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SureWest Reports Fourth Quarter and Full Year 2011 Results

ROSEVILLE, Calif., Feb. 29, 2012 /PRNewswire/ -- SureWest Communications (NASDAQ: SURW) today announced operating results for the fourth quarter and full year ended December 31, 2011.

(Logo: http://photos.prnewswire.com/prnh/20050908/SFSUREWESTLOGO)

Steve Oldham, SureWest's president and chief executive officer, said, "Our strong 2011 results were highlighted by top-line business and residential services revenue growth, driving an increase in adjusted EBITDA. Our core Broadband segment now accounts for 77% of the company's total revenues and 54% of total adjusted EBITDA. SureWest's business services revenues continue to be an important part of delivering long-term, sustainable growth due to positive trends in Kansas City and increased bandwidth demands for backhaul services to wireless carriers. We continue to increase the take rates of our residential products like Advanced Digital TV, high-speed Internet and Broadband Voice over IP. During the year, we also added 15,400 new fiber homes in Kansas City that we are aggressively targeting.

"The investments we've made over the last several years to expand our extensive fiber-to-the-home network and enhance our suite of services have delivered excellent returns and offer many opportunities for additional value creation. Our knowledge and innovation is what drives SureWest's strong continued growth and underscores the strategic benefits of the recently announced acquisition of our company by Consolidated Communications. The combination with Consolidated is highly accretive and brings together Consolidated's strong cash flow with SureWest's proven broadband growth strategy. Customers and shareholders alike will benefit from the combined company's greater scale, scope and financial resources."

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


                                               Y-O-Y comparison                             Full Year comparison
                                               ----------------                             --------------------
    Consolidated                Q4'11        Q4'10       Change          %            2011       2010    Change      %
                                -----        -----       ------         ---           ----       ----    ------     ---
      Broadband
       Revenue                 $49,010      $45,032       $3,978           9%     $188,366   $174,546     $13,820      8%
      Telecom
       Revenue                  14,529       16,614      (2,085)        (13%)       59,687     68,953      (9,266)  (13%)
    Total
     Revenue                    63,539       61,646        1,893           3%      248,053    243,499       4,554      2%
    Adjusted
     EBITDA                     21,602       21,780         (178)        (1%)       84,431     82,511       1,920      2%
    Net Income                   1,483        1,951         (468)       (24%)        1,802      3,355      (1,553)  (46%)
    Capital
     Expenditures               21,747       13,289        8,458          64%       72,528     52,560      19,968     38%
    Net Cash
     Provided
     by
     Operating
     Activities                 20,259    17,044     3,215       19%    81,448     63,553   17,895    28%
    Free Cash
     Flow                      (4,241)        4,439      (8,680)       (196%)       (6,761)    12,620     (19,381) (154%)
    Adjusted
     Free Cash
     Flow                        3,281        4,465      (1,184)        (27%)       16,651     13,931       2,720     20%
    Net Debt                   200,167      202,472      (2,305)         (1%)      200,167    202,472      (2,305)   (1%)
    --------                   -------      -------       ------        ----       -------    -------      ------   ----
    See Non-GAAP measure notes near end of release, and Adjusted EBITDA, Free Cash
     Flow, Adjusted Free Cash Flow and Net Debt reconciliations for adjustments.

Fourth Quarter Financial Results

Consolidated revenues increased 3% year-over-year to $63.5 million as Broadband revenues grew by $4 million, or 9%, more than offsetting Telecom revenue declines of $2.1 million, or 13%. Adjusted EBITDA declined 1% year-over-year to $21.6 million, with Broadband adjusted EBITDA increasing 8% to account for 54% of total adjusted EBITDA, offsetting most of the Telecom adjusted EBITDA decline of 10%. SureWest expects to continue increasing its Broadband revenues and adjusted EBITDA through expansion of both residential and business product offerings. The long-term strategy remains growing the Broadband segment while continuing to successfully offset industry-wide structural declines in the traditional Telecom segment.

Operating expenses, exclusive of depreciation and amortization, increased 5% year-over-year to $43.0 million due primarily to increases in residential video license fees and transport charges associated with commercial services growth and advertising expense offset slightly by office consolidation savings.

Net income for the quarter was $1.48 million compared to net income of $1.95 million in the same period last year. Earnings per share from continuing operations were $0.11 compared to $0.14 in the fourth quarter 2010 and $0.05 in the third quarter 2011.

Capital expenditures totaled $21.7 million for the fourth quarter and $72.5 million for the full year 2011, an increase from $52.6 million in 2010. During the quarter, SureWest added 5,800 new marketable homes on its fiber-to-the-home (FTTH) network in Kansas City and a total of 15,400 new fiber homes for the full year 2011. Also during the quarter, the company upgraded 2,800 ILEC territory copper homes with Advanced Digital TV service and completed 8,600 upgrades during 2011. These upgrades increased the percentage of fiber and copper triple-play marketable homes in the ILEC to 66%, up from 57% in the fourth quarter of 2010. The 2012 capital plan prioritizes spending where the company has experienced the greatest return on investment. This includes continued business sales growth opportunities, residential RGU growth and increased residential penetration. The company plans to pass 11,000 additional fiber homes during 2012 in Kansas City where it has experienced superior penetration levels. SureWest is reiterating projected capital expenditures of $60-70 million in 2012.

Free cash flow, defined as income from continuing operations plus depreciation and amortization less capital expenditures, was negative $4.2 million for the quarter and negative $6.8 million for the full year 2011, compared to positive $12.6 million in 2010. This decline was expected as a result of the $23.4 million investment in network expansion in 2011 compared to $1.3 million in 2010. Adjusted free cash flow, defined as free cash flow excluding capital investments in network expansion, increased 20% year-over-year to $16.7 million.

Cash and cash equivalents increased year-over-year to $4.2 million from $2.9 million. Total debt net of cash and cash equivalents (net debt) was $200.2 million, resulting in a net debt to adjusted EBITDA ratio of 2.37x.

Broadband Segment Results

Broadband revenues increased 9% year-over-year and accounted for 77% of the company's total revenues, compared to 73% in the fourth quarter 2010. Broadband adjusted EBITDA increased 8% year-over-year and now represents 54% of the company's total adjusted EBITDA. Broadband adjusted EBITDA will be impacted in the first quarter when the company incurs increases in video license fees that do not coincide with a customer price increase, which in 2012, is scheduled for the second quarter.

