SUREWEST COMMUNICATIONS - FORM 8-K - EX-99.1

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8-K - SUREWEST COMMUNICATIONS	v175571_8k.htm

SUREWEST REPORTS FOURTH QUARTER

AND FULL YEAR 2009 RESULTS

Broadband-focused strategy continues to drive

long-term revenue, adjusted EBITDA and free cash flow growth

Full year revenues increased 5% and adjusted EBITDA grew 13%

Full year Broadband revenues grew 19% from a 20% increase in residential revenues and 20% business services growth

Free cash flow increased by $33 million to positive $2 million for the full year

Debt, net of cash and cash equivalents, reduced by $23 million from year-end 2008, resulting in a net debt to adjusted EBITDA ratio of 2.77x

Net income decreased to $3.2 million compared to $18.9 million in 2008 as a result of the $18.8 million gain on the sale of SureWest’s wireless assets in 2008

Average monthly revenue per customer (ARPU) in triple-play markets increased by 8% to $115

ROSEVILLE, CA – February 25, 2010 – SureWest Communications (NASDAQ: SURW) today announced operating results for the fourth quarter and full year ended December 31, 2009.

Steve Oldham, SureWest’s president and chief executive officer, said, “Our results for the year were driven by top-line revenue growth, increased adjusted EBITDA and three consecutive quarters of positive free cash flow as we continued to drive down net debt. Among our peers, we stood out with 5% revenue growth and 13% adjusted EBITDA growth. Our commercial service sales efforts are showing great results, particularly in the Kansas City market where our business customer count grew 27% from 2008 and pro forma revenues increased by 29%. We also increased residential revenues and ARPU by targeting high-value subscribers looking for the exceptional performance our superior networks deliver.

“Our ability to react quickly to market dynamics and to be flexible with our marketing strategies allowed us to grow the company during 2009’s difficult economic and fiercely competitive climate. Having markets in both California and Kansas provides geographic and economic diversity in addition to cost-saving opportunities across the organization that allow for significant benefits.

“Looking ahead, we expect to continue growing our Broadband segment, focusing resources on expanding our business services customer base and increasing residential ARPU and the number of products our customers subscribe to (RGUs). Our competition is not standing still and we are seeing a significant response; however, they can only compete with us on price. We have the ability to cost effectively grow the company today largely because of investments we made over the last several years to extend our superior fiber networks, something our competitors have yet to even begin. Our new video service, Advanced Digital TV, has created an exciting buzz among both fiber and copper network customers in the Sacramento region due to its compelling features, such as Whole Home DVR, lightning-fast channel change times and an intuitive program guide. In Kansas City, improvements to the network in 2010 will allow us to add more HD channels and deliver faster Internet speeds. We are confident our superior networks will drive future growth, and we will continue to execute on the challenges and opportunities ahead in order to drive shareholder value.”

The following table highlights financial results for continuing operations on a consolidated basis (dollars are in thousands):

	4th Quarter												Full Year
Consolidated	2009			2008			Change			%			2009		2008			Change			%
Broadband Revenue	$	41,566		$	36,929		$	4,637			13	%	$	161,222	$	135,341			25,881			19	%
Telecom Revenue		18,733			22,009			(3,276	)		(15	%)		80,478		95,032			(14,554	)		(15	%)
Total Revenue		60,299			58,938			1,361			2	%		241,700		230,373			11,327			5	%
Adjusted EBITDA		19,585			17,015			2,570			15	%		77,898		69,239			8,659			13	%
Income (loss) from Continuing Ops		(100	)		(1,547	)		1,447			94	%		667		826			(159	)		(19	%)
Capital Expenditure		14,967			21,922			(6,955	)		(32	%)		58,330		86,489			(28,159	)		(33	%)
Free Cash Flow		359			(8,803	)		9,162			104	%		2,061		(30,636	)		32,697			107	%
Net Debt		215,556			238,848			(23,292	)		(10	%)		215,556		238,848			(23,292	)		(10	%)

See Non-GAAP measure notes near end of release, and EBITDA, Free Cash Flow and Net Debt reconciliations for detailed adjustments.

Fourth Quarter Financial Results

Consolidated revenues increased 2% year-over-year to $60.3 million resulting from 13% Broadband revenue growth offset by Telecom revenue declines of 15%. Adjusted EBITDA, which is adjusted for non-cash pension expense of $642 thousand and non-cash stock compensation expense of $495 thousand, increased 15% year-over-year to $19.6 million as the company continued to recognize cost savings from initiatives such as consolidation of office space and employee attrition. Employee counts decreased 3% from the prior year to 893 employees.

Operating expenses, exclusive of depreciation and amortization, remained flat year-over-year at $41.9 million due to reductions in labor expense, and sales and advertising costs offset by increases in video license fees and transport charges related to commercial business revenue growth.

Net loss was $100 thousand compared to a loss of $2.1 million in the fourth quarter of 2008 due primarily to an increase in adjusted EBITDA and a decrease in interest expense. Earnings per share from continuing operations was zero compared to negative $.15 in the fourth quarter of 2008.

Capital expenditures totaled $15 million for the fourth quarter and $58.3 million for the full year compared to $86.5 million in 2008. The company passed 8,800 additional advanced fiber homes in 2009.

As previously announced, SureWest’s video service is expanding to reach over 25,000 existing voice and data marketable ILEC homes on the Sacramento copper network, creating the ability to deliver a new IP-based triple-play option to these potential customers. The first 15,000 homes receiving SureWest’s extended video became available in January 2010 and the second phase of over 10,000 homes will become available throughout the second quarter of 2010. These 25,000-plus homes will be served with video for a cost of just over $3 million, which is roughly 10% of the average cost to pass a home with fiber. SureWest’s projected 2010 capital expenditure remains at $55-60 million, of which approximately two-thirds is scheduled for residential and business success-based investment.

Free cash flow, defined as income from continuing operations plus depreciation and amortization less capital expenditures, increased to positive $359 thousand – a $9.2 million increase year-over-year. The increase is due to adjusted EBITDA growth and lower capital expenditures related to the third quarter 2009 completion of the fiber network expansion. The company continues to focus on increasing revenues and free cash flow by growing residential ARPU and RGUs, and increasing business services revenues.

Cash and cash equivalents increased to $7.5 million from $2.8 million at December 31, 2008. During the year, SureWest paid down $18.6 million in debt resulting in $215.6 million in remaining total debt net of cash and cash equivalents (net debt), and a net debt to adjusted EBITDA ratio of 2.77x.

