<PAGE>   1

================================================================================

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                 ---------------

                                    FORM 10-Q

(MARK ONE)

[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

             FOR THE TRANSITION PERIOD FROM _________ TO _________


                  ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

                              --------------------

<TABLE>
<S>                                                          <C>
            DELAWARE                                            91-1921377
  (STATE OR OTHER JURISDICTION                               (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)                            IDENTIFICATION NO.)
</TABLE>

                510 L STREET, SUITE 500, ANCHORAGE, ALASKA 99501
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (907) 297-3000

--------------------------------------------------------------------------------

              FORMER NAME, FORMER ADDRESS AND FORMER THREE MONTHS,
                  IF CHANGED SINCE LAST REPORT: Not Applicable


INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.

        YES     [X]            NO       [ ]

                APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTIONS 12, 13, OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT.

        YES     [ ]            NO       [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

    INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES
               OF COMMON STOCK, AS OF THE LAST PRACTICABLE DATE.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE


================================================================================

<PAGE>   2

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                           PAGE
PART I.        FINANCIAL INFORMATION                                                      NUMBER
<S>                                                                                       <C>
Item 1.        Financial Statements:

               Consolidated Balance Sheets (unaudited)
               As of September 30, 2000 and December 31, 1999................................3

               Consolidated Statements of Operations (unaudited)
               For the Three and Nine Months Ended September 30, 2000 and 1999...............4

               Consolidated Statements of Cash Flows (unaudited)
               For the Nine Months Ended September 30, 2000 and 1999.........................5

               Notes to Consolidated Financial Statements (unaudited)........................6

Item 2.        Management's Discussion and Analysis of
               Financial Condition and Results of Operations................................11

Item 3.        Quantitative and Qualitative Disclosures
               About Market Risk............................................................19

PART II.       OTHER INFORMATION

Item 1         Legal Proceedings............................................................20

Item 2         Changes in Securities and Use of Proceeds....................................22

Item 3         Defaults upon Senior Securities..............................................22

Item 4         Submission of Matters to a Vote of Security Holders..........................22

Item 5         Other Information............................................................22

Item 6.        Exhibits and Reports on Form 8-K.............................................22

SIGNATURE...................................................................................23
</TABLE>



                                       2
<PAGE>   3

                  ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEETS
               (Unaudited, in Thousands Except Per Share Amounts)

<TABLE>
<CAPTION>
                                                                           September 30,      December 31,
                                   ASSETS                                      2000               1999
                                                                           -------------      ------------
<S>                                                                        <C>                <C>
Current assets:
    Cash and cash equivalents                                                $  83,568          $   9,006
    Accounts receivable-trade, net of allowance of $9,395 and $5,203            46,143             49,323
    Accounts receivable-affiliates                                                 639             97,676
    Materials and supplies                                                       9,631              5,923
    Prepayments and other current assets                                         4,150              3,533
                                                                             ---------          ---------
       Total current assets                                                    144,131            165,461


Property, plant and equipment                                                  943,134            902,131
Less:  accumulated depreciation                                                489,401            452,304
                                                                             ---------          ---------
    Property, plant and equipment, net                                         453,733            449,827

Goodwill, net of accumulated amortization of $9,814 and $4,243                 260,150            250,346
Investments                                                                      1,520              1,673
Other assets                                                                    63,922             70,404
                                                                             ---------          ---------
Total assets                                                                 $ 923,456          $ 937,711
                                                                             =========          =========

                      LIABILITIES AND STOCKHOLDER'S EQUITY

Current liabilities:
    Current portion of long-term debt                                            4,020              4,944
    Accounts payable-trade                                                      25,876             31,212
    Accounts payable-affiliates                                                    880                610
    Advance billings and customer deposits                                       9,541              7,521
    Accrued and other current liabilities                                       19,798             19,800
                                                                             ---------          ---------
       Total current liabilities                                                60,115             64,087

Long-term debt, net of current portion                                         597,043            593,463
Unamortized investment tax credits                                                 238                394
Other deferred credits and long-term liabilities                                17,477             13,226
Commitments and contingencies                                                       --                 --

Stockholder's equity:
    Common stock, $.01 par value; 1,000 shares authorized,
       and 1 share issued and outstanding                                           --                 --
    Contributed capital                                                        287,242            287,242
    Accumulated deficit                                                        (38,659)           (20,701)
                                                                             ---------          ---------
       Total stockholder's equity                                              248,583            266,541
                                                                             ---------          ---------
Total liabilities and stockholder's equity                                   $ 923,456          $ 937,711
                                                                             =========          =========
</TABLE>



                 See Notes to Consolidated Financial Statements



                                       3
<PAGE>   4

                  ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
             THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999

                            (UNAUDITED, IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                  Three Months Ended                  Nine Months Ended
                                                                     September 30,                       September 30,
                                                            ----------------------------          ----------------------------
                                                              2000               1999               2000               1999
                                                            ---------          ---------          ---------          ---------
<S>                                                         <C>                <C>                <C>                <C>
Operating revenues:
     Local telephone:
         Local network service                              $  22,133          $  23,527          $  69,752          $  35,630
         Network access revenue                                21,779             26,352             79,835             39,514
         Directory advertising                                  8,146              6,737             23,005             10,188
         Deregulated and other revenue                          6,016              5,175             16,958              8,260
                                                            ---------          ---------          ---------          ---------
     Total local telephone                                     58,074             61,791            189,550             93,592
     Cellular                                                  10,947             10,153             29,657             14,720
     Interexchange network, data services and other             5,845              3,596             14,613              5,510
                                                            ---------          ---------          ---------          ---------
         Total operating revenues                              74,866             75,540            233,820            113,822

Operating expenses:
     Local telephone                                           37,570             38,456            113,487             60,440
     Cellular                                                   5,913              5,821             17,684              8,813
     Interexchange network, data services and other             8,201              5,046             21,593              7,885
     Unusual charges                                            2,083                 --              2,083                 --
     Depreciation and amortization                             17,773             15,615             52,464             23,708
                                                            ---------          ---------          ---------          ---------
         Total operating expenses                              71,540             64,938            207,311            100,846
                                                            ---------          ---------          ---------          ---------

Operating income                                                3,326             10,602             26,509             12,976

Other income (expense):
     Interest expense                                         (15,815)           (14,796)           (46,452)           (22,235)
     Interest income and other                                  1,753                160              1,984               (197)
     Equity in earnings (loss) of investments                      --               (170)              (153)               (81)
                                                            ---------          ---------          ---------          ---------
         Total other expense                                  (14,062)           (14,806)           (44,621)           (22,513)
                                                            ---------          ---------          ---------          ---------

Loss before income taxes                                      (10,736)            (4,204)           (18,112)            (9,537)

Income tax benefit                                                 20                174                154                174
                                                            ---------          ---------          ---------          ---------