Broadband Residential:

Broadband Residential revenues increased 7% year-over-year to $34 million as a result of 5% growth in average revenue per user (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 '11 vs. Q4 '10 Change    Q4 '11 vs. Q3 '11 Change
                      ------------------------    ------------------------
                                   Kansas                      Kansas
                      Sacramento    City             Sacramento City
                         Market    Market     Total     Market    Market  Total
                      -----------  ------     -----  -----------  ------  -----
    Broadband
     Residential RGUs           3%      5%        4%           1%      2%     1%
    Data RGUs                   0%      8%        3%           0%      3%     1%
    Video RGUs                  9%      7%        7%           2%      3%     2%
    Voice RGUs                  4%    (1%)        2%           0%      0%     0%
    Total Residential
     Subscribers                0%      7%        3%           0%      3%     1%

The Sacramento region's Advanced Digital TV product continued to drive growth, helping to increase net video RGUs by 2,230 year-over-year and 530 sequentially. SureWest had 21,662 Advanced Digital TV subscribers through the fourth quarter, representing 78% of the company's overall video RGUs in the Sacramento market. Approximately 98% of the Advanced Digital TV subscribers bundle Internet and 79% subscribe to a triple-play with ARPU of $148.

ARPU for customers on SureWest's FTTH and hybrid fiber coaxial (HFC) networks increased 2% year-over-year to $117 due to video and data price increases in July 2011.

Residential customer churn improved year-over-year and sequentially in the fourth quarter from 1.6% to 1.4% as a result of churn reduction programs such as Advanced Digital TV video upgrades on the copper network, as well as ongoing superior customer service and value-added features like additional HD channels and increased Internet speeds.

Broadband Business:

Broadband Business revenues increased by $1.8 million, or 15%, year-over-year to $14.2 million. Business customers increased 3% year-over-year to 8,000 and ARPU grew 11% from the prior year to $592. The Kansas City market grew ARPU by 11% year-over-year while increasing customer counts by 3%. The Sacramento market grew customers by 4% while ARPU increased by 11% driven by wireless carrier backhaul and existing customers taking additional products. Broadband Business growth expectations remain high in both Sacramento and Kansas City.

As of December 31, 2011, SureWest was billing for 322 wireless backhaul access points at annualized revenues of $3.6 million. The company is now scheduled to bill for over 398 backhaul connections by third quarter 2012 with over $4.5 million in annualized revenues when those sites become active. Opportunities continue to be pursued to serve additional connections in both the Sacramento and Kansas City markets.

Telecom Segment Results

Telecom revenues declined $2.1 million, or 12.5%, year-over-year to $14.5 million, consistent with the industry-wide trend of declines in access lines, minutes of use and access revenues. This was partially due to the decrease of $1 million in regulatory support revenues that were reduced as scheduled in the first quarter 2011. The company's scheduled state regulatory support declines began in 2006 and will be fully phased out in the first quarter 2012.

The Telecom segment has consistently generated adjusted EBITDA margins over 40% and continues to generate significant free cash flow, which is utilized to reduce debt and fund Broadband segment expansion. As the company focuses on growing its Broadband segment, the Telecom segment will continue to account for a smaller percentage of total revenues. For the fourth quarter 2011, Telecom revenues were 23% of total company revenues compared to 27% in the fourth quarter of 2010.

Additionally, voice line loss is declining and is having less of an impact on overall financial performance. Fourth quarter 2011 year-over-year consolidated ILEC voice RGU loss was 3,800, compared to a loss of 4,800 in the fourth quarter 2010. In addition, fourth quarter 2011 consolidated year-over-year loss in ILEC and CLEC voice RGUs combined was 4,400, compared to a loss of 6,000 in the fourth quarter 2010.

Telecom Residential:

Telecom Residential revenues declined 21% year-over-year to $3.1 million resulting from a 20% decline in Telecom voice RGUs. However, of the 5,900 year-over-year Telecom Residential voice RGU losses, 2,600, or 44%, migrated to the SureWest Broadband Voice over IP service. The migration of existing Telecom ILEC access lines to Broadband VoIP enables the continued preservation of voice revenues on a consolidated basis.

Telecom Business:

Telecom Business revenues declined 2% year-over-year to $8.4 million as a result of a 3% decrease in business customers in the ILEC territory. The company is experiencing competitive pressure in the very small business customer segments; however medium and large ILEC business customers remain stable.

Telecom Access:

Telecom Access revenues decreased $1.1 million year-over-year to $3.0 million primarily due to the scheduled reduction in the California High Cost Fund (CHCF) subsidy, the elimination of the transport interconnection charge (TIC) and the decline in switched access revenues related to access line loss and declining minutes of use. The combined annual regulatory support related to CHCF and TIC declined roughly $4.0 million in 2011 from $6.1 million in 2010 to $2.0 million in 2011 - and will be zero in 2012. In the first quarter of 2012, the company will have an expected quarterly revenue decline of $500 thousand related to the final phase out of the CHCF.

Merger Update

As previously announced on February 6, 2012, SureWest entered into a definitive merger agreement under which Consolidated Communications (Nasdaq: CNSL) will acquire all the outstanding shares of SureWest in a cash and stock transaction valued at $23.00 per share, or a total of approximately $340.9 million, exclusive of debt. The consideration represents a 47% premium to SureWest's stock price as of the close on February 3, 2012. Subject to the satisfaction of customary closing conditions, including federal and state regulatory approvals and the approval by both Consolidated and SureWest shareholders, the transaction is expected to close in the second half of 2012. The transaction was unanimously approved by the boards of directors of both companies.

The merger agreement is attached as Exhibit 2.1 to the Current Report on Form 8-K that SureWest filed with the Securities and Exchange Commission on February 8, 2012.

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, adjusted free cash flow and net debt. Adjusted EBITDA represents net income (loss) excluding amounts for income taxes, depreciation and amortization, non-cash pension and certain post-retirement benefits, non-cash stock compensation, severance and other related termination costs, and all other non-operating income/expenses. Free cash flow represents net income (loss) plus depreciation and amortization less capital expenditures. Adjusted free cash flow represents free cash flow as defined above, excluding the network expansion capital investments. Free cash flow and adjusted free cash flow are a measure of operating cash flows available for corporate purposes after providing sufficient fixed asset additions to maintain current productive capacity. Net debt represents total long-term debt (including current maturities) less cash and cash equivalents. Net debt can be used as a component in measuring leverage. 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. Reconciliations to the comparable GAAP measures are 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 Communications will not host an investor call with respect to the financial results.

