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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 March 31, 2003
OR

|                                                                                               
|-----------------------------------------------------------------------------------------------
|o     
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from            to

Commission file number 333-82363

ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)


|                                                                                  |  |                                                
|--------------------------------------------------------------------------------- |  | -----------------------------------------------
|Delaware
(State or Other Jurisdiction          
of Incorporation or Organization) |  | 91-1921377
(I.R.S. Employer
Identification No.)

600 Telephone Avenue, Anchorage, Alaska 99503
(Address of Principal Executive Offices)    (Zip Code)

(907) 297-3000
(Registrants Telephone Number, Including Area Code)

Not Applicable
(Former name, former address and former three months, if changed since last report)

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    [ü] | No  [  ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

|            |          
|----------- | ---------
|Yes    [  ] | No    [ü]

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



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TABLE OF CONTENTS



|               |                                                                                               |                                            |  |  |  |  |  | 
|-------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------ |  |  |  |  |  | 
|               |                                                                                               | Consolidated Balance Sheets               
|               |                                                                                               | Consolidated Statements of Operations     
|               |                                                                                               | Consolidated Statements of Cash Flows     
|               |                                                                                               | Notes to Consolidated Financial Statements
|               | Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|               | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II       
|               | ITEM 1. LEGAL PROCEEDINGS.                                                                   
|               | ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.                                           
|               | ITEM 3. DEFAULTS UPON SENIOR SECURITIES.                                                     
|               | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.                                 
|               | ITEM 5. OTHER INFORMATION.                                                                   
|               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                                    
|SIGNATURES    
|CERTIFICATIONS
|EXHIBIT 10.13 
|EXHIBIT 10.14 
|EXHIBIT 99.1  
|EXHIBIT 99.2  



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TABLE OF CONTENTS

|               |  |                                                                                                      |  |       
|-------------- |  | ---------------------------------------------------------------------------------------------------- |  | ------
|               |  |                                                                                                      |  | Page  
|               |  |                                                                                                      |  | Number
|               |  |                                                                                                      |  |       
|PART I.        |  | Financial Information                                                                                |  |       
|Item 1.        |  | Financial Statements:                                                                                |  |       
|               |  | Consolidated Balance Sheets (unaudited)
As of March 31, 2003 and December 31, 2002                   |  | 3     
|               |  | Consolidated Statements of Operations (unaudited)
For the Three Months Ended March 31, 2003 and 2002 |  | 4     
|               |  | Consolidated Statements of Cash Flows (unaudited)
For the Three Months Ended March 31, 2003 and 2002 |  | 5     
|               |  | Notes to Consolidated Financial Statements (unaudited)                                               |  | 6     
|Item 2.        |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations                |  | 15    
|Item 3.        |  | Quantitative and Qualitative Disclosures About Market Risk                                           |  | 25    
|Item 4.        |  | Controls and Procedures                                                                              |  | 25    
|PART II.       |  | Other Information                                                                                    |  |       
|Item 1.        |  | Legal Proceedings                                                                                    |  | 26    
|Item 2.        |  | Changes in Securities and Use of Proceeds                                                            |  | 27    
|Item 3.        |  | Defaults upon Senior Securities                                                                      |  | 27    
|Item 4.        |  | Submission of Matters to a Vote of Security Holders                                                  |  | 27    
|Item 5.        |  | Other Information                                                                                    |  | 27    
|Item 6.        |  | Exhibits and Reports on Form 8-K                                                                     |  | 27    
|Signatures     |  |                                                                                                      |  | 28    
|Certifications |  |                                                                                                      |  | 29    

2



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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Consolidated Balance Sheets
(Unaudited, In Thousands Except Per Share Amounts)

|                                                                |                                                                                       |                            |           |                                      |        |           |           |              |        |  |  | 
|--------------------------------------------------------------- | ------------------------------------------------------------------------------------- | -------------------------- | --------- | ------------------------------------ | ------ | --------- | --------- | ------------ | ------ |  |  | 
|                                                                |                                                                                       |                            |           |                                      |        | March 31, |           | December 31,
|                                                                |                                                                                       |                            |           |                                      |        | 2003      |           | 2002        
|                                                                |                                                                                       |                            |           |                                      |        |           |           |             
|                                                                |                                                                                       |                            | Assets    |                                      |        |           |           |              |        |  | 
|Current assets:                                                 |                                                                                       |                            |           |                                      |        |           |           |             
|                                                                | Cash and cash equivalents                                                             |                            | $         | 33,482                               |        |           | $         | 18,565       |       
|                                                                | Restricted cash                                                                       |                            |           | 310                                  |        |           |           | 3,440        |       
|                                                                | Accounts receivable-trade, net of allowance of $6,179 and $6,075                      |                            |           | 45,536                               |        |           |           | 48,820       |       
|                                                                | Accounts receivable-affiliate                                                         |                            |           | 3,754                                |        |           |           | 3,761        |       
|                                                                | Materials and supplies                                                                |                            |           | 10,924                               |        |           |           | 11,203       |       
|                                                                | Prepayments and other current assets                                                  |                            |           | 5,091                                |        |           |           | 6,172        |       
|                                                                | Assets held for sale                                                                  |                            |           |                                     |        |           |           | 261          |       
|                                                                |                                                                                       |                            |           |                                      |        |           |           |              |       
|                                                                |                                                                                       | Total current assets       |           |                                      | 99,097 |           |           |              | 92,222 | 
|Property, plant and equipment                                   |                                                                                       |                            | 1,094,131 |                                      |        |           | 1,090,365 |             
|Less: accumulated depreciation                                  |                                                                                       |                            | 643,420   |                                      |        |           | 625,276   |             
|                                                                |                                                                                       |                            |           |                                      |        |           |           |              |       
|                                                                | Property, plant and equipment, net                                                    |                            |           | 450,711                              |        |           |           | 465,089      |       
|Goodwill                                                        |                                                                                       |                            | 77,225    |                                      |        |           | 77,225    |             
|Intangible assets                                               |                                                                                       |                            | 23,026    |                                      |        |           | 23,269    |             
|Debt issuance costs, net of amortization of $16,916 and $15,883 |                                                                                       |                            | 20,097    |                                      |        |           | 21,130    |             
|Deferred charges and other assets                               |                                                                                       |                            | 26,030    |                                      |        |           | 26,047    |             
|                                                                |                                                                                       |                            |           |                                      |        |           |           |              |       
|Total assets                                                    |                                                                                       | $                          | 696,186   |                                      |        | $         | 704,982   |             
|                                                                |                                                                                       |                            |           |                                      |        |           |           |              |       
|                                                                |                                                                                       |                            |           | Liabilities and Stockholders Equity |        |           |           |              |        |  |  | 
|Current liabilities:                                            |                                                                                       |                            |           |                                      |        |           |           |             
|                                                                | Current portion of long-term obligations                                              |                            | $         | 8,282                                |        |           | $         | 5,933        |       
|                                                                | Accounts payable-affiliates                                                           |                            |           | 1,624                                |        |           |           | 1,319        |       
|                                                                | Accounts payable, accrued and other current liabilities                               |                            |           | 44,713                               |        |           |           | 49,480       |       
|                                                                | Advance billings and customer deposits                                                |                            |           | 9,852                                |        |           |           | 9,804        |       
|                                                                |                                                                                       |                            |           |                                      |        |           |           |              |       
|                                                                |                                                                                       | Total current liabilities  |           |                                      | 64,471 |           |           |              | 66,536 | 
|Long-term obligations, net of current portion                   |                                                                                       |                            | 586,573   |                                      |        |           | 586,898   |             
|Other deferred credits and long-term liabilities                |                                                                                       |                            | 31,227    |                                      |        |           | 32,930    |             
|Commitments and contingencies                                   |                                                                                       |                            |          |                                      |        |           |          |             
|Stockholders equity:                                           |                                                                                       |                            |           |                                      |        |           |           |             
|                                                                | Common stock, $.01 par value; 1,000 shares authorized, 1 share
issued and outstanding |                            |           |                                     |        |           |           |             |       
|                                                                | Contributed capital                                                                   |                            |           | 287,242                              |        |           |           | 287,242      |       
|                                                                | Accumulated deficit                                                                   |                            |           | (256,103                             | )      |           |           | (249,738     | )     
|                                                                | Accumulated other comprehensive loss                                                  |                            |           | (17,224                              | )      |           |           | (18,886      | )     
|                                                                |                                                                                       |                            |           |                                      |        |           |           |              |       
|                                                                |                                                                                       | Total stockholders equity |           |                                      | 13,915 |           |           |              | 18,618 | 
|                                                                |                                                                                       |                            |           |                                      |        |           |           |              |       
|Total liabilities and stockholders equity                      |                                                                                       | $                          | 696,186   |                                      |        | $         | 704,982   |             
|                                                                |                                                                                       |                            |           |                                      |        |           |           |              |       

See Notes to Consolidated Financial Statements

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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Consolidated Statements of Operations
(Unaudited, In Thousands)

