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						Underwriting								Proceeds to
		Price to				Discounts and				Proceeds to				Selling
		Public				Commissions				Us				Stockholders
Per share			$13.00				$0.8125				$12.1875				$12.1875
Total			$203,666,658				$12,729,166.13				$73,125,000				$117,812,491.87

	Deutsche Bank Securities

	Lehman Brothers

	Wachovia Securities

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		Page
Summary			1
Risk Factors			13
Forward-Looking Statements			31
Use of Proceeds			32
Dividend Policy and Restrictions			34
Capitalization			48
Dilution			50
Selected Historical and Other Financial Data — CCI Holdings			51
Selected Historical and Other Financial Data — CCI Texas			53
Management’s Discussion and Analysis of Financial Condition and Results of Operations — CCI Holdings			55
Management’s Discussion and Analysis of Financial Condition and Results of Operations — CCI Texas			83
Business			94
Regulation			116
Management			125
Principal and Selling Stockholders			134
Certain Relationships and Related Party Transactions			137
Description of Indebtedness			141
Description of Capital Stock			150
Shares Eligible for Future Sale			157
Material U.S. Federal Income Tax Considerations			159
Underwriting			162
Validity of the Common Stock			166
Experts			166
Where You Can Find More Information			167
Index to Unaudited Pro Forma Condensed Consolidated Financial Statements			P-1
Index to Financial Statements			F-1

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	You may not receive dividends because our board of directors could, in its discretion, depart from or change our dividend policy at any time.

	We might not have cash in the future to pay dividends in the intended amounts or at all.

	•	the state of our business, the environment in which we operate and the various risks we face, including, but not limited to, competition, technological change, changes in our industry, regulatory and other risks summarized in this prospectus;
	•	changes in the factors, assumptions and other considerations made by our board of directors in reviewing and adopting the dividend policy, as described under “Dividend Policy and Restrictions”;
	•	our future results of operations, financial condition, liquidity needs and capital resources;
	•	our various expected cash needs, including interest and principal payments on our indebtedness, capital expenditures, integration and restructuring costs associated with TXUCV acquisition, incremental costs associated with being a public company, taxes and certain other costs; and
	•	potential sources of liquidity, including borrowing under our revolving credit facility or possible asset sales.

	•	either reduce or eliminate dividends;
	•	fund dividends by incurring additional debt (to the extent we were permitted to do so under the agreements governing our then existing debt), which would increase our leverage, debt repayment obligations and interest expense and decrease our interest coverage, resulting in, among other things, reduced capacity to incur debt for other purposes, including to fund future dividend payments;
	•	amend the terms of our amended and restated credit agreement or indenture to permit us to pay dividends or make other payments if we are otherwise not permitted to do so;

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	•	fund dividends from future issuances of equity securities, which could be dilutive to our stockholders and negatively effect the price of our common stock;
	•	fund dividends from other sources, such as such as by asset sales or by working capital, which would leave us with less cash available for other purposes; and
	•	reduce other expected uses of cash, such as capital expenditures or TXUCV integration and restructuring costs, which could limit our ability to grow or delay our integration of the TXUCV acquisition.

Over time, our capital and other cash needs will invariably be subject to uncertainties, which could affect whether we pay dividends and the level of any dividends we may pay in the future. In addition, to the extent that we would seek to raise additional cash from additional debt incurrence or equity security issuances, we cannot assure you that such financing will be available on reasonable terms or at all. Each of the results listed above could negatively affect our results of operations, financial condition, liquidity and ability to maintain and expand our business.

	You may not receive dividends because of restrictions in our debt agreements, Delaware and Illinois law and state regulatory requirements.

	•	Our amended and restated credit agreement will restrict, and our indenture restricts, our ability to pay dividends. For the twelve months ended March 31, 2005, on a pro forma basis and after giving effect to this offering and the related transactions, CCI Holdings would have been able to pay dividends of $69.2 million based on the restricted payment covenant of the amended and restated credit agreement and the indenture. This is based on the ability of the borrowers under the amended and restated credit facility (CCI and Texas Holdings) to pay to CCI Holdings $69.2 million in dividends and the ability of CCI Holdings to pay to its stockholders $116.5 million in dividends under the general formula under the restricted payments covenants of the indenture, commonly referred to as the build-up amount. The amount of dividends we will be able to make under the build-up amount will be based, in part, on the amount of cash that may be distributed by the borrowers under the amended and restated credit agreement to us. In addition, based on the indenture provision relating to public equity offerings, which includes this offering, we expect that we will be able to pay approximately $4.1 million annually in dividends, subject to specified conditions. This means that we could pay $4.1 million in dividends under this provision in addition to whatever we may be able to pay under the build-up amount, although a dividend payment under this provision will reduce the amount we otherwise would have available to us under the build-up amount for restricted payments, including dividends. See “Description of Indebtedness — Amended and Restated Credit Facilities” and “— Senior Notes”.
	•	Under Delaware law, our board of directors may not authorize payment of a dividend unless it is either paid out of our surplus, as calculated in accordance with the Delaware General Corporation law, or the DGCL, or if we do not have a surplus, it is paid out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. The Illinois Business Corporation Act also imposes limitations on the ability of our subsidiaries that are Illinois corporations, including Illinois Consolidated Telephone Company, which we refer to as ICTC, to declare and pay dividends.
	•	The Illinois Commerce Commission, or the ICC, and the Public Utility Commission of Texas, or the PUCT, could require our Illinois and Texas rural telephone companies to make minimum amounts of capital expenditures and could limit the amount of cash available to transfer from our rural telephone companies to us. Our rural telephone companies are ICTC, Consolidated Communications of Fort Bend Company and Consolidated Communications of Texas Company. As

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		part of the ICC’s review of the reorganization, the ICC imposed various conditions as part of its approval of the reorganization, including (1) prohibitions on the payment of dividends or other cash transfers from ICTC, our Illinois rural telephone company, to us if it fails to meet or exceed agreed benchmarks for a majority of seven service quality metrics for the prior reporting year and (2) the requirement that our Illinois rural telephone company have access to the higher of $5.0 million or its currently approved capital expenditure budget for each calendar year through a combination of available cash and amounts available under credit facilities. In addition, the Illinois Public Utilities Act prohibits the payment of dividends by ICTC, except out of earnings and earned surplus, if ICTC’s capital is or would become impaired by payment of the dividend, or if payment of the dividend would impair ICTC’s ability to render reasonable and adequate service at reasonable rates, unless the ICC otherwise finds that the public interest requires payment of the dividend, subject to any conditions imposed by the ICC. For the first year following the offering, we expect to satisfy each of the applicable Illinois regulatory requirements necessary to permit ICTC to pay dividends to us. See “Dividend Policy and Restrictions — Restrictions on Payment of Dividends — State Regulatory Requirements”.

	Because we are a holding company with no operations, we will not be able to pay dividends unless our subsidiaries transfer funds to us.

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	•	dividing our board of directors into three classes, which results in only approximately one-third of our board of directors being elected each year;

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	•	requiring the affirmative vote of holders of not less than 75% of the voting power of our outstanding common stock to approve any merger, consolidation or sale of all or substantially all of our assets;
	•	providing that directors may only be removed for cause and then only upon the affirmative vote of holders of not less than two-thirds of the voting power of our outstanding common stock;
	•	requiring the affirmative vote of holders of not less than two-thirds of the voting power of our outstanding common stock to amend, alter, change or repeal specified provisions of our amended and restated certificate of incorporation and bylaws (other than provisions regarding stockholder approval of any merger, consolidation or sale of all or substantially all of our assets, which shall require the affirmative vote of 75% of the voting power of our outstanding common stock);
	•	requiring stockholders to provide us with advance notice if they wish to nominate any persons for election to our board of directors or if they intend to propose any matters for consideration at an annual stockholders meeting; and
	•	authorizing the issuance of so-called “blank check” preferred stock without stockholder approval upon such terms as the board of directors may determine.

	•	elect a majority of the members of our board of directors;
	•	enter into significant corporate transactions, such as a merger or other sale of our company or its assets, or to prevent any such transaction;
	•	enter into acquisitions that increase our amount of indebtedness or sell revenue-generating assets;
	•	determine our corporate and management policies;
	•	amend our organizational documents; and
	•	other matters submitted to our stockholders for approval.

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	•	create competing financial demands on our equity investors;
	•	create potential conflicts of interest;
	•	require efforts consistent with applicable law to keep the other businesses separate from our operations; and
	•	require efforts consistent with applicable law to keep the other businesses separate from our operations.

	•	create or expand the roles and duties of our board of directors, our board committees and management;
	•	institute a more comprehensive compliance function;
	•	prepare and distribute periodic public reports in compliance with our obligations under the federal securities laws;
	•	involve and retain to a greater degree outside counsel and accountants in the above activities;

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	•	enhance our investor relations function; and
	•	establish new internal policies, such as those relating to disclosure controls and procedures and insider trading.

	We have a substantial amount of debt outstanding and may incur additional indebtedness in the future, which could restrict our ability to pay dividends.

	•	requiring us to dedicate a substantial portion of our cash flow from operations to make payments on our debt, which payments we currently expect to be approximately $37.9 million in the first year following the offering, thereby reducing funds available for operations, future business opportunities and other purposes and/or dividends on our common stock;
	•	limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
	•	making it more difficult for us to satisfy our debt and other obligations;
	•	limiting our ability to borrow additional funds, or to sell assets to raise funds, if needed, for working capital, capital expenditures, acquisitions or other purposes;

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	•	increasing our vulnerability to general adverse economic and industry conditions, including changes in interest rates; and
	•	placing us at a competitive disadvantage compared to our competitors that have less debt.

	We will require a significant amount of cash to service and repay our debt and to pay dividends on our common stock, and our ability to generate cash depends on many factors beyond our control.

	•	our business will generate sufficient cash flow from operations to service and repay our debt, pay dividends on our common stock and to fund working capital and planned capital expenditures;
	•	future borrowings will be available under the amended and restated credit facilities or any future credit facilities in an amount sufficient to enable us to repay our debt and pay dividends on our common stock; or
	•	we will be able to refinance any of our debt on commercially reasonable terms or at all.

	The indenture contains, and the amended and restated credit agreement will contain, covenants that limit the discretion of our management in operating our business and could prevent us from capitalizing on business opportunities and taking other corporate actions.

	•	incur additional debt and issue preferred stock;
	•	make restricted payments, including paying dividends on, redeeming, repurchasing or retiring our capital stock;
	•	make investments and prepay or redeem debt;
	•	enter into agreements restricting our subsidiaries’ ability to pay dividends, make loans or transfer assets to us;

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	•	create liens;
	•	sell or otherwise dispose of assets, including capital stock of subsidiaries;
	•	engage in transactions with affiliates;
	•	engage in sale and leaseback transactions;
	•	make capital expenditures;
	•	engage in business other than telecommunications businesses; and
	•	consolidate or merge.

	•	limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business plans; and
	•	adversely affect our ability to finance our operations, enter into acquisitions or to engage in other business activities that would be in our interest.

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	•	substantial regulatory change due to the passage and implementation of the Telecommunications Act, which included changes designed to stimulate competition for both local and long distance telecommunications services;
	•	rapid development and introduction of new technologies and services;
	•	increased competition within established markets from current and new market entrants that may provide competing or alternative services;
	•	the blurring of traditional dividing lines between, and the bundling of, different services, such as local dial tone, long distance, wireless, cable, data and Internet services; and
	•	an increase in mergers and strategic alliances that allow one telecommunications provider to offer increased services or access to wider geographic markets.

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	•	greater demands on our management and administrative resources;
	•	difficulties and unexpected costs in integrating the operations, personnel, services, technologies and other systems of CCI Illinois and CCI Texas;
	•	possible unexpected loss of key employees, customers and suppliers;
	•	unanticipated liabilities and contingencies of TXUCV and its business;
	•	unexpected costs of integrating the management and operation of the two businesses; and
	•	failure to achieve expected cost savings.

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	•	demographic trends;
	•	in Illinois, the strength of the agricultural markets and the light manufacturing and services industries, continued demand from universities and hospitals and the level of government spending; and
	•	in Texas, the strength of the manufacturing and retail industries and continued demand from schools and hospitals.

	A system failure could cause delays or interruptions of service, which could cause us to lose customers.

	•	physical damage to our central offices or local access lines;
	•	disruptions beyond our control;
	•	power surges or outages; and
	•	software defects.

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	•	includes provisions that allow the respective state agency to terminate the contract without cause and without penalty under some circumstances;
	•	is subject to decisions of state agencies that are subject to political influence on renewal;
	•	gives the State of Illinois the right to renew the contract at its option but does not give us the same right; and
	•	could be cancelled if state funding becomes unavailable.

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	•	In 2004, CCI Illinois received $10.6 million from the federal universal service fund and CCI Texas received an aggregate of $40.9 million from the federal universal service fund and the Texas universal service fund, which in the aggregate comprised 15.9% of our revenues in 2004, after giving effect to the TXUCV acquisition.
	•	For the three months ended March 31, 2005, CCI Illinois received $4.2 million from the federal universal service fund and CCI Texas received an aggregate of $9.5 million from the federal universal service fund and the Texas universal service fund, which in the aggregate comprised 17.2% of our revenues for the three months ended March 31, 2005.

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	•	Under certain environmental laws, we could be held liable, jointly and severally and without regard to fault, for the costs of investigating and remediating any actual or threatened environmental contamination at currently and formerly owned or operated properties, and those of our predecessors, and for contamination associated with disposal by us or our predecessors of hazardous materials at third party disposal sites. Hazardous materials may have been released at certain current or formerly owned properties as a result of historic operations.
	•	The presence of contamination can adversely affect the value of our properties and our ability to sell any such affected property or to use it as collateral.
	•	We could be held responsible for third party property damage claims, personal injury claims or natural resource damage claims relating to any such contamination.
	•	The cost of complying with existing environmental requirements could be significant.
	•	Adoption of new environmental laws or regulations or changes in existing laws or regulations or their interpretations could result in significant compliance costs or as yet identified environmental liabilities.
	•	Future acquisitions of businesses or properties subject to environmental requirements or affected by environmental contamination could require us to incur substantial costs relating to such matters.
	•	In addition, environmental laws regulating wetlands, endangered species and other land use and natural resource issues may increase costs associated with future business or expansion opportunities, delay, alter or interfere with such plans, or otherwise adversely affect such plans.

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	•	repay in full outstanding borrowings under our term loan A and C facilities, together with accrued but unpaid interest through the closing date of this offering;
	•	redeem 32.5% of the aggregate principal amount of our senior notes and to pay the associated redemption premium of 9.75% of the principal amount to be redeemed, together with accrued but unpaid interest through the date of redemption;
	•	pre-fund expected integration and restructuring costs for 2005 relating to the TXUCV acquisition; and
	•	pay fees and expenses associated with the repayment of the term loan A and C facilities and entering into the amended and restated credit facilities.

Sources							Uses
(Dollars in millions)
Cash			$	10.3			Repayment of term loan A facility(1)(2)		$	112.0
Offering proceeds				78.0			Repayment of term loan C facility(1)(2)			311.9
New term loan D facility(1)				425.0			Senior notes redemption(2)			65.0
							Fees and expenses(3)			12.8
							Redemption premium			6.3
							Pre-funding integration and restructuring costs			5.3
	Total sources		$	513.3					$	513.3

(1)	In connection with this offering, our existing credit facilities will be amended and restated to, among other things, provide for the repayment in full of our term loan A and C facilities and to borrow $425.0 million under a new term loan D facility, which is expected to mature on October 14, 2011. See “Description of Indebtedness — Amended and Restated Credit Facilities”.

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(2)	Excludes accrued but unpaid interest on the term loan A and C facilities and the senior notes to be redeemed, respectively, through the closing date of this offering.
(3)	Transaction fees and expenses include estimated underwriting discounts and commissions, commitment and financing fees payable in connection with the amended and restated credit facilities, and legal, accounting, advisory and other costs payable in connection with this offering and the related transactions. We will pay approximately $9.5 million of fees and expenses in connection with this offering and approximately $3.4 million in connection with the amendment and restatement of the existing credit facilities.

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	•	Nothing requires us to pay dividends.
	•	While our current dividend policy contemplates the distribution of a substantial portion of the cash generated by our business in excess of our expected cash needs, this policy could be changed or revoked by our board of directors at any time, for example, if it were to determine that we had insufficient cash to take advantage of other opportunities with attractive rates of return.
	•	Even if our dividend policy is not changed or revoked, the actual amount of dividends distributed under this policy, and the decision to make any distributions, is entirely at the discretion of our board of directors.
	•	The amount of dividends distributed will be subject to covenant restrictions in the agreements governing our debt, including our indenture and our amended and restated credit agreement, and in agreements governing our future debt.
	•	The amount of dividends distributed may be limited by state regulatory requirements.
	•	The amount of dividends distributed is subject to restrictions under Delaware and Illinois law.
	•	Our stockholders have no contractual or other legal right to receive dividends.
	•	We might not have sufficient cash in the future to pay dividends in the intended amounts or at all. Our ability to generate this cash will depend on numerous factors, including the state of our business, the environment in which we operate and the various risks we face, changes in the factors, assumptions and other considerations made by our board of directors in reviewing and adopting the dividend policy, as described below, our future results of operations, financial condition, liquidity needs and capital resources and our various expected cash needs.

	•	our EBITDA;
	•	our Bank EBITDA, which under the terms of our amended and restated credit agreement excludes certain items (such as expenses associated with TXUCV acquisition and professional service fees)

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		that do not affect our ongoing ability to pay interest on our debt or pay dividends on our common stock; and
	•	our cash available to pay dividends determined under our amended and restated credit agreement.

	• plus all amounts deducted in arriving at Bank Consolidated Net Income in respect of (without duplication), interest expense, amortization or write-off of debt discount and non-cash expense incurred in connection with our equity compensation plans, income taxes, charges for depreciation of fixed assets and amortization of intangible assets, non-cash charges for the impairment of long lived assets, fees accrued prior to this offering payable to certain of our existing equity investors not exceeding $5.0 million in any twelve-month period and fees, expenses and charges incurred in connection with this offering and the related transactions as disclosed in this prospectus under the heading “Use of Proceeds”;
	• minus (in the case of gains) or plus (in the case of losses) (a) gain or loss on any sale of assets and (b) non-cash charges relating to foreign currency gains or losses;
	• plus (in the case of losses) and minus (in the case of income) non-cash minority interest income or loss;
	• plus (in the case of items deducted in arriving at Bank Consolidated Net Income) or minus (in the case of items added in arriving at Bank Consolidated Net Income) non-cash charges resulting from changes in accounting principles;
	• plus (a) extraordinary losses and (b) the first $15.0 million of TXUCV integration expenses incurred after April 14, 2004 and prior to December 31, 2005;
	• minus the sum of interest income and extraordinary income or gains; and
	• plus unusual or nonrecurring charges, fees or expenses (excluding integration expenses) relating to the acquisition of TXUCV (including severance payments and retention bonuses) that were incurred during the fiscal quarter ended June 30, 2004 (net of any offsetting items that increased Bank EBITDA in such quarter as a result thereof) and to give pro forma effect to the

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	TXUCV acquisition and the related transactions as if they had occurred on the first day of such fiscal quarter and in an aggregate amount not to exceed $12.0 million.

	•	estimated cash available to pay dividends based upon our estimated minimum Bank EBITDA;
	•	our calculation of EBITDA on an historical basis for the year ended December 31, 2004 and the twelve months ended March 31, 2005; and
	•	our calculation of (a) Bank EBITDA on a pro forma basis for the TXUCV acquisition for the year ended December 31, 2004 and the twelve months ended March 31, 2005 and (b) estimated cash available to pay dividends based upon our calculation of pro forma Bank EBITDA for these periods.

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			(In thousands)
Estimated Cash Available to Pay Dividends Based on Estimated Minimum Bank EBITDA
Estimated Minimum Bank EBITDA(1)			$	118,568
Less:
	Estimated cash interest expense(2)			(37,901	)
	Estimated capital expenditures(3)			(33,500	)
	Estimated principal payments associated with capital lease obligations(4)			—
	TXUCV integration and restructuring costs(5)			—
	Estimated cash taxes(6)			(1,167	)
Estimated cash available to pay dividends on common stock(7)			$	46,000
Total net leverage ratio derived from the above(8)				4.71:1.00
Senior secured leverage ratio derived from the above(9)				3.64:1.00
Fixed charge coverage ratio derived from the above(10)				3.11:1.00

							Twelve Months
			Year Ended				Ended
			December 31, 2004				March 31, 2005
			(In thousands)
Historical EBITDA
Net cash provided by operating activities			$	79,766			$	88,508
Adjustments:
	Deferred income tax			(201	)			(1,752	)
	Partnership income and minority interest			961				1,125
	Provision for bad debt losses			(4,666	)			(5,178	)
	Asset impairment			(11,578	)			(11,578	)
	Amortization of deferred financing costs			(6,476	)			(7,045	)
Changes in operating assets and liabilities				(4,427	)			(312	)
Interest expense, net				39,551				48,195
Income taxes				232				(359	)
Historical EBITDA(11)			$	93,162			$	111,604

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								Twelve Months
				Year Ended				Ended
				December 31, 2004				March 31, 2005
				(In thousands)
Pro Forma Bank EBITDA and Estimated Cash Available to Pay Dividends
Historical EBITDA				$	93,162			$	111,604
Pro forma adjustments(12)					16,656				(2,243	)
Pro forma EBITDA(13)					109,818				109,361
	Retention bonuses(14)				259				238
	Severance costs(15)				5,707				5,331
	TXUCV sales due diligence and transaction costs(16)				2,239				1,577
	TXUCV integration and restructuring costs(5)				7,009				9,259
	Professional service fees(17)				5,000				5,000
	Other, net(18)				(4,764	)			(4,375	)
	Partnership distributions(19)				4,135				3,624
	Non-cash losses (gains):
		Restructuring, asset impairment and other charges			11,566				11,566
Pro forma Bank EBITDA					140,969				141,581
	Cash expenses excluded from pro forma Bank EBITDA(20)				(20,214	)			(21,405	)
	Estimated cash interest expense(2)				(37,901	)			(37,901	)
	Capital expenditures(3)				(36,745	)			(34,744	)
	Estimated public company expenses(1)				(1,000	)			(1,000	)
	Estimated principal payments associated with capital lease obligation(4)				—				—
	TXUCV integration and restructuring costs(5)				—				—
	Cash income taxes(6)				(1,317	)			(1,317	)
Estimated cash available to pay dividends				$	43,792			$	45,214
Estimated cash required to pay dividends				$	46,000			$	46,000

	(1)	In comparing our estimated minimum Bank EBITDA to our Bank EBITDA calculated on an historical basis, the historical calculation does not include approximately $1.0 million in incremental, ongoing expenses associated with being a public company with equity securities quoted on the Nasdaq National Market. These expenses include estimated compliance (SEC and Nasdaq) and related administrative expenses, accounting and legal fees, investor relations expenses, directors’ fees and director and officer liability insurance premiums, registrar and transfer agent fees, listing fees and other, miscellaneous expenses.
	(2)	Assumes: (a) with respect to the amended and restated credit facilities, interest at a weighted average rate of 5.79% on an annual basis on $425.0 million outstanding borrowings under the new term loan D facility, no borrowings under our new $30.0 million revolving credit facility and a 0.5% commitment fee on the unused balance under the new revolving credit facility; (b) with respect to our senior notes, an interest rate of 93/4% on $135.0 million aggregate principal amount of senior notes outstanding after giving effect to the redemption of $65.0 million principal amount of senior notes in connection with this offering and the related transactions; and (c) excludes non-cash amortization of deferred financing costs. For a discussion of deferred financing costs, see Note 14 to the unaudited pro forma condensed consolidated financial statements. At March 31, 2005, we had interest rate swap agreements covering $213.7 million of aggregate principal amount of our existing variable rate debt, which we expect to cover our new variable rate debt under the new term loan D facility, at fixed LIBOR rates ranging from 2.99% to 3.35%. If market interest rates were to average 1.0% higher than the average rates that prevailed from January 1, 2005 through March 31, 2005, our interest payments would have increased by approximately $0.5 million for the period.

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		We note that the tables above do not reflect the payment of principal on any debt because our amended and restated credit agreement will not, and the indenture does not, require any amortization prior to the applicable maturity dates.
	(3)	We expect capital expenditures for the year following the offering to be approximately $33.5 million. If our capital expenditures in the year following the offering were to exceed $33.5 million, which is less than actual amounts incurred during the year ended December 31, 2004 and the twelve months ended March 31, 2005, our Estimated Minimum Bank EBITDA would have to be commensurately greater in order to pay dividends at the expected level. For a more detailed discussion of our capital expenditures, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — CCI Holdings — Liquidity and Capital Resources — Capital Requirements”.
	(4)	Required principal payments under existing capital lease obligation. On May 27, 2005, we elected to pay in full the outstanding balance on this capital lease. As a result, no scheduled principal payments will be incurred under this capital lease obligation following the offering. See “Description of Indebtedness — GECC Capital Leases”.
	(5)	We currently expect to incur approximately $14.5 million in operating expenses associated with the TXUCV integration and restructuring process in 2004 and 2005. Of the $14.5 million, approximately $11.5 million relates to integration and approximately $3.0 million relates to restructuring. As of March 31, 2005, we had incurred $9.2 million in integration and restructuring costs in connection with the TXUCV acquisition. We expect to spend the remaining $5.3 million during the remainder of 2005. However, we have not listed any such expenses in the tables because in connection with this offering and the related transactions, we will pre-fund the remaining $5.3 million of expected integration and restructuring expenses for 2005 with cash from our balance sheet. We do not expect that the pre-funding of these estimated expenses will change any of our expected cash plans or otherwise affect our expected working capital requirements. We do not expect to incur any significant costs relating to the TXUCV acquisition after 2005.
	(6)	We estimate that as of March 31, 2005, we had an estimated $20.2 million of federal net operating losses, or NOLs, net of valuation allowances, available to us to carry forward to periods beginning after March 31, 2005. In estimating our NOLs as of March 31, 2005, we forecasted information to calculate our expected taxable income (loss) for the year ended December 31, 2005 and then prorated the resulting amount to arrive at estimated taxable income (loss) for the three months ended March 31, 2005. In forecasting information to calculate taxable income (loss) for the year ended December 31, 2005, we assumed that there would be no accounting entries or adjustments other than those known at the time of the estimate. Prorating the forecasted year end taxable income (loss) for the three months ended March 31, 2005 to arrive at an NOL estimate for March 31, 2005 also necessarily involves the assumption that proration is a fair basis to estimate taxable income (loss) at an interim period. In addition, we believe that the possible limitations under Section 382 of the Internal Revenue Code on our NOL as a result of this offering should not have a significant impact on our use of such NOL.
		In the table showing estimated cash available to pay dividends based on estimated minimum Bank EBITDA, we have estimated 2005 federal cash taxes to be zero and state cash taxes to be $1.1 million. This estimate is based on $118.6 million of Bank EBITDA and estimated tax deductible items arising in 2005, including adjustments related to this offering and related transactions and an estimate of our available NOL carryforward in 2005, taking into account any limitation on the use of our NOL resulting from an “ownership change” under Section 382 of the Internal Revenue Code. Adjustments related to this offering and related transactions include deductions of the redemption premium and interest and amortization of deferred financing costs based on our new capital structure. Pursuant to these calculations, after taking into account estimated 2005 taxable income (loss), we would have estimated federal NOLs of $11.3 million, net of valuation allowances, to be carried forward to taxable periods beginning after December 31, 2005. In the future, we expect that we will be required to pay cash income taxes because all of our NOL will have been used or will have expired or because of limitations on our NOL under Section 382 of

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		the Internal Revenue Code. Any of the foregoing would have the effect of reducing our after-tax cash available to pay dividends in future periods.
		In the table showing estimated cash available to pay dividends based on Pro Forma Bank EBITDA, we have estimated 2004 federal cash taxes to be zero and state cash taxes to be $1.3 million. We have estimated federal cash taxes to be zero and state cash taxes to be $1.3 million for the twelve months ended March 31, 2005. These estimates are based on Pro Forma Bank EBITDA, taking into account an estimate of our available NOL carryforward in the applicable period and any limitation on the use of our NOL resulting from an “ownership change” under Section 382 of the Internal Revenue Code. See “Risk Factors — Risks Relating to Our Common Stock — We expect that our cash income tax liability will increase in the future as a result of the use of, and limitations on, our net operating loss carryforwards, which may reduce our after-tax cash available to pay dividends and may require us to reduce dividend payments in future periods”.
	(7)	The table below sets forth the assumed number of outstanding shares of common stock upon the closing of this offering and the estimated per share and aggregate dividend amounts payable on these shares during the year following the closing of this offering.