Additional Information and Where to Find It

In connection with the proposed transaction, Consolidated will file a registration statement on Form S-4 with the SEC, which will include the proxy statement and also constitute a prospectus with respect to the Consolidated common stock. SureWest will mail the proxy statement/prospectus to its shareholders once the Form S-4 has been declared effective. INVESTORS ARE URGED TO READ THE REGISTRATION STATEMENT AND PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS) BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Once filed with the SEC, investors may obtain free copies of the registration statement and proxy statement/prospectus, as well as other filings containing information about Consolidated and SureWest, without charge, at the SEC's website (www.sec.gov). These documents may also be obtained free of charge from SureWest's Investor Relations website (www.surw.com) or by directing a request to: SureWest Investor Relations, P.O. Box 969, Roseville, CA 95678 or by calling 916.786.1831. Copies of Consolidated's filings may be obtained free of charge from Consolidated's Investor Relations website (http://ir.consolidated.com) or by directing a request to: Consolidated Investor Relations, 121 South 17th Street, Mattoon, IL 61938.

SureWest, Consolidated and their respective officers and directors may be deemed, under SEC rules, to be participants in the solicitation of proxies from shareholders with respect to the proposed Merger. Information regarding the officers and directors of SureWest is included in its definitive proxy statement for its 2011 annual meeting filed with the SEC on April 7, 2011. Information regarding the officers and directors of Consolidated is included in its definitive proxy statement for its 2011 annual meeting filed with the SEC on March 30, 2011. More detailed information regarding the identity of potential participants in the solicitation, and their direct or indirect interests, by securities, holdings or otherwise, which interests may be different from those of the company's shareholders generally, will be set forth in the proxy statement/prospectus and other materials to be filed with the SEC in connection with the proposed transaction.

About SureWest

SureWest Communications is a leading integrated communications provider and the bandwidth leader in the markets it serves. Headquartered in Northern California for more than 95 years, SureWest offers bundled residential and commercial services in the greater Sacramento and Kansas City regions 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. For up-to-date information on products and services, visit the company on Facebook and Twitter.

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

                                                Quarters Ended
                                                --------------
                                      December 31,      September 30,            $        %
                                              2011               2011      Change      Change
                                              ----               ----      ------      ------
    Operating
     revenues:
      Broadband                            $49,010            $48,018         $992          2%
      Telecom                               14,529             14,979         (450)       (3%)
                                            ------             ------         ----       ----
        Total
         operating
         revenues                           63,539             62,997          542          1%

    Operating
     expenses:
      Cost of
       services and
       products
       (exclusive
       of
       depreciation
       and
       amortization)                        28,919          28,566       353        1%
      Customer
       operations
       and selling                           7,631              7,771         (140)       (2%)
      General and
       administrative                        6,496              6,879         (383)       (6%)
      Depreciation
       and
       amortization                         16,023             15,810          213          1%
                                            ------             ------          ---        ---
        Total
         operating
         expenses                           59,069             59,026           43          0%
                                            ------             ------          ---        ---

    Income from
     operations                              4,470              3,971          499         13%

    Other income
     (expense):
         Investment
          income                                 3                  4           (1)      (25%)
         Interest
          expense                           (2,074)            (2,497)         423         17%
         Other, net                            208               (546)         754        138%
                                               ---               ----          ---        ---
        Total other
         income
         (expense),
         net                                (1,863)            (3,039)       1,176         39%
                                            ------             ------        -----        ---

    Income from
     operations
     before
     income taxes                            2,607                932        1,675        180%

    Income tax
     expense                                 1,124                289          835        289%
                                             -----                ---          ---        ---

    Net income                              $1,483               $643         $840        131%
                                            ======               ====         ====        ===

    Basic and
     diluted
     earnings per
     share                                   $0.11              $0.05        $0.06
                                             =====              =====        =====

    Shares of
     common stock
     used to
     calculate
     earnings per
     share:
      Basic                                 13,948             13,918           30
                                            ======             ======          ===
      Diluted                               14,035             14,023           12
                                            ======             ======          ===

    Dividends per
     share                                   $0.10              $0.08        $0.02
                                             =====              =====        =====


                                  SUREWEST COMMUNICATIONS
                             CONSOLIDATED STATEMENTS OF INCOME
                    (Unaudited; Amounts in thousands, except per share
                                          amounts)

                                          Quarters Ended
                                           December 31,                 $         %
                                         ---------------
                                        2011          2010      Change       Change
                                        ----          ----      ------       ------
    Operating
     revenues:
      Broadband                      $49,010       $45,032       $3,978            9%
      Telecom                         14,529        16,614      (2,085)         (13%)
                                      ------        ------       ------        -----
        Total operating
         revenues                     63,539        61,646        1,893            3%

    Operating
     expenses:
      Cost of services
       and products
       (exclusive of
       depreciation and
       amortization)                  28,919     26,948     1,971         7%
      Customer
       operations and
       selling                         7,631         7,095          536            8%
      General and
       administrative                  6,496         6,828         (332)         (5%)
      Depreciation and
       amortization                   16,023        15,777          246            2%
                                      ------        ------          ---          ---
        Total operating
         expenses                     59,069        56,648        2,421            4%
                                      ------        ------        -----          ---

    Income from
     operations                        4,470         4,998         (528)        (11%)

    Other income
     (expense):
         Investment income                 3            15          (12)        (80%)
         Interest expense             (2,074)       (2,157)          83            4%
         Other, net                      208           107          101           94%
                                         ---           ---          ---          ---
        Total other income
         (expense), net               (1,863)       (2,035)         172            8%
                                      ------        ------          ---          ---

    Income from
     operations before
     income taxes                      2,607         2,963         (356)        (12%)

    Income tax expense                 1,124         1,012          112           11%
                                       -----         -----          ---          ---

    Net income                        $1,483        $1,951        $(468)        (24%)
                                      ======        ======        =====        =====

    Basic and diluted
     earnings per
     share                             $0.11         $0.14       $(0.03)
                                       =====         =====       ======

    Shares of common
     stock used to
     calculate
     earnings per
     share:
      Basic                           13,948        13,694          254
                                      ======        ======          ===
      Diluted                         14,035        13,694          341
                                      ======        ======          ===

    Dividends per
     share                             $0.10            $-        $0.10
                                       =====           ===        =====


                                        SUREWEST COMMUNICATIONS
                                   CONSOLIDATED STATEMENTS OF INCOME
                      (Unaudited; Amounts in thousands, except per share amounts)

                                             Years Ended December 31,                  $          %
                                             ------------------------
                                                 2011             2010        Change         Change
                                                 ----             ----        ------         ------
    Operating
     revenues:
      Broadband                              $188,366         $174,546         $13,820             8%
      Telecom                                  59,687           68,953          (9,266)         (13%)
                                               ------           ------          ------         -----
        Total
         operating
         revenues                             248,053          243,499           4,554             2%