|                                                                                                                   |                                                              |                         |        |                    |         |      |          |         |         |  
|------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------ | ----------------------- | ------ | ------------------ | ------- | ---- | -------- | ------- | ------- | -
|                                                                                                                   |                                                              |                         |        | Three Months Ended
|                                                                                                                   |                                                              |                         |        | March 31,         
|                                                                                                                   |                                                              |                         |        |                   
|                                                                                                                   |                                                              |                         |        | 2003               |         | 2002
|                                                                                                                   |                                                              |                         |        |                    |         |     
|Operating revenue:                                                                                                 |                                                              |                         |        |                    |         |      |          |        
|                                                                                                                   | Local telephone                                              |                         | $      | 54,001             |         |      | $        | 55,322  |        
|                                                                                                                   | Wireless                                                     |                         |        | 10,330             |         |      |          | 9,355   |        
|                                                                                                                   | Directory                                                    |                         |        | 8,278              |         |      |          | 8,641   |        
|                                                                                                                   | Internet                                                     |                         |        | 6,296              |         |      |          | 3,842   |        
|                                                                                                                   | Interexchange                                                |                         |        | 4,766              |         |      |          | 4,850   |        
|                                                                                                                   |                                                              |                         |        |                    |         |      |          |         |        
|                                                                                                                   |                                                              | Total operating revenue |        |                    | 83,671  |      |          |         | 82,010  |  
|Operating expense:                                                                                                 |                                                              |                         |        |                    |         |      |          |        
|                                                                                                                   | Local telephone (exclusive of depreciation and amortization) |                         |        | 27,847             |         |      |          | 28,998  |        
|                                                                                                                   | Wireless (exclusive of depreciation and amortization)        |                         |        | 6,564              |         |      |          | 6,042   |        
|                                                                                                                   | Directory (exclusive of depreciation and amortization)       |                         |        | 3,449              |         |      |          | 3,426   |        
|                                                                                                                   | Internet (exclusive of depreciation and amortization)        |                         |        | 9,276              |         |      |          | 5,128   |        
|                                                                                                                   | Interexchange (exclusive of depreciation and amortization)   |                         |        | 6,589              |         |      |          | 6,615   |        
|                                                                                                                   | Depreciation and amortization                                |                         |        | 22,600             |         |      |          | 19,259  |        
|                                                                                                                   | Loss of disposal of assets                                   |                         |        | 746                |         |      |          |        |        
|                                                                                                                   |                                                              |                         |        |                    |         |      |          |         |        
|                                                                                                                   |                                                              | Total operating expense |        |                    | 77,071  |      |          |         | 69,468  |  
|                                                                                                                   |                                                              |                         |        |                    |         |      |          |         |        
|Operating income                                                                                                   |                                                              |                         | 6,600  |                    |         |      | 12,542   |        
|Other income (expense):                                                                                            |                                                              |                         |        |                    |         |      |          |        
|                                                                                                                   | Interest expense                                             |                         |        | (12,687            | )       |      |          | (12,743 | )      
|                                                                                                                   | Interest income and other                                    |                         |        | 192                |         |      |          | 500     |        
|                                                                                                                   |                                                              |                         |        |                    |         |      |          |         |        
|                                                                                                                   |                                                              | Total other expense     |        |                    | (12,495 | )    |          |         | (12,243 | )
|                                                                                                                   |                                                              |                         |        |                    |         |      |          |         |        
|Income (loss) before income taxes, discontinued operations and cumulative
effect of change in accounting principle |                                                              |                         | (5,895 | )                  |         |      | 299      |        
|Income tax benefit                                                                                                 |                                                              |                         |       |                    |         |      |         |        
|                                                                                                                   |                                                              |                         |        |                    |         |      |          |         |        
|Income (loss) from continuing operations                                                                           |                                                              |                         | (5,895 | )                  |         |      | 299      |        
|Loss from discontinued operations                                                                                  |                                                              |                         | (52    | )                  |         |      | (6,872   | )      
|                                                                                                                   |                                                              |                         |        |                    |         |      |          |         |        
|Loss before cumulative effect of change
in accounting principle                                                    |                                                              |                         | (5,947 | )                  |         |      | (6,573   | )      
|Cumulative effect of change in accounting principle                                                                |                                                              |                         |       |                    |         |      | (105,350 | )      
|                                                                                                                   |                                                              |                         |        |                    |         |      |          |         |        
|Net loss                                                                                                           |                                                              | $                       | (5,947 | )                  |         | $    | (111,923 | )      
|                                                                                                                   |                                                              |                         |        |                    |         |      |          |         |        

See Notes to Consolidated Financial Statements

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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Consolidated Statements of Cash Flows
(Unaudited, In Thousands)

|                                                                                |                                                                 |   |                    |        |      |   |          |         |  
|------------------------------------------------------------------------------- | --------------------------------------------------------------- | - | ------------------ | ------ | ---- | - | -------- | ------- | -
|                                                                                |                                                                 |   | Three Months Ended
|                                                                                |                                                                 |   | March 31,         
|                                                                                |                                                                 |   |                   
|                                                                                |                                                                 |   | 2003               |        | 2002
|                                                                                |                                                                 |   |                    |        |     
|Cash Flows from Operating Activities:                                           |                                                                 |   |                    |        |      |   |          |        
|Net loss                                                                        |                                                                 | $ | (5,947             | )      |      | $ | (111,923 | )      
|Adjustments to reconcile net loss to net cash provided by operating activities: |                                                                 |   |                    |        |      |   |          |        
|                                                                                | Loss on discontinued operations                                 |   |                    | 52     |      |   |          | 6,872   |  
|                                                                                | Cumulative effect of change in accounting principle             |   |                    |       |      |   |          | 105,350 |  
|                                                                                | Depreciation and amortization                                   |   |                    | 22,600 |      |   |          | 19,259  |  
|                                                                                | Loss on disposal of assets                                      |   |                    | 746    |      |   |          |        |  
|                                                                                | Amortization of debt issuance costs and original issue discount |   |                    | 1,033  |      |   |          | 1,033   |  
|                                                                                | Capitalized interest                                            |   |                    |       |      |   |          | (349    | )
|                                                                                | Other deferred credits                                          |   |                    | (41    | )    |   |          | 3,973   |  
|                                                                                | Changes in components of working capital:                       |   |                    |        |      |   |          |         |  
|                                                                                | Accounts receivable and other current assets                    |   |                    | 4,631  |      |   |          | 1,154   |  
|                                                                                | Accounts payable and other current liabilities                  |   |                    | (4,423 | )    |   |          | 2,356   |  
|                                                                                | Other                                                           |   |                    | 17     |      |   |          | (742    | )
|                                                                                | Net cash used in discontinued operations                        |   |                    | (41    | )    |   |          | (384    | )
|                                                                                |                                                                 |   |                    |        |      |   |          |        
|Net cash provided by operating activities                                       |                                                                 |   | 18,627             |        |      |   | 26,599   |        
|Cash Flows from Investing Activities:                                           |                                                                 |   |                    |        |      |   |          |        
|Construction and capital expenditures, net of capitalized interest              |                                                                 |   | (6,115             | )      |      |   | (13,246  | )      
|Release of funds from escrow                                                    |                                                                 |   | 3,339              |        |      |   |         |        
|Placement of funds in restricted account                                        |                                                                 |   | (200               | )      |      |   |         |        
|                                                                                |                                                                 |   |                    |        |      |   |          |        
|Net cash used by investing activities                                           |                                                                 |   | (2,976             | )      |      |   | (13,246  | )      
|Cash Flows from Financing Activities:                                           |                                                                 |   |                    |        |      |   |          |        
|Payments on long-term debt                                                      |                                                                 |   | (316               | )      |      |   | (331     | )      
|Dividends                                                                       |                                                                 |   | (418               | )      |      |   |         |        
|                                                                                |                                                                 |   |                    |        |      |   |          |        
|Net cash used by financing activities                                           |                                                                 |   | (734               | )      |      |   | (331     | )      
|Increase in cash and cash equivalents                                           |                                                                 |   | 14,917             |        |      |   | 13,022   |        
|Cash and cash equivalents at beginning of the period                            |                                                                 |   | 18,565             |        |      |   | 41,012   |        
|                                                                                |                                                                 |   |                    |        |      |   |          |        
|Cash and cash equivalents at the end of the period                              |                                                                 | $ | 33,482             |        |      | $ | 54,034   |        
|                                                                                |                                                                 |   |                    |        |      |   |          |        
|Supplemental Cash Flow Data:                                                    |                                                                 |   |                    |        |      |   |          |        
|Interest paid                                                                   |                                                                 | $ | 8,401              |        |      | $ | 9,805    |        
|Income taxes paid                                                               |                                                                 |   |                   |        |      |   |         |        
|Supplemental Noncash Transactions:                                              |                                                                 |   |                    |        |      |   |          |        
|Property acquired under capital leases and mortgages                            |                                                                 | $ | 2,340              |        |      | $ |         |        
|Interest rate swap marked to market                                             |                                                                 | $ | (1,662             | )      |      | $ | (2,903   | )      

See Notes to Consolidated Financial Statements

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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Notes to Consolidated Financial Statements
(Unaudited, Dollars 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 an integrated
communications provider engaged principally in providing local telephone,
directory, wireless, Internet, and interexchange services to its customers in
the state of Alaska through its telecommunications subsidiaries. The Company
was formed in October of 1998 for the purpose 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 principally of the
following entities:



| |  |  | Alaska Communications Systems Holdings, Inc.
| | - |  | --------------------------------------------
|
| |  |  | ACS of Alaska, Inc. (ACSAK)               
|
| |  |  | ACS of the Northland, Inc. (ACSN)         
|
| |  |  | ACS of Fairbanks, Inc. (ACSF)             
|
| |  |  | ACS of Anchorage, Inc. (ACSA)             
|
| |  |  | ACS Wireless, Inc. (ACSW)                 
|
| |  |  | ACS Long Distance, Inc. (ACSLD)           
|
| |  |  | ACS Internet, Inc. (ACSI)                 
|
| |  |  | ACS InfoSource, Inc. (ACSIS)              

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 this 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, 2002. Certain reclassifications have been made to the 2002
financial statements to make them conform to the current presentation.

In the opinion of management, the financial statements contain all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the consolidated financial position, results of operations and cash
flows for all periods presented. The results of operations for the three months
ended March 31, 2003 and 2002 are not necessarily indicative of the results of
operations which might be expected for the entire year or any other interim
periods.

Revenue Recognition

Access revenue is recognized when earned. The Company participates in toll
revenue pools with other telephone companies. Such pools are funded by toll
revenue and/or access charges regulated by the Regulatory Commission of Alaska
(RCA) within the intrastate jurisdiction and the Federal Communications
Commission (FCC) within the interstate jurisdiction. Much of the interstate
access revenue is initially recorded based on estimates. These estimates are
derived from interim financial statements, available separations studies and
the most recent information available about achieved rates of return. These
estimates are subject to adjustment in future accounting periods as additional
operational information becomes available. To the extent that disputes arise
over revenue settlements, the Companys policy is to defer revenue collected
until settlement methodologies are resolved and finalized. During the second
quarter of 2002, the Company recognized as revenue $11,066 of previously
deferred interstate access revenue and reversed $1,673 of interest expense
previously accrued thereon as a result of a favorable ruling by the District of
Columbia Court of Appeals related to a dispute on interstate access rates for
the Anchorage market. At March 31, 2003 and 2002, the Company had liabilities
of $17,532 and $35,433, respectively, related to its estimate of refundable
access revenue.
6Table of ContentsALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited, Dollars In Thousands Except Per Share Amounts)1.     DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Regulatory Accounting and RegulationThe local telephone exchange operations of the Company account for costs
in accordance with the accounting principles for regulated enterprises
prescribed by Statement of Financial Accounting Standards (SFAS) No. 71,
Accounting for the Effects of Certain Types of Regulation.This accounting
recognizes the economic effects of rate regulation by recording cost and a
return on investment as such amounts are recovered through rates authorized by
regulatory authorities. Accordingly, under SFAS No. 71, plant and equipment is
depreciated over lives approved by regulators and certain costs and obligations
are deferred based upon approvals received from regulators to permit recovery
of such amounts in future years. Historically, lives approved for regulatory
purposes have approximated economically useful lives. On July 21, 2002, the
Company received an order from the RCA which appears to extend lives approved
for rate-making purposes beyond the economically useful lives of the underlying
assets. Management petitioned for reconsideration, and the RCA has agreed to
take additional testimony. A final order on the matter is not expected until
the second quarter of 2003. The Company implemented, effective January 1, 2003,
higher depreciation rates for its regulated telephone plant for the interstate
jurisdiction. As a result, the Company has recorded a regulatory asset under
SFAS No. 71 of $2,418. As of March 31, 2002 the Company has also deferred as a
regulatory asset $894 of costs incurred in connection with regulatory rate
making proceedings, which will be amortized in future periods. If the Company
were not following SFAS No. 71, it would have recorded additional depreciation
expense of $2,418 for the intrastate and local jurisdictions and the deferred
costs incurred in connection with regulatory rate making proceedings would have
been charged to expense as incurred. Non-regulated revenues and costs incurred
by the local telephone exchange operations and non-regulated operations of the
Company are not accounted for under SFAS No. 71 principles.Stock Incentive PlansThe Companys employees participate in various plans of ACS Group. The
Company applies Accounting Principles Board Opinion No. 25 Accounting for
Stock Issued to Employees, in accounting for its stock incentive plans.
Accordingly, no compensation cost has been recognized for options with exercise
prices equal to or greater than fair value on the date of grant. No
compensation costs were charged to operations for the three months ended March
31, 2003 or 2002. If compensation costs had been determined consistent with
SFAS No. 123, Accounting for Stock-Based Compensation,the Companys net loss
on a pro forma basis for the three months ended March 31, 2003 and 2002 would
have been as follows:

