Liberty Broadband Corp. Class C Aktie

Welcome to GCI Liberty 2026 First Quarter Earnings Call. [Operator Instructions] As a reminder, this conference will be recorded May 7. I would now like to turn the call over to Hooper Stevens, Senior Vice President, Investor Relations. Please go ahead.

Thank you, everyone, for joining us today for GCI Liberty's First Quarter 2026 Earnings Call. As you know, this call may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10-K and 10-Q filed by GCI Liberty and Liberty Broadband with the SEC. These forward-looking statements speak only as of the date of this call, and GCI Liberty and Liberty Broadband expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in GCI Liberty or Liberty Broadband's expectations with regard to any change in events, conditions or circumstances on which any such statement is based.

On today's call, we will discuss certain non-GAAP financial measures for GCI Liberty, including adjusted OIBDA, adjusted OIBDA margin and free cash flow. Information regarding the required definitions along with the comparable GAAP metrics and reconciliations for GCI Liberty can be found in the earnings press release issued today, which is available on GCI Liberty's IR website.

Speaking on today's call will be Ron Duncan, the CEO of GCI Liberty, and Brian Wendling, GCI Liberty's Chief Accounting and Principal Financial Officer. Also during Q&A, we will take questions related to Liberty Broadband should they arise, and we have additional members of GCI and Liberty Broadband management available to answer questions.

With that, I'll turn the call over to Ron Duncan.

Thank you, and good morning. We had an incredibly productive start to the year and delivered solid first quarter results. We continue to execute on our mission of delivering quality connectivity to all Alaskans. At GCI, we recently announced a definitive agreement to acquire Quintillion for consideration of $310 million in cash, subject to certain adjustments, reimbursement of up to $50 million for capital expenditures incurred by Quintillion prior to closing and potential earn-out payments. We are incredibly excited to marry two of Alaska's best networks. This transaction will bring together complementary subsea and terrestrial fiber routes, our extensive rural microwave network, deep operational expertise and long-term investment under one operating model. It will enhance the scale, resilience and reach of GCI's statewide network to benefit all Alaskans. We expect the transaction to be accretive to free cash flow in the first year after closing.

We announced yesterday that GCI Liberty has invested approximately $107 million to acquire Searchlight Capital Partners equity interest in Liberty Latin America. We are also in discussions with Dr. John Malone, Chairman of the Board of GCI Liberty and Director Emeritus of Liberty Latin America and certain affiliates to acquire additional shares in Liberty Latin America. We are pleased to begin GCI Liberty's next chapter of growth with this opportunistic investment in Liberty Latin America and are keenly interested in acquiring a more significant equity and voting stake in the company from Dr. Malone and others. Balan Nair and his team have done an impressive job of developing LLA into a leading integrated connectivity provider across Latin America and the Caribbean, and we look forward to participating in the growth potential that lies ahead.

As part of this evolution, we intend to change our name from GCI Liberty to Liberty Capital Corporation in the coming weeks with no change to our ticker. We are changing our name to reflect our expanded focus at the parent level as we start making investments outside of our core Alaska operating subsidiary. Our Alaska operations will continue under the GCI name and brand. These first steps of strategic change at GCI Liberty represent our focus on augmenting the ways we create value for our shareholders and our progression as Liberty Capital. We look forward to keeping you updated on our progress.

Turning now to our operating highlights. We grew consumer wireless subscribers 2% year-over-year, ending the quarter with 200,000 consumer wireless lines. We had a total of 207,700 wireless lines at quarter end, including 7,700 business lines. We added 1,000 consumer wireless lines during the quarter, including 500 postpaid lines, largely from our GCI+ wireless free for a year promotion. On the data side, we saw a 3% decline year-over-year, ending the quarter with 150,500 data subscribers. We lost 700 data subscribers during the quarter due to continued competitive pressure from wireless substitution and limited competition from Starlink. Encouragingly, we note the pace of our broadband losses is decreasing, indicating a stabilizing broadband base. We believe the stabilization is due to the success of our new GCI+ promotional offer and the improvements we are making to speed and reliability throughout our network.

As we look forward, we expect the business to remain stable. At GCI, our operating priorities are: first, to invest in our network infrastructure, including closing our acquisition of Quintillion; second, to complete our build-out commitments under the Alaska plan; third, to drive value and the benefits of convergence for our customers; and finally, to bridge the digital divide through our rural expansion.

Starting with network infrastructure. Our planned acquisition of Quintillion creates value for both the Alaska community and our shareholders and is expected to be accretive to free cash flow within the first year of closing. The transaction will bring together complementary fiber routes, and we expect to enhance network resilience, routing diversity and overall reliability through a more robust architecture comprised of multiple rings and sub-rings. This expanded fiber footprint positions us to compete more effectively against LEO satellite broadband alternatives, bringing a more competitive connectivity environment to Alaska. Importantly, this transaction also strengthens critical communications infrastructure that supports Alaska's communities, government operations and national security priorities.

Next, on driving convergence and maximizing value and quality for our consumers. We remain encouraged by our promotional offers in the market, which provide value for our consumers. Last year, we concluded our unlimited test drive promotion. The retention of up sales from that promotion was exceptionally high in the low 90% range. This quarter, we launched free for a year wireless promotion that continues to support our consumer postpaid wireless growth and drives convergence. Our converged customer base continues to grow. More than 40% of our broadband customers have one or more wireless lines and more than 60% of our postpaid wireless lines are sold as part of a package.

Lastly, on bridging the digital divide in Alaska through rural expansion and completing our commitments on the Alaska plant. We are nearing completion of our build-out for the Alaska plan, increasing wireless speeds across the communities we serve. We will continue to focus on providing 5G wireless service to all covered Alaskans over the coming years. We still expect CapEx, including Quintillion to peak this year and to step down over the coming years as it returns to our historical range of 15% to 20% of revenue. The planned Quintillion acquisition should support substantial cash generation as we look ahead.

In summary, we are encouraged by our steady financial and operational performance this quarter. At GCI Liberty, we remain focused on our continued evolution as Liberty Capital as we look to create value for our shareholders from our existing business and new investments.

With that, I'll turn it to Brian to discuss the financials in more detail.

Thanks, Ron, and good morning, everyone. At the end of the first quarter, GCI Liberty had consolidated cash, cash equivalents and restricted cash of $448 million, including $131 million of cash, cash equivalents and restricted cash at GCI. Total principal amount of debt at GCI Liberty was approximately $1 billion. At quarter end, GCI Liberty's consolidated net leverage was 1.6x, which incorporates cash at the parent level, including proceeds from last quarter's rights offering as well as GCI's nonvoting preferred stock.

Subsequent to the end of the first quarter, GCI completed the acquisition of a 6% equity interest in Liberty Latin America from Searchlight for $107 million. GCI will also provide $160 million unsecured loan to Quintillion pursuant to the terms of the acquisition agreement. Pro forma for these 2 transactions, GCI Liberty's consolidated net leverage would have been 2.3x. At quarter end, GCI's net leverage as defined in its credit agreement was 2.3x. Additionally, GCI's credit facility had $377 million of undrawn capacity net of letters of credit. Pro forma for the $160 million loan that GCI will provide to Quintillion, GCI's leverage would have been approximately 2.7x.

Now turning to GCI's operating results for the first quarter. For the first quarter, GCI generated total revenue of $256 million, representing a 4% decrease year-over-year and adjusted OIBDA of $93 million, an 18% decrease year-over-year. There were approximately $13 million of items impacting year-over-year comparability, most of which are nonrecurring in nature. These include about a $4 million benefit we recognized during the first quarter of 2025 related to the successful appeal of rates for services provided to certain health care customers in prior years. Additionally, we are lapping a roughly $2 million net benefit to OIBDA last quarter related to the fiber break on the Quintillion network that GCI uses capacity, which has since been repaired.

We're also making incremental investments into operating business more efficiently, representing an increase of approximately $4 million in operating expenses. And lastly, during the first quarter of this year, we have $3 million of public company costs, which were not in the prior year numbers. We do expect these public company costs to continue.

Looking at the segment detail, the consumer revenue declined 5% during the first quarter, with the majority of the decline driven by the shutdown of the video business as well as data subscriber losses, slightly offset by growth in wireless. As a reminder, GCI exited the video business during the third quarter of last year. Consumer gross margin increased to 72.2% for the quarter, driven by a decline in consumer direct costs resulting from decreases in video programming costs. Business revenue declined 3% for the first quarter. As mentioned above, the first quarter of '25 benefited from approximately $4 million of out-of-period revenue, excluding or out of period -- more like recovered revenue. Excluding this impact, revenue would have been flat. Business gross margin decreased to 77.3% for the first quarter, primarily driven by higher distribution costs related to restored service on the Quintillion fiber network. As we've previously mentioned, this network was out of service during the first quarter of 2025.

Capital expenditures net of grant proceeds totaled $55 million during the first quarter. We expect 2026 CapEx of approximately $290 million, which includes $20 million that was carried over from 2025 due to normal course timing shifts. And as Ron mentioned, we do expect 2026 to represent our peak year of CapEx spend. GCI generated $99 million of free cash flow for the trailing 12 months through the end of the first quarter, down around 13% year-over-year. This was largely driven by an increase in capital expenditures net of grant proceeds. The CapEx increase in 2026 when coupled with ordinary course working capital swings will drive proportionately lower free cash flow on a year-over-year basis.

And with that, I'll turn the call back over to you, Ron.

Thank you. And operator, we can open it up for questions.

[Operator Instructions] Our first question is from David Joyce with Seaport Research Partners.

A few questions, please. First, I'll ask on the operational side. With the business wireless losses, what were the drivers of that?

The Business wireless is kind of a small part of the business, and I think there's ordinary churn going on in there. We've been gradually descending in Business wireless, partly as people transition business accounts more to the consumer side. I don't think the magnitude of those losses is material to the overall situation of the company.

Understood. And then secondly, on the Liberty Latin America investment, should we think of that as a tax-advantaged cash flow play since they announced that they're distributing a 9% preferred later this summer, thereby you could use some of your tax attributes with those cash flows to fund your own preferred and CapEx? Or is there some other kind of strategic thrust there?

We think there's a more strategic thrust there. We are pleased with their restructuring and we'll be happy to receive the benefits of the preferred there. And you're correct, those would be sheltered. But we've been looking at Liberty Latin America for a while before they had decided on their recapitalization plan with the preferred. We believe it's an undervalued entity and has many characteristics that are similar to what we face in the Alaskan market. It's got a great asset footprint in a market that is generally under-invested in, although they have some specific end markets that have more competition than we do.

We think they're on the verge of a substantial inflection in free cash flow, and we think looking at the overall situation there that they are materially undervalued. We saw this as an opportunity to get in at that undervaluation and build a bigger position over time. So we're happy to have the benefit of the preferred, but not -- that's not the principal reason for undertaking the transaction.

All right. And the final question is on Quintillion. What were your payments to them last year? And have there been other fiber breaks in the past like you experienced last year? And who are your -- who would the remaining customers be?

Okay. Let's take those one at a time. I don't think we have broken out the total Quintillion payments. Have we, Pete?

We have not.

Okay. We are more than half of Quintillion's total revenues, and that's a big piece of what drives the transaction. We generally don't compete with them on a customer basis. They're more in the wholesale business, and we buy services from them, that we then remarket to our business, and rural health care customers in the marketplace. But we're not -- give me the last piece of that question again, too, please, David?

Yes. Just wondering who the customer base is aside from yourself?

The customer base would be people who -- other people who provide services largely to the schools and the health care providers that would include ACS and some of the smaller local telephone companies throughout the state.

Our next question is from Jim Harris with Bistlet Management.

Liberty Broadband question. Outside of the purchases that they're making of Charter stock from Liberty every month, why wouldn't Liberty Broadband be encouraging Charter to reduce their debt in absolute terms since their business is shrinking, it's making it more risky and reducing the debt would increase the value per share. Just wondering why Liberty isn't pushing that absolute debt reduction as to their current plan to sort of slow leverage?

This is Martin Patterson speaking for Liberty Broadband. So you'll note that pro forma for the Cox transaction, there will be a reduction in net leverage. We remain very supportive of the capital allocation policy at the company and do see them lowering their leverage at the close of the Cox transaction, which will be the close of the Liberty Broadband transaction.

Thank you, Jim. Thank you, everyone, for participating in today's call. We will speak to you soon. And again, thanks. Take care.

Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

Welcome to the GCI Liberty's 2025 Year-end Earnings Call. [Operator Instructions] As a reminder, this conference will be recorded February 11.

I would now like to turn the call over to Hooper Stevens, Senior Vice President of Investor Relations. Please go ahead.

Good morning. Thank you for joining us. This call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10-K followed by GCI Liberty and Liberty Broadband with the SEC. These forward-looking statements speak only as of the date of this call, and GCI Liberty and Liberty Broadband expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in GCI Liberty Broadband's expectations with regard thereto or any change in events, conditions or circumstances on which such statement is based.

On today's call, we will discuss certain non-GAAP financial measures for GCI Liberty, including adjusted OIBDA, adjusted OIBDA margin and free cash flow. Information regarding the required definitions along with the comparable GAAP metrics and reconciliations including Schedule 1 and Schedule 2 for GCI Liberty can be found in the earnings press release issued today, which is available on GCI Liberty's IR website.