    Operating
     expenses:
      Cost of
       services
       and
       products
       (exclusive
       of
       depreciation
       and
       amortization)                          110,271       105,719        4,552          4%
      Customer
       operations
       and selling                             29,777           29,637             140             0%
      General and
       administrative                          29,315           31,124          (1,809)          (6%)
      Depreciation
       and
       amortization                            63,965           61,825           2,140             3%
                                               ------           ------           -----           ---
        Total
         operating
         expenses                             233,328          228,305           5,023             2%
                                              -------          -------           -----           ---

    Income from
     operations                                14,725           15,194            (469)          (3%)

    Other income
     (expense):
      Investment
       income                                      39               77             (38)         (49%)
      Interest
       expense                                (11,586)          (8,346)         (3,240)         (39%)
      Other, net                                  (41)            (216)            175            81%
                                                  ---             ----             ---           ---
        Total other
         income
         (expense),
         net                                  (11,588)          (8,485)         (3,103)         (37%)
                                              -------           ------          ------         -----

    Income from
     operations
     before
     income
     taxes                                      3,137         6,709       (3,572)      (53%)

    Income tax
     expense                                    1,335            3,354          (2,019)         (60%)
                                                -----            -----          ------         -----

    Net income                                 $1,802           $3,355         $(1,553)         (46%)
                                               ======           ======         =======         =====

    Basic and
     diluted
     earnings
     per share                                  $0.13            $0.24          $(0.11)
                                                =====            =====          ======

    Shares of
     common
     stock used
     to
     calculate
     earnings
     per share:
      Basic                                    13,876           13,836              40
                                               ======           ======             ===
      Diluted                                  13,936           13,836             100
                                               ======           ======             ===

    Dividends
     per share                                  $0.26               $-           $0.26
                                                =====              ===           =====


    SureWest Communications
    Quarterly Selected Financial Results & Reconciliations of Non-GAAP Measures
    (on a consolidated and a segment basis)
     (Unaudited; Amounts in thousands)

    Consolidated Results of Operations

                                                                                                       Twelve Months                                                                      Twelve Months
                                                         For 2010 Quarters Ended:                                                                       Ended                             For 2011 Quarters Ended:                                                                    Ended            Twelve Months      Quarter        Sequential
                                                         ------------------------                                                                         ------------------------                                Year-over-Year             Year-over-Year              Qtr-over-Qtr
                                                                                                                                                                                                                  --------------             --------------              ------------
                                       March 31      June 30       September 30   December 31        December 31,    March 31      June 30       September 30      December 31        December 31,             $chg         %            $chg         %            $chg         %
                                       --------      -------       ------------   -----------        ------------    --------      -------       ------------      -----------        ------------             ----        ---           ----        ---           ----        ---
                                                                                                               2010                                                                             2011
                                                                                                               ----                                                                             ----
    Operating revenues
      (1)
    Broadband                           $42,577       $43,076           $43,861       $45,032              $174,546   $45,379       $45,959           $48,018          $49,010              $188,366        $13,820           8%       $3,978           9%         $992           2%
    Telecom                              17,611        17,472            17,256        16,614                68,953    15,176        15,003            14,979           14,529                59,687         (9,266)       (13%)       (2,085)       (13%)         (450)        (3%)
                                                                                                                                                                                                                          -----                     -----                      ----
    Total operating
     revenues                            60,188        60,548            61,117        61,646               243,499    60,555        60,962            62,997           63,539               248,053          4,554           2%        1,893           3%          542           1%
                                         ------        ------            ------        ------               -------    ------        ------            ------           ------               -------          -----         ---         -----         ---           ---         ---

    Operating expenses
     (1)                                 41,940        43,249            40,420        40,871               166,480    42,792        40,309            43,216           43,046               169,363          2,883           2%        2,175           5%         (170)        (0%)
    Depreciation and
     amortization                        15,106        15,262            15,680        15,777                61,825    15,775        16,357            15,810           16,023                63,965          2,140           3%          246           2%          213           1%
                                                                                                                                                                                                                            ---                       ---                       ---
    Income from
     operations                          $3,142        $2,037            $5,017        $4,998               $15,194    $1,988        $4,296            $3,971           $4,470               $14,725          $(469)        (3%)        $(528)       (11%)         $499          13%
                                         ======        ======            ======        ======               =======    ======        ======            ======           ======               =======          =====        ====         =====       =====          ====         ===


     Consolidated Reconciliation of Adjusted EBITDA to Net Income (Loss)

                                                                                               Twelve Months                                                              Twelve Months
                                                     For 2010 Quarters Ended:                                                                   Ended                         For 2011 Quarters Ended:                                                                          Ended    Twelve Months            Quarter     Sequential
                                                     ------------------------                                                             ------------------------                              Year-over-Year           Year-over-Year            Qtr-over-Qtr
                                                                                                                                                                                                --------------           --------------            ------------
                                       March 31      June 30       September 30   December 31        December 31,    March 31      June 30       September 30      December 31        December 31,             $chg      %               $chg      %               $chg      %
                                       --------      -------       ------------   -----------        ------------    --------      -------       ------------      -----------        ------------             ----      ---             ----      ---             ----      ---
                                                                                                               2010                                                                             2011
                                                                                                               ----                                                                             ----
    Net income (loss)                      $527         $(527)           $1,404        $1,951                $3,355   $(1,644)       $1,320              $643           $1,483                $1,802        $(1,553)       (46%)        $(468)       (24%)         $840         131%
    Add: income tax
     expense                                824           190             1,328         1,012                 3,354      (562)          484               289            1,124                 1,335         (2,019)       (60%)          112          11%          835         289%

    Less: other
     (income)/expense                     1,791         2,374             2,285         2,035                 8,485     4,194         2,492             3,039            1,863                11,588          3,103          37%         (172)        (8%)       (1,176)       (39%)
                                          -----         -----             -----         -----                 -----     -----         -----             -----            -----                ------          -----         ---          ----        ----        ------       -----
    Income from
     operations                           3,142         2,037             5,017         4,998                15,194     1,988         4,296             3,971            4,470                14,725           (469)        (3%)         (528)       (11%)          499          13%
    Add (subtract):
      Depreciation and
       amortization                      15,106        15,262            15,680        15,777                61,825    15,775        16,357            15,810           16,023                63,965          2,140           3%          246           2%          213           1%
      Non-cash pension
       expense                              420           341               371           371                 1,503       313           394               351              346                 1,404            (99)        (7%)          (25)        (7%)           (5)        (1%)
      Non-cash stock
       compensation
       expense                              800         1,144               267           634                 2,845     1,645         1,182               747              763                 4,337          1,492          52%          129          20%           16           2%
      Severance and
       other related
       costs (3)                              -         1,144                 -             -                 1,144         -             -                 -                -                     -         (1,144)      (100%)            -           -             -           -
                                                                                                                                                                                                                         ------
    Adjusted EBITDA
     (2)                                $19,468       $19,928           $21,335       $21,780               $82,511   $19,721       $22,229           $20,879          $21,602               $84,431         $1,920           2%        $(178)        (1%)         $723           3%
                                        =======       =======           =======       =======               =======   =======       =======           =======          =======               =======         ======         ===         =====        ====          ====         ===