						Dividends
		Number of				Per
		Shares				Share				Aggregate
Estimated dividends on our outstanding common stock			29,687,510			$	1.5495			$	46,000,000

	(8)	Under the restricted payments covenant in the amended and restated credit agreement, if our total net leverage ratio (as defined in the amended and restated credit agreement), as of the end of any fiscal quarter, is greater than 4.75 to 1.00, we will be required to suspend dividends on our common stock unless otherwise permitted by an exception for dividends that may be paid from the portion of the proceeds of any sale of our equity not used to redeem or repurchase indebtedness and not used to fund acquisitions, capital expenditures or make other investments. It will be an event of default if our total net leverage ratio, as of the end of any fiscal quarter, is greater than 5.0 to 1.00. The calculation assumes no prepayment of the amended and restated credit facilities during the period.
	(9)	It will be an event of default under the amended and restated credit agreement if our senior secured leverage ratio (as defined under the amended and restated credit agreement), as of the end of any fiscal quarter, is greater than 4.00 to 1.00. We will not be permitted to pay dividends under the amended and restated credit agreement if an event of default has occurred and is continuing.

(10)	It will be an event default under the amended and restated credit agreement if our fixed charge coverage ratio (as defined in our amended and restated credit agreement), as of the end of any fiscal quarter, is not (x) after the closing date and on or prior to December 31, 2005, at least 2.50 to 1.00, (y) after January 1, 2006 and on or prior to December 31, 2006, at least 2.00 to 1.00 and (z) after January 1, 2007, at least 1.75 to 1.00. We will not be permitted to pay dividends under the amended and restated credit agreement if an event of default has occurred and is continuing.
(11)	Historical EBITDA is defined as net earnings (loss) before interest expense, income taxes, depreciation and amortization on an historical basis, without giving effect to the TXUCV acquisition, this offering and the related transactions. We believe that net cash provided by operating activities is the most directly comparable financial measure to EBITDA under GAAP. We present EBITDA for several reasons. Management believes that EBITDA is useful as a means to evaluate our ability to pay our estimated cash needs and pay dividends. In addition, we have presented EBITDA to investors in the past because it is frequently used by investors, securities analysts and other interested parties in the evaluation of companies in our industry, and we believe that presenting it here provides a measure of consistency in our financial reporting. EBITDA is also a component of the restrictive covenants and financial ratios contained and will be contained in the agreements governing our debt which will require us to maintain compliance with these covenants and will limit certain activities, such as our ability to incur debt and to pay dividends. The definitions in these covenants and ratios are based on EBITDA after giving effect to specified charges. As a result, we believe that the presentation of EBITDA as supplemented by these other items provides important additional

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information to investors. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — CCI Holdings — Liquidity and Capital Resources — Debt and Capital Leases — Covenant Compliance”. In addition, EBITDA provides our board of directors meaningful information to determine, with other data, assumptions and considerations, our dividend policy and our ability to pay dividends under the restrictive covenants in the agreements governing our debt.

		EBITDA is a non-GAAP financial measure. Accordingly, it should not be construed as an alternative to net cash from operating or investing activities, cash flows from operations or net income (loss) as defined by GAAP and is not on its own necessarily indicative of cash available to fund our cash needs as determined in accordance with GAAP. In addition, not all companies use identical calculations, and this presentation of EBITDA may not be comparable to other similarly titled measures of other companies.

(12)	Pro forma adjustments consist of the following:

						Twelve Months
		Year Ended				Ended
		December 31, 2004				March 31, 2005
		(In thousands)
CCI Texas EBITDA(a)		$	15,538			$	(2,384	)
Selling, general and administrative expense adjustments for TXUCV acquisition(b)			1,118				141
		$	16,656			$	(2,243	)

	(a)	CCI Texas EBITDA represents the EBITDA of CCI Texas for the periods presented. The operating results of CCI Texas are not reflected in our historical EBITDA and financial results for the period from January 1, 2004, through April 13, 2004. The following table illustrates our calculation of CCI Texas EBITDA for the following periods:

			January 1, 2004				April 1, 2004
			through				through
			April 13, 2004				April 13, 2004
			(In thousands)
Net cash provided by operating activities			$	5,319			$	(819	)
Adjustments:
	Prepayment penalty on extinguishment of debt			(1,914	)			(1,914	)
	Deferred income tax			(950	)			1,827
	Provision for postretirement benefits			(3,007	)			(1,386	)
	Loss/(gain) or disposition of property and investments			(19	)			(38	)
	Restructuring, asset impairment and other charges			12				12
	Partnership income and minority interest			1,068				336
	Provision for bad debt losses			(542	)			(100	)
	Other charges			31				3
Changes in operating assets and liabilities				9,909				(1,639	)
Interest expense, net				3,158				2,084
Income taxes				2,473				(750	)
CCI Texas EBITDA			$	15,538			$	(2,384	)

	(b)	The pro forma adjustments to selling, general, and administrative expense for the TXUCV acquisition reflect (1) a reduction in costs of approximately $2.0 million for the year ended December 31, 2004 and $0.3 million for the twelve months ended March 31, 2005 resulting from the termination of TXUCV employees upon the closing of the TXUCV acquisition and (2) incremental professional service fees of $0.9 million for the year ended December 31, 2004 and $0.1 million for the twelve months ended March 31, 2005 to be paid to Mr. Lumpkin, Providence Equity and Spectrum Equity pursuant to the second professional services agreement entered into in connection with the TXUCV acquisition. See Note 2 to the unaudited pro forma condensed consolidated financial statements.

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(13)	Pro forma EBITDA represents our historical EBITDA as adjusted for the TXUCV acquisition and has been prepared on a basis consistent with the comparable data in the unaudited pro forma condensed consolidated financial statements included elsewhere in this prospectus.
(14)	During 2004, TXUCV paid retention bonuses to keep key employees to run its day-to-day business operations while it was being prepared for sale. Other than retention costs payable in connection with the TXUCV acquisition, we do not expect to incur such charges in the future. Given the unusual and non-recurring nature of these expenses, they are excluded from the calculation of Bank EBITDA under our amended and restated credit agreement and do not affect our ongoing ability to pay dividends.
(15)	During 2004, we incurred severance costs primarily due to employee terminations associated with the TXUCV acquisition. While we expect to incur additional severance costs as part of the integration and restructuring process in 2005, these costs have already been accounted for within our $5.3 million estimate of 2005 integration and restructuring costs described in note 5 above. Given the unusual and non-recurring nature of these expenses, they are excluded from the calculation of Bank EBITDA under our amended and restated credit agreement and do not affect our ongoing ability to pay dividends.
(16)	During 2004, TXUCV incurred certain costs associated with its sale. Given the unusual and non-recurring nature of these expenses, they are excluded from the calculation of Bank EBITDA under our amended and restated credit agreement and do not affect our ongoing ability to pay dividends.
(17)	Represents the aggregate professional service fees we paid to Mr. Lumpkin, Providence Equity and Spectrum Equity pursuant to two professional services agreements. After the closing of the offering, we will no longer pay these fees because these professional service agreements will automatically terminate on the closing of the offering. See Note 7 to the unaudited pro forma condensed consolidated financial statements.
(18)	Other, net assumes the TXUCV acquisition occurred on the first day of the period presented and includes the equity earnings from our investments in cellular partnerships, dividend income, recognizing the minority interests of investors in East Texas Fiber Line Incorporated as well as certain other miscellaneous non-operating items.

	See Note 6 to our audited consolidated financial statements for a description of our investments. The table below sets out the components of Other, net:

						Twelve Months
		Year ended				Ended
		December 31, 2004				March 31, 2005
		(In thousands)
Partnership income		$	2,462			$	1,935
Dividend income			2,589				2,593
Minority interest			(433	)			(473	)
Other			146				320
Other, net		$	4,764			$	4,375

(19)	For purposes of calculating Bank EBITDA, our amended and restated credit agreement provides that all dividends and other distributions received from our cellular partnership investments shall be included as part of our Bank Consolidated Net Income. Partnership distributions included in the calculation of Pro Forma Bank EBITDA assumes that the TXUCV acquisition occurred on the first day of the periods presented. For a more detailed description of how Bank EBITDA is calculated, including the related definition of Bank Consolidated Net Income, please see “Description of Indebtedness — Amended and Restated Credit Facilities — Restricted Payments”.
(20)	Represents expenses that were excluded from the calculation of pro forma Bank EBITDA as permitted by the terms of the amended and restated credit agreement and as described in note (5) and notes (14)-(17) above. These expenses were paid by us in cash and would have impacted the amount of cash that would have been available to pay dividends had our dividend policy been in

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	effect for the periods presented. However, we do not expect these cash expenses to affect our ongoing ability to pay dividends following this offering. See note (5) and notes (14)-(17) above.

	•	our results of operations and financial condition, including that our Bank EBITDA was $141.0 million in 2004 and $141.6 million for the twelve months ended March 31, 2005, on a pro forma basis to give effect to the TXUCV acquisition;
	•	our estimated minimum Bank EBITDA of $118.6 million and our belief that our actual Bank EBITDA for the first year following the offering will be at least this amount;
	•	the matters discussed in the notes to the tables above;
	•	our expected cash needs will not include the repayment of any principal on our debt since the agreements governing our debt do not require any amortization prior to the applicable maturity dates;
	•	our assumption that we will be able to refinance our debt prior to the scheduled maturity dates; if we are unable to do so, or are only able to do so on less favorable terms, our cash available to pay dividends will be reduced;
	•	our various expected cash needs, including interest payments on our debt, capital expenditures, integration and restructuring costs of the TXUCV acquisition in 2005, taxes, incremental costs associated with being a public company and certain other costs;
	•	the $37.5 million distribution to our existing equity investors on June 7, 2005;
	•	our belief that the payment of dividends at the level described above will not have a negative impact on our operations and performance based on prior years’ results and, relatedly, our belief that our amended and restated revolving credit facility will have sufficient capacity to finance expected fluctuations in working capital and other cash needs, including the payment of dividends at the levels described above, although we currently do not intend to borrow under our new revolving credit facility to pay dividends;
	•	other possible uses of cash with attractive rates of return;
	•	potential sources of liquidity, including that we have at our disposal the possibility of raising cash from asset sales, and capital resources;
	•	the state of our business, the environment in which we operate and the various risk we face, including competition, technological change, changes in our industry, and regulatory and other risks and that they will remain consistent with previous periods; and
	•	our assumption regarding the absence of extraordinary business events and risks, such as new industry-altering technological developments or adverse regulatory developments, that may adversely affect our business, results of operations or anticipated cash needs.

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	Amended and Restated Credit Agreement

	•	If the total net leverage ratio (as defined under “Description of Indebtedness — Amended and Restated Credit Facilities”), as of the end of any fiscal quarter, is greater than 4.75 to 1.0, we will be required to suspend dividends on our common stock unless otherwise permitted by an exception for dividends that may be paid from the portion of the proceeds of any sale of our equity not used to redeem or repurchase indebtedness and not used to fund acquisitions, capital expenditures or make other investments. During any dividend suspension period, we will be required to repay debt

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		in an amount equal to 50.0% of any increase in our Available Cash during such dividend suspension period.
	•	In addition, we will not be permitted to pay dividends if an event of default under the amended and restated credit agreement has occurred and is continuing. In particular, it will be an event of default if:

	•	our total net leverage, as of the end of any fiscal quarter, is greater than 5.0 : 1.0;
	•	our senior secured leverage ratio, as of the end of any fiscal quarter, is greater than 4.00 to 1.00;
	•	our fixed charge coverage ratio, as of the end of any fiscal quarter, is not (x) after the closing date and on or prior to December 31, 2005, at least 2.50 to 1.00, (y) after January 1, 2006 and on or prior to December 31, 2006, at least 2.00 to 1.00 and (z) after January 1, 2007, at least 1.75 to 1.00; or
	•	we make or commit to make capital expenditures greater than the base amount of $45.0 million in each fiscal year, provided that the base amount may be increased by up to 100% of such base amount by carrying over to any such period any portion of the base amount (without giving effect to any increase) not spent in the immediately preceding period, and that capital expenditures in any period shall be deemed first made from the base amount applicable to such period in any given period.

	Senior Notes

	Delaware and Illinois Law

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	State Regulatory Requirements

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	•	of Homebase on an actual basis without giving effect to the reorganization; and
	•	of CCI Holdings, on an as adjusted basis to give effect to: (a) the reorganization; (b) this offering; (c) the amendment and restatement of our existing credit facilities; and (d) our application of the estimated net proceeds in the manner set forth in “Use of Proceeds”, in each case, assuming these transactions occurred on March 31, 2005.

				As of March 31, 2005
				Actual				As Adjusted
				(In thousands)
Cash and cash equivalents(1)				$	56,538			$	13,594
Long-term debt (including current portion):
Credit facilities:
	Revolving credit facility(2)				—				—
	Term loan facilities(3)				423,850				425,000
Total credit facilities					423,850				425,000
Capital lease obligation(4)					1,059				1,059
93/4 senior notes due 2012					200,000				135,000
Total long-term debt (including current portion)					624,909				561,059
Redeemable preferred shares:
		Class A preferred shares, $1,000 per value, 182,000 shares authorized, issued and outstanding			210,092				—
Members’ deficit/stockholders’ equity
		Common shares, no par value, 10,000,000 shares authorized, issued and outstanding			—				—
		Common stock, par value $0.01 per share, 100,000,000 shares authorized, and 29,687,510 shares issued and outstanding			—				297
		Preferred stock, par value $0.01 per share, 10,000,000 shares authorized, and no shares issued and outstanding			—				—
		Additional paid-in capital			58				247,325
		Accumulated deficit			(23,033	)			(34,518	)
		Accumulated other comprehensive income			1,944				1,944
Members’ (deficit)/stockholders’ equity					(21,031	)			215,048
Total capitalization				$	813,970			$	776,107

(1)

Includes $5.3 million of cash that will be used to pre-fund expected integration and restructuring costs for 2005 relating to the TXUCV acquisition. Our actual cash and cash equivalents as of March 31, 2005 includes $37.5 million of cash that was used to fund the distribution to our existing equity investors on June 7, 2005, as well as approximately $0.4 million in expenses incurred to amend our existing credit facilities to permit this distribution.

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(2)	The existing credit agreement contains, and the amended and restated credit agreement will contain, a $30.0 million revolving credit facility with a maturity of six years.
(3)	As of March 31, 2005, the existing credit facilities included a $112.0 million term loan A facility and a $311.9 million term loan C facility. In connection with this offering, our existing credit facilities will be amended and restated to, among other things, provide for the repayment in full of our term loan A and C facilities and to borrow $425.0 million under a new term loan D facility, which is expected to mature on October 14, 2011. See “Description of Indebtedness — Amended and Restated Credit Facilities”.
(4)	The capital lease obligation represents the outstanding balance under the GECC capital lease. On May 27, 2005, we elected to pay in full the outstanding balance on this capital lease. See “Description of Indebtedness — GECC Capital Leases”.

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Initial public offering price per share of common stock			$	13.00
	Net tangible book value (deficiency) per share as of March 31, 2005			(13.83	)
	Increase per share attributable to new investors in this offering			4.93
	Pro forma as adjusted net tangible book value (deficiency) after giving effect to this offering		$	(8.90	)
Dilution in net tangible book value (deficiency) per share to investors in this offering			$	21.90

	•	the total number of shares of our common stock owned by our existing common stockholders and to be owned by new investors purchasing shares of common stock in this offering;
	•	the total consideration paid by our existing common stockholders and to be paid by the new investors purchasing shares of common stock in this offering; and
	•	the average price per share of common stock paid by our existing common stockholders and to be paid by new investors purchasing shares of common stock in this offering:

			Shares Purchased								Total Consideration
																			Average Price
			Number				Percent				Amount				Percent				Per Share
Existing common stockholders				14,020,844				47.2	%		$	104,230,190				33.9	%		$	7.43
New investors				15,666,666				52.8	%			203,666,658				66.1	%			13.00
	Total			29,687,510				100.0	%		$	307,896,848				100.0	%

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			Predecessor													CCI Holdings
																								Three Months
			Year Ended December 31,																					Ended March 31,
			2000				2001				2002					2003				2004				2004				2005
			(In millions)
Consolidated Statement of Operations Data:
	Total operating revenues		$	117.1			$	115.6			$	109.9				$	132.3			$	269.6			$	34.1			$	79.8
	Cost of services and products (exclusive of depreciation and amortization shown separately below)			39.0				38.9				35.8					46.3				80.6				12.4				24.4
	Selling, general and administrative			42.1				36.0				35.6					42.5				87.9				10.6				26.2
	Asset impairment			—				—				—					—				11.6				—				—
	Depreciation and amortization(1)			33.6				31.8				24.6					22.5				54.5				5.4				16.8
	Income from operations			2.4				8.9				13.9					21.0				35.0				5.7				12.4
	Interest expense, net(2)			(1.8	)			(1.8	)			(1.6	)				(11.9	)			(39.6	)			(2.8	)			(11.4	)
	Other, net(3)			0.5				5.8				0.4					0.1				3.7				—				0.3
	Income before income taxes			1.1				12.9				12.7					9.2				(0.9	)			2.9				1.3
	Income tax expense			(1.7	)			(6.3	)			(4.7	)				(3.7	)			(0.2	)			(1.1	)			(0.6	)
	Net income (loss)		$	(0.6	)		$	6.6			$	8.0					5.5				(1.1	)			1.8				0.7
	Dividends on redeemable preferred shares			—				—				—					(8.5	)			(15.0	)			(2.3	)			(4.6	)
	Net loss applicable to common shares			—				—				—				$	(3.0	)		$	(16.1	)		$	(0.5	)		$	(3.9	)

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				Predecessor													CCI Holdings
																									Three Months
				Year Ended December 31,																					Ended March 31,
				2000				2001				2002					2003				2004				2004				2005
				(In millions)
	Net loss per common share — basic and diluted				—				—				—				$	(0.33	)		$	(1.79	)		$	(0.06	)		$	(0.42	)
Other Financial Data:
	Telephone Operations revenues			$	82.0			$	79.8			$	76.7				$	90.3			$	230.4			$	22.9			$	71.0
Other Data (as of end of period):
	Local access lines in service
		Residential			63,064				62,249				60,533					58,461				168,778				58,345				168,017
		Business			32,933				33,473				32,475					32,426				86,430				32,481				85,054
		Total local access lines(3)			95,997				95,722				93,008					90,887				255,208				90,826				253,071
	DSL subscribers				—				2,501				5,761					7,951				27,445				8,456				30,804
		Total connections			95,997				98,223				98,769					98,838				282,653				99,282				283,875
Consolidated Cash Flow Data:
	Cash flows from operating activities			$	36.1			$	34.3			$	28.5				$	28.9			$	79.8			$	5.9			$	14.6
	Cash flows used in investing activities				(21.8	)			(13.1	)			(14.1	)				(296.1	)			(554.1	)			(2.7	)			(5.5	)
	Cash flows from (used in) financing activities				(21.5	)			(18.9	)			(16.6	)				277.4				516.3				(2.6	)			(4.6	)
	Capital expenditures				20.7				13.1				14.1					11.3				30.0				2.7				5.5

			Predecessor													CCI Holdings
			As of December 31																					As of March 31,
			2000				2001				2002					2003				2004				2004				2005
			(In millions)
Consolidated Balance Sheet Data:
	Cash and cash equivalents		$	0.9			$	3.3			$	1.1				$	10.1			$	52.1			$	10.7			$	56.5
	Total current assets			27.1				26.7				23.2					39.6				98.9				38.6				103.9
	Net plant, property & equipment(4)			102.6				100.5				105.1					104.6				360.8				99.5				353.1
	Total assets			270.0				248.9				236.4					317.6				1,006.1				314.9				1,002.2
	Total long-term debt (including current portion)(5)			21.3				21.1				21.0					180.4				629.4				177.8				624.9
	Redeemable preferred shares			—				—				—					101.5				205.5				95.1				210.1
	Parent company investment/ Members’ deficit			191.3				178.1				174.5					(3.5	)			(18.8	)			4.6				(21.0	)

(1)	On January 1, 2002, ICTC and related businesses adopted SFAS No. 142, Goodwill and Other Intangible Assets. Pursuant to SFAS No. 142, ICTC ceased amortizing goodwill on January 1, 2002 and instead tested for goodwill impairment annually. Amortization expense for goodwill and intangible assets was $17.6 million for 2000 and 2001, $10.1 million in 2002 and $7.0 million in 2003. Depreciation and amortization excludes amortization of deferred financing costs.
(2)	Interest expense includes amortization of deferred financing costs totaling $0.5 million in 2003, $6.4 million in 2004, and $0.2 million and $0.7 million for the periods ended March 31, 2004 and March 31, 2005 respectively.
(3)	On September 30, 2001, ICTC sold two exchanges of approximately 2,750 access lines, received proceeds from the sale of $7.2 million and recorded a gain on the sale of assets of approximately $5.2 million.
(4)	Property, plant and equipment are recorded at cost. The cost of additions, replacements and major improvements is capitalized, while repairs and maintenance are charged to expenses. When property, plant and equipment are retired from ICTC, the original cost, net of salvage, is charged against accumulated depreciation, with no gain or loss recognized in accordance with composite group life remaining methodology used for regulated telephone plant assets.
(5)	In connection with the TXUCV acquisition on April 14, 2004, we issued $200.0 million in aggregate principal amount of senior notes and entered into the existing credit facilities, of which $423.9 million was outstanding as of March 31, 2005.

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			Year Ended December 31,
			Predecessor to TXUCV
							Period from					Period from
							1/1/00 to					8/11/00 to
			1999				8/10/00					12/31/00				2001				2002				2003
			(Dollars in millions)
Consolidated Statement of Operations Data:
	Total operating revenues		$	126.3			$	93.2				$	67.9			$	207.5			$	214.7			$	194.8
	Network operating costs (exclusive of depreciation and amortization shown separately below)			48.7				38.7					29.9				95.6				76.9				58.4
	Selling, general and administrative			35.9				31.8					32.1				88.7				109.4				75.4
	Depreciation and amortization(1)			22.8				19.3					17.1				50.2				41.0				32.9
	Restructuring, asset impairment and other charges(2)			—				—					—				—				101.4				0.2
	Goodwill impairment charges			—				—					—				—				18.0				13.2
	Income (loss) from operations			18.9				3.4					(11.2	)			(27.0	)			(132.0	)			14.7
	Interest expense, net(3)			(1.8	)			(3.6	)				(4.9	)			(11.1	)			(7.5	)			(5.4	)
	Other, net(4)			2.4				5.8					10.9				9.9				11.4				0.8
	Income (loss) before income taxes			19.5				5.6					(5.2	)			(28.2	)			(128.1	)			10.1
	Income taxes (expense) benefit			(9.3	)			(3.8	)				(0.3	)			6.3				38.3				(12.4	)
	Net income (loss)		$	10.2			$	1.8				$	(5.5	)		$	(21.9	)		$	(89.8	)		$	(2.3	)

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				Year Ended December 31,
				Predecessor to TXUCV
								Period from					Period from
								1/1/00 to					8/11/00 to
				1999				8/10/00					12/31/00				2001				2002				2003
				(Dollars in millions)
Other Data (as of end of period):
	Local access lines in service
		Residential			80,182				—					117,130				119,488				119,060				116,862
		Business			36,394				—					49,292				50,406				53,023				54,780
		Total local access lines			116,576				—					166,422				169,894				172,083				171,642
	DSL subscribers				—				—					1,593				4,069				5,423				8,668
		Total connections			116,576				—					168,051				173,963				177,506				180,310
	CLEC access lines				3,656				—					18,541				58,591				26,088				—
Consolidated Cash Flow Data:
	Cash flows from (used in) operating activities			$	56.8			$	(16.5	)			$	37.4			$	6.8			$	34.7			$	75.1
	Cash flows used in investing activities				(53.0	)			(27.3	)				(48.3	)			(59.9	)			(21.3	)			(14.3	)
	Cash flows from (used in) financing activities				20.0				34.2					(3.8	)			46.3				(4.4	)			(61.8	)
	Capital expenditures				54.9				36.0					59.2				67.0				27.4				18.2

			As of December 31,
			Predecessor
			to TXUCV
			1999					2000				2001				2002				2003
												(In millions)
Consolidated Balance Sheet Data:
	Cash and cash equivalents		$	34.6				$	10.3			$	3.4			$	12.4			$	11.5
	Total current assets			69.7					63.8				44.3				86.4				34.5
	Net plant, property & equipment(5)			198.8					332.4				363.4				240.8				231.4
	Total assets			555.5					787.0				800.4				700.1				647.9
	Total long-term debt (including current portion)			56.1					157.5				172.8				166.2				100.4
	Stockholders’ equity			354.3					490.5				496.6				407.6				410.9

	(1)	On January 1, 2002, TXUCV adopted SFAS No. 142, Goodwill and Other Intangible Assets. Pursuant to SFAS No. 142, TXUCV ceased amortizing goodwill on January 1, 2002, and instead tests for goodwill impairment annually. Amortization expense for goodwill and intangible assets was $5.3 million in 1999, $8.7 million in 2000, and $13.7 million in 2001. In accordance with SFAS No. 142, TXUCV recognized goodwill impairments of $13.2 million and $18.0 million in 2003 and 2002, respectively.
	(2)	During 2002, TXUCV recognized restructurings, asset impairment and other charges of $101.4 million due to write down of assets relating to TXUCV’s competitive telephone company and transport businesses.
	(3)	Interest expense prior to the TXUCV acquisition was from the TXU revolving credit facility, GECC capital leases, mortgage notes and is reduced by allowance for funds used during construction.
	(4)	Other, net includes equity earnings from the cellular partnerships, dividend income and recognizing the minority interests of investors in East Texas Fiber Line Incorporated.
	(5)	Property, plant and equipment items are recorded at cost. The cost of additions, replacements and major improvements is capitalized, while repairs and maintenance are charged to expense.