Speaking on today's call will be Ron Duncan, the CEO of GCI Liberty; and Brian Wendling; GCI Liberty's Chief Accounting and Principal Financial Officer. Also during the Q&A, we will take questions related to Liberty Broadband should they arise. Additional members of GCI and Liberty Broadband management will be available to assist Ron and Brian with questions.

With that, I'll hand the call over to Ron Duncan.

Thank you, Hooper, and good morning. GCI had an exceptional year. We reported solid fourth quarter results. We achieved record revenue of over $1 billion and record adjusted EBITDA of more than $400 million, a significant milestone for the company. We continue to execute on our mission to deliver best-in-class connectivity across Alaska. Our consumer wireless base is expanding we are realizing the benefits of last year's strong sales cycle in our business segment. We continue to sharpen our strategic focus as Alaska's only converged broadband and wireless provider following the exit of our video business last year.

During the fourth quarter, we announced executed and completed our rights offering. The rights offering is fully subscribed, resulting in approximately $300 million in net proceeds. We are pleased with the outcome, which allows us ample flexibility to continuously canvass the market and fine-tune our strategy at the parent company level. We plan to use the proceeds for general corporate purposes as well as for potential strategic acquisitions, investments or partnerships.

Turning to the business. I'm proud of how nimble and effective our GCI team is in ensuring the continuity of our network. First, in December, we experienced 2 fiber brings, one in Dutch Harbor, which was repaired in early January and under 2 weeks and the other [indiscernible], we expect to incur repair costs this year in the low single-digit million range with service expected to be restored during the summer months after the ice goes out.

Second, as we mentioned last quarter, Typhoon Halong hit Southwest Alaska in early October of last year. We fully restored service to the 2 villages that were hit in under 4 months. Beyond the small revenue overhang in January, we do not expect any ongoing impact to our business. We commend the entire GCI team for their outstanding service to the communities that we serve.

Turning now to our operating highlights. We grew consumer wireless subscribers 2% year-over-year, ending the year with 199,000 consumer wireless lines. We had a total of 207,500 wireless lines at year-end, including 8,500 business lines. We added 3,500 consumer wireless lines during the year, including 6,700 postpaid lines largely as a result of our unlimited test drive promotion, where we continue to see slow erosion in our repaid and government-subsidized Lifeline segments, partially offsetting the growth in our postpaid lines.

On the data side, we saw a 3% decline year-over-year, exiting the year with 151,200 data subscribers. We lost 4,500 data subscribers during the year and 1,200 data subscribers during the fourth quarter. The decline of data subscribers over the past year due to wireless substitution and limited competition from [indiscernible] and others, exacerbated by a fiber break on a third-party network in which GCI uses capacity. As of the third quarter, service has been restored, although we note that winning back customers in the service impacted areas has been slow.

We are proud of the operational and financial progress we made in 2025. We reported over $400 million of adjusted OIBDA, an exceptional milestone for GCI. But looking ahead to this year, we expect the business to be stable. As we look forward to 2026, our operating priorities are first, to invest in our network infrastructure and deliver high-quality service to our customers; second, to complete our build-out commitments under the Alaska plan; third, to drive value and the benefits of convergence for our customers; and fourth, to continue bridging the digital divide through our rural expansion.

Starting with our network infrastructure. We're offering 2.5 gigabit broadband connectivity everywhere that has fiber middle mile, which means we can offer it to an overwhelming majority of our customers. We're making progress improving the broadband network and acreage. We're in the process of upgrading the core, reducing node sizes and upgrading to a 1.8 gigahertz plant. Our initial deployment is yielding positive results, and we plan to significantly scale the deployment of our HFC network this year. All the work that we are doing is [ DOCSIS ] 4.0 or 4.0 capable enabling speeds that are multiple times what we have today.

We will be rolling this out to markets outside of acreage this year, allowing us to get to 5 gigabits and ultimately beyond. We believe these changes will not only lead to higher speeds but also in network with better reliability and fewer maintenance requirements. The strength of this offering positions us well to its competitors today and into the future.

Next, on driving convergence and maximizing value and quality for our customers. We concluded our unlimited test drive promotion at year-end, which drove meaningful postpaid consumer wireless growth in 2025 to a peak of 165,400 lines. The first cohorts of our promotional subscribers are now rolling off. And while it's still early, we are seeing exceptionally strong retention rates. At the end of January, we launched a 12-month free promotion that we expect will further support postpaid wireless growth this year.

As of year-end, approximately 40% of our broadband customers have 1 or more wireless lines and approximately 62% of our postpaid wireless lines are sold as part of a bundle, up from 57% at the end of 2024. Our focus remains on delivering quality and value for all of our customers.

Lastly, on bridging the digital divide in Alaska through expansion and completing our build commitments on the Alaska plan. Just a few weeks ago, we announced that we had completed the build-out of the [ IHC 1 ] network, which brings fiber infrastructure to the Yukon-Kuskokwim delta, ensuring residents there enjoy 2.5 gigabit service. We also remain on track to complete our build-out requirements for the Alaska plan this year and increased wireless speeds in the communities we serve. The new Alaska Connect fund will extend the Alaska plan to 2034. Our focus remains on providing 5G wireless service to all cover Alaskans over the coming years.

Turning briefly to Bead. The State of Alaska has announced that GCI has been provisionally awarded approximately $120 million in BEAD fund. This award remains subject to approval by the NTIA. There remains substantial uncertainty about the timing of the final award as the state is still in active negotiations with the NTIA regarding the ultimate distribution of Alaska's BEAD funding. Any funding that GCI ultimately receives will offset our capital costs as we expand in unserved locations.

Regulatory and macro environment. From a macro perspective, [indiscernible] economy could be poised for some long overdue economic growth. In mid-October, the Trump administration announced plans to open the Arctic National Wildlife range to drilling, a development that could accelerate oil and gas activity across the state, combined with the potential development of the gas line -- these initiatives could drive substantial economic expansion in Alaska, lifting the Alaska economy and creating new opportunities with the potential of increased demand for our services.

In summary, we are encouraged by an exceptional year of financial and operational performance. The peak of CapEx in 2026 and projected step down over the coming years back to our historical range of 15% to 20% of revenue, should be highly supportive of substantial cash generation as we look ahead. We believe the strength of our network and our robust and operating results will continue to create value for our customers, partners and shareholders.

With that, I'll turn it to Brian to discuss the financials in more detail.

Thank you, Ron, and good morning, everyone. At year-end, GCI Liberty had consolidated cash, cash equivalents and restricted cash of $429 million, which is inclusive of our approximately $300 million rights offering, which was completed at the end of 2025. And we had total principal amount of debt of approximately $1 billion. At year-end, GCI's net leverage as defined in its credit agreement was 2.3x and GCI Liberty's consolidated net leverage was 1.6x, which incorporates cash at the parent level, including the proceeds from the rights offering as well as GCI's nonvoting preferred stock.

Additionally, GCI's credit facility has $377 million of undrawn capacity net of letters of credit. Just in an admin matter during the fourth quarter, we refined the definition of our subscriber metrics. The definitions of consumer cable and wireless subscribers now exclude prepaid customers who are no longer paying for the service and postpaid and cable modem customers who have been inactive for over 60 days. All prior periods have been reflected for this refined definition, and this aligns with how GCI manages and evaluates the business.

Turning to the GCI's operating results for the full year and the fourth quarter. For the year, GCI generated total revenue of $1 billion, representing a 3% increase for the full year. Revenue increased primarily due to growth at the GCI business. Adjusted OIBDA of $403 million was a record high and increased 12% for the full year. The increase was driven by both higher revenue and lower operating expenses, which this includes lower programming -- video programming expenses and reduced distribution costs related to temporary cost savings from a fiber break on a third-party network.

The fiber break was fully restored during the third quarter of 2025. In the fourth quarter, GCI generated total revenue of $262 million was flat with the prior year quarter, and adjusted OIBDA increased 7% to $90 million. primarily due to lower selling, general and administrative expenses related to personnel and compensation expenses. Consumer revenue declined 2% for the full year in the fourth quarter with the majority of the decline driven by the shutdown of the video business as well as data subscriber losses, slightly offset by growth in wireless.

As a reminder, GCI exited the video business during the third quarter of the year. Consumer wireless revenue increased both for the full year and the fourth quarter, driven by an increase in federal wireless subsidies. Consumer gross margin increased to 70.7% for the full year and increased to 69.7% for the fourth quarter, driven by a decline in consumer direct costs resulting from decreases in video programs. For the year, direct costs also benefited from temporary cost savings from the fiber break on the third-party network that was previously discussed.

Business revenue grew 7% for the year and 1% during the fourth quarter. For the year, the increase was driven by the strong upgrade cycle, which started in the third quarter of 2024. For both the full year and fourth quarter revenue growth was partially offset by lower wireless roaming revenue. Business gross margin increased to 80.1% for the year and increased to 78.3% for the fourth quarter, primarily driven by revenue growth. For the year, business gross margin benefited from lower direct costs due to temporary cost savings from the aforementioned third-party fiber break.

Capital expenditures, net grant proceeds totaled $224 million for the year. As Ron said, we expect 2026 CapEx of approximately $290 million, which includes carried over from 2025 due to normal course timing shifts. As was mentioned, we expect '26 to represent our peak year of CapEx spend, driven by completing the build-out requirements of the Alaska plan and the timing shifts for 2025. Our historical CapEx has been 15% to 20% of revenue and we expect our long-term CapEx following the completion of the Alaska plan build-out to trend back to these levels.

GCI generated $146 million in free cash flow for the full year, up over 70% from 2024, driven by our record financial growth. And 2025 free cash flow also benefited from positive working capital swings. The CapEx increase in 2026, when coupled with ordinary course, working capital swings will drive proportionately lower free cash flow on a year-over-year basis.

And with that, I'll turn the call back over to Ron.

Thank you, Brian. We appreciate everyone's interest in GCI Liberty, and we look forward to continuing to update you on our progress. With that, we'll open the call up for Q&A.

[Operator Instructions] And the first question comes from the line of David Joyce with Seaport Research.

A couple of questions, please. First, I was wondering how we should think about margins this year since you'll be comping against the operational savings, while the undersea fiber was offline in the first part of last year, and then you don't have the TV programming expenses. And then secondly, what sort of cadence of CapEx spending should we expect this year? And if you could kind of drill down on where you would be spending which products?

Okay. Pete, do you want to tackle the margin question?

No Pete. Okay. Well, I will do my best on the margins. The margin would be -- is Pete there. Pete just go ahead.

I'm happy to take the margin question and you can ask if you want Ron. I think on the margin 6, we obviously can't guide, David, on where we think we'll ultimately end up for 2026. I guess you heard Ron say in his remarks, we expect a stable year for 2026. There are certainly some things on the cost side that are benefits meaning no video expense at all during 2026. Obviously, we also had revenue that was offsetting that in the early part of the year. And then there was the benefit from the fiber break. But overall, we expect a pretty stable year for work for next year.

And I comment on -- yes, I'll take the CapEx. I would just comment on margins as well that the video business was kind of a net zero for us anyway by the time we got out there were substantial revenues, but also a very substantial programming costs. The reason we exited was we could see ourselves heading into a negative free cash flow situation to stay in the video business. So it was a net positive going forward and probably not tremendous change in the base of the business as you look at it.

On the CapEx cadence, typically, we peak in the second and third quarters when the construction season is in full swing up here, and I expect that pattern to continue this year. The largest single element of this year's CapEx is in wireless, particularly rural wireless, as we sprint to the finish of our first phase commitments under the Alaska plan but we'll also be expanding substantial CapEx to expand the urban wired network as we move to our 5G and [indiscernible] 4.0 implementation.

Thank you. David, if you don't have any other questions, that will conclude today's call. appreciate everybody's participation, and we look forward to speaking to you offline in next quarter as well. Thank you.

Thank you all very much.

This will conclude today's conference. We disconnect your lines at this time. We thank you for your participation. Have a wonderful day.

Greetings. Welcome to the GCI Liberty 2025 Q3 Earnings Call. [Operator Instructions] As a reminder, this conference will be recorded today, November 5.

I will now turn the call over to Shane Kleinstein, Senior Vice President, Investor Relations. Please go ahead.

Thank you. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties including those mentioned in the prospectus forming part of GCI Liberty's registration statement, most recent forms 10-Q followed by GCI Liberty and Liberty Broadband with the SEC. These forward-looking statements speak only as of the date of this call, and GCI Liberty and Liberty Broadband expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in GCI Liberty or Liberty Broadband's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

On today's call, we will discuss certain non-GAAP financial measures for GCI Liberty, including adjusted OIBDA, adjusted OIBDA margin and free cash flow. Information regarding the required definitions along with the comparable GAAP metrics and reconciliations including Schedule 1 can be found in the earnings press release issued today, which is available on GCI Liberty's website.

Speaking on the call today, we have Ron Duncan, CEO of GCI Liberty; Brian Wendling; GCI Liberty's Chief Accounting and Principal Financial Officer. And during Q&A, we will answer questions related to Liberty Broadband. Members of both GCI Liberty and Liberty Broadband Management and GCI management will be available to answer questions.