    Adjusted EBITDA
     margin                                  32%           33%               35%           35%                   34%       33%           36%               33%              34%                   34%


     Consolidated Free Cash Flow and Adjusted Free Cash Flow

                                                                                               Twelve Months                                                              Twelve Months
                                                     For 2010 Quarters Ended:                                                                   Ended                         For 2011 Quarters Ended:                                                                          Ended    Twelve Months            Quarter     Sequential
                                                     ------------------------                                                             ------------------------                              Year-over-Year           Year-over-Year            Qtr-over-Qtr
                                                                                                                                                                                                --------------           --------------            ------------
                                       March 31      June 30       September 30   December 31        December 31,    March 31      June 30       September 30      December 31        December 31,             $chg      %               $chg      %               $chg      %
                                       --------      -------       ------------   -----------        ------------    --------      -------       ------------      -----------        ------------             ----      ---             ----      ---             ----      ---
                                                                                                               2010                                                                             2011
                                                                                                               ----                                                                             ----
    Net income (loss)                      $527         $(527)           $1,404        $1,951                $3,355   $(1,644)       $1,320              $643           $1,483                $1,802        $(1,553)       (46%)        $(468)       (24%)         $840         131%
    Add: Depreciation
     and amortization                    15,106        15,262            15,680        15,777                61,825    15,775        16,357            15,810           16,023                63,965          2,140           3%          246           2%          213           1%
    Less: Capital
     expenditures                      (12,536)      (13,878)           (12,857)      (13,289)              (52,560) (11,452)      (20,671)           (18,658)         (21,747)              (72,528)       (19,968)       (38%)       (8,458)       (64%)       (3,089)       (17%)
                                        -------       -------           -------       -------               -------   -------       -------           -------          -------               -------        -------       -----        ------       -----        ------       -----
    Free cash flow (4)                    3,097           857             4,227         4,439                12,620     2,679        (2,994)           (2,205)          (4,241)               (6,761)       (19,381)      (154%)       (8,680)      (196%)       (2,036)       (92%)
    Add: Capital
     expenditures for
     network expansion                      368           588               329            26                 1,311     1,415         7,020             7,455            7,522                23,412         22,101        1686%        7,496          na            67           1%
    Adjusted free cash
     flow (4)                            $3,465        $1,445            $4,556        $4,465               $13,931    $4,094        $4,026            $5,250           $3,281               $16,651         $2,720          20%      $(1,184)       (27%)      $(1,969)       (38%)
                                         ======        ======            ======        ======               =======    ======        ======            ======           ======               =======         ======         ===       =======       =====       =======       =====


     Consolidated Net Debt Ratio

                                                     For 2010 Quarters Ended:                                                For 2011 Quarters Ended:                                                                          Quarter                Sequential
                                                     ------------------------                                                ------------------------                                                                      Year-over-Year            Qtr-over-Qtr
                                                                                                                                                                                                                           --------------            ------------
                                       March 31      June 30       September 30   December 31                        March 31      June 30       September 30      December 31                                                           $chg      %               $chg      %
                                       --------      -------       ------------   -----------                        --------      -------       ------------      -----------                                                           ----      ---             ----      ---
    Net Debt:
    Long-term debt,
     including current
     maturities                        $215,045      $219,045          $209,045      $205,409                        $210,000      $210,000          $206,250         $204,375                                                        $(1,034)        (1%)      $(1,875)        (1%)
    Less: Cash and
     cash equivalents                    (6,982)       (6,154)           (3,215)       (2,937)                       (12,881)      (11,047)            (8,932)          (4,208)                                                        (1,271)       (43%)        4,724          53%
    Net Debt (5)                       $208,063      $212,891          $205,830      $202,472                        $197,119      $198,953          $197,318         $200,167                                                        $(2,305)        (1%)       $2,849           1%
                                       ========      ========          ========      ========                        ========      ========          ========         ========                                                        =======        ====        ======         ===




    (1) External customers only.

    (2) Adjusted EBITDA represents net income (loss) excluding amounts for income taxes; depreciation and amortization; non-cash pension and certain post-retirement benefits; non-cash stock compensation;
     severance and other related termination costs; 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) Severance and other related termination costs related to the workforce reduction initiative implemented during the quarter ended June 30, 2010. Amounts exclude the termination costs related to stock
     compensation expense, which are included in non-cash stock compensation expense of the adjusted EBITDA reconciliation.

    (4) 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. Consolidated free cash
     flow includes capital expenditures for our corporate operating unit. Adjusted free cash flow represents free cash flow excluding capital expenditures for network expansion.  Free cash flow and adjusted
     free cash flow are not measures 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 and net cash provided by operating activities as a measure of liquidity.

    (5) Net debt represents total long-term debt (including current maturities) less cash and cash equivalents.  Net debt can be 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.

    (6) The ratio of net debt to adjusted EBITDA is calculated as net debt divided by adjusted EBITDA based on a trailing twelve month (TTM) period.  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.

    (7) Operating revenues in the Broadband segment have been reclassified for a change during the fourth quarter of 2011 in the classification of promotional discounts between residential voice, video and
     data revenue. Prior period revenues have been reclassified to conform to the current period presentation.
    ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


                             SUREWEST COMMUNICATIONS
                           CONSOLIDATED BALANCE SHEETS
                        (Unaudited; Amounts in thousands)


                                 December        December
                                    31,             31,              $      %
                                      2011            2010    Change     Change
                                      ----            ----    ------     ------
    ASSETS
      Current assets:
        Cash and cash
         equivalents                $4,208          $2,937      $1,271        43%
        Short-term
         investments                     -             771        (771)    (100%)
        Accounts
         receivable,
         net                        21,540          20,298       1,242         6%
        Income tax
         receivable                    280           1,782      (1,502)     (84%)
        Prepaid
         expenses                    2,912           3,792        (880)     (23%)
        Deferred income
         taxes                       2,226           2,284         (58)      (3%)
        Assets held for
         sale                        4,756           6,009      (1,253)     (21%)
                                     -----           -----      ------     -----
      Total current
       assets                       35,922          37,873      (1,951)      (5%)

