1089511--3/14/2007--ALASKA_COMMUNICATIONS_SYSTEMS_GROUP

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Risks related to our common stock ACS Group is a holding company and relies on dividends, interest and other payments, advances and transfer of funds from its subsidiaries to meet its debt service and pay dividends. Our dividend policy may limit our ability to pursue growth opportunities. You may not receive the level of dividends provided for in our dividend policy or any dividends at all. Our substantial debt could adversely affect our financial health and restrict our ability to pay dividends on our common stock and adversely affect our financing options and liquidity position. Our debt instruments include restrictive and financial covenants that limit our operating flexibility. We will require a significant amount of cash to service our debt, pay dividends and fund our other liquidity needs. Our ability to generate cash depends on many factors beyond our control. Possible volatility in the price of our common stock could negatively affect us and our stockholders. The limited liquidity of the trading market for our common stock may affect the trading price of our common stock. Limitations on usage of our net operating losses, and other factors requiring us to pay cash taxes in future periods, may affect our ability to pay dividends to you. Risks related to our business We provide services to our customers over access lines and if we continue to lose access lines our revenues, earnings and cash flow from operations may decrease. Our business is subject to extensive governmental legislation and regulation. Applicable federal and state legislation and regulations and changes to them could adversely affect our business. As the incumbent local exchange carrier in our service areas, we are subject to legislation and regulation that are not applicable to our competitors. A reduction by the RCA or the FCC of the rates we charge our customers would reduce our revenues and earnings. Increased bandwidth consumption by customers using our data services may result in increased costs to us for wholesale network capacity, and we may be unable to recover those costs in our retail prices. Loss of the exemption from certain forms of competition granted to one of our rural local exchange carriers under the Federal Telecommunications Act of 1996 exposes us to increased competition. Our results of operations could be materially harmed as GCI further develops its own network facilities and stops leasing our network elements. We derive a significant portion of our wireless revenue from roaming charges. This revenue may fluctuate or decline in the future as a result of general economic, contractual, and competitive factors. The telecommunications industry is extremely competitive, particularly in Alaska, and we may have difficulty competing effectively for share in generally small markets. Recent strategic investment among other Alaskan telecommunications providers may lead to increased competition and a different competitive landscape. Revenues from our retail local telephone access lines may be reduced or lost. Revenues from access charges may be reduced or lost. A reduction in the universal service support currently received by some of our subsidiaries would reduce our revenues and earnings. Revenues from wireless services may be reduced. We may not be able to offer long distance and Internet services on a profitable basis. If we substantially underestimate or overestimate the demand for our long distance services, our cost of providing these services would increase. If we do not adapt to technological changes in the telecommunications industry, we could lose customers or market share. New governmental regulations may impose obligations on us to upgrade our existing technology or adopt new technology that may require additional capital and we may not be able to comply timely with these new regulations. Our network capacity and customer service system may not be adequate and may not expand quickly enough to support our anticipated customer growth. The reduction in our regulated rate base may adversely affect our ability to price our services. The successful operation and growth of our businesses depends on economic conditions in Alaska. We depend on key members of our senior management team. We rely on a limited number of key suppliers and vendors for timely supply of equipment and services for our network infrastructure. If these suppliers or vendors experience problems or favor our competitors, we could fail to obtain sufficient quantities of the equipment and services we require to operate our business successfully. Wireless devices may pose health and safety risks and driving while using a wireless phone may be prohibited; as a result, we may be subject to new regulations, and demand for our services may decrease. We are subject to environmental regulation and environmental compliance expenditures and liabilities. A failure of our system or network cables could cause significant delays or interruptions of service, which could cause us to lose customers.

Full 10-K form ▸

1089511--3/14/2007--ALASKA_COMMUNICATIONS_SYSTEMS_GROUP_INC