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
	Sacramento Market		Kansas City Market		Total		Sacramento Market		Kansas City 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

[e-mail]

Misty Wells

Investor Relations

916-786-1799

[e-mail]

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
		For 2010 Quarters Ended:								Twelve Months Ended		For 2011 Quarters Ended:								Twelve Months Ended		Twelve Months Year-over-Year				Quarter Year-over-Year				Sequential Qtr-over-Qtr
		March 31		June 30		September 30		December 31		December 31, 2010		March 31		June 30		September 30		December 31		December 31, 2011		$ chg		%		$ chg		%		$ chg		%
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)
		For 2010 Quarters Ended:								Twelve Months Ended		For 2011 Quarters Ended:								Twelve Months Ended		Twelve Months Year-over-Year				Quarter Year-over-Year				Sequential Qtr-over-Qtr
		March 31		June 30		September 30		December 31		December 31, 2010		March 31		June 30		September 30		December 31		December 31, 2011		$ chg		%		$ chg		%		$ chg		%
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
		For 2010 Quarters Ended:								Twelve Months Ended		For 2011 Quarters Ended:								Twelve Months Ended		Twelve Months Year-over-Year				Quarter Year-over-Year				Sequential Qtr-over-Qtr
		March 31		June 30		September 30		December 31		December 31, 2010		March 31		June 30		September 30		December 31		December 31, 2011		$ chg		%		$ chg		%		$ chg		%
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 Year-over-Year				Sequential 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%
Ratio of Net Debt to Adjusted EBITDA:
Net Debt		$ 208,063		$ 212,891		$         205,830		$       202,472				$ 197,119		$ 198,953		$         197,318		$       200,167
Divided by: Adjusted EBITDA (TTM)		$   77,873		$   77,942		$           80,316		$         82,511				$   82,764		$   85,065		$           84,609		$         84,431
Ratio of net debt to Adjusted EBITDA (6)		2.67		2.73		2.56		2.45				2.38		2.34		2.33		2.37
Broadband Results of Operations
		For 2010 Quarters Ended:								Twelve Months Ended		For 2011 Quarters Ended:								Twelve Months Ended		Twelve Months Year-over-Year				Quarter Year-over-Year				Sequential Qtr-over-Qtr
		March 31		June 30		September 30		December 31		December 31, 2010		March 31		June 30		September 30		December 31		December 31, 2011		$ chg		%		$ chg		%		$ chg		%
Data (7)		$   12,073		$   11,921		$           11,844		$         12,116		$                     47,954		$   12,184		$   12,281		$           13,260		$         13,480		$                    51,205		$   3,251		7%		$  1,364		11%		$     220		2%
Video (7)		12,409		12,453		12,515		12,987		50,364		13,312		13,466		14,039		14,178		54,995		4,631		9%		1,191		9%		139		1%
Voice (7)		6,492		6,537		6,596		6,535		26,160		6,335		6,341		6,361		6,331		25,368		(792)		(3%)		(204)		(3%)		(30)		(0%)
Total residential revenues		30,974		30,911		30,955		31,638		124,478		31,831		32,088		33,660		33,989		131,568		7,090		6%		2,351		7%		329		1%
Business		10,570		11,253		11,979		12,407		46,209		12,614		12,999		13,557		14,223		53,393		7,184		16%		1,816		15%		666		5%
Access		727		541		481		486		2,235		556		504		509		476		2,045		(190)		(9%)		(10)		(2%)		(33)		(6%)
Other		306		371		446		501		1,624		378		368		292		322		1,360		(264)		(16%)		(179)		(36%)		30		10%
Total operating revenues from external customers		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%