|          |             |  |                            |        |      |  |   |          |  
|--------- | ----------- |  | -------------------------- | ------ | ---- |  | - | -------- | -
|          |             |  | For the three months ended
|          |             |  | March 31,                 
|          |             |  | 2003                       |        | 2002
|          |             |  |                            |        |     
|Net loss: |             |  |                            |        |      |  |   |         
|          | As reported |  | $                          | (5,947 | )    |  | $ | (111,923 | )
|          | Pro forma   |  |                            | (6,375 | )    |  |   | (112,394 | )

The fair value for these options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted average
assumptions for grants:

|                             |  |      |      |      |  |  |      |  
|---------------------------- |  | ---- | ---- | ---- |  |  | ---- | -
|                             |  | 2003 |      | 2002
|                             |  |      |      |     
|Risk free rate               |  |      | 2.88 | %    |  |  | 4.98 | %
|Dividend yield               |  |      | 0.0  | %    |  |  | 0.0  | %
|Expected volatility factor   |  |      | 64.2 | %    |  |  | 52.3 | %
|Expected option life (years) |  |      | 6.1  |      |  |  | 6.1  |  

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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited, Dollars In Thousands Except Per Share Amounts)

1.     DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Change in Accounting Estimate

During the period, the Company changed its estimate of the useful lives of
certain classes of assets resulting in additional depreciation expense of $806,
or $0.03 per share for the three months ended March 31, 2003. Management
adopted the higher depreciation rates as a result of an evaluation of the
expected economic useful lives of the underlying assets, primarily in its
regulated local telephone segment as applied to the interstate jurisdiction
under SFAS No. 71.

2.     NEW ACCOUNTING STANDARDS

On August 15, 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 143,Accounting for Asset Retirement Obligations. This
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. SFAS No. 143 addresses financial accounting and
reporting obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. This standard generally
applies to legal obligations associated with the retirement of long-lived
assets that result from the acquisition, construction, development and/or the
normal operation of a long-lived asset. Under the new accounting method, asset
retirement obligations are recognized in the period in which they are incurred
if a reasonable estimate of fair value can be made. When the liability is
initially recorded, the cost is capitalized and increases the carrying value of
the related long-lived asset. The liability is then accreted to its present
value each period and the capitalized cost is depreciated over the estimated
useful life of the related asset. At the settlement date, the obligation is
settled for its recorded amount or a gain or loss is recognized.

In accordance with federal and state regulations, depreciation expense for
the Companys local exchange carriers regulated operations have historically
included an additional provision for cost of removal. Under SFAS No. 143, the
additional cost of removal provision would no longer be included in
depreciation expense, because it does not meet the recognition and measurement
principles of an asset retirement obligation. On December 20, 2002, the FCC
notified local exchange carriers that they should not adopt the provisions of
SFAS No. 143 unless specifically required by the FCC in the future. As a result
of the FCC ruling, the Company will continue to record a regulatory liability
for cost of removal for its local exchange carriers subsidiaries that follow
SFAS No. 71 accounting.

The Company applied the provisions of SFAS No. 143 to its nonregulated
subsidiaries effective January 1, 2003. The Company has cell site leases which
typically have terms of 10 years that contain contractual obligations to
restore the site to its original condition. Since the Company plans to renew
these leases indefinitely, it is unable to determine when it might have to
perform the restoration of the cell sites to their original condition. The
Company is therefore unable to estimate the fair value of these asset
retirement obligations and has not recorded a liability under SFAS No. 143.

In June 2002, FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities.SFAS No. 146 requires that companies
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
SFAS No. 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. The Company does not believe the adoption of
this statement will have a material impact on its financial position, results
of operations, or cash flows.

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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited, Dollars In Thousands Except Per Share Amounts)

2.     NEW ACCOUNTING STANDARDS (Continued)

On December 31, 2002, FASB issued SFAS No. 148, Accounting for Stock-Based
CompensationTransition and Disclosure.SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The Company does not currently have plans to change to the fair value
method of accounting for our stock based compensation. The disclosure
requirements are now effective.

In November 2002, the FASB issued FASB Interpretation No. 45 (FIN 45),
Guarantors Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others.FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under that guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
disclosure requirements are effective for financial statements of interim or
annual periods ending after December 15, 2002. The recognition and measurement
provisions are effective on a prospective basis to guarantees issued or
modified after December 31, 2002. The adoption of FIN 45 has no effect on the
Companys financial position, results of operations or cash flows.

3.     DISCONTINUED OPERATIONS

On March 30, 2002, the Company approved a plan to sell its wireless cable
television service segment. As a result of this decision, the operating revenue
and expense of this segment has been classified as discontinued operations
under SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived
Assets,for all periods presented and the assets and liabilities of the
disposal group have been written down to their fair value, net of expected
selling expenses. The income tax benefit in all periods was offset by a
valuation allowance. The Company completed its disposal of its wireless cable
television segment as of March 31, 2003. The following discloses the results of
the discontinued operations for the three months ended March 31, 2003 and 2002:

|                                             |  |                    |     |      |  |   |        |  
|-------------------------------------------- |  | ------------------ | --- | ---- |  | - | ------ | -
|                                             |  | Three Months Ended
|                                             |  | March 31,         
|                                             |  | 2003               |     | 2002
|                                             |  |                    |     |     
|Operating revenue                            |  | $                  | 110 |      |  | $ | 214    |  
|Operating expense                            |  |                    | 162 |      |  |   | 398    |  
|                                             |  |                    |     |      |  |   |        |  
|Operating loss                               |  |                    | (52 | )    |  |   | (184   | )
|Interest expense                             |  |                    |    |      |  |   | (28    | )
|                                             |  |                    |     |      |  |   |        |  
|Loss from operations of discontinued segment |  |                    | (52 | )    |  |   | (212   | )
|Write down of net assets to fair value       |  |                    |    |      |  |   | (6,660 | )
|                                             |  |                    |     |      |  |   |        |  
|Loss from discontinued operations            |  | $                  | (52 | )    |  | $ | (6,872 | )
|                                             |  |                    |     |      |  |   |        |  

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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited, Dollars In Thousands Except Per Share Amounts)

4.     CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE

Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. SFAS No. 142 requires that goodwill be tested for
impairment at the reporting unit level upon adoption and at least annually
thereafter, utilizing a two-step methodology. The initial step requires the
Company to determine the fair value of each reporting unit and compare it to
the carrying value, including goodwill, of such unit. If the fair value exceeds
the carrying value, no impairment loss would be recognized. However, if the
carrying value of the reporting unit exceeds its fair value, the goodwill of
the unit may be impaired. The amount, if any, of the impairment is then
measured in the second step. The second step of the goodwill impairment test
compares the implied fair value goodwill of the reporting unit with the
carrying amount of that goodwill. The implied fair value of a reporting units
goodwill is the excess of the fair value of a reporting unit over the amounts
assigned to assets and liabilities. If the carrying value amount of reporting
unit goodwill exceeds the implied fair value of that goodwill, an impairment
loss shall be recognized in an amount equal to that excess.

The Company has determined that its business segments constitute reporting
units, with the exception of the Internet segment, which includes two reporting
units. Those reporting units are (1) Internet service and (2) IP based private
network service. The Company completed the initial step of impairment testing
which indicated that goodwill recorded in the local telephone, Internet, and
interexchange segments was impaired as of January 1, 2002. Due to the potential
impairment, the Company then completed the second step of the test to measure
the amount of the impairment. The Company determined the fair value of each
reporting unit for purposes of this test primarily by using a discounted cash
flow valuation technique. Significant estimates used in the valuation include
estimates of future cash flows, both future short-term and long-term growth
rates, and the Companys estimated cost of capital for purposes of arriving at
a discount factor. Based on that analysis, a transitional impairment loss of
$105,350 was recognized as the cumulative effect of a change in accounting
principle in the consolidated statement of operations. The income tax benefit
of $39,540 was offset by a valuation allowance.

5.     STOCK INCENTIVE PLANS

The Companys employees participate in various plans of ACS Group, which
through its 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 March 31, 2003, ACS Group has reserved a total of
6,060 shares of authorized common stock for issuance under the plans. The plans
terminate in approximately 10 years from the date of adoption and allow
forfeited options to be reissued. In general, options under the plans vest
ratably over three, four or five years and will have an exercise price equal to
the fair market value of the common stock on the date of grant. The term of
options granted under the plan may not exceed 10 years.

Alaska Communications Systems Group, Inc. 1999 Stock Incentive Plan

ACS Group has reserved 4,910 shares under this plan, which was adopted by
the Company in November 1999. At March 31 2003, 5,712 options have been
granted, 1,935 have been forfeited, 441 have been exercised, and 1,133 shares
are available for grant under the plan.

