UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|(Mark One)                                               |                                                                                         
|-------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                        | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended March 31, 2008.          
|or                                                      
|o                                                        | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                        to

Commission File Number 333-56365

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FairPoint Communications, Inc.(Exact Name of Registrant as Specified in Its Charter)

|Delaware(State or Other Jurisdiction of Incorporation or Organization)                                |  | 13-3725229(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|521 East Morehead Street, Suite 250
Charlotte, North Carolina(Address of Principal Executive Offices) |  | 28202(Zip Code)                               
|(704) 344-8150(Registrant's telephone number, including area code)                                   

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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

|Large accelerated filer o |  | Accelerated filer ý |  | Non-accelerated filer o (Do not check if a smaller reporting company) |  | Smaller reporting company o
|------------------------- |  | ------------------- |  | --------------------------------------------------------------------- |  | ---------------------------

Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o    No ý

As of May 13, 2008, there were 89,020,957 shares of the Registrant's common stock, par value $0.01 per share, outstanding.

Documents
incorporated by reference:None



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Explanatory Note

As used in Quarterly Report, unless the context indicates or otherwise requires:



On
March 31, 2008, the previously announced merger between Spinco, a subsidiary of Verizon Communications Inc. ("Verizon"), and FairPoint, was completed. We refer to this
transaction herein as the merger. In connection with the merger and in accordance with the terms of an Agreement and Plan of Merger (the "merger agreement") entered into among FairPoint, Verizon and
Spinco on January 15, 2007, as amended, the Company issued 53,760,623 shares of common stock to Verizon stockholders. Prior to the merger, Verizon and its subsidiaries (other than Cellco
Partnership doing business as Verizon Wireless ("Cellco"), collectively referred to with Verizon as the Verizon Group, engaged in a series of restructuring transactions to effect the transfer of
specified assets and liabilities of the local exchange business of Verizon New England Inc. ("Verizon New England"), in Maine, New Hampshire and Vermont and the customers of the Verizon Group's
related long distance and Internet service provider businesses in those states (the "Northern New England business"), to Spinco and the entities that became Spinco's subsidiaries. Spinco was then spun
off from Verizon immediately prior to the merger. While FairPoint was the surviving entity in the merger, for accounting purposes Spinco is deemed to be the acquirer. As a result, the statement of
operations and the financial information derived from the statement of operations in this Quarterly Report reflect only the financial results of the Northern New England business. The balance sheet
and financial information derived from the balance sheet in this Quarterly Report reflect the combined assets and liabilities of FairPoint and Spinco at March 31, 2008. Certain assets and
liabilities of the Northern New England business (principally related to pension, other post-employment benefits and associated deferred taxes) were not distributed to Spinco prior to the merger and
for accounting purposes were effectively contributed back to Verizon. The assets and liabilities of the Northern New England business that were effectively
contributed back to Verizon are reflected as contributions to Verizon on the statement of stockholder's equity contained herein. The statement of operations in this Quarterly Report reflects the
actual results of the Northern New England business for the three months ended March 31, 2008 and may not be indicative of the Company's future results. For more information see note 1
to the "Condensed Consolidated Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of OperationsBasis of Presentation."

2

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INDEX

|                              |  |                                                                                                     |  | Page
|----------------------------- |  | --------------------------------------------------------------------------------------------------- |  | ----
|PART I. FINANCIAL INFORMATION |  |                                                                                                    
|Item 1.                       |  | Financial Statements                                                                                |  |     
|                              |  | Condensed Consolidated Balance Sheets as of March 31, 2008 and December 31, 2007                    |  | 5   
|                              |  | Condensed Consolidated Statements of Operations for the three months ended March 31, 2008 and 2007  |  | 6   
|                              |  | Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2008 |  | 7   
|                              |  | Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2008 and 2007  |  | 8   
|                              |  | Notes to Condensed Consolidated Financial Statements                                                |  | 9   
|Item 2.                       |  | Management's Discussion and Analysis of Financial Condition and Results of Operations               |  | 32  
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk                                          |  | 47  
|Item 4.                       |  | Controls and Procedures                                                                             |  | 48  
|PART II. OTHER INFORMATION    |  |                                                                                                    
|Item 1.                       |  | Legal Proceedings                                                                                   |  | 50  
|Item 1A.                      |  | Risk Factors                                                                                        |  | 50  
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                         |  | 66  
|Item 3.                       |  | Defaults Upon Senior Securities                                                                     |  | 68  
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                 |  | 68  
|Item 5.                       |  | Other Information                                                                                   |  | 68  
|Item 6.                       |  | Exhibits                                                                                            |  | 68  
|                              |  | Signatures                                                                                          |  | 69  