Net loss                                                    $ (10,716)         $  (4,030)         $ (17,958)         $  (9,363)
                                                            =========          =========          =========          =========
</TABLE>



                 See Notes to Consolidated Financial Statements



                                       4
<PAGE>   5

                  ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (UNAUDITED, IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                              NINE MONTHS ENDED
                                                                                                SEPTEMBER 30,
                                                                                        ----------------------------
                                                                                          2000                1999
                                                                                        ---------          ---------
<S>                                                                                     <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                                $ (17,958)         $  (9,363)
Adjustments to reconcile net loss to net cash provided by operating activities:
     Depreciation and amortization                                                         52,464             23,708
     Amortization of debt issuance costs                                                    3,389              1,751
     Investment tax credits                                                                  (156)              (947)
     Other deferred credits                                                                 5,580               (436)
     Capitalized interest                                                                    (681)                --
     Changes in components of working capital:
       Accounts receivable and other current assets                                        92,414              3,244
       Accounts payable and other current liabilities                                      (7,338)              (441)
       Other                                                                                2,158              1,789
                                                                                        ---------          ---------
Net cash provided by operating activities                                                 129,872             19,305

CASH FLOWS FROM INVESTING ACTIVITIES:
Construction and capital expenditures, net of capitalized interest                        (44,910)           (46,181)
Cost of acquisitions, net of cash received                                                 (5,598)          (691,855)
Other                                                                                          --             (2,385)
                                                                                        ---------          ---------
Net cash used by investing activities                                                     (50,508)          (740,421)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term notes payable                                                         --             10,000
Proceeds from the issuance of long-term debt, net of discounts                                 --            592,446
Debt issuance costs                                                                            --            (37,047)
Payments on long-term debt                                                                 (4,802)            (1,275)
Issuance of common stock                                                                       --            158,265
                                                                                        ---------          ---------
Net cash provided (used) by financing activities                                           (4,802)           722,389

Increase (decrease) in cash                                                                74,562              1,273
Cash and cash equivalents at beginning of the period                                        9,006                281
                                                                                        ---------          ---------
Cash and cash equivalents at the end of the period                                      $  83,568          $   1,554
                                                                                        =========          =========

SUPPLEMENTAL CASH FLOW DATA:
Interest paid                                                                           $  39,644          $  11,148
Income taxes paid                                                                              --                 --

SUPPLEMENTAL NONCASH TRANSACTIONS:
Property acquired under capital lease                                                       3,152                 --
Note payable in connection with acquisition                                                 2,250                 --
</TABLE>



                 SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                       5
<PAGE>   6

                  ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NINE MONTHS ENDED SEPTEMBER 30, 2000
               (UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)



1. DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Alaska Communications Systems Holdings, Inc. and Subsidiaries (the
"Company" or "ACS Holdings") a Delaware corporation, is engaged principally in
providing local telephone, wireless, and interexchange network and data services
to its customers in the state of Alaska through its telecommunications
subsidiaries. The Company was formed in July of 1998 for the purposes of
acquiring and operating telecommunications properties. The principal activities
in 1998 and through May 14, 1999 were the preparation of systems and obtaining
financing for pending acquisitions. On May 14, 1999, the Company was acquired
and became a wholly owned subsidiary of Alaska Communications Systems Group,
Inc. (the "Parent" or "ACS Group").

        The financial statements for the Company represent the consolidated
financial position, results of operations and cash flows of the following
entities:

        -       Alaska Communications Systems Holdings, Inc.

        -       ACS of Alaska, Inc. ("ACSA") (formerly Telephone Utilities of
                Alaska, Inc.)

        -       ACS of the Northland, Inc. ("ACSN") (formerly Telephone
                Utilities of the Northland, Inc.)

        -       ACS of Fairbanks, Inc. ("ACSF") (formerly PTI Communications of
                Alaska, Inc.)

        -       Alaska Communications Systems, Inc. ("ACS") (formerly Anchorage
                Telephone Utility)

        -       ACS Wireless, Inc. ("ACSW") (formerly MACtel, Inc.)

        -       ACS Long Distance, Inc. ("ACSLD") (formerly ATU Long Distance,
                Inc.)

        -       ACS Television, L.L.C. ("ACSTV") (formerly Alaskan Choice
                Television, L.L.C.)

        -       ACS Internet, Inc. (formerly PTINet, Inc.)

        -       Internet Alaska, Inc. ("IAI")

        The accompanying consolidated results of operations for the three and
nine months ended September 30, 1999 include the operations of the Company for
the three and nine months then ended and the operations of ACSA, ACSN, ACSF,
ACS, ACSW and ACSLD for the period from May 15, 1999 through September 30, 1999.
Prior to the acquisition of these acquired companies on May 14, 1999, the
Company had no significant operations.

        On June 16, 2000, ACS Holdings acquired all outstanding shares of IAI,
an Internet service provider to over 25,000 customers in Alaska.

        Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to rules and regulations of the Securities and Exchange Commission; however the
Company believes the disclosures which are made are adequate to make the
information presented not misleading. The consolidated financial statements and
footnotes included in the Form 10-Q should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999.

        Certain reclassifications have been made to the 1999 financial
statements to make them conform to the current presentation.

        Comprehensive loss is equal to the net loss for all periods presented.

        In the opinion of management, the financial statements contain all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the consolidated financial position, consolidated results of operations
and cash flows for all periods presented. The results of operations for the
three and nine months ended September 30, 2000 are not necessarily indicative of
the results of operations which might be expected for the entire year or any
other interim periods.



                                       6
<PAGE>   7

                  ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NINE MONTHS ENDED SEPTEMBER 30, 2000
               (UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


2. STOCK INCENTIVE PLANS

        The Company's employees participate in various plans of ACS Group, which
through the Compensation Committee of the Board of Directors, may grant stock
options, stock appreciation rights and other awards to officers, employees and
non-employee directors. At September 30, 2000, ACS Group has reserved a total of
6,060 shares of authorized common stock for issuance under the various plans. In
general, options under the plans vest ratably over three, four or five years and
the plans terminate in approximately 10 years.

ALEC Holdings, Inc. 1999 Stock Incentive Plan

        The Parent has reserved 3,410 shares under this plan, which was adopted
in connection with the completion of the acquisition of the acquired companies
on May 14, 1999. At September 30, 2000, 3,423 options have been granted under
the Plan at an exercise price of $6.1542 per share, generally vesting ratably
over five years or after nine years subject to acceleration upon the attainment
of certain performance goals. Of the options granted under the plan, 235 have
been exercised and 283 have been forfeited upon termination of the grantee. At
September 30, 2000 2,905 options are outstanding. The plan allows forfeited
options to be reissued and 270 remain available for grant under the plan. The
plan will terminate on May 14, 2009.

