Lynch Interactive Corporation Reports Second Quarter Operating Results

Lynch Interactive Corporation (AMEX:LIC) reported that
second quarter revenues rose to $22.5 million from $21.1 million in
the second quarter of 2005. Higher interstate access revenues,
favorable NECA adjustments, USF support payments and additional DSL
lines, partially offset a 3.6% decline in access lines and lower
intrastate revenues. In addition, revenues were bolstered by
approximately $0.3 million from the initial inclusion of Precis, a
Utah based Cable TV operator which was acquired in March 2005.
   Second quarter of 2005 Adjusted Operating Profit (operating profit
before depreciation and amortization) before corporate expense rose to
$11.0 million from $10.4 million in the second quarter of 2004, due
primarily to the favorable NECA adjustments. (See Attachment A for an
explanation of why we believe Adjusted Operating Profit is useful
information to our investors and see Attachment B for a reconciliation
of Adjusted Operating Profit to operating profit.) Corporate expenses
increased by four hundred thousand dollars due to incremental legal
costs of $1.0 million associated with the Taylor litigation offset by
lower audit fees paid in the second quarter of 2005 compared to 2004.
Reflecting these "corporate" costs, operating income for the second
quarter of 2005 was $3.0 million or $0.3 million lower than the $3.2
million reported in the second quarter of 2004.
   Earnings were $0.08 per share for the three months ended June 30,
2005, as compared to $0.14 per share for the three months ended June
30, 2004.
   We invested $4.2 million in capital expenditures during the six
months ended June 30, 2005, down from $6.3 million in 2005. The
Company is currently anticipating 2005 capital expenditures of
approximately $11 million, but that amount may increase as the result
of ongoing review of capital requirements. 2004 capital expenditures
totaled $16.5 million.

   Update On Initiatives

   --  California-Oregon Telecommunications Company - the Company
        expects to complete the acquisition of its fifteenth telephone
        company, Cal-Ore Telecommunication Company for total
        investment of $21.2 million in late August of 2005. Cal-Ore is
        a 2,500 access line RLEC located in northern California.

   --  Utah CATV - On March 18, 2005, Central Telecom Services
        acquired 2,411 CATV subscribers in central Utah for a total
        investment of $3.5 million. We now have 3,386 Cable
        subscribers and 8,590 Telecom subscribers in Utah.

   --  Simplifying our Structure - We are working to simplify our
        balkanized structure. In one initiative, at the end of July,
        we completed the sale of a portion of our burglar alarm
        security operation in Upstate New York for $2.7 million.
        Another initiative is to acquire the remaining two-thirds
        interest in KMG Holdings, Inc., which will eliminate the
        minority interest associated with Western New Mexico Telephone
        Company. In addition, we are considering the distribution of
        certain non RLEC assets to our shareholders.

   --  Going to the Pink Sheets - we have previously announced that
        we will be asking our shareholders to give our Board authority
        to implement a reverse stock split, whereby our shareholders
        would be reduced to under 300 and we could voluntarily
        deregister from reporting under the Securities and Exchange
        Act of 1934. Assuming implementation, our stock will be
        delisted from the American Stock Exchange and we expect to
        trade on the "Pink Sheets." Such an action will save us the
        considerable public company costs including audit fees and
        other fees related to the Sarbanes-Oxley Act. At the same
        time, we are committed to providing shareholders financial
        information.

   Telephone Operations

   The following table summarizes certain information regarding
Interactive's multimedia operation. In addition, Interactive has PCS
licenses covering areas with an aggregate population of approximately
380,800.
-0-
*T
                               June 30,    December 31,    June 30,
                                 2005          2004          2004
                          --------------------------------------------
Access Lines                    51,269        50,803        53,850
DSL Lines                        4,399         4,098         3,366
Cable Subscribers                5,839         3,630         3,800
Internet Subscribers            19,521        20,240        19,660
CLEC Customers                   5,311         5,837         5,800
Long Distance Resale            15,622        16,134        15,900
*T

   Other Investments

   --  Network affiliates - We have interests in two network
        affiliated television stations, a 50% interest in Station
        WOI-TV, an ABC affiliate, serving the Des Moines, Iowa, market
        (72nd largest in the U.S.) and a 20% interest in Station
        WHBF-TV, a CBS affiliate, serving the Quad-Cities markets
        (94th largest in the U.S.).