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	Acquisitions

	•	Revenues and expenses for the three months ended March 31, 2004 and 2005 and for the years ended December 31, 2003 and 2004 for certain long distance services and data and Internet services include services that were not part of the financial results of our Telephone Operations segment when it was owned by McLeodUSA in 2002. These services were provided, and revenues were recognized, by McLeodUSA as part of its competitive telephone company operations. In order for McLeodUSA to provide these services to customers in our Illinois rural telephone company’s service area, ICTC provided McLeodUSA’s competitive telephone company operations access to its network and billing and collection services for which it received network access charges and billing and collection fees. Following our acquisition of ICTC and the related businesses, Telephone Operations launched its own business providing similar long distance and data and Internet services to customers primarily located in our Illinois rural telephone company’s service area. As a result, the results of operations of Telephone Operations for the three months ended March 31, 2004 and 2005 and for the years ended December 31, 2003 and 2004 include operations that were not included in 2002 when ICTC and the related operations were owned by McLeodUSA.
	•	Revenues and expenses for the year ended December 31, 2004 include the results of operations of CCI Texas from April 14, 2004, the date of its acquisition. As a result, our financial results as of and for the three months ended March 31, 2005 and for the year ended for December 31, 2004

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		include operations that were not included for the three months ended March 31, 2004 or for the year ended December 31, 2003.
	•	Expenses for the three months ended March 31, 2004 and 2005 and for the years ended December 31, 2003 and 2004 included $0.5 million, $1.25 million, $2.0 million and $4.1 million, respectively, in aggregate professional services fees paid to our existing equity investors. The rights of our existing equity investors to receive these professional service fees will terminate upon the closing of this offering. See “Certain Relationships and Related Party Transactions — Professional Services Fee Agreements”.
	•	In 2001 and 2002 McLeodUSA encountered financial difficulties and, as a result, initiated cost-cutting initiatives and reduced financial support for all operations other than ICTC. Although certain expenses were reduced as a result of these initiatives, revenues and income from operations also declined in these periods. In connection with its bankruptcy proceeding in 2002, McLeodUSA identified ICTC and the related businesses as assets held for sale and as discontinued operations.
	•	In connection with the TXUCV acquisition, we currently expect to incur approximately $14.5 million in operating expenses associated with the integration and restructuring process in 2004 and 2005. As of March 31, 2005, $9.2 million had been spent on integration and restructuring, including $1.6 million and $0.6 million by CCI Texas and CCI Illinois, respectively, in the first quarter of 2005. These one-time integration and restructuring costs will be in addition to certain ongoing expenses we expect to incur to expand certain administrative functions, such as those relating to SEC reporting and compliance, and do not take into account other potential cost savings and expenses of the TXUCV acquisition. We do not expect to incur costs relating to the TXUCV integration after 2005.

	Reorganization and this Offering

	•	In connection with this offering, we will incur approximately $10.2 million in one-time fees and expenses. These fees and expenses, which will be recorded as a reduction to paid-in capital, are in addition to certain other one-time fees and expenses we will incur in connection with the related transactions discussed under “—Liquidity and Capital Resources”.
	•	As a public company, we expect to incur approximately $1.0 million in incremental, ongoing selling, general and administrative expenses associated with being a public company with equity securities quoted on the Nasdaq National Market. These expenses include SEC reporting, compliance (SEC and Nasdaq) and related administration expenses, accounting and legal fees, investor relations expenses, directors’ fees and director and officer liability insurance premiums, registrar and transfer agent fees, listing fees and other, miscellaneous expenses.
	•	Following this offering, we will have $5.0 million less annually in selling, general and administrative expenses. We have been obligated to pay these amounts as fees under two professional service agreements with our existing equity investors. Upon the closing of this offering, these professional service fee agreements will automatically terminate.
	•	We expect to incur a non-cash compensation expense of $6.4 million as a result of the amendment and restatement of our restricted share plan in connection with this offering. In the future, we expect to incur an additional $6.4 million of non-cash compensation expense under the restricted share plan that will be recognized ratably over the remaining three year vesting period of the issued, but unvested restricted shares outstanding at the offering date. We may also incur additional non-cash compensation expenses in connection with any new grants under our 2005 long term incentive plan, consistent with other public companies.

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	•	As a result of the dividend policy that our board of directors will adopt effective upon the closing of this offering, we currently intend to pay an initial dividend of $0.4089 per share (representing a pro rata portion of the expected dividend for the first year following the closing of this offering) on or about November 1, 2005 to stockholders of record as of October 15, 2005 and to continue to pay quarterly dividends at an annual rate of $1.5495 per share for the first year following the closing of this offering, subject to various restrictions on our ability to do so. We expect the aggregate impact of this dividend policy in the year following the closing of the offering to be $46.0 million.
	•	We do not expect any of our day-to-day operations to be affected by this offering.

	Factors Affecting Future Results of Operations

	Revenues

														Three Months
		Year Ended												Ended
		December 31,												March 31,
		2002				2003				2004				2004				2005
		(Percentage of total revenues)
Telephone Operations			69.8	%			68.2	%			85.5	%			67.2	%			89.0	%
Other Operations			30.2				31.8				14.5				32.8				11.0

				CCI Illinois								CCI Texas
				Year Ended				Three Months Ended				April 14, 2004-				Three Months Ended
				December 31, 2004				March 31, 2005				December 31, 2004				March 31, 2005
				(In millions)
Telephone Operations
	Local calling services			$	33.9			$	8.3			$	41.0			$	14.2
	Network access services				30.3				6.8				26.5				9.6
	Subsidies				10.6				4.2				29.9				9.5
	Long distance services				7.7				1.9				7.0				2.1
	Data and Internet services				10.6				2.6				10.3				3.9
	Other services				4.2				0.9				18.4				7.0
		Total telephone operations			97.3				24.7				133.1				46.3
Other Operations					39.2				8.8				—				—
		Total revenue		$	136.5			$	33.5			$	133.1			$	46.3

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	•	aggressively promoting DSL service;
	•	bundling value-added services, such as DSL with a combination of local service, custom calling features, voicemail and Internet access;
	•	maintaining excellent customer service standards, particularly as we introduce new services to existing and new customers and;
	•	keeping a strong local presence in the communities we serve.

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	Expenses

	Cost of Services and Products

	•	operating expenses relating to plant costs, including those related to the network and general support costs, central office switching and transmission costs and cable and wire facilities;
	•	general plant costs, such as testing, provisioning, network, administration, power and engineering;
	•	the cost of transport and termination of long distance and private lines outside our rural telephone companies’ service area.

	Selling, General and Administrative Expenses

	•	selling and marketing expenses;
	•	expenses associated with customer care;
	•	billing and other operating support systems; and
	•	corporate expenses, including professional service fees.

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	Depreciation and Amortization Expenses

		Years
Buildings			15-35
Network and outside plant facilities			5-30
Furniture, fixtures and equipment			3-17

			Predecessor									CCI Holdings
			Year Ended December 31,																									Three Months Ended March 31,
			2002									2003								2004								2004								2005
							% of									% of								% of								% of								% of
			$				Total					$				Total				$				Total				$				Total				$				Total
			(millions)				Revenues					(millions)				Revenues				(millions)				Revenues				(millions)				Revenues				(millions)				Revenues
Revenues
Telephone Operations
	Local calling services		$	33.4				30.4	%			$	34.4				26.0	%		$	74.9				27.8	%		$	8.5				24.9	%		$	22.5				28.2	%
	Network access services			29.0				26.4					27.5				20.8				56.8				21.1				6.6				19.5				16.4				20.6
	Subsidies			4.1				3.7					4.7				3.5				40.5				15.0				2.3				6.7				13.7				17.2
	Long distance services			1.4				1.3					8.8				6.7				14.7				5.5				2.0				5.9				4.0				5.0
	Data and Internet services			4.3				3.9					10.8				8.2				20.9				7.8				2.5				7.3				6.5				8.1
	Other services			4.5				4.1					4.1				3.1				22.6				8.3				1.0				2.9				7.9				9.9
	Total Telephone Operations			76.7				69.8					90.3				68.3				230.4				85.5				22.9				67.2				71.0				89.0
Other Operations				33.2				30.2					42.0				31.7				39.2				14.5				11.2				32.8				8.8				11.0
Total operating revenues				109.9				100.0					132.3				100.0				269.6				100.0				34.1				100.0				79.8				100
Expenses
Operating expenses(1)
Telephone Operations				46.9				42.7					54.7				41.3				133.5				49.5				13.5				39.6				42.4				53.2
	Other Operations			24.6				22.4					34.1				25.8				46.6				17.3				9.5				27.9				8.2				10.3
Depreciation and amortization				24.5				22.3					22.5				17.0				54.5				20.2				5.4				15.8				16.8				21.0
Total operating expenses				96.0				87.4					111.3				84.1				234.6				87.0				28.4				83.3				67.4				84.4

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		Predecessor									CCI Holdings
		Year Ended December 31,																									Three Months Ended March 31,
		2002									2003								2004								2004								2005
						% of									% of								% of								% of								% of
		$				Total					$				Total				$				Total				$				Total				$				Total
		(millions)				Revenues					(millions)				Revenues				(millions)				Revenues				(millions)				Revenues				(millions)				Revenues
Income from operations			13.9				12.6					21.0				15.9				35.0				13.0				5.7				16.7				12.4				15.6
Interest expense, net			1.6				1.5					11.9				9.0				39.9				14.8				2.8				8.2				11.4				14.3
Other income, net			0.4				0.4					0.1				0.1				4.0				1.5				—				—				0.3				0.4
Income taxes expense			4.7				4.3					3.7				2.8				0.2				0.1				1.1				3.2				0.6				0.8
Net income		$	8.0				7.2	%			$	5.5				4.2	%		$	(1.1	)			(0.4	%)		$	1.8				5.3	%		$	0.7				0.9	%

(1)	This category reflects costs of services and products and selling, general and administrative expenses line items set forth in the consolidated financial statement of income of CCI Holdings and the audited combined statements of income for ICTC and related business.

	Segments

	Three Months Ended March 31, 2005 Compared to March 31, 2004

	Revenues

	Telephone Operations Revenue

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	Other Operations Revenue

	CCI Holdings Operating Expenses

	Telephone Operations Operating Expenses

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	Other Operations Operating Expenses

	Depreciation and Amortization

	Income from Operations

	Interest Expense, Net

	Other Income (Expense)

	Income Taxes

	Net Income (Loss)

	Year Ended December 31, 2004 Compared to December 31, 2003

	Revenues

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	Telephone Operations Revenues

	Other Operations Revenues

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	CCI Holdings Operating Expenses

	Telephone Operations Operating Expenses

	Other Operations Operating Expenses

	Depreciation and Amortization

	Income from Operations

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	Interest Expense

	Other Income (Expense)

	Income Taxes

	Net Income (Loss)

	Year Ended December 31, 2003 Compared to December 31, 2002

	Revenues

	Telephone Operations Revenues

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	Other Operations Revenues

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	Operating Expenses

	Telephone Operations Operating Expenses

	Other Operations Operating Expenses

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	Depreciation and Amortization

	Income from Operations

	Interest Expense

	Other Income (Expense)

	Income Taxes

	Net Income

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	•	a change in the use or perceived value of our tradenames;
	•	significant underperformance relative to expected historical or projected future operating results;
	•	significant regulatory changes that would impact future operating revenues;
	•	significant negative industry or economic trends; or
	•	significant changes in the overall strategy in which we operate our overall business.

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Percentage

December 31, 2004

Point

Obligation

2005 Expense

Assumption

Change

Higher/(Lower)

Higher/(Lower)

(Dollars in thousands)

Discount rate

±0.5  pts

$(7,826)/$8,744

$(141)/$142

Expected return on assets

±1.0  pts

—

$(928)/$928

Percentage

December 31, 2004

Point

Obligation

2005 Expense

Assumption

Change

Higher/(Lower)

Higher/(Lower)

(Dollars in thousands)

Discount rate

±0.5  pts

$(2,227)/$2,497

$(94)/$47

	General

	Operating, Investing and Financing Activities

		Predecessor				CCI Holdings
														Three Months
		Year Ended												Ended March 31,
		2002				2003				2004				2004				2005
		(In millions)
Net Cash Provided (Used):
Operating Activities		$	28.5			$	28.9			$	79.8			$	5.9			$	14.6
Investing Activities			(14.1	)			(296.1	)			(554.1	)			(2.7	)			(5.5	)
Financing Activities			16.6				277.4				516.3				(2.6	)			(4.6	)

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	Operating Activities

	Investing Activities

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	Financing Activities

Amount

Maturity Date

Rate(1)

(Dollars in thousands)

Revolving credit facility

$

—

April 14, 2010

LIBOR + 2.25%

Term loan A facility

112,000

April 14, 2010

LIBOR + 2.25%

Term loan C facility

311,850

October 14, 2011

LIBOR + 2.50%

Senior notes

200,000

April 1, 2012

9.75%

Capital leases

1,059

March 1, 2007

6.50%

Amount

Maturity Date

Rate(1)

(Dollars in thousands)

Revolving credit facility

$

—

April 14, 2010

LIBOR + 2.00%

Term loan D facility

425,000

October 14, 2011

LIBOR + 2.50%

Senior notes

135,000

April 1, 2012

9.75%

Capital lease

1,059

March 1, 2007

6.50%

(1)	As of March 31, 2005, the 90-day LIBOR rate was 3.12%.

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	Existing Credit Facilities and Amended and Restated Credit Facilities

	•	a new term loan D facility of up to $425.0 million maturing on October 14, 2011; and
	•	a $30.0 million new revolving credit facility maturing on April 14, 2010.

	Senior Notes

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	Covenant Compliance

	•	our senior secured leverage ratio, as of the end of any fiscal quarter, is greater than 4.00 to 1.00; or
	•	our fixed charge coverage ratio, as of the end of any fiscal quarter, is not (x) after the closing date and on or prior to December 31, 2005, at least 2.50 to 1.00, (y) after January 1, 2006 and on or prior to December 31, 2006, at least 2.00 to 1.00 and (z) after January 1, 2007, at least 1.75 to 1.00.

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Twelve

Year Ended

Year Ended

Months Ended

December 31,

December 31,

March 31,

2003

2004

2005

(Dollars in millions)

Pro forma Bank EBITDA

$124.0

$141.0

$141.6

Total net leverage ratio

4.49:1.00

3.95:1.00

3.93:1.00

Senior secured leverage ratio

3.47:1.00

3.05:1.00

3.04:1.00

Fixed charge coverage ratio

3.69:1.00

4.13:1.00

4.04:1.00

	GECC Capital Leases

	Capital Requirements

	•	scheduled principal and interest payments on our long-term debt;
	•	capital expenditures for CCI Holdings of approximately $30.0 million for network, central offices and other facilities and information technology for operating support and other systems; and
	•	$7.0 million in aggregate to integrate and restructure the operations of CCI Illinois and CCI Texas following the TXUCV acquisition.

	•	interest payments on our long-term debt;
	•	a $37.5 million cash distribution to our existing equity investors;
	•	capital expenditures of approximately $33.5 million for similar investments as we made in 2004;
	•	approximately $7.5 million in TXUCV integration and restructuring costs; and
	•	incremental costs associated with being a public company.

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	Results of Operations.

	•	We will pay approximately $12.9 million in one-time fees and expenses in connection with this offering and the related transactions, $9.5 million of which are related to the offering and will be recorded as a reduction to paid-in capital and $3.4 million of which are related to the amendment and restatement of the existing credit facilities and will be recorded as deferred financing costs that will be amortized over the life of the term loan D facility.
	•	We will pay a premium of $6.3 million in connection with the redemption of senior notes.
	•	We will have a net decrease in interest expense of $6.3 million per year due to the partial redemption of senior notes and amendment and restatement of the credit facilities.
	•	We will have a net increase in deferred financing costs, due to the write-off of approximately $2.3 million of deferred financing costs relating to the redemption of senior notes, and the incurrence of approximately $3.4 million of deferred financing costs to amend and restate the existing credit facilities.
	•	As a result of the amendment and restatement of our credit facilities, we will (a) have $18.1 million less in scheduled amortization payments due to the elimination of the requirement to amortize outstanding principal amounts and (b) no longer be required to prepay our outstanding term loans with 50% of our excess cash flow, as that term is used in the amended and restated credit facilities.
	•	As a public company, we expect to incur approximately $1.0 million in incremental, ongoing selling, general and administrative expenses associated with being a public company with equity securities quoted on the Nasdaq National Market. These expenses include SEC reporting, compliance (SEC and Nasdaq) and related administration expenses, accounting and legal fees, investor relations

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		expenses, directors’ fees and director and officer liability insurance premiums, registrar and transfer agent fees, listing fees and other, miscellaneous expenses.
	•	Following this offering, we will have $5.0 million less annually in selling, general and administrative expenses from the termination of the two professional service agreements as described above.
	•	We expect to incur a non-cash compensation expense of $6.4 million as a result of the amendment and restatement of our restricted share plan in connection with this offering. In the future, we expect to incur an additional $6.4 million of non-cash compensation expense under the restricted share plan that will be recognized ratably over the remaining three year vesting period of the issued, but unvested restricted shares outstanding at the offering date. We may also incur additional non-cash compensation expenses in connection with any new grants under our 2005 long-term incentive plan, consistent with other public companies.
	•	As a result of the dividend policy that our board of directors will adopt effective upon the closing of this offering, we currently intend to pay an initial dividend of $0.4089 per share (representing a pro rata portion of the expected dividend for the first year following the closing of this offering) on or about November 1, 2005 to stockholders of record as of October 15, 2005 and to continue to pay quarterly dividends at an annual rate of $1.5495 per share for the first year following the closing of this offering, subject to various restrictions on our ability to do so. We expect the aggregate impact of this dividend policy in the year following the closing of the offering to be $46.0 million. The cash requirements of the expected dividend policy are in addition to our other expected cash needs, both of which we expect to be funded with cash flow from operations. In addition, we expect we will have sufficient availability under our amended and restated revolving credit facility to fund dividend payments in addition to any expected fluctuations in working capital and other cash needs, although we do not intend to borrow under this facility to pay dividends.

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	Surety Bonds

	Table of Contractual Obligations & Commitments

		Payments Due by Period
		Total				2005				2006				2007				2008				2009				Thereafter
		(In thousands)
Long-term debt(a)		$	623,850			$	36,169			$	21,900			$	23,150			$	26,900			$	33,400			$	482,331
Operating leases			24,276				3,644				3,896				3,169				2,601				2,571				8,395
Capital lease(b)			1,059				398				563				98				—				—				—
Minimum purchase contracts(c)			1,056				297				396				363				—				—				—
Pension and other post-retirement obligations(d)			62,924				3,027				5,307				5,704				5,939				6,264				36,683
Total contractual cash obligations and commitments		$	713,165			$	43,535			$	32,062			$	32,484			$	35,440			$	42,235			$	527,409

		Payments Due by Period
		Total				2005				2006				2007				2008				2009				Thereafter
		(In thousands)
Long-term debt(e)		$	560,000			$	—			$	—			$	—			$	—			$	—			$	560,000
Operating leases			24,276				3,644				3,896				3,169				2,601				2,571				8,395
Capital lease(b)			1,059				398				563				98				—				—				—
Minimum purchase contracts(c)			1,056				297				396				363				—				—				—
Pension and other post-retirement obligations(d)			62,924				3,027				5,307				5,704				5,939				6,264				36,683
Total contractual cash obligations and commitments		$	649,315			$	7,366			$	10,162			$	9,334			$	8,540			$	8,835			$	605,078

(a)		This item consists of loans outstanding under our existing credit facilities and our senior notes. Our existing credit facilities consist of a $112.0 million term loan A facility with a maturity of six years, a $311.9 million term loan C facility with a maturity of seven years and six months, and a $30.0 million revolving credit facility with a maturity of six years, which is fully available.

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(b)		This item consists of a $1.1 million capital lease entered into by CCI Texas with GECC. On May 27, 2005, we elected to pay in full the outstanding balance on this lease. See “Description of Indebtedness — GECC Capital Leases”.
(c)		As of March 31, 2005, the minimum purchase contract was a 60-month High-Capacity Term Payment Plan agreement with Southwestern Bell, dated November 25, 2002. The agreement requires CCI Texas to make monthly purchases of at least $33,000 from Southwestern Bell on a take-or-pay basis. The agreement also provides for an early termination charge of 45.0% of the monthly minimum commitment multiplied by the number of months remaining through the expiration date of November 25, 2007. As of March 31, 2005, the potential early termination charge was approximately $0.5 million.
(d)		Pension funding is an estimate of our minimum funding requirements to provide pension benefits for employees based on service through 2004. Obligations relating to other post retirement benefits are based on estimated future benefit payments. Our estimates are based on forecasts of future benefit payments which may change over time due to a number of factors, including life expectancy, medical costs and trends and on the actual rate of return on the plan assets, discount rates, discretionary pension contributions and regulatory rules. See Note E (Postretirement Benefit Plans) to the consolidated financial statements of TXUCV and Note 12 (Pension Costs and Other Postretirement Benefits) of CCI Holdings consolidated financial statements.
(e)		This item consists of loans expected to be outstanding under the amended and restated credit facilities and our senior notes. The amended and restated credit facilities will consist of a $425.0 million term loan D facility maturing on October 14, 2011, which will be drawn on the closing of this offering, and a $30.0 million revolving credit facility maturing on April 14, 2010, which is expected to be fully available but undrawn immediately following the closing of this offering. See “Description of Indebtedness — Amended and Restated Credit Facilities”. The table does not reflect any amortization of long-term debt, that is because none requires any amortization prior to its scheduled maturity.

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	CCI Texas’ Business

	TXUCV Acquisition

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	Revenues

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	Expenses

	Network Operating Costs

	•	expenses related to plant costs, including those related to network and general support costs, central office switching and transmission costs, and cable and wire facilities;
	•	general plant costs, such as testing, provisioning, network, administration, power and engineering; and
	•	the cost of transport and termination of long distance and private lines outside our Texas rural telephone companies’ service areas.

	Selling, General and Administrative Expenses

	•	selling and marketing expenses;
	•	expenses associated with customer care;
	•	billing and other operating support systems; and
	•	corporate expenses.

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	Depreciation and amortization expenses

		Years
Buildings			15-35
Network and outside plant facilities			5-30
Furniture, fixtures, and equipment			3-17

			Year Ended December 31,
			2001								2002								2003
			$				% of Total				$				% of Total				$				% of Total
			(millions)				Revenues				(millions)				Revenues				(millions)				Revenues
Revenues(1)
	Local calling services		$	52.5				25.3	%		$	54.3				25.3	%		$	56.2				28.9	%
	Network access services			37.0				17.8				36.2				16.9				35.2				18.1
	Subsidies			28.6				13.8				31.8				14.8				41.4				21.2
	Long distance services			23.4				11.3				20.1				9.4				13.4				6.9
	Data and Internet services			14.9				7.2				14.1				6.6				14.7				7.5
	Directory publishing			8.3				4.0				9.6				4.4				10.4				5.3
	Transport services			10.3				5.0				12.6				5.8				12.8				6.6
	Other services			8.4				4.0				6.0				2.8				4.8				2.5
	Exited services			24.1				11.6				30.0				14.0				5.9				3.0
Operating Revenues				207.5				100.0				214.7				100.0				194.8				100.0

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		Year Ended December 31,
		2001								2002								2003
		$				% of Total				$				% of Total				$				% of Total
		(millions)				Revenues				(millions)				Revenues				(millions)				Revenues
Expenses
Operating expenses(2)			184.3				88.8				186.3				86.8				133.8				68.7
Depreciation and amortization			50.2				24.2				41.0				19.1				32.9				16.9
Other charges(3)			—				—				119.4				55.6				13.4				6.9
Total operating expenses			234.5				113.0				346.7				161.5				180.1				92.5
Operating (loss) income			(27.0	)			(13.0	)			(132.0	)			(61.5	)			14.7				7.5
Total other (expense) income, net			(1.2	)			(0.6	)			3.9				1.8				(4.6	)			(2.4	)
(Loss) income before income taxes			(28.2	)			(13.6	)			(128.1	)			(59.7	)			10.1				5.1
Income tax (benefit) expense			(6.3	)			(3.0	)			(38.3	)			(17.9	)			12.4				6.4
Net (loss) income		$	(21.9	)			(10.6	)%		$	(89.8	)			(41.8	)%		$	(2.3	)			(1.3	)%

(1)	This category corresponds to the line items presented under “Business — Telephone Operations — Texas” and provides more detail than that presented in the consolidated statement of operations and comprehensive loss of TXUCV. See the audited consolidated financial statements of TXU Communications Ventures Company and Subsidiaries.
(2)	This line item includes network operating costs and selling, general and administrative expenses.
(3)	This line item includes restructuring, asset impairment and other charges and goodwill impairment charges.

	Year ended December 31, 2003 compared to December 31, 2002

	Revenues

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	Operating Expenses

	•	Network costs decreased primarily as a result of CCI Texas having substantially exited the competitive telephone company business by the end of March 2003, which led to the removal of leased circuit costs from SBC and other carriers.
	•	Related to the exit from the competitive telephone company business, total headcount decreased by 161 to 644 as of December 31, 2003. CCI Texas estimates that the actual expense of salaries and benefits for these employees was approximately $4.4 million in addition to the $4.4 million in severance costs CCI Texas incurred in connection with these terminations.
	•	Bad debt expense decreased by $11.0 million from $10.2 million in 2002 to a $0.8 million benefit in 2003. This was primarily due to (1) a re-evaluation of the bad debt reserve from $5.0 million at year-end 2002, which included a $2.7 million reserve for MCI accounts receivable due to the bankruptcy of MCI’s parent, Worldcom, Inc., to $1.5 million at year-end 2003 and (2) a decrease in bad debt write-offs to $2.3 million in 2003, which decrease primarily related to the exit from the competitive telephone company business.
	•	Those network costs that were not associated with the competitive telephone company decreased due to process improvements and network optimization projects. Process improvements were related to implementation of an automated system for tracking circuit costs payable to other carriers, including a monthly feed to the general ledger. Network optimization projects included renegotiation of contracts with long distance and other carriers, which eliminated monthly minimum

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		usage fees. In addition, network costs decreased due to the removal of circuits in connection with the exit from the wholesale long distance business.
	•	Operating expenses decreased due to one-time system consolidation projects in 2002 that were not experienced in 2003. This decrease, however, was partially offset by expenses associated with a one-time software development project to enhance CCI Texas’ customer billing system in connection with the sale process.
	•	The incurrence of $1.4 million of one-time transaction costs, including financial and legal expenses associated with preparing TXUCV for sale.
	•	In addition, $2.4 million in retention bonuses that were paid to key employees to facilitate the sales transaction process while running the day to day operations of the business.

	Depreciation and Amortization

	Other Charges

	Other Income (Expense)

	Income Tax Expense (Benefit)

	Year Ended December 31, 2002 Compared to December 31, 2001

	Revenues

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	Operating Expenses

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	Depreciation and Amortization

	Other Income (Expense)

	Income Tax Expense (Benefit)

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	•	a change in the use or perceived value of CCI Texas’ tradenames;
	•	significant underperformance relative to expected historical or projected future operating results;
	•	significant regulatory changes that would impact future operating revenues;
	•	significant negative industry or economic trends; or
	•	significant changes in the overall strategy in which we operate our overall business.