Broadband Segment Results

Broadband revenues increased 13% year-over-year and accounted for 69% of the company’s total revenues, compared to 63% in the fourth quarter of 2008. This growth is due to the company’s successful long-term strategy of growing its Broadband operations to counteract the industry-wide trend of declining Telecom segment revenues.

Broadband Residential:

Broadband Residential revenues increased 13% year-over-year to $30.5 million due to 12% growth in ARPU and a 4% increase in RGUs. To illustrate growth trends, Broadband RGUs, subscriber counts and ARPU are detailed both year-over-year and sequentially in the table and text below:

	Q4 '09 vs. Q4 '08 change			Q4 '09 vs. Q3 '09 change
	Sacramento Market	Kansas City Market	Total	Sacramento Market	Kansas City Market	Total
Broadband Residential RGUs	6%	1%	4%	2%	0%	1%
Data RGUs	0%	3%	1%	1%	1%	1%
Video RGUs - Fiber & HFC	-4%	1%	-1%	0%	0%	0%
Voice RGUs	30%	-1%	13%	4%	-1%	2%
Total Residential Subscribers	-1%	1%	0%	0%	-1%	0%

ARPU for triple-play marketable homes, consisting of the company’s fiber-to-the-home (FTTH) and hybrid fiber coaxial (HFC) networks, increased 8% year-over-year to $115 from $107. This was due to a fourth quarter 2009 video and data price increase that reinforced the company’s ability to maintain growth while targeting customers who value superior service offerings. Additionally, continued customer demand for higher data speeds, HDTV and DVR impacted ARPU growth.

Broadband Business:

Broadband Business revenues increased by $1.3 million, or 14%, year-over-year to $10.3 million. Customer counts increased 9% year-over-year to 7,100 and ARPU grew 5% from the prior year to $492.

Broadband Business growth expectations remain high in both Sacramento and Kansas City due to several operational and sales factors. The company has the competitive advantage of being able to add business customers at lower initial investment costs where service is provided over its extensive fiber network. Aggressive sales and renewal tactics, superior customer satisfaction levels and catered packages coupled with a host of product solutions including wireless backhaul, data center services and the upcoming launches of Hosted IP PBX and SIP Trunking will drive future growth. And as the economy begins to turn and businesses return, SureWest anticipates it will capture additional business customers.

Telecom Segment Results

The Telecom segment, which only services the Sacramento market, experienced revenue declines of 15% year-over-year to $18.7 million from the industry-wide trend of residential access line attrition and associated access revenue declines. The Telecom segment accounted for just 31% of total revenues compared to 37% in the fourth quarter of 2008 as the company continues to successfully grow its Broadband segment and perform as a Broadband-driven company. Forecasts anticipate Telecom segment declines will begin to slow over the next several years.

Telecom Residential:

Telecom Residential revenues declined 26% year-over-year to $5.4 million resulting from losses in Telecom voice RGUs of 29% year-over-year. The company continues to mitigate Telecom voice line losses as customers elect to move to its Broadband Voice over IP (VoIP) product. Though 15,500 Telecom Residential voice RGUs were lost on a year-over-year basis, 7,100, or 46%, of that number was reclaimed through new growth in SureWest’s Broadband VoIP service.

Telecom Business:

Telecom Business revenues declined 5% year-over-year to $8.6 million due to a decline in small- and medium-sized business customers, particularly those impacted by California’s depressed real estate industry. In addition, some carrier consolidation activity took place during the year. Growth opportunities are expected once the Sacramento office market recovers and businesses begin to return.

Telecom Access:

Telecom Access revenues decreased $950 thousand year-over-year to $4.5 million due to scheduled reductions in the California High Cost Fund (CHCF) subsidies and a decline in switched access revenues. As previously announced, CHCF subsidies are scheduled to decline by $2 million per year through 2011, in line with a negotiated transition.

Non-GAAP Measures

In addition to the results presented in accordance with generally accepted accounting principles (GAAP) throughout this press release; the company has presented non-GAAP financial measures such as adjusted EBITDA, free cash flow and net debt. Adjusted EBITDA represents net income (loss) from continuing operations excluding amounts for income taxes, depreciation and amortization, non-cash pension and certain post-retirement benefits, non-cash stock compensation, and all other non-operating income/expenses. Free cash flow represents net income (loss) from continuing operations plus depreciation and amortization less capital expenditures. Net debt is a measure of total debt (current, plus long-term) less cash and cash equivalents. The company believes these non-GAAP measures, viewed in addition to but not in lieu of its reported GAAP results, provide useful information to investors as they are an integral part of the internal evaluation of operating performance. In addition, they are measures that the company uses to evaluate management’s effectiveness. Reconciliation to the comparable GAAP measures is provided in the accompanying financial and operating summaries. SureWest’s non-GAAP financial measures may not be comparable to similarly titled measures presented by other companies.

Conference Call and Webcast

SureWest will host a conference call providing details of its results and business strategy at 5 p.m. Eastern Time on Thursday, February 25, 2010. Open to the public, a simultaneous live webcast of the call will be available from the company's investor relations Web site at www.surw.com. A telephone replay of the call will be available shortly after completion through Thursday, March 4 by dialing 888.286.8010 and entering pass code 36995627. Visit www.surw.com for updates prior to the call.

About SureWest

SureWest Communications (www.surewest.com) is a leading integrated communications provider and the bandwidth leader in the markets it serves. Headquartered in Northern California for more than 95 years, the company expanded into the Kansas City region in February 2008 with the acquisition of Everest Broadband, Inc. and offers bundled residential and commercial services that include IP-based digital and high-definition television, high-speed Internet, Voice over IP, and local and long distance telephone. SureWest was the nation’s first provider to launch residential HDTV over an IP network and offers one of the nation’s fastest symmetrical Internet services with speeds of up to 50 Mbps in each direction on its fiber-to-the-home network.

Safe Harbor Statement

Statements made in this news release that are not historical facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. In some cases, these forward-looking statements may be identified by the use of words such as may, will, should, expect, plan, anticipate, or project or the negative of those words or other comparable words. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Such forward-looking statements are subject to a number of risks, assumptions and uncertainties that could cause the company's actual results to differ from those projected in such forward-looking statements.

Important factors that could cause actual results to differ from those set forth in the forward-looking statements include, but are not limited to, advances in telecommunications technology, changes in the telecommunications regulatory environment, changes in the financial stability of other telecommunications providers who are customers of the company, changes in competition in markets in which the company operates, adverse circumstances affecting the economy in California, Kansas and Missouri in general, and in the greater Sacramento, California and greater Kansas City, Kansas and Missouri areas in particular, the availability of future financing, changes in the demand for services and products, new product and service development and introductions, and pending and future litigation.