Alaska Communications Systems Group, Inc. 1999 Stock Incentive Plan

        This plan was adopted by the Parent in November 1999 in connection with
its initial public offering. The Parent has reserved 1,500 shares under this
plan. At September 30, 2000, 917 options have been granted, 70 have been
forfeited under the plan and 653 shares are available for grant under the plan.
The term of options granted under the plan may not exceed 10 years. Unless
otherwise determined by the Compensation Committee, options will vest ratably on
each of the first four anniversaries after the grant date and will have an
exercise price equal to the fair market value of the common stock on the date of
grant.

        On February 9, 2000, the Board of Directors approved the grant of
options under the plan to purchase 887 shares to certain members of management
at an exercise price of $14.1354 per share, generally vesting over four years
ratably. On June 20, 2000, the Board of Directors approved the grant of options
under the plan to purchase 28 shares to certain members of management at an
exercise price of $12.625 per share, generally vesting over four years ratably.
On September 7, 2000, the Board of Directors approved the grant of options under
the plan to purchase two shares to a member of management at an exercise price
of $8.5819 per share, generally vesting over four years ratably.

Alaska Communications Systems Group, Inc. 1999 Non-Employee Director Stock
Compensation Plan

        The non-employee director stock compensation plan was adopted by the
Parent in connection with its initial public offering. The Parent has reserved
150 shares under this plan. At September 30, 2000, 22 shares have been awarded
and 128 shares are available for grant under the plan. Directors are required to
receive not less than 25% of their annual retainer and meeting fees in the form
of the Parent's stock, and may elect to receive up to 100% of director's
compensation in the form of stock.

        During January of 2000, eight shares under the plan were awarded to a
director. On March 31, 2000, four shares under the plan were awarded to
directors, of which three were elected to be deferred until termination of
service by the directors. On June 30, 2000, four shares under the plan were
awarded to directors, of which three were elected to be deferred until
termination of service by the directors. On September 29, 2000, six shares under
the plan were awarded to directors, of which four were elected to be deferred
until termination of service by the directors.



                                       7
<PAGE>   8

2. STOCK INCENTIVE PLANS, CONTINUED

Alaska Communications Systems Group, Inc. 1999 Employee Stock Purchase Plan

        This plan was also adopted in connection with the Parent's initial
public offering in November 1999. On June 30, 2000, 65 shares were issued under
the plan and 935 shares are available for issuance and sale. The plan will
terminate on December 31, 2009. All ACS Group employees and all of the employees
of designated subsidiaries generally will be eligible to participate in the
purchase plan, other than employees whose customary employment is 20 hours or
less per week or is for not more than five months in a calendar year, or who are
ineligible to participate due to restrictions under the Internal Revenue Code.

3. BUSINESS SEGMENTS

        The Company has two reportable segments: (1) local telephone, which
provides landline telecommunications services and consists of local telephone
service, network access, directory advertising, deregulated and other revenues;
and (2) cellular, which provides wireless telecommunications service. Each
reportable segment is a strategic business under separate management and
offering different services than those offered by the other segments. The
Company has aggregated its interexchange network, data services and wireless
cable television segments into "All Other" below. The Company also incurs
operating expenses, interest expense, interest income, equity in earnings
(losses) of minority investments and other nonoperating income and expense at
the corporate level which are not allocated to the business segments, nor are
they evaluated by the chief operating decision maker in analyzing the
performance of the business segments. These corporate level income and expense
items are provided in the accompanying table under the caption "All Other" in
order to assist the users of these financial statements in reconciling the
operating results and total assets of the business segments to the consolidated
financial statements. Common use assets are held at ACS Holdings and are
allocated below based on operating revenues. The accounting policies of the
segments are the same as those in the summary of significant accounting policies
described in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999. Intersegment revenues and expenses are eliminated between the
nonregulated entities. Due to the regulated nature of the local telephone
segment, intersegment revenues and expenses between the local telephone and
other segments are not eliminated.

        The following table illustrates selected financial data for each segment
for the three months ended September 30, 2000.

<TABLE>
<CAPTION>
                                                                                                INTERCOMPANY
                                     LOCAL TELEPHONE       CELLULAR          ALL OTHER          ELIMINATIONS          TOTAL
                                     ---------------       --------          ---------          ------------          -----
<S>                                  <C>                  <C>                <C>                <C>                <C>
Operating revenues                     $  58,074          $  10,954          $   8,023          $  (2,185)         $  74,866
Depreciation and amortization             13,720              1,298              2,755                 --             17,773
Operating income (loss)                    6,616              2,682             (5,972)                --              3,326
Interest expense                            (274)                (3)           (15,538)                --            (15,815)
Interest income                              686                 71              1,048                 --              1,805
Income tax provision (benefit)             1,932              1,151             (3,103)                --                (20)
Net income (loss)                          4,400              1,607            (16,723)                --            (10,716)
Total assets                             722,153            118,966             82,337                 --            923,456
Capital expenditures                      12,642              3,340                588                 --             16,570
</TABLE>


        Operating revenues disclosed above include intersegment operating
revenues of $3,008 for local telephone, $367 for the cellular, and $2,987 for
all other.



                                       8
<PAGE>   9
                  ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NINE MONTHS ENDED SEPTEMBER 30, 2000
               (UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


3. BUSINESS SEGMENTS, CONTINUED

        The following table illustrates selected financial data for each segment
for the three months ended September 30, 1999.

<TABLE>
<CAPTION>
                                                                                              INTERCOMPANY
                                    LOCAL TELEPHONE        CELLULAR         ALL OTHER         ELIMINATIONS          TOTAL
                                    ---------------        --------         ---------         ------------          -----
<S>                                 <C>                   <C>               <C>               <C>                 <C>
Operating revenues                     $  61,736          $  10,167         $   3,844          $    (207)         $  75,540
Depreciation and amortization             12,094                861             2,660                 --             15,615
Operating income (loss)                    8,906              3,292            (1,596)                --             10,602
Interest expense                             (42)                --           (14,754)                --            (14,796)
Interest income                              173                 38                76                 --                287
Income tax provision (benefit)             4,603              1,199            (5,976)                --               (174)
Net income (loss)                          9,159              1,488           (14,677)                --             (4,030)
Total assets                             706,156             73,491            24,481                 --            804,128
Capital expenditures                      13,751              5,223                13                 --             18,987
</TABLE>


        Operating revenues disclosed above include intersegment operating
revenues of $1,141 for local telephone, $15 for the cellular, and $193 for all
other.

        The following table illustrates selected financial data for each segment
for the nine months ended September 30, 2000.

