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Gary R. Donahee - John M. Egan - Saul A. Fox Byron I. Mallott - W. Dexter Paine, III - Patrick Pichette Brian D. Rogers - Charles P. Sitkin - Wray T. Thorn 

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## Board Chair 

 Liane Pelletier 

## Board of Directors 

## Dear Fellow ACS Shareholder: 

2004 marked a year of significant progress for Alaska Communications Systems. Our execution centered on a customer-focused business model, which clearly drove benefits for customers, Alaskan communities, employees and shareholders. Our commitment to delivering a quality customer experience is the daily expression of ACS’ competitive growth strategy. 

During 2004, we translated this growth strategy into an operating model. We operate as “One ACS” rather than a collection of product-centric divisions. We have leaders in the business who are distinctly focused on individuals, on enterprises and on other telecom carriers. These leaders are streamlining how we do business, enhancing our customers’ experience and reducing our costs of operation. 

Our goal has been and is to grow the number of loyal ACS customers within each segment, and in 2004 we made great progress. In terms of retail relationships established, by year-end we had grown to approximately 400,000 and reached a milestone of 100,000 wireless subscribers. These retail relationships allow us to grow our share of wallet through cross-selling, bundles and highly differentiated integrated offerings. Today, few of our customers purchase all of their telecommunications services from ACS, yet ACS has its own statewide local, long distance, internet and wireless networks to serve them. As a result, we enjoy a wonderful organic and efficient growth model. 

These customers are also our neighbors and we recognize our responsibility to the communities we serve – after all, “Alaska” is our first name. ACS and its employees contribute their financial support, time and commitment 

CDMA 1xRTT Launch May 2004 

Wireless Broadband (EV-DO) Launch June 2004 

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to many organizations, events and civic activities throughout Alaska. Through our civic work and our daily work, our investment in leading edge communications services enables Alaskans to grow and prosper. 

ACS employees have both embraced and benefited from the transformation taking place at ACS. As one example, in March 2005, the members of our local union, IBEW Local 1547, approved an extension of the collective bargaining agreement through 2009. This new agreement affirms our 

ACS Named to Russell 3000 Index June 2004 

Functionally Integrated Product Launch: Mobile-To-Home August 2004 

employees’ confidence in the company as the union members elected to take ACS common stock in lieu of cash cost-of-living increases in future years. In fact, the confidence of all segments of the employee base is evident as we saw a 40%+ increase in Employee Stock Purchase Plan participation from the beginning of 2004 to date. 

We face the future with the strongest balance sheet in our history. Earlier this year ACS concluded a series of capital market activities, which reduced borrowing costs, lowered our debt-to-equity ratio and resulted in a much broader base of shareholders including many new institutional investors. We initiated a cash dividend policy in October 2004, with the first quarterly cash dividend of $0.185 per share paid in January 2005. The successful financial restructuring and our continued ability to generate cash from operations enabled a subsequent increase in the quarterly cash dividend to $0.20 per share. 

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ACS Initiates Dividend Program October 2004 