###

Contacts:

Ron Rogers

Corporate Communications

916-746-3123

r.rogers@surewest.com

Misty Wells

Investor Relations

916-786-1799

m.wells@surewest.com

SUREWEST COMMUNICATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; Amounts in thousands, except per share amounts)

	Quarter Ended December 31, 2009			Quarter Ended December 31, 2008			$ Change			% Change
	Quarter Ended December 31, 2009			Quarter Ended December 31, 2008			$ Change			% Change
Operating revenues:
Broadband	$	41,566		$	36,929		$	4,637			13	%
Telecom		18,733			22,009			(3,276	)		-15	%
Total operating revenues		60,299			58,938			1,361			2	%

Operating expenses:
Cost of services and products (exclusive of depreciation and amortization)		24,929			23,875			1,054			4	%
Customer operations and selling		8,173			9,260			(1,087	)		-12	%
General and administrative		8,749			8,578			171			2	%
Depreciation and amortization		15,426			14,666			760			5	%
Total operating expenses		57,277			56,379			898			2	%

Income from operations		3,022			2,559			463			18	%

Other income (expense):
Investment income		22			83			(61	)		-73	%
Interest expense		(2,916	)		(3,281	)		365			11	%
Other, net		264			261			3			1	%
Total other income (expense), net		(2,630	)		(2,937	)		307			10	%

Income (loss) from continuing operations before income taxes		392			(378	)		770			204	%

Income tax expense		492			1,169			(677	)		-58	%

Loss from continuing operations		(100	)		(1,547	)		1,447			94	%

Discontinued operations, net of tax:
Loss from discontinued operations	$	-			(229	)		229			100	%
Loss on sale of discontinued operations		-			(358	)		358			100	%
Total discontinued operations	$	-			(587	)		587			100	%

Net loss	$	(100	)	$	(2,134	)	$	2,034			95	%

Basic and diluted earnings per common share:
Loss from continuing operations	$	-		$	(0.11	)	$	0.11
Discontinued operations, net of tax		-			(0.04	)		0.04
Net loss per basic common share	$	-		$	(0.15	)	$	0.15

Shares of common stock used to calculate earnings per share:
Basic and diluted		13,956			13,976			(20	)

SUREWEST COMMUNICATIONS

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited; Amounts in thousands, except per share amounts)

	Quarter Ended December 31, 2009			Quarter Ended September 30, 2009			$ Change			% Change
	Quarter Ended December 31, 2009			Quarter Ended September 30, 2009			$ Change			% Change
Operating revenues:
Broadband	$	41,566		$	40,175		$	1,391			3	%
Telecom		18,733			19,354			(621	)		-3	%
Total operating revenues		60,299			59,529			770			1	%

Operating expenses:
Cost of services and products (exclusive of depreciation and amortization)		24,929			24,563			366			1	%
Customer operations and selling		8,173			9,017			(844	)		-9	%
General and administrative		8,749			8,073			676			8	%
Depreciation and amortization		15,426			15,260			166			1	%
Total operating expenses		57,277			56,913			364			1	%

Income from operations		3,022			2,616			406			16	%

Other income (expense):
Investment income		22			28			(6	)		-21	%
Interest expense		(2,916	)		(3,046	)		130			4	%
Other, net		264			205			59			29	%
Total other income (expense), net		(2,630	)		(2,813	)		183			7	%

Income (loss) from continuing operations before income taxes		392			(197	)		589			299	%

Income tax expense		492			14			478		nm

Loss from continuing operations		(100	)		(211	)		111			53	%

Discontinued operations, net of tax:
Loss from discontinued operations		-			-			-			-
Loss on sale of discontinued operations		-			-			-			-
Total discontinued operations		-			-			-			-

Net loss	$	(100	)	$	(211	)	$	111			53	%

Basic and diluted earnings per common share:
Loss from continuing operations	$	-		$	(0.02	)	$	0.02
Discontinued operations, net of tax		-			-			-
Net loss per basic common share	$	-		$	(0.02	)	$	0.02

Shares of common stock used to calculate earnings per share:
Basic and diluted		13,956			13,936			20

SUREWEST COMMUNICATIONS

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited; Amounts in thousands, except per share amounts)

	Twelve Months Ended December 31, 2009			Twelve Months Ended December 31, 2008			$ Change			% Change
	Twelve Months Ended December 31, 2009			Twelve Months Ended December 31, 2008			$ Change			% Change
Operating revenues:
Broadband	$	161,222		$	135,341		$	25,881			19	%
Telecom		80,478			95,032			(14,554	)		-15	%
Total operating revenues		241,700			230,373			11,327			5	%

Operating expenses:
Cost of services and products (exclusive of depreciation and amortization)		99,624			89,684			9,940			11	%
Customer operations and selling		33,770			32,933			837			3	%
General and administrative		35,009			37,588			(2,579	)		-7	%
Depreciation and amortization		59,724			55,027			4,697			9	%
Total operating expenses		228,127			215,232			12,895			6	%

Income from operations		13,573			15,141			(1,568	)		-10	%

Other income (expense):
Investment income		121			676			(555	)		-82	%
Interest expense		(11,318	)		(12,126	)		808			7	%
Other, net		297			274			23			8	%
Total other income (expense), net		(10,900	)		(11,176	)		276			2	%

Income from continuing operations before income taxes		2,673			3,965			(1,292	)		-33	%

Income tax expense		2,006			3,139			(1,133	)		-36	%

Income from continuing operations		667			826			(159	)		-19	%

Discontinued operations, net of tax:
Income (loss) from discontinued operations		(69	)		103			(172	)		-167	%
Gain on sale of discontinued operations		2,568			18,004			(15,436	)		-86	%
Total discontinued operations		2,499			18,107			(15,608	)		-86	%

Net income	$	3,166		$	18,933		$	(15,767	)		-83	%

Basic and diluted earnings per common share:
Income from continuing operations	$	0.05		$	0.06		$	(0.01	)
Discontinued operations, net of tax		0.18			1.28			(1.10	)
Net income per basic common share	$	0.23		$	1.34		$	(1.11	)

Shares of common stock used to calculate earnings per share:
Basic		13,996			14,096			(100	)
Diluted		13,996			14,099			(103	)

SureWest Communications

Unaudited Pro Forma Selected Financial Results (3)

(on a pro forma consolidated and a pro forma segment basis)

(Amounts in thousands)