Intersegment revenues		168		145		110		141		564		160		155		152		177		644		80		14%		36		26%		25		16%
Total operating revenues		42,745		43,221		43,971		45,173		175,110		45,539		46,114		48,170		49,187		189,010		13,900		8%		4,014		9%		1,017		2%
Operating expenses without depreciation		35,137		36,003		34,304		34,838		140,282		36,337		35,624		37,179		38,062		147,202		6,920		5%		3,224		9%		883		2%
Depreciation and amortization		12,180		12,140		12,609		12,692		49,621		12,688		13,098		12,574		12,759		51,119		1,498		3%		67		1%		185		1%
Loss from operations		$   (4,572)		$   (4,922)		$           (2,942)		$          (2,357)		$                   (14,793)		$   (3,486)		$   (2,608)		$           (1,583)		$          (1,634)		$                    (9,311)		$   5,482		37%		$     723		31%		$      (51)		(3%)
Broadband Reconciliation of Adjusted EBITDA to Net Loss
		For 2010 Quarters Ended:								Twelve Months Ended		For 2011 Quarters Ended:								Twelve Months Ended		Twelve Months Year-over-Year				Quarter Year-over-Year				Sequential Qtr-over-Qtr
		March 31		June 30		September 30		December 31		December 31, 2010		March 31		June 30		September 30		December 31		December 31, 2011		$ chg		%		$ chg		%		$ chg		%
Net loss		$   (3,720)		$   (4,269)		$           (3,082)		$          (1,802)		$                   (12,873)		$   (4,405)		$   (3,006)		$           (2,801)		$          (3,654)		$                  (13,866)		$    (993)		(8%)		$ (1,852)		(103%)		$    (853)		(30%)
Add: income tax benefits		(2,504)		(2,867)		(2,066)		(2,456)		(9,893)		(2,928)		(1,998)		(1,867)		(36)		(6,829)		3,064		31%		2,420		99%		1,831		98%
Less: other (income)/expense		1,652		2,214		2,206		1,901		7,973		3,847		2,396		3,085		2,056		11,384		3,411		43%		155		8%		(1,029)		(33%)
Loss from operations		(4,572)		(4,922)		(2,942)		(2,357)		(14,793)		(3,486)		(2,608)		(1,583)		(1,634)		(9,311)		5,482		37%		723		31%		(51)		(3%)
Add (subtract):
Depreciation and amortization		12,180		12,140		12,609		12,692		49,621		12,688		13,098		12,574		12,759		51,119		1,498		3%		67		1%		185		1%
Non-cash pension expense		205		162		181		179		727		153		187		173		167		680		(47)		(6%)		(12)		(7%)		(6)		(3%)
Non-cash stock compensation expense		386		560		160		343		1,449		978		720		457		469		2,624		1,175		81%		126		37%		12		3%
Severance and other related costs (3)		-		469		-		-		469		-		-		-		-		-		(469)		(100%)		-		-		-		-
Adjusted EBITDA (2)		$     8,199		$     8,409		$           10,008		$         10,857		$                     37,473		$   10,333		$   11,397		$           11,621		$         11,761		$                    45,112		$   7,639		20%		$     904		8%		$     140		1%
Adjusted EBITDA margin		19%		19%		23%		24%		21%		23%		25%		24%		24%		24%
Broadband Free Cash Flow and Adjusted Free Cash Flow
		For 2010 Quarters Ended:								Twelve Months Ended		For 2011 Quarters Ended:								Twelve Months Ended		Twelve Months Year-over-Year				Quarter Year-over-Year				Sequential Qtr-over-Qtr
		March 31		June 30		September 30		December 31		December 31, 2010		March 31		June 30		September 30		December 31		December 31, 2011		$ chg		%		$ chg		%		$ chg		%
Net loss		$   (3,720)		$   (4,269)		$           (3,082)		$          (1,802)		$                   (12,873)		$   (4,405)		$   (3,006)		$           (2,801)		$          (3,654)		$                  (13,866)		$    (993)		(8%)		$ (1,852)		(103%)		$    (853)		(30%)