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		Percentage		December 31, 2004
		Point		Obligation		2005 Expense
Assumption		Change		Higher/(Lower)		Higher/(Lower)
		(Dollars in thousands)
Discount rate		+-0.5 pts		$(4,545)/$5,110		$(114)/$116
Expected return on assets		+-1.0 pts		—		$(413)/$413

		Percentage		December 31, 2004
		Point		Obligation		2005 Expense
Assumption		Change		Higher/(Lower)		Higher/(Lower)
		(Dollars in thousands)
Discount rate		+-0.5 pts		$(1,881)/$2,125		$(80)/$33

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	Stable Local Telephone Businesses

	Favorable Regulatory Environment

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	Attractive Markets and Limited Competition

	Technologically Advanced Network

	Broad Service Offerings and Bundling of Services

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	Experienced Management Team with Proven Track Record

	•	particular expertise in providing superior quality services to rural customers in a regulated environment;
	•	a proven track record of successful business integrations, including the integration of ICTC and several related businesses, including long distance and private line services, into McLeodUSA in 1998; and
	•	a proven track record of launching and growing of new, regulated services, such as long distance and DSL services, and complementary services, such as operator and telemarketing and order fulfillment services.

	Improve Operating Efficiency and Maintain Capital Expenditure Discipline

	Increase Revenues Per Customer

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	•	attractiveness of the markets;
	•	quality of the network;
	•	our ability to integrate the acquired company efficiently;
	•	potential operating synergies; and
	•	the potential of any proposed transaction to permit increased dividends on our common stock.

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	•	86,624 local access lines in service, of which approximately 64% served residential customers and 36% served business customers;
	•	64% long distance penetration of its local access lines;
	•	7,611 dial-up Internet customers; and
	•	11,915 DSL lines, which represented an approximately 13.8% penetration of total local access lines. Approximately 90% of our total local access lines in Illinois, excluding local access lines already served by other high speed connections, are DSL-capable.

		% of Net
		Revenue of Illinois
Revenue Source		Telephone Operations				Description
Local Calling Services			33.6%			Offers the local customer the ability to originate and receive an unlimited number of calls within a defined local calling area. The customer is charged a flat monthly fee for basic service, including local calls, and service charges for custom calling features, value added services and local private line services.
Network Access Services			27.5%			Offers long distance and other carriers the opportunity to use our Illinois network to originate or terminate long distance calls in our Illinois service area. Network access charges are paid by the long distance or other carriers to our Illinois Telephone Operations and are regulated by the FCC and the ICC. These revenues also include special access and certain regulated, end-user charges.
Subsidies			17.0%			Our Illinois Telephone Operations receive federal subsidy payments designed to promote widely available, quality telephone service at affordable prices in rural areas.

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		% of Net
		Revenue of Illinois
Revenue Source		Telephone Operations				Description
Long Distance Services			7.7%			Offers intrastate and interstate long distance services provided to local customers in Illinois who subscribe to our Telephone Operations’ long distance services.
Data and Internet Services			10.6%			Offers DSL, non-local private line service, dial-up Internet access and frame relay networks and related enhanced Internet services.
Other Services			3.6%			Offers other services, including billing and collection services and commissions from the sale of advertising for yellow and white pages directories.

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	Texas

	•	166,447 local access lines in service, of which approximately 68% served residential customers and 32% served business customers;
	•	40% long distance penetration of its local access lines in Texas;
	•	11,998 dial-up Internet customers; and
	•	18,889 DSL lines, which represented an approximately 11.3% penetration of total local access lines. Approximately 90% of our total local access lines in Texas, excluding local access lines already served by other high speed connections, are DSL-capable.

	•	GTE Mobilnet of South Texas, which serves the greater Houston metropolitan area. Our Texas Telephone Operations own approximately 2.3% of this partnership. In 2004, our Texas Telephone Operations recognized income of $2.5 million and received cash distributions totaling $3.2 million from this partnership. For the three months ended March 31, 2005, our Texas Telephone Operations did not recognize any income or receive any cash distributions from this partnership.

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	•	GTE Mobilnet of Texas RSA #17, which serves rural areas in and around Conroe, Texas. Our Texas Telephone Operations own approximately 17.0% of the equity of this partnership. In 2004, our Texas Telephone Operations recognized income of $1.7 million and received cash distributions totaling $0.8 million from this partnership. For the three months ended March 31, 2005, our Texas Telephone Operations recognized income of $0.3 million, but did not receive any cash distributions from this partnership.

		% of Net
		Revenue of Our
Revenue Source		Texas Telephone Operations				Description
Local Calling Services			30.7%			Offers the local customer in Texas the ability to originate and receive an unlimited number of calls within a defined local calling area. The customer is charged a flat monthly fee for basic service, including local calls, and service charges for custom calling features, voicemail and local private line services.
Network Access Services			20.7%			Offers long distance and other carriers the opportunity to use our Texas network to originate or terminate long distance calls in our Texas service areas. Network access charges are paid by the long distance or other carriers to our Texas Telephone Operations and are regulated by the FCC and PUCT. These revenues also include special access and certain regulated, end user charges.
Subsidies			20.5%			Our Telephone Operations in Texas receive federal and state subsidy payments designed to promote widely available, quality telephone service at affordable prices in rural areas.
Long Distance Services			4.5%			Offers intrastate and interstate long distance services provided to local customers who subscribe to our long distance services in Texas.
Data and Internet Services			8.4%			Offers DSL, non-local private line service, dial-up Internet access, Asynchronous Transfer Mode, or ATM, based services and frame relay networks and related enhanced Internet services.

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		% of Net
		Revenue of Our
Revenue Source		Texas Telephone Operations				Description
Directory Publishing			6.5%			Offers the sale of directory advertising and publishes yellow and white pages directories in and around our Texas service areas.
Transport Services			5.9%			Offers connectivity to customers within Texas over a fiber-optic transport network.
Other Services			2.8%			Offers other services, including equipment sales and billing and collection services.

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	•	Public Services provides local and long distance service and automated collect calling from county jails and state prisons in Illinois under multi-year contracts as described under “— Customers and Markets”. These services include fraud control, customer service, call management and technical field support. The range of customized applications include institution-specific branding, call time and dollar limits, 3-way call detection, Personal Identification Number System, call blocking and screening, public defender access, call restriction application, on-site training, fully automated collect calls, touch tone and rotary dial acceptable, inmate tested equipment and monitors and recorders. Public Services also provides payphone services to approximately 356 payphones in our Illinois service area.
	•	Operator Services offers both live and automated local and long distance operator assistance in Texas and national directory assistance on a wholesale and retail basis to incumbent telephone companies, competitive telephone companies, long distance companies and payphone providers. Operator Services also provides specialized message center services and corporate and governmental attendant services and private corporate directory assistance and messaging services to corporations and government agencies.
	•	Market Response provides telemarketing and order fulfillment services to customers nationwide. Our order fulfillment services provide our clients with the ability to quickly and cost-effectively meet their customers’ requests for shipment of information and products. Typically, these customers are responding to a direct-response advertising campaign by the Internet, mail or telephone.
	•	Business Systems sells, installs and maintains telecommunications equipment and wiring to residential and business customers in our Illinois service area and in nearby, larger markets including Champaign, Decatur and Springfield, Illinois. This operation allows us to cross-sell our services to many of our business customers in Illinois, such as colleges, hospitals and secondary schools.
	•	Mobile Services provides one-way messaging service to residential and business customers. The basic paging capability has been supplemented with other complimentary mobile information services, including Internet, 800 service, info-text and voicemail.

	Illinois

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	Key Illinois Market Data

				Coles				Christian				Montgomery				Effingham				Shelby				Other				Totals
2000 Census Data
	County Population (2000)				53,196				35,372				30,652				34,264				22,893				n/a				176,377
	County Population CAGR 1990-2000				0.30	%			0.27	%			(0.03)	%			0.78	%			0.28	%			n/a				n/a
	County Median Household Income			$	32,286			$	36,561			$	33,123			$	39,379			$	37,313				n/a				n/a
Market Territory (sq. miles)					531				662				585				26				520				357				2,681
Local Access Lines
	Residence				19,095				12,276				9,564				4,369				6,002				4,101				55,407
	Business				12,859				4,670				4,239				5,568				1,958				1,923				31,217
		Total			31,954				16,946				13,803				9,937				7,960				6,024				86,624
Number of Exchanges					5				9				7				1				8				5				35

	Texas

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	Key Texas Market Data

				Conroe Market				Lufkin Market				Katy Market
				(Montgomery				(Angelina				(Fort Bend
				County)				County)				County)				Totals
2000 Census Data
	County Population (2000)				293,768				80,130				354,452				728,350
	County Population CAGR 1990-2000				4.9	%			1.4	%			4.6	%
	County Median Household Income			$	50,864			$	33,806			$	63,831
Market Territory (sq. miles)					433				1,080				541				2,054
Local Access Lines Residential					49,868				30,552				32,190				112,610
	Business				23,400				16,966				13,471				53,837
		Total			73,268				47,518				45,661				166,447
Number of Exchanges					7				9				5				21

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	Other Operations

	•	includes provisions that allow the respective state agency and county to terminate the contract without cause and without penalty under some circumstances;
	•	is subject to decisions of state agencies and counties that are subject to political influence on renewal;

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	•	gives the State of Illinois the right to renew the contract at its option but does not give us the same right; and
	•	could be cancelled if state funding becomes unavailable.

	•	positioning itself as a single point of contact for customers’ telecommunications needs;
	•	providing its customers with a broad array of voice and data services and bundling services where possible;
	•	providing excellent customer service, including providing 24-hour, 7-day a week centralized customer support to coordinate installation of new services, repair and maintenance functions;
	•	developing and delivering new services; and
	•	with respect to our Illinois Telephone Operations, leveraging the history of CCI Illinois and its involvement with its local communities and expanding “Consolidated Communications” and “Consolidated” brand recognition, subject to regulatory and strategic business considerations and, with respect to our Texas Telephone Operations, leveraging the history of CCI Texas and its involvement with its local communities.

	•	accelerating DSL service penetration in all of our service areas;
	•	cross-selling our services;
	•	developing additional services to maximize revenues and increase revenues per customer;
	•	increasing customer loyalty through superior customer service, local presence and motivated service employees; and
	•	leveraging the telemarketing, order fulfillment and directory-assistance capabilities to provide functions that are currently being outsourced by our Texas Telephone Operations, a process that has already begun with the migration of Texas directory assistance traffic to the system in Illinois in May 2004.

	Telephone Operations

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	Other Operations

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				Owned/				Approx.
Location		Primary Use		Leased				Sq. Ft.
Charleston		Illinois Telephone Operations Communications Center and Market Response Offices(1)			Leased				33,987
Effingham		Office and Illinois Telephone Operations Communications Center			Leased				2,500
Mattoon		Sales and Administration Office(1)			Leased				30,687
Mattoon		Corporate Headquarters(1)			Leased				49,054
Mattoon		Operator Services and Operations			Owned				36,263
Mattoon		Archive			Owned				9,097
Mattoon		Operations and Distribution Center(1)			Leased				30,883
Mattoon		Communications Center			Leased				5,677
Mattoon		Market Response Order Fulfillment(2)			Leased				20,000
Mattoon		Office			Owned				10,086
Taylorville		Operations and Branch Distribution Center(1)			Leased				14,655
Taylorville		Office and Illinois Telephone Operations Communications Center			Owned				15,934
Taylorville		Operator Services Call Center(2)			Leased				11,500

(1)	In 2002, our Illinois Telephone Operations sold these facilities to, and leased them back from, LATEL, LLC, or LATEL, an entity affiliated with Mr. Lumpkin. For more information about these arrangements, see “Certain Relationships and Related Party Transactions — LATEL Sale/ Leaseback”.
(2)	All properties listed above other than these two properties are used by both Illinois Telephone Operations and Other Operations. These two properties are used by Other Operations only.

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				Owned/				Approx.
Location		Primary Use		Leased				Sq. Ft.
Brookshire		Office			Owned				4,400
Conroe		Regional Office			Owned				51,875
Conroe		Warehouse & Plant			Owned				28,500
Conroe		Office			Owned				10,650
Dallas		Current Texas Headquarters — Administration			Leased				5,997
Irving		Office			Leased				44,060
Katy		Regional Office			Owned				6,500
Katy		Office (Electric Shop)			Owned				1,600
Katy		Warehouse			Owned				13,983
Katy		Office			Owned				5,733
Lufkin		Regional Office			Owned				30,145
Lufkin		Business Office			Owned				23,190
Lufkin		Warehouse			Owned				14,240
Lufkin		Office and Data Center			Owned				11,920
Lufkin		Office			Owned				8,000
Lufkin		Office and Parking Area			Owned				7,925
Needville		Office			Owned				6,649
Rosenberg		Storage			Leased				10,000

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	Wireline Competition

	Wireless Competition

	VOIP Competition

	Internet Competition

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	Long Distance Competition

	Other Competition

	Related Risks

	•	how well we market our existing services and develop new technologies;
	•	the quality and reliability of our network and service; and
	•	our ability to anticipate and respond to various competitive factors affecting the telecommunications industry, including a changing regulatory environment that may affect us differently from our competitors, pricing strategies by competitors, changes in consumer preferences, demographic trends and economic conditions.

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	Removal of Entry Barriers

	•	allow others to resell their services;
	•	where feasible, provide number portability;
	•	ensure dialing parity, whereby consumers can choose their local or long distance telephone company over which their calls will automatically route without having to dial additional digits;

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	•	ensure that competitors’ customers receive nondiscriminatory access to telephone numbers, operator service, directory assistance and directory listing;
	•	afford competitors access to telephone poles, ducts, conduits and rights-of-way; and
	•	establish reciprocal compensation arrangements for the transport and termination of telecommunications traffic.

	•	negotiate any interconnection agreements in good faith;
	•	interconnect their facilities and equipment with any requesting telecommunications carrier, at any technically feasible point, at nondiscriminatory rates and on nondiscriminatory terms and conditions;
	•	provide nondiscriminatory access to unbundled network elements, commonly known as UNEs, such as local loops and transport facilities, at any technically feasible point, at nondiscriminatory rates and on nondiscriminatory terms and conditions;
	•	offer their retail services for resale at discounted wholesale rates;
	•	provide reasonable notice of changes in the information necessary for transmission and routing of services over the incumbent telephone company’s facilities or in the information necessary for interoperability; and
	•	provide, at rates, terms and conditions that are just, reasonable and nondiscriminatory, for the physical co-location of equipment necessary for interconnection or access to UNEs at the premises of the incumbent telephone company.

	Rural Exemption

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	Access Charges

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	Promotion of Universal Service

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	Rural Telephone Company Services Regulation

	•	maintain separate books of account;
	•	not own transmission or switching facilities jointly with our rural telephone companies; and
	•	acquire any services from our rural telephone companies at tariffed rates, term and conditions.

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	Local Government Authorizations

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	Texas Universal Service

	Local Government Authorizations

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Name		Age				Position
Richard A. Lumpkin			70			Chairman of the board and director
Robert J. Currey			59			President, Chief Executive Officer and director
Steven L. Childers			49			Chief Financial Officer
Joseph R. Dively			45			Senior Vice President of CCI Holdings and President of Illinois Telephone Operations
Steven J. Shirar			46			Senior Vice President of CCI Holdings and President of Enterprise Operations
C. Robert Udell, Jr.			39			Senior Vice President of CCI Holdings and President of Texas Telephone Operations
Christopher A. Young			49			Chief Information Officer
Steven L. Grissom			52			Treasurer and Secretary
Kevin J. Maroni			42			Director
Mark A. Pelson			43			Director
Jack W. Blumenstein			61			Director Nominee
Roger H. Moore			63			Director Nominee
Maribeth S. Rahe			56			Director Nominee

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	•	Class I Directors. Mr. Lumpkin will be the Class I director, whose term will expire at the 2006 annual meeting of stockholders;
	•	Class II Directors. Messrs. Moore and Blumenstein will be the Class II directors, whose terms will expire at the 2007 annual meeting of stockholders; and
	•	Class III Directors. Mr. Currey and Ms. Rahe will be the Class III directors, whose terms will expire at the 2008 annual meeting of stockholders.

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	•	the integrity of our financial statements and reporting process;
	•	our compliance with legal and regulatory matters;
	•	the independent registered public accounting firm’s qualifications and independence; and
	•	the performance of our registered public accounting firm.

	•	conducting an annual performance evaluation of the audit committee;
	•	compensating, retaining and overseeing the work of our registered public accounting firm;
	•	establishing procedures for (a) receipt and treatment of complaints on accounting and other related matters and (b) submission of confidential employee concerns regarding questionable accounting or auditing matters; and
	•	preparing reports to be included in our public filings with the SEC.

	•	to review and approve goals and objectives relating to the compensation of our chief executive officer and, based upon a performance evaluation, to determine and approve the compensation of the chief executive officer;
	•	to make recommendations to our board of directors on the compensation of other executive officers and on incentive compensation and equity-based plans; and
	•	to prepare reports on executive compensation to be included in our public filings with the SEC.

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	•	to identify individuals qualified for membership on our board of directors and to select, or recommend for selection, director nominees;
	•	to develop and recommend to our board of directors a set of corporate governance principles; and
	•	to oversee the evaluation of our board of directors and management.

	Summary Compensation Table

																			Long-Term
			Annual Compensation																Compensation
																			2003 Restricted
			Fiscal												Other Annual				Share Plan				All Other
Name(1)			Year				Salary				Bonus				Compensation				Awards(8)				Compensation(9)
Richard A. Lumpkin				2004			$	1,528,205	(2)			—			$	653,019	(3)			—			$	5,538
	Chairman of the Board and Director			2003			$	816,205	(2)			—			$	21,945	(4)			—			$	2,077
Robert J. Currey				2004			$	301,923			$	400,000			$	—			$	0			$	8,931
	President, Chief Executive Officer and Director			2003			$	263,846			$	300,000			$	13,847	(5)		$	0			$	3,077
Steven J. Shirar				2004			$	193,846			$	100,000			$	8,123	(5)		$	0			$	5,873
	Senior Vice President and President of Enterprise Operations			2003			$	178,615			$	90,000			$	5,138	(5)		$	0			$	2,769
Joseph R. Dively				2004			$	170,769			$	115,000			$	6,141	(5)		$	0			$	6,828
	Senior Vice President and President of Illinois Telephone Operations			2003			$	148,846			$	70,000			$	1,979	(5)		$	0			$	2,423
Christopher A. Young				2004			$	166,923			$	85,000			$	3,568	(5)		$	0			$	6,791
	Chief Information Officer			2003			$	144,615			$	74,000			$	58,724	(6)		$	0			$	1,108
Steven L. Childers				2004			$	157,692			$	125,000			$	834	(5)		$	0			$	6,250
	Chief Financial Officer			2003			$	106,692			$	65,000			$	86,978	(7)		$	0			$	1,246

	(1)	Each of the named executive officers served in their positions throughout fiscal years 2003 and 2004, other than Mr. Young, who was hired on February 3, 2003.
	(2)	Includes professional services fees of $1,378,205 and $666,667 in 2004 and 2003, respectively, paid to Mr. Lumpkin as one of our existing equity investors. See “Certain Relationships and Related Party Transactions — Professional Services Fee Agreements”. Pursuant to a side letter agreement with some of the other investors in Central Illinois Telephone, including affiliates of Mr. Lumpkin and members of his family, whereby Mr. Lumpkin shares a portion of this professional services fee, Mr. Lumpkin retained only $967,547 and $492,468 of the professional services fee in 2004 and 2003, respectively. In addition, the remaining $150,000 and $149,538 in the table above represents amounts paid to Mr. Lumpkin for his services to us in 2004 and 2003, respectively.
	(3)	Includes a lump sum payment of $649,617 by ICTC to Mr. Lumpkin to terminate the Supplemental Executive Retirement Plan for Mr. Lumpkin. See “— Employment and Other Arrangements —

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		Supplemental Executive Retirement Plan”. The amount in the table above also includes $3,402 for the reimbursement of taxes.
	(4)	Includes $21,050 we paid to purchase Mr. Lumpkin’s personal automobile, $542 attributable to Mr. Lumpkin’s personal use of the automobile in 2003 and $353 for the reimbursement of taxes.
	(5)	All amounts represent reimbursement of taxes.
	(6)	Includes a relocation allowance of $58,724. Of the relocation allowance, $24,315 represents reimbursement of taxes.
	(7)	Includes a relocation allowance of $86,978. Of the relocation allowance $25,781 represents reimbursement of taxes.
	(8)	The board of managers of Homebase ascribed no value to the restricted shares on the date awarded. The value of the restricted shares of our common stock, after giving effect to the reorganization, held by each of the named executive officers as of December 31, 2004 would be as follows:

		Restricted				Value as of
Named Officer		Shares Held				December 31, 2004
Robert J. Currey			299,466			$	0
Steven J. Shirar			99,822			$	0
Joseph R. Dively			99,822			$	0
Steven L. Childers			99,822			$	0
Christopher A. Young			62,389			$	0

	25.0% of these shares vested on December 31, 2004 and 25% will vest on the day prior to the completion of this offering. The remaining 50% will vest in three equal installments on December 31, 2005, 2006 and 2007. Holders of our restricted common stock are entitled to receive dividends and other distributions if and when declared by the board of directors.

	(9)	Amounts listed consist of CCI’s matching contributions to its 401(k) plan. We also provide the named executive officers with certain group life, health, medical and other non-cash benefits generally available to all salaried employees and excluded from this column pursuant to SEC rules.

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	General

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	Administration and Terms of Awards

	Vesting

	•	if the board of directors accelerates the vesting at any time for any reason, which it is entitled to do; or
	•	upon a change of control (as defined in the restricted share plan) of CCI Holdings, if the employee is terminated without cause, the employee’s compensation is reduced below 90.0% of the compensation prior to the change of control or the employee is assigned duties and responsibilities materially inconsistent with his or her previous level of responsibility.

	Other Stockholder Rights

	Term

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	Supplemental Executive Retirement Plan

	Directors’ and Officers’ Indemnification and Insurance

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	•	certain of our employees participating as selling stockholders in this offering;
	•	each person or entity who is known to us to beneficially own more than 5.0% of our capital stock, including our existing equity investors;
	•	our named executive officers, directors and director nominees; and
	•	our directors and executive officers as a group.

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																		Shares Beneficially Owned
										Shares Offered Hereby								After Offering
										Assuming No				Assuming Full				Assuming No								Assuming Full
		Shares Beneficially								Exercise of				Exercise of				Exercise of								Exercise of
		Owned Prior								Over-Allotment				Over-Allotment				Over-Allotment								Over-Allotment
		to Offering								Option				Option				Option								Option
Name of Beneficial Owner		Number				%				Number				Number				Number				%				Number				%
Central Illinois Telephone(a)			7,564,758				31.9	%			—				585,548				7,564,758				25.5	%			6,979,210				23.5	%
Providence Equity(b)			7,564,759				31.9	%			3,222,222				3,782,380				4,342,537				14.6	%			3,782,379				12.7	%
Spectrum Equity(c)			7,564,760				31.9	%			6,444,444				7,564,760				1,120,316				3.8	%			—				*
Richard A. Lumpkin(d)			7,564,758				31.9	%			—				585,548				7,564,758				25.5	%			6,979,210				23.5	%
Robert J. Currey(e)			299,466				1.3	%			—				—				299,466				1.0	%			299,466				1.0	%
Kevin J. Maroni(f)			7,564,760				31.9	%			6,444,444				7,564,760				1,120,316				3.8	%			—				*
Mark A. Pelson(g)			7,564,759				31.9	%			3,222,222				3,782,380				4,342,537				14.6	%			3,782,379				12.7	%
Jack W. Blumenstein
Roger H. Moore
Maribeth S. Rahe
Steven J. Shirar(h)			99,822				*				—				—				99,822				*				99,822				*
Joseph R. Dively(i)			99,822				*				—				—				99,822				*				99,822				*
Steven L. Childers(j)			99,822				*				—				—				99,822				*				99,822				*
Christopher A. Young(k)			62,389				*				—				—				62,389				*				62,389				*
Brian L. Carr(l)			49,911				*				—				12,500				49,911				*				37,411				*
C. Robert Udell Jr.			19,965				*				—				—				19,965				*				19,965				*
James A. Watkins(m)			49,911				*				—				20,000				49,911				*				29,911				*
Michael W. Smith(n)			49,911				*				—				20,000				49,911				*				29,911				*
Patricia A. Bacon(o)			24,956				*				—				5,000				24,956				*				19,956				*
Rick H. Hall(p)			24,956				*				—				5,000				24,956				*				19,956				*
Steven L. Grissom			24,956				*				—				—				24,956				*				24,956				*
Barbara TenEyck(q)			12,478				*				—				5,000				12,478				*				7,478				*
William T. White(r)			12,478				*				—				6,239				12,478				*				6,239				*
Doug R. Abolt(s)			12,478				*				—				4,000				12,478				*				8,478				*
David N. McDonald(t)			12,478				*				—				6,239				12,478				*				6,239				*
All directors and executive officers as a group (10 persons)			23,355,598				98.6	%			9,666,666				11,932,688				13,688,932				46.1	%			11,422,910				38.5	%

*		Less than 1.0% ownership.
(a)		The equity interests in Central Illinois Telephone are approximately 81.9% owned by SKL Investment Group, a Delaware limited liability company, approximately 9.5% owned by LTIC, LLC, an Illinois limited liability company, approximately 1.0% owned by GRISS, LLC, an Illinois limited liability company, and approximately 7.6% owned collectively by Messrs. Currey, Shirar, Dively, Udell and others, either directly or indirectly through retirement accounts and various trusts. SKL Investment Group is owned by Mr. Lumpkin and members of his family, Mr. Lumpkin is the sole manager of an SKL Investment Group investment fund and has the sole power to direct the voting and disposition of its investments. LTIC, LLC is managed by Agracel, an Illinois corporation, which has a four member board of directors, two of whom are Messrs. Lumpkin and Grissom. In addition, Mr. Lumpkin and members of his family own approximately 50.0% of Agracel and Mr. Grissom owns approximately 2.6% of Agracel. In addition, GRISS, LLC is approximately 80.0% owned by Mr. Grissom and members of his family, and Mr. Grissom is also a co-trustee of trusts that own approximately 37.4% of the common shares of Central Illinois Telephone through SKL Investment Group. As a result of the above, Messrs. Lumpkin, Currey, Shirar, Dively, Udell and Grissom may be deemed to share beneficial ownership of the shares owned by Central Illinois Telephone. Each of them disclaims this beneficial ownership. Mr. Lumpkin is the sole manager of Central Illinois Telephone has the sole investment and voting power with respect to the shares of common stock held by Central Illinois Telephone. The address of Central Illinois Telephone and Mr. Lumpkin is c/o Homebase, P.O. Box 1234, Mattoon, Illinois 61938.
(b)		Consists of 7,540,438 shares of common stock held by Providence Equity Partners IV L.P. and 24,321 shares of common stock held by Providence Equity Operating Partners IV L.P. Providence Equity GP IV L.P. is the general partner of each of these entities and Providence Equity Partners IV, LLC is the general partner of Providence Equity GP IV L.P. Providence Equity Partners IV, LLC has the sole power to direct the voting and disposition of the shares. As a result, each of the entities may be deemed to share beneficial ownership of the shares owned by the others. Each of the entities disclaims this beneficial ownership. Jonathan M. Nelson, Glenn M. Creamer and Paul J. Salem are members and officers of Providence Equity Partners IV, LLC, and thus may be deemed to possess indirect beneficial ownership of the securities owned by these entities. Each of Messrs. Nelson, Creamer and Salem disclaims such beneficial ownership. The address of Providence Equity and Messrs. Nelson, Creamer and Salem is c/o Providence Equity Partners, Inc., 50 Kennedy Plaza, 18th Floor, Providence, Rhode Island 02903.
(c)		Consists of 6,814,745 shares of common stock held by Spectrum Equity Investors IV, L.P. (“SEI4”); 81,153 shares of common stock held by Spectrum IV Investment Managers’ Fund, L.P. (“SIM4”); 40,230 shares of common stock held by