   --  Hector - We own approximately 166,500 shares of Hector
        Communications, Inc., or 4.8% of their outstanding shares
        (AMEX:HCT). Hector is a 30,000 access line provider of
        telecommunications and cable service primarily in Minnesota.
        In its second quarter earnings release, Hector announced that
        its management and Board of Directors continue to assess all
        strategic options and have hired an investment banking firm to
        assist in this effort.

   --  Spectrum ownership - The Company is developing its PCS license
        in Las Cruces, New Mexico. We also own 12 licenses in the
        Lower 700 MHz spectrum band, which industry analysts believe
        have promising applications. On July 30, 2004, we were high
        bidder on two licenses, Buffalo, NY and Davenport, IA in the
        24 GHz Auction. On February 28, 2005, we were high bidder for
        two PCS licenses in Auction 58 for Marquette, MI and Klamath
        Falls, OR which serve populations of 75,000 and 81,000
        respectively for a total investment of $500,000. During April
        and May, 2005, the Company participated in Auction 59 but did
        not acquire any licenses.

   --  Wireless Investments - Interactive also has four
        minority-owned investments in cellular telephone operations in
        New Mexico and North Dakota covering a net population of
        35,000 and in ventures that own spectrum licenses in the 39
        GHz and 700 MHz Guard Band.

   --  Iowa Network Services ("INS") - INS provides wireline
        telecommunication access and transport services, long distance
        services, internet equipment and services, and wireless
        telecommunication services to significant parts of Iowa and
        retains a 16% ownership in Iowa Telecommunications Services
        Inc. (NYSE: IWA). We own 3% of INS preferred stock, 1.8% of
        INS common stock and also hold a $400,000 face amount
        preferred in INS.

   Rural Telephone Bank Holdings

   President Bush's proposed Budget for Fiscal Year 2006 establishes
the process and terms to implement the dissolution of the Rural
Telephone Bank ("RTB"). Under RTB's By-Laws, on dissolution, the
holders of its Class B and Class C stock would be paid the par value
of their stock. As of December 31, 2004, the total par value of RTB
Class B and Class C stock at the Company's subsidiaries was $11.3
million. The dissolution of the RTB and payments to the stock holders
is subject to numerous approvals and actions, including Congressional
approval of President Bush's proposed Budget for Fiscal Year 2006 and
actions by RTB's Board of Directors. Therefore, the Company cannot
predict whether, or when, such payments will actually be made to the
Company's subsidiaries.

   Stock Repurchase Program

   Due to regulatory constraints, the Company did not acquire any of
its stock in the second quarter of 2005. During the six months ended
June, 2005, Interactive acquired 5,700 shares at an average investment
of $31.53 per share. Since the inception of the stock repurchase
program, Interactive has acquired 72,700 shares at a total investment
of $2.3 million or $32.26 per share.

   Balance Sheet

   At June 30, 2005, we had cash and cash equivalents of $27.8
million as compared to $27.2 million at December 31, 2004. We point
out that the majority of this cash is not readily available to the
parent company. As a result, we are sensitive to liquidity issues as
we are incurring significant cost for litigation as well as ongoing
corporate expenses for accounting and other "public" company costs. On
June 15, 2005 our parent company entered into a new $10 million bank
line with Webster Bank. We are continuing to both augment our credit
facility, and restructure some or all of our debt. The total debt at
June, 2005 was $172.1 million, down from $173.8 million at December
31, 2004. At June, 2005, $69.6 million of debt was at variable
interest rates, averaging 6.3% and $102.6 million was at fixed
interest rates, averaging 7.0%.

   Full Year

   Operating profit in 2005 is expected to be $15.3 million, about
$0.4 million less than 2004, even though Cal-Ore Telephone is
estimated to be included for almost five months. Adjusted Operating
Profit, generated by our operating subsidiaries including Cal-Ore for
the year 2005 is expected to be about $44.4 million versus $44.0
million in 2004. Excluding Cal-Ore, Adjusted Operating Profit from
comparable operations is expected to decline about $1 million. Legal
and accounting expenses are expected to remain at an elevated level
for an extended period of time. Operating profit plus depreciation and
amortization expense equals Adjusted Operating Profit. See Attachment
A for an explanation of why Adjusted Operating Profit is useful
information to our investors.