3

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PART I    CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Some statements in this Quarterly Report are known as "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, referred to as the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements may relate to, among other
things:



These
forward-looking statements include, but are not limited to, statements about our plans, objectives, expectations and intentions and other statements contained in this Quarterly
Report that are not historical facts. When used in this Quarterly Report, the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions are generally
intended to identify forward looking statements. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual
results, events or developments to differ materially from those expressed or implied by these forward-looking statements,
including our plans, objectives, expectations and intentions and other factors discussed in "Part IIItem 1A. Risk Factors" and other parts of this Quarterly Report. You
should not place undue reliance on such forward-looking statements, which are based on the information currently available to us and speak only as of the date on which this Quarterly Report was filed
with the SEC. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is
directed to any further disclosures made on related subjects in our subsequent periodic reports filed with the SEC on Forms 10-K, 10-Q and 8-K and
Schedule 14A.

4

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        Condensed Consolidated Balance Sheets

March 31,
2008

December 31,
2007(unaudited)(Dollars in thousands)AssetsCurrent assets:Cash

$
10,961

$
Restricted cash


19,200


Accounts receivable, net


168,330


160,130Other receivables


40,233


18,579Materials and supplies


10,136


4,229Other


43,344


21,180Deferred income tax, net


27,382


9,730Short term investments





37,090Total current assets


319,586


250,938Property, plant, and equipment, net


1,890,403


1,630,085Intangibles assets, net


232,973


Prepaid pension asset


70,080


36,692Debt issue costs, net


29,271


Other assets


79,517


20,457Investments


6,856


Goodwill


611,624


Total assets

$
3,240,310

$
1,938,172Liabilities and Stockholders' EquityCurrent liabilities:Current portion of capital lease obligations

$
2,029

$
2,064Accounts payable


206,599


175,866Dividends payable


13,970


Accrued interest payable


282


Interest rate swaps


27,079


Other accrued liabilities


58,679


47,115Total current liabilities


308,638


225,045Long-term liabilities:Capital lease obligations


9,472


9,936Employee benefit obligations


170,675


408,863Deferred income taxes


248,802


140,911Unamortized investment tax credits


5,738


5,877Other long-term liabilities


39,290


28,378Long-term debt, net of current portion


2,177,381


Interest rate swap agreements


47,588


Total long-term liabilities


2,698,946


593,965Minority interest


6Stockholders' equity:Common stock


890


538Additional paid-in capital


800,321


484,383Retained earnings (deficit)


(489,766
)

634,241Accumulated other comprehensive loss


(78,725
)

Total stockholders' equity


232,720


1,119,162Total liabilities and stockholders' equity

$
3,240,310

$
1,938,172


See accompanying notes to condensed consolidated financial statements (unaudited)

5

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        Condensed Consolidated Statements of Operations        (Unaudited)

|                                     |                                                                                      | Three months ended
March 31, |        
|------------------------------------ | ------------------------------------------------------------------------------------ | ---------------------------- | -------
|
|
|Revenues                             |                                                                                      | $                            | 282,414
|                                     |                                                                                      |                              |        
|Operating expenses:                  |                                                                                      |                              |        
|                                     | Cost of services and sales, excluding depreciation and amortization                  |                              |        
|                                     | Selling, general and administrative expense, excluding depreciation and amortization |                              |        
|                                     | Depreciation and amortization                                                        |                              |        
|                                     |                                                                                      |                              |        
|Total operating expenses             |                                                                                      |                              | 252,878
|                                     |                                                                                      |                              |        
|Income from operations               |                                                                                      |                              | 29,536 
|                                     |                                                                                      |                              |        
|Other income (expense):              |                                                                                      |                              |        
|                                     | Interest expense                                                                     |                              |        
|                                     | Other                                                                                |                              |        
|                                     |                                                                                      |                              |        
|Total other expense                  |                                                                                      |                              | (13,536
|                                     |                                                                                      |                              |        
|Income before income taxes           |                                                                                      |                              | 16,000 
|Income tax expense                   |                                                                                      |                              | (6,457 
|                                     |                                                                                      |                              |        
|Net income                           |                                                                                      | $                            | 9,543  
|                                     |                                                                                      |                              |        
|Weighted average shares outstanding: |                                                                                      |                              |        
|                                     | Basic                                                                                |                              |        
|                                     | Diluted                                                                              |                              |        
|Earnings per share:                  |                                                                                      |                              |        
|                                     | Basic                                                                                |                              | $      
|                                     | Diluted                                                                              |                              |        