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		Spectrum Equity Investors Parallel IV, L.P. (“SEIP4”); 603,487 shares of common stock held by Spectrum Equity Investors III, L.P. (“SEI3”); 18,859 shares of common stock held by SEI III Entrepreneurs’ Fund, L.P. (“SEI3E”); and 6,286 shares of common stock held by Spectrum III Investment Managers’ Fund, L.P. (“SIM3”). Spectrum Equity Associates IV, L.P. (“SEA4”) is the sole general partner of SEI4 and SEIP4. Spectrum Equity Associates III, L.P. (“SEA3”) is the sole general partner of SEI3. SEI III Entrepreneurs’ LLC (“SEI3LLC”) is the general partner of SEI3E. Because these funds ultimately are under common management that shares the power to direct the voting and disposition of the shares, each of these entities may be deemed to share beneficial ownership of the shares owned by the others. Each of these entities disclaims this beneficial ownership except to the extent of their pecuniary interest therein. Because decisions by each of the entities serving as the ultimate general partners of the individual funds in question are made by majority vote of either four or seven partners or members, as the case may be, no individual partner of SEA4, SIM4, SEA3 or SIM3, and no individual member of SEI3LLC, has the power alone to direct the voting or disposition of the shares, and no such individual has the power to prevent the voting or disposition of such shares over his objection. The address of Spectrum Equity is c/o Spectrum Equity Investors, One International Place, 29th Floor, Boston, Massachusetts 02110.
(d)		Mr. Lumpkin and his family own a majority of the shares of Central Illinois Telephone, Mr. Lumpkin is its sole manager and has the sole power to direct the voting and disposition of its shares. As a result, Mr. Lumpkin may be deemed to share beneficial ownership of the shares owned by Central Illinois Telephone. Mr. Lumpkin disclaims this beneficial ownership except to the extent of his pecuniary interest in those securities.
(e)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”. In addition, Mr. Currey, through an IRA trust, owns less than 1.0% of Central Illinois Telephone. As a result, Mr. Currey may be deemed to share beneficial ownership of the shares owned by Central Illinois Telephone. Mr. Currey disclaims this beneficial ownership except to the extent of his pecuniary interest in those securities.
(f)		Mr. Maroni is a general partner or managing member of, and holds a minority interest in, the Spectrum Equity funds that own shares of common stock. As a result, Mr. Maroni may be deemed to share beneficial ownership of the shares owned by Spectrum Equity. Mr. Maroni disclaims this beneficial ownership. Mr. Maroni will resign as director of CCI Holdings effective on the closing of this offering.
(g)		Mr. Pelson is a Managing Director of Providence Equity and holds a minority interest in the Providence Equity funds that own shares of common stock. As result, Mr. Pelson may be deemed to share beneficial ownership of the shares owned by Providence Equity. Mr. Pelson disclaims this beneficial ownership. Mr. Pelson will resign as director of CCI Holdings effective on the closing of this offering.
(h)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”. In addition, Mr. Shirar, through a trust, owns less than 1.0% of Central Illinois Telephone. As a result, Mr. Shirar may be deemed to share beneficial ownership of the shares owned by Central Illinois Telephone. Mr. Shirar disclaims this beneficial ownership except to the extent of his pecuniary interest in those securities.
(i)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”. In addition, Mr. Dively owns less than 1.0% of Central Illinois Telephone. As a result, Mr. Dively may be deemed to share beneficial ownership of the shares owned by Central Illinois Telephone. Mr. Dively disclaims this beneficial ownership except to the extent of his pecuniary interest in those securities.
(j)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.
(k)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.
(l)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.
(m)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.
(n)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.
(o)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.
(p)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.
(q)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.
(r)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.
(s)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.
(t)		Consists of shares of common stock initially awarded under the restricted share plan. See “Management — Restricted Share Plan”.

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	•	Central Illinois Telephone will receive from Homebase an aggregate of 7,564,758 shares of common stock;
	•	Spectrum Equity will receive from Homebase an aggregate of 7,564,760 shares of common stock;
	•	Providence Equity will receive from Homebase an aggregate of 7,564,759 shares of common stock; and
	•	our management stockholders will receive from Homebase an aggregate of 993,233 shares of common stock.

	Registration Rights

	•	up to two demand registration rights;
	•	unlimited shelf registration rights; and
	•	unlimited “piggyback” registration rights.

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	Professional Services Fee Agreements

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	Business Systems

	Mobile Services

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	Overview

	•	a new term loan D facility of up to $425.0 million available at closing and maturing on October 14, 2011; and
	•	a $30.0 million revolving credit facility maturing on April 14, 2010.

	Prepayments

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	•	a pledge of the capital stock of the borrowers and each of the subsidiary guarantors and ICTC (the enforcement of the pledges of capital stock being subject to regulatory restriction); and
	•	a security interest in substantially all tangible and intangible assets of CCI Holdings, the borrowers and the subsidiary guarantors.

	•	incur additional indebtedness or issue capital stock;
	•	create liens on assets;
	•	repay other indebtedness (including our senior notes other than as described under “Use of Proceeds”);
	•	sell assets;
	•	make investments, loans, guarantees or advances;
	•	pay dividends, repurchase equity interests or make other restricted payments (other than Subject Payments as described below) from the borrowers to CCI Holdings;
	•	engage in transactions with affiliates;
	•	make capital expenditures;
	•	engage in mergers, acquisitions or consolidations;
	•	enter into sale-leaseback transactions;
	•	amend or otherwise modify agreements governing indebtedness, formation documents and certain material agreements;

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	•	enter into agreements that restrict dividends from subsidiaries; and
	•	change the business conducted by us and our subsidiaries.

	•	First, the borrowers may make Subject Payments in an aggregate amount not to exceed Cumulative Available Cash which will be equal to the sum of:

	(1) for the period from the closing date of this offering until December 31, 2005, an amount available to pay dividends on our outstanding common stock in accordance with our dividend policy;
	(2) plus the excess, if any, of:

	(a) Available Cash, as defined below, for a period commencing on the first day of the first full fiscal quarter commencing after the closing and ending on the last day of the fiscal quarter then most recently reported; and
	(b) the aggregate amount of Subject Payments paid after the closing out of Available Cash.

	•	Second, the borrowers may make Subject Payments from the portion of the proceeds of any equity sale not used to redeem or repurchase their indebtedness and not used to fund acquisitions, capital expenditures or make other investments.

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	(3) plus (to the extent not included in the determination of Bank EBITDA), cash interest income for the period, the cash amount realized in respect of extraordinary or unusual gains during the period and net decreases in revolving loans during the period.

	(a) plus all amounts deducted in arriving at Bank Consolidated Net Income amount in respect of (without duplication) interest expense, amortization or write-off of debt discount and non-cash expense incurred in connection with equity compensation plans, foreign, federal, state and local income taxes for the period, charges for depreciation of fixed assets and amortization of intangible assets during the period, non-cash charges for the impairment of long-lived assets during the period, fees accrued during periods prior to this offering payable to certain of our existing equity investors not exceeding $5.0 million in any twelve-month period, and fees, expenses and charges incurred in connection with this offering and the related transactions as specified in reasonable detail in an amount not to exceed the amount of fees and expenses disclosed under the heading “Use of Proceeds” in this prospectus;
	(b) minus (in the case of gains) or plus (in the case of losses) gain or loss on any sale of assets;
	(c) minus (in the case of gains) or plus (in the case of losses) non-cash charges relating to foreign currency gains or losses;
	(d) plus (in the case losses) and minus (in the case of income) non-cash minority interest income or loss;
	(e) plus (in the case of items deducted in arriving at Bank Consolidated Net Income) and minus (in the case of items added in arriving at Bank Consolidated Net Income) non-cash charges resulting from changes in accounting principles;
	(f) plus extraordinary loss as defined by GAAP;
	(g) plus the first $15.0 million of other expenses relating to the integration of CCV incurred after April 14, 2004 and prior to December 31, 2005;
	(h) minus the sum of interest income and extraordinary income or gains as defined by GAAP; and
	(i) plus unusual or nonrecurring charges, fees or expenses (excluding integration expenses) relating to the acquisition of TXUCV (including severance payments and retention bonuses) that were incurred during the fiscal quarter ended June 30, 2004 (net of any offsetting items that increased Bank EBITDA in such quarter as a result thereof) and to give pro forma effect to the TXUCV acquisition and the related transactions as if they had occurred on the first day of such fiscal quarter and in an aggregate amount not to exceed $12.0 million.

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	•	If the total net leverage ratio, as of any fiscal quarter, is greater than 4.75:1.0, we will not be allowed to pay our Subject Payments from Available Cash. The total net leverage ratio will be defined as the ratio of total net debt (defined as total debt minus the lesser of (x) the consolidated cash and cash equivalents in excess of $5,000,000 reflected on our balance sheets, other than amount that could be classified as “restricted cash” in accordance with GAAP (and excluding consolidated cash of any subsidiary that is not a loan party to the extent the subsidiary would be prohibited from distributing cash to a loan party), and (y) $25.0 million) to Bank EBITDA.
	•	In addition, the borrowers will not be permitted to pay Subject Payments if an event of default exists under the amended and restated credit agreement. In particular, it will be an event of default if:

	•	our total net leverage ratio, as of the end of any fiscal quarter, is greater than 5.00:1.00;
	•	our senior secured leverage ratio (as defined in the amended and restated credit agreement), as of the end of any fiscal quarter, is greater than 4.00:1.00;
	•	our fixed charge coverage ratio, as of the end of any fiscal quarter, is not (x) after the closing date and on or prior to December 31, 2005, at least 2.50 to 1.00, (y) after January 1, 2006 and on or prior to December 31, 2006, at least 2.00 to 1.00 and (z) after January 1, 2007, at least 1.75 to 1.00; or
	•	we make or commit to make capital expenditures greater than $45,000,000 in any fiscal year, provided that the base amount may be increased by up to 100% of such base amount by carrying over to any such period any portion of the base amount (without giving effect to any increase) not spent in the immediately preceding period, and that capital expenditures in any period shall be deemed first made from the base amount applicable to such period in any given period.

	Overview

	•	mature on April 1, 2012;
	•	are our unsecured obligations:

	•	equal in right of payment to any of our existing and future senior unsecured indebtedness,
	•	senior in right of payment to any of our existing and future subordinated indebtedness,

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	•	effectively junior in right of payment to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness, and
	•	effectively subordinated to the existing and future liabilities of our subsidiaries; and

	•	accrue interest at a rate of 93/4% per annum, payable on a semi-annual basis, on April 1 and October 1 of each year.

	Optional Redemption

		Redemption
Period		Price
2008			104.875	%
2009			102.438	%
2010 and thereafter			100.000	%

		Redemption
Period		Price
Day 1 through Day 360			104.875	%
Day 361 through Day 540			102.438	%

	Change of Control

	Covenants

	•	to incur additional indebtedness or issue preferred stock;
	•	pay dividends or make other distributions to its stockholders
	•	purchase or redeem capital stock or subordinated indebtedness;
	•	make investments;
	•	create liens;
	•	incur restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us;
	•	sell assets;

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	•	consolidate or merge with or into other companies or transfer all of substantially all of our assets; and
	•	engage in transactions with affiliates.

	Limitation on Restricted Payments

	•	a default or event of default shall have occurred and be continuing (or would result from such payment);
	•	we could not incur at least $1.00 of additional indebtedness pursuant a 6.0 to 1.0 leverage ratio (defined as the ratio of outstanding indebtedness of CCI Holdings and its restricted subsidiaries on a consolidated basis to the Pro Forma EBITDA (as defined in the indenture) for the last four fiscal quarters preceding the date on which the calculation is made);
	•	the aggregate amount of such restricted payment and all other restricted payments declared or made subsequent to the issue date and then outstanding would exceed, at the date of determination, without duplication, the sum of:

	•	an amount (whether positive or negative) equal to consolidated EBITDA (as defined in the indenture) from the beginning of the first fiscal quarter in which our senior notes were originally issued to the end of our most recent fiscal quarter for which internal financial statements are available at the date of such restricted payment, taken as a single accounting period, less the product of 1.5 times our consolidated interest expense (as defined in the indenture) from the first date of the fiscal quarter in which the issue date occurs to the end of our most recent fiscal quarter ending at least 45 days prior to the date of such restricted payment, taken as a single accounting period,
	•	proceeds of capital stock sales,
	•	the sum of (A) the aggregate net cash proceeds received by us or any of our restricted subsidiaries from the issuance or sale after the issue date of convertible or exchangeable indebtedness that has been converted into or exchanged for our capital stock (other than disqualified stock) and (B) the aggregate amount by which our indebtedness or any of our restricted subsidiaries is reduced on our consolidated balance sheet on or after the issue date upon the conversion or exchange of any indebtedness issued or sold on or prior to the issue date that is convertible or exchangeable for our capital stock (other than disqualified stock) (excluding, in the case of clause (A) or (B), (x) any such indebtedness issued or sold to us or a subsidiary of ours or an employee stock ownership plan or trust established by us or any such subsidiary of ours for the benefit of their employees and (y) the aggregate amount of any cash or other property distributed by us or any of our restricted subsidiaries upon any such conversion or exchange), and
	•	an amount equal to the sum of (A) the net reduction in, or any return on, investments (other than permitted investments) resulting from dividends, repayments of loans or advances or other transfers of property, in each case to us or any restricted subsidiary in respect of such investment, or from the reclassification of any unrestricted subsidiary as a restricted subsidiary, or from the disposition of capital stock of an unrestricted subsidiary for cash or property received by us or any restricted subsidiary, and (B) the portion (proportionate to our equity interest in an unrestricted subsidiary) of the fair market value of the net assets of an

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		unrestricted subsidiary at the time such unrestricted subsidiary is designated a restricted subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any person, the amount of investments previously made (and treated as a restricted payment) by any Issuer or any restricted subsidiary in such person.

	•	use our reasonable best efforts to cause the registration of our senior notes within 195 days after the issuance date of our senior notes;

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	•	use our reasonable best efforts to cause the registration statement to become effective within 270 days of the issue date of the notes;
	•	consummate the exchange offer within 300 days after the issuance date of our senior notes; and
	•	use our reasonable best efforts to file a shelf registration statement for the resale of our senior notes if we do not consummate an exchange offer within the time period listed above and in certain other circumstances.

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	•	100 million shares of common stock, par value $0.01 per share; and
	•	10 million shares of preferred stock, par value $0.01 per share.

	Voting Rights

	Dividends

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	Preemptive and Other Subscription Rights

	•	determining the number of shares to be included in each class or series; and
	•	fixing the designation, preferences, limitations and relative rights of the shares of each class or series, including provisions related to dividends, conversion, voting, redemption and liquidation, which may be superior to those of our common stock.

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	•	up to two demand registration rights;
	•	unlimited shelf registration rights; and
	•	unlimited “piggyback” registration rights.

	Classified Board

	Removal of Directors; Vacancies

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	Action by Written Consent; Special Meetings of Stockholders

	Advance Notice Procedure for Director Nominations and Stockholder Proposals

	•	the name, age, business address and, if known, residential address of each nominee;
	•	the principal occupation or employment of each nominee;
	•	the class, series and number of our shares beneficially owned by each nominee;
	•	any other information relating to each nominee required by the SEC’s proxy rules; and
	•	the written consent of each nominee to be named in our proxy statement and to serve as director if elected.

	•	a brief description of the business desired to be brought before the annual meeting and the reasons for conducting the business at the annual meeting;
	•	the name and address of the stockholder proposing the business as they appear on our stock transfer books;
	•	a representation that the stockholder is a stockholder of record and intends to appear in person or by proxy at the annual meeting to bring the business proposed in the notice before the meeting;

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	•	a representation whether the stockholder intends to deliver a proxy statement to the holders of at least the percentage of our outstanding common stock required to approve the business;
	•	the class, series and number of our shares beneficially owned by the stockholder; and
	•	any material interest of the stockholder in the business.

	•	the classified board, removal of directors and filling of director vacancies;
	•	the notice requirements for director nominations and stockholder proposals;
	•	the ability to call a special meeting of stockholders;
	•	the limitation on the liability of our directors to us and our stockholders and the obligation to indemnify and advance reasonable expenses to the directors and officers to the fullest extent authorized by the DGCL;
	•	the authority of our board of directors to amend or repeal our bylaws without a stockholder vote, as described in more detail in the next paragraph; and
	•	the amendment of any of the foregoing.

	Authorized but Unissued Shares

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	Undesignated Preferred Stock

	No Cumulative Voting

	Anti-takeover Effects of Delaware Law

	•	prior to such time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
	•	upon consummation of the transaction which resulted in the stockholder becoming an “interested stockholder,” the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding specified shares); or
	•	on or subsequent to such time, the business combination is approved by the board of directors of the corporation and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least two-thirds percent of the outstanding voting stock not owned by the interested stockholder.

	•	any person that is the owner of 15% or more of the outstanding voting stock of the corporation, or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding

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		voting stock of the corporation at any time within three years immediately prior to the date of determination; and
	•	the affiliates and associates of any such person.

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	•	1.0% of the then-outstanding shares of common stock; and
	•	the average weekly trading volume in the common stock on the Nasdaq National Market during the four calendar weeks preceding the date on which the notice of the sale is filed with the SEC.

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	Dividends

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	Gain on Disposition of Common Stock

	Information Reporting and Backup Withholding

	Dividends

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	Gain on Disposition of Common Stock

	Federal Estate Tax

	Information Reporting and Backup Withholding

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			Number of
Underwriter			Shares
Credit Suisse First Boston LLC				5,308,335
Citigroup Global Markets Inc.				3,791,667
Banc of America Securities LLC				1,516,666
Deutsche Bank Securities Inc.				1,516,666
Lehman Brothers Inc.				1,516,666
Wachovia Capital Markets, LLC				1,516,666
A.G. Edwards & Sons, Inc.				100,000
Oppenheimer & Co. Inc.				100,000
Robert W. Baird & Co. Incorporated				100,000
William Blair & Company, L.L.C.				100,000
CMG Institutional Trading LLC				100,000
	Total			15,666,666

		Per Share								Total
		Without Over-				With Over-				Without Over-				With Over-
		allotment				allotment				allotment				allotment
Underwriting discounts and commissions paid by us		$	0.8125			$	0.8125			$	4,875,000			$	4,875,000
Expenses payable by us		$	1.5758			$	1.5758			$	9,455,000			$	9,455,000
Underwriting discounts and commissions paid by the selling stockholders		$	0.8125			$	0.8125			$	7,854,166			$	9,763,541
Expenses payable by the selling stockholders		$	—			$	—			$	—			$	—

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	•	prevailing market conditions;
	•	the history of and prospects for our industry;
	•	an assessment of our management;
	•	our present operations;
	•	our historical results of operations;
	•	the trend of our revenues and earnings; and
	•	our earnings prospects.

	•	Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
	•	Over-allotment involves sales by the underwriters of shares in excess of the number of shares the underwriters are obligated to purchase, which creates a syndicate short position. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the over-allotment option. In a naked short position, the number of shares involved is greater than the number of shares in the over-allotment option. The underwriters may close out any covered short position by either exercising their over-allotment option or purchasing shares in the open market.

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	•	Syndicate covering transactions involve purchases of the common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the over-allotment option. If the underwriters sell more shares than could be covered by the over- allotment option, a naked short position, the position can only be closed out by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the price of the shares in the open market after pricing that could adversely affect investors who purchase in the offering.
	•	Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.

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		Page
Unaudited Pro Forma Condensed Consolidated Statement of Operations — Year ended December 31, 2004			P-5
Unaudited Pro Forma Condensed Consolidated Statement of Operations — Three Months ended March 31, 2005			P-6
Unaudited Pro Forma Condensed Consolidated Statement of Operations — Three Months ended March 31, 2004			P-7
Unaudited Pro Forma Condensed Consolidated Balance Sheet — At March 31, 2005			P-8
Notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements			P-9

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	•	the contribution by the existing equity investors of $89.0 million in cash in exchange for additional Class A preferred shares of Homebase, the distribution by CCI, a wholly owned subsidiary of Homebase, of $63.4 million to Homebase and the contribution by Homebase of $152.4 million to Consolidated Communications Texas Holdings, Inc. of the aggregate proceeds of such distribution and contribution;
	•	the TXUCV acquisition by Texas Holdings, a wholly owned subsidiary of Homebase, on April 14, 2004, pursuant to which Texas Holdings acquired all of the capital stock of TXUCV for $524.1 million in cash, net of cash acquired and including transaction costs;
	•	the refinancing and termination of the CoBank credit facilities of CCI, and the entering into, and borrowing under, the existing credit facilities;
	•	the issuance of $200.0 million of the senior notes; and
	•	the payment of related fees and expenses.

	•	A $122.0 million term loan A facility with a six year maturity;
	•	A $315.0 million term loan B facility with a seven year and six-month maturity; and
	•	A $30.0 million revolving credit facility with a six year maturity, all of which remains available for general corporate purposes.

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	•	in respect of the term loan A facility and the revolving credit facility, 1.25% with respect to base rate loans and 2.25% with respect to LIBOR loans; and
	•	in respect of the term loan C facility, 1.50% with respect to base rate loans and 2.50% with respect to LIBOR loans.

	•	$37.5 million cash dividend paid to our existing equity investors on June 7, 2005, including approximately $0.4 million of expenses incurred to amend our existing credit facilities to permit this distribution;
	•	the reorganization of Homebase, Illinois Holdings and Consolidated Communications Texas Holdings, Inc., pursuant to which first Consolidated Communications Texas Holdings, Inc. and then Homebase will merge with and into Illinois Holdings, in each case with Illinois Holdings surviving the merger, and thereafter Illinois Holdings will change its name to Consolidated Communications Holdings, Inc., or CCI Holdings;
	•	Our existing stockholders receipt from Homebase of shares of CCI Holdings common stock representing 100% of the outstanding common stock of CCI Holdings;
	•	the initial public offering of common stock of CCI Holdings and the sale by the selling stockholders of additional shares of their common stock;
	•	the amendment and restatement of the existing credit facilities to provide for, among other things, the repayment in full of our term loan A and C facilities and to borrow $425.0 million under a new term loan D facility. See “Description of Indebtedness — Amended and Restated Credit Facilities”.
	•	the amendment of the restricted share plan to eliminate the call provision and to accelerate the vesting schedule;
	•	the redemption of 32.5% of the aggregate principal amount of our senior notes and payment of the associated redemption premium of 9.75% of the principal amount to be redeemed, together with accrued and unpaid interest through the date of redemption; and
	•	the payment of related fees and expenses.

	•	a new term loan D facility of up to $425.0 million maturing on October 14, 2011; and
	•	$30.0 million revolving credit facility maturing on April 14, 2010.