<TABLE>
<CAPTION>
                                                                                              INTERCOMPANY
                                     LOCAL TELEPHONE       CELLULAR          ALL OTHER         ELIMINATIONS          TOTAL
                                     ---------------       --------          ---------         ------------          -----
<S>                                  <C>                  <C>                <C>              <C>                  <C>
Operating revenues                     $ 189,550          $  29,678          $  20,675          $  (6,083)         $ 233,820
Depreciation and amortization             41,280              3,661              7,523                 --             52,464
Operating income (loss)                   35,741              5,745            (14,977)                --             26,509
Interest expense                            (842)                (8)           (45,602)                --            (46,452)
Interest income                              774                148              1,159                 --              2,081
Income tax provision (benefit)            11,707              2,457            (14,318)                --               (154)
Net income (loss)                         23,270              3,449            (44,677)                --            (17,958)
Total assets                             722,153            118,966             82,337                 --            923,456
Capital expenditures                      32,703              9,932              5,427                 --             48,062
</TABLE>


        Operating revenues disclosed above include intersegment operating
revenues of $6,700 for local telephone, $712 for the cellular, and $7,979 for
all other.

        The following table illustrates selected financial data for each segment
for the nine months ended September 30, 1999.

<TABLE>
<CAPTION>
                                                                                                 INTERCOMPANY
                                     LOCAL TELEPHONE       CELLULAR          ALL OTHER           ELIMINATIONS        TOTAL
                                     ---------------       --------          ---------           ------------        -----
<S>                                  <C>                  <C>                <C>                <C>                <C>
Operating revenues                     $  92,787          $  14,735          $   6,555          $    (255)         $ 113,822
Depreciation and amortization             19,743              1,237              2,728                 --             23,708
Operating income (loss)                   12,272              4,445             (3,741)                --             12,976
Interest expense                            (114)                (1)           (22,120)                --            (22,235)
Interest income                              318                 54                143                 --                515
Income tax provision (benefit)             6,497              1,869             (8,540)                --               (174)
Net income (loss)                         11,982              2,657            (24,002)                --             (9,363)
Total assets                             706,156             73,491             24,481                 --            804,128
Capital expenditures                      21,154              5,549             19,515                 --             46,218
</TABLE>


        Operating revenues disclosed above include intersegment operating
revenues of $3,822 for local telephone, $250 for the cellular, and $498 for all
other.



                                       9
<PAGE>   10

                  ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      NINE MONTHS ENDED SEPTEMBER 30, 2000
               (UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)


4. RELATED PARTY TRANSACTIONS

        Fox Paine & Company, the majority stockholder, receives an annual
management fee in the amount of 1% of the Company's net income before interest
expense, interest income, income taxes, depreciation and amortization and equity
in earnings (losses) of minority investments, calculated without regard to the
fee. The management fee expense for the nine months ended September 30, 2000 is
$904 of which $880 remains payable.


5. COMMITMENTS AND CONTINGENCIES

        The Company has a commitment to acquire additional fiber optic circuit
capacity in the first quarter of 2001 at a purchase price of $19,500.

        The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes
that the disposition of claims currently pending under these matters will not
have a material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.


6. UNUSUAL CHARGES

        During the quarter ended September 30, 2000, ACS Holdings recorded $2.1
million of unusual charges, consisting of the write-off of approximately $1.5
million of costs related to the attempted acquisition of Matanuska Telephone
Association and $0.6 million of severance cost related to a reduction in
workforce of approximately 100 personnel.



                                       10
<PAGE>   11

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

FORWARD LOOKING STATEMENTS AND ANALYSTS' REPORTS

        This report contains forward looking statements within the meaning of
the federal securities laws, including statements concerning future rates,
revenues, costs, capital expenditures and financing needs and availability and
statements of management's expectations and beliefs. Actual results could differ
materially from these statements as a result of many factors, including future
economic, regulatory and political conditions in Alaska and the rest of the
United States.

        Investors should also be aware that while ACS Holdings does, at various
times, communicate with securities analysts, it is against ACS Holdings' policy
to disclose to them any material non-public information or other confidential
information. Accordingly, shareholders should not assume that ACS Holdings
agrees with any statement or report issued by an analyst irrespective of the
content of the statement or report. To the extent that reports issued by
securities analysts contain any projections, forecasts or opinions, such reports
are not the responsibility of ACS Holdings.


INTRODUCTION

        On May 14, 1999, the Company acquired the incumbent providers of local
telephone services in Anchorage, Juneau, Fairbanks and approximately 70 rural
communities in Alaska, making it the largest provider of local telephone service
in the state and the fifteenth largest provider of local exchange services in
the United States. The Company also acquired on May 14, 1999 long distance
operations primarily serving the Anchorage market and cellular and Internet
services providing statewide coverage. The Company has unified its statewide
branding under the ACS name. ACS Holdings is a wholly owned subsidiary of Alaska
Communications Systems, Group, Inc.

        Prior to the completion of these acquisitions, ACS Holdings had no
operations. Accordingly, the following discussion should be read in conjunction
with the Company's consolidated financial statements and the related notes
included herein.

        Today, ACS Holdings generates revenue through:

        -       the provision of local telephone services, including:

                -       basic local service to retail customers within ACS
                        Holdings's service areas,

                -       wholesale service to competitive local exchange
                        carriers,

                -       network access services to interexchange carriers for
                        origination and termination of interstate and intrastate
                        long distance phone calls,

                -       enhanced services,

                -       ancillary services, such as billing and collection, and

                -       universal service payments;

        -       the provision of wireless services;

        -       the provision of interexchange network services, data services
                and other services, and;

        -       the provision of wireless television services.

        ACS Holdings also recognizes its proportionate share of the net income
or loss of its minority-owned investments.



                                       11
<PAGE>   12

RESULTS OF OPERATIONS

        The following unaudited table summarizes ACS Holdings' consolidated
operations for the three and nine months ended September 30, 2000 and the three
months ended September 30, 1999 and its combined operations for the nine months
ended September 30, 1999. For the nine months ended September 30, 1999, the
summary information represents the historical combined operating results of
companies acquired on May 14, 1999 - prior to their ownership by ACS Holdings,
from January 1, 1999 through May 14, 1999, plus the consolidated results of ACS
Holdings from May 15, 1999 through September 30, 1999. Certain reclassifications
have been made to the 1999 combined operations to conform to the current
presentation of ACS Holdings' consolidated operations.