With that, I will turn the call over to Ron.

Good morning. GCI had a solid quarter, building on an already strong year and the business is performing largely in line with expectations. We are proud to say we are tracking towards a record adjusted OIBDA in 2025, a huge milestone for the company. Our consumer business continued to add wireless lines. Our business unit continues to deliver the benefits of last year's strong sales cycle, and we have streamlined to become a pure-play connectivity provider following the exit of our video business this quarter.

As mentioned last quarter, our rural operations this year have been adversely impacted by an outage from a fiber break in the Arctic Ocean in January on a third-party network in which GCI uses capacity. In early September, our partner was able to repair the broken fiber. We moved quickly to restore our consumer wireless and Internet customers as well as business customers that had lost service. All customers are operational as of the end of the third quarter.

Unfortunately, in early October, Typhoon Halong hit Southwest Alaska with devastating consequences. Two villages, Kipnuk and Kwigillingok were destroyed with dozens of other villages very hard hit. While we do not expect any material impact on our business in the near term, we are still in the early days of assessing the longer-term plans for a rebuilding effort in the broader area including the potential loss of locations served for clinics and schools.

We grew consumer wireless subscribers 2% year-over-year, ending the quarter with 207,500 subscribers. During the quarter, we added 500 consumer wireless lines. On the data side, we saw a 3% decline year-over-year, ending the quarter with 153,100 cable modem subscribers. During the quarter, we lost 1,400 data subscribers. The decline of data subscribers over the past year is largely due to competition, including wireless substitution as well as the aforementioned break on the third-party network in which GCI uses capacity.

During the third quarter, we exited the video business. This will not have a significant impact on revenue or cost of sales, but will allow us to avoid future capital expenditures in the business with no margin and to focus on the core connectivity products that our consumers want most.

As I mentioned last quarter, the adjusted OIBDA growth rates we reported in the first half of the year benefited from a series of nonrecurring tailwinds with an expected deceleration in the back half of the year. We fully lapped the upsell cycle in schools, which began in the third quarter of 2024. We also incurred additional SG&A spend in the third quarter as compared to the prior year due to increased personnel expense including higher health care costs and expenses related to accrued employee incentive payments.

We are proud of the progress both financially and operationally this year. We remain focused on improving our infrastructure to deliver high-quality service to our customers, furthering our rural expansion to bridge the digital divide and increasing the efficiency of our business. I'll go into a bit more detail in several areas.

Starting with our network infrastructure. We are offering 2.5 gigabit broadband connectivity everywhere that has fiber middle mile, which covers an overwhelming majority of our customers. Material progress is being made in improving the broadband network in Anchorage as we are in the process of upgrading the core, reducing node sizes and upgrading to 1.8 gigahertz. Our initial deployment is yielding positive results, and we plan to significantly scale the deployment of our hybrid fiber coax network next year. All the work that we are doing is DOCSIS 4.0 or 4.0 capable enabling speeds that are multiple times of that which we have today. We will be rolling this out to other markets starting in 2026, allowing us to get to 5 gigabits and ultimately beyond. We believe these changes will not only lead to higher speeds, but also in network with fewer maintenance requirements. The strength of this offering positions us well against competitors today and into the future.

On wireless, our unlimited test drive promotion continue to support subscriber growth in the third quarter. As a reminder, this promotion offers our broadband customers an attractive discounted price to gain access to unlimited broadband and add a wireless line free of charge. We expect to roll out other new pricing and promotional offers next year to best maximize quality and value for our customers. Through continued investment in our network, we believe we will be able to offer 5G wireless service to all of Alaska over the coming years.

We continue to bridge the digital divide in Alaska with our rural expansion. On the Alaska plan, we expect to complete the first phase and meet our build-out requirements in 2026 and increased wireless speeds in the communities we're serving. Additionally, the FCC's new Alaska Connect fund will extend the Alaska plan and increase the amount of funding support, which will aid in the deployment of 5G wireless throughout Alaska.

Turning to BEAD. GCI was provisionally awarded subject to NTIA approval, three sub grants totaling over $140 million. These sub grants will support the build-out of infrastructure to and within communities in the Yukon–Kuskokwim Delta and the expansion of GCI's anchorage local access network to four new neighborhoods. Any funding that GCI is ultimately awarded will offset our capital costs as we expand in unserved locations.

Other items. From a macro perspective, looking at the Alaska economy in mid-October, the administration announced plans to open the Arctic National Wildlife Refuge to drilling. This increase in oil and gas activity, along with the potential deployment of a gas pipeline could grow the Alaska economy and provide an opportunity for increased demand for our services.

And finally, as we announced today, we intend to launch shortly a rights offering to raise approximately $300 million in proceeds. In the offering, all holders of our common stock would receive transferable rights to acquire shares of LibK at a discount to the market. Our Chairman, John Malone, has stated his intention to fully support the offering by exercising his rights in full and oversubscribing for any remaining shares available. We intend to use the proceeds for general corporate purposes including potential future M&A. We believe this is an attractive source of liquidity and will provide value to our shareholder base. We refer you to the related registration statement being filed later today for more details.

In summary, we continue to deliver high-quality service to the State of Alaska with both the breadth and caliber of our network. We believe the quality of our infrastructure and durability of our financial results will drive value for our customers, partners and shareholders.

With that, I'll turn it to Brian to discuss the financials in more detail.

Thanks, Ron, and good morning, everyone. At quarter end, GCI Liberty had consolidated cash, cash equivalents and restricted cash of $137 million and total principal amount of debt of approximately $1 billion. At quarter end, GCI's leverage as defined by its credit agreement, was 2.3x and GCI's credit facility had $377 million of undrawn capacity net of letters of credit.

In the third quarter, $10 million of nonvoting preferred stock at GCI Liberty was issued to Liberty Broadband and then sold by Liberty Broadband to third-party buyers. The GCI Liberty nonvoting preferred stock pays a 12% dividend with a redemption date in 2032.

During the quarter, we took a noncash impairment charge on our indefinite-lived intangible assets totaling $525 million. These intangibles were originally recorded as part of the 2020 acquisition of GCI Liberty by Liberty Broadband when cable multiples were much higher. As part of the spin and seeing the post-spin trading values, we reevaluated the recoverability of these intangibles during the third quarter. The impairment is included in operating loss, but excluded from adjusted OIBDA.

Now turning to GCI's operating results. GCI generated total revenue of $257 million representing a 2% decrease in the third quarter. Revenue declined primarily due to exiting the video business in the quarter, adjusted OIBDA of $92 million, decreased 8%. The decline was driven by lower revenue and higher SG&A expense from increased personnel expense, including higher health care costs and growth in accrued employee incentive payments, partially offset by reduced operating expenses from lower distribution costs.

Consumer revenue declined 4% to $115 million. The majority of the decline was driven by a decline in video and data revenue, slightly offset by growth in consumer wireless. Consumer wireless revenue increased 11% to $52 million, benefiting from subscriber growth and an increase in federal wireless subsidies. Consumer gross margin increased to 72.2%, driven by a decline in consumer direct costs resulting from decreases in video programming costs and temporary cost savings from the Quintillion fiber break. As a reminder, the Quintillion fiber break was fully restored in September.

Business revenue was flat at $142 million. We have now fully lapped the strong upgrade cycle starting in the third quarter of last year. Business wireless revenue declined $1 million or 9%, driven by a slight decline in roaming revenue and business gross margin increased to 78.2% primarily due to temporary cost savings from the Quintillion fiber break combined with data revenue growth.

Capital expenditures net of grant proceeds totaled $52 million during the quarter. Year-to-date, GCI had approximately $152 million in net CapEx investment. We now expect full year CapEx to be in the range of $225 million to $250 million, with the lower end of the range, driven by normal course timing shifts and planned CapEx projects. We still expect that 2026 will be our peak year for CapEx spend and that CapEx will step down meaningfully after 2026.

GCI generated $155 million of free cash flow on a trailing 12-month basis through the end of the third quarter. We believe presenting free cash flow on a trailing 12-month basis more accurately demonstrates our cash generation and liquidity profile by minimizing seasonal fluctuations, particularly around the timing of USF cash receipts.

And with that, I will turn the call back over to you, Ron.

Thank you, Brian. We appreciate your interest in GCI Liberty and look forward to continuing to update you on our progress.

Before we open for Q&A, I want to take a moment to recognize and congratulate Shane Kleinstein, our Head of Investor Relations, on her last earnings call with us. She has been instrumental in our Investor Relations function and has left an indelible mark on our company. On behalf of the entire GCI Liberty team. Thank you, Shane, and we wish you the best in your future endeavors.

We will have a new Head of Investor Relations, joining us and look forward to sharing that update in the future. In the meantime, we encourage you to please continue to reach out to the rest of the IR team or e-mail us at [email protected] with questions.

With that, we'll open the call up for Q&A.

Mr. Duncan, it seems we have no questions at this time. I'll turn the floor back to you.

Okay. Well, thank you all very much for your participation this morning. And as stated previously, we are available for questions through the IR team and the website. Everyone, have a good day. Thank you.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Hi, everyone. Thank you for joining today's call. [Operator Instructions] In the meantime, I'm going to read a quick disclaimer. Members of the media are not invited to participate. Any publication, distribution, reproduction, posting, sharing or transmission of this information without the expressed permission of TD Securities is prohibited.

As a reminder, we are not interested in receiving and you should not disclose any confidential information. In the event that you inadvertently disclose such information, please notify us as soon as possible. I will now pass the call over to Greg.

Great. Thanks, Jada. Good afternoon, everybody. Welcome, and thank you for joining our TD Cowen call with GCI. For those of you that don't know me, I'm Greg Williams. I cover cable, wireless, and telco at TD Cowen. I'm delighted to be joined by Ron Duncan, CEO of the upcoming GCI spin.

This will be a 1-hour fireside chat, I will be asking the questions. We got a whole host of questions, but feel free by all means to e-mail me questions. I've got my e-mail right here for questions that I could very well relay during the fireside chat. And with that, yes, thank you, Ron, for joining us.

Glad to be here, thank you for being the host.

Sure. So we just wanted to -- before we get started, talk for a few minutes about a brief overview of the business and the upcoming spin-off and the timeline for this, going forward?

Okay. Well, the time line for the spin-off is closing down on launch date. The spin becomes effective at the close of business on Monday, the 14th. So we'll see the number we've all been waiting for, which is the opening price on Tuesday morning, the 15th unless there's pre-trading, which may happen. We're awaiting clearance from NASDAQ to do pre-distribution trading, and we will issue a press release when that happens.

But the when-issued would be presumably maybe there's only one day left in this week. So maybe tomorrow or Monday will get when-issued trading otherwise, Tuesday morning, you can wake up and look for the stock price and call us up to find out who won the pool up here.

Right. Fair enough. Can you provide a brief overview of those that are less familiar with GCI, whether obviously, we can talk a little bit more about the uniqueness of Alaska. But before I even do that, just on a high level, your business versus consumer mix, homes passed, HFC versus fiber plants? Any overview there would be helpful.

Sure. Well, today, we're the largest telecom provider in Alaska. We started out as a competitive long distance entrant 45 years ago, probably half the people on your call, don't remember when you actually paid for a long distance call. But over those 45 years, we've built out both wired and wireless facilities to almost the entirety of Alaska.

Our wired broadband plant passes almost 90% of the homes in the state and 55% of the homes that we pass our broadband subscribers our wireless footprint and it's noteworthy that we're a mobile network operator, not a virtual mobile network operator. Unlike our peers in the cable industry. We own and operate the entirety of our own mobile network. That network covers 100,000 square miles and 700,000 POPs, virtually the entirety of Alaska. The substantial -- a substantial number of the urban POPs are served by 5G, although only about 20% of the geographic footprint is 5G today that will increase to about 30% by the end of the year.

And over the next several years, our 5G footprint will span the entire state. But today, we're essentially 5G in the Anchorage and surrounding areas, and we're far and away the best 5G in the state. We typically clock out at about 50% to 75% faster on the speed test than AT&T does on the wireless network.

On the wired side, almost all of our broadband customers have access to 2.5G services at the same urban pricing rate. And our plan is to drive that to 5G and then 10G over the next 3 or 4 years.

Got it. And I just want to stay on the wireline landscape. Understanding Alaska is fairly different compared to the Lower 48 states. So maybe you can help us with a brief overview of the uniqueness in terms of geography demographics and, of course, competitive landscape of Alaska.

The primary characteristics of Alaska are that it's -- and again, it's small. It's a huge state, but it's got a small population, that population is fairly dispersed throughout the state. There are obviously urban clusters in Anchorage and Fairbanks, but by Lower 48 standards, even Anchorage which is the largest city in the state is relatively small. It's only 120,000 homes that we have in the Anchorage area.

When Liberty announced the spin out of -- well, when Liberty announced the Charter, Liberty Broadband recombination and the spinout of GCI at the subsequent Investor Day, somebody asked Chris Winfrey, the Charter CEO about why he didn't want GCI because GCI was listed as a disposable asset in the Liberty distribution. And I thought Chris' answer was pretty good. He said, "Well, the total population that GCI serves is less than the number of subscribers we have in Charlotte, North Carolina. And they're at the end of 2,000 miles of undersea fiber optic cable, just not in our wheelhouse."