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																			Cash
							CCI Texas												Distribution				Pro Forma
							Historical				Acquisition				Pro Forma as				and IPO				as Adjusted
			Homebase				January 1 -				Pro Forma				Adjusted for				Pro Forma				for Acquisition
			Historical				April 13				Adjustments				Acquisition				Adjustments				and IPO
Revenues			$	269,608			$	53,855			$	—			$	323,463			$	—			$	323,463
Operating expenses:
	Cost of services and products (exclusive of depreciation and amortization shown separately below)			80,572				15,296				—				95,868				—				95,868
	Selling, general and administrative expenses			87,955				24,138				(1,118	)(2)			110,975				(5,000	)(7)			108,117
																				2,142	(8)
	Depreciation and amortization			54,522				8,124				4,875	(3)			67,521				—				67,521
	Intangible impairment charges			11,578				(12	)							11,566								11,566
Total operating expenses				234,627				47,546				3,757				285,930				(2,858	)			283,072
Income from operations				34,981				6,309				(3,757	)			37,533				2,858				40,391
Other income (expense):
	Interest income			384								—				384				—				384
	Interest expense			(39,935	)			(1,244	)			(3,484	)(4)			(44,663	)			44,663	(9)			(36,956	)
																				(36,956	)(9)
	Prepayment penalty on extinguishment of debt			—				(1,914	)			—				(1,914	)							(1,914	)
	Partnership income			1,288				1,174	(1)			—				2,462				—				2,462
	Minority interest			(327	)			(106	)			—				(433	)			—				(433	)
	Other, net			2,698				37				—				2,735				—				2,735
Income (loss) before income taxes				(911	)			4,256				(7,241	)			(3,896	)			10,565				6,669
Income tax expense (benefit)				232				2,473				(3,012	)(5)			(307	)			5,286	(10)			4,979
Net income (loss)				(1,143	)			1,783				(4,229	)			(3,589	)			5,279				1,690
Dividends on redeemable preferred shares				(14,965	)							(2,225	)(6)			(17,190	)			17,190	(12)			—
Net income (loss) applicable to common shareholders			$	(16,108	)		$	1,783			$	(6,454	)		$	(20,779	)		$	22,469			$	1,690
Earnings (loss) per share:
	Basic and diluted		$	(1.79	)										$	(2.31	)						$	0.06
Number of shares for calculation:
	Basic and diluted			9,000,685												9,000,685								29,687,510

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							Cash
							Distribution				Pro Forma
							and IPO				as Adjusted
			Homebase				Pro Forma				for Acquisition
			Historical				Adjustments				and IPO
Revenues			$	79,772			$	—			$	79,772
Operating expenses:
	Cost of services and products (exclusive of depreciation and amortization shown separately below)			24,417				—				24,417
	Selling, general and administrative expenses			26,196				(1,250	)(7)			25,482
								536	(8)
	Depreciation and amortization			16,818				—				16,818
Total operating expenses				67,431				(714	)			66,717
Income from operations				12,341				714				13,055
Other income (expense):
	Interest income			253				—				253
	Interest expense			(11,694	)			11,694	(9)			(9,922	)
								(9,922	)(9)
	Partnership income			330				—				330
	Minority interest			(165	)			—				(165	)
	Other, net			222				—				222
Income (loss) before income taxes				1,287				2,486				3,773
Income tax expense (benefit)				586				1,336	(10)			1,922
Net income (loss)				701				1,150				1,851
Dividends on redeemable preferred shares				(4,623	)			4,623	(12)			—
Net income (loss) applicable to common shareholders			$	(3,922	)		$	5,773			$	1,851
Earnings (loss) per share:
	Basic and diluted		$	(0.42	)						$	0.06
Number of shares for calculation:
	Basic and diluted			9,250,000								29,687,510

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																			Cash
							CCI Texas												Distribution				Pro Forma
							Historical				Acquisition				Pro Forma as				and IPO				as Adjusted
			Homebase				January 1 -				Pro Forma				Adjusted for				Pro Forma				for Acquisition
			Historical				March 31				Adjustments				Acquisition				Adjustments				and IPO
Revenues			$	34,067			$	45,366			$	—			$	79,433			$	—			$	79,433
Operating expenses:
	Cost of services and products (exclusive of depreciation and amortization shown separately below)			12,374				13,134				—				25,508				—				25,508
	Selling, general and administrative expenses			10,589				15,086				(977	)(2)			24,698				(1,250	)(7)			23,984
																				536	(8)
	Depreciation and amortization			5,366				8,150				4,260	(3)			17,776				—				17,776
Total operating expenses				28,329				36,370				3,283				67,982				(714	)			67,268
Income from operations				5,738				8,996				(3,283	)			11,451				714				12,165
Other income (expense):
	Interest income			32				66				—				98								98
	Interest expense			(2,829	)			(1,140	)			(7,023	)(4)			(10,992	)			10,992	(9)			(9,076	)
																				(9,076	)(9)
	Partnership income			—				857	(1)			—				857				—				857
	Minority interest			—				(125	)			—				(125	)			—				(125	)
	Other, net			—				44				—				44				—				44
Income (loss) before income taxes				2,941				8,698				(10,306	)			1,333				2,630				3,963
Income tax expense (benefit)				1,177				3,223				(4,164	)(5)			236				1,279	(10)			1,515
Net income (loss)				1,764				5,475				(6,142	)			1,097				1,351				2,448
Dividends on redeemable preferred shares				(2,274	)							(2,003	)(6)			(4,277	)			4,277	(12)			—
Net income (loss) applicable to common shareholders			$	(510	)		$	5,475			$	(8,145	)		$	(3,180	)		$	5,628			$	2,448
Earnings (loss) per share:
	Basic and diluted		$	(0.06	)										$	(0.35	)						$	0.08
Number of shares for calculation:
	Basic and diluted			9,000,000												9,000,000								29,687,510

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							Cash
							Distribution
							and IPO				Pro Forma
			Homebase				Pro Forma				as Adjusted
			Historical				Adjustments				for IPO
ASSETS
Current assets:
Cash and cash equivalents			$	56,538			$	(37,921	)(11)		$	13,594
								68,545	(12)
								(73,568	)(13)
	Accounts receivable, net			32,148								32,148
	Inventories			3,202								3,202
	Prepaid expenses and other assets			12,028				—				12,028
Total current assets				103,916				(42,944	)			60,972
Intangibles and other assets:
	Property, plant and equipment, net			353,060								353,060
	Investments			43,261								43,261
	Goodwill			318,481								318,481
	Customer lists, net			146,236								146,236
	Tradenames, net			14,546								14,546
	Deferred financing costs			18,507				1,076	(14)			19,583
	Other assets			4,236				4,005	(16)			8,241
Total assets			$	1,002,243			$	(37,863	)		$	964,380
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Current portion of long-term debt		$	41,242			$	(40,706	)(13)		$	536
	Accounts payable			9,621								9,621
	Accrued expenses and advance billings and customer deposits			41,909				—				41,909
Total current liabilities				92,772				(40,706	)			52,066
Long-term debt less current maturities				583,667				(63,850	)(13)			560,523
								40,706	(13)
Deferred income taxes				68,192								68,192
Pension and post retirement obligations and other liabilities				66,094				—				66,094
Total Liabilities				810,725				(63,850	)			746,875
Minority interests				2,457				—				2,457
Redeemable preferred shares				210,092				(37,500	)(11)			—
								(172,592	)(12)
Stockholders’ equity (deficit):
	Common stock			—				297	(12)			297
	Additional paid in capital			58				240,840	(12)			247,325
								6,427	(8)
	Accumulated deficit			(23,033	)			(11,485	)(15)			(34,518	)
	Accumulated other comprehensive loss			1,944				—				1,944
Total stockholders’ equity (deficit)				(21,031	)			236,079				215,048
Total liabilities and stockholders’ equity			$	1,002,243			$	(37,863	)		$	964,380

P-8

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Table of Contents

1.	Partnership Income

	•	a 2.34% interest in GTE Mobilnet of South, Texas, LP (“South Texas”);
	•	a 17.02% interest in GTE Mobilnet of Texas RSA #17, LP (“RSA #17”); and
	•	a 39.06% interest in Fort Bend Fibernet, LP (“Fort Bend”).

2.	Selling, General and Administrative Expenses

P-9

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Table of Contents

						Three Months
		Year Ended				Ended
		December 31,				March 31,
		2004				2004
Effect of TXUCV acquisition related headcount reductions		$	(1,983	)		$	(1,733	)
Incremental professional service fees			865				756
		$	(1,118	)		$	(977	)

3.	Depreciation and Amortization

						Three Months
		Year Ended				Ended
		December 31,				March 31,
		2004				2004
Removing historical depreciation and amortization		$	(62,646	)		$	(13,516	)
Recording new depreciation and amortization			67,521				17,776
		$	4,875			$	4,260

4.	Interest Expense

P-10

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Table of Contents

											Twelve Months				Three Months
			Estimated				Estimated				Ended				Ended
			Principal				Interest				December 31,				March 31,
			Outstanding				Rates				2004				2004
Removal of historical interest expense including amortization of deferred financing costs											$	41,179			$	3,969
Recording of new interest expense, net
	Term loan A		$	122,000				LIBOR + 2.50%				(4,892	)			(1,125	)
	Term loan B			315,000				LIBOR + 2.75%				(13,419	)			(3,103	)
	Senior notes			200,000				9.750%				(19,500	)			(4,875	)
	Capital leases			1,059				6.500%				(69	)			(17	)
	Revolver commitment fee											(150	)			(38	)
	Net effect of interest rate hedges											(3,733	)			(1,109	)
	Amortization of deferred financing costs											(2,900	)			(725	)
Total new interest expense												(44,663	)			(10,992	)
Net adjustment to interest expense											$	(3,484	)		$	(7,023	)

5.	Income Tax Expense

Twelve months ended December 31, 2004			41.6	%
Three months ended March 31, 2004			40.4	%

6.	Dividends on Preferred Shares

P-11

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Table of Contents

7.	Selling, General and Administrative Expenses

8.	Restricted Share Plan

9.	Interest Expense

P-12

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Table of Contents

											Twelve Months				Three Months				Three Months
			Estimated								Ended				Ended				Ended
			Principal				Estimated				December 31,				March 31,				March 31,
			Outstanding				Interest Rates				2004				2004				2005
Removal of pro forma interest expense prior to the offering including amortization of deferred financing costs											$	44,663			$	10,992			$	11,694
New Debt:
	Term loan D			$425,000				LIBOR +2.5	%			(17,043	)			(3,921	)			(5,674	)
	Senior notes			135,000				9.750	%			(13,163	)			(3,291	)			(3,291	)
	Capital leases			1,059				6.500	%			(69	)			(17	)			(17	)
	Revolver commitment fee											(150	)			(38	)			(38	)
	Net effect of interest rate hedges											(3,733	)			(1,109	)			(202	)
	Amortization of deferred financing costs											(2,798	)			(700	)			(700	)
Total new interest expense												(36,956	)			(9,076	)			(9,922	)
Net adjustment to interest expense											$	7,707			$	1,916			$	1,772

10.	Income Tax Expense

Twelve months ended December 31, 2004			41.6	%
Three months ended March 31, 2004			40.4	%
Three months ended March 31, 2005			44.2	%

11.	Cash Distribution to Existing Equity Investors

P-13

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Table of Contents

12.	Reorganization and Offering

Gross cash proceeds		$	78,000
Less transaction fees and expenses			(9,455	)
Net cash proceeds		$	68,545
Common stock		$	297
Additional paid in capital		$	77,703
Conversion of redeemable preferred shares			172,592
Less transaction fees and expenses			(9,455	)
Paid in capital		$	240,840

13.	Amendment and Restatement of Existing Credit Facilities and Redemption of Senior Notes

	•	Retirement of the $112,000 term loan A facility
	•	Retirement of the $311,850 term loan C facility
	•	The payment of $3,380 of deferred financing costs associated with the amended and restated credit facilities

P-14

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Table of Contents

Payment of term loan A facility			$	(112,000	)
Payment of term loan C facility				(311,850	)
New term loan D facility				425,000
	Net borrowings on loan facilities			1,150
Senior notes redemption				(65,000	)
	Adjustment to long-term debt		$	(63,850	)
Redemption premium				(6,338	)
Deferred financing costs				(3,380	)
Net cash used			$	(73,568	)

14.	Deferred Financing Costs

Write-off of pro rata share of deferred financing costs associated with the redemption of senior notes		$	(2,304	)
Recording of new deferred financing costs associated with the amendment and restatement of existing credit facilities			3,380
		$	1,076

15.	Accumulated Deficit

Charge to reflect expense for 50% vesting of restricted shares		$	(6,427	)
Expensing of the redemption premium on senior notes, net of tax			(3,537	)
Write-off of the pro rata share of the deferred financing costs associated with the redemption of senior notes, net of tax			(1,286	)
Expenses incurred to amend our existing credit facilities in connection with cash distribution to existing equity investors			(235	)
		$	(11,485	)

16.	Other Assets

P-15

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Table of Contents

			Page
Audited Financial Statements
Consolidated Financial Statements — Homebase Acquisition, LLC				F-2
	Report of Independent Registered Public Accounting Firm			F-3
	Consolidated Balance Sheets as of December 31, 2004 and 2003			F-4
	Consolidated Statements of Operations for the years ended December 31, 2004 and 2003			F-5
	Consolidated Statements of Changes in Common Members’ Deficit for the years ended December 31, 2004 and 2003			F-6
	Consolidated Statements of Cash Flows for the years ended December 31, 2004 and 2003			F-7
	Notes to Consolidated Financial Statements			F-8
Combined Financial Statements — Illinois Consolidated Telephone Company and Related Businesses				F-33
	Report of Independent Registered Public Accounting Firm			F-34
	Combined Balance Sheet as of December 30, 2002			F-35
	Combined Statement of Income for the year ended December 30, 2002			F-36
	Combined Statement of Changes in Parent Company Investment for the year ended December 30, 2002			F-37
	Combined Statement of Cash Flows for the year ended December 30, 2002			F-38
	Notes to Combined Financial Statements			F-39
Consolidated Financial Statements — TXU Communications Ventures Company and Subsidiaries				F-50
	Report of Independent Registered Public Accounting Firm			F-51
	Consolidated Balance Sheets as of April 13, 2004, December 31, 2003 and 2002			F-52
	Consolidated Statements of Operations and Comprehensive Income (Loss) for the period from January 1, 2004 to April 13, 2004 and for the years ended December 31, 2003, 2002 and 2001			F-54
	Consolidated Statements of Shareholder’s Equity for the period from January 1, 2004 to April 13, 2004 and for the years ended December 31, 2003, 2002 and 2001			F-55
	Consolidated Statements of Cash Flows for the period from January 1, 2004 to April 13, 2004 and for the years ended December 31, 2003, 2002 and 2001			F-56
	Notes to Consolidated Financial Statements			F-57
Financial Statements — GTE Mobilnet of Texas #17 Limited Partnership				F-79
	Report of Independent Registered Public Accounting Firm			F-80
	Balance Sheets as of December 31, 2004 and 2003			F-81
	Statements of Operations for the years ended December 31, 2004, 2003 and 2002			F-82
	Statements of Changes in Partners’ Capital for the years ended December 31, 2004, 2003 and 2002			F-83
	Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002			F-84
	Notes to Financial Statements			F-85
Unaudited Financial Statements
Condensed Consolidated Financial Statements — Homebase Acquisition, LLC				F-92
	Condensed Consolidated Balance Sheet as of March 31, 2005			F-93
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2005 and 2004			F-94
	Condensed Consolidated Statements of Changes in Common Members’ Deficit for the three months ended March 31, 2005			F-95
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2004			F-96
	Notes to Unaudited Condensed Consolidated Financial Statements			F-97

F-1

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Table of Contents

F-2

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Table of Contents

	/s/ Ernst & Young, LLP

F-3

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Table of Contents

			December 31
			2004				2003
ASSETS
Current assets:
	Cash and cash equivalents		$	52,084			$	10,142
	Accounts receivable, net of allowance of $2,613 and $1,837, respectively			33,817				18,701
	Inventories			3,529				2,277
	Deferred income taxes			3,278				2,868
	Prepaid expenses and other current assets			6,179				5,643
Total current assets				98,887				39,631
Property, plant and equipment, net				360,760				104,580
Intangibles and other assets:
	Investments			42,884				—
	Goodwill			318,481				99,554
	Customer lists, net			149,805				53,559
	Tradenames			14,546				15,863
	Deferred financing costs and other assets			20,736				4,408
Total assets			$	1,006,099			$	317,595
LIABILITIES AND MEMBERS’ DEFICIT
Current liabilities:
	Current portion of long-term debt		$	41,079			$	10,300
	Accounts payable			11,176				5,518
	Advance billings and customer deposits			11,061				6,368
	Accrued expenses			34,251				12,642
Total current liabilities				97,567				34,828
Long-term debt less current maturities				588,342				170,100
Deferred income taxes				66,641				1,114
Pension and postretirement benefit obligations				61,361				12,595
Other liabilities				3,223				972
Total liabilities				817,134				219,609
Minority interests				2,291				—
Redeemable preferred shares:
	Class A, redeemable preferred shares, $1 par value, 182,000 shares authorized, 182,000 and 93,000 shares issued and outstanding, respectively; liquidation preference of $205,469 and $101,504, respectively			205,469				101,504
Common members’ deficit:
	Common shares, no par value, 10,000,000 shares, authorized, 10,000,000 and 9,975,000 shares issued and outstanding, respectively			—				—
	Paid in capital			58				—
	Accumulated deficit			(19,111	)			(3,003	)
	Accumulated other comprehensive income (loss)			258				(515	)
Total common members’ deficit				(18,795	)			(3,518	)
Total liabilities and members’ deficit			$	1,006,099			$	317,595

F-4

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Table of Contents

			Year ended December 31
			2004				2003
Revenues			$	269,608			$	132,330
Operating expenses:
	Cost of services and products (exclusive of depreciation and amortization shown separately below)			80,572				46,305
	Selling, general and administrative expenses			87,955				42,495
	Intangible assets impairment			11,578				—
	Depreciation and amortization			54,522				22,476
Income from operations				34,981				21,054
Other income (expense):
	Interest income			384				154
	Interest expense			(39,935	)			(11,975	)
	Partnership income			1,288				—
	Dividend income			2,497				—
	Minority interest			(327	)			—
	Other, net			201				(15	)
Income (loss) before income taxes				(911	)			9,218
Income tax expense				232				3,717
Net income (loss)				(1,143	)			5,501
Dividends on redeemable preferred shares				(14,965	)			(8,504	)
Net loss applicable to common shareholders			$	(16,108	)		$	(3,003	)
Net loss per common share — basic and diluted			$	(1.79	)		$	(0.33	)

F-5

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Table of Contents

																		Accumulated
		Common Shares																Other
														Accumulated				Comprehensive								Comprehensive
		Shares				Amount				Paid in Capital				Deficit				Income (Loss)				Total				Income (Loss)
Balance, January 1, 2003			—			$	—			$	—			$	—			$	—			$	—			$	—
Net income			—				—				—				5,501				—				5,501				5,501
Capital contributions			9,000,000				—				—				—				—				—
Shares issued under employee plan			975,000				—				—				—				—				—				—
Dividends on redeemable preferred shares			—				—				—				(8,504	)			—				(8,504	)
Change in fair value of cash flow hedges, net of ($344) of tax			—				—				—				—				(515	)			(515	)			(515	)
Balance, December 31, 2003			9,975,000				—				—				(3,003	)			(515	)			(3,518	)		$	4,986
Net loss			—				—				—				(1,143	)			—				(1,143	)		$	(1,143	)
Shares issued under employee plan			25,000				—				58				—				—				58				—
Dividends on redeemable preferred shares			—				—				—				(14,965	)			—				(14,965	)			—
Minimum pension liability, net of ($174) of tax			—				—				—				—				(283	)			(283	)			(283	)
Unrealized loss on marketable securities, net ($33) of tax			—				—				—				—				(49	)			(49	)			(49	)
Change in fair value of cash flow hedges, net of $1,090 of tax			—				—				—				—				1,105				1,105				1,105
Balance, December 31, 2004			10,000,000			$	—			$	58			$	(19,111	)		$	258			$	(18,795	)		$	(370	)

F-6

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Table of Contents

					Year ended December
					2004				2003
Operating Activities
	Net income (loss)				$	(1,143	)		$	5,501
	Adjustments to reconcile net income (loss) to cash provided by operating activities:
		Depreciation and amortization				54,522				22,476
		Provision for bad debt losses				4,666				3,412
		Deferred income tax				201				3,388
		Asset impairment				11,578				—
		Partnership income				(1,288	)			—
		Minority interest in net income of subsidiary				327				—
		Amortization of deferred financing costs				6,476				504
	Changes in operating assets and liabilities, net of effects of acquisitions:
		Accounts receivable				(3,499	)			(9,799	)
		Inventories				(249	)			(73	)
		Other assets				4,401				(480	)
		Accounts payable				(2,689	)			(2,267	)
		Accrued expenses and other liabilities				6,463				6,227
			Net cash provided by operating activities			79,766				28,889
Investing Activities
		Capital expenditures				(30,010	)			(11,296	)
		Acquisitions, net of cash acquired				(524,090	)			(284,834	)
		Other				—				(2	)
			Net cash used in investing activities			(554,100	)			(296,132	)
Financing Activities
		Capital contributions from investors				89,058				93,000
		Proceeds from long-term obligations				637,000				190,000
		Payments made on long-term obligations				(190,826	)			(10,193	)
		Payment of deferred financing costs				(18,956	)			(4,602	)
		Proceeds from sale of building				—				9,180
			Net cash provided by financing activities			516,276				277,385
Net increase in cash and cash equivalents						41,942				10,142
Cash and cash equivalents at beginning of period						10,142				—
Cash and cash equivalents at end of period					$	52,084			$	10,142
Supplemental cash flow information
		Interest paid			$	27,758			$	11,463
		Income taxes paid (refunded)			$	(509	)		$	2,000

F-7

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Table of Contents

1.	Description of Business

2.	Summary of Significant Accounting Policies

	Principles of Consolidation

	Basis of Presentation

	Use of Estimates

F-8

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Table of Contents

	Regulatory Accounting

	Cash Equivalents

	Investments

	Accounts Receivable and Allowance for Doubtful Accounts

F-9

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Table of Contents

	Inventory

	Goodwill and Other Intangible Assets

	Property, Plant, and Equipment

		Years
Buildings			15-35
Network and outside plant facilities			5-30
Furniture, fixtures, and equipment			3-17

F-10

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Table of Contents

	Revenue Recognition

	Advertising Costs

	Income Taxes

F-11

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Table of Contents

	Stock Based Compensation

	Financial Instruments and Derivatives

	Recent Accounting Pronouncements

F-12

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Table of Contents

3.	Acquisitions

	Acquisition of ICTC and Related Businesses

F-13

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Table of Contents

Current assets		$	25,802
Property, plant and equipment			118,057
Customer lists			59,517
Tradenames			15,863
Goodwill			99,554
Liabilities assumed			(33,959	)
Net purchase price		$	284,834

	Acquisition of TXUCV

F-14

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Table of Contents

Current assets		$	27,478
Property, plant and equipment			268,706
Customer list			108,200
Goodwill			228,792
Other assets			43,291
Liabilities assumed			(152,376	)
Total purchase price, net of cash acquired		$	524,090

		Year Ended December 31
		2004				2003
Total revenues		$	323,463			$	327,148
Income from operations		$	37,533			$	29,507
Proforma net loss		$	(2,956	)		$	(15,431	)
Proforma net loss applicable to common shareholders		$	(20,146	)		$	(31,945	)
Loss per share — basic and diluted		$	(2.24	)		$	(3.55	)

4.	Prepaids and other current assets

		December 31
		2004				2003
Deferred charges		$	1,637			$	1,138
Prepaid expenses			3,492				1,991
Income tax receivables			—				2,002
Other current assets			1,050				512
		$	6,179			$	5,643

F-15

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Table of Contents

5.	Property, plant and equipment

			December 31
			2004				2003
Property, plant and equipment:
	Land and buildings		$	49,567			$	15,487
	Network and outside plant facilities			641,913				209,927
	Furniture, fixtures and equipment			68,360				29,145
	Work in process			7,783				2,639
				767,623				257,198
	Less: accumulated depreciation			(406,863	)			(152,618	)
Net property, plant and equipment			$	360,760			$	104,580

6.	Investments

Cash surrender value of life insurance policies			$	1,708
Cost method investments:
	GTE Mobilnet of South Texas Limited Partnership			21,450
	CoBank, ACB stock			1,879
	Rural Telephone Bank stock			5,921
	Other			19
Equity method investments
	GTE Mobilnet of Texas RSA #17 Limited Partnership (17.02% owned)			11,759
	Fort Bend Fibernet Limited Partnership (39.06% owned)			148
			$	42,884

F-16

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Table of Contents

2004
Revenues		$	35,203
Operating income			9,636
Income before income taxes			10,116
Net income or loss			10,116
Current assets			6,443
Non-current assets			22,494
Current liabilities			1,733
Non current liabilities			—
Partnership equity			27,204

7.	Minority Interest

F-17

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Table of Contents

8.	Goodwill and Other Intangible Assets

		Telephone				Other
		Operations				Operations				Total
Balance at January 1, 2004		$	78,443			$	21,111			$	99,554
Impairment			—				(10,147	)			(10,147	)
Finalization of ICTC and related businesses purchase accounting			2,292				(2,010	)			282
TXUCV acquisition			228,792				—				228,792
Balance at December 31, 2004		$	309,527			$	8,954			$	318,481

		Telephone				Other
		Operations				Operations				Total
Balance at January 1, 2004		$	10,046			$	5,817			$	15,863
Impairment			—				(1,431	)			(1,431	)
Other			—				114				114
Balance at December 31, 2004		$	10,046			$	4,500			$	14,546

F-18

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Table of Contents

		December 31
		2004				2003
Gross carrying amount		$	167,633			$	59,517
Less: accumulated amortization			(17,828	)			(5,958	)
Net carrying amount		$	149,805			$	53,559

9.	Affiliated Transactions

F-19

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Table of Contents

			Year Ended
			December 31
			2004				2003
Fees charged from First Mid-Illinois for:
	Banking fees		$	5			$	2
	401K plan administration			77				46
Interest income earned by the Company on deposits at First Mid-Illinois				170				97
Fees charged by the Company to First Mid-Illinois for telecommunication services				476				437

10.	Income Taxes

			Year Ended
			December 31
			2004				2003
Current:
	Federal		$	393			$	—
	State			673				—
				1,066				—
Deferred:
	Federal			(305	)			3,252
	State			(529	)			465
				(834	)			3,717
Income tax expense			$	232			$	3,717

F-20

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Table of Contents

		Year Ended
		December 31
		2004				2003
Statutory federal income tax rate (benefit)			(35.0	)%			35.0	%
State income taxes, net of federal effect			15.1				5.0
Other permanent differences			28.8				0.0
Derivative instruments			24.6				0.0
Change in valuation allowance			(5.7	)			0.0
Other			(2.2	)			0.3
			25.6	%			40.3	%

			December 31
			2004				2003
Current deferred tax assets:
	Reserve for uncollectible accounts		$	1,020			$	385
	Accrued vacation pay deducted when paid			1,504				512
	Accrued expenses and deferred revenue			754				1,971
				3,278				2,868
Noncurrent deferred tax assets:
	Net operating loss carryforwards			21,866				2,253
	Derivative instruments			—				344
	Goodwill and other intangibles			846				—
	Pension and post retirement obligations			23,402				3,691
	Minimum tax credit carryforward			806				—
	Valuation allowance			(17,136	)			—
				29,784				6,288
Noncurrent deferred tax liabilities:
	Goodwill and other intangibles			—				(1,641	)
	Derivative instruments			(547	)			—
	Partnership investment			(6,898	)			—
	Property, plant and equipment			(87,348	)			(5,761	)
	Basis in investment			(1,632	)			—
				(96,425	)			(7,402	)
Net noncurrent deferred tax liabilities				(66,641	)			(1,114	)
Net deferred income tax assets (liabilities)			$	(63,363	)		$	1,754

F-21

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Table of Contents

11.	Accrued Expenses

		December 31
		2004				2003
Salaries and employee benefits		$	9,191			$	2,542
Taxes payable			6,915				987
Accrued interest			6,490				859
Other accrued expenses			11,655				8,254
		$	34,251			$	12,642

F-22

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Table of Contents

12.	Pension Costs and Other Postretirement Benefits

F-23

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Table of Contents

		Pension Benefits								Other Benefits
		December 31								December 31
		2004				2003				2004				2003
Change in benefit obligation
Projected benefit obligation, beginning of period		$	55,528			$	49,637			$	8,951			$	7,966
TXUCV acquisition			60,984				—				26,629				—
Service cost			2,930				770				989				165
Interest cost			5,902				3,207				1,579				557
Plan participant contributions			—				—				158				135
Plan amendments			—				—				(2,652	)			454
Plan curtailment			—				—				(772	)			—
Benefits paid			(7,237	)			(3,403	)			(1,747	)			(692	)
Administrative expenses paid			(410	)			—				—				—
Actuarial (gain)/ loss			(57	)			5,317				2,612				366
Projected benefit obligation, end of period		$	117,640			$	55,528			$	35,747			$	8,951
Accumulated benefit obligation		$	105,451			$	51,070
Change in plan assets
Fair value of plan assets, beginning of period		$	50,704			$	45,446			$	—			$	—
TXUCV acquisition			40,633				—				—				—
Actual return on plan assets			6,715				7,804				—				—
Employer contributions			3,887				857				1,589				557
Plan participant contributions			—				—				158				135
Administrative expenses paid			(410	)			—				—				—
Benefits paid			(7,237	)			(3,403	)			(1,747	)			(692	)
Fair value of plan assets, end of period		$	94,292			$	50,704			$	—			$	—
Funded status
Funded status		$	(23,348	)		$	(4,824	)		$	(35,747	)		$	(8,951	)
Employer contributions after measurement date and before fiscal year end			—				—				275				194
Unrecognized prior service cost			—				—				918				952
Unrecognized net actuarial (gain) loss			(177	)			162				(115	)			(128	)
Accrued benefit cost		$	(23,525	)		$	(4,662	)		$	(34,669	)		$	(7,933	)
Amounts recognized in the consolidated balance sheet
Accrued benefit liability		$	(23,982	)		$	(4,662	)		$	(34,669	)		$	(7,933	)
Accumulated other comprehensive income			457				—				—				—
Net amount recognized		$	(23,525	)		$	(4,662	)		$	(34,669	)		$	(7,933	)

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		December 31
		2004				2003
Plan assets by category at end of year
Equity securities			54.8	%			52.8	%
Debt securities			36.8				44.5
Other			8.4				2.7
			100.0	%			100.0	%

		Pension				Other
		Benefits				Benefits
2005		$	5,388			$	1,820
2006			5,587				1,924
2007			5,864				2,085
2008			6,101				2,129
2009			6,481				2,259
2010 through 2014			40,217				12,555