<TABLE>
<CAPTION>
                                                                THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                                   SEPTEMBER 30,                        SEPTEMBER 30,
                                                         -------------------------------        ----------------------------
                                                             2000              1999                2000               1999
                                                         CONSOLIDATED       CONSOLIDATED        CONSOLIDATED        COMBINED
                                                         ------------       ------------        ------------        --------
                                                                  (in thousands)                         (in thousands)
<S>                                                      <C>                <C>                <C>                <C>
Operating revenues
    Local telephone:
       Local network service                               $  22,133          $  23,527          $  69,752          $  70,238
       Network access revenue                                 21,779             26,352             79,835             77,706
       Directory advertising                                   8,146              6,737             23,005             20,386
       Deregulated revenue and other                           6,016              5,175             16,958             15,085
                                                           ---------          ---------          ---------          ---------
    Total local telephone                                     58,074             61,791            189,550            183,415
    Cellular                                                  10,947             10,153             29,657             25,925
    Interexchange network, data services and other             5,845              3,596             14,613             11,246
                                                           ---------          ---------          ---------          ---------
         Total operating revenues                             74,866             75,540            233,820            220,586

Operating expenses
    Local telephone                                           37,570             38,456            113,487            114,374
    Cellular                                                   5,913              5,821             17,684             17,067
    Interexchange network, data services and other             8,201              5,046             21,593             15,214
    Unusual charges                                            2,083                 --              2,083                 --
    Depreciation and amortization                             17,773             15,615             52,464             46,889
                                                           ---------          ---------          ---------          ---------
       Total operating expenses                               71,540             64,938            207,311            193,544
                                                           ---------          ---------          ---------          ---------

Operating income                                               3,326             10,602             26,509             27,042

Other income (expense):
    Interest expense                                         (15,815)           (14,796)           (46,452)           (26,761)
    Interest income and other                                  1,753                160              1,984              2,276
    Equity in earnings (loss) of investments                      --               (170)              (153)            (1,452)
                                                           ---------          ---------          ---------          ---------
       Total other expense                                   (14,062)           (14,806)           (44,621)           (25,937)
                                                           ---------          ---------          ---------          ---------

Income (loss) before income taxes                            (10,736)            (4,204)           (18,112)             1,105
Income tax benefit (expense)                                      20                174                154             (3,770)
                                                           ---------          ---------          ---------          ---------
Net income (loss)                                          $ (10,716)         $  (4,030)         $ (17,958)         $  (2,665)
                                                           =========          =========          =========          =========
</TABLE>



                                       12
<PAGE>   13

THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999

        OPERATING REVENUES

        Operating revenues decreased $0.7 million, or 0.9% for the three months
ended September 30, 2000 compared to the three months ended September 30, 1999.
Local telephone revenues decreased while cellular and interexchange network,
data services and other revenues increased compared to the prior three month
period.

        Local Telephone

        Local telephone revenues, which consist of local network service,
network access revenue, directory advertising and deregulated and other
revenues, decreased $3.7 million, or 6.0%, for the three months ended September
30, 2000 compared to the three months ended September 30, 1999.

        The local network service component of local telephone revenues was
$22.1 million during 2000 compared with $23.5 million during 1999. Revenue
decreased $1.4 million, or 5.9%, despite growth in average total access lines in
service of 3.5% and increased penetration of enhanced features. The net decrease
was due primarily to charges for uncollectible accounts and increased market
penetration of lower margin wholesale lines in the Anchorage market. The charges
for uncollectible accounts recorded against local network service revenue in
2000 were $2.1 million in excess of those recorded during 1999, accounting for
more than 100% of the decrease in local network service revenue. The charges for
uncollectible accounts were approximately $1.7 million in excess of industry
average collection rates. Collection processes have been improved and management
expects that charges for uncollectible accounts will be in line with industry
benchmarks going forward. Management also believes that the continued loss of
market share experienced in the Anchorage market is attributable to below cost
interconnection rates for unbundled network elements ("UNE's") currently in
place. The Regulatory Commission of Alaska ("RCA") has recently approved
arbitrated interconnection rates for UNE's for the Company's Fairbanks and
Juneau markets which, in the opinion of management, are also below cost. See
"Legal Proceedings" under Item 1 of Part II of this report for further
discussion.

        Network access revenues decreased by $4.6 million, or 17.4%, from $26.4
million in 1999 to $21.8 million in 2000. Network access revenues were reduced
by $3.6 million in the third quarter of 2000 to reflect the uncertainty of
certain components of these revenues. The amounts being reserved relate to a
complaint filed with the FCC during the third quarter alleging that certain of
the Company's subsidiaries exceeded their federally authorized rates of return.
See "Legal Proceedings" under Item 1 of Part II of this report for further
discussion of this matter. An additional decrease of $1.0 million in network
access revenues over the corresponding quarter of 1999 is due primarily to
changes relating to cost allocation factors, rate base and expenses from period
to period. Network access revenues are based on a regulated return on rate base
and recovery of allowable expenses associated with the origination and
termination of toll calls. Management expects that network access revenues will
decline as a component of local telephone revenues for the foreseeable future.

        Directory advertising revenues increased by $1.4 million, or 20.9%, from
$6.7 million in 1999 to $8.1 million in 2000. This growth corresponds with
additional penetration for the current directory phone book cycle combined with
the growth in average access lines in service during 2000 over 1999 from 320,508
during 1999 to 331,633 during 2000, or an increase of 3.5%.

        Deregulated and other revenues, which grew $0.8 million or 16.3% over
1999, consists principally of billing and collection services, space and power
rents, deregulated equipment sales, paystation revenues and other miscellaneous
telephone revenues. The revenue increase was due primarily to increased sales of
deregulated equipment during 2000.

        Cellular

        Cellular revenues increased $0.8 million, or 7.8%, to $10.9 million for
the three months ended September 30, 2000 compared to $10.1 million for the
three months ended September 30, 1999. This growth in revenue is due to growth
in average cellular subscribers to 73,395 during the quarter ended



                                       13
<PAGE>   14

September 30, 2000 from 70,217 during 1999, or 4.5%, and an increase in average
revenue per unit from $48.20 in 1999 to $49.72 in 2000. The increase in average
revenue per unit is due to the introduction of new statewide and national
pricing programs and the benefits of the digital upgrade completed in the first
quarter of 2000.

        Interexchange Network, Data Services and Other

        Interexchange network, data services and other revenues include
principally long distance, data transmission and Internet services revenues.
These revenues increased from $3.6 million in 1999 to $5.8 million in 2000 -- an
increase of $2.2 million, or 62.5%. Long distance revenues increased from $2.4
million in 1999 to $3.0 million in 2000 due to increases in long distance
minutes of use and increases in circuit rent revenues. Internet revenues also
increased $1.4 million due to the revenues of IAI, which was acquired in June
2000.

        OPERATING EXPENSES

        Operating expenses increased $6.6 million, or 10.2%, from $64.9 million
for the three months ended September 30, 1999 to $71.5 million for the three
months ended September 30, 2000.