Add: Depreciation and amortization		12,180		12,140		12,609		12,692		49,621		12,688		13,098		12,574		12,759		51,119		1,498		3%		67		1%		185		1%
Less: Capital expenditures		(8,723)		(11,805)		(11,370)		(12,046)		(43,944)		(9,574)		(16,706)		(16,677)		(17,661)		(60,618)		(16,674)		(38%)		(5,615)		(47%)		(984)		(6%)
Free cash flow (4)		(263)		(3,934)		(1,843)		(1,156)		(7,196)		(1,291)		(6,614)		(6,904)		(8,556)		(23,365)		(16,169)		(225%)		(7,400)		(640%)		(1,652)		(24%)
Add: Capital expenditures for network expansion		31		57		176		2		266		1,013		6,492		6,500		7,044		21,049		20,783		7813%		7,042		na		544		8%
Adjusted free cash flow (4)		$      (232)		$   (3,877)		$           (1,667)		$          (1,154)		$                     (6,930)		$      (278)		$      (122)		$              (404)		$          (1,512)		$                    (2,316)		$   4,614		67%		$    (358)		(31%)		$ (1,108)		(274%)
Telecom Results of Operations
		For 2010 Quarters Ended:								Twelve Months Ended		For 2011 Quarters Ended:								Twelve Months Ended		Twelve Months Year-over-Year				Quarter Year-over-Year				Sequential Qtr-over-Qtr
		March 31		June 30		September 30		December 31		December 31, 2010		March 31		June 30		September 30		December 31		December 31, 2011		$ chg		%		$ chg		%		$ chg		%
Residential		$     4,868		$     4,479		$             4,086		$           3,843		$                     17,276		$     3,592		$     3,393		$             3,196		$           3,048		$                    13,229		$ (4,047)		(23%)		$    (795)		(21%)		$    (148)		(5%)
Business		8,418		8,400		8,750		8,592		34,160		8,394		8,294		8,122		8,390		33,200		(960)		(3%)		(202)		(2%)		268		3%
Access		4,160		4,408		4,274		4,053		16,895		3,054		3,148		3,559		2,999		12,760		(4,135)		(24%)		(1,054)		(26%)		(560)		(16%)
Other		165		185		146		126		622		136		168		102		92		498		(124)		(20%)		(34)		(27%)		(10)		(10%)
Total operating revenues from external customers		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%)
Intersegment revenues		4,919		5,091		5,275		5,352		20,637		5,296		5,052		5,231		5,373		20,952		315		2%		21		0%		142		3%
Total operating revenues		22,530		22,563		22,531		21,966		89,590		20,472		20,055		20,210		19,902		80,639		(8,951)		(10%)		(2,064)		(9%)		(308)		(2%)
Operating expenses without depreciation		11,890		12,482		11,501		11,526		47,399		11,911		9,892		11,420		10,534		43,757		(3,642)		(8%)		(992)		(9%)		(886)		(8%)
Depreciation and amortization		2,926		3,122		3,071		3,085		12,204		3,087		3,259		3,236		3,264		12,846		642		5%		179		6%		28		1%
Income from operations		$     7,714		$     6,959		$             7,959		$           7,355		$                     29,987		$     5,474		$     6,904		$             5,554		$           6,104		$                    24,036		$ (5,951)		(20%)		$ (1,251)		(17%)		$     550		10%
Telecom Reconciliation of Adjusted EBITDA to Net Income
		For 2010 Quarters Ended:								Twelve Months Ended		For 2011 Quarters Ended:								Twelve Months Ended		Twelve Months Year-over-Year				Quarter Year-over-Year				Sequential Qtr-over-Qtr
		March 31		June 30		September 30		December 31		December 31, 2010		March 31		June 30		September 30		December 31		December 31, 2011		$ chg		%		$ chg		%		$ chg		%
Net income		$     4,247		$     3,742		$             4,486		$           3,753		$                     16,228		$     2,761		$     4,326		$             3,444		$           5,137		$                    15,668		$    (560)		(3%)		$  1,384		37%		$  1,693		49%