And I think that's the characteristic of Alaska, that really pertains to everybody else. Unless you specialize on Alaska, the technology that you need, the assets that you need and the skill sets simply aren't in anybody else's wheelhouse. There's nobody else doing anything equivalent to this business in the Lower 48, we're different from many of our cable peers and that we have a larger commercial business than we have consumer business, that comes about because of how extensive our facilities and our network is in the state.

We've invested more than $4 billion over 40 years, building out facilities. So virtually every community in every location in the state, and it's simply not feasible for somebody to come in and say, oh, I'm going to compete with that. I'm going to write my $4 billion check. I'm going to build out new network assets, and I'm going to serve 500,000 people spread throughout the entire state. So we're far removed. We have a higher cost structure than most other places. Physical asset construction up here, costs 50% to 100% more than similar construction in the Lower 48. And by the time you get to the end of the rainbow, the pot of gold is small on a relative basis, compared to what people look for elsewhere.

Right. So it's a compelling case that you've got a nice moat here. But what about the one competitor you do compete with, which is Alaska Communications. Can you help us characterize them as a competitor and risks there. The way I think about it is, yes, it could be prohibitive to go fiber up and across Alaska, but they can pick their battles.

Like you said, Anchorage is 120,000 homes. Can you help us to contextualize the risk of fiber-to-the-home entry like we've seen in the Lower 48.

There's always a risk of competitive overbuild. And ACS is the local telephone company elect for, I guess, probably 70% of our footprint. And they have dabbled in fiber-to-the-home, but we haven't seen any impact in it. We think the number of homes that they've passed is actually quite small and we're not aware of any ongoing construction activity. The challenge up here is that the construction cost for fiber-to-the-home is 50% to 250% more than it is in the Lower 48.

Urban fiber-to-the-home can cost as much as $3,000 per passing, not for sub. And in the smaller areas, that can be up to as high as $10,000 per passing. So you're really talking about a business case that's pretty challenged to start with. And yes, the revenues are a little bit higher in the Alaska market, but they're not double what they are in the rest of the country and the market is fairly well served and penetrated today. ACS still has customers on DSL. So there's a broad range of services, but I think the principal reason we don't see fiber-to-the-home competition is that it's just prohibitively expensive to build it out.

And there may be areas where you could cherry-pick we originally saw what ACS was doing as kind of trying to cherry-pick the more likely neighborhoods to succeed in but ultimately, we didn't see an impact on our footprint, and they don't appear to be pursuing that strategy. That doesn't mean they couldn't turn it up in the future, and we'd be ready for that with a competitive response. But it's a market smaller than Charlotte, and it's at the end of 2,000 miles of undersea fiber cable. So it's not hanging out there with a big red flag saying, "come build me."

Right. That makes sense. But how about Starlink, they could be a competitor. Obviously, they're more expensive and requires some addition itself. But could you help us understand Starlink as a competitor? And what's the target demographic for Starlink versus you? Or any Starlink for that matter?

Starlink is a vibrant competitor in the rural areas in places that aren't wired or in places where the wired connectivity doesn't provide enough capacity. Starlink took a significant percentage of a very small number of subscribers from us in a number of the rural areas before we were able to get there with fiber middle mile. What we were constricted by our microwave backbone on the middle mile didn't have any fiber connectivity.

We had both high rates, low speeds and substantial usage charges because there simply wasn't enough capacity in the middle mile to serve people in those markets. Starlink has been very successful in those markets picking up people there. We do see Starlink cropping up in the urban markets. Some of that is that people just want an alternative to GCI.

Some people in the marketplace just don't need the amount of speed that you would get through a wired connection. And I think some of the Starlink motivation comes from people who are really buying Starlink portability. If you subscribe to a primary Starlink terminal, you get substantial discounts on the one for your RV or the one you put on the dash of your airplane and the one you put your back when you want to go out somewhere else.

I think that has driven some urban Starlink competition as well. It's not a big number. It's certainly a very low single-digit penetration, but they're definitely there on the horizon. To some extent, you could consider them to be the equivalent of our fixed wireless competition although at a different price point. And we've always seen customers for whom lower capacity was enough. Before COVID, we estimated that probably 15% of our customers were wireless-only, that they simply didn't buy a wired connectors. They had no need for the for the capacity to the speed.

And frequently, they were more nomadic so they didn't have a place to deliver a wireless connection or a wired connection. COVID changed that, and particularly with ACP a lot of those customers, I would say, the vast majority of our wireless-only customers connected to a wired connection. Many of them stayed wired post ACP, but the 4,500 customers that we lost following the turndown of ACP seemed to have mostly gone back to wireless only. So there's a market for people at a lower price point and a lower service point in terms of bandwidth and capacity that's always going to be there.

Got it. And you touched on fixed wireless and from what we understand, there's really no fixed route competition or maybe negligible. Maybe help us with that dynamic. Obviously, it goes back to Alaska being a unique geography, but we see Verizon rolling out rural [ EC ] category and the C-band, I guess, is there a fear that you can see some of the carriers to roll out fixed wireless in Alaska, at least in the more dense areas.

There is very limited fixed wireless, mostly at the periphery of the wired service area. ACS does some fixed wireless in places where they have basically DSL or almost DSL because the loops are too long and the speeds are too slow. There's a small company that has served a couple of rural communities that has been advertising in Anchorage, but the penetration of fixed wireless is not material.

AT&T and Verizon don't do it up here. Primarily, I believe it's a spectrum constraint on the Verizon doesn't have the spectrum up here that they use for fixed wireless everywhere else in the country. And my guess is that AT&T is spectrum constrained, given that it has a super normal market share up here, and it uses its wireless spectrum. I would suggest but based on the speed tests that ACS doesn't -- the comparative speed test where we're faster than ACS, AT&T doesn't have adequate capacity even for its mobile network and you have to remember the size of the marketplace.

This is not a very big market to turn up a new service, and you don't get to roll it out as part of -- if you're in Wyoming, you can roll it out as an extension of what you've done in the cities there, but their cities, even they're bigger than ours. So it's a size and it's a location and it's a difficulty of getting here means that it's been a long time before state-of-the-art products really make it here.

Got it. And slightly shifting gears, just your customers, your customer base. Have you seen any change in customer behavior given the macro environment? I assume broadband Alaska is a very defensive product.

Broadband, I think, is always a defensive product. We unfortunately beat you all to the difficult macro environment. We've been in a difficult macro environment for the last 5 or 6 years. Alaska has been a victim of out migration the economy up here is flat to barely growing. New job creation is very low. During the Biden years, we were the victims of targeted resistance to any form of economic or resource exploration, many projects stalled a number of them stalled out.

Some of that, hopefully, will change with the current administration, which is plowing the road, so to speak, both to build roads to open up areas for more resource deployment and to create access for mining, which is a potentially significant impact on Alaska as well. We have 95% of the rare minerals that are needed for solving all of the problems that we're dealing with, with China, but we haven't been able to get to them in the past because we haven't been able to build 100-mile long roads across federal property to get to the mine sites. That's all changing now. You probably read that the President has opened up more areas of the petroleum reserve for drilling.

That will drive both primary growth in the economy, and most importantly, it will drive additional resource to the -- additional money to the state government, because the state government gets royalties off of the resource development and the biggest break on the growth in the economy in Alaska has been constrained state spending. The state is the largest component of our -- state spending is the largest component of our economy, and that has been retarded because oil prices are down, and oil flows are down.

So there's the potential for some of that to change. There's also a potential that a gas line bringing North Slope natural gas to tight water at Anchorage and exporting it to the Far East is probably more feasible than it has ever been in the past. The line is actually permitted. People are working on putting the construction process in place. The key to that is really whether or not the state and the providers are able to negotiate contracts with Japan, Taiwan and Korea, and those are very much in play in the tariff negotiations. One of the potential issues is trading the import of Alaska natural gas to balance out trade deficits with some of those countries. We've been assured it's high on the agenda of the current administration, that would very substantially change the forward-looking economic picture of Alaska, potentially in the next 3 to 5 years.

Got it. Fingers crossed. Before I talk to more about the commercial verticals, you mentioned government and what I'm thinking about is the government subsidies, more specifically BEAD. We've got new BEAD guidelines. And yes, some of it will help out the Starlinks of the world, but there's also some rules and regulations that might help wire line build out some more fiber. So I'm curious if the recent changes by the NTAA have shifted your views on the ability to desire to participate in the program.

We've always planned to participate in BEAD and the changes that strip away all of the fundamental additives that were put on by the prior administration, the low price requirements, the union contracting requirements, the permission and consultation with the tribes. All of those things raise the cost of building what are already very expensive assets. So stripping all that out, makes the program more attractive.

Yes, it offers some more opportunities for Starlink, but we don't see Starlink making "Gee, we're going to take the whole state play." In fact, they simply today don't have the capacity to serve the entire rural area in the state.

We see BEAD as part of the process of building out and enhancing connectivity in our smallest rural locations. My expectation is that the changes that were recently announced really won't shift the BEAD outcome that we were expecting. We expect that most carriers in Alaska will use BEAD to fill in within their existing service areas to supplement their capital budgets to get to places where the business case doesn't facilitate full high-speed connectivity to the home without the -- I don't see BEAD creating an overbuild of any of the existing providers.

One of the original fears, of course, was BEAD would lead to an overbuilding of incumbent providers with free government money. I don't see that happening at this point. We'll know in 90 days because the RFPs are on the street right now, and the state is supposed to evaluate them. The state has a fair degree of discretion in how it evaluates those, but I don't expect to see BEAD change in the nature of the game.

Okay. And then back to the commercial segment you're alluding to, can you help us with the size of the commercial business, who are your verticals, the products and the competition there?

Well, as I mentioned initially, commercial is slightly more than half of our total revenues. And the largest segment of commercial is -- or commercial and business is the service we provide to the subsidized entities in rural Alaska.

You're aware that USF-related revenues account for about 40% of total company revenues. Those are principally in 3 buckets. In the commercial segment, you have service to the health corporations, which are usually small clinics or regional hospitals. Alaska's health delivery system is a system of very small clinics staffed by 1 or maybe 2 EMT equivalent. We call them health aides and the village is connected by two-way HD video to regional hospitals and then back to Anchorage, those are subsidized through USF. Those represent about half of our commercial USF revenue.

The other half is the school networks in rural Alaska, which again depend on high-speed delivery. And Alaska has led the country really in developing a distance delivery method for rural education. The No Child Left Behind Act required that every school have -- that every teacher and every school have either a major or a minor in the subjects that they were teaching. Well, we have many communities up here that have 2 or 3 teachers, yet we're teaching a dozen subjects.

It was simply impossible to meet the requirements for federal funding without deploying a fairly advanced system of distance education. So what we have is a system where the specialized teachers are frequently in the regional centers and then you end up with additional teachers who really become classroom coaches and monitors at the end of a 2-way distance delivery network. But when that network is not there, the school is closed. So that's a highly important area for rural Alaska in an area where we've built out the facilities, and that comprises the other half of the USF revenue that falls into the business.

There's a third piece, which is known as the Alaska plan, which pays a contribution to support the build-out of statewide wireless in the rural areas, and that's actually reflected in our consumer revenues. Outside the USF business, the commercial business comprises a traditional commercial business because we are -- we have the largest footprint and the most extensive network in the state.

We have significantly the largest share of the commercial enterprise, we serve the stand-alone government customers, the large entities throughout the state with statewide networks, the banks, the oil companies, the transportation companies and those sorts of things. We tend to do very well in that segment because we're the only ones who are able to deliver one-stop shopping for a statewide network. If you want to put together a network that's competitive with us that serves say, a bank that has branches or outlets. Sometimes the branch is only an ATM, but has that in 50 or 60 communities around the state.

You would have to cobble together services from maybe half a dozen different providers. You have to be your own network manager, you have to be your own network monitor, and it would be extremely confusing who you got to point the finger at when the network wasn't working, right? We provide a single point of finger accountability, if you will, when that network is down, they know who's responsible and they let us know who's responsible.

And our ability to keep those networks up and provide that service has given us a real competitive advantage in the enterprise space.

Right. So the competition just doesn't as ubiquitous they'd have to depend on a lot of the off-net costs and off-net piggybacking.

As I said, we spent more than $4 billion. And my guess is number 2 is probably ACS at less than $1 billion over the last 30 years. So the networks just aren't comparable. And really, nobody else has invested in the long-haul networks the way we have. We have 3,000 miles of undersea fiber, 2,000 miles of middle mile terrestrial fiber and thousands of miles of middle-mile microwave connectivity on top of a satellite network that continues to serve some of the most remote communities and that was built even in a couple of years.

That's been built out over a 45-year period, and it's just a very, very difficult asset to compete against unless you -- unless you're serving a very unique customer who only needs to go from point A to point B. But anybody who has a statewide network requirement in some place where they want to be able to look to somebody for integrated services is sort of driven to our door.

Got it. And just a reminder for those on the call, feel free to e-mail me. I probably should give my e-mail address, its [email protected]. Just back on the USF, I guess, with the Supreme Court ruling, are we done? Is it done and dusted and it's just business as usual, and that was a bit of a relief?