See
accompanying notes to condensed consolidated financial statements (unaudited)

6

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        Condensed Consolidated Statements of Stockholders' Equity        (Unaudited)

|                                                    |  | Common Stock |  |   |     |  |   | Accumulated
other
comprehensive
income (loss) |  |   |           
|--------------------------------------------------- |  | ------------ |  | - | --- |  | - | --------------------------------------------- |  | - | ----------
|
|
|Balance at December 31, 2007                        |  |              |  | $ | 538 |  | $ | 484,383                                       |  | $ | 634,241   
|                                                    |  |              |  |   |     |  |   |                                               |  |   |           
|Net income                                          |  |             |  |   |    |  |   |                                              |  |   | 9,543     
|Acquisition of FairPoint                            |  | 35,265       |  |   | 352 |  |   | 315,938                                       |  |   |          
|Return of capital to Verizon                        |  |             |  |   |    |  |   |                                              |  |   | (1,160,000
|Issuance of bonds to Verizon                        |  |             |  |   |    |  |   |                                              |  |   | (539,831  
|Contributions by Verizon                            |  |             |  |   |    |  |   |                                              |  |   | 352,929   
|Net liabilities contributed back to Verizon         |  |             |  |   |    |  |   |                                              |  |   | 134,627   
|Employee benefit adjustment to comprehensive income |  |             |  |   |    |  |   |                                              |  |   | 78,725    
|                                                    |  |              |  |   |     |  |   |                                               |  |   |           
|Balance at March 31, 2008                           |  | 35,265       |  | $ | 890 |  | $ | 800,321                                       |  | $ | (489,766  
|                                                    |  |              |  |   |     |  |   |                                               |  |   |           

See accompanying notes to condensed consolidated financial statements (unaudited)

7

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        Condensed Consolidated Statements of Cash Flows        (Unaudited)