		Pension Benefits								Other Benefits
		2004				2003				2004				2003
Service cost		$	2,930			$	770			$	989			$	165
Interest cost			5,902				3,207				1,579				557
Expected return on plan assets			(6,434	)			(3,507	)			—				—
Other, net			(2	)			—				(19	)			(4	)
Net periodic benefit cost		$	2,396			$	470			$	2,549			$	718

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		Pension
		Benefits								Other Benefits
		2004				2003				2004				2003
Discount rate			6.0	%			6.0	%			6.0	%			6.0	%
Compensation rate increase			3.5	%			3.5	%			—				—
Initial healthcare cost trend rate			—				—				10.0	%			11.0	%
Ultimate healthcare cost trend rate			—				—				5.0	%			5.0	%
Year ultimate trend rate is reached			—				—				2010 to 2012				2009

		1% Increase				1% Decrease
Effect on 2004 service and interest costs		$	581			$	(452	)
Effect on accumulated postretirement benefit obligations as of December 31, 2004			4,424				(3,565	)

13.	Employee 401k Benefit Plans and Deferred Compensation Agreements

	401k Benefit Plans

	Deferred Compensation Agreements

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14.	Long-Term Debt

			December 31
			2004				2003
Senior Secured Credit Facility Revolving loan			$	—			$	—
	Term loan A			115,333				110,400
	Term loan B			—				70,000
	Term loan C			312,900				—
Senior notes				200,000				—
Capital leases				1,188				—
				629,421				180,400
Less: current portion				(41,079	)			(10,300	)
			$	588,342			$	170,100

	Senior Secured Credit Facility

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	Senior Notes

Calendar year 2005			$	41,079
Calendar year 2006				22,463
Calendar year 2007				23,248
Calendar year 2008				26,900
Calendar year 2009				33,400
	Thereafter			482,331
			$	629,421

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	Derivative Instruments

15.	Redeemable Preferred Shares and Member’s Equity

	Preferred Shares

	Common Shares

16.	Restricted Share Plan

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17.	Environmental Remediation Liabilities

18.	Commitments and Contingencies

	Legal proceedings

	Operating leases

19.	Net Loss per Common Share

		Year Ended December 31
		2004				2003
Net loss applicable to common shareholders		$	(16,108	)		$	(3,003	)
Weighted average number of common shares outstanding			9,000,685				9,000,000
Net loss per common share		$	(1.79	)		$	(0.33	)

20.	Business Segments

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		Telephone				Other
		Operations				Operations				Total
Year ended December 31, 2004
Operating revenues		$	230,401			$	39,207			$	269,608
Cost of services and products			56,339				24,233				80,572
			174,062				14,974				189,036
Selling, general and administrative expenses			77,123				10,832				87,955
Intangible assets impairment			—				11,578				11,578
Depreciation and amortization			49,061				5,461				54,522
Net operating income (loss)		$	47,878			$	(12,897	)		$	34,981
Capital expenditures		$	28,779			$	1,231			$	30,010
Year ended December 31, 2003
Operating revenues		$	90,282			$	42,048			$	132,330
Cost of services and products			21,762				24,543				46,305
			68,520				17,505				86,025
Selling, general and administrative expenses			32,987				9,508				42,495
Depreciation and amortization			16,488				5,988				22,476
Net operating income		$	19,045			$	2,009			$	21,054
Capital expenditures		$	9,117			$	2,179			$	11,296
As of December 31, 2004:
Goodwill		$	309,527			$	8,954			$	318,481
Total assets		$	936,545			$	69,554			$	1,006,099
As of December 31, 2003:
Goodwill		$	78,443			$	21,111			$	99,554
Total assets		$	245,855			$	71,740			$	317,595

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21.	Quarterly Financial Information (unaudited)

				March 31				June 30				September 30				December 31
2004
	Revenues			$	34,067			$	72,538			$	84,405			$	78,598
	Operating expenses:
		Cost of services and products			12,374				22,401				23,223				22,574
		Selling, general and administrative expenses			10,589				22,441				27,768				27,157
		Depreciation and amortization			5,366				15,176				16,942				17,038
		Asset impairment			—				—				—				11,578
Total operating expenses					28,329				60,018				67,933				78,347
Income from operations					5,738				12,520				16,472				251
Other expenses, net					2,797				12,984				10,143				9,968
Pretax income (loss)					2,941				(464	)			6,329				(9,717	)
Income tax expense (benefit)					1,177				(357	)			2,842				(3,430	)
Net income (loss)					1,764				(107	)			3,487				(6,287	)
Dividends on redeemable preferred shares					(2,274	)			(4,019	)			(4,330	)			(4,342	)
Net loss applicable to common shareholders				$	(510	)		$	(4,126	)		$	(843	)		$	(10,629	)
Net loss per common share				$	(0.06	)		$	(0.46	)		$	(0.09	)		$	(1.18	)
2003
	Revenues			$	31,772			$	33,224			$	33,741			$	33,593
	Operating expenses:
		Cost of services and products			11,081				12,028				12,355				10,841
		Selling, general and administrative expenses			10,090				10,114				10,348				11,943
		Depreciation and amortization			5,494				5,938				5,698				5,346
Total operating expenses					26,665				28,080				28,401				28,130
Income from operations					5,107				5,144				5,340				5,463
Other expenses, net					3,131				2,889				2,961				2,855
Income tax expense					790				902				952				1,073
Net income					1,186				1,353				1,427				1,535
Dividends on redeemable preferred shares					(2,119	)			(2,119	)			(2,119	)			(2,148	)
Net loss applicable to common shareholders				$	(933	)		$	(766	)		$	(692	)		$	(613	)
Net loss per common share				$	(0.10	)		$	(0.09	)		$	(0.08	)		$	(0.07	)

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F-33

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	/s/ Ernst & Young llp

F-34

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ASSETS
Current assets:
	Cash and cash equivalents			$	1,089
	Accounts receivable, net of allowances of $1,850				14,107
	Inventories				2,204
	Prepaid expenses				1,399
	Deferred directory costs and other charges				369
	Deferred tax assets				2,914
	Other current assets				1,122
		Total current assets			23,204
Investments					18
Property, plant, and equipment:
	Land and buildings				24,162
	Network and outside plant facilities				200,481
	Furniture, fixtures and equipment				32,614
	Work in process				3,330
					260,587
Less: Accumulated depreciation					155,526
Net property, plant, and equipment					105,061
Intangibles and other assets:
	Goodwill				101,324
	Other intangibles				6,463
	Deferred charges and other assets				333
		Total intangibles and other assets			108,120
		Total assets		$	236,403
LIABILITIES AND PARENT COMPANY INVESTMENT
Current liabilities:
	Current portion of capital lease obligations			$	479
	Accounts payable				7,306
	Accrued liabilities				6,725
	Advance billings and customer deposits				5,307
		Total current liabilities			19,817
Long-term liabilities:
	Unamortized investment tax credits				320
	Deferred income taxes				10,815
	Pension benefit obligations and other postretirement obligations				9,471
	Deferred compensation				—
	Other long-term liabilities				903
	Long-term debt, excluding current maturities				20,593
	Long-term capital lease obligations				—
	Commitments and contingencies				—
		Total long-term liabilities			42,102
Parent company investment					174,484
		Total liabilities and parent company investment		$	236,403

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Operating revenues
	Illinois Telephone Operations		$	76,745
	Other Illinois Operations			33,159
Total operating revenues				109,904
Operating expenses
	Cost of services and products (exclusive of depreciation and amortization shown separately below)			35,820
	Selling, general, and administrative			35,616
	Depreciation and amortization			24,544
Total operating expenses				95,980
Income from operations				13,924
Other income (expense):
	Interest income			6
	Interest expense			(1,652	)
	Other, net			428
Total other expense				(1,218	)
Income before income taxes				12,706
Income taxes				4,670
Net income			$	8,036

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Balance at January 1, 2002		$	178,142
Net income			8,036
Net settlement with parent			(11,694	)
Balance at December 30, 2002		$	174,484

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Cash flows from operating activities
Net income				$	8,036
Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation and amortization				24,544
	Deferred income taxes				(4,933	)
	Other deferred credits, net				1,864
	Changes in net operating assets and liabilities:
		Accounts receivable			(660	)
		Inventories			805
		Prepaid expenses			(105	)
		Accounts payable			1,102
		Advance billings and customer deposits			453
		Accrued income taxes and liabilities			(3,604	)
		Other			1,035
Net cash provided by operating activities					28,537
Cash flows from investing activities
Property, plant, and equipment expenditures					(14,137	)
Net cash used in investing activities					(14,137	)
Cash flows from financing activities
Repayment of long-term debt					(68	)
Deferred charges and other noncurrent assets					19
Settle intercompany receivables, net					(16,515	)
Net cash used in financing activities					(16,564	)
Net decrease in cash and cash equivalents					(2,164	)
Cash and cash equivalents at beginning of year					3,253
Cash and cash equivalents at end of year				$	1,089
Non-cash investing and financing activities
	Property, plant and equipment additions			$	4,821
Supplemental disclosures of cash flow information
	Cash paid for interest			$	1,643

F-38

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1.	Nature of Business

2.	Basis of Preparation

F-39

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Table of Contents

3.	Summary of Significant Accounting Policies

	Regulatory Accounting

	Use of Estimates

	Cash Equivalents

	Accounts Receivable and Allowance for Doubtful Accounts

	Inventory

	Investments

F-40

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	Intangible Assets and Goodwill

	Property, Plant, and Equipment

		Years
Buildings			15-20
Telecommunications networks			5-15
Furniture, fixtures, and equipment			3-10

	Revenue Recognition

F-41

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Table of Contents

	Advertising Costs

	Financial Instruments

	Deferred Income Taxes

	Stock-Based Compensation

	Recent Accounting Pronouncements

F-42

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4.	Affiliated Transactions

5.	Goodwill and Intangible Assets

F-43

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6.	Income Taxes

Current:
	Federal		$	8,628
	State			1,240
Total Current				9,868
Deferred:
	Federal			(4,297	)
	State			(636	)
Total Deferred				(4,933	)
	Investment tax credit amortized			(265	)
Total income tax expense			$	4,670

Statutory federal income tax rate			34.0	%
State income taxes, net of federal benefit			4.8
Other			(2.0	)
Effective overall income tax rate			36.8	%

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Current deferred income tax assets:
	Accrued vacation		$	582
	Reserve for uncollectible accounts			541
	Accrued expenses			365
	Deferred revenue and regulatory reserves			1,426
Total current deferred income tax assets				2,914
Noncurrent deferred income tax assets:
	Pension and post retirement expense			3,771
	Other			320
Total noncurrent deferred income tax assets				4,091
Noncurrent deferred income tax liabilities:
	Depreciable property			(11,740	)
	Intangibles			(2,685	)
	Regulatory liabilities			(481	)
Total noncurrent deferred income tax liability				(14,906	)
Net noncurrent deferred income tax liability				(10,815	)
Total net deferred tax liability			$	(7,401	)

7.	Pension Costs and Other Postretirement Benefits

Projected benefit obligation at beginning of period		$	47,379
Service cost			807
Interest cost			3,240
Benefits paid			(3,374	)
Actuarial loss			1,585
Projected benefit obligation at end of period		$	49,637

Fair value of plan assets at beginning of period		$	50,769
Actual return on plan assets			(1,949	)
Benefits paid			(3,374	)
Fair value of plan assets at end of period		$	45,446

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Funded status		$	(4,191	)
Unrecognized net actuarial gain			(220	)
Unrecognized prior service cost			2,536
Net amount recognized at period-end		$	(1,875	)

Service cost		$	807
Interest cost			3,240
Expected return on plan assets			(3,940	)
Amortization of prior service costs			482
Recognized actuarial gain			(223	)
Net periodic benefit cost		$	366

Benefit obligation at beginning of period		$	7,710
Service cost			143
Interest cost			520
Benefits paid			(393	)
Actuarial gain			(14	)
Benefit obligation at end of period		$	7,966

Fair value of plan assets at beginning of period		$	—
Employer contributions			393
Benefits paid			(393	)
Fair value of plan assets at end of period		$	—

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Funded status		$	(7,966	)
Contributions made after measurement date and before fiscal year end			111
Unrecognized net actuarial gain			(1,018	)
Unrecognized transition obligation			2,796
Unrecognized prior service cost			(1,519	)
Net amount recognized at period-end		$	(7,596	)

Service cost		$	143
Interest cost			520
Amortization of prior service costs			(174	)
Amortization of transitional obligation			388
Recognized actuarial gain			(26	)
Net periodic benefit cost		$	851

8.	Employee Benefit Plan

9.	Long-Term Debt

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ICTC First mortgage bonds:
	Series K, 8.620%, due September 1, 2022		$	10,000
	Series L, 7.050%, due October 1, 2013			10,000
CMR mortgage bond				593
			$	20,593

10.	Environmental Remediation Liabilities

11.	Operating Leases

		Lease
Year		Payments
2003		$	675
2004			457
2005			419
2006			364
2007			312
2008 and thereafter			815
Total		$	3,042

12.	Capital Leases

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13.	Business Segments

		2002
		Illinois				Other
		Telephone				Illinois
		Operations				Operations				Total
Operating revenues		$	76,745			$	33,159			$	109,904
Cost of services and products			17,980				17,840				35,820
			58,765				15,319				74,084
Selling, general and administrative expenses			28,967				6,649				35,616
Depreciation and amortization			20,074				4,470				24,544
Net operating income		$	9,724			$	4,200			$	13,924
Total assets		$	222,380			$	14,023			$	236,403
Goodwill			81,059				20,265				101,324
Capital expenditures			12,005				2,132				14,137

14.	Quarterly Financial Information (unaudited)

		2002
		March 31				June 30				September 30				December 31
Operating revenues		$	27,155			$	27,998			$	27,610			$	27,141
Cost of services and products			8,837				9,188				8,518				9,277
			18,318				18,810				19,092				17,864
Selling, general and administrative expenses			8,733				7,782				8,752				10,349
Depreciation and amortization			6,135				6,136				6,136				6,137
Net operating income			3,450				4,892				4,204				1,378
Other expenses			(252	)			(305	)			(320	)			(341	)
Income taxes			1,183				2,127				1,639				(279	)
Net income		$	2,015			$	2,460			$	2,245			$	1,316

15.	Subsequent Event

F-49

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	Deloitte & Touche LLP

F-51

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						April 13,				December 31,
						2004				2003				2002
						(Dollars in thousands)
ASSETS
CURRENT ASSETS
	Cash and Cash Equivalents					$	9,897			$	11,464			$	12,427
	Accounts Receivable — net of allowance of $1,316 in 2004, $1,501 in 2003 and $5,021 in 2002						17,555				15,778				18,825
	Short-Term Investments						117				125				125
	Prepaid Federal Income Taxes						45				—				6,615
	Materials and Supplies						1,003				1,102				2,379
	Deferred Income Taxes						3,974				2,527				34,145
	Assets Held for Sale						—				—				8,030
	Other Current Assets						4,467				3,519				3,814
		TOTAL CURRENT ASSETS					37,058				34,515				86,360
NONCURRENT ASSETS
	Investments						36,862				36,118				35,260
	Goodwill						304,336				304,336				317,536
	Prepaid Pension Cost						—				997				3,669
	Deferred Income Taxes						16,033				39,525				15,709
	Other						831				961				771
		TOTAL NONCURRENT ASSETS					358,062				381,937				372,945
PROPERTY, PLANT & EQUIPMENT
	Plant in Service						341,238				333,607				326,243
	Plant Under Construction						7,147				8,595				5,249
				TOTAL PROPERTY, PLANT & EQUIPMENT			348,385				342,202				331,492
	Less: Accumulated Depreciation						118,343				110,795				90,700
			TOTAL PROPERTY, PLANT & EQUIPMENT — NET				230,042				231,407				240,792
TOTAL ASSETS						$	625,162			$	647,859			$	700,097

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									December 31,
					April 13,
					2004				2003				2002
					(Dollars in thousands)
LIABILITIES AND SHAREHOLDER’S EQUITY
CURRENT LIABILITIES
	Accounts Payable				$	7,712			$	9,223			$	14,043
	Accounts Payable — Affiliates					35				2,314				352
	Advance Billing and Payments					4,163				2,954				3,438
	Customer Deposits					752				739				788
	Current Maturities of Long-Term Debt					2,847				98,247				2,999
	Accrued Expenses					12,105				18,518				18,234
	Liabilities Related to Assets Held for Sale					—				—				2,661
	Other Current Liabilities					3,485				4,594				4,078
		TOTAL CURRENT LIABILITIES				31,099				136,589				46,593
LONG-TERM DEBT, LESS CURRENT MATURITIES						—				2,136				163,203
OTHER LIABILITIES AND DEFERRED CREDITS
	Accrued Postretirement and Pension Benefits					31,173				27,669				28,072
	Deferred Income Taxes					33,513				54,486				39,458
	Other Deferred Credits and Liabilities					5,868				5,856				5,145
	Regulatory Liabilities					8,283				8,405				8,807
			TOTAL OTHER LIABILITIES AND DEFERRED CREDITS			78,837				96,416				81,482
TOTAL LIABILITIES						109,936				235,141				291,278
MINORITY INTEREST						1,964				1,858				1,224
SHAREHOLDER’S EQUITY
	Common Stock — No par value, 1,000 shares authorized, 1,000 shares issued and outstanding					—				—				—
	Paid-In Capital					636,868				534,749				530,459
	Accumulated Deficit					(117,463	)			(119,246	)			(116,905	)
	Accumulated Other Comprehensive Loss					(6,143	)			(4,643	)			(5,959	)
		TOTAL SHAREHOLDER’S EQUITY				513,262				410,860				407,595
TOTAL LIABILITIES AND SHAREHOLDER’S EQUITY					$	625,162			$	647,859			$	700,097

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				Period From				Year Ended December 31,
				January 1, 2004
				To April 13, 2004				2003				2002				2001
				(Dollars in thousands)
OPERATING REVENUES				$	53,855			$	194,818			$	214,709			$	207,451
OPERATING EXPENSES
	Network Operating Costs (exclusive of depreciation and amortization shown separately below)				15,296				58,415				76,891				95,663
	Selling, General and Administrative				24,138				75,365				109,401				88,671
	Depreciation and Amortization				8,124				32,875				40,990				50,177
	Restructuring, Asset Impairment and Other Charges				(12	)			248				101,390				—
	Goodwill Impairment Charges				—				13,200				18,000				—
		TOTAL OPERATING EXPENSES			47,546				180,103				346,672				234,511
OPERATING INCOME (LOSS)					6,309				14,715				(131,963	)			(27,060	)
OTHER INCOME (EXPENSE):
	Pre-payment Penalty on Extinguishment of Debt				(1,914	)			—				—
	Interest Expense				(1,275	)			(5,422	)			(7,669	)			(11,625	)
	(Loss)/Gain on Sale of Property and Investments				(19	)			(101	)			558				6,158
	Allowance for Funds Used During Construction				31				81				179				572
	Partnership Income				1,174				2,693				2,332				3,151
	Minority Interest				(106	)			(872	)			8,048				507
	Other				56				(980	)			489				101
		TOTAL (EXPENSE) OTHER INCOME			(2,053	)			(4,601	)			3,937				(1,136	)
INCOME (LOSS) BEFORE INCOME TAXES					4,256				10,114				(128,026	)			(28,196	)
	Income Tax Expense (Benefit)				2,473				12,455				(38,261	)			(6,304	)
NET INCOME (LOSS)					1,783				(2,341	)			(89,765	)			(21,892	)
OTHER COMPREHENSIVE INCOME (LOSS)
	Minimum Pension Liability Adjustment, Net of Tax				(1,494	)			1,316				(6,028	)			—
	Unrealized (Loss) Gain on Marketable Securities, Net of Tax				(6	)			—				(136	)			169
COMPREHENSIVE INCOME (LOSS)				$	283			$	(1,025	)		$	(95,929	)		$	(21,723	)

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																			Accumulated
			Common Stock																Other
											Paid In				Accumulated				Comprehensive
			Shares				Amount				Capital				Deficit				Loss
			(Dollars in thousands)
Balance, January 1, 2001				1,000				—			$	495,701			$	(5,248	)		$	36
	Net Loss															(21,892	)
	Capital Contributions											27,784
	Unrecognized Gain on Marketable Securities, Net of Tax																			169
Balance, December 31, 2001				1,000				—				523,485				(27,140	)			205
	Net Loss															(89,765	)
	Capital Contributions											6,974
	Minimum Pension Liability Adjustment, Net of Tax																			(6,028	)
	Unrealized Loss on Marketable Securities, Net of Tax																			(136	)
Balance, December 31, 2002				1,000				—				530,459				(116,905	)			(5,959	)
	Net Loss															(2,341	)
	Capital Contributions											4,290
	Minimum Pension Liability Adjustment, Net of Tax																			1,316
Balance, December 31, 2003				1,000				—				534,749				(119,246	)			(4,643	)
	Net Income															1,783
	Capital Contributions											102,119
	Minimum Pension Liability Adjustment, Net of Tax																			(1,494	)
	Unrealized Loss on Marketable Securities, Net of Tax																			(6	)
Balance, April 13, 2004				1,000				—			$	636,868			$	(117,463	)		$	(6,143	)

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				Period from
				January 1,
				2004				Year Ended December 31,
				to April 13,
				2004				2003				2002				2001
				(Dollars in thousands)
OPERATING ACTIVITIES
Net Income (Loss)				$	1,783			$	(2,341	)		$	(89,765	)		$	(21,892	)
Adjustments to Reconcile Net Income (Loss) to Cash Provided by Operating Activities:
	Pre-payment Penalty on Extinguishment of Debt				1,914				—				—				—
	Deferred Income Tax				950				22,428				(38,908	)			(9,368	)
	Depreciation and Amortization				8,124				32,875				40,990				50,177
	Provision for Postretirement Benefits				3,007				3,583				9,160				838
	Loss/(Gain) on Disposition of Property and Investments				19				101				(558	)			(6,158	)
	Restructuring, Asset Impairment and Other Charges				(12	)			248				101,390				—
	Goodwill Impairment				—				13,200				18,000				—
	Partnership Income				(1,174	)			(2,693	)			(2,332	)			(3,151	)
	Allowance for Funds Used During Construction				(31	)			(81	)			(179	)			(572	)
	Minority Interest				106				872				(8,048	)			(507	)
	Provision for Bad Debt Losses				542				(804	)			10,200				3,981
Changes in Operating Assets and Liabilities:
	Accounts Receivable				(2,319	)			3,851				1,349				(7,287	)
	Materials and Supplies				99				1,277				2,520				3,048
	Prepaid Federal Income Tax				(45	)			6,615				(4,664	)			12,299
	Other Assets				(1,164	)			105				(2,075	)			2,688
	Accounts Payable				(1,051	)			(2,858	)			(15,003	)			(14,520	)
	Accrued Expenses and Other Liabilities				(5,429	)			(1,323	)			12,637				(2,772	)
		Net Cash Provided by Operating Activities			5,319				75,055				34,714				6,804
INVESTING ACTIVITIES
	Capital Expenditures				(6,735	)			(18,189	)			(27,374	)			(66,976	)
	Business Assets Purchased																(2,467	)
	Proceeds From Sale-Leaseback Transactions				—				—				4,814				—
	Proceeds From Investments				432				1,837				998				188
	Proceeds From Sale of Assets				—				2,101				290				9,309
		Net Cash Used in Investing Activities			(6,303	)			(14,251	)			(21,272	)			(59,946	)
FINANCING ACTIVITIES
	Other Paid-In Capital				—				—				—				2,479
	Proceeds From TXU Investment Company				—				4,290				6,974				27,784
	Proceeds From Long-Term Obligations				18,000				5,895				23,319				40,620
	Minority Interest Equity Distribution				—				(238	)			—				—
	Pre-payment Penalty on Extinguishment of Debt				(1,914	)			—				—
	Payments Made on Long-Term Obligations				(16,669	)			(71,714	)			(34,724	)			(24,619	)
		Net Cash (Used in) Provided by Financing Activities			(583	)			(61,767	)			(4,431	)			46,264
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS					(1,567	)			(963	)			9,011				(6,878	)
CASH AND CASH EQUIVALENTS — BEGINNING					11,464				12,427				3,416				10,294
CASH AND CASH EQUIVALENTS — ENDING				$	9,897			$	11,464			$	12,427			$	3,416
SUPPLEMENTAL CASH FLOW INFORMATION:
	Debt for Equity Swap with TXU Investment Co.			$	102,119			$	—			$	—			$	—
	Interest Paid			$	1,045			$	6,045			$	7,500			$	11,820
	Taxes Paid (Refunds) Received			$	73			$	(16,329	)		$	(153	)		$	(1,333	)
	Capital Leases			$	—			$	—			$	4,761			$	—

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	•	GTE Mobilnet of South Texas, which serves the greater Houston metropolitan area. TXUCV owns 2% of the equity of this partnership.
	•	GTE Mobilnet of Texas RSA #17, which serves rural areas in and around Conroe, Texas. TXUCV owns 17% of the equity of this partnership.