It was a bit of a goat rope, getting up to it. We were prepared with all sorts of contingency plans for the very low probability outcome that didn't happen. And the decision resulted in a giant sigh of relief, time to get back to business and continue building out a network to serve those most rural and remote locations in the state.

USF is a risk that will have to be managed, the USF structure is always under discussion for necessary changes. Some day, the political motivation to change it will be there. But Alaska's rural situation is such that it's unlikely to change in any dramatic ways. The losers in that Supreme Court lawsuit have already announced that they're going to come back and try again, but it was a 6-3 decision. It was pretty compelling.

And while there are some avenues for them, the chip away around the margins, the existential risk to USF is pretty much off the table. So it's full speed ahead for our network construction and lets us continue on with what has been a pretty good year so far and looks like it will continue to be.

Right. Good to hear. Can we talk about underlying unit growth at this point when it comes to residential broadband. Should we expect you to continue to go broaden our subscribers? Or are we reached that market saturation, market maturity, like you said, in the old days, 15% of your subscribers took wireless only. And where are we at broadband subscribers going forward?

Well, unit growth would be easier if households were growing. Households growing would be easier if the state's population was growing rather than shrinking. So fundamentally, that's a headwind to our business. I don't see tremendous upside for share gains on the wired side. We're already materially above 50% for wired broadband. And while there will be incremental additions, I wouldn't look for anything that's going to move the needle there.

The opportunity for us, as you know, is more on the wireless side for unit growth. But I also don't think that we're going to wind up like our cable peers in the Lower 48 with the needle actually risks tipping down in any material way. And I quite frankly don't think it's going to tip down very far in the Lower 48, but we're certainly not seeing the kind of erosion potential that they see down there.

So our wired business is pretty much stable, if any of the economic projects happen over the next 3 to 5 years, and that led to some population inflow that could be again, not big enough to move the needle, but it could put us back to a couple of percent unit growth on the wired side, which would be helpful. We are challenged a little bit in that -- in Anchorage, the largest market in the state.

We're basically play out of land to build housing. We have a housing problem here in Anchorage they are attempting to address it with more multi-dwelling units and those sorts of things, but that's a long, slow process. So even though we want more people, we don't have a lot of space to put them. So flat, basically, I think, on the unit side on broadband upside potential on the wireless.

Okay. So flattish broadband. On the pricing side, help us understand, for one, how you think about pricing. When I look at the numbers, I see that data ARPU is $129 and I'm just using data revenue divided by data program subs, you're commanding a very high ARPU when I think about it to the Lower 48. So maybe you can help us contextualize that, and the room for growth in ARPU, if there's any.

That number is distorted because what's reported in broadband revenues include small and medium business. We have moved most of our small and medium business customers into the consumer unit basically anybody that's taking a standardized product ends up in the consumer unit, which is in the business of delivering standardized products. The business customers that are left in the government, health care and education sector, are all substantially larger enterprises that need customized service delivery.

So if you need a customized network, if you need network management and those sorts of things, that winds up in the business unit on the company, not the consumer units. So that ARPU is distorted by thousands of small businesses who may be buying $200, $300, $400 a month worth of high-speed broadband. I think the better way to look at our pricing is to look at what we're driving on our bundled ultimately converged pricing where you can buy high-speed broadband at a threshold tier of about 2.5 gigabits plus 2 mobile lines for $129 a month.

That's a compelling offer in the marketplace. We sell that to about 1/3 of our broadband customers today it comprises 60% of our wireless customers and our real upside opportunity is driving that product into the 2/3 of broadband customers who don't take it today. It's a very compelling price point compared to what you would pay for a stand-alone broadband plus 2 stand-alone wireless lines it's similar to the play that the cable guys have done in the Lower 48, and we're kind of ahead of them in terms of market penetration, both because we've been at it longer and because we own and control our own mobile network but that's really where the potential wireless growth comes from.

We're a little underpenetrated. Given the quality of our network, we're a little underpenetrated vis-a-vis AT&T who still has more than a 50% market share up here. And while I think we'll probably take proportionally from both them and Verizon, just their market share, which is more than double Verizon's, says that you're going to take twice as many customers from them. But what we typically see is -- it's a long sales process because your phone needs to come up for renewal before you switch over and those sorts of things, but we've been making steady incremental progress at moving people from stand-alone, both stand-alone GCI and stand-alone other competitors wireless into that product.

And then ultimately, that product will morph into a fully converged product, which includes integration with your whole home WiFi when you get your wired service from us today, it includes one or multiple of need home WiFi nodes on a managed WiFi network, which lets us control the experience all the way to the end devices in the house. And if you do that with the GCI cellphone that can be integrated into that platform. It's the same vision that CableLabs is enunciated that the cable industry is looking at in the Lower 48.

It's a little easier for us to implement because we own our own mobile network, and we own an operator on core. So we don't have to negotiate with somebody else for the integration aspects of those services into the core, the Lower 48 cable guys have a plan for doing that but it's a little more cumbersome for them to get to full convergence of wired and wireless than it is for us on the flip side, we're not as big, so we can't buy as many unique boxes at affordable prices.

But the long run for us is that basically one-stop shopping for a service, probably ultimately at one price where you get a fully converged wired wireless service that sort of follows you everywhere you go.

Got it. That's a perfect segue into the next categories, which is wireless. So just sort of at the risk of repeating some of this, it sounds like -- from my understanding you have a 30% market share, but it's about double, but Verizon stood around 15% and then AT&T is one around 55%. And the way you're playing is the convergence route, because you're fully converged on both sides with an owned RAN network in an owned wire line now because that's the strategy you're going after in the bundle, of course, it's 2.5 gigs and 2 lines. That's the right way of thinking about it and are my numbers correct?

That's a correct enunciation of the strategy. I can't tell you precisely what the AT&T and the Verizon market shares are because even when you measure those through something like OpenSignal, you pick up a lot of roamers. So it's hard to differentiate what's in the market for roaming versus core subscribers. But yes, I think we're somewhere between 30% and 40%.

AT&T has, I'm convinced more than 50%, Verizon doesn't even offer 5G up here, and they really just haven't made a play in this market. They are here. They provide a backbone service that is adequate to serve their roamers. They buy some services from us to support their network. I think they've been diligent about making sure that when their roamers come to Alaska, they are well served. But we don't see them as a significant force in the marketplace. If you go into Costco, it's not the Verizon guys assaulting you to try to sell you a cell phone.

It's the AT&T guys who are on the streets competing with us and the combination of the fact that where we've upgraded the 5G, we're literally 50% to 100% faster on the speed tests than they are, plus the bundling with the GCI+ product is over time, eroding the AT&T customer base, although wireless customer bases tend to be fairly loyal and fairly resilient. We've historically had a reputation that roaming wasn't as good on GCI. That's no longer true. We now have a nationwide full 5G roaming agreement with T-Mobile, and we also have secondary roaming agreements with other carriers.

So our roaming platform within the Lower 48 is now equal to or potentially better depending on how you rate T-Mobile's network in the Lower 48, but it takes a while to get that message into the market and convince people of that. So wireless is kind of a slow climb. It's not like the rocket ship and take the take a huge chunk of share. It works that way for the first 5% or 10% where you're offering a deeply discounted product like the cable guys have that's of equivalent quality and you can rock it up.

But after that, you begin to get some stickiness in it, and it's a place where I think we can eke-out where we can sustain slow and steady growth over the next several years. I don't think we'll ever get to 100% of our broadband base being on our wireless, but certainly, the 30% that's there today is too low. There are customers we know, there are customers we have a relationship, there are customers who obviously are at least in part satisfied with our service, and it's just a question of mining more deeply into that customer base.

That makes sense then. So further penetrate your broadband base with convergence. You mentioned, I guess, T-Mobile is your nationwide roamer for the Lower 48. I guess last week, they said they now have the #1 network per, Ookla, I think, was there third-party measurer. And but yes, to your point, perception lags reality, but we'll see. I'm curious when it comes to Alaska then, do you own your own towers then? And does At&T own their own towers because you're in the Lower 48, they lease from Crown Castle, SBA, American. How does that work, like you versus like AT&T?

We sold our towers off 10 years ago maybe, I guess, 10 years because we're just coming up on the first renewal of that. AT&T and Verizon lease most of their towers. We lease towers wherever we're in an area where there are multiple providers. So in the areas where we're competitive with AT&T and Verizon we go to the tower companies and lease tower space. There are a number of towers that we've had to build for ourselves because they're in the rural areas where nobody else serves and the tower companies are not interested in towers, of course, where there can't be multiple tenants.

In some of these places, they will never ever be multiple tenants, but you still need the tower. So we own a number of rural towers. But of the 500-some-odd cell site towers that we have, 90% of them, more than 90% of them are leased facilities.

Got it. And then just back on the convergence strategy you're talking about, it seems like the bigger play is to go from 30% to something way higher than that. I assume you see the churn benefits and like the CLV, customer lifetime value benefits. I think AT&T says they have 15% boost when it's converged. I've heard numbers that 400 bps higher [ SOGA ], churn and wireless cut as much as half, if you believe, Verizon. What kind of sort of conversion do we see?

We track pretty consistently at 40% lower churn on both the wired and the wireless side for the converged product. That was -- the reduction in churn was a little lower -- a little more initially when we first were stepping into the converged business, we saw a greater than 50% churn reduction I think that's because the early adopters were loyal GCI customers anyway. I think we were selling our converged product into the base initially of people who really like GCI, and we're less likely to churn anyway as we penetrated more deeply into that market, we're picking up more customers who are closer to the margin.

I would be surprised if we went much below the 40% churn reduction, but it doesn't bother me if we increase our market share by 50% with the bundled product and the churn savings goes down a little bit because as you're milking that market you're getting into customers who don't have as much brand loyalty, but it's clearly a benefit.

And it's really the price point of that plan is so compelling that it really is an impediment to people changing carriers, people switching their wireless phones away would pay twice as much per phone for the best product that the wireless competitor offers, people who wanted to switch broadband away would suddenly find they doubled the price of their wireless phone by not getting it in the bundle.

And when you start to look at that or if a customer calls in and says they're thinking about switching or tells us they're trying to switch. We say, okay, well, you realize now that we're going to have to move either your broadband plan or your wireless plan, whichever you think you're going to take away from us to a much higher price point. And most people can do that math and conclude that it's better to stay where they are.

Right, right. Save the money. Why don't we shift gears just talk about capital and capital allocation. Maybe we'll start with sort of CapEx. What's the general capital intensity of the business? You mentioned how expensive is out there, greenfield expansion, et cetera. What stage of the CapEx cycle are you in right now? You mentioned the Alaska plan, et cetera?

Historically, CapEx for us has run 15% to 20% of revenues. We are in a CapEx hyper cycle. Right now, we've guided to $250 million for this year. And we see next year as the peak year in that cycle. So obvious implication there is more than $250 million and then falling back over the next 2 years to a more normal CapEx cycle in the 15% to 20% range, probably scaling down longer and closer to the 15%. Right now, we're in a heavy investment cycle for rural Alaska, the Alaska plant, which is part of the subsidy mechanism that we talked about is paying for upgrades to the rural areas that ultimately will lead to statewide 5G wireless everywhere we serve. That's a very heavy CapEx cycle. That will taper off. Next year, it will peak, and then it will fall fairly rapidly as we have completed those build-outs there'll be some deep contribution to the capital out in the final build-out phases of the wired platform.

But then we think we're pretty much back to steady state. We're in a 3- to 5-year transition on the hybrid fiber coax plant where typically today, 1 gig low split with nodes of 200 average although the dispersion in net average the SKU is very, very wide from much bigger nodes to substantially smaller than the average size we are moving to 1.8 gig high split with extended spectrum DOCSIS which will ultimately where ultimately is by 2030, support 10-gig symmetric. And we think the market is losing its focus on speed when we first moved to a gig in all of our urban systems, everybody flock to the gig.

And when we move to 2.5 gigs, there was less enthusiasm about stepping up to the high end of the package because people seem to have discovered that something in the 1 to 2 gigs adequately meets their need. We're designing the network to let us get to the 10-gig symmetric, but that doesn't seem to be as much of a market driver anymore. But our CapEx, our urban CapEx and our wired CapEx really will represent a gradual transition to the 1.8 gig high split DOCSIS platform, and we're -- we're at the front end of this deploying DOCSIS 4.0, we're able to get to 2.5 gigs with the right node sizes and 3.1 or 3 wherever we are in the 3s. I lose, which extension we're on sometimes.

Got it. High splits. So it seems like that's sort of took the Charter out too. They do the high splits with ASP. And then an eventual because of that, that's like so DOCSIS 3.1 where you want to call it -- to get to, I guess, 10 gigs, you're saying 10 gigs by 2030 or by 2030, you'll have the availability to do like a sort of a 10G solution. But again, to your point, it doesn't sound like we're going to need it from a market perspective anytime soon?

Until we start broadcasting holographic robots or something to do the work around your house or until we can perfect teletransportation, it's hard to see what's going to drive the 10 gig. But -- and we will start deploying our first 1.8 gig actives and taps next year. And after that, we'll build out all of the expansions with the 1.8 gig plant. But with the 1.8 gig and DOCSIS 4.0, that gives us the capability to go to 10 gigs. If there really was a demand for speed, we'd go there more quickly, but there doesn't seem to be that much demand for speed.