Add: income tax expense		3,328		3,057		3,394		3,468		13,247		2,366		2,482		2,156		1,160		8,164		(5,083)		(38%)		(2,308)		(67%)		(996)		(46%)
Less: other (income)/expense		139		160		79		134		512		347		96		(46)		(193)		204		(308)		(60%)		(327)		(244%)		(147)		(320%)
Income from operations		7,714		6,959		7,959		7,355		29,987		5,474		6,904		5,554		6,104		24,036		(5,951)		(20%)		(1,251)		(17%)		550		10%
Add (subtract):
Depreciation and amortization		2,926		3,122		3,071		3,085		12,204		3,087		3,259		3,236		3,264		12,846		642		5%		179		6%		28		1%
Non-cash pension expense		215		179		190		192		776		160		207		178		179		724		(52)		(7%)		(13)		(7%)		1		1%
Non-cash stock compensation expense		414		584		107		291		1,396		667		462		290		294		1,713		317		23%		3		1%		4		1%
Severance and other related costs (3)		-		675		-		-		675		-		-		-		-		-		(675)		(100%)		-		-		-		-
Adjusted EBITDA (2)		$   11,269		$   11,519		$           11,327		$         10,923		$                     45,038		$     9,388		$   10,832		$             9,258		$           9,841		$                    39,319		$ (5,719)		(13%)		$ (1,082)		(10%)		$     583		6%
Adjusted EBITDA margin		50%		51%		50%		50%		50%		46%		54%		46%		49%		49%
Telecom Free Cash Flow and Adjusted Free Cash Flow
		For 2010 Quarters Ended:								Twelve Months Ended		For 2011 Quarters Ended:								Twelve Months Ended		Twelve Months Year-over-Year				Quarter Year-over-Year				Sequential Qtr-over-Qtr
		March 31		June 30		September 30		December 31		December 31, 2010		March 31		June 30		September 30		December 31		December 31, 2011		$ chg		%		$ chg		%		$ chg		%
Net income		$     4,247		$     3,742		$             4,486		$           3,753		$                     16,228		$     2,761		$     4,326		$             3,444		$           5,137		$                    15,668		$    (560)		(3%)		$  1,384		37%		$  1,693		49%
Add: Depreciation and amortization		2,926		3,122		3,071		3,085		12,204		3,087		3,259		3,236		3,264		12,846		642		5%		179		6%		28		1%
Less: Capital expenditures		(3,218)		(1,729)		(1,442)		(897)		(7,286)		(1,704)		(2,598)		(1,971)		(3,394)		(9,667)		(2,381)		(33%)		(2,497)		(278%)		(1,423)		(72%)
Free cash flow (4)		3,955		5,135		6,115		5,941		21,146		4,144		4,987		4,709		5,007		18,847		(2,299)		(11%)		(934)		(16%)		298		6%
Add: Capital expenditures for network expansion		337		531		153		24		1,045		402		528		955		478		2,363		1,318		126%		454		1892%		(477)		(50%)
Adjusted free cash flow (4)		$     4,292		$     5,666		$             6,268		$           5,965		$                     22,191		$     4,546		$     5,515		$             5,664		$           5,485		$                    21,210		$    (981)		(4%)		$    (480)		(8%)		$    (179)		(3%)

(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 31,		December 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
BROADBAND					12/31/2011 (1)		12/31/2010 (1)		Change		% Change		9/30/2011 (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
BROADBAND					3/31/2009 (1)		6/30/2009 (1)		9/30/2009 (1)		12/31/2009 (1)		3/31/2010 (1)		6/30/2010 (1)		9/30/2010 (1)		12/31/2010 (1)		3/31/2011 (1)		6/30/2011 (1)		9/30/2011 (1)		12/31/2011 (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 RGUs					3/31/2009 (1)		6/30/2009 (1)		9/30/2009 (1)		12/31/2009 (1)		3/31/2010 (1)		6/30/2010 (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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