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

The non-employee director stock compensation plan was adopted by ACS Group
in November 1999. ACS Group has reserved 150 shares under this plan. At March
31, 2003, 110 shares have been awarded and 40 shares are available for grant
under the plan. Prior to 2003, directors were required to receive not less than
25% of their annual retainer and meeting fees in the form of ACS Groups stock, and may have
elected to receive up to 100% of directors compensation in the form of stock.
Starting in 2003, directors no longer have the option of receiving stock and
receive all of their annual retainer and meeting fees in cash.

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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited, Dollars In Thousands Except Per Share Amounts)

5.     STOCK INCENTIVE PLANS (Continued)

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

This plan was also adopted by ACS Group in November 1999. ACS Group has
reserved 1,000 shares under this plan. At March 31, 2003, 632 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.

6.     BUSINESS SEGMENTS

The Company has five reportable segments: local telephone, wireless,
directory, Internet and interexchange. Local telephone provides landline
telecommunications services, and consists of local telephone service, network
access and deregulated and other revenue; wireless provides wireless
telecommunications service; directory provides yellow page advertising and
other related products; Internet provides Internet service and advanced IP
based private networks; and interexchange provides switched and dedicated long
distance services. Each reportable segment is a strategic business under
separate management and offering different services than those offered by the
other segments. The Company evaluates the performance of its segments based on
operating income (loss).

The Company also incurs interest expense, interest income, equity in
earnings of investments, and other operating and non operating 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 non operating 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 either the
Company and are allocated to the business segments based on operating revenue.
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies.

The following table illustrates selected financial data for each segment
as of and for the three months ended March 31, 2003:

|                                         |  |           |         |          |  |           |        |          |  |               |         |           |  |              |         |       |  |   |       |   |  |   |        |   |  |   |        |   |  |   |         |  
|---------------------------------------- |  | --------- | ------- | -------- |  | --------- | ------ | -------- |  | ------------- | ------- | --------- |  | ------------ | ------- | ----- |  | - | ----- | - |  | - | ------ | - |  | - | ------ | - |  | - | ------- | -
|                                         |  | Local     |         |          |  |           |        |          |  |               |         |           |  |              |         |       |  |   |       |   |  |   |        |   |  |   |        |   |  |  
|                                         |  | Telephone |         | Wireless |  | Directory |        | Internet |  | Interexchange |         | All Other |  | Eliminations |         | Total
|                                         |  |           |         |          |  |           |        |          |  |               |         |           |  |              |         |      
|Operating revenue                        |  | $         | 54,001  |          |  | $         | 10,353 |          |  | $             | 8,278   |           |  | $            | 6,296   |       |  | $ | 6,839 |   |  | $ | 6,321  |   |  | $ | (8,417 | ) |  | $ | 83,671  |  
|Depreciation and amortization            |  |           | 14,692  |          |  |           | 1,445  |          |  |               | 2       |           |  |              | 2,410   |       |  |   | 555   |   |  |   | 3,496  |   |  |   |       |   |  |   | 22,600  |  
|Operating income (loss)                  |  |           | 6,326   |          |  |           | 29     |          |  |               | 4,749   |           |  |              | (6,453  | )     |  |   | (575  | ) |  |   | 2,533  |   |  |   | (9     | ) |  |   | 6,600   |  
|Interest expense                         |  |           | 136     |          |  |           | 1      |          |  |               |        |           |  |              | 34      |       |  |   | 74    |   |  |   | 12,442 |   |  |   |       |   |  |   | 12,687  |  
|Interest income                          |  |           | 1       |          |  |           |       |          |  |               |        |           |  |              |        |       |  |   |      |   |  |   | 245    |   |  |   |       |   |  |   | 246     |  
|Income tax provision (benefit)           |  |           | 2,507   |          |  |           | 4      |          |  |               | 1,952   |           |  |              |        |       |  |   |      |   |  |   | (4,463 | ) |  |   |       |   |  |   |        |  
|Income (loss) from
continuing operations |  |           | 3,684   |          |  |           | 24     |          |  |               | 2,797   |           |  |              | (6,487  | )     |  |   | (649  | ) |  |   | (5,255 | ) |  |   | (9     | ) |  |   | (5,895  | )
|Total assets                             |  |           | 519,502 |          |  |           | 82,081 |          |  |               | 114,486 |           |  |              | (32,461 | )     |  |   | 4,449 |   |  |   | 8,129  |   |  |   |       |   |  |   | 696,186 |  
|Capital expenditures                     |  |           | 3,994   |          |  |           | 121    |          |  |               |        |           |  |              | 1,232   |       |  |   | 8     |   |  |   | 3,100  |   |  |   |       |   |  |   | 8,455   |  

Operating revenue disclosed above includes intersegment operating revenue
of $5,633 for local telephone, $413 for wireless, $350 for directory, $2,873
for interexchange and $6,321 for all other. In accordance with SFAS No. 71,
intercompany revenue between local telephone and all other segments is not
eliminated above.

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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited, Dollars In Thousands Except Per Share Amounts)

6.     BUSINESS SEGMENTS (Continued)

The following table illustrates selected financial data for each segment
as of and for the three months ended March 31, 2002:

|                                         |  |           |         |          |  |           |         |          |  |               |        |           |  |              |        |       |  |   |        |   |  |   |         |   |  |   |        |   |  |   |         |  
|---------------------------------------- |  | --------- | ------- | -------- |  | --------- | ------- | -------- |  | ------------- | ------ | --------- |  | ------------ | ------ | ----- |  | - | ------ | - |  | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                         |  | Local     |         |          |  |           |         |          |  |               |        |           |  |              |        |       |  |   |        |   |  |   |         |   |  |   |        |   |  |  
|                                         |  | Telephone |         | Wireless |  | Directory |         | Internet |  | Interexchange |        | All Other |  | Eliminations |        | Total
|                                         |  |           |         |          |  |           |         |          |  |               |        |           |  |              |        |      
|Operating revenue                        |  | $         | 55,322  |          |  | $         | 9,364   |          |  | $             | 8,641  |           |  | $            | 3,842  |       |  | $ | 7,134  |   |  | $ | 4,841   |   |  | $ | (7,134 | ) |  | $ | 82,010  |  
|Depreciation and amortization            |  |           | 13,681  |          |  |           | 1,365   |          |  |               | 1      |           |  |              | 1,253  |       |  |   | 574    |   |  |   | 2,385   |   |  |   |       |   |  |   | 19,259  |  
|Operating income (loss)                  |  |           | 8,589   |          |  |           | 757     |          |  |               | 5,211  |           |  |              | (3,864 | )     |  |   | (279   | ) |  |   | 2,150   |   |  |   | (22    | ) |  |   | 12,542  |  
|Interest expense                         |  |           | (433    | )        |  |           | (1      | )        |  |               |       |           |  |              | (7     | )     |  |   | (75    | ) |  |   | (12,227 | ) |  |   |       |   |  |   | (12,743 | )
|Interest income                          |  |           | 1       |          |  |           |        |          |  |               |       |           |  |              |       |       |  |   |       |   |  |   | 563     |   |  |   |       |   |  |   | 564     |  
|Income tax provision
(benefit)           |  |           | 2,689   |          |  |           | 294     |          |  |               | 2,142  |           |  |              |       |       |  |   |       |   |  |   | (5,125  | ) |  |   |       |   |  |   |        |  
|Income (loss) from
continuing operations |  |           | 5,468   |          |  |           | 465     |          |  |               | 3,069  |           |  |              | (3,871 | )     |  |   | (354   | ) |  |   | (4,456  | ) |  |   | (22    | ) |  |   | 299     |  
|Total assets                             |  |           | 686,383 |          |  |           | 108,599 |          |  |               | 55,178 |           |  |              | 5,052  |       |  |   | 28,831 |   |  |   | 17,910  |   |  |   |       |   |  |   | 901,953 |  
|Capital expenditures                     |  |           | 5,970   |          |  |           | 955     |          |  |               | 198    |           |  |              | 3,126  |       |  |   |       |   |  |   | 2,997   |   |  |   |       |   |  |   | 13,246  |  

Operating revenue disclosed above include intersegment operating revenue
of $5,376 for local telephone, $405 for wireless, $351 for directory, $3,198
for interexchange and $4,481 for all other. In accordance with SFAS No. 71,
intercompany revenue between local telephone and all other segments is not
eliminated above.

7.     RELATED PARTY TRANSACTIONS

On April 17, 2001, the Company issued an interest bearing note receivable
to an officer totaling $328. The note bears interest at the Mid-Term Applicable
Federal Rate, which was 3.19% as of March 31, 2003, and is due on April 15,
2005. The note is secured by a pledge of 100 shares of ACS Groups stock held
in the officers name. In accordance with an addendum to the officers
employment agreement dated May 3, 2001, the loan will be forgiven ratably over
a three year period ending April 16, 2004. Accordingly, $114 was forgiven on
April 16, 2002 and recognized as compensation expense. The note balance,
including accrued interest, was $237 as of March 31, 2003.

Fox Paine & Company, the majority stockholder, receives an annual
management fee in the amount of one percent of the Companys net income before
interest expense, income taxes and depreciation and amortization, calculated
without regard to the fee. The management fee expense for the three months
ended March 31, 2003 and 2002 was $304 and $345, respectively.

8.     SEVERANCE AND RESTRUCTURING CHARGES

In June 2002, the Company adopted a restructuring plan and recorded $862
of associated charges, including $523 of severance costs and $339 of lease
termination costs for office space. Employee force reductions expected as a
result of this plan total approximately 30 persons, and the plan is expected to
be completed by June 2003. As of March 31, 2003, 12 employees have been
terminated and are eligible for severance and the Company has paid out $342
accrued under this plan.

9.     COMMITMENTS AND CONTINGENCIES

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 these matters will not have a material adverse effect
on the Companys consolidated financial position, results of operations or cash
flows.

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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited, Dollars In Thousands Except Per Share Amounts)

9.     COMMITMENTS AND CONTINGENCIES (Continued)

A class action lawsuit was filed against the Company on March 14, 2001.
The litigation alleges various contract and tort claims concerning the
Companys decision to terminate its Infinite Minutes long distance plan.
Although the Company believes this suit is without merit and intends to
vigorously defend its position, it is impossible to determine at this time the
actual number of plaintiffs or the claims that will actually continue to be in
dispute.

In December 2001, the Company entered into a material contract with the
State of Alaska to provide it with comprehensive telecommunications services
for a period of five years. This contract obligates the Company to, among other
things, provide on the states behalf customer premise equipment and other
capital assets which the Company believes will range between $25,000 and
$30,000 over the term of the agreement, of which approximately $12,400 has been
expended through March 31, 2003. The Company intends to fund this commitment
with cash on hand and cash flows from operations. The contract with the State
of Alaska contains specific completion dates for various implementation aspects
as well as specific service level agreements which, if not met, may result in
revenue credits and/or penalties which in the aggregate could amount to as much
as $200 per month.