|                                                                                                           |                                                         | Three months ended March 31,                                                 |                                               
|---------------------------------------------------------------------------------------------------------- | ------------------------------------------------------- | ---------------------------------------------------------------------------- | ----------------------------------------------
|
|
|Cash flows from operating activities:                                                                      |                                                         |                                                                              |                                               
|                                                                                                           | Net income                                              |                                                                              | $                                             
|                                                                                                           |                                                         |                                                                              |                                               
|Adjustments to reconcile net income to net cash provided by operating activities of continuing operations: |                                                         |                                                                              |                                               
|                                                                                                           |                                                         | Deferred income taxes                                                        |                                               
|                                                                                                           |                                                         | Provision for uncollectible revenue                                          |                                               
|                                                                                                           |                                                         | Depreciation and amortization                                                |                                               
|                                                                                                           |                                                         | SFAS 106 post-retirement accruals                                            |                                               
|                                                                                                           |                                                         | Other non cash items                                                         |                                               
|                                                                                                           |                                                         | Changes in assets and liabilities arising from operations:                   |                                               
|                                                                                                           |                                                         |                                                                              | Accounts receivable and other current assets  
|                                                                                                           |                                                         |                                                                              | Accounts payable and other accrued liabilities
|                                                                                                           |                                                         |                                                                              | Other                                         
|                                                                                                           |                                                         |                                                                              |                                               
|                                                                                                           |                                                         |                                                                              |                                               
|                                                                                                           |                                                         |                                                                              |                                               
|                                                                                                           |                                                         |                                                                              |                                               
|                                                                                                           |                                                         |                                                                              |                                               
|Cash flows from investing activities of continuing operations:                                             |                                                         |                                                                              |                                               
|                                                                                                           | Acquired cash balance, net                              |                                                                              |                                               
|                                                                                                           | Net capital additions                                   |                                                                              |                                               
|                                                                                                           | Net proceeds from sales of investments and other assets |                                                                              |                                               
|                                                                                                           |                                                         |                                                                              |                                               
|                                                                                                           |                                                         | Net cash used in investing activities of continuing operations               |                                               
|                                                                                                           |                                                         |                                                                              |                                               
|Cash flows from financing activities of continuing operations:                                             |                                                         |                                                                              |                                               
|                                                                                                           | Loan origination costs                                  |                                                                              |                                               
|                                                                                                           | Proceeds from issuance of long-term debt                |                                                                              |                                               
|                                                                                                           | Repayments of long-term debt                            |                                                                              |                                               
|                                                                                                           | Contributions from Verizon                              |                                                                              |                                               
|                                                                                                           | Restricted cash                                         |                                                                              |                                               
|Repayment of capital lease obligations                                                                     |                                                         |                                                                              | (255                                          
|                                                                                                           | Dividends paid to stockholders                          |                                                                              |                                               
|                                                                                                           |                                                         |                                                                              |                                               
|                                                                                                           |                                                         | Net cash provided by (used in) financing activities of continuing operations |                                               
|                                                                                                           |                                                         |                                                                              |                                               
|                                                                                                           |                                                         | Net increase in cash                                                         |                                               
|Cash, beginning of period                                                                                  |                                                         |                                                                              |                                              
|                                                                                                           |                                                         |                                                                              |                                               
|Cash, end of period                                                                                        |                                                         | $                                                                            | 10,961                                        
|                                                                                                           |                                                         |                                                                              |                                               
|Supplemental disclosure of cash flow information:                                                          |                                                         |                                                                              |                                               
|                                                                                                           | Non-cash equity consideration                           |                                                                              | $                                             
|                                                                                                           | Non-cash issuance of senior notes                       |                                                                              |                                               

See
accompanying notes to condensed consolidated financial statements (unaudited)

8

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES        NOTES TO CONDENSED CONSOLIDATED        FINANCIAL STATEMENTS (Unaudited)

(1) Organization and Basis of Financial Reporting

On March 31, 2008, FairPoint completed the acquisition of Spinco, pursuant to which Spinco merged with and into FairPoint with FairPoint continuing as the
surviving corporation for legal purposes. Spinco was a wholly-owned subsidiary of Verizon and prior to the merger the Verizon Group transferred certain specified assets and liabilities of the local
exchange businesses of Verizon New England in Maine, New Hampshire and Vermont and the customers of the related long distance and Internet service provider businesses in those states to subsidiaries
of Spinco. The merger was accounted for as a "reverse acquisition" of Legacy FairPoint by Spinco under the purchase method of accounting because Verizon stockholders owned a majority of the shares of
the combined company following the merger and, therefore, Spinco is treated as the acquirer for accounting purposes. The financial statements reflect the transaction as if Spinco had issued
consideration to FairPoint shareholders. As a result, the statement of operations and the financial information derived from the statement of operations, in this Quarterly Report reflect only the
financial results of the Northern New England business. The balance sheet and financial information derived from the balance sheet in this Quarterly Report reflect the combined assets and liabilities
of FairPoint and Spinco at March 31, 2008. Certain assets and liabilities of the Northern New England business (principally related to pension, other post-employment benefit, and associated
deferred taxes) were not distributed to Spinco prior to the merger and for accounting purposes were effectively contributed back to Verizon. The assets and liabilities of the Northern New England
business that were effectively contributed back to Verizon are reflected as contributions to Verizon on the statement of stockholders' equity contained herein. The statement of operations reflects the
actual results of the Northern New England business for the three months ended March 31, 2008 and may not be indicative of the Company's future results.

In
order to effect the merger described above, the Company issued 53,760,623 shares to Verizon stockholders for their interest in Spinco. Accordingly the number of common stock
outstanding, par value, paid in capital and per share information included herein has been retroactively restated to give effect to the merger.