	For 2008 Quarters Ended:								Twelve Months Ended December 31, 2008		For 2009 Quarters Ended:								Twelve Months Ended December 31, 2009
Consolidated	March 31		June 30		September 30		December 31		Twelve Months Ended December 31, 2008		March 31		June 30		September 30		December 31		Twelve Months Ended December 31, 2009
Operating revenues (1)
Residential	$	34,647	$	34,621	$	33,959	$	34,180	$	137,407	$	35,713	$	36,180	$	35,246	$	35,845	$	142,984
Business		16,946		18,188		19,342		18,218		72,694		18,633		18,704		18,705		18,969		75,011
Access		6,647		6,393		6,308		5,922		25,270		6,031		5,351		5,031		4,942		21,355
Other		630		650		661		618		2,559		565		695		547		543		2,350
Total operating revenues from external customers		58,870		59,852		60,270		58,938		237,930		60,942		60,930		59,529		60,299		241,700

Operating expenses (1)		41,274		39,903		42,034		41,713		164,924		42,812		42,087		41,653		41,851		168,403
Depreciation and amortization		13,259		14,075		14,219		14,666		56,219		14,810		14,228		15,260		15,426		59,724
Income from operations	$	4,337	$	5,874	$	4,017	$	2,559	$	16,787	$	3,320	$	4,615	$	2,616	$	3,022	$	13,573

Consolidated Reconciliation of Adjusted EBITDA to Net Income (Loss) from Continuing Operations

	For 2008 Quarters Ended:												Twelve Months Ended December 31, 2008			For 2009 Quarters Ended:										Twelve Months Ended December 31, 2009
	March 31			June 30			September 30			December 31			Twelve Months Ended December 31, 2008			March 31		June 30		September 30			December 31			Twelve Months Ended December 31, 2009
Net income (loss) from continuing operations	$	376		$	1,729		$	622		$	(1,547	)	$	1,180		$	79	$	899	$	(211	)	$	(100	)	$	667
Add back: income tax expense		489			1,139			582			1,169			3,379			884		616		14			492			2,006
Less: other (income)/expense		3,472			3,006			2,813			2,937			12,228			2,357		3,100		2,813			2,630			10,900
Income from operations		4,337			5,874			4,017			2,559			16,787			3,320		4,615		2,616			3,022			13,573
Add (subtract):
Depreciation and amortization		13,259			14,075			14,219			14,666			56,219			14,810		14,228		15,260			15,426			59,724
Non-cash pension (income)/expense		(393	)		(524	)		(458	)		(433	)		(1,808	)		755		552		642			642			2,591
Non-cash stock compensation expense		141			345			170			223			879			608		464		443			495			2,010
Adjusted EBITDA (2)	$	17,344		$	19,770		$	17,948		$	17,015		$	72,077		$	19,493	$	19,859	$	18,961		$	19,585		$	77,898

Other data:
Total debt	$	277,830		$	231,828		$	233,827		$	241,688			n/a		$	240,187	$	236,685	$	226,683		$	223,045			n/a

	For 2008 Quarters Ended:												Twelve Months Ended December 31, 2008			For 2009 Quarters Ended:												Twelve Months Ended December 31, 2009
Broadband	March 31			June 30			September 30			December 31			Twelve Months Ended December 31, 2008			March 31			June 30			September 30			December 31			Twelve Months Ended December 31, 2009
Data	$	10,128		$	10,338		$	10,348			10,491		$	41,305		$	10,763		$	11,184		$	11,236		$	11,878		$	45,061
Video		10,359			10,365			10,264			10,522			41,510			11,689			11,995			11,711			12,127			47,522
Voice		5,258			5,395			5,542			5,933			22,128			6,399			6,594			6,442			6,462			25,897
Total residential revenues		25,745			26,098			26,154			26,946			104,943			28,851			29,773			29,389			30,467			118,480
Business		7,899			8,374			9,271			9,084			34,628			9,585			9,615			10,018			10,336			39,554
Access		305			370			414			449			1,538			384			398			427			419			1,628
Other		439			459			441			450			1,789			402			473			341			344			1,560
Total operating revenues from external customers		34,388			35,301			36,280			36,929			142,898			39,222			40,259			40,175			41,566			161,222
Intersegment revenues		140			141			138			120			539			91			94			93			160			438
Total operating revenues		34,528			35,442			36,418			37,049			143,437			39,313			40,353			40,268			41,726			161,660

Operating expenses without depreciation		30,742			31,085			32,844			32,698			127,369			34,695			34,294			34,615			34,247			137,851
Depreciation and amortization		9,597			10,335			10,700			11,051			41,683			11,620			11,283			12,199			12,257			47,359
Loss from operations	$	(5,811	)	$	(5,978	)	$	(7,126	)	$	(6,700	)	$	(25,615	)	$	(7,002	)	$	(5,224	)	$	(6,546	)	$	(4,778	)	$	(23,550	)

Broadband Reconciliation of Adjusted EBITDA to Net Loss from Continuing Operations

	For 2008 Quarters Ended:												Twelve Months Ended December 31, 2008			For 2009 Quarters Ended:												Twelve Months Ended December 31, 2009
	March 31			June 30			September 30			December 31			Twelve Months Ended December 31, 2008			March 31			June 30			September 30			December 31			Twelve Months Ended December 31, 2009
Loss from continuing operations	$	(5,416	)	$	(5,391	)	$	(5,856	)	$	(6,667	)	$	(23,330	)	$	(5,398	)	$	(4,884	)	$	(5,619	)	$	(4,881	)	$	(20,782	)
Add back: income tax benefits		(4,054	)		(3,690	)		(3,994	)		(3,179	)		(14,917	)		(3,656	)		(3,312	)		(3,810	)		(2,675	)		(13,453	)
Less: other (income)/expense		3,659			3,103			2,724			3,146			12,632			2,052			2,972			2,883			2,778			10,685
Loss from operations		(5,811	)		(5,978	)		(7,126	)		(6,700	)		(25,615	)		(7,002	)		(5,224	)		(6,546	)		(4,778	)		(23,550	)
Add (subtract):
Depreciation and amortization		9,597			10,335			10,700			11,051			41,683			11,620			11,283			12,199			12,257			47,359
Non-cash pension (income)/expense		(162	)		(212	)		(186	)		(178	)		(738	)		327			56			197			199			779
Non-cash stock compensation expense		54			173			77			103			407			304			231			221			246			1,002
Adjusted EBITDA (2)	$	3,678		$	4,318		$	3,465		$	4,276		$	15,737		$	5,249		$	6,346		$	6,071		$	7,924		$	25,590