On July 15, 2002 the Company fulfilled a commitment to Neptune
Communications, L.L.C. (Neptune) to provide a loan in the form of an
unsecured note receivable totaling $15,000 in return for certain consideration.
The note, which is included in deferred charges and other assets on the
Companys Consolidated Balance Sheets, bears interest at the applicable federal
rate, which was 4.84% at March 31, 2003, and matures on July 15, 2022. Interest
is payable semiannually, but Neptune may elect to add the interest to the
principal in lieu of cash payments. The commitment was funded with cash on
hand. In connection with this note, Neptune has granted the Company an option
to purchase certain network assets of Neptune, no later than January 2, 2006 at
a price equal to the then outstanding loan balance. The Company has also
entered into a strategic agreement with Neptune for the life of the fiber optic
cable system owned by Neptune. The significant provisions of this agreement
are: i) purchase commitments by the Company for capacity in 2005 and 2007, the
final price and quantity of which are subject to future events, ii) Neptunes
restoration of the Companys traffic carried on another cable system, iii) and
specific interconnection arrangements between the Company and Neptune, should
the Company exercise its option to purchase certain network assets from
Neptune. The Company is currently renegotiating the terms and conditions of
this agreement and it is not possible to determine the ultimate outcome of
these negotiations at this time.

10.     SUBSEQUENT EVENT

The Company has been authorized by its Board of Directors to evaluate the
disposition of all or part of its directory business, ACSIS. The Company has
met substantially all of the conditions necessary to sell its directory
business and, on April 28, 2003, entered into an underwriting agreement with a
syndicate of Canadian investment banks to complete the sale of a majority
interest in it. The Company subsequently filed on April 29, 2003, a final
prospectus with Canadian securities regulators to sell a majority interest in
its directories business in a public offering in Canada through a Canadian
income fund. The transaction is expected to close on May 8, 2003. This
transaction, if completed, would result in a de-leveraging of the Companys
balance sheet and generate cash for other corporate objectives.

The board of directors has also approved the payment of a fee equal to 1%
of the gross proceeds generated from the sale of the Companys directories
business to Fox Paine & Company, the majority stockholder, contingent upon
closing such sale, plus expenses in connection with such transaction, including
the reimbursement by the Company of the $250 consulting fee and transaction
bonus to be paid to an officer under the agreement described below. The Company
expects to complete such sale during May of 2003.

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ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.
Notes to Consolidated Financial Statements, Continued
(Unaudited, Dollars In Thousands Except Per Share Amounts)

10.     SUBSEQUENT EVENT (Continued)

Fox Paine & Company has entered into a consulting agreement with an
officer of the Company for services rendered for the benefit of the Company
related to the sale of the Companys directories business. Under this
agreement, the officer is to be paid a lump sum consulting fee and transaction
bonus of $250 in May 2003. As described above, Fox Paine & Company is entitled
to reimbursement of this expense.

On April 17, 2001, the Company issued an interest bearing note receivable to an
officer totaling $328. In accordance with an addendum to the officers
employment agreement dated May 3, 2001, the loan will be forgiven ratably over
a three year period ending April 16, 2004. The note balance, including accrued
interest, was $237 as of March 31, 2003. The officer has waived certain rights
under his employment agreement, contingent upon closing a contemplated sale of
the Companys directories business for which he will receive a fee of $840.
Included in these waived rights, valued in total at approximately $700, the
officer has waived the forgiveness terms of this indebtedness that would have
occurred during 2003 and 2004. The Company expects to complete such sale
during May of 2003.

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|        |  |                                                                                      
|------- |  | -------------------------------------------------------------------------------------
|Item 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS AND ANALYSTS REPORTS

This Form 10-Q and future filings by the Company on Forms 10-K, 10-Q and
8-K and future oral and written statements by the Company and its management
may include, certain forward-looking statements as defined under the Private
Securities Litigation Reform Act of 1995, including (without limitation)
statements with respect to anticipated future operating and financial
performance, financial position and liquidity, growth opportunities and growth
rates, pricing plans, acquisition and divestitive opportunities, business
prospects, strategic alternatives, business strategies, regulatory and
competitive outlook, investment and expenditure plans, financing needs and
availability, and other similar forecasts and statements of expectation. Words
such as aims, anticipates, believes, could, estimates, expects,
hopes, intends, may, plans, projects, seeks, should, and will,
and variations of these words and similar expressions, are intended to identify
these forward-looking statements. These forward looking statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from our Companys historical experience and our present
expectations or projections.Forward-looking statements by the Company and its
management are based on estimates, projections, beliefs and assumptions of
management and are not guarantees of future performance. The Company disclaims
any obligation to update or revise any forward-looking statement based on the
occurrence of future events, the receipt of new information, or otherwise.

Actual future performance, outcomes and results may differ materially from
those expressed in forward-looking statements made by the Company and its
management as a result of a number of important factors. Examples of these
factors include (without limitation)rapid technological developments and
changes in the telecommunications industries; ongoing deregulation (and the
resulting likelihood of significantly increased price and product/service
competition) in the telecommunications industry as a result of the
Telecommunications Act of 1996 (the 1996 Act) and other similar federal and
state legislation and the federal and state rules and regulations enacted
pursuant to that legislation; regulatory limitations on the Companys ability
to change its pricing for communications services; the possible future
unavailability of SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation,to the Companys wireline subsidiaries; and possible changes in the
demand for the Companys products and services. In addition to these factors,
actual future performance, outcomes and results may differ materially because
of other, more general, factors including (without limitation) changes in
general industry and market conditions and growth rates; changes in interest
rates or other general national, regional or local economic conditions;
governmental and public policy changes; changes in accounting policies or
practices adopted voluntarily or as required by accounting principles generally
accepted in the United States of America; and the continued availability of
financing in the amounts, at the terms and on the conditions necessary to
support the Companys future business.

Investors should also be aware that while ACS Holdings does, at various
times, communicate with securities analysts, it is against the Companys policy
to disclose to them any material non-public information or other confidential
information.Accordingly, investors 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 fourteenth largest provider of local exchange
services in the United States. The Company also acquired on May 14, 1999
interexchange operations primarily serving the Anchorage market and wireless
and Internet services providing statewide coverage. The Company has unified its
statewide branding under the ACS name.

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Today, the Company generates revenue primarily through the provision of:



| |  | local telephone services, including:
|- |  | ------------------------------------



| |  |  | basic local service to retail customers within ACS Holdings service areas,                                                              
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | wholesale service to CLECs,                                                                                                              
|
| |  |  | network access services to interexchange
carriers for origination and termination of interstate and
intrastate long distance phone calls,
|
| |  |  | enhanced services,                                                                                                                       
|
| |  |  | ancillary services, such as B&C, and                                                                                                     
|
| |  |  | universal service payments;                                                                                                              



| |  | wireless services;                                    
|- |  | ------------------------------------------------------
| 
| |  | yellow pages directory advertising;                   
| 
| |  | Internet services; and                                
| 
| |  | interexchange network long-distance and data services.

Local
Telephone -Within the telecommunications industry, LECs have
historically enjoyed stable revenue and cash flow from local exchange
operations resulting from the need for basic telecommunications services, the
highly regulated nature of the telecommunications industry and, in the case of
rural LECs, the underlying cost recovery settlement and support mechanisms

applicable to local exchange operations. Basic local service is generally
provided at a flat monthly rate and allows the user to place unlimited calls
within a defined local calling area. Access revenues are generated by providing
interexchange carriers access to the LECs local network and its customers.
Universal service revenues are a subsidy paid to rural LECs to support the high
cost of providing service in rural markets. Other service revenue is generated
from ancillary services and enhanced services.

Changes in revenue are largely attributable to changes in the number of
access lines, local service rates and minutes of use. Other factors can also
impact revenue, including:



|                                         |  | intrastate and interstate revenue settlement methodologies,                                                                                                                     
|----------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                         
|                                         |  | authorized rates of return for regulated services,                                                                                                                              
|                                         
|                                         |  | whether an access line is used by a business or residential subscriber,                                                                                                         
|                                         
|                                         |  | intrastate and interstate calling patterns,                                                                                                                                     
|                                         
|                                         |  | customers selection of various local rate plan options,                                                                                                                        
|                                         
|                                         |  | selection of enhanced calling services, such as voice mail, and                                                                                                                 
|                                         
|                                         |  | other subscriber usage characteristics.                                                                                                                                         
|                                         
|LECs have three basic tiers of customers:
|                                         
|                                         |  | business and residential customers located in their
local service areas that pay for local phone service,                                                                       
|                                         
|                                         |  | interexchange carriers that pay for access to long
distance calling customers located within its local service
areas and                                                        
|                                         
|                                         |  | CLECs that pay for wholesale access to the Companys
network in order to provide competitive local service on either
a wholesale or UNE basis as prescribed under the 1996 Act.

LECs provide access service to numerous interexchange carriers and may
also bill and collect long distance charges from interexchange carrier
customers on behalf of the interexchange carriers. The amount of access charge
revenue associated with a particular interexchange carrier varies depending
upon long distance calling patterns and the relative market share of each long
distance carrier.

The Companys local service rates for end users are authorized by the RCA.
Authorized rates are set by the FCC and the RCA for interstate and intrastate
access charges, respectively, and may change from time to time.

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Wireless- The Company is the largest and only statewide provider of
wireless services in Alaska, currently serving approximately 82,000
subscribers. Its wireless network covers over 478,000 residents, including all
major population centers and highway corridors. The Company operates a TDMA
digital network in substantially all of its service areas, and intends to
upgrade this network to a new generation of digital network known as CDMA.

Directory The Company through its subsidiary ACSIS, is the largest
provider of published directory advertising in Alaska. The Company serves over
13,500 customers through its yellow page directory books tailored to serve the
needs of each of its local exchange markets, with many customers advertising in
multiple books. During 2002, ACSIS published ten different yellow pages, white
pages or combined directory books covering approximately 95% of the State of
Alaskas population. ACSIS publishes the white pages directories under a
publishing agreement with its affiliated LECs. ACSIS also provides an online
directory product and other specialized advertising vehicles to its customers.

Internet- The Company is the second largest provider of Internet access
services in Alaska with approximately 45,000 customers. The Company offers
dial-up and dedicated digital subscriber line, (DSL) Internet access to its
customers. The Company is also the only single source provider of advanced IP
based private networks in Alaska.