Basis of PresentationNorthern New England Business (Historical)

Prior to March 31, 2008, the Northern New England business and operations were comprised of the local exchange business and related landline activities of
the Verizon Group in the states of Maine, New Hampshire and Vermont. The Northern New England business is primarily comprised of carved-out components from each of Verizon New England,
NYNEX Long Distance Company (doing business as Verizon Enterprise Solutions), Bell Atlantic Communications, Inc. (doing
business as Verizon Long Distance), Verizon Internet Services Inc., GTE.Net LLC, and Verizon Select Services Inc.

The
Northern New England business had one reportable segment, servicing a territory consisting of Local Access and Transport Areas ("LATAs"), in Maine, New Hampshire, and Vermont. These
LATAs are generally centered on a city or based on some other identifiable common geography. The Northern New England business includes regulated and unregulated carrier business in all three states,
consisting principally of:



9

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting (Continued)



Management
will re-evaluate its reportable segments in 2008 to reflect the manner in which the merged businesses are managed.

Many
of the communications services that the Northern New England business provided are subject to regulation by the state regulatory commissions of Maine, New Hampshire and Vermont with
respect to intrastate rates and services and other matters. The Federal Communications Commission regulates rates that the Northern New England business charges long-distance carriers and
end-user subscribers for interstate access services and interstate traffic.

All
results presented herein prior to March 31, 2008 represent the historical financial results of the Northern New England business and represent special-purpose combined
financial statements prepared to present the balance sheets, statement of operations and cash flows of the Northern New England business in contemplation of the merger with FairPoint and related
transactions. These special-purpose combined financial statements were prepared in accordance with U.S. generally accepted accounting principles.

The
special-purpose combined financial statements include the wireline-related businesses, Internet access, long distance and customer premises equipment services provided by the
Northern New England business to customers in the states of Maine, New Hampshire and Vermont. All significant intercompany transactions have been eliminated. These special-purpose combined financial
statements also included the assets, liabilities and expenses related to employees who support the Northern New England business, some of whom remained employees of Verizon following the merger. The
financial statements also include transactions with Verizon which was an affiliate of the Northern New England business prior to consummation of the merger. Through these transactions, Verizon
provided various services to the Northern New England business including various operational and administrative services.

Prior
to March 31, 2008, the financial statements of the Northern New England business were prepared using specific information where available and allocations where data was not
maintained on a state-specific basis within the Northern New England business' books and records. Effective March 31, 2008, the balance sheet reflects actual balances of Spinco and Legacy
FairPoint combined. All adjustments required to change from allocated balances at December 31, 2007 to actual balances at March 31, 2008 are reflected in stockholders' equity.

The
accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for Quarterly
Reports on Form 10-Q. Accordingly, certain information and disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted
accounting principles, or GAAP, have

10

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(1) Organization and Basis of Financial Reporting (Continued)

been
omitted and condensed pursuant to such rules and regulations. In the opinion of the Company's management, the unaudited condensed consolidated financial statements reflect all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of the Company's results of operations, financial position, and cash flows. The results of operations for the Northern New
England business interim periods presented are not necessarily indicative of the results of operations of the combined Company and may not be indicative of results for the entire year. The unaudited
condensed consolidated financial statements should be read in conjunction with the FairPoint's Annual Report on Form 10-K for the year ended December 31, 2007.

Use of Estimates

The accompanying condensed combined financial statements have been prepared using U.S. generally accepted accounting principles, which require management to make
estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.

Examples
of significant estimates include the allowance for doubtful accounts, the recoverability of plant, property and equipment, pension and postretirement benefit assumptions,
purchase price allocation for the acquisition of Legacy FairPoint and income taxes. In addition, estimates were made to determine the allocations used in preparing the historical combined financial
statements as described above.

(2) Accounting Policies

Revenue Recognition

The Company recognizes service revenues based upon contract terms and usage of the Company's local exchange network and facilities. Fixed fees for local
telephone, long distance, Internet access and certain other services are recognized in the month the service is provided. Revenue from other services that are not fixed fee or that exceed contracted
amounts is recognized when such services are provided.

The
Company recognizes revenue for equipment and installation services when the equipment is installed in accordance with contractual specifications and ready for the customer's use.
Maintenance and monitoring services are recognized over the term of the contract as services are provided. Long-term contracts are accounted for using the percentage of completion method.
The completed contract method is used if the costs cannot be estimated with a reasonable degree of reliability.