	For 2008 Quarters Ended:								Twelve Months Ended December 31, 2008		For 2009 Quarters Ended:								Twelve Months Ended December 31, 2009
Telecom	March 31		June 30		September 30		December 31		Twelve Months Ended December 31, 2008		March 31		June 30		September 30		December 31		Twelve Months Ended December 31, 2009
Residential	$	8,902	$	8,523	$	7,805	$	7,234	$	32,464	$	6,862	$	6,407	$	5,857	$	5,378	$	24,504
Business		9,047		9,814		10,071		9,134		38,066		9,048		9,089		8,687		8,633		35,457
Access		6,342		6,023		5,894		5,473		23,732		5,647		4,953		4,604		4,523		19,727
Other		191		191		220		168		770		163		222		206		199		790
Total operating revenues from external customers		24,482		24,551		23,990		22,009		95,032		21,720		20,671		19,354		18,733		80,478
Intersegment revenues		4,343		4,560		4,706		4,846		18,455		4,874		4,981		5,043		4,999		19,897
Total operating revenues		28,825		29,111		28,696		26,855		113,487		26,594		25,652		24,397		23,732		100,375

Operating expenses without depreciation		15,015		13,519		14,034		13,981		56,549		13,082		12,868		12,174		12,763		50,887
Depreciation and amortization		3,662		3,740		3,519		3,615		14,536		3,190		2,945		3,061		3,169		12,365
Income from operations	$	10,148	$	11,852	$	11,143	$	9,259	$	42,402	$	10,322	$	9,839	$	9,162	$	7,800	$	37,123

Telecom Reconciliation of Adjusted EBITDA to Net Income from Continuing Operations

	For 2008 Quarters Ended:												Twelve Months Ended December 31, 2008			For 2009 Quarters Ended:										Twelve Months Ended December 31, 2009
	March 31			June 30			September 30			December 31			Twelve Months Ended December 31, 2008			March 31		June 30		September 30			December 31			Twelve Months Ended December 31, 2009
Net income from continuing operations	$	5,792		$	7,120		$	6,478		$	5,120		$	24,510		$	5,477	$	5,783	$	5,408		$	4,781		$	21,449
Add back: income tax expense		4,543			4,829			4,576			4,348			18,296			4,540		3,928		3,824			3,167			15,459
Less: other (income)/expense		(187	)		(97	)		89			(209	)		(404	)		305		128		(70	)		(148	)		215
Income from operations		10,148			11,852			11,143			9,259			42,402			10,322		9,839		9,162			7,800			37,123
Add (subtract):
Depreciation and amortization		3,662			3,740			3,519			3,615			14,536			3,190		2,945		3,061			3,169			12,365
Non-cash pension (income) / expense		(231	)		(312	)		(272	)		(255	)		(1,070	)		428		496		445			443			1,812
Non-cash stock compensation expense		87			172			93			120			472			304		233		222			249			1,008
Adjusted EBITDA (2)	$	13,666		$	15,452		$	14,483		$	12,739		$	56,340		$	14,244	$	13,513	$	12,890		$	11,661		$	52,308

(1) External customers only.

(2) Adjusted EBITDA represents net income (loss) from continuing operations excluding amounts for income taxes; depreciation and amortization; non-cash pension and certain post-retirement benefits; non-cash stock compensation; and all other non-operating income/expenses. Adjusted EBITDA is a common measure of operating performance in the telecommunications industry. Adjusted EBITDA is not a measure of financial performance under United States generally accepted accounting principles and should not be considered in isolation or as a substitute for consolidated net income (loss) as a measure of performance.

(3) The pro forma selected financial results are based on the historical consolidated financial statements of SureWest Communications and Everest Broadband, Inc. ("Everest") and have been adjusted to reflect the Everest acquisition, which was consummated on February 13, 2008. The unaudited condensed combined pro forma financial statements give the effect as if the acquisition had occurred on January 1, 2008. On May 9, 2008, the sale of the Wireless assets was completed and the pro forma financial results reflect for all periods presented the classification of the sold Wireless operations as discontinued operations. Also, on February 27, 2009, SureWest Communications completed the sale of its Tower Assets and the pro forma financial results reflect the classification of the operations for the Tower Assets sold as discontinued operations for all periods presented.

SUREWEST COMMUNICATIONS

CONSOLIDATED BALANCE SHEETS

(Unaudited; Amounts in thousands)

	December 31,			December 31,
	2009			2008
ASSETS
Current assets:
Cash and cash equivalents	$	7,489		$	2,840
Short-term investments		4,306			610
Accounts receivable, net		19,734			21,415
Income tax receivable		2,221			6,391
Inventories		5,263			6,527
Prepaid expenses		3,704			4,539
Deferred income taxes		3,373			2,989
Other current assets		1,760			1,752
Assets held for sale		6,009			7,388
Assets of discontinued operations		-			5,002
Total current assets		53,859			59,453

Property, plant and equipment, net		517,230			515,843

Intangible and other assets:
Long-term investments		-			3,508
Customer relationships, net		3,847			5,062
Goodwill		45,814			45,814
Deferred charges and other assets		2,113			4,129
		51,774			58,513
	$	622,863		$	633,809


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Current portion of long-term debt and capital lease obligations	$	15,636		$	15,643
Accounts payable		2,547			2,798
Other accrued liabilities		18,315			19,050
Advance billings and deferred revenues		8,580			8,960
Accrued compensation and pension benefits		9,172			11,292
Liabilities of discontinued operations		-			453
Total current liabilities		54,250			58,196

Long-term debt		207,409			226,045
Deferred income taxes		54,856			46,358
Accrued pension and other post-retirement benefits		32,451			36,046
Other liabilities and deferred revenues		4,714			5,819

Commitments and contingencies		–			–

Shareholders' equity:
Common stock, without par value; 100,000 shares authorized, 14,148 and 14,082 shares issued and outstanding at December 31, 2009 and December 31, 2008, respectively		146,844			146,558
Accumulated other comprehensive loss		(15,280	)		(19,248	)
Retained earnings		137,619			134,035
Total shareholders' equity		269,183			261,345
	$	622,863		$	633,809

SUREWEST COMMUNICATIONS

ADJUSTED EBITDA RECONCILIATION TO NET INCOME (LOSS) FROM CONTINUING OPERATIONS

(Unaudited; Amounts in thousands)

	Twelve Months ended December 31, 2009							Twelve Months ended December 31, 2008
	Broadband			Telecom		Consolidated		Broadband			Telecom			Consolidated

Income (loss) from continuing operations	$	(20,782	)	$	21,449	$	667	$	(23,684	)	$	24,510		$	826

Add (subtract):

Income taxes (benefit)/expense		(13,453	)		15,459		2,006		(15,157	)		18,296			3,139

Other (income)/expense		10,685			215		10,900		11,580			(404	)		11,176

Depreciation and amortization		47,359			12,365		59,724		40,491			14,536			55,027

Non-cash pension (income)/expense		779			1,812		2,591		(738	)		(1,070	)		(1,808	)

Non-cash stock compensation expense		1,002			1,008		2,010		407			472			879

Adjusted EBITDA (1)	$	25,590		$	52,308	$	77,898	$	12,899		$	56,340		$	69,239

(1) Adjusted EBITDA represents net income (loss) from continuing operations excluding amounts for income taxes; depreciation and amortization; non-cash pension and certain post-retirement benefits; non-cash stock compensation; and all other non-operating income/expenses. Adjusted EBITDA is a common measure of operating performance in the telecommunications industry. Adjusted EBITDA is not a measure of financial performance under United States generally accepted accounting principles and should not be considered in isolation or as a substitute for consolidated net income (loss) as a measure of performance.

