No Frills or Chills From Alaska Communications

Investors felt a little chill in the market last week as the S&P index surrendered almost 5%, but Alaska Communications (NASDAQ:ALSK) did its part to help warm things up with its second-quarter results. The company reported continued progress in expanding wireless and broadband services in the 49th state, growing revenue and operating income as well.

Revenue increased 9.6% to $93.2 million year over year, while net income was $7.1 million, down from the $13.5 million reported last year. When $8.7 million of one-time gains in 2006 are factored out, however, net income actually rose significantly on higher operating income of $14.4 million.

As with other integrated telecom carriers, wireless service is a key asset to Alaska Communication Systems (ACS). The company increased its subscriber base 3.2% to 142,000. Churn remained stable at 1.4%, while average revenue per user (ARPU) increased 9% to $61.62 as more customers made use of third-generation broadband wireless features. More than 20% of ACS' customers have data plans, and use of these features contributed to 5% of the total ARPU.

The improvements in wireless metrics from ACS compare favorably against those from other carriers in the U.S., such as Sprint Nextel (NYSE:S), with its strong ARPU, and Verizon Wireless -- a joint venture of Verizon Communications (NYSE:VZ) and Vodafone (NYSE:VOD) -- which sports an industry-low churn rate. The company also captured $4.5 million in roaming revenue from users coming in from the lower 48 states, which is up 22.8% from last year.

On the wireline side of ACS' business, the company grew revenue by 3% to $59.9 million. Even though the number of access lines dropped 2.7%, the loss was partly made up for by a 27% increase in Internet revenue, mostly coming from new enterprise customers. Upselling other wireline services also helped ACS limit the bleeding in traditional telephony services.

ACS will face a new challenge in the Alaskan market next year, however -- one that may provide formidable competition. If AT&T (NYSE:T) is able to close on its purchase of Dobson Communications (NASDAQ:DCEL), the AT&T brand will take over ACS' main competitor, Cellular One. ACS management believes the company has the edge in terms of service features and quality, but AT&T could be more of a threat if the company pumps significant investment into the area.

Chill with more Foolishness here:

• Read This Before the Market Crashes
• Foolish Forecast: Alaska Communications' Lasting Impression
• AT&T's Latest Prize: Dobson Communications

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Fool contributor Dave Mock is so cool he's hot, and so hot he's cool. He owns no shares of companies mentioned here. He is the author of The Qualcomm Equation. The Fool's disclosure policy is never lukewarm.