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GCI Profit Falls Amid Rising Cost: FIRST QUARTER: Higher Expenses Outpaced Company's Revenue Growth.

Posted on: Thursday, 11 May 2006, 12:04 CDT

By Bill White, Anchorage Daily News, Alaska

May 11--Anchorage phone and cable TV company General Communication Inc. recorded a $3.3 million profit for the first quarter, down 27 percent from the same three months of last year, the company said.

The decline came as operating expenses rose 7.4 percent while revenue grew 5.9 percent, GCI's financial statements show.

Revenue reached $113 million, compared with $107 million in last year's first quarter.

GCI is a major Alaska telecom business, competing in the long-distance and local phone arena and providing cable TV and Internet service.

Although GCI's profits were smaller, a measure of its cash flow -- an indicator of its ability to pay its bills -- grew by 8 percent to $37.1 million.

That number grew because some of its expenses don't actually involve spending cash.

As a telecom company, GCI has hundreds of millions of dollars in equipment and takes large depreciation expenses on that equipment. In the first quarter, that cost was $20.1 million, up 14 percent.

Another non-cash expense was $608,000 to reflect value of stock options awarded to executives under a new U.S. accounting rule.

John Lowber, chief financial officer, told stock and bond analysts that he expects the first quarter to be GCI's weakest. The company is "bullish on the Alaska economy," he said.

GCI is making an aggressive move into the wireless phone market, with a pending purchase for $29.5 million of a majority interest in Anchorage-based Alaska DigiTel, the No. 3 player in the market.

GCI also sells Cellular One wireless service through an alliance with Dobson Communication Corp. of Oklahoma City, which owns Cellular One.

Ron Duncan, chief executive of GCI, told analysts Tuesday that he'd "like to own" the Cellular One network in Alaska, but there's "nothing happening" on that at the moment.

On Wednesday, GCI stock fell 37 cents a share, or 3 percent, to close at $11.79, just below its highest price of the past year.

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Copyright (c) 2006, Anchorage Daily News, Alaska

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NASDAQ-NMS:GNCMA,

Source: Anchorage Daily News

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