        Local Telephone

        The components of local telephone expense are plant specific operations,
plant non-specific operations, customer operations, corporate operations and
property and other operating tax expense. Depreciation and amortization
associated with the operation of the local telephone segment is included in
total depreciation and amortization. Local telephone expenses decreased from
$38.5 million for the three months ended September 30, 1999 to $37.6 million for
the three months ended September 30, 2000 - a decrease of $0.9 million, or 2.3%.
As a percent of local telephone revenue, local telephone expense was 64.7% for
the quarter ended September 30, 2000 compared to 62.2% for the quarter ended
September 30, 1999. This change in local telephone expense as a percentage of
local telephone revenue is primarily attributable to the $2.1 million in charges
for uncollectible accounts recorded against revenue during the third quarter of
2000 in excess of those recorded during 1999, as previously discussed. During
the third quarter of 2000, ACS Holdings also incurred $1.1 million of local
telephone expense associated with interconnection proceedings with competitive
local exchange carriers for which comparable costs were not incurred during the
corresponding quarter of 1999. Management expects to incur additional costs
associated with interconnection proceedings in the future.

        Cellular

        Cellular expenses remained flat for the three months ended September 30,
2000 compared to the three months ended September 30, 1999. As a percentage of
revenue, cellular expenses decreased from 57.3% for 1999 to 54.0% for 2000.

        Interexchange Network, Data Services and Other

        Interexchange network, data services and other expenses increased by
$3.2 million, or 62.5%, but was consistent as a percentage of revenue during the
three months ended September 30, 2000 and 1999 at 140.3%. The increase in
interexchange network, data services and other was the result of additional
circuit and other costs associated with developing the Company's statewide
network and Internet infrastructure and increases in minutes of use for long
distance as discussed above. Internet expenses also increased $1.9 million due
to the expenses of IAI, which was acquired in June 2000.

        Unusual charges

        During the quarter ended September 30, 2000, ACS Holdings recorded $2.1
million of unusual charges, consisting of the write-off of approximately $1.5
million of costs related to the attempted acquisition of Matanuska Telephone
Association and $0.6 million of severance cost related to a reduction in
workforce of approximately 100 personnel. The reduction in workforce, along with
other cost structure



                                       14
<PAGE>   15

improvements, is expected to result in annual expense reductions totaling
approximately $10 million, beginning with the fourth quarter of 2000.

        Depreciation and Amortization

        Depreciation and amortization expense increased $2.2 million, or 13.8%,
due principally to increases in plant in service for the three months ended
September 30, 2000 over the corresponding period of 1999.

        INTEREST EXPENSE

        Interest expense increased $1.0 million, or 6.9%, for the three months
ended September 30, 2000 as compared to the three months ended September 30,
1999. The increase is due to higher interest rates for the variable rate
components of debt in 2000 compared to 1999.

        INCOME TAXES

        ACS Holdings has fully reserved the income tax benefit resulting from
the consolidated losses incurred since May 14, 1999 - the date of the
acquisition of substantially all of its operations.

        NET INCOME (LOSS)

        The increase in the net loss is primarily a result of the factors
discussed above.


NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999

        OPERATING REVENUES

        Operating revenues increased $13.2 million, or 6.0% for the nine months
ended September 30, 2000 compared to the nine months ended September 30, 1999.
Local telephone, cellular and interexchange network, data services and other
revenues all increased compared to the prior nine month period.

        Local Telephone

        Local telephone revenues, which consist of local network service,
network access revenue, directory advertising and deregulated and other
revenues, increased $ 6.1 million, or 3.3%, for the nine months ended September
30, 2000 compared to the same period in 1999.

        The local network service component of local telephone revenues was
$69.8 million during 2000 compared with $70.2 million during 1999. Revenue
decreased $0.4 million or 0.7% over the prior year, despite growth in average
total access lines in service of 4.7% and increased penetration of enhanced
features. The net decrease was due primarily to charges for uncollectible
accounts and increased market penetration of lower margin wholesale lines in the
Anchorage market. The charges for uncollectible accounts recorded against local
network service revenue in 2000 were $2.9 million in excess of those recorded
during 1999, accounting for more than 100% of the decrease in local network
service revenue. The charges for uncollectible accounts were also approximately
$1.6 million in excess of industry average collection rates. Collection
processes have been improved and management expects that charges for
uncollectible accounts will be in line with industry benchmarks going forward.
Management also believes that the continued loss of market share experienced in
the Anchorage market is attributable to below cost interconnection rates for
UNE's currently in place. The RCA has recently approved arbitrated
interconnection rates for UNE's for the Company's Fairbanks and Juneau markets
which, in the opinion of management, are also below cost. See "Legal
Proceedings" under Item 1 of Part II of this report for further discussion.

        Network access revenues increased by $2.1 million, or 2.7%, from $77.7
million in 1999 to $79.8 million in 2000. Network access revenues were reduced
by $3.6 million in the third quarter of 2000 to reflect the uncertainty of
certain components of these revenues. The amounts being reserved relate to a



                                       15
<PAGE>   16

complaint filed with the FCC during the third quarter alleging that certain of
the Company's subsidiaries exceeded their federally authorized rates of return.
See "Legal Proceedings" under Item 1 of Part II of this report for further
discussion of this matter. Network access revenues are based on a regulated
return on rate base and recovery of allowable expenses associated with the
origination and termination of toll calls. The increase in telephone access
revenues over the corresponding period in 1999 is due primarily to changes
relating to cost allocation factors, rate base and expenses from period to
period. Management expects that network access revenues will decline as a
component of local telephone revenues for the foreseeable future.

        Directory advertising revenues increased by $2.6 million, or 12.8%, from
$20.4 million in 1999 to $23.0 million in 2000. This growth corresponds with the
growth in average access lines in service during 2000 over 1999 from 314,061
during 1999 to 328,846 during 2000, or an increase of 4.7%, combined with
additional penetration for the current directory phone book cycle.

        Deregulated and other revenues, which grew $1.9 million, or 12.4% over
1999, consists principally of billing and collection services, space and power
rents, deregulated equipment sales, paystation revenues and other miscellaneous
telephone revenues. The revenue increase was due primarily to increased
deregulated equipment sales in 2000.

        Cellular

        Cellular revenues increased $3.7 million, or 14.4%, to $29.7 million for
the nine months ended September 30, 2000 compared to $25.9 million for the nine
months ended September 30, 1999. This growth in revenue is due to growth in
average cellular subscribers to 73,132 in 2000 from 68,712 in 1999, or 6.4%, and
an increase in average revenue per unit from $41.92 in 1999 to $45.06 in 2000.
The increase in average revenue per unit is due to the introduction of new
statewide and national pricing programs and the benefits of the digital upgrade
completed in the first quarter of 2000.

        Interexchange Network, Data Services and Other

        Interexchange network, data services and other revenues include
principally long distance, data transmission and Internet services revenues.
These revenues increased from $11.2 million in 1999 to $14.6 million in 2000 -
an increase of $3.4 million, or 29.9%. Long distance revenues increased from
$7.4 million in 1999 to $8.5 million in 2000 due to increases in long distance
minutes of use from 51.3 million to 56.8 million and increases in circuit rent
revenues. Internet revenues also increased $1.7 million due to the additional
revenues from IAI, which was acquired in June of 2000, and wireless cable
revenues increased $0.9 million due to the additional revenues from ACSTV, which
was not consolidated during the third quarter of 1999.