      Property, plant
       and equipment,
       net                         522,790         514,639       8,151         2%

      Intangible and
       other assets:
        Customer
         relationships,
         net                         1,417           2,632      (1,215)     (46%)
        Goodwill                    45,814          45,814           -         -
        Deferred
         charges and
         other assets                6,133           2,223       3,910       176%
                                     -----           -----       -----       ---
                                    53,364          50,669       2,695         5%
                                    ------          ------       -----       ---
                                  $612,076        $603,181      $8,895         1%
                                  ========        ========      ======       ===

    LIABILITIES AND
     SHAREHOLDERS'
     EQUITY
      Current
       liabilities:
        Current portion
         of long-term
         debt                       $7,500         $15,636     $(8,136)     (52%)
        Accounts
         payable                     4,315           2,885       1,430        50%
        Other accrued
         liabilities                16,783          12,847       3,936        31%
        Advance
         billings and
         deferred
         revenues                    8,051           8,035          16         0%
        Accrued
         compensation                7,593           6,998         595         9%
                                     -----           -----         ---       ---
      Total current
       liabilities                  44,242          46,401      (2,159)      (5%)

      Long-term debt               196,875         189,773       7,102         4%
      Deferred income
       taxes                        49,126          56,661      (7,535)     (13%)
      Accrued pension
       and other
       post-
       retirement
       benefits                     54,354        33,815    20,539      61%
      Other
       liabilities
       and deferred
       revenues                      6,784           4,473       2,311        52%

      Commitments and
       contingencies

      Shareholders'
       equity:
        Common stock,
         without par
         value; 100,000
         shares
         authorized,
         14,060 and
         13,866 shares
         issued and
         outstanding at
         December 31,
         2011 and
         December 31,
         2010,
         respectively              146,498       143,309     3,189       2%
        Accumulated
         other
         comprehensive
         loss                      (27,770)        (15,081)    (12,689)     (84%)
        Retained
         earnings                  141,967         143,830      (1,863)      (1%)
                                   -------         -------      ------      ----
      Total
       shareholders'
       equity                      260,695         272,058     (11,363)      (4%)
                                   -------         -------     -------      ----
                                  $612,076        $603,181      $8,895         1%
                                  ========        ========      ======       ===


                                                       SUREWEST COMMUNICATIONS
                                                      SELECTED OPERATING METRICS
                                                   As of and for the Quarters Ended

                                            12/31/2011       12/31/2010                          9/30/2011
    BROADBAND                                       (1)              (1)     Change   % Change          (1) Change   % Change
    ---------                              -----------      -----------      ------   --------  ----------  ------   --------
      Residential
        Video
          Marketable Homes (2)                 296,700          271,800       24,900         9%    287,900    8,800         3%

          RGUs                                  66,400           61,800        4,600         7%     64,900    1,500         2%
          Penetration (2)                         22.4%            22.7%        -0.4%      (2%)       22.5%    -0.2%      (1%)
          ARPU                                     $72              $70           $2         2%        $73      ($1)      (1%)
        Voice
          Marketable Homes                     327,700          311,300       16,400         5%    321,700    6,000         2%
          RGUs                                  76,400           74,900        1,500         2%     76,100      300         0%
          Penetration                             23.3%            24.1%        -0.7%      (3%)       23.7%    -0.3%      (1%)
          ARPU                                     $28              $29          ($1)      (5%)        $28       $0       (1%)
        Data
          Marketable Homes                     327,700          311,300       16,400         5%    321,700    6,000         2%

          RGUs                                 102,600           99,400        3,200         3%    101,300    1,300         1%

          Penetration                             31.3%            31.9%        -0.6%      (2%)       31.5%    -0.2%      (1%)
          ARPU                                     $44              $41           $3         8%        $44       $0         0%
        Total
          RGUs                                 245,400          236,100        9,300         4%    242,300    3,100         1%


        Subscriber totals
          Subscribers (3)                      107,100          104,100        3,000         3%    105,800    1,300         1%

          Penetration                             32.7%            33.4%        -0.8%      (2%)       32.9%    -0.2%      (1%)

          ARPU (4)                                $106             $101           $5         5%       $107      ($1)      (0%)

          Triple Play ARPU (5)                    $117             $115           $2         2%       $118      ($1)      (1%)

          Triple Play RGUs per Subscriber
           (5)                                    2.49             2.53        (0.04)      (2%)       2.50    (0.01)      (1%)

          Churn                                    1.4%             1.6%        -0.2%     (10%)        1.6%    -0.2%     (11%)


      Business (6)
          Customers                              8,000            7,800          200         3%      8,000        0         0%
          ARPU                                    $592             $535          $57        11%       $570      $22         4%

    TELECOM                                 12/31/2011       12/31/2010      Change   % Change   9/30/2011  Change   % Change
    -------                                 ----------       ----------      ------   --------   ---------  ------   --------
      Residential
        Voice
          Marketable Homes                      91,900           91,500          400         0%     91,800      100         0%
          RGUs (7)                              23,000           28,900      (5,900)      (20%)     24,200  (1,200)       (5%)
            Cumulative Migration to
             Broadband Voice (8)                18,000           15,400        2,600        17%     17,500      500         3%
          Penetration                             25.0%            31.6%        -6.6%     (21%)       26.4%    -1.3%      (5%)
          ARPU                                     $43              $43          ($0)      (0%)        $43       $0         1%
          Churn (9)                                1.6%             2.0%        -0.3%     (18%)        1.8%    -0.2%     (10%)

      Business (6)
          Customers                              7,700            7,900         (200)      (3%)      7,700        0         0%
          ARPU                                    $363             $359           $4         1%       $351      $12         3%

    CONSOLIDATED RESIDENTIAL VOICE
     RGUs                                   12/31/2011       12/31/2010      Change   % Change   9/30/2011  Change   % Change
    ------------------------------          ----------       ----------      ------   --------   ---------  ------   --------
          ILEC Voice RGUs
              Broadband                         23,100           21,000        2,100        10%     22,700      400         2%
              Telecom                           23,000           28,900      (5,900)      (20%)     24,200  (1,200)       (5%)
                                                ------           ------       ------     -----      ------   ------      ----
          Total ILEC Voice RGUs (10)            46,100           49,900      (3,800)       (8%)     46,900     (800)      (2%)
          CLEC Residential Voice RGUs (11)      53,300           53,900         (600)      (1%)     53,400     (100)      (0%)
                                                ------           ------         ----      ----      ------     ----      ----
          TOTAL Residential Voice RGUs
           (12)                                 99,400          103,800      (4,400)       (4%)    100,300     (900)      (1%)