Non-recurring
customer activation fees, along with the related costs up to, but not exceeding the activation fees, are deferred and amortized over the customer relationship
period.

Maintenance and Repairs

The cost of maintenance and repairs, including the cost of replacing minor items not constituting substantial betterments, is charged primarily to cost of
services and sales as these costs are incurred.

11

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(2) Accounting Policies (Continued)

Restricted Cash

As of March 31, 2008, the Company had $80.9 million of restricted cash of which $19.2 million is shown in current assets and
$61.7 million is in other long-term assets on the Condensed Consolidated Balance Sheet at March 31, 2008. The Company is required to use these funds to (i) pay for the removal of
double poles in Vermont which is estimated to cost $6.7 million, (ii) pay for certain service quality improvements under a performance enhancement plan in Vermont totaling
$25.0 million, (iii) pay for network improvements in New Hampshire totaling $49.2 million.

Short-term Investments

Short-term investments consist primarily of cash equivalents held in trust to pay for certain employee benefits. Short-term investments
are stated at cost, which approximates market value.

Trade and Other Accounts Receivable

Trade and other accounts receivable are stated at the amount the Company expects to collect. Allowances for uncollectible accounts are maintained for estimated
losses resulting from the inability of the customers to make required payments. In determining these estimates, the Company considers historical write-offs, the aging of the receivables
and other factors, such as overall economic conditions.

Materials and Supplies

Materials and supplies include new and reusable supplies and network equipment, which are stated principally at average original cost, except that specific costs
are used in the case of large individual items.

Plant, Property and Equipment

Plant, property, and equipment is recorded at cost. Depreciation expense is principally based on the composite group remaining life method and
straight-line composite rates. This method provides for the recognition of the cost of the remaining net investment in telephone plant, property and equipment less anticipated positive net
salvage value, over the remaining asset lives. This method requires the periodic revision of depreciation rates.

The
asset lives used are presented in the following table:

Average Lives

YearsBuildings

45Central office equipment

511Outside communications plantCopper cable

1518Fiber cable

25Poles and conduit

3050Furniture, vehicles and other

315


12

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FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(2) Accounting Policies (Continued)

When
depreciable telephone plant used in the Company's wireline network is replaced or retired, the carrying amount of such plant is deducted from the respective accounts
and charged to accumulated depreciation.

Network
software purchased or developed in connection with related plant assets is capitalized. The Company also capitalizes interest associated with the acquisition or construction of
network-related assets. Capitalized interest is reported as part of the cost of the network-related assets and as a reduction in interest expense.

The
Company believes that current estimated useful asset lives are reasonable, although they are subject to regular review and analysis. In the evaluation of asset lives, multiple
factors are considered, including, but not limited to, the ongoing network deployment, technology upgrades and enhancements, planned retirements, and the adequacy of reserves.

Long-Lived Assets

Plant, property, and equipment and intangible assets subject to amortization are reviewed for impairment in accordance with Statement of Financial Accounting
Standards (SFAS) No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets. Under SFAS No. 144, these assets are
tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount, if any, by which
the carrying value of the asset exceeds its fair value.

Computer Software Costs

The Company capitalizes certain costs incurred in connection with developing or obtaining internal use software which has a useful life in excess of one year in
accordance with American Institute of Certified Public Accountants Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use", or
SOP 98-1. Capitalized costs include direct development costs associated with internal use software, including direct labor costs and external costs of materials and services. Costs
incurred during the preliminary project stage, as well as maintenance and training costs are expensed as incurred.

On
January 15, 2007, FairPoint entered into the Master Services Agreement, or MSA, with Capgemini U.S. LLC. Through the MSA, FairPoint intends to replicate and/or replace certain
existing Verizon systems during a phased period through September 30, 2008. The Company is currently in the application development stage of the project and is recognizing costs in accordance
with SOP 98-1. The Company has recognized both external and internal service costs associated with the MSA based on total labor incurred as of March 31, 2008 compared to the
total estimated labor to substantially complete the implementation project. As of March 31, 2008, the Company had capitalized $56.1 million of costs under SOP 98-1.