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		April 13,				December 31,
														Estimated
		2004				2003				2002				Useful Life
		(Dollars in thousands)
Land		$	4,228			$	4,280			$	4,433
Buildings			25,209				24,922				24,938			15-35 years
Telephone Plant			264,352				258,000				242,934			5-30 years
Furniture and Office Equipment			41,455				40,327				45,420			5-17 years
Automotive and Other Equipment			5,994				6,078				8,518			3-7 years
Construction in Progress			7,147				8,595				5,249
			348,385				342,202				331,492
Less: Accumulated Depreciation			118,343				110,795				90,700
		$	230,042			$	231,407			$	240,792

			April 13,				December 31,
			2004				2003				2002
			(Dollars in thousands)
TXU Corp. Revolving Credit Facility			$	—			$	80,867			$	144,066
CoBank Mortgage Notes				—				16,429				18,071
Capital Leases				2,847				3,087				4,009
Debentures Payable				—				—				56
				2,847				100,383				166,202
Less: Current Maturities				2,847				98,247				2,999
	TOTAL LONG-TERM DEBT		$	—			$	2,136			$	163,203

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2004		$	711
2005			952
2006			1,010
2007			174
TOTAL		$	2,847

			Period From				Year Ended December 31,
			January 1, 2004
			To April 13, 2004				2003				2002				2001
			(Dollars in thousands)
Current:
	U.S. Federal		$	28			$	(9,704	)		$	(3,018	)		$	(1,951	)
	State			455				324				(214	)			83
Deferred:
	U.S. Federal			1,833				21,435				(31,819	)			(3,610	)
	State			157				610				(2,766	)			(311	)
Amortization of Investment Tax Credit				—				(210	)			(231	)			(301	)
Amortization of Excess Deferred Taxes				—				—				(213	)			(214	)
INCOME TAX EXPENSE (BENEFIT)			$	2,473			$	12,455			$	(38,261	)		$	(6,304	)

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		Period From				Year Ended December 31,
		January 1, 2004
		To April 13, 2004				2003				2002				2001
		(Dollars in thousands)
Income Tax Expense (Benefit) at U.S. Federal Statutory Rate		$	1,488			$	3,540			$	(44,809	)		$	(10,101	)
State Income Tax Expense (Benefit)			239				934				(3,841	)			(355	)
State Income Tax Refunds			—				—				(866	)			—
Goodwill Amortization			—				—				—				4,752
Goodwill Impairment			(1	)			4,704				6,300				—
Minority Interest			37				305				(2,817	)			(177	)
Amortization of Investment Tax Credit			—				(210	)			(231	)			(301	)
Amortization of Excess Deferred Taxes			—				—				(214	)			(214	)
Increase in Valuation Reserve			157				3,084				9,080				(270	)
Other			480				33				(929	)			—
Other Permanent Differences			73				65				66				362
INCOME TAX EXPENSE (BENEFIT)		$	2,473			$	12,455			$	(38,261	)		$	(6,304	)

							December 31,
			April 13,
			2004				2003				2002
			(Dollars in thousands)
Deferred Tax Assets
	Net Operating Losses		$	8,649			$	9,625			$	19,437
	Allowance for Uncollectible Accounts Receivable			500				570				1,831
	Accrued Vacation			2,127				873				939
	Postretirement Benefits			14,833				13,164				12,496
	Deferred Franchise Tax			4,183				3,918				1,666
	Prior Year Minimum Tax Credit			699				527				—
	Other			1,347				1,084				129
TOTAL DEFERRED ASSETS			$	32,338			$	29,761			$	67,873
Deferred Tax Liabilities
	Franchise Tax		$	—			$	—			$	(3,600	)
	Partnership Investment			(2,212	)			(1,698	)			(1,151	)
	Basis in Investment			(1,632	)			(1,632	)			(1,632	)
	Depreciation			(29,669	)			(26,691	)			(42,004	)
TOTAL DEFERRED LIABILITIES				(33,513	)			(30,021	)			(48,387	)
VALUATION ALLOWANCE				(12,331	)			(12,174	)			(9,090	)
NET DEFERRED TAX (LIABILITY) ASSET			$	(13,506	)		$	(12,434	)		$	10,396

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							December 31,
			April 13,
			2004				2003				2002
			(Dollars in thousands)
Current Deferred Income Tax Asset			$	3,974			$	2,527			$	34,145
Noncurrent Deferred Income Tax Asset				16,033				39,525				15,709
Noncurrent Deferred Income Tax Liability				(33,513	)			(54,486	)			(39,458	)
	NET DEFERRED TAX LIABILITY (ASSET)		$	(13,506	)		$	(12,434	)		$	10,396

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		Pension Benefits												Other Benefits
						Dec. 31,												Dec. 31,
		April 13,												April 13,
		2004				2003				2002				2004				2003				2002
		(Dollars in thousands)
Change in benefit obligation
Benefit obligation at beginning of period		$	56,966			$	51,534			$	45,838			$	24,320			$	18,701			$	14,240
Service cost			928				2,973				3,321				400				1,205				1,129
Interest cost			1,125				3,480				3,232				472				1,486				1,002
Plan participants’ contributions			—				—				—				47				94				97
Amendments			—				—				407				—				—				—
Benefit vesting due to partial plan termination			2,105				—				—				—				—				—
Actuarial loss			736				4,624				3,672				1,701				5,743				4,561
Curtailment			—				(3,250	)			(2,388	)			—				(1,933	)			(1,606	)
Assumption change			—				62				5				—				—				—
Benefits paid			(768	)			(2,115	)			(2,191	)			(311	)			(976	)			(722	)
Administrative expenses paid			(108	)			(342	)			(363	)			—				—				—
Benefit obligation at end of period			60,984				56,966				51,533				26,629				24,320				18,701
Change in plan assets
Fair value of plan assets at beginning of period			40,399				35,468				41,397				—				—				—
Actual return on plan assets			1,105				5,667				(3,375	)			—				—				—
Employer contribution			—				1,705				—				264				882				626
Plan participants’ contributions			—				—				—				47				94				97
Benefits paid			(763	)			(2,099	)			(2,191	)			(311	)			(976	)			(723	)
Administrative expenses paid			(108	)			(342	)			(363	)			—				—				—
Fair value of plan assets at end of period			40,633				40,399				35,468				—				—				—
Funded status			(20,351	)			(16,567	)			(16,065	)			(26,629	)			(24,320	)			(18,701	)
Unrecognized net actuarial loss			19,687				17,255				19,291				9,251				7,665				4,153
Unrecognized prior service cost			302				309				443				—				—				—
Net amount recognized		$	(362	)		$	997			$	3,669			$	(17,378	)		$	(16,655	)		$	(14,548	)

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		Pension Benefits												Other Benefits
						Dec. 31,												Dec. 31,
		April 13,												April 13,
		2004				2003				2002				2004				2003				2002
		(Dollars in thousands)
(Accrued) Prepaid benefit cost		$	(362	)		$	997			$	3,669			$	—			$	—			$	—
Accrued benefit liability			(10,324	)			(7,921	)			(10,176	)			(17,378	)			(16,655	)			(14,548	)
Intangible assets			311				318				453				—				—				—
Accumulated other comprehensive income			10,013				7,603				9,723				—				—				—
Net amount recognized		$	(362	)		$	997			$	3,669			$	(17,378	)		$	(16,655	)		$	(14,548	)

						Dec. 31,
		April 13,
		2004				2003				2002
Projected benefit obligation		$	60,984			$	56,966			$	51,533
Accumulated benefit obligation			51,197				47,323				41,975
Fair value of plan assets			40,633				40,399				35,468

		Pension Benefits												Other Benefits
		Period from												Period from
		Jan. 1, 2004				Dec. 31,								Jan. 1, 2004				Dec. 31,
		to April 13,												to April 13,
		2004				2003				2002				2004				2003				2002
		(Dollars in thousands)
Service cost		$	928			$	2,973			$	3,321			$	400			$	1,205			$	1,129
Interest cost			1,125				3,480				3,232				472				1,486				1,002
Expected return on plan assets			(994	)			(3,066	)			(3,478	)			—				—				—
Amortization of prior service cost			7				28				41				—				—				—
Net actuarial loss recognition			298				873				289				116				298				—
Net periodic benefit cost		$	1,364			$	4,288			$	3,405			$	988			$	2,989			$	2,131

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		Pension Benefits												Other Benefits
						Dec. 31,												Dec. 31,
		April 13,												April 13,
		2004				2003				2002				2004				2003				2002
Discount rate			6.25	%			6.25	%			6.75	%			6.25	%			6.25	%			6.75	%
Rate of compensation increase			4.30	%			4.30	%			4.30	%			—				—				—

		Pension Benefits												Other Benefits
						Dec. 31,												Dec. 31,
		April 13,												April 13,
		2004				2003				2002				2004				2003				2002
Discount rate			6.25	%			6.75%/6.50%	*			7.25	%			6.25	%			6.75	%			7.25	%
Expected long-term return on plan assets			8.50	%			8.50%				8.50	%			—				—				—
Rate of compensation increase			4.30	%			4.30%				4.30	%			—				—				—

*	6.75% from 1/1/2003 - 8/1/2003 6.5% from 8/1/2003 - 12/31/2004 for qualified plan only

						Dec. 31,
		April 13,
		2004				2003				2002
Health care cost trend rate assumed for next year			10.00	%			10.00	%			11.00	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)			5.00	%			5.00	%			5.00	%
Year that the rate reaches the ultimate trend rate			2009				2009				2009

		1-Percentage-				1-Percentage-
		Point Increase				Point Decrease
		(Dollars in thousands)
Effect on total of service and interest cost		$	176			$	(135	)
Effect on postretirement benefit obligation		$	4,061			$	(3,215	)

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			Plan Assets
							Dec. 31,
			April 13,
			2004				2003				2002
Asset Category
Equity securities				55%				55%				49%
Debt securities				40%				40%				47%
Other				5%				5%				4%
	Total			100%				100%				100%

		Pension				Other
		Benefits				Benefits
		(Dollars in
		thousands)
4/14 — 12/31/2004		$	1,452			$	647
2005			2,182				983
2006			2,353				1,095
2007			2,594				1,139
2008			2,790				1,239
Years 2009-2013			18,759				7,357

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	Nonbargaining: TXUCV Services, TXUCV Telephone, TXUCV Telecom, Transport Services, Telcon, Fort Bend Telephone and Fort Bend LD

	Bargaining: TXUCV Services, TXUCV Telephone, TXUCV Telecom and Transport Services

	Nonbargaining: Telcon, Fort Bend Telephone and Fort Bend LD

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		Fiber Optic
As of April 13, 2004		Systems
		(Dollars in
		thousands)
4/14-12/31/2004		$	827
2005			1,131
2006			1,103
2007			1,103
2008			1,103
		$	5,267

						December 31,
		April 13,
		2004				2003				2002
		(Dollars in thousands)
Fiber Optic System		$	222			$	222			$	245
Less: Accumulated Depreciation			10				6				—
		$	212			$	216			$	245

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		Cost												Fair Value												Unrealized Gain												Realized Gain
		4/13/04				2003				2002				4/13/04				2003				2002				4/13/04				2003				2002				4/13/04				2003				2002
		(Dollars in thousands)
Other Marketable Equity Securities		$	11			$	11			$	11			$	117			$	125			$	125			$	106			$	114			$	114			$	—			$	—			$	230

		Percentage Owned												Investment Amount
						December 31,												December 31,
		April 13,												April 13,
		2004				2003				2002				2004				2003				2002
														(Dollars in thousands)
GTE Mobilnet of South Texas Limited Partnership			2.34	%			2.34	%			2.34	%		$	24,045			$	23,384			$	22,332
GTE Mobilnet of Texas RSA #17 Limited Partnership			17.02	%			17.02	%			17.02	%		$	3,731			$	3,794			$	3,629
Fort Bend Fibernet Limited Partnership			39.06	%			39.06	%			39.06	%		$	187			$	139			$	731

						December 31,
		April 13,
		2004				2003				2002
		(Dollars in thousands)
CoBank, ACB Stock		$	1,452			$	1,347			$	1,230
Rural Telephone Bank Stock		$	5,921			$	5,921			$	5,921

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						December 31,
		April 13,
		2004				2003				2002				2001
		(Dollars in thousands)
Prepaid to Oncor for Transmission Fees		$	886			$	—			$	—
Accounts Payable — TXU		$	35			$	2,314			$	352
Accounts Payable — Oncor		$	—			$	245			$	117
Long-Term Debt Payable — TXU		$	—			$	80,867			$	144,066
Capital Contributions — Pinnacle		$	102,119			$	4,290			$	6,974			$	27,784
Interest Expense Paid to TXU		$	636			$	3,597			$	5,059			$	8,501
Billings From Oncor for Transmission Line Fees		$	1,139			$	1,458			$	1,324			$	1,184
Billings From TXU for Management Fees		$	2,350			$	2,647			$	3,331			$	5,594
Billings From TXU for Services		$	660			$	1,487			$	2,427			$	1,885

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4/14 - 12/31/2004		$	2,827
2005		$	3,451
2006		$	2,747
2007		$	1,546
2008		$	1,368
Thereafter		$	3,038

		Carrying Amount												Fair Value
						Dec. 31,												Dec. 31,
		April 13,												April 13,
		2004				2003				2002				2004				2003				2002
		(Dollars in thousands)
Long-Term Investments For Which It Is Not Practicable To Estimate Fair Value		$	36,862			$	34,585			$	33,884			$	36,862			$	34,585			$	33,884
Debt		$	2,847			$	100,383			$	166,202			$	2,663			$	102,077			$	166,202
Cash Surrender Value of Life Insurance Policies		$	1,526			$	1,533			$	1,376			$	1,526			$	1,533			$	1,376

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		CLEC				Transport				Total
		(Dollars in thousands)
PPE Net Book Value		$	27,512			$	70,831			$	98,343
Estimated Cost of Sale			232				360				592
			27,744				71,191				98,935
Less: Estimated FMV			947				7,083				8,030
Assets Held For Sale Impairment Charges		$	26,797				64,108			$	90,905

Employee Separations		$	736
Facility Closure Costs			916
Other Contractual Commitments			417
Total		$	2,069

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		2003				2002
Balance, January 1		$	317,536			$	335,536
Less impairment			13,200				18,000
Balance, December 31		$	304,336			$	317,536

						December 31,
		April 13,
		2004				2003				2002				2001
		(Dollars in thousands)
Reported Net Income (Loss)		$	1,783			$	(2,341	)		$	(89,765	)		$	(21,892	)
Add: Goodwill Amortization			—				—				—				8,419
Proforma Net Income (Loss)		$	1,783			$	(2,341	)		$	(89,765	)		$	(13,473	)

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	•	Fort Bend Telephone (now known as Consolidated Communications of Fort Bend Company) and TXUCV Telephone (now known as Consolidated Communications of Texas Company), two RLECs, which together serve markets in Conroe, Katy and Lufkin, Texas;
	•	TXUCV’s investments in the cellular partnership (see Note H — Investments in Nonaffiliated Companies);
	•	a telephone directory publishing business; and
	•	a transport services business.

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				2004				2003
ASSETS
CURRENT ASSETS:
	Accounts receivable, net of allowance of $268 and $244			$	2,061			$	1,920
	Unbilled revenue				712				533
	Due from General Partner				3,659				7,513
	Prepaid expenses and other current assets				11				13
		Total current assets			6,443				9,979
PROPERTY, PLANT AND EQUIPMENT — Net					22,494				13,681
TOTAL ASSETS				$	28,937			$	23,660
LIABILITIES AND PARTNERS’ CAPITAL
CURRENT LIABILITIES:
	Accounts payable and accrued liabilities			$	1,193			$	1,117
	Advance billings				297				223
	Other current liabilities				243				232
		Total current liabilities			1,733				1,572
COMMITMENTS AND CONTINGENCIES (see Notes 6 and 8)
PARTNERS’ CAPITAL					27,204				22,088
TOTAL LIABILITIES AND PARTNERS’ CAPITAL				$	28,937			$	23,660

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				2004				2003				2002
OPERATING REVENUES:
	Service revenues			$	32,687			$	28,324			$	24,525
	Equipment and other				2,516				2,135				1,594
		Total operating revenues			35,203				30,459				26,119
OPERATING COSTS AND EXPENSES:
Cost of service (excluding depreciation and amortization related to network assets included below)					9,899				8,316				8,724
Cost of equipment					2,490				2,284				1,172
Selling, general and administrative					10,144				9,344				8,389
Depreciation and amortization					3,034				2,886				2,688
Loss on disposal of property, plant and equipment					—				—				3
		Total operating costs and expenses			25,567				22,830				20,976
OPERATING INCOME					9,636				7,629				5,143
OTHER INCOME:
	Interest income, net				480				365				250
	Other, net				—				—				20
		Total other income			480				365				270
NET INCOME				$	10,116			$	7,994			$	5,413
Allocation of Net Income:
	Limited partners			$	8,093			$	6,396			$	4,329
	General partner			$	2,023			$	1,598			$	1,084

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			General
			Partner				Limited Partners
			San				Eastex								Consolidated								San
			Antonio				Telecom				Telecom				Communications				ALLTEL				Antonio				Total
			MTA,				Investments,				Supply,				Transport				Communications				MTA,				Partners’
			L.P.				L.P.				Inc.				Company				Investments, Inc.				L.P.				Capital
BALANCE — January 1, 2002			$	3,536			$	3,009			$	3,009			$	3,009			$	3,009			$	2,109			$	17,681
	Distributions			(400	)			(340	)			(340	)			(340	)			(340	)			(240	)			(2,000	)
	Net income			1,084				921				921				921				921				645				5,413
BALANCE — December 31, 2002				4,220				3,590				3,590				3,590				3,590				2,514				21,094
	Distributions			(1,402	)			(1,191	)			(1,191	)			(1,191	)			(1,191	)			(834	)			(7,000	)
	Net income			1,598				1,361				1,361				1,361				1,361				952				7,994
BALANCE — December 31, 2003				4,416				3,760				3,760				3,760				3,760				2,632				22,088
	Distributions			(1,000	)			(851	)			(851	)			(851	)			(851	)			(596	)			(5,000	)
	Net income			2,023				1,722				1,722				1,722				1,722				1,205				10,116
BALANCE — December 31, 2004			$	5,439			$	4,631			$	4,631			$	4,631			$	4,631			$	3,241			$	27,204

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						2004				2003				2002
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income					$	10,116			$	7,994			$	5,413
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization					3,034				2,886				2,688
		Net loss on disposal of property, plant and equipment					—				—				3
		Provision for losses on accounts receivable					793				496				719
		Changes in certain assets and liabilities:
			Accounts receivable and unbilled revenue				(1,113	)			(125	)			(671	)
			Prepaid expenses and other current assets				2				6				(18	)
			Accounts payable and accrued liabilities				76				(294	)			275
			Advance billings and other current liabilities				85				178				133
				Net cash provided by operating activities			12,993				11,141				8,542
CASH FLOWS FROM INVESTING ACTIVITIES:
	Capital expenditures, including purchases from affiliates, net						(11,847	)			(2,654	)			(3,225	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Decrease (Increase) in Due from General Partner						3,854				(1,487	)			(3,317	)
	Distributions to partners						(5,000	)			(7,000	)			(2,000	)
				Net cash used in financing activities			(1,146	)			(8,487	)			(5,317	)
CHANGE IN CASH							—				—				—
CASH — Beginning of year							—				—				—
CASH — End of year						$	—			$	—			$	—

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1.	Organization and Management

General Partner:
	San Antonio MTA, L.P.*			20.0000	%
Limited Partners:
	Eastex Telecom Investments, L.P.			17.0213	%
	Telecom Supply, Inc.			17.0213	%
	Consolidated Communications Transport Company			17.0213	%
	ALLTEL Communications Investments, Inc.			17.0213	%
	San Antonio MTA, L.P.*			11.9148	%

*	San Antonio MTA, L.P. (“General Partner”) is a wholly-owned subsidiary of Cellco Partnership (“Cellco”) doing business as Verizon Wireless.

2.	Significant Accounting Policies

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3.	Property, Plant and Equipment

		2004				2003
Buildings and improvements (10-40 years)		$	6,858			$	5,422
Cellular plant equipment (3-15 years)			34,259				24,134
Furniture, fixtures and equipment (2-5 years)			349				55
Leasehold improvements (5-10 years)			226				213
			41,692				29,824
Less accumulated depreciation and amortization			19,198				16,143
Property, plant and equipment, net		$	22,494			$	13,681

4.	Accounts Payable and Accrued Liabilities

		2004				2003
Accounts payable		$	481			$	258
Non-income based taxes and regulatory fees			449				605
Accrued commissions			263				254
Accounts payable and accrued liabilities		$	1,193			$	1,117

5.	Transactions with Affiliates

		2004				2003				2002
Service revenues(a)		$	1			$	(76	)		$	(1	)
Equipment and other revenues(b)			(234	)			(267	)			197
Cost of service(c)			4,137				1,579				984
Equipment costs(d)			349				852				443
Selling, general and administrative expenses(e)			5,430				5,143				5,063

(a)		Service revenues include long distance, paging, data and allocated contra revenues including revenue concessions; excluding roaming revenue, see below.
(b)		Equipment and other revenues include sales of handsets and accessories and allocated contra revenues including equipment concessions and coupon rebates.

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(c)		Cost of service includes cost of telecom, long distance, paging, and handset applications; excluding roaming costs, see below.
(d)		Equipment costs include warehousing, freight, handsets, accessories, and upgrades.
(e)		Selling, general and administrative expenses include office telecom, customer care, billing, salaries, sales and marketing, advertising, and commissions.

6.	Commitments

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Year
2005		$	1,077
2006			985
2007			929
2008			891
2009			827
2010 and thereafter			235
Total minimum payments		$	4,944

7.	Valuation and Qualifying Accounts

			Balance at				Additions				Write-offs				Balance at
			Beginning				Charged to				Net of				End
			of the Year				Operations				Recoveries				of the Year
Accounts Receivable Allowances:
	2004		$	244			$	793			$	(769	)		$	268
	2003			320				496				(572	)			244
	2002			451				719				(850	)			320

8.	Contingencies

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			March 31,
			2005
ASSETS
Current assets:
	Cash and cash equivalents		$	56,538
	Accounts receivable, net of allowance of $2,795			32,148
	Inventories			3,202
	Deferred income taxes			3,278
	Prepaid expenses and other current assets			8,750
Total current assets				103,916
Property, plant and equipment, net				353,060
Intangibles and other assets:
	Investments			43,261
	Goodwill			318,481
	Customer lists, net			146,236
	Tradenames			14,546
	Deferred financing costs and other assets			22,743
Total assets			$	1,002,243
LIABILITIES AND MEMBERS’ DEFICIT
Current liabilities:
	Current portion of long-term debt		$	41,242
	Accounts payable			9,621
	Advance billings and customer deposits			10,466
	Accrued expenses			31,443
Total current liabilities				92,772
Long-term debt less current maturities				583,667
Deferred income taxes				68,192
Pension and postretirement benefit obligations				62,924
Other liabilities				3,170
Total liabilities				810,725
Minority interests				2,457
Redeemable preferred shares:
	Class A, redeemable preferred shares, $1 par value, 182,000 shares authorized, issued and outstanding; liquidation preference of $210,092			210,092
Common members’ deficit:
	Common shares, no par value, 10,000,000 shares, authorized, issued and outstanding			—
	Paid in capital			58
	Accumulated deficit			(23,033	)
	Accumulated other comprehensive income			1,944
Total common members’ deficit				(21,031	)
Total liabilities and members’ deficit			$	1,002,243

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			Three Months Ended
			March 31,
			2005				2004
Revenues			$	79,772			$	34,067
Operating expenses:
	Cost of services and products (exclusive of depreciation and amortization shown separately below)			24,417				12,374
	Selling, general and administrative expenses			26,196				10,589
	Depreciation and amortization			16,818				5,366
Income from operations				12,341				5,738
Other income (expense):
	Interest income			253				32
	Interest expense			(11,694	)			(2,829	)
	Partnership income			330				—
	Dividend income			98				—
	Minority interest			(165	)			—
	Other, net			124				—
Income before income taxes				1,287				2,941
Income tax expense				586				1,177
Net income				701				1,764
Dividends on redeemable preferred shares				(4,623	)			(2,274	)
Net loss applicable to common shareholders			$	(3,922	)		$	(510	)
Net loss per common share — basic and diluted			$	(0.42	)		$	(0.06	)

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																		Accumulated
		Common Shares																Other
														Accumulated				Comprehensive
		Shares				Amount				Paid in Capital				Deficit				Income				Total
Balance, January 1, 2005			10,000,000			$	—			$	58			$	(19,111	)		$	258			$	(18,795	)
Net income			—				—				—				701				—				701
Dividends on redeemable preferred shares			—				—				—				(4,623	)			—				(4,623	)
Change in fair value of cash flow hedges, net of tax			—				—				—				—				1,686				1,686
Balance, March 31, 2005			10,000,000			$	—			$	58			$	(23,033	)		$	1,944			$	(21,031	)

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					Three Months Ended
					March 31,
					2005				2004
Operating Activities
	Net income				$	701			$	1,764
	Adjustments to reconcile net income to cash provided by operating activities:
		Depreciation and amortization				16,818				5,366
		Provision for bad debt losses				1,579				1,067
		Deferred income tax				1,551				—
		Partnership income				(330	)			—
		Minority interest in net income of subsidiary				166				—
		Amortization of deferred financing costs				732				163
	Changes in operating assets and liabilities:
		Accounts receivable				90				(1,278	)
		Inventories				327				470
		Other assets				(3,574	)			197
		Accounts payable				(1,555	)			802
		Accrued expenses and other liabilities				(1,893	)			(2,681	)
			Net cash provided by operating activities			14,612				5,870
Investing Activities
		Capital expenditures				(5,533	)			(2,737	)
			Net cash used in investing activities			(5,533	)			(2,737	)
Financing Activities
		Payments made on long-term obligations				(4,512	)			(2,575	)
		Payment of deferred financing costs				(113	)			—
			Net cash used in financing activities			(4,625	)			(2,575	)
Net increase in cash and cash equivalents						4,454				558
Cash and cash equivalents at beginning of period						52,084				10,142
Cash and cash equivalents at end of period					$	56,538			$	10,700

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1.	Description of Business

2.	Presentation of Interim Financial Statements

3.	Recent Accounting Pronouncements

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4.	Acquisition

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Current assets		$	27,478
Property, plant and equipment			268,706
Customer list			108,200
Goodwill			228,792
Other assets			43,291
Liabilities assumed			(152,377	)
Net purchase price		$	524,090

Total revenues		$	79,433
Income from operations		$	11,451
Proforma net income		$	1,259

5.	Summarized financial information for significant investments

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2005 Unaudited First Quarter
Revenues		$	9,352
Operating income			2,173
Income before income taxes			2,225
Net income or loss			2,225
Current assets			8,037
Non-current assets			23,078
Current liabilities			1,686
Non-current liabilities			—
Partnership equity			29,429

6.	Pension Costs and Other Postretirement Benefits

		Pension Benefits								Other Benefits
		2005				2004				2005				2004
Service cost		$	1,233			$	119			$	343			$	12
Interest cost			2,615				407				508				32
Expected return on plan assets			(2,888	)			(495	)			(3	)			(1	)
Other, net			79				—				27				—
Net periodic benefit cost		$	1,038			$	32			$	874			$	43

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7.	Long-Term Debt

			March 31,
			2005
Senior Secured Credit Facility
	Revolving loan		$	—
	Term loan A			112,000
	Term loan C			311,850
Senior notes				200,000
Capital leases				1,059
				624,909
Less: current portion				(41,242	)
			$	583,667

	Senior Secured Credit Facility

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	•	a new term loan D facility of up to $425.0 million available at closing and maturing on October 14, 2011; and
	•	a $30.0 million revolving credit facility maturing on April 14, 2010.

	Senior Notes

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April 1 - December 31, 2005			$	36,567
Calendar year 2006				22,463
Calendar year 2007				23,248
Calendar year 2008				26,900
Calendar year 2009				33,400
	Thereafter			482,331
			$	624,909

	Derivative Instruments

8.	Restricted Share Plan

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9.	Net Loss per Common Share

		Three Months Ended
		March 31,
		2005				2004
Net loss applicable to common shareholders		$	(3,922	)		$	(510	)
Weighted average number of common shares outstanding			9,250,000				9,000,000
Net loss per common share		$	(0.42	)		$	(0.06	)

10.	Comprehensive Income

		Three Months Ended
		March 31,
		2005				2004
Net income		$	701			$	1,764
Change in fair value of cash flow hedges, net of tax			1,686				—
Total comprehensive income		$	2,387			$	1,764

11.	Business Segments

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		Telephone				Other
		Operations				Operations				Total
Three months ended March 31, 2005:
Operating revenues		$	71,019			$	8,753			$	79,772
Cost of services and products			18,809				5,608				24,417
			52,210				3,145				55,355
Selling, general and administrative expenses			23,625				2,571				26,196
Depreciation and amortization			15,547				1,271				16,818
Net operating income (loss)		$	13,038			$	(697	)		$	12,341
Capital expenditures		$	5,145			$	388			$	5,533
Three months ended March 31, 2004:
Operating revenues		$	22,883			$	11,184			$	34,067
Cost of services and products			5,640				6,734				12,374
			17,243				4,450				21,693
Selling, general and administrative expenses			7,829				2,760				10,589
Depreciation and amortization			2,930				2,436				5,366
Net operating income (loss)		$	6,484			$	(746	)		$	5,738
Capital expenditures		$	2,190			$	547			$	2,737
As of March 31, 2005:
Goodwill		$	309,527			$	8,954			$	318,481
Total assets		$	956,991			$	45,252			$	1,002,243

12.	Subsequent Event

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