    TOTAL RESIDENTIAL BROADBAND &
     TELECOM RGUs                              268,400          265,000        3,400         1%    266,500    1,900         1%
    -----------------------------

    NETWORK METRICS                         12/31/2011       12/31/2010      Change   % Change   9/30/2011  Change   % Change
    ---------------                         ----------       ----------      ------   --------   ---------  ------   --------
          Marketable Homes - Fiber             164,500          148,500       16,000        11%    158,500    6,000         4%
          Marketable Homes - HFC                94,000           93,600          400         0%     94,000        0         0%
          Marketable Homes -Copper 2-Play       31,000           39,600      (8,600)      (22%)     33,800  (2,800)       (8%)

          Marketable Homes -Copper 3-Play       38,200           29,600        8,600        29%     35,400    2,800         8%
                                                ------           ------        -----       ---      ------    -----       ---
          Total                                327,700          310,400       17,300         6%    321,700    6,000         2%




    Note:  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, except percents and dollars.

    (1) During the fourth quarter of 2011, we revised our methodology for allocating subscriber discounts to video,
     voice and data revenue.  The revised methodology facilitates the consistent application of discounts and ARPU
     calculation between both our residential markets.  Accordingly, the ARPU metrics previously reported for 2009,
     2010 and 2011 have been revised to conform to current practice.

    (2) Marketable Homes -Prior to Q110, video marketable homes and penetration rate included serviceable homes in
     Sacramento and Kansas City fiber and hybrid fiber coax (HFC) networks only. With launch of ADTV in Q110,
     certain copper homes became video serviceable and 3-play capable and are included in marketable home counts.
     Penetration rates prior to Q110 were not adjusted for small number of video customers on copper network prior
     to ADTV.

    (3) A residential subscriber is a customer who subscribes 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 subscribes to one or more voice access lines.

    (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.


                                                                                                             SUREWEST COMMUNICATIONS
                                                                                                           SELECTED OPERATING METRICS
                                                                                                        As of and for the Quarters Ended

                                                           3/31/2009        6/30/2009        9/30/2009        12/31/2009        3/31/2010   6/30/2010   9/30/2010  12/31/2010   3/31/2011   6/30/2011   9/30/2011   12/31/2011
    BROADBAND                                                     (1)              (1)              (1)               (1)              (1)         (1)         (1)         (1)         (1)         (1)         (1)          (1)
    ---------                                             ----------       ----------       ----------       -----------       ----------  ----------  ----------              ----------  ----------  ----------  -----------
      Residential
        Video
          Marketable Homes (2)                               236,500          239,800          240,000           240,500          261,900     265,100     268,500     271,800     272,600     281,200     287,900      296,700

          RGUs                                                59,900           59,000           59,000            58,900           58,500      60,200      61,200      61,800      63,100      64,100      64,900       66,400
          Quarterly change                                      (100)            (900)               0              (100)            (400)      1,700       1,000         600       1,300       1,000         800        1,500
          Year-over-Year change                                4,800            2,000              600            (1,100)          (1,400)      1,200       2,200       2,900       4,600       3,900       3,700        4,600
          Penetration (2)                                       24.4%            23.7%            23.8%             23.7%            22.3%       22.7%       22.8%       22.7%       23.1%       22.8%       22.5%        22.4%
          ARPU                                                   $66              $68              $67               $69              $71         $70         $69         $70         $71         $71         $73          $72
        Voice
          Marketable Homes                                   308,200          309,300          309,400           309,700          309,900     310,400     311,200     311,300     311,600     317,400     321,700      327,700
          RGUs                                                66,000           67,700           70,000            71,300           71,800      73,900      74,900      74,900      75,600      75,900      76,100       76,400
          Quarterly change                                     2,800            1,700            2,300             1,300              500       2,100       1,000           0         700         300         200          300
          Year-over-Year change                               12,500           11,400           10,300             8,100            5,800       6,200       4,900       3,600       3,800       2,000       1,200        1,500
          Penetration                                           21.5%            22.0%            22.7%             23.1%            23.2%       23.8%       24.1%       24.1%       24.3%       23.9%       23.7%        23.3%
          ARPU                                                   $32              $33              $31               $30              $30         $30         $30         $29         $28         $28         $28          $28
        Data
          Marketable Homes                                   308,200          309,300          309,400           309,700          309,900     310,400     311,200     311,300     311,600     317,400     321,700      327,700

          RGUs                                                97,800           97,400           97,600            98,300           97,500      98,900      99,200      99,400     100,300     100,600     101,300      102,600

          Quarterly change                                       700             (400)             200               700             (800)      1,400         300         200         900         300         700        1,300
          Year-over-Year change                                6,300            3,700            2,200             1,200             (300)      1,500       1,600       1,100       2,800       1,700       2,100        3,200
          Penetration                                           31.8%            31.6%            31.6%             31.8%            31.5%       31.9%       31.9%       31.9%       32.2%       31.7%       31.5%        31.3%
          ARPU                                                   $36              $38              $38               $40              $41         $40         $40         $41         $41         $41         $44          $44
        Total
          RGUs                                               223,700          224,100          226,600           228,500          227,800     233,000     235,300     236,100     239,000     240,600     242,300      245,400

          Quarterly change                                     3,400              400            2,500             1,900             (700)      5,200       2,300         800       2,900       1,600       1,700        3,100
          Year-over-Year change                               23,600           17,100           13,100             8,200            4,100       8,900       8,700       7,600      11,200       7,600       7,000        9,300

        Subscriber totals
          Subscribers (3)                                    103,300          102,400          103,000           103,100          102,500     103,600     104,000     104,100     104,900     105,100     105,800      107,100

          Quarterly change                                       300             (900)             600               100             (600)      1,100         400         100         800         200         700        1,300

          Year-over-Year change                                5,800            2,900            1,900               100             (800)      1,200       1,000       1,000       2,400       1,500       1,800        3,000

          Penetration                                           33.5%            33.1%            33.3%             33.3%            33.1%       33.4%       33.4%       33.4%       33.7%       33.1%       32.9%        32.7%

          ARPU (4)                                               $93              $97              $95               $99             $101        $100         $99        $101        $102        $102        $107         $106

          Triple Play ARPU (5)                                  $111             $114             $111              $114             $116        $115        $113        $115        $114        $114        $118         $117

          Triple Play RGUs per Subscriber
           (5)                                                  2.56             2.55             2.54              2.54             2.53        2.54        2.53        2.53        2.52        2.51        2.50         2.49