SUREWEST COMMUNICATIONS

CONSOLIDATED FREE CASH FLOW FROM CONTINUING OPERATIONS

(Unaudited; Amounts in thousands)

	Twelve Months Ended December 31,
	2009			2008

Income from continuing operations	$	667		$	826

Add: Depreciation and amortization		59,724			55,027

Less: Capital expenditures		(58,330	)		(86,489	)

Free cash flow (2)	$	2,061		$	(30,636	)

SUREWEST COMMUNICATIONS

CONSOLIDATED NET DEBT RATIO FROM CONTINUING OPERATIONS

(Unaudited; Amounts in thousands)

	Twelve Months Ended December 31,
	2009			2008
Net Debt:
Long-term debt, including current maturities	$	223,045		$	241,681

Less: Cash and cash equivalents		(7,489	)		(2,840	)

Net debt (3)	$	215,556		$	238,841

Ratio of Net Debt to Adjusted EBITDA:
Net debt	$	215,556		$	238,841

Divided by: Adjusted EBITDA		77,898			69,239

Ratio of net debt to Adjusted EBITDA (4)		2.77			3.45

(2) Free cash flow is a measure of operating cash flows available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity.

(3) Net debt is a measure of total long-term debt (including current maturities) less cash and cash equivalents. Net debt is a component in measuring leverage. Net debt is not a measure determined in accordance with United States generally accepted accounting principles and should not be considered as a substitute for total long-term debt.

(4) The ratio of net debt to Adjusted EBITDA is calculated as net debt divided by Adjusted EBITDA. This measure provides useful information to our investors about our debt level relative to our performance and about our ability to meet our financial obligations.

SUREWEST COMMUNICATIONS

ADJUSTED EBITDA RECONCILIATION TO NET INCOME (LOSS) FROM CONTINUING OPERATIONS

(Unaudited; Amounts in thousands)

	Quarter Ended December 31, 2009									Quarter Ended September 30, 2009									Quarter Ended December 31, 2008
	Broadband			Telecom			Consolidated			Broadband			Telecom			Consolidated			Broadband			Telecom			Consolidated

Income (loss) from continuing operations	$	(4,881	)	$	4,781		$	(100	)	$	(5,619	)	$	5,408		$	(211	)	$	(6,667	)	$	5,120		$	(1,547	)

Add (subtract):

Income taxes (benefit)/expense		(2,675	)		3,167			492			(3,810	)		3,824			14			(3,179	)		4,348			1,169

Other (income)/expense		2,778			(148	)		2,630			2,883			(70	)		2,813			3,146			(209	)		2,937

Depreciation and amortization		12,257			3,169			15,426			12,199			3,061			15,260			11,051			3,615			14,666

Non-cash pension (income)/expense		199			443			642			197			445			642			(178	)		(255	)		(433	)

Non-cash stock compensation expense		246			249			495			221			222			443			103			120			223

Adjusted EBITDA (1)	$	7,924		$	11,661		$	19,585		$	6,071		$	12,890		$	18,961		$	4,276		$	12,739		$	17,015

SUREWEST COMMUNICATIONS

CONSOLIDATED FREE CASH FLOW FROM CONTINUING OPERATIONS

(Unaudited; Amounts in thousands)

	Quarter Ended
	December 31, 2009			September 30, 2009			December 31, 2008

Loss from continuing operations	$	(100	)	$	(211	)	$	(1,547	)

Add: Depreciation and amortization		15,426			15,260			14,666

Less: Capital expenditures		(14,967	)		(13,841	)		(21,922	)

Free cash flow (2)	$	359		$	1,208		$	(8,803	)

(2) Free cash flow is a measure of operating cash flows available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity.

SUREWEST COMMUNICATIONS - Consolidated Operations

SELECTED OPERATING METRICS (inc KC results from periods prior to acquisition)

As of and for the quarter ended

BROADBAND	3/31/2008 [1]			6/30/2008 [1]			9/30/2008 [1]			12/31/2008 [1]			3/31/2009 [1]			6/30/2009 [1]			9/30/2009 [1]			12/31/2009 [1]
Residential
Video
Marketable Homes - Fiber & HFC [2]		211,000			217,700			221,700			232,400			236,500			239,800			240,000			240,500
RGUs - Fiber & HFC		52,500			54,500			55,900			57,500			57,600			56,900			57,000			56,900
Qtrly change		800			2,000			1,400			1,600			100			(700	)		100			(100	)
YoY (% change)		6	%		9	%		10	%		11	%		10	%		4	%		2	%		-1	%
RGUs - Copper		2,700			2,600			2,600			2,600			2,400			2,200			2,200			2,200
Qtrly change		(200	)		(100	)		0			0			(200	)		(200	)		0			0
YoY (% change)		-13	%		-10	%		-13	%		-10	%		-11	%		-15	%		-15	%		-15	%
Penetration - Fiber & HFC		24.9	%		25.0	%		25.2	%		24.7	%		24.4	%		23.7	%		23.8	%		23.7	%
ARPU	$	63		$	62		$	59		$	59		$	65		$	67		$	66		$	68
Voice
Marketable Homes		286,600			292,200			296,600			304,200			308,200			309,300			309,400			309,700
RGUs		53,800			56,600			60,000			63,500			66,300			68,000			70,300			71,600
Qtrly change		300			2,800			3,400			3,500			2,800			1,700			2,300			1,300
YoY (% change)		3	%		7	%		13	%		19	%		23	%		20	%		17	%		13	%
Penetration		18.8	%		19.4	%		20.2	%		20.9	%		21.5	%		22.0	%		22.7	%		23.1	%
ARPU	$	32		$	33		$	32		$	32		$	33		$	33		$	31		$	30
Data
Marketable Homes		286,600			292,200			296,600			304,200			308,200			309,300			309,400			309,700
RGUs		91,800			94,000			95,700			97,400			98,100			97,700			97,700			98,500
Qtrly change		1,400			2,200			1,700			1,700			700			(400	)		0			800
YoY (% change)		7	%		7	%		7	%		8	%		7	%		4	%		2	%		1	%
Penetration		32.0	%		32.2	%		32.3	%		32.0	%		31.8	%		31.6	%		31.6	%		31.8	%
ARPU	$	37		$	37		$	36		$	36		$	37		$	38		$	38		$	40
Total
Marketable Homes - Fiber, HFC, Copper		286,600			292,200			296,600			304,200			308,200			309,300			309,400			309,700
RGUs		200,800			207,700			214,200			221,000			224,400			224,800			227,200			229,200
Qtrly change		2,300			6,900			6,500			6,800			3,400			400			2,400			2,000
YoY (% change)		5	%		7	%		9	%		11	%		12	%		8	%		6	%		4	%

Subscriber totals
Subscribers [3]		96,900			99,000			100,600			102,400			102,800			101,800			102,500			102,600
Qtrly change		1,100			2,100			1,600			1,800			400			(1,000	)		700			100
Penetration		33.8	%		33.9	%		33.9	%		33.7	%		33.4	%		32.9	%		33.1	%		33.1	%
ARPU [4]	$	89		$	89		$	88		$	89		$	94		$	97		$	96		$	99
Triple Play ARPU [5]	$	110		$	109		$	106		$	107		$	112		$	115		$	112		$	115
Triple Play RGUs per Subscriber [5]		2.59			2.60			2.60			2.59			2.59			2.58			2.57			2.57
Churn		1.4	%		1.5	%		1.7	%		1.4	%		1.4	%		1.7	%		1.8	%		1.5	%

Business [6]
Customers		6,000			6,200			6,300			6,500			6,700			6,800			7,000			7,100
ARPU	$	444		$	458		$	494		$	467		$	484		$	475		$	483		$	492

TELECOM	3/31/2008 [1]			6/30/2008 [1]			9/30/2008 [1]			12/31/2008 [1]			3/31/2009 [1]			6/30/2009 [1]			9/30/2009 [1]			12/31/2009 [1]
Residential
Voice
Marketable Homes		89,900			90,000			90,500			90,800			90,800			90,900			90,900			91,000
RGUs [7]		66,800			62,900			58,500			54,000			49,500			45,100			41,300			38,500
RGU Migration to Broadband Voice [8]		0			1,400			2,900			4,700			6,900			9,000			10,700			11,800
Penetration		74.3	%		69.9	%		64.6	%		59.5	%		54.5	%		49.6	%		45.4	%		42.3	%
ARPU	$	44		$	44		$	43		$	43		$	44		$	45		$	45		$	44
Churn		2.3	%		2.1	%		2.4	%		2.2	%		2.1	%		2.3	%		2.3	%		2.0	%

Business [6]
Customers		9,600			9,600			9,400			9,200			9,000			8,900			8,700			8,500
ARPU	$	311		$	341		$	354		$	327		$	332		$	339		$	329		$	334

CONSOLIDATED RESIDENTIAL VOICE RGUs
ILEC Voice RGUs
Broadband		100			2,000			4,400			7,100			9,900			12,400			14,700			16,200
Telecom		66,800			62,900			58,500			54,000			49,500			45,100			41,300			38,500
Total ILEC Voice RGUs [9]		66,900			64,900			62,900			61,100			59,400			57,500			56,000			54,700
Qtrly change		(2,300	)		(2,000	)		(2,000	)		(1,800	)		(1,700	)		(1,900	)		(1,500	)		(1,300	)
YoY (% change)		-13	%		-13	%		-12	%		-12	%		-11	%		-11	%		-11	%		-10	%
CLEC Residential Voice RGUs [10]		53,700			54,600			55,600			56,400			56,400			55,600			55,600			55,400
TOTAL Residential Voice RGUs [11]		118,300			119,500			118,500			117,500			115,800			113,100			111,600			110,100
Qtrly change		(4,400	)		1,200			(1,000	)		(1,000	)		(1,700	)		(2,700	)		(1,500	)		(1,500	)
YoY (% change)		-9	%		-6	%		-5	%		-4	%		-2	%		-5	%		-6	%		-6	%

NETWORK METRICS	3/31/2008 [1]		6/30/2008 [1]		9/30/2008 [1]		12/31/2008 [1]		3/31/2009 [1]		6/30/2009 [1]		9/30/2009 [1]		12/31/2009 [1]
Marketable Homes - Fiber		119,900		125,700		129,000		138,800		142,900		146,900		147,100		147,600
Marketable Homes - HFC		91,100		92,000		92,700		93,600		93,600		92,900		92,900		92,900
Marketable Homes - Copper		75,600		74,500		74,900		71,800		71,700		69,500		69,400		69,200
Total		286,600		292,200		296,600		304,200		308,200		309,300		309,400		309,700
Qtrly change		2,700		5,600		4,400		7,600		4,000		1,100		100		300

[1] The calculation of certain metrics have been revised over time to reflect the current view of our business. Where necessary prior period metric calculations have been revised to conform with current practice. All amounts rounded to the nearest 100s,

[2] Marketable Homes - Fiber & HFC consists of Sacramento fiber homes and Kansas City hybrid fiber coax (HFC) homes.

[3] A residential subscriber is a customer who subscribers to one or more residential RGUs.

[4] ARPU is the total residential revenue per average subscriber.

[5] Triple play ARPU and RGU per Subscriber includes the total residential revenue per average subscriber and ending RGUs per ending subscriber for the triple play markets, excluding the ILEC market.

[6] A business customer is a customer who subscribes to business data, voice or video and represents a unique customer account. ARPU is the total business revenue per average customer.

[7] A voice RGU is a residential customer who subscribers to one or more voice access line.

[8] Telecom Voice RGU Migration to Broadband Voice are residential Telecom voice RGUs in Line [7] that have ported their Telecom primary access line service to Broadband VoIP.

[9] Telecom Churn excludes disconnects in Line [8] that have ported their Telecom primary access line service to Broadband VoIP.

[10] ILEC Voice RGUs are the total residential voice RGUs in the ILEC franchise market area that are either a Telecom primary access line or Broadband VoIP subscriber.

[11] CLEC Voice RGUs are the total residential voice RGUs in the Kansas City and Sacramento markets, excluding the ILEC market.

[12] Total Voice RGUs are the total of ILEC and CLEC residential voice RGUs, and represent the total company residential voice RGUs of both the Broadband and Telecom Segments.

[13] For information purposes, sequential Telecom access line counts (residential and business) were: 110,200 105,900 100,200 94,600 88,400 82,600 77,600 73,200

SUREWEST COMMUNICATIONS - Consolidated Operations

SELECTED OPERATING METRICS

As of and for the quarter ended

BROADBAND	12/31/2009 [1]			12/31/2008 [1]			Chg			Chg %			9/30/2009 [1]			Chg			Chg %
Residential
Video
Marketable Homes - Fiber & HFC [2]		240,500			232,400			8,100			3	%		240,000			500			0	%
RGUs - Fiber & HFC		56,900			57,500			(600	)		-1	%		57,000			(100	)		0	%
RGUs - Copper		2,200			2,600			(400	)		-15	%		2,200			0			0	%
Penetration - Fiber & HFC		23.7	%		24.7	%		-1.1	%		-4	%		23.8	%		-0.1	%		0	%
ARPU	$	68		$	59		$	9			15	%	$	66		$	2			3	%
Voice
Marketable Homes		309,700			304,200			5,500			2	%		309,400			300			0	%
RGUs		71,600			63,500			8,100			13	%		70,300			1,300			2	%
Penetration		23.1	%		20.9	%		2.2	%		11	%		22.7	%		0.4	%		2	%
ARPU	$	30		$	32		$	(2	)		-5	%	$	31		$	(1	)		-2	%
Data
Marketable Homes		309,700			304,200			5,500			2	%		309,400			300			0	%
RGUs		98,500			97,400			1,100			1	%		97,700			800			1	%
Penetration		31.8	%		32.0	%		-0.2	%		-1	%		31.6	%		0.2	%		1	%
ARPU	$	40		$	36		$	4			11	%	$	38		$	2			5	%
Total
Marketable Homes - Fiber, HFC, Copper		309,700			304,200			5,500			2	%		309,400			300			0	%
RGUs		229,200			221,000			8,200			4	%		227,200			2,000			1	%

Subscriber totals
Subscribers [3]		102,600			102,400			200			0	%		102,500			100			0	%
Penetration		33.1	%		33.7	%		-0.5	%		-2	%		33.1	%		0.0	%		0	%
ARPU [4]	$	99		$	89		$	10			12	%	$	96		$	3			3	%
Triple Play ARPU [5]	$	115		$	107		$	8			8	%	$	112		$	3			3	%
Triple Play RGUs per Subscriber [5]		2.57			2.59			(0.01	)		-1	%		2.57			0.01			0	%
Churn		1.5	%		1.4	%		0.1	%		10	%		1.8	%		-0.3	%		-18	%

Business [6]
Customers		7,100			6,500			600			9	%		7,000			100			1	%
ARPU	$	492		$	467		$	25			5	%	$	483		$	9			2	%

TELECOM	12/31/2009 [1]			12/31/2008 [1]			Chg			Chg %			9/30/2009 [1]			Chg			Chg %
Residential
Voice
Marketable Homes		91,000			90,800			200			0	%		90,900			100			0	%
RGUs [7]		38,500			54,000			(15,500	)		-29	%		41,300			(2,800	)		-7	%
Cumulative Migration to Broadband Voice [8]		11,800			4,700			7,100			151	%		10,700			1,100			10	%
Penetration		42.3	%		59.5	%		-17.2	%		-29	%		45.4	%		-3.1	%		-7	%
ARPU	$	44		$	43		$	1			2	%	$	45		$	(1	)		-2	%
Churn [9]		2.0	%		2.2	%		-0.2	%		-9	%		2.3	%		-0.3	%		-14	%

Business [6]
Customers		8,500			9,200			(700	)		-8	%		8,700			(200	)		-2	%
ARPU	$	334		$	327		$	7			2	%	$	329		$	5			2	%

CONSOLIDATED RESIDENTIAL VOICE RGUs
ILEC Voice RGUs
Broadband	16,200	7,100	9,100		128	%	14,700	1,500		10	%
Telecom	38,500	54,000	(15,500	)	-29	%	41,300	(2,800	)	-7	%
Total ILEC Voice RGUs [10]	54,700	61,100	(6,400	)	-10	%	56,000	(1,300	)	-2	%
CLEC Residential Voice RGUs [11]	55,400	56,400	(1,000	)	-2	%	55,600	(200	)	0	%
TOTAL Residential Voice RGUs [12]	110,100	117,500	(7,400	)	-6	%	111,600	(1,500	)	-1	%

NETWORK METRICS	12/31/2009 [1]		12/31/2008 [1]		Chg			Chg %			9/30/2009 [1]		Chg			Chg %
Marketable Homes - Fiber		147,600		138,800		8,800			6	%		147,100		500			0	%
Marketable Homes - HFC		92,900		93,600		(700	)		-1	%		92,900		0			0	%
Marketable Homes - Copper		69,200		71,800		(2,600	)		-4	%		69,400		(200	)		0	%
Total		309,700		304,200		5,500			2	%		309,400		300			0	%

[2] Marketable Homes - Fiber & HFC consists of Sacramento fiber homes and Kansas City hybrid fiber coax (HFC) homes.

[3] A residential subscriber is a customer who subscribers to one or more residential RGUs.

[4] ARPU is the total residential revenue per average subscriber.

[5] Triple play ARPU includes the total residential revenue per average subscriber and Triple play RGUs per Subscriber includes ending RGUs per ending subscriber, for the triple play markets, excluding the ILEC market.

[6] A business customer is a customer who subscribes to business data, voice or video and represents a unique customer account. ARPU is the total business revenue per average customer.

[7] A voice RGU is a residential customer who subscribers to one or more voice access line.

[8] Telecom Voice RGU Migration to Broadband Voice are residential Telecom voice RGUs in Line [7] that have ported their Telecom primary access line service to Broadband VoIP.

[9] Telecom Churn excludes disconnects in Line [8] that have ported their Telecom primary access line service to Broadband VoIP.

[10] ILEC Voice RGUs are the total residential voice RGUs in the ILEC franchise market area that are either a Telecom primary access line or Broadband VoIP subscriber.

[11] CLEC Voice RGUs are the total residential voice RGUs in the Kansas City and Sacramento markets, excluding the ILEC market.

[12] Total Voice RGUs are the total of ILEC and CLEC residential voice RGUs, and represent the total company residential voice RGUs of both the Broadband and Telecom Segments.

[13] Telecom access lines include residential and business access lines. For information purposes, access line counts were 94,600 at 12/31/08, 77,600 at 9/30/09, and 73,200 at 12/31/09.

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