Interexchange-The Company provides switched and dedicated long distance
services to approximately 58,000 customers in Alaska. The traffic from these
customers is carried over the Companys owned or leased facilities.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2003 Compared to Three Months Ended March 31,
2002

All amounts are discussed at the consolidated level after the elimination
of intercompany revenue and expense.

Operating Revenue

Operating revenue increased $1.7 million, or 2.0%, for the three months
ended March 31, 2003 compared to the three months ended March 31, 2002.
Wireless and Internet revenue increased compared to the corresponding period of
2002, while local telephone, directory advertising and interexchange revenue
decreased compared to the corresponding period of 2002.

Local Telephone

Local telephone revenue, which consist of local network service, network
access revenue and deregulated and other revenue, decreased $1.3 million, or
2.4%, for the three months ended March 31, 2003 compared to the same period in
2002. The following table summarizes the Companys consolidated local telephone
revenue by category.

|                              |                       |   |                    |        |      |   |        |        | 
|----------------------------- | --------------------- | - | ------------------ | ------ | ---- | - | ------ | ------ | 
|                              |                       |   | Three Months Ended
|                              |                       |   | March 31,         
|                              |                       |   |                   
|                              |                       |   | 2003               |        | 2002
|                              |                       |   |                    |        |     
|                              |                       |   | (In Thousands)    
|Local telephone revenue:      |                       |   |                    |        |      |   |        |       
|                              | Local network         |   | $                  | 24,129 |      |   | $      | 25,644 | 
|                              | Network access        |   |                    | 25,061 |      |   |        | 25,036 | 
|                              | Deregulated and other |   |                    | 4,811  |      |   |        | 4,642  | 
|                              |                       |   |                    |        |      |   |        |       
|Total local telephone revenue |                       | $ | 54,001             |        |      | $ | 55,322 |       
|                              |                       |   |                    |        |      |   |        |       

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The following table summarizes the Companys local telephone access lines.

|                                                |  |                 |         |      |  |  |         | 
|----------------------------------------------- |  | --------------- | ------- | ---- |  |  | ------- | 
|                                                |  | As of March 31,
|                                                |  |                
|                                                |  | 2003            |         | 2002
|                                                |  |                 |         |     
|Retail                                          |  |                 | 231,832 |      |  |  | 252,417 | 
|Wholesale                                       |  |                 | 19,619  |      |  |  | 24,537  | 
|Unbundled
network elements - platform (UNE - P) |  |                 | 4,275   |      |  |  |        | 
|Unbundled
network elements - loop (UNE - L)     |  |                 | 64,821  |      |  |  | 53,704  | 
|                                                |  |                 |         |      |  |  |         | 
|Total local telephone access lines              |  |                 | 320,547 |      |  |  | 330,658 | 
|                                                |  |                 |         |      |  |  |         | 

The local network service component of local telephone revenue was $24.1
million for the three months ended March 31, 2003 compared with $25.6 million
for the three months ended March 31, 2002.Revenue decreased $1.5 million or
5.9% from the prior year. This decrease reflects the impact of competition
exacerbated by below cost UNE rates.

The Company continued to experience loss of retail market share for local
network service in its Anchorage, Fairbanks and Juneau service areas during the
year. Generally, when the Company loses a retail local network service line to
a competitor, it continues to provide the line to the competitor on a wholesale
basis at reduced revenue per line. Management believes that the continuing loss
of market share it has experienced in certain of its markets is partially
attributable to below cost interconnection rates mandated by the RCA for UNEs.
During the second quarter of 2001, the Company reopened interconnection
proceedings for its Anchorage market and filed for an interim and refundable
UNE rate increase of approximately $10 per month per loop. On October 25, 2001,
the RCA granted ACSA an interim and refundable UNE rate increase of $1.07,
increasing the UNE rates from $13.85 to $14.92. The interim and refundable rate
increase was implemented in November 2001 and generated approximately $0.7
million in additional revenue during 2002. The Company expects the RCA to hold
hearings during 2003 and adjudicate final Anchorage UNE rates during 2003 or
2004.

The Company believes it is earning less than its required rate of return
for local network service in several of its markets and filed local service
rate cases for all of its LEC businesses with the RCA on July 2, 2001 aimed at
making up this deficiency. Subsequently, in October 2001, the Company filed for
interim and refundable local service rates in its Anchorage market in order to
expedite a partial recovery of the total revenue deficiency. On November 15,
2001 the RCA approved an interim and refundable rate increase for ACSA of 24%
for certain services.This interim and refundable rate increase was implemented
in November 2001 and generated approximately $4.2 million in additional revenue
in 2002. The Company expects the RCA to continue to hold hearings during 2003
and to adjudicate final local service rates during 2003 or 2004.

On March 25, 2003, the RCA issued an order approving new revenue
requirements for ACSF, ACSAK, and ACSN. The order reduces the revenue
requirements for ACSF and ACSN while slightly increasing the revenue
requirement for ACSAK. The Company has sought reconsideration of this decision.
In addition, the RCA has allowed for the reopening of the revenue requirement
phase of the hearing for ACSA. The ACSA hearing will be to review the RCAs
decision to reduce the revenue requirement for ACSA by lengthening the service
lives of specific assets and thereby reducing depreciation expense. The RCA
will evaluate whether to correct earlier ACSA decisions that were based on
erroneous information about several categories of assets and resulted in longer
service lives, lower depreciation expense, and therefore a reduced allowable
revenue requirement. The RCAs decisions on revenue requirements will have a
direct impact on the retail rates and intrastate access rates that the Company
is allowed to charge.

Network access revenue was essentially flat for 2003 at $25.1 million.
Network access revenue is based on a regulated return on rate base and recovery
of allowable expense associated with the origination and termination of toll
calls for the Companys retail and resale customers.Management expects that
network access revenue will decline as a component of local telephone revenue
for the foreseeable future.

Deregulated and other revenue, which increased slightly to $4.8 million
compared to $4.6 million in the prior year, consists principally of B&C
services, space and power rents, deregulated equipment sales, paystation
revenue, regulated directory listing revenue, and other miscellaneous telephone
revenue.

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Wireless

Wireless revenue increased $1.0 million, or 10.4%, to $10.3 million for
the three months ended March 31, 2003 compared to $9.4 million for the three
months ended March 31, 2002. This increase was due to a growth in average
subscribers of 3.0% from 79,860 in 2002 to 82,223 in 2003. The average revenue
per unit, or ARPU, increased to $41.88 in 2003 compared to $39.05 during 2002.

Directory

Directory revenue decreased to $8.3 million in 2003 from $8.6 million in
2002. On April 28, 2003, the Company signed an underwriting agreement to sell a
majority interest in its directory business and on April 29, 2003 filed a final
prospectus to offer this majority interest to investors through a Canadian
income fund.

Internet

Internet revenue increased from $3.8 million in 2002 to $6.3 million in
2003  an increase of $2.5 million, or 63.9%.This increase is primarily due
to revenue associated with the Companys contract with the State of Alaska and
growth in DSL subscribers of 63.9% from 8,488 in 2002 to 13,910 in 2003.

On December 10, 2001, the Company entered into a five year contract with
the State of Alaska to provide a broad range of telecommunications services,
many of which will be provided over an IP network owned and operated by ACSI.
Services under this contract began to be implemented during the second quarter
of 2002. The Company anticipates that revenue for this segment will increase in
future periods as additional services are added under the contract.

Interexchange

Interexchange revenue decreased slightly from $4.9 million in 2002 to $4.8
million in 2003. Long distance subscribers decreased from 66,521 in 2002 to
57,677 in 2003. The decrease in subscribers was substantially due to database
grooming to remove approximately 12,000 non-revenue generating inactive
subscribers from the subscriber list in connection with the conversion of long
distance billing from an outside service bureau to an in-house system during
the first quarter of 2003. The average revenue per unit, or ARPU, increased
slightly to $24.89 in 2003 compared to $24.45 during 2002 and total minutes of
use declined slightly from 37.9 million in 2002 to 37.8 million in 2003.

Operating Expense

Operating expense increased $7.6 million, or 10.9%, from $69.5 million for
the three months ended March 31, 2002 to $77.1 million for the three months
ended March 31, 2003. Depreciation and amortization associated with the
operation of each of the Companys segments has been included in total
depreciation and amortization.

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.Local telephone expense decreased to $27.8
million for the three months ended March
31, 2003 from $29.0 million for the three months ended March 31, 2002.The
decrease in local telephone expense was substantially attributable to cost
reductions achieved as a result of the Companys restructuring plan adopted in
June of 2002.

Wireless

Wireless expense increased $0.5 million, or 8.6%, for the three months
ended March 31, 2003 compared to the three months ended March 31, 2002. This
increase is due substantially to an increase in minutes of use from 41.2
million minutes in 2002 to 47.2 million minutes in 2003.

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Directory

Directory expense was $3.4 million for both of the quarters ended March
31, 2003 and 2002. On April 28, 2003, the Company signed an underwriting
agreement to sell a majority interest in its directory business and on April
29, 2003 filed a final prospectus to offer this majority interest to investors
through a Canadian income fund.

Internet

Internet expense increased by $4.2 million, or 80.9%, from $5.1 million in
2002 to $9.3 million in 2003. The increase in Internet expense was due
principally to transition expenses and operating costs associated with
commencing services under the State of Alaska telecommunications contract. On
December 10, 2001, the Company entered into a five year contract with the State
of Alaska to provide a broad range of telecommunications services, many of
which will be provided over an IP network and supported by a service center
owned and operated by ACSI. The Company anticipates expense for this segment to
level out or decline as it completes the integration of the State of Alaska
services.

Interexchange

Interexchange expense was steady at $6.6 million for both of the quarters
ended March 31, 2003 and 2002. The Company converted its long distance billing
from an outside service bureau to an in-house system during the first quarter
of 2003. This billing conversion is expected to result in annual cost savings
of approximately $0.6 million and improved customer service.

Depreciation and Amortization

Depreciation and amortization expense increased $3.3 million, or 17.3%,
due principally to increases in plant in service and to the adoption of shorter
depreciable lives for certain classes of assets compared to the corresponding
period of 2002. Management adopted the higher depreciation rates on these
classes of assets as a result of an evaluation of the expected useful lives of
its underlying assets, primarily in its regulated local telephone segment.

Loss on disposal of assets

The Company recorded a non-cash loss on disposal of certain wireless
assets of $0.7 million during the quarter ended March 31, 2003 as a result of
retiring assets which had not been fully recovered through depreciation
expense.