          Churn                                                  1.4%             1.7%             1.8%              1.5%             1.6%        1.6%        1.7%        1.6%        1.4%        1.5%        1.6%         1.4%


      Business (6)
          Customers                                            6,900            7,000            7,200             7,300            7,400       7,500       7,700       7,800       7,800       7,900       8,000        8,000
          ARPU                                                  $467             $459             $467              $476             $479        $502        $526        $535        $539        $551        $570         $592

    TELECOM                                                3/31/2009        6/30/2009        9/30/2009        12/31/2009        3/31/2010   6/30/2010   9/30/2010  12/31/2010   3/31/2011   6/30/2011   9/30/2011   12/31/2011
    -------                                                ---------        ---------        ---------        ----------        ---------   ---------   ---------  ----------   ---------   ---------   ---------   ----------
      Residential
        Voice
          Marketable Homes                                    90,800           90,900           90,900            91,000           91,100      91,200      91,400      91,500      91,700      91,800      91,800       91,900
          RGUs (7)                                            49,500           45,100           41,300            38,500           35,500      32,800      30,700      28,900      27,300      25,600      24,200       23,000
            Cumulative Migration to
             Broadband Voice (8)                               6,900            9,000           10,700            11,800           12,900      14,000      14,900      15,400      16,100      16,900      17,500       18,000
          Penetration                                           54.5%            49.6%            45.4%             42.3%            39.0%       36.0%       33.6%       31.6%       29.8%       27.9%       26.4%        25.0%
          ARPU                                                   $44              $45              $45               $45              $44         $44         $43         $43         $43         $43         $43          $43
          Churn (9)                                              2.1%             2.3%             2.3%              2.0%             2.3%        2.1%        2.1%        2.0%        1.8%        1.8%        1.8%         1.6%

      Business (6)
          Customers                                            9,000            8,900            8,700             8,500            8,300       8,200       8,000       7,900       7,800       7,700       7,700        7,700
          ARPU                                                  $332             $339             $329              $334             $334        $340        $360        $359        $356        $357        $351         $363

    CONSOLIDATED RESIDENTIAL VOICE                         3/31/2009        6/30/2009        9/30/2009        12/31/2009        3/31/2010   6/30/2010
     RGUs                                                         (1)              (1)              (1)               (1)              (1)         (1)  9/30/2010  12/31/2010   3/31/2011   6/30/2011   9/30/2011   12/31/2011
    ------------------------------                        ----------       ----------       ----------       -----------       ----------  ----------   ---------  ----------   ---------   ---------   ---------   ----------
          ILEC Voice RGUs
              Broadband                                        9,900           12,400           14,700            16,200           17,500      19,000      20,400      21,000      21,500      22,300      22,700       23,100
              Telecom                                         49,500           45,100           41,300            38,500           35,500      32,800      30,700      28,900      27,300      25,600      24,200       23,000
                                                              ------           ------           ------            ------           ------      ------      ------      ------      ------      ------      ------       ------
          Total ILEC Voice RGUs (10)                          59,400           57,500           56,000            54,700           53,000      51,800      51,100      49,900      48,800      47,900      46,900       46,100
          Quarterly change                                    (1,700)          (1,900)          (1,500)           (1,300)          (1,700)     (1,200)       (700)     (1,200)     (1,100)       (900)     (1,000)        (800)
          Year-over-Year change                               (7,500)          (7,400)          (6,900)           (6,400)          (6,400)     (5,700)     (4,900)     (4,800)     (4,200)     (3,900)     (4,200)      (3,800)

          CLEC Residential Voice RGUs (11)                    56,100           55,300           55,300            55,100           54,300      54,900      54,500      53,900      54,100      53,600      53,400       53,300
                                                              ------           ------           ------            ------           ------      ------      ------      ------      ------      ------      ------       ------
          Quarterly change                                         0             (800)               0              (200)            (800)        600        (400)       (600)        200        (500)       (200)        (100)
          Year-over-Year change                                2,700            1,000                0            (1,000)          (1,800)       (400)       (800)     (1,200)       (200)     (1,300)     (1,100)        (600)

          TOTAL Residential Voice RGUs
           (12)                                              115,500          112,800          111,300           109,800          107,300     106,700     105,600     103,800     102,900     101,500     100,300       99,400
          Quarterly change                                    (1,700)          (2,700)          (1,500)           (1,500)          (2,500)       (600)     (1,100)     (1,800)       (900)     (1,400)     (1,200)        (900)
          Year-over-Year change                               (4,800)          (6,400)          (6,900)           (7,400)          (8,200)     (6,100)     (5,700)     (6,000)     (4,400)     (5,200)     (5,300)      (4,400)

    TOTAL RESIDENTIAL BROADBAND &
     TELECOM RGUs                                            273,200          269,200          267,900           267,000          263,300     265,800     266,000     265,000     266,300     266,200     266,500      268,400
    -----------------------------
          Year-over-Year change                                6,300             (700)          (4,100)           (7,300)          (9,900)     (3,400)     (1,900)     (2,000)      3,000         400         500        3,400

    NETWORK METRICS                                        3/31/2009        6/30/2009        9/30/2009        12/31/2009        3/31/2010   6/30/2010   9/30/2010  12/31/2010   3/31/2011   6/30/2011   9/30/2011   12/31/2011
    ---------------                                        ---------        ---------        ---------        ----------        ---------   ---------   ---------  ----------   ---------   ---------   ---------   ----------
          Marketable Homes - Fiber                           142,900          146,900          147,100           147,600          147,700     147,900     148,300     148,500     148,700     154,300     158,500      164,500
          Marketable Homes - HFC                              93,600           92,900           92,900            92,900           93,000      93,200      93,600      93,600      93,700      93,900      94,000       94,000
          Marketable Homes -Copper 2-Play                     71,700           69,500           69,400            69,200           47,900      45,300      42,700      39,600      39,000      36,200      33,800       31,000

          Marketable Homes -Copper 3-Play                          0                0                0                 0           21,300      24,000      26,600      29,600      30,200      33,000      35,400       38,200
                                                                 ---              ---              ---               ---           ------      ------      ------      ------      ------      ------      ------       ------
          Total                                              308,200          309,300          309,400           309,700          309,900     310,400     311,200     311,300     311,600     317,400     321,700      327,700

          Quarterly change                                     4,000            1,100              100               300              200         500         800         100         300       5,800       4,300        6,000
          Year-over-Year change                               21,600           17,100           12,800             5,500            1,700       1,100       1,800       1,600       1,700       7,000      10,500       16,400

    (1-12)  See all notes on Selected Operating Metrics Actuals Quarterly and Year-over-Year comparison

SOURCE SureWest Communications

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