So I expect coming back to your original question, the CapEx will be much more measured once we get past this bolus of capital that we're expanding in the next 2 years to complete the Alaska plan.

And on capital allocation or CapEx, I guess the next question is, I guess, buybacks would be interesting if you need to or even M&A, we talk about both of this, but I found it interesting on the previous call, whether it was yourself or from John Malone saying that you think you should command a higher multiple than a charter, which makes sense given the financial profile, especially when the CapEx cycle ends.

But if it's -- if you don't get it, you consider I interpreted it as buying back shares. Is that probably the right way of thinking about it?

Yes. I think the capital allocation model is putting the free cash flows wherever you think they have the highest return. I've been in business one way or another with Dr. Malone for the last 45 years. And I know that there is an intense capital discipline when you're involved with John. The Board of the new company hasn't really even had its first formal meeting yet. So it's a bit early to tell you, okay, well, with a multiple of x-point-y, we will buy back stock. And below that, we will, above that, we won't or that we've targeted these M&A acquisitions.

I think the message is that GCI will be a prodigious generator of free cash flow over the next 5 years, and you're going to have to trust Dr. Malone and the Board to deploy that free cash flow in the places that we think make the most sense. But John has a track record of pretty successful deployment of those kind of assets. We -- in addition to the CapEx falling we will basically end up being a very minimal cash taxpayer with the new bill that passed and 100% expensing, we obviously get our CapEx off the top each year as a full deduction.

So while we're running [ 250 ] plus on CapEx, that means even before looking at any benefit from the tax step-up that we will get as a result of the spin that we're very low on cash taxes anyway, and the spin will give us a step-up of $1 billion to $1.4 billion in basis depending on the equity value of the company post spin that will be measured based on the first 20 days of trading and then we'll get allocated back to the existing assets, which will become depreciable once again.

So we'll be down on the floor on cash taxes. CapEx will be dropping and the EBITDA will be slowly growing. So you're going to be throwing a lot of cash. It will be up to John and the other 4 of us to figure out what those opportunities are. We will be supported by the existing Liberty staff and their M&A skills and opportunities. So I think John views this as an opportunity to build yet another enterprise that probably start further down the road, produces more spinouts, but for today, where the cash generation anchor and the tax asset that provides the foundation for the next building blocks. And obviously, if it trades down dramatically because people don't like Alaska, then you have to look at a buyback opportunity to shrink it in.

Right. But if the stock does trade well and you mentioned it yourself and Dr. Malone would do sort of M&A and that also caught my ear last call as well, can you tell us a bit like what would be on your wishlist for M&A? Is this stuff in Alaska? Or it would actually look down to Lower 48? Can you help us there? What kind of opportunities we explore?

There's very little left in Alaska to buy. So I wouldn't expect significant M&A in Alaska. There are some potential opportunities, but they would be flushing out the existing network. So by definition, any truly significant M&A needs to be out of Alaska. And probably not in the core space that we're in today. I think we're looking for more unique opportunities where we can provide or deploy some of our expertise, but I wouldn't expect to see us moving into Lower 48 cable or Lower 48 wireless.

I think those markets are pretty crowded and they're pretty mature. I think we'll be looking for more unique opportunities. I think if you look at the track record of what Liberty broadband or take the whole Liberty mobile thing and look at the Liberty Media thing, look at how they expanded over time at the opportunistic things that they bought and created that weren't necessarily in line with a core business. So I think we're open to all opportunities, obviously, an ability if you have a taxable income generating entity and ability to use our tax asset to create value there and looking for sort of unique opportunities, probably niches where we can add some unusual value to the equation.

But as I said, we -- while the Board all knows each other and they are all people I've dealt with in the last 40 years, we haven't had our first sit down yet and said, "Okay, guys, here's the product cash flow. What are we going to do with it?

Got it. That's helpful. So it's interesting, so you wouldn't necessarily leverage the GCI platform. It would be something unique and niche you are saying maybe using the tax yields that Dr. Malone has done in the past, the media or something else.

You've got a long track record that you could look to.

I guess with the last few minutes, I have a couple of questions coming in, and I apologize if they're a little bit all over the place. But what I see is like, do you anticipate the -- or what do you anticipate the impact of earnings would be as you exit the consumer video service in the near term? What do you think the impact would be on subs if you pull video?

We have lost so many video subs that there really aren't any bundled subs left to lose that relate to the video, I think -- there will be a slight negative impact in the 2 quarters that we facilitate the exit. And then over time, we'll make more money. Our decision to leave the video business was based on multiple factors, but it wasn't contributing free cash flow, and it was on the cusp of not contributing any EBITDA because we're too small to be in the video business.

We don't have to be able to negotiate the charter style video arrangements. If we could have done that, if we could have gotten their programming agreements and wrapped the core services, the streaming services into the package. I think that's a very compelling offering. But we were just too small. The programmers wouldn't even talk to us. We are in a take process when it comes to programming contracts. And the platform that we need to deliver was just getting more and more expensive.

We're so subscale that building that stream platform wasn't feasible. So we will make more money in the long run by being out of the video business, we will sell more data by being out of the video business because when you buy YouTube or Disney or anybody else over the top, you pay for data when you bought video from us, you didn't pay for the data. That will help a little bit to drive bandwidth requirements. So it's -- it's definitely a positive impact on the company over the next 2 or 3 years. There's probably a little bit of a split, not big enough to see, but you won't see the positive benefits in year 1.

So maybe become video agnostic and partner with a virtual MVPD like YouTube TV or Sling or yes...

We have tried that. And again, it's the size problem that if you had 1 million -- if you had an addressable market of 1 million video subs, you could get in the door to talk to them. But when you're saying, Oh, well the addressable markets maybe 150,000 subs, they look at you and laugh.

Okay. I have another question coming in saying, some of the recent earnings growth has been driven by lower expenses due to lower distribution costs. I think it's like temporary cost savings from fiber break on the network where GCI used capacity. I guess -- when it comes to EBITDA, I mean, is it inflated from the temporary benefit? And do you expect this to normalize?

The answer is yes and yes, at the margin, we disclosed in the first quarter a number of onetime events, some of which were revenue related and some of which were expense related. So Q1 is probably not a good extrapolation for the year as a whole and there will be an ongoing small benefit from the fact that the fiber asset is out of service for 6 months and one of our important leased fiber assets that has adverse ramifications on the customer base.

But the amount by which that will go back up in the fall when that is hopefully reconnected will probably be mostly lost in the noise. It's low single-digit millions that we're talking about there. And I think that will be covered up by other things. We are continuing to drive cost control. We move to a new structure with a Chief Technology Officer and organizing all of our technology and technology programs under a single head, that's led to some organizational streamlining. It's led to an increase in organizational capacity. And I think over the next several years, you'll see us making some progress on truly disciplining total operating costs.

Got it. And last question, if I may. What's the long-term goals and ambitions here for GCI, sort of the end game? Where do you see the company 3 to 4 years from now? And then what keeps you up at night?

Well, I don't stay up at night anymore now the Supreme Court has ruled. That one was keeping me up at night. And we had contingency plans to how we're going to go 6 months without 40% of our revenue coming in. So I'm sleeping a lot better thanks to 6 justices on the Supreme Court.

What's the long-term plan? What I see is that we will provide a platform that delivers substantially accelerating free cash flow growth and has a tax asset that can be levered possibly along with levering the existing cash flow if the right opportunity comes about to pursue unique acquisitions that will add value to the company and not necessarily in the core business.

I think it's the John Malone business plan of being an opportunistic buyer, bundle them together, minimize taxes for as long as possible. And then when you get to the end of the road where somebody wants you to pay taxes, you scramble the egg and spin them all out and start over again. I was not expecting to start over again this time. We had merged in, as you know, to broadband in 2017, I did not expect to become a public company CEO again. But I've learned over 45 years that when John Malone asks you to do something, it's generally the right decision to say, yes. I think everybody on the board is enthused at the chance to use this as a platform to build another John Malone entity.

Got it. Well, Ron, we're a little bit over time, actually. So thank you very much for your time. Good luck with the spin and look forward to following the journey.

Thank you, Greg. Good to see you.

Greetings. Welcome to Liberty Broadband Investors Call to discuss the GCI Business. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to your host, Shane Kleinstein, Senior Vice President of Investor Relations. You may begin.

Thank you for joining. Before we begin, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual events or results could differ materially due to a number of risks and uncertainties, including those mentioned in the most recent Forms 10-K and 10-Q followed by Liberty Broadband with the SEC and the registration statement on Form S-1 as amended, followed by GCI Liberty with the SEC. These forward-looking statements speak only as of the date of this call, and Liberty Broadband and GCI Liberty expressly disclaim any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Broadband's or GCI Liberty's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures for Liberty Broadband and GCI Liberty.

Information regarding the comparable GAAP metrics, along with required definitions and reconciliations as well as information about the pending spin-off of Liberty Broadband's GCI business can be found on Liberty Broadband's website. There are slides to accompany today's presentation that will be posted to Liberty Broadband's Investor Relations website after the call after appropriate filings are made. Today speaking on the call, we have Ron Duncan, who is CEO of the GCI business and will serve as President and CEO of GCI Liberty; Pete Pounds, CFO of GCI; and John Malone, who will serve as Chairman of GCI Liberty, will be available to answer questions following prepared remarks. Thank you to those who submitted questions in advance. [Operator Instructions] Today's call is being recorded, and we will make a replay available after -- on our website after appropriate filings are made, so we ask for your patience in that being posted. And with that, I will turn the call over to Ron Duncan.

Thank you, Shane. Good afternoon, and thank you to everyone for joining us today. Today is a great opportunity for investors to learn more about the GCI business. First, to briefly reiterate the background for the proposed spin-off of GCI Liberty. On November 12, Liberty Broadband entered into a definitive agreement to be acquired by Charter. Liberty Broadband has agreed to spin off its GCI business by way of a distribution to Liberty stockholders, which we expect to complete late in the second quarter or early the third quarter of this year. I will be CEO of the new entity, which will be called GCI Liberty. The new GCI Liberty will be my second trip around the Malone merry-go-round. Bob Walp and I started GCI in 1979 with the aim of providing Alaskans with better options and long-distance telephone service.

TCI under Dr. Malone was our original investor, and we became a wholly owned subsidiary of WTCI. We went public for the first time as a spinout from WTCI in 1987. In the 4 decades since, we've grown from a competitive long distance upstart, probably not many of you remember when you actually had to pay for long-distance service to today where we've become a fully converged telecom provider that serves all of Alaska. Along the way, we acquired all of the cable television properties in Alaska, moved into the wireless business, growing to become the state's second largest wireless provider, developed a statewide enterprise business and with substantial revenues from the Universal Service Fund, became the largest provider of supported telecom service to the schools and health care facilities in rural Alaska.

In 2018, GCI was acquired by Liberty Interactive and became GCI Liberty with the bulk of our assets being an investment in Charter. Then as noted, in 2024, it was announced that the Liberty Broadband -- that Liberty Broadband would merge with Charter and that GCI would be spun off once again as an independent company, joining -- signing up for my second trip around the Malone merry-go-round. Today, GCI is far and away the largest telecom company in the Alaska market. We've invested $4.7 billion and tens of thousands of person years to connect virtually every place in Alaska. We provide a full range of wireless, data and voice services. Our hybrid fiber coax network passes 80% of the homes in Alaska, and we provide 2.5 gig high-speed data service to virtually all of those passings. Our wireless network covers all of Alaska with a substantial majority having access to 5G wireless service. Within several years, we will offer 5G wireless to almost every community in Alaska.

We generated $1 billion of revenue and a record $383 million of adjusted OIBDA on a 12-month trailing basis. Alaska is different in size, large distances and small populations in geography, the largest mountains in the U.S. and more coastline than the rest of the country combined, in climate, harsh and unique operating conditions and most importantly, in connectivity. There are virtually no roads within Alaska, no roads to the state and all transportation -- almost all transportation among the major areas of the state is by water or by air. These conditions create both challenges and opportunities. First of all, getting to the state requires construction of thousands of miles of undersea cable. GCI is one of only 2 Alaska providers that has built these cables. Then getting around the state requires construction of terrestrial systems, undersea fiber, terrestrial fiber and microwave that cross vast, often frozen open expanses of hundreds of miles.

Pole access hasn't been one of our problems because there simply aren't any poles. We've had to make it up as we go. However, without those unique and challenging connecting links, there is no high-speed data or 5G wireless to sell. The flip side is that because getting to and around Alaska is so difficult, the value of virtual connectivity is much higher than it is in other locations. That helped us build a business with better margins and less competitive erosion. Over 40 years, with $4.7 billion, lots of creativity and more than a little learning, we've built an asset that simply can't be matched. We own the undersea cables that connect Alaska to the rest of the world. We own the terrestrial networks, including more undersea fiber, terrestrial fiber and microwave that connect the communities within Alaska to each other and to the rest of the world.

And we own the local broadband networks, both wired and wireless, that provide that last-mile connection to homes and businesses. Duplicating GCI's network would be an almost impossible task. Collectively, our management team has centuries of Alaska experience, and we're very proud of what we've built. GCI is the only Alaska company able to offer a statewide suite of converged products. Looking more at our primary business lines, we're the only provider in Alaska with a full suite of data, wireless and voice services for consumers. We first provided 1 gig Internet service in 2015, and we launched GCI's -- we launched Alaska's first 5G wireless service in 2020. Today, we cover 80% of Alaska homes with 2.5 gigabit data services. We generate more than half of our revenues from providing enterprise customers with data, wireless and wholesale solutions. Our enterprise data offering is meaningfully supported by the Universal Service Fund. We have more consumer -- customer relationships than any other provider in the state.

Other than the losses associated with last year's discontinuation of the ACP program, our consumer customer base has been stable. We continue to grow the number of customers on our GCI+ product, which provides a compelling bundle of wired and wireless services. GCI+ also provides a platform for the further development of fully converged services. It's important to note that we own and operate our own wireless network. We're an MNO, not an MVNO. As we continue to build out our network, offering 10-gig high-speed data and 5G wireless on a statewide basis, we expect to be able to maintain our consumer customer base. While we face competition for most of the services we sell, there is no single operator that competes with us across our full suite of products or geography. The only competitor that has a larger market share than we do in any of our segments is AT&T in the wireless business. However, we have the widest statewide wireless footprint of any provider in Alaska.

For wired services, we provide 2.5 gig speeds to 80% of the households in the state using our HFC network. Our nearest competitor offers primarily DSL. We do not compete with any pure-play fiber-to-the-home or any fixed wireless providers. The only other technology competitor of relevance in the state is Starlink. While there are Starlink customers in the urban areas, the bulk of our losses to Starlink have occurred either in rural locations before we were able to offer our full suite of high-speed services or in places that have experienced prolonged fiber outages, which have degraded our service offerings. Our enterprise service benefits from ubiquitous statewide infrastructure and a full suite of products, including wireless and wired data. There are no competitors that have the breadth of our network or can offer our level of reliability. Notably absent from this slide is video. By the end of this month, we will have disconnected our last video customer.

We made the decision to exit the video business last year and recently received regulatory permission to do so. We simply don't have the scale to support the required investments in a video platform, and we're too small to meaningfully negotiate with the media providers. Video customers have been tailing off rapidly over the past 2 years, and this strategy will increase free cash flow next year. The dotted lines on this slide represent the portions of segment revenue from USF-related services. In 2024, about 42% of our total revenue came from various programs under the Universal Service Fund. Over the last 12 months through March 31, 2025, approximately 80% of our GCI business segment revenue and 30% of our consumer wireless revenue were supported by USF. The Universal Service Fund is an approximately $9 billion annual program supporting telecommunication services in high-cost areas and for underserved populations.

It was established by the Telecom Act of 1996 and has enjoyed broad bipartisan support. It's an essential part of the telecom infrastructure in the U.S. It's funded by an assessment on interstate telecom carriers and administered by the FCC through the Universal Services Administrative Corporation. It is not funded by tax revenues, and it's not part of the federal budget. Alaskan companies receive approximately $600 million annually. In 2024, GCI received 42% of its total revenues from various programs in the fund to support a portion of the cost of services that we provide to approximately 185 rural clinics and 230 rural schools and with the completion of our Alaska plan program, 139,000 rural wireless POPs. While Alaska is the largest single beneficiary of the Universal Service Fund due to its extremely remote location and challenging service conditions, USF is also critical to providers and beneficiaries in other states. If USF funding were interrupted, school districts across the nation would face a $3 billion hole in their annual budget.

Critical connections for rural health providers could be discontinued and telecommunications in remote and high-cost areas of the country would be disrupted. USF support is essential to the provision of telecommunication services in rural Alaska, with the largest amount going to support high-speed 2-way video connections to over 185 rural health clinics. Modern telecommunications in most villages and modern health care simply wouldn't exist in rural Alaska without USF support. While the USF enjoys broad bipartisan political and public support throughout the country, several conservative activist groups have repeatedly filed lawsuits challenging the structure and distribution mechanism of the fund. To date, all but one court has found the USF statute to meet appropriate constitutional standards. Last July, the Fifth Circuit Court of Appeals in an [ ongoing ] decision found the current structure to be impermissible.

The FCC through the Solicitor General appealed that decision, and the Supreme Court heard oral argument in the case on March 26 of this year. We feel the oral argument went very well for the government, and we, along with all other telecom companies and the vast majority of the telecommunications bar, expect that the Supreme Court will overturn the Fifth Circuit decision, leaving the Universal Service Fund as currently structured. There is, however, some risk that the court could find problems with the fund that would result in a temporary suspension of payments and require congressional action to repair it. Something as simple as Congress putting a cap on the fund would most likely resolve their claims. GCI has been working with members of the relevant congressional committees of jurisdiction and industry participants to develop legislation that could remedy any deficiency that the Supreme Court might identify.

GCI has also developed a range of contingency plans that will allow it to operate during an interim period when USF payments might be suspended. GCI has adequate liquidity to survive such a period. In the event of any disruption in USF payments, there would be substantial pressure to assure that any congressional repair allowed for back payments for services provided during the interim period. So in sum, we don't expect any disruption in the flow of USF, but we are appropriately prepared to respond in the event it should be necessary. We expect a decision from the Supreme Court sometime this month. In summary then, while we have the risks that we are managing, including the Universal Service Fund, the future looks very exciting for GCI. Following the spinout, we will have a compelling asset with a stable customer base, consistent revenues and OIBDA and an attractive tax asset due to the step-up in basis that will occur upon the spin.

With 100% expensing retroactive to assets acquired after January 19, 2025, as in the version of the tax bill that recently passed the House, GCI's tax profile could be further enhanced. We also anticipate a significant acceleration in free cash flow with the expected reduction in capital expenditures following the completion of the Alaska plan build-out in 2026. What do we do with it? Well, we have a lot of optionality. We could deploy those cash flows with or without additional leverage to acquire other assets, either in Alaska or elsewhere or we could return capital to shareholders. Last time GCI spun out into an independent entity with Dr. Malone, we started a journey that ultimately resulted in a recombination with other entities accompanied by substantial value creation. I look forward to our next journey with John. Now I'll turn it over to Pete Pounds, GCI's CFO, to go through some financial details.

Thank you, Ron. Over the last 4 years, we've seen the change in the components of GCI revenues. High-margin data revenue has been growing, while other revenue, particularly low-margin video revenue has been declining. The combination of modest revenue growth and a rotation from lower to higher-margin products has been a formula that has allowed us to grow both gross margin and OIBDA. Upon completion of our wireless build-out in rural Alaska to fulfill the requirements of the Alaska plan, I expect that we will allocate more capital resources to our urban wireless network, which will allow us to grow that part of the business as well. Our LTM OIBDA is a record $383 million. When I joined GCI in 1997, our OIBDA was only $39 million. This significant growth of OIBDA is due to our willingness to invest meaningful capital in the Alaska market when many of our competitors were either unwilling or unable to make those investments.

Given our current market position, we don't have as many opportunities to grow OIBDA as we had back in 1997, but we will continue to pursue growth in the Alaska market. However, that growth may be more skewed to free cash flow instead of OIBDA. We are a bit unusual as a cable company in that we have more revenue and gross margin on the business side as compared to consumer. Margins as a percentage of revenue are also higher on the business side due to the mix of products with business having more of their revenue from data, while consumer has some video revenue, though, as Ron noted, that is being discontinued as we speak. We do have some opportunity within our SG&A expense. We spent a lot of time and effort in 2024 figuring out how to better manage our network and IT groups, ultimately merging those into our Chief Technology Officer group. While that led to some temporary increases in costs, we are already seeing that pay dividends with improvements in both efficiency and efficacy.

As Ron noted, we spent a lot of capital over our history. $4.7 billion in a state with 740,000 people is a massive investment. It has allowed Alaskans to enjoy a much better telecommunications infrastructure than you would guess from the population density and geographic challenges that are faced. Going forward, I'm not uncomfortable with 15% to 20% of revenues that we've traditionally invested in CapEx. However, this will ultimately be dictated by the economics of the opportunities. If there are a few good investments, we would be comfortable below that level. And if there are many, we'd be comfortable going above that range. Due to the step-up in basis that could generate as much as $420 million of tax benefits on our spinout, we are in a favorable free cash flow position even at relatively elevated levels of CapEx. With more modest levels of CapEx, GCI could be a very significant generator of free cash flow. Now I'd like to turn the call back to Shane.

Thank you, Ron. Thank you, Pete. Thanks, everyone, who's joined so far. We appreciate your interest in Liberty Broadband and GCI Liberty.

Now I'd like to transition the discussion over to Q&A, where we are joined by Ron and Pete as well as by John Malone. [Operator Instructions] So with that, we will turn to our first question. This is for Ron. Ron, it's evident that Alaska is a unique environment to operate in. Can you just elaborate on what has made GCI successful in this environment? What continues to position it uniquely relative to your peers?

Thank you, Shane. I think GCI's success largely stems from the nature of the Alaska environment and the unique expertise that GCI's employee base brings to dealing with that environment. When Bob Walp and I started the company in 1979, the telecommunication industry was on the cusp of rapid technological change. We understood that technology, and we also understood that it wouldn't be deployed in Alaska the same way that it was deployed elsewhere. Alaska because of its long distances between places, the lack of physical connectivity, its harsh climate and its geography of very small population centers separated by large distances presents very unique challenges for delivering that technology.

And our success has come by understanding Alaska better than anybody else. We're not the top of the world when it comes to understanding the technology, although we're highly fluent in it, but our skill set has been in taking that technology, applying it to unique Alaska applications such as 185 single-room village health clinics that need 2-way video connections to provide any form of basic medical care to remote learning in Alaska schools to building terrestrial fiber across hundreds of miles of Tundra or underwater that is covered in ice for 9 months of the year and making those networks operate reliably. That's a daunting task and people who are not familiar with Alaska have tried and failed at that. Nothing is really changing about the geography or the climate of Alaska, and that continues to reward us for our Alaska knowledge.

I think, Ron, if we go deeper on the competitive landscape, a number of questions came in as well on that, particularly pressures from satellite broadband, how it differs in rural and suburban areas? And how does some of the competitive pressures or competitive landscape differ from what we see in the Lower 48?

The primary difference from the Lower 48 at the outset is we don't face fixed wireless competition up here, the spectrum that the fixed wireless operators use in the Lower 48 is largely not available in Alaska. We do instead have competition from the LEO services, most particularly Starlink. Starlink is an excellent solution for people who are truly isolated and there are, I think, according to the state broadband map, something like 17,000 locations in Alaska that aren't part of any community that are totally isolated. Those are absolutely ideal situations for Starlink and almost all of those will end up ultimately having their connectivity that way.

We do see some urban customers taking Starlink service. It is a competitor for us around the margin in the more developed areas and we've seen customers move to Starlink in rural areas where either before we've been able to provide the full suite of high bandwidth wireless services or when, as unfortunately happens, fiber connectivity to those markets goes down for 6 or 8 months because the fiber breaks under the ice and you can't get into repair it until the ice goes away and Starlink has managed to take a substantial number of customers in those communities and those conditions. And we've discovered that it takes a while to win them back once we're back in there with the higher speed services. To date, Starlink isn't able to offer the truly high-speed, high-capacity services that you can get with the 2.5 gigabit cable modem or with higher enterprise services, but they're definitely a relevant competitor for us.

How do you also see the risk of Alaska Telecom or other potential overbuilders upgrading DSL homes primarily in the urban areas?

We faced limited fiber overbuild in the urban areas. There are a few places where the fiber overbuilds by the local telephone companies have been more successful than others. The principal issue with that is the cost for everything are a lot higher in Alaska, probably 2 to 2.5x what they are in the Lower 48. And while ARPUs are somewhat higher, they're not double and that tends to depress the return characteristics of a fiber overbuild because if you're spending 2x to 2.5x the capital that it takes to do it in the Lower 48 and you're not getting a commensurately higher ARPU from the thing -- from the investment, then the incentive for that is not as great, and we simply haven't seen a substantial build-out of fiber to the home.

We also don't see any fiber pure-play companies entering the state, largely because the state is far away from everywhere else and once you get here, the market size is not very big. As I noted in my presentation, coming to Alaska and building fiber doesn't mean you can immediately provide the high-speed services. You also have to negotiate with us or our competitors to acquire large chunks of the connective bandwidth through the undersea fiber cables to get back to the rest of the country. So it's not as attractive a market for overbuilders, and the costs have disciplined the build-outs for many incumbents in the state.

Thank you, Ron. We'll change gears slightly, turn to John. John, how would you describe your capital allocation framework and priorities for GCI Liberty, both near term and long term?

Well, first of all, we'll see, Shane, how the equities trade once do this spin-off in the next month or 2. Obviously, if it trades well, which we expect and hope we would not be inclined to use free cash flow to shrink equity, but be more inclined to look for highly accretive acquisitions, which there are very few, and they would require regulatory approval. But given the rising free cash flow characteristics due to the strong tax shelter that comes with the asset step-up coming out of the spin-off we will be looking for accretive diversification, I would say or paying a dividend if we can't find appropriate accretive diversification.

And then if we build on that, how do you think about potentially growing the entity beyond kind of the bounds of its current communications business? What source of capital could you look to deploy or what type of...

Yes, we would certainly first look for operating synergies, but we will have financial and tax synergies that will be substantial as we look for opportunities to invest and diversify in similar businesses, I would say. I'd point out also that we're not highly levered. We have a lot of elbow room and financial flexibility in the company and with Ron and his team focused on driving free cash flow as CapEx requirements decline it's a good problem to have.

Thank you, John. Ron, actually, back to you with this. What would -- kind of building on that, what do you believe are the primary sort of growth for GCI in the future? And then a related question, once you get kind of video rolling off, how do you think about the [ ARC ] of top line in terms of kind of the good guys, the bad guys for that growth outlook?

We're not forecasting a strong top line growth because the Alaska market is fairly flat right now, and we already have a very substantial share of all of the segments that we operate in, other than wireless. Going forward, while we expect to prevail in the Supreme Court case, we believe that there probably will be top line pressure on USF funding in the rural areas. And while it will grow in some areas, it will be compressed than others, we expect to see continued slow growth in the wired data and in the wireless business, but it's not a strong growth story from the OIBDA perspective, you really have to be looking more at the stability that the business has. The fact that there aren't great competitive alternatives, the fact that we're the only company that can bundle the wired data along with the wireless on a statewide basis and ultimately drive into converged products and then sit back and admire the stability that those cash flows that those revenue streams provide because the customers really don't have a full scale competitive alternative for an integrated service. As the CapEx drops off, I think our focus will be much more on driving the free cash flows and benefiting from the fact that with the step-up in basis and with the new tax laws, we won't be a cash taxpayer for quite some time.

I think building on that, John, we got a question from a valuation perspective, building on what Ron had said, how do you suggest investors think about appropriate multiples or valuation for this asset partially in light of the recent Cox-Charter transaction, partially in light, while GCI has strategic advantages. It is -- the dynamics have changed since it last traded publicly. So curious reviews from a valuation standpoint.

Well, I would say, if you're speaking of valuation in terms of EBITDA multiple, it should trade at a premium EBITDA multiple because it's EBITDA will be fully sheltered, it has a modest debt leverage situation, so it doesn't have a lot of downside risk. It has a declining capital intensity, and therefore, its free cash flow characteristics should be superior. Now Charter is currently is trading at or around a 7 multiple EBITDA. I would think that this business should be trading at a premium to that. And if it doesn't, we've got -- we're going to have plenty of free cash flow with which to reduce equity if that opportunity presents itself, I think, the Board will be looking at returns on the free cash flow and how to deploy it.

And given the fact that we have more than enough tax shelter to shelter our own cash flow, we'll be looking opportunistically for acquisitions or investments that provides unusually high pretax returns, but that can benefit substantially from the shelter that consolidating what GCI could provide. So it's kind of an ideal core asset, around which to build some interesting incremental assets. So we certainly look forward to that. I'm hoping that it can become the beginning of a new Liberty Media and now that Liberty Media has largely gone to a single line of business focus with its spin-offs and we will have the availability, of course, of the Liberty Media management team who work for -- who will work for this enterprise under contract, providing services ranging from financial to tax accounting and public relations chain, including you.

Thank you, John. We've gotten a number of questions, if you don't mind, either for you, John or maybe for Pete, to clarify what you've called as the attractive tax attributes of this transactional split. Do you mind just elaborating for a minute on that? And then, Pete, can you clarify as well on how the basis step up will work?

Yes. In the transaction that was negotiated with Charter, they have agreed that they will step up the basis of the GCI assets in a transaction which basically the tax basis of the spun entity will be stepped up to its debt plus the equity value and then allocated across its assets, then to be re-depreciated going forward. In addition, of course, the Trump big beautiful bill calls for first year deduction of incremental capital spend. So it would look that GCI will have extraordinary tax shelter available to it. Now the spinoff from the company is taxable, which means that shareholders will be receiving a taxable distribution of GCI shares. And I'm not going to give tax advice, check with your tax advisers but I see that my folks seem on a pro forma basis to be treating it as an allocation of basis and then to the degree it's above basis, treating it as a qualified dividend. But I'm not a tax adviser.

I feel obliged that and that there also is additional tax information in the S-1 and as we get closer to the spin, we will provide supplemental information. So agreed, consult thereon, we will try to provide additional areas as well. Thank you, John. Well, let's go back to the business for a minute, for Ron. Can you talk about your pricing philosophy at GCI. The implied ARPU, while we don't disclose it is higher than the Lower 48. What drives that distinction?

The difference in ARPU, which is generally higher than Lower 48 ARPUs relates directly to the increased value of virtual connectivity in the Alaska environment because physical connectivity is so much more challenged. People are forced to substitute virtual uses for physical uses. One of the clear examples that I gave previously was how we connect the 185 village clinics to the greater medical resources. These are villages that can be anywhere from 25 to 100 miles from the nearest regional center, which may have a small hospital with a limited number of physicians and hundreds of miles from Anchorage, which is the primary medical facility in the state. Those connections are by air, not by the road. You don't climb in an ambulance in a village and run down the road to the local regional hospital.

Your primary treatment occurs with a doc in the regional or the Anchorage hospital supervising a health aide in the village for the delivery of that. That's an example of substituting virtual connectivity for physical connectivity. It occurs in education, and it occurs on a individual consumer level when they're forced to do more of their transactions through the web. That leads to a demand for much higher speeds, the percentage of our customer base who takes the highest speed tier that we offer is approximately double the comparable percentage for Lower 48 broadband providers. So people are buying more bandwidth because they need it because it has higher utility and the penetration of that bandwidth into the marketplace is greater than it is in the Lower 48 again because the connectivity is so vital to carrying out daily life in Alaska. That's the principal reason that our ARPUs run higher.

And then if you look at the residential customers, how would you characterize the split between rural urban to the extent relevant in Alaska? Any differences in customer behavior between those cohorts?

Well, rural and urban is a bit of a stretch even in Alaska. I think if you're really looking at us, you should be thinking of us as serving what to the Lower 48 would look like suburban and then really remote. The distinction between the 2 really depends on whether you're on the limited road system that exists or whether your primary connectivity to the largest community in the state, which is Anchorage, is by air. So you have a block of geography that runs north and south of Anchorage that's connected by roads from Fairbanks through Anchorage down the Kenai Peninsula to Homer, and that would be more of a classic suburban environment in terms of densities, in terms of how you construct facilities and those sorts of things.

Those customers would be more typical to what you'd see in the Lower 48, although again, because of the relatively low densities, the opportunity for overbuilds seems to be lower. And the demand for bandwidth there is somewhat higher than in the Lower 48, but not as extreme as in the rural areas. Once you get off the road system, then you face a situation where the connectivity is absolutely essential to daily life. Much of the education in rural Alaska occurs through distance learning, online programs and those sorts of things and that creates a different competitive environment, a different demand environment.

And the other element that's unique to GCI is we're the only ones who are able to provide a statewide wireless platform. So if you want your wireless phone to work in every village that you land in, in Alaska, the only phone that's going to do that is a GCI phone. Our competitors don't have roaming in the smallest places in Alaska. And those smallest places, while they're isolated, they are also frequently the source of transient visits and roaming because people from the urban areas of the state go to those communities to do business, to build things, to sell things, to provide services and if you want ubiquitous connectivity when you're traveling, then you better have a GCI cell phone. So those sorts of things create a bit of a unique differentiation. And it's a bit of a stretch to call rural Alaska rural, it's really remote, and it's in a category on its own.

How should -- or how would you recommend investors think about the historic or projected returns on your network investments over the past 40 years or the returns to which you underwrite, what's the calculus there?

We don't have a fixed formula that says, okay, if you don't achieve an IRR of 12%, then you don't build a project. We undertake projects that have rates of return that are probably in the 20% and 30% range all the way down to high single digits. And our evaluation of investment really depends on the longevity of the investment. We would have a lower return period for a 30-year asset than we would for a 5-year asset. The risk of the asset that we're constructing and the potential for growth in the market that we're going to. We think that we've demonstrated a substantial value in the return over the 40-year period that we've been at this, not all of our investments have been successful.

And going forward, we also expect that a substantial amount of what remains for build-out in our marketplace will be funded with the BEAD program when those monies hit the market in the next several years. So we're -- that's part of why we think CapEx goes down. The last 2 years and next year are really kind of the peak of the CapEx wave as we build out the assets that we will be building with our own capital. And then after that, and including some assets that we're building this year. And next year, there'll be substantial contributions from the government funding that arose under the BEAD and the Infrastructure Act.

Great. A question for Pete and then John actually would love your comments on this as well. But a question on how GCI historical leverage has trended and how much leverage you're comfortable with the business? And then, John, maybe after Pete answers, your view just more broadly on leverage for this business and your appetite to reduce debt further, thinking through just cable industry more at a macro level?

Thanks, Shane. I guess I would point to where our leverage has been in the past couple of years here, it has been generally in the 3 to 3.5 ZIP code. We ended Q1 at 2.84x total leverage. Obviously, there's a limit to how far down we could go on the leverage before it starts to be a bad capital allocation decision. But I would say the range that we've been in, we are comfortable in and we would go above that a little bit for investment or acquisition opportunities, but probably not dip terribly far below that level either.

Well, from my point of view, Shane, I would say 3 is a pretty nice number going up for accretive acquisitions. Sometimes you'll take it up in order to -- until you get the synergies realized from combination. We would try to stay in the 3 to 3.5 range, I would think. And if we drop below that, we might take it up in some kind of a small recap and shrink the equity. But my guess is that if we look widely enough, we're going to find lots of accretive, small but accretive acquisitions in the communications sector, looking primarily at special situations, in some cases, distress, but I think that we will find opportunities to grow the business outside of Alaska with accretive small incremental acquisitions in the -- in and around the communications industry.

Great. Pete, another one for you on the financial picture, how should we think about normalized CapEx? It's elevated with the Alaska plan, '25 and '26. Is there a -- can you give us a sense of maintenance CapEx for the business?

Yes. Maintenance CapEx is one of those things that I think everyone defines a little bit differently. From my perspective, I define maintenance CapEx is roughly 10% of your revenues, and that keeps kind of a stable EBITDA stream or OIBDA stream there. So investments over 10% of revenue should drive real OIBDA growth.

Great. Back to Ron. Ron, a question came in, you were clearly critical to the business and its success is the founder. But if you can speak a little bit to the bench and the management team you have around during the tenure of management and the team you have up there in Alaska?

Sure. We've got a pretty deep management team up here. Most of the senior members of the team have been here for more than a decade. They understand Alaska very well. And that, as I mentioned earlier, is one of our unique attributes is the ability to translate from what works in the rest of the world to what works in the Alaska environment. My role today is largely guiding the strategy and making sure it all holds together, the team is excellent at the execution side of the fence. I see in that question, somebody actually referenced my age, and I'm feeling a little bit insulted I thought I looked a little bit better than that, but I'm having a good -- I'm having a good time, I enjoy what I do. I've known John for 40 years, and I've never been disappointed being in business with them and I note without reciting his chronological age that he's older than I am, and I'm hoping to keep the road going just as long as John is.

Well, John, I'll turn a related but different one to you. A question came through, what's your expected involvement in GCI and Liberty. What are the areas that you particularly expect to be taking part?

Well, I enjoy strategy, I enjoy strategizing with Ron. I love M&A. I love deals, and I love structure and so the opportunity to rebuild what some people regard as complexity and I regard it as high return investing is what I look forward to. And I think the combination of Ron and his knowledge of the business and his team with some of the young guys within Liberty Media's management structure, who are pretty good at turning over rocks so we'll have talent available to the organization that is several steps above what an organization that size would normally have available to it in terms of finance, tax structure and clearly IR and public relations. So I think we have a little bit of a supercharger when it comes to capabilities that you wouldn't normally find in a business of the size of GCI because of the involvement with Liberty, Liberty Media, me and the rolodexes that both Ron and I have been able to develop over this long period, I think, we're going to find some very interesting opportunities, which will have exceptional financial reward associated with them.

I think that probably is about the best place we could wrap, I'll close with one final logistical for Ron. If you can just remind the Street the latest timing on when the spin is expected to be completed? And then we will leave it to you, Ron, to close it off for everyone.

All right. Well, thank you. The latest that we have is probably very early in July for the actual distribution of the shares. We're still waiting on final closeout with the SEC. I think we're mostly down to accounting questions, and we don't have the approval from the Alaska regulator yet, although we anticipate that in the not-too-distant future, and I'm not expecting that to be the item that would actually hold up the distribution. So right now, looks most likely to be in the first 2 weeks of July for the actual distribution of the shares. The process would start a little before that, it's about a 20-day process from the time you hit the launch button until the time the shares actually hit the mail box of current broadband shareholders.

And with that, thank you, Shane, for putting this together and your team. Thank you, Pete, for dialing in from the middle of nowhere this morning on your way to a trip with some of our bankers, and thank you, John, for the time you've taken to help explain our vision for where we want to go. Thank you to all of the people who dialed in and we are available as a group, you can connect through Shane with additional questions, and we'd be happy to get back to you and discuss the opportunity further. So thank you very much, and have a great morning -- great afternoon, everybody.