Interest Expense and Interest Income and Other

Interest expense was flat at $12.7 million for the three months ended
March 31, 2003. Interest income and other also declined by $0.3 million, or
61.6%, as a result of a lower average invested cash balance and lower market
interest rates during 2003 compared to 2002.

Income Taxes

The Company has provided a valuation allowance for the full 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.

Discontinued Operations

On March 30, 2002, the Companys management approved a plan to offer for
sale its wireless cable television service segment. As a result of this
decision, the operating revenue and expense of this segment have been
classified as discontinued operations under SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets,for all periods presented and the
assets and liabilities of the disposal group have been written down to their
fair value, net of expected selling expense. The results of operations of this
discontinued segment resulted in a charge to discontinued operations of $52
thousand and

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$6.9 million
for the three months ended March 31, 2003 and 2002, respectively. The Company
has fully reserved in the form of a valuation allowance the income tax benefit
resulting from this discontinuance. The Company completed its disposal of its
wireless cable television segment as of March 31, 2003.

Cumulative Effect of Change in Accounting Principle

Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. SFAS No. 142 requires that goodwill be tested for
impairment at the reporting unit level upon adoption and at least annually
thereafter, utilizing a two-step methodology. The transitional review for
goodwill impairment required under SFAS No. 142 indicated that goodwill
recorded in the local telephone, Internet and interexchange segments was
impaired as of January 1, 2002. Accordingly, the Company measured and
recognized in the first quarter of 2002 a transitional impairment loss of
$105.4 million as the cumulative effect of a change in accounting principle in
the consolidated statement of operations. The income tax benefit of $39.5
million was offset by a valuation allowance. See Note 4 Cumulative Effect of
Change in Accounting Principle in the Notes to Consolidated Financial
Statements included elsewhere in this 10-Q for additional discussion of the
this statement.

Net loss

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

LIQUIDITY AND CAPITAL RESOURCES

The Company has satisfied its operational and capital cash requirements
primarily through internally generated funds, the sale of stock and debt
financing. For the three months ended March 31, 2003 the Companys cash flows
from operating activities were $18.6 million. At March 31, 2003, the Company
had approximately $34.6 million in net working capital. As of March 31, 2003
the Company had $75.0 million of remaining capacity under its revolving credit
facility, representing 100% of available capacity.

The Company has outstanding a $430.7 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 $594.9 million as of March 31, 2003.In addition, $17.3 million 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 are payable
semiannually.Interest on borrowings under the Senior Credit Facility is
payable monthly, bi-monthly, quarterly or semi-annually at the Companys
option. The Senior Credit Facility requires 1% annual principal payments that
commenced on May 14, 2002, with balloon payments in each of 2006, 2007, and
2008. The Senior Credit Facility contains a number of restrictive covenants and
events of default, including covenants limiting capital expenditures,
incurrence of debt, and the payment of dividends, and requires the Company to
achieve certain financial ratios. The Company is in compliance with all of its
debt covenants. During the first quarter of 2003, the Companys lenders

approved an Amendment and Waiver to its Senior Credit Facility that, among
other things, permits the Company to sell its directory business, ACSIS,
provided that it can achieve a certain minimum amount of proceeds from the sale
and that 75% of such proceeds would be used to repay outstanding Senior Credit
Facility term loans. This Amendment and Waiver will not become effective until
executed by the Company.

The Company employs an interest rate hedge transaction, which fixes at
5.99% the underlying variable rate on $217.5 million of the borrowings under
the Senior Credit Facility, expiring in June 2004. 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.

In December 2001, the Company entered into a material contract with the
State of Alaska to provide it with comprehensive telecommunications services
for a period of five years. This contract obligates the Company to, among other
things, provide on the states behalf customer premise equipment and other
capital assets which the Company believes will range between $25 million and
$30 million over the term of the agreement, of which approximately $12.4
million has been expended through March 31, 2003. The Company intends to fund
this commitment with cash on hand and cash flows from operations.

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On July 15, 2002 the Company fulfilled a commitment to Neptune to provide
to that party a loan in the form of an unsecured note receivable totaling $15
million in return for certain consideration. The note bears interest at the
applicable federal rate, which was 4.84% at March 31, 2003 and matures on July
15, 2022. Interest is payable semiannually, but the borrower may elect to add
the interest to the principal in lieu of cash payments. The commitment was
funded with cash on hand. In connection with this note, Neptune has granted the
Company an option to purchase certain network assets of Neptune, no later than
January 2, 2006, at a price equal to the then outstanding loan balance. The
Company has also entered into a strategic agreement with Neptune for the life
of the fiber optic cable system owned by Neptune. The significant provisions of
this agreement are: i) purchase commitments by the Company for capacity in 2005
and 2007, the final price and quantity of which are subject to future events,
ii) Neptunes restoration of the Companys traffic carried on another cable
system, iii) and specific interconnection arrangements between the Company and
Neptune, should the Company exercise its option to purchase certain network
assets from Neptune. The Company is currently renegotiating the terms and
conditions of this agreement and it is not possible to determine the ultimate
outcome of these negotiations at this time.

The local telephone network requires the timely maintenance of plant and
infrastructure. The Companys historical capital expenditures have been
significant. The construction and geographic expansion of the Companys
wireless network has required significant 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 1999 acquisitions. Capital
expenditures for 2000 were $72.3 million, including $3.2 million in capital
leases. Capital expenditures for 2001 were $87.6 million, including $19.5
million for additional fiber capacity and $15.0 million for an IP based network
and service center. Capital expenditures for 2002 were $71.4 million, including
4.2 million in capital leases, approximately $12.4 million necessary to meet
its obligations under a contract with the State of Alaska and approximately
$5.0 million for the first phase of its buildout of PCS licenses. The Company
anticipates capital spending of between $60 million and $65 million for 2003,
and has spent $8.4 million in the first quarter of 2003, including property
acquired under a mortgage of $2.3 million. The Company intends to fund its
future capital expenditures with cash on hand, through internally generated
cash flows, and if necessary, through borrowings under the revolving credit
facility.

The Company has been authorized by its Board of Directors to evaluate the
disposition of all or part of its directory business, ACSIS. The Company has
met substantially all of the conditions necessary to sell its directory
business and, on April 28, 2003, entered into an underwriting agreement with a
syndicate of Canadian investment banks to complete the sale of a majority
interest in it. The Company subsequently filed on April 29, 2003, a final
prospectus with Canadian securities regulators to sell a majority interest in
its directories business in a public offering in Canada through a Canadian
income fund. The transaction is expected to close on May 8, 2003. This
transaction, if completed, would result in a de-leveraging of the Companys
balance sheet and generate cash for other corporate objectives.

The Companys capital requirements may change due to, among other things:
impacts of regulatory decisions that affect the Companys ability to recover
its investments, changes in technology, the effects of competition, changes in
the Companys business strategy, and the Companys decision to pursue specific
acquisition opportunities.

The Company believes that it will have sufficient working capital provided
by operations and available borrowing capacity under the existing revolving
credit facility to service its debt and fund its operations, capital
expenditures and other obligations over the next 12 months.The Companys
ability to service its debt and fund its operations, capital expenditures and
other obligations will be dependent upon its future financial performance,
which is, in turn, subject to future economic conditions and to financial,
business, regulatory and other factors, many of which are beyond the Companys
control.

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CRITICAL ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES

Management is responsible for the financial statements presented elsewhere
in this 10-Q and has evaluated the accounting policies used in their
preparation. Management believes these policies to be reasonable and
appropriate. The Companys significant accounting policies are described in
Note 1 in the Notes to the Consolidated Financial Statements included in the
Companys Annual Report on Form 10-K for the year ended December 31, 2002. The
following discussion identifies those accounting policies that management
believes are critical in the preparation of the Companys financial statements,
the judgements and uncertainties affecting the application of those policies,
and the possibility that materially different amounts would be reported under
different conditions or using different assumptions.

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of commitments and contingencies at
the date of the financial statements and the reported amounts of revenue and
expense during the reporting period. Among the significant estimates affecting
the financial statements are those related to the realizable value of accounts
receivable, long-lived assets, income taxes and network access revenue
reserves. Actual results may differ from those estimates.

Access revenue is recognized when earned. The Company participates in toll
revenue pools with other telephone companies. Such pools are funded by toll
revenue and/or access charges regulated by the RCA within the intrastate
jurisdiction and the FCC within the interstate jurisdiction. Much of the
interstate access revenue is initially recorded based on estimates. These
estimates are derived from interim financial statements, available separations
studies and the most recent information available about achieved rates of
return. These estimates are subject to adjustment in future accounting periods
as additional operational information becomes available. To the extent that
disputes arise over revenue settlements, the Companys policy is to defer
revenue collected until settlement methodologies are resolved and finalized. At
March 31, 2003, the Company had recorded liabilities of $17.5 million related
to its estimate of refundable access revenue. Actual results could vary from
this estimate.

The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred taxes reflect the temporary differences
between the financial and tax basis of assets and liabilities using the enacted
tax rates in effect in the years in which the differences are expected to
reverse.Deferred tax assets are reduced by a valuation allowance to the extent
that it is more likely than not that such deferred tax assets will not be
realized. The cumulative valuation allowance against deferred tax assets is
$94.5 million as of March 31, 2003.

The local telephone exchange operations of the Company account for costs
in accordance with the accounting principles for regulated enterprises
prescribed by SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation.This accounting recognizes the economic effects of rate regulation
by recording cost and a return on investment as such amounts are recovered
through rates authorized by regulatory authorities. Accordingly, under SFAS No.
71, plant and equipment is depreciated over lives approved by regulators and
certain costs and obligations are deferred based upon approvals received from
regulators to permit recovery of such amounts in future years. Historically,
lives approved for regulatory purposes have approximated economically useful
lives. On July 21, 2002, the Company received an order from the RCA which
appears to extend lives approved for rate-making purposes beyond the
economically useful lives of the underlying assets. Management petitioned for
reconsideration, and the RCA has agreed to take additional testimony. A final
order on the matter is not expected until the second quarter of 2003. The
Company implemented, effective January 1, 2003, higher depreciation rates for
its regulated telephone plant for the interstate jurisdiction. As a result, the
Company has recorded a regulatory asset under SFAS No. 71 of $2.4 million. As
of March 31, 2002 the Company has also deferred as a regulatory asset $0.9
million of costs incurred in connection with regulatory rate making
proceedings, which will be amortized in future periods. If the Company were not
following SFAS No. 71, it would have recorded additional depreciation expense
of $2.4 million for the intrastate and local jurisdictions and the deferred
costs incurred in connection with regulatory rate making proceedings would have
been charged to expense as incurred.