13

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(2) Accounting Policies (Continued)

Intangible Assets, net

The Company's intangible assets consist of customer lists, non-compete agreements and trade names as follows (in thousands):

At March 31, 2008Customer lists (weighted average 10 years):Gross carrying amount

$
197,174Less accumulated amortization


Total customer lists


197,174Non-Compete agreement (weighted average 1 year):Gross carrying amount


352Less accumulated amortization


Total customer lists


352Trade names (indefinite life):Gross carrying amount


35,447Total

$
232,973


The
estimated weighted average useful lives of the intangible assets are 9.7 years for the customer relationships, one year for the non-compete agreement and the trade
name has an indefinite useful life. Amortization expense is expected to be approximately $22 million per year.

Debt Issue Costs

On March 31, 2008, immediately prior to the merger, Legacy FairPoint and Spinco entered into a $2,030 million senior secured credit facility (the
"credit facility"), consisting of a non-amortizing revolving facility in an aggregate principal amount of $200 million (the "revolver"), a senior secured term loan A facility in an
aggregate principal amount of $500 million (the "term loan A facility"), a senior secured term loan B facility in the aggregate principal amount of $1,130 million (the "term loan B
facility"), and together with the term loan A facility, referred to as the term loan, and a delayed draw term loan facility in an aggregate principal amount of $200 million (the "delayed draw
term loan"). Debt issue costs associated with these credit facilities are being amortized
over the life of the related debt, ranging from 6 to 7 years using the effective interest method. As of March 31, 2008, the Company had capitalized debt issue and offering costs of
$29.3 million.

14

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(2) Accounting Policies (Continued)

Accounting for income taxes

As part of the process of preparing its consolidated financial statements, the Company is required to estimate its income taxes. This process involves estimating
the actual current tax exposure and assessing temporary differences resulting from different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and
liabilities, which are included within the Company's consolidated balance sheets. The Company must then assess the likelihood that its deferred tax assets will be recovered from future taxable income
and to the extent the Company believes the recovery is not likely, it must establish a valuation allowance. Further, to the extent that the Company establishes a valuation allowance or increases this
allowance in a financial accounting period, the Company must include a tax provision, or reduce its tax benefit in the consolidated statement of operations. In performing the assessment, management
considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. The Company uses its judgment to determine its provision or benefit for
income taxes, deferred tax assets and liabilities and any valuation allowance recorded against its net deferred tax assets.

Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and trade receivables. The Company
places its cash with high-quality financial institutions. Concentrations of credit risk with respect to trade receivables are principally related to receivables from other interexchange
carriers and are otherwise limited to the Company's large number of customers in several states.

Advertising Costs

Advertising costs are expensed as they are incurred.

Stock Option Plans

Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123(R),Share-Based
Payment(SFAS No. 123(R)). SFAS No. 123(R) establishes accounting for stock-based awards granted in exchange for employee services. Accordingly, for employee
awards which are expected to vest, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense on a straight-line basis
over the requisite service period, which generally begins on the date the award is granted through the date the award vests.

Employee Benefit Plans

For the three months ended March 31, 2008 and 2007, the employees of the Northern New England business participated in Verizon's benefit plans including
noncontributory pension plans, postretirement health care and life insurance plans for the Northern New England business' retirees and their dependents. Under these plans pension, postretirement
health care and life insurance benefits earned during the year as well as interest on projected benefit obligations are accrued currently. Prior service costs and credits resulting from changes in
plan benefits are amortized over the average remaining service period of the employees expected to receive benefits.

15

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(2) Accounting Policies (Continued)

Prior
to the effective date of the merger, the benefit plans were part of the Verizon consolidated plans. The structure of the plans during this period does not provide for the separate
attribution of the related pension and postretirement assets and obligations at the Northern New England business level. Because there is not a separate plan for the Northern New England business, the
annual income and expense related to such assets and obligations have been allocated to the Northern New England business and are reflected as prepaid pension assets and employee benefit obligations
in the balance sheet as of March 31, 2007 and are reflected in the financial results for the three months ended March 31, 2008 and 2007.

Effective
March 31, 2008 as part of the merger, the Northern New England benefit plans were separated from the Verizon benefit plans and accounted for in accordance with FASB
Statement No. