we need to offer a little bit more, what it results in is a higher cost of acquisition for customer in the form of higher handset subsidies or higher costs associated with waving first month charges or activation fees and those sorts of things.

And it comes out in the wash once you get the customer on board because the monthly revenues while discounted some, have not been discounted materially as the upfront push to get customers. The hope I think for all the players in the business is that we’re not just churning customers in this process but we’re actually putting people on for long term performance.

Unidentified Analyst

Okay. And then also on wireless, I want to take another stab at the discussion on Verizon’s upcoming entry to the market. We have a couple more data points now that’s why they reported that the iPhone 6 is going to include a VoLTE support so they will be able to do voice now if that’s correct.

They have announced on their website a grand total of three of their own retail stores to be opened in Alaska, two in Anchorage, one at Fairbanks. And I just wonder maybe if you could help me better understand the competitive dynamics of the Alaskan wireless industry. It would seem to me that AT&T is probably a lot more risk from another national carrier entering the Alaskan market than with GCI or the ACS brands which are more local. And if somebody does the research i.e. superior network experience. Thank you.

Ronald Duncan

Our anticipation is certainly that Verizon will take more from AT&T even if they only took proportionally they are going to take two subs from AT&T for every sub they take from us. And my sense is that people have a reason to want a national network, their national brand, already have a preference for AT&T and when Verizon comes in it will dilute the national brand preference if you will and spread over the two companies.

That said, I think Verizon still has material challenges in the state both with respect to us and with respect to AT&T. Yes, they have VoLTE but VoLTE isn’t going to be as good up here as it is in New York because they don’t have ubiquitous LTE coverage. And my guess is they have got to be at least a little bit careful in how they launch VoLTE in markets where their network isn’t as dense because you are going to have a substantial increase in dropped calls.

If you are on a VoLTE network and you drive outside the LTE range your calls are still going to crash and burn and you are going to have reinitiate the call on the CDMA network. So, you’ve got some potential customer effects if you try to launch VoLTE in the places where you have thinner network coverage first.

With respect to the stores, I mean I assume some point we will see stores but the three stores have sort of been on the website for two or three years now. And yes we see sites out there in the malls; they are boarded up in terms of paper over the windows. We occasionally see movements for hiring, hard to say when that’s actually going to come about and hard to say what the net impact of the Verizon entry really is because once they start selling handsets, they will almost certainly increase their amount of roaming traffic that they are currently putting on our network because of the relatively narrow footprint of their LTE network and their complete absence of the CDMA network.

When they sell an LTE handset to a Verizon customer Anchorage particularly a Verizon customer who used to be an AT&T customer and that customer heads down to the ski area at Girdwood or drives on down to Kenai or Stewart, the entire roaming that that customer does is going to be on our CDMA network.

And we have no doubt that as soon as they open the store somebody from Kenai is going to drive up here and decide they want to buy a Verizon phone instead of their AT&T phone and all of sudden you are going to have a permanent roamer in Kenai who is running all of his traffic on the GCI CDMA network.

So, I think it’s a mix bag. We are certainly not sitting here in fear of the Verizon entry. We think the pricing in the market is already set essentially by T-Mobile who is not ever here because the national carriers are responding to T-Mobile. It’s a vigorously competitive market as a result of that but we are not expecting any material adverse economic impact from the Verizon entry because a large piece of it will be offset by increased roaming.

Peter Pounds

Also in terms of actual exposure on the sub side, I think you also want to take into account the fact that Verizon’s network is going to be of hybrid of their LTE network and AWN CDMA network. That network doesn’t extend to most of what we think of as rural Alaska, which is a significant component of our subscriber base.

So, that’s not really addressable by Verizon. Also another significant part of our wireless customer base is a lifeline that’s a space that neither AT&T nor Verizon have had much interest in going after. And I don’t expect Verizon even to be certified as an CETC here in Alaska, so I don’t think they are either going to be obligated to go after that business or actually able to get the subsidy in the event that they did.

Operator

Thank you. Our next question comes from Mr. Jeff Hatz. Your line is open.

Unidentified Analyst

Thanks. Just two questions from me, the Managed Broadband segment in particularly data revenue has been growing very nicely for the last year and half 10%ish kind of growth. Can we expect that to continue? I mean I don’t know where the TERRA network expansion is but do you see further near double-digit growth in managed broadband data revenue?

Peter Pounds

Again I think a lot of that growth has been related to TERRA but not all of it. We have seen significant growth on the satellite supported side of the business as schools and medical care providers need more even if they don't get the benefit of terrestrial broadband.

The goal with TERRA is to move to complete the ring as Pete mentioned earlier. Completing -- but at the same time there are significant numbers of villages that we have not build out in the Norton sound and the [indiscernible] sound areas that will also expand managed broadbands business. In that business every location is a significant component of building revenues.

So we’ve got growth left there. I think that’s growth in expanding the footprint to additional villagers. There is also growth left there in the sense that we see continued demand from the major customers on TERRA just as there’s continued demand on the side light side to just expand their base amount of bandwidth.

People -- the customers out there are moving to more and more extensive use of high definition video teleconferencing and other applications that require bandwidth.

Unidentified Analyst

One additional follow-up just on the M&A front anything new as far as opportunities, obviously the Denali field but any other telecom related assets that were outside Alaska assets that have been present? Thanks.

Ronald Duncan

We continue to be opportunistic (Peter) [ph] as you saw that we’ve been the 10 deal if something seems to fit our knowledge set and our strategy we are very happy to take a look at it.

And if we think there is something we bring to the table either in terms of our ability to analyze, owner manage or some fit with the core business we certainly would like to find ways to continue growing through investment and acquisition, but we don’t have any particular hot top targets in mind right now.

The population of targets here in Alaska is obviously diminishing. I wouldn’t rule out that at some point in the next several years we might do something more in the broadcast base. But that needs to sort out a little bit the FCC’s new rules on cross ownership and arrangements among stations will have some impact up here and if that results in some dislocation of existing stations we might do something a little more there.

We’re obviously enjoying our first year in the broadcast business. We timed it just perfectly with the best selection year that Alaska has ever had and if we can figure out a way to generate more contentious elections on an annual recurring basis, we’d obviously look to invest deeper in the broadcast space.

Unidentified Analyst

That’s helpful. I just thought of one other that no one else has asked yet. The whole concept of the restructure that we saw wind stream attempt to pursue, can you -- do you have any comments on that if you look at that or any of your thoughts on that structure?

Peter Pounds

Yes. So first of all, my perspective on that is that’s a -- basically it’s a tax structure at its core. And we have north of 250 million of NOLs right now, so we’re good for the next several years here from a tax perspective. So that takes out probably the biggest reason for doing it and just the complexity of splitting apart of business is an awful lot of overhead to put out there.

So barring the tax, the tax advantages that we don’t see for several years, the inclination right now is let see how wind stream turns out, let see how others that might be me too in that space turn out and we’ll address that situation as we start to get near exorcising our NOLs.

Operator

Thank you. At this time, there are no further questions. I would now like to hand the call back to Mr. Peter Pounds.

Peter Pounds

All right. Thank you, Sheryl. And thank you all for joining the call. We will look forward to talking again in early November. Thank you very much.

Operator

Thank you. That does conclude today's conference. Thank you all for participating, you may now disconnect.

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