   This release contains certain forward-looking information within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
including without limitation, spectrum applications, dissolution of
RTB and payments to The Company, future financing, and performance and
financial targets for 2005. It should be recognized that such
information is based upon certain assumptions, projections and
forecasts, including without limitation business conditions and
financial markets, regulatory actions and initiatives, and the
cautionary statements set forth in documents filed by Interactive with
the Securities and Exchange Commission. As a result, there can be no
assurance that any possible transactions will be accomplished or be
successful or that financial targets will be met, and such information
is subject to uncertainties, risks and inaccuracies, which could be
material.
   Interactive is a holding company with subsidiaries in multimedia
and actively seeks acquisitions, principally in existing business
areas.
   Interactive is listed on the American Stock Exchange under the
symbol LIC. Interactive's World Wide Web address is:
http://www.lynchinteractivecorp.com.

-0-
*T
                             Attachment A
*T

   Use of Adjusted Operating Profit

   Adjusted Operating Profit is presented because it is a widely
accepted financial indicator of transaction values and the ability to
incur and service debt. Interactive utilizes Adjusted Operating Profit
as one of its metrics for valuing potential acquisitions. Adjusted
Operating Profit equals Operating Profit plus depreciation and
amortization. It excludes all amounts included in "Other income
(expense)", the provision for income taxes and minority interest.
Adjusted Operating Profit for the three months ended June 30, 2005 and
2004 is not a substitute for operating profit ($2.9 million and $3.2
million, respectively) or net income ($0.2 million and $0.4 million,
respectively) determined in accordance with generally accepted
accounting principles.

-0-
*T
                             Attachment B


Lynch Interactive Corporation                                       
Statements of Operations and Selected Balance Sheet Data
Unaudited
(In Thousands, Except Per Share Data)

STATEMENTS OF OPERATIONS

                    Three Months               Six Months    
                       Ended                     Ended
                      June 30,     Percent      June 30,     Percent
                  ---------------  Increase ---------------  Increase
                    2005    2004  (Decrease)  2005    2004  (Decrease)
                  ----------------------------------------------------

Revenues          $22,471 $21,087    6.6%   $44,089 $42,511     3.7%

Cost and Expenses:
Cost of service
 and sales          8,095   7,407            15,746  14,610
Selling, general
 and
 administration     3,343   3,253             6,766   6,392
Corporate office
 expense            2,742   2,273             4,834   3,246
Depreciation and
 amortization       5,346   4,927            10,541  10,148
                  ----------------          ----------------
  Operating profit,
   in accordance
   with generally
   accepted
   accounting
   principles       2,945   3,227   (8.7%)    6,202   8,115   (23.6%)

Other Income 
 (Expense)
Investment income     191      82               984     810
Interest expense   (2,950) (2,851)           (5,772) (5,670)
Equity in earnings
 of affiliated
 companies            841     886             1,552   1,598
                  ----------------          ----------------
                   (1,918) (1,883)           (3,236) (3,262)
                  ----------------          ----------------
Income Before
 Income Taxes
 Minority
 Interests          1,027   1,344             2,966   4,853
Provision For
 Income Taxes        (330)   (473)           (1,097) (1,922)
Minority
 Interests           (484)   (487)             (961)   (944)
                  ----------------          ----------------
  Net Income         $213    $384              $908  $1,987
                  ================          ================

Weighted Average 
 Shares Used In  
 Earnings Per 
 Share
 Computations       2,752   2,774             2,753   2,775

Basic and Diluted
 Earnings Per
 Share              $0.08   $0.14             $0.33   $0.72

Adjusted Operating 
 Profit - Operating 
 Profit before
 Depreciation and
 amortization - see
 Attachment A
Operating
 Subsidiaries      11,033  10,427    5.8%    21,577  21,509     0.3%
Corporate Office
 Expense           (2,742) (2,273)           (4,834) (3,246)
                  ----------------          ----------------
  Total Adjusted
   Operating 
   Profit           8,291   8,154    1.7%    16,743  18,263    (8.3%)
Depreciation and
 amortization      (5,346) (4,927)          (10,541)(10,148)
                  ----------------          ----------------
  Operating 
   profit, in 
   accordance
   with generally
   accepted
   accounting
   principles      $2,945  $3,227            $6,202  $8,115
                  ================          ================
Capital
 Expenditures      $2,290  $3,714            $4,205  $6,307


SELECTED BALANCE SHEET DATA

                         June 30,  Dec. 31,    June 30,
                           2005      2004        2004
                         ------------------    --------
Cash and Cash
 Equivalents              $27,741  $27,214     $25,932
Long-Term Debt            163,728  168,966     174,680
Minority Interests         11,250   11,543      10,784
Shareholders'
 Equity                    35,346   34,572      32,404

Shares Outstanding
 at Date                    2,752    2,757       2,772
*T