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Effective January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. In accordance with the guidelines of this accounting
principle, goodwill and indefinite-lived intangible assets are no longer
amortized but will be assessed for impairment on at least an annual basis. SFAS
No. 142 requires that goodwill be tested for impairment at the reporting unit
level upon adoption and at least annually thereafter, utilizing a two-step
methodology. The initial step requires the Company to determine the fair value
of each reporting unit and compare it to the carrying value, including
goodwill, of such unit. If the fair value exceeds the carrying value, no
impairment loss would be recognized. However, if the carrying value of the
reporting unit exceeds its fair value, the goodwill of the unit may be
impaired. The amount, if any, of the impairment is then measured in the second
step. The Company determines the fair value of each reporting unit for purposes
of this test primarily by using a discounted cash flow valuation technique.
Significant estimates used in the valuation include estimates of future cash
flows, both future short-term and long-term growth rates, and estimated cost of
capital for purposes of arriving at a discount factor. The Company recognized
in the first quarter of 2002 a transitional impairment loss of $105.4 million
under SFAS No. 142 as the cumulative effect of a change in accounting principle
in the consolidated statement of operations. At March 31, 2003 the Company had
recorded goodwill of $77.2 million.

OUTLOOK

The Company expects that, overall, the demand for telecommunications
services in Alaska to grow, particularly as a result of:



| |  |  | increasing demand for private network services by
government and business on a statewide basis on either a circuit
switched or IP basis,
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | increasing demand for wireless voice and data
services, and                                                                             
|
| |  |  | growth in demand for DSL and Internet access services
due to higher business and consumer bandwidth needs.                              

The Company believes that it will be able to capitalize on this demand
through its diverse service offerings on its owned circuit switched and IP
facilities and new sales and marketing initiatives directed toward basic voice,
enhanced and data services.

There are currently a number of regulatory proceedings underway at the
state and federal levels that could have a significant impact on the Companys
operations.The Company cannot predict with certainty the impact of current or
future regulatory developments on any of its businesses.

The telecommunications industry is extremely competitive, and the Company
expects competition to intensify in the future. As an ILEC, the Company faces
competition mainly from resellers, local providers who lease its UNEs and, to a
lesser degree, from facilities-based providers of local telephone services. In
addition, as a result of the RCAs recent affirmation of the APUCs termination
of the Companys rural exemptions, the Company may be required to provide
interconnection elements and/or wholesale discounted services to competitors in
all or some of its rural service areas. Moreover, while wireless telephone
services have historically complemented traditional LEC services, the Company
anticipates that existing and emerging wireless technologies may increasingly
compete with LEC services. In wireless services, the Company currently competes
with at least one other wireless provider in each of its wireless service
areas. The Company competes for directory advertising services with at least
one other publisher in substantially all of its service areas. In the highly
competitive business for Internet access services, the Company currently
competes with a number of established online service companies, interexchange
carriers and cable companies. In the interexchange market, the Company believes
it currently has less than 10% of total revenue in Alaska and faces competition
from the two major interexchange providers.

The telecommunications industry is subject to continuous technological
change. The Company expects that new technological developments in the future
will generally serve to enhance its ability to provide service to its
customers. However, these developments may also increase competition or require
the Company to make significant capital investments to maintain its leadership
position in Alaska.

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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 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 hedging 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, 2002.




ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Within the 90 days prior to the date of this report, the Company carried
out an evaluation of the effectiveness of the design and operation of the
Companys disclosure controls and procedures (as defined in the Securities
Exchange Act of 1934 (Exchange Act) Rules 13a-14(c) and 15d-14(c)) under the
supervision and with the participation of the Companys management, including
the Companys Chief Executive Officer and its Chief Financial Officer. Based
upon that evaluation, the Companys Chief Executive Officer and its Chief
Financial Officer concluded that our disclosure controls and procedures are
effective.

Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in Company
reports filed or submitted under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the Securities
and Exchange Commissions rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed in Company reports filed under the
Exchange Act is accumulated and communicated to management to allow timely
decisions regarding required disclosure.

Changes in internal controls

There were no significant changes in our internal controls or, to our
knowledge, in other factors that could significantly affect our disclosure
controls and procedures subsequent to the date the Company carried out this
evaluation.

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PART II

OTHER INFORMATION




ITEM 1. LEGAL PROCEEDINGS.

As previously reported, the Company filed a formal appeal of the RCAs
order terminating the rural exemption for Fairbanks, Juneau and the rural
communities in the Glacier State study area on November 10, 1999. This matter
has been fully briefed and argued and is currently pending before the Alaska
Supreme Court.

General Communication, Inc. (GCI), requested a new interconnection
agreement for the rural communities in ACSNs Glacier State study area on
November 29, 2001. The RCAs right to impose this obligation on ACSN during the
term of an existing agreement was challenged in federal court, but the federal
court declined to pursue the matter. GCI is currently negotiating and/or
arbitrating new interconnection agreements with ACSN, ACSF, ACSAK and ACSA.

On March 25, 2003, the RCA issued an order approving new revenue
requirements for ACSF, ACSAK, and ACSN. The order reduces the revenue
requirements for ACSF and ACSN while slightly increasing the revenue
requirement for ACSAK. The Company has sought reconsideration of this decision.
In addition, the RCA has allowed for the reopening of the revenue requirement
phase of the hearing for ACSA. The ACSA hearing will be to review the RCAs
decision to reduce the revenue requirement for ACSA by lengthening the service
lives of specific assets and thereby reducing depreciation expense. The RCA
will evaluate whether to correct earlier ACSA decisions that were based on
erroneous information about several categories of assets and resulted in longer
service lives, lower depreciation expense, and therefore a reduced allowable
revenue requirement. The RCAs decisions on revenue requirements will have a
direct impact on the retail rates and intrastate access rates that the Company
is allowed to charge.

The Company previously reported that it had a dispute with GCI pending
before the FCC concerning interstate access charges. This matter has been
resolved.

The Company has been involved with a number of service-oriented disputes
with GCI. Most recently, the Company was ordered, amongst other things, to
construct new facilities for GCI to serve GCI customers and to provide GCI with
access to the ACS ordering and provisioning systems. The Company is currently
seeking review of these decisions.

On May 14, 2001, the Company was served with a class action lawsuit
concerning its interstate Infinite Minutes long distance plan. It is impossible
to determine at this time the actual number of plaintiffs or the claims that
will actually continue to be in dispute. The Company believes this suit is
without merit and intends to vigorously defend its position.

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

26



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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 SECURITY HOLDERS.

None.




ITEM 5. OTHER INFORMATION.

None.




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

(a) Exhibits:

| |  |  |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                      
| |  |  | ----- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |  | 10.13 |  |  | Investment Agreement, dated April 28, 2003, between ACS
Media Income Fund, ACS Media Canada Inc., ACS Media Holdings LLC,
ACS InfoSource, Inc., ACS Media LLC, and Alaska Communications
Systems Holdings, Inc.                                                                                                                                                                      
| |  |  |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                      
| |  |  | 10.14 |  |  | Underwriters Agreement dated April 28, 2003 by and among ACS
Media Income Fund, ACS Media Canada Inc., ACS Media Holdings LLC,
ACS InfoSource, Inc., ACS Media LLC, and Alaska Communications
Systems Holdings, Inc. and CIBC World Markets Inc., RBC Dominion
Securities Inc., Scotia Capital Inc., BMO Nesbitt Burns Inc.,
National Bank Financial Inc., and Westwind Partners Inc.
| |  |  |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                      
| |  |  | 99.1  |  |  | Certification of Charles R. Robinson, Chief Executive
Officer, pursuant to 18 U.S.C. Section 1350, as adopted to Section
906 of The Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                      
| |  |  |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                      
| |  |  | 99.2  |  |  | Certification of Kevin P. Hemenway, Chief Financial Officer,
pursuant to 18 U.S.C. Section 1350, as adopted to Section 906 of The
Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                        

(b) Reports on Form 8-K:

|                                                                                                                                                                                                                                                      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|The following item was reported on Form 8-K, filed March 6, 2003                                                                                                                                                                                      
|                                                                                                                                                                                                                                                      
|Item 9. Regulation FD
Disclosure - A preliminary prospectus with Canadian
securities regulators was filed on March 6, 2003 in connection with a
proposed Canadian public offering of Alaska Communications Systems Group,
Inc.s directories business.

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##### Table of Contents






SIGNATURES

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: May 6, 2003                       ALASKA COMMUNICATIONS SYSTEMS HOLDINGS, INC.

| |  |                               
| |  | ------------------------------
| |  | /s/ Charles E. Robinson       
| |  |                               
| |  | Charles E. Robinson           
| |  | Chief Executive Officer and   
| |  | Chairman of the Board         
| |  |                               
| |  | /s/ Kevin P. Hemenway         
| |  |                               
| |  | Kevin P. Hemenway             
| |  | Senior Vice President and     
| |  | Chief Financial Officer       
| |  | (Principal Accounting Officer)

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CERTIFICATIONS

Form of Sarbanes-Oxley Section 302(a) Certification

I, Charles E. Robinson, Chief Executive Officer of Alaska Communications
Systems Holdings, Inc., certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Alaska Communications
Systems Holdings, Inc.;                                                                                                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  |  |                                             
|----------------- |  | --------------------------------------------
|Date: May 6, 2003 |  | /s/ Charles E. Robinson                     
|                  |  |                                             
|                  |  | Charles E. Robinson                         
|                  |  | Chief Executive Officer and                 
|                  |  | Chairman of the Board                       
|                  |  | Alaska Communications Systems Holdings, Inc.

29



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##### Table of Contents



Form of Sarbanes-Oxley Section 302(a) Certification

I, Kevin P. Hemenway, Chief Financial Officer of Alaska Communications Systems
Holdings, Inc, certify that:



|1. |  | I have reviewed this quarterly report on Form 10-Q of Alaska Communications
Systems Holdings, Inc.;                                                                                                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;                   
|  
|4. |  | The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we
have:                                                                                                      



| | a) |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) |  | presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        



|5. |  | The registrants other certifying officer and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of the registrants board of directors:
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a) |  | all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to
record, process, summarize and report financial data and have
identified for the registrants auditors any material weaknesses in
internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b) |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        



|6. |  | The registrants other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                  |  |                                             
|----------------- |  | --------------------------------------------
|Date: May 6, 2003 |  | /s/ Kevin P. Hemenway                       
|                  |  |                                             
|                  |  | Kevin P. Hemenway                           
|                  |  | Senior Vice President and                   
|                  |  | Chief Financial Officer                     
|                  |  | Alaska Communications Systems Holdings, Inc.

30