OPERATING EXPENSES

        Operating expenses increased $13.8 million, or 7.1%, from $193.5 million
for the nine months ended September 30, 1999 to $207.3 million for the nine
months ended September 30, 2000.

        Local Telephone

        The components of local telephone expense are plant specific operations,
plant non-specific operations, customer operations, corporate operations and
property and other operating tax expense. Depreciation and amortization
associated with the operation of the local telephone segment is included in
total depreciation and amortization. Local telephone expenses decreased from
$114.4 million for the nine months ended September 30, 1999 to $113.5 million
for the nine months ended September 30, 2000 - a decrease of $0.9 million or
0.8%. As a percentage of revenue, local telephone expense decreased from 62.4%
for 1999 to 59.9% for 2000. This change in local telephone expense as a
percentage of local telephone revenue improved despite approximately $2.9
million in charges for uncollectible accounts recorded against revenues during
2000 in excess of those recorded during 1999, as previously discussed. During
the nine months of 2000, ACS Holdings also incurred $1.1 million of local
telephone expense associated with interconnection proceedings with competitive
local exchange carriers for which comparable costs were not incurred during the
corresponding nine months of 1999. Management expects to incur additional costs
associated with interconnection proceedings in the future.



                                       16
<PAGE>   17

        Cellular

        Cellular expenses increased $0.6 million, or 3.6%, for the nine months
ended September 30, 2000 compared to the nine months ended September 30, 1999.
Cellular expense was 65.8% of cellular revenues for 1999 and 59.6% of cellular
revenues for 2000.

        Interexchange Network, Data Services and Other

        Interexchange network, data services and other expenses increased by
$6.4 million, or 41.9%, and increased as a percentage of revenue from 135.3% in
1999 to 147.8% in 2000. The increase in interexchange network, data services and
other was the result of additional circuit and other costs associated with
developing the Company's statewide network and Internet infrastructure, the
rollout of ADSL Internet service and increases in minutes of use for long
distance as discussed above. Internet expenses also increased $2.2 million due
to the additional expenses from IAI, which was acquired in June of 2000, and
wireless cable expenses increased $1.0 million due to the acquisition of ACSTV,
the operations of which were not consolidated during the nine months ended
September 30, 1999.

        Unusual charges

        During the nine months ended September 30, 2000, ACS Holdings recorded
$2.1 million of unusual charges, consisting of the write-off of approximately
$1.5 million of costs related to the attempted acquisition of Matanuska
Telephone Association and $0.6 million severance cost related to a reduction in
workforce of approximately 100 personnel. The reduction in workforce, along with
other cost structure improvements, is expected to result in annual expense
reductions totaling approximately $10 million, beginning with the fourth quarter
of 2000.

        Depreciation and Amortization

        Depreciation and amortization expense increased $5.6 million, or 11.9%,
due principally to increases in plant in service for the nine months ended
September 30, 2000 over the corresponding period of 1999.

        INTEREST EXPENSE

        Interest expense increased $19.7 million, or 73.6%, for the nine months
ended September 30, 2000 as compared to the nine months ended September 30,
1999. This increase is due to $591.7 million of debt incurred by ACS Holdings in
connection with the acquisitions on May 14, 1999 of substantially all of its
operations.

        INCOME TAXES

        ACS Holdings has fully reserved the income tax benefit resulting from
the consolidated losses it has incurred since May 14, 1999 - the date of the
acquisition of substantially all of its operations. Income taxes reflected in
the combined financial statements are substantially those of the predecessor
entities.

        NET INCOME

        The decrease in net income is primarily a result of the factors
discussed above and, in particular, the increase in interest expense of $19.7
million as a result of the financing of the acquisitions.



                                       17
<PAGE>   18

LIQUIDITY AND CAPITAL RESOURCES

        ACS Holdings has satisfied its operational and capital cash requirements
primarily through internally generated funds, the sale of stock and debt
financing. At September 30, 2000, the Company had approximately $84.0 million in
working capital, with approximately $83.6 million in cash and cash equivalents.
As of September 30, 2000 the Company had $75.0 million of remaining capacity
under its revolving credit facility, representing 100% of available capacity.

        The Company has a $435.0 million bank credit agreement ("senior credit
facility") and $150.0 million in 9.375% senior subordinated notes due 2009,
representing substantially all of the Company's long-term debt of $601.1 million
as of September 30, 2000. In addition, $17.3 in senior discount debentures are
recorded at ACS Group and are collateralized by substantially all assets of the
Company. Interest on ACS Group's senior discount debentures and ACS Holdings'
senior subordinated notes is payable semiannually. Interest on borrowings under
the senior credit facility is payable monthly, quarterly or semi-annually at the
Company's option. The senior credit facility requires annual principal payments
commencing on May 14, 2002.

        The Company employs an interest rate hedge transaction which fixes at
5.99% the underlying variable rate on one-half of the borrowings under the
senior credit facility, or $217.5 million, expiring in June 2002. The underlying
variable rate for the senior credit facility is based on the London Interbank
Offer Rate ("LIBOR"), which is adjusted at each monthly, quarterly or
semi-annual rollover date.

        The local telephone network requires the timely maintenance of plant and
infrastructure. ACS Holdings' local network is of high quality and is
technically advanced and will have relatively predictable annual capital needs.
The Company's historical capital expenditures have been significant. The
construction and geographic expansion of ACS Holdings' cellular network required
a substantial amount of capital. The implementation of the Company's
interexchange network and data services strategy is also capital intensive. In
1999 the Company purchased fiber capacity for $19.5 million, which was funded
with monies borrowed to finance the acquisition of substantially all of its
operations. The Company has also agreed to purchase additional fiber capacity
for $19.5 million in the first quarter of 2001. ACS Holdings anticipates total
capital expenditures of approximately $65.0 million to $75.0 million in 2000.
Capital expenditures for the first nine months of 2000 were $48.1 million,
including $3.2 million in capital leases. The Company intends to fund its
capital expenditures with cash on hand, through internally generated cash flows,
and if necessary, through additional borrowings under the revolving credit
facility.

        ACS Holdings' capital requirements may change, however, due to, among
other things: the Company's decision to pursue specific acquisition
opportunities, changes in technology, the effects of competition or changes in
the Company's business strategy. ACS Holdings' ability to satisfy its capital
requirements will be dependent upon its future financial performance, which is,
in turn, subject to future economic conditions and to financial, business and
other factors, many of which are beyond the Company's control.

        On September 30, 1999, the Company acquired an additional one-third
interest in Alaskan Choice Television (now ACSTV) for $1.9 million, increasing
its ownership to a two-thirds majority interest. On October 6, 1999, the Company
entered into an agreement to acquire the remaining one-third interest and on
February 14, 2000, the Company completed the acquisition of the remaining
one-third interest in ACSTV for $3.0 million.

        On June 16, 2000, ACS Holdings acquired for an undisclosed amount all
outstanding shares of IAI, an Internet service provider with over 25,000
customers in Alaska. The acquisition was funded entirely with cash on hand.

        ACS Holdings believes that it will have sufficient working capital
provided by operations and available borrowing capacity under the existing
revolving credit facility to fund its operations and capital expenditures over
the next 12 months.



                                       18
<PAGE>   19

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company has issued senior subordinated notes and has entered into a
bank credit facility. These on-balance sheet financial instruments, to the
extent they provide for variable rates of interest, expose the Company to
interest rate risk, with the primary interest rate risk exposure resulting from
changes in LIBOR or the prime rate, which are used to determine the interest
rates that are applicable to borrowings under the Company's bank credit
facilities. The Company uses off-balance sheet derivative financial instruments,
in particular an interest rate swap agreement, to partially hedge variable
interest transactions. The Company's derivative financial instrument transaction
has been entered into for non-trading purposes. The terms and characteristics of
the derivative financial instruments are matched with the underlying on-balance
sheet instrument or anticipated transactions and do not constitute speculative
or leveraged positions independent of these exposures. There have been no
material changes to the Company's outstanding debt instruments since December
31, 1999.



                                       19
<PAGE>   20

                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

        The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes
that the disposition of claims currently pending under these matters will not
have a material adverse effect on the Company's consolidated financial position,
results of operations or cash flows.

        The Company's incumbent local exchange carriers ("ILECS") in the
Anchorage, Fairbanks, and Juneau markets have received additional requests for
interconnection under section 251 of the Telecommunications Act of 1996 ("1996
Act"), as well as requests for arbitration or to "pick and choose" provisions of
existing interconnection agreements under section 252 of the 1996 Act. The
Company expects that additional such requests will be received over time in the
future as additional entities seek to enter these markets.

        As previously reported, ALLTEL Publishing Corporation has initiated
litigation alleging improper termination of certain directory publishing
contracts. Following various discovery proceedings in August and September 2000,
ALLTEL filed a second amended complaint on October 10, 2000, alleging new facts
in connection with its cause of action. Based upon this revised complaint, ACS
Holdings tendered the defense of this proceeding to CenturyTel ("CTE") on
October 19, 2000, under the terms of the August 14, 1998 acquisition agreement
between CTE and ACS Holdings (then ALEC Acquisition Corp.). On October 23, 2000,
CTE declined to assume the defense of the proceeding. The Company is currently
reviewing the amended complaint and the CTE response, but cannot predict the
future course or outcome of this proceeding at this time. Trial remains
scheduled for January, 2001.

        On August 24, 2000, General Communication, Inc. ("GCI"), filed a formal
complaint with the FCC under various provisions of the Communications Act of
1934 (as amended), alleging that certain of the Company's subsidiaries exceeded
their federally authorized rates of return related to the 1997-1998 monitoring
period. The principle issue raised in the complaint focuses on the proper
jurisdictional recognition (federal versus state) of minutes of use associated
with Internet service provider traffic. The final FCC disposition of the
complaint is expected to occur in January 2001. The Company believes it has
adhered to applicable legal requirements and is actively defending the
complaint, but cannot predict the ultimate outcome of the proceedings.

        On September 5, 2000, the RCA issued orders largely ratifying the
findings of the arbiter in the Fairbanks and Juneau interconnection arbitration
proceedings involving the Company and GCI. On September 25, 2000, ACS Holdings
filed protective appeals in the state Superior Court and in the Federal District
Court for the District of Alaska, alleging various errors in the Commission
orders. On October 5, 2000, the RCA issued final orders affirming the
interconnection agreements arbitrated in these proceedings. On October 20, 2000,
ACS Holdings filed a petition for reconsideration with the RCA, seeking
Commission review and redetermination of specific elements in its final order.
The RCA may, but is not required, to reconsider its prior rulings, in whole or
in part, and the Commission's disposition of this petition cannot be predicted.

        The Company previously reported on the decision of the United States
Court of Appeals for the Eighth Circuit in the case of Iowa Utilities Board, et
al. v. Federal Communications Commission (Case No. 96-3321 and consolidated
cases ("Iowa II"). On September 22, 2000, the Eighth Circuit suspended that
portion of its decision which had vacated the FCC pricing rule relating to
forward looking economic cost measurement based upon the most efficient
technology currently available and the lowest cost network configuration (set
out at 47 C.F.R. Section 51.505(b)(1)). This suspension was ordered by the Court
to permit parties to the proceeding to seek review of its Iowa II decision by
the U.S. Supreme Court. The Eighth Circuit did not suspend other portions of its
decision, including those portions vacating certain FCC rules purporting to
address the "rural exemption" provisions of 47 U.S.C. Section 251(f)(1). The
Company instituted previously reported litigation in the State Superior Court in
1999 against the RCA, alleging generally that the rural exemption had been
improperly terminated with respect to the Fairbanks and Juneau markets. The



                                       20
<PAGE>   21

Company is currently reviewing the effects of the recent Eighth Circuit
suspension order, but has made no decision with respect to further courses of
action in that litigation.

        On October 26, 2000, the Federal Communication Commission granted the
petition of a subsidiary of ACS Holdings, ACS of Anchorage (previously filed
under the name of ATU), seeking a waiver of certain federal access charge rules.
The effect of the waiver is to permit ACS of Anchorage pricing flexibility
through the ability to offer term and volume discount pricing in connection with
its switched access services. The FCC waiver was granted, in part, upon findings
concerning the level of competition in the Anchorage marketplace, as
demonstrated in the record of the proceedings.



                                       21
<PAGE>   22

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

        NONE.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

        NONE.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.

        NONE.

ITEM 5. OTHER INFORMATION.

        NONE.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) EXHIBITS:


<TABLE>
<CAPTION>
EXHIBIT NO.     DESCRIPTION
-----------     -----------
<S>             <C>
   27.1         Financial Data Schedule
</TABLE>

(b) REPORTS ON FORM 8-K:

        No reports on Form 8-K were filed during the quarter ended September 30,
2000.



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<PAGE>   23

                                    SIGNATURE



Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report on Form 10-Q to be signed on its behalf
by the undersigned, thereunto duly authorized.





Date: November 9, 2000              ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.



                                            /s/  Kevin P. Hemenway
                                            ------------------------------------
                                            Kevin P. Hemenway
                                            Senior Vice President and
                                            Chief Financial Officer
                                            (signing both in his capacity as
                                            Senior Vice President on behalf of
                                            the Registrant and as Chief
                                            Financial Officer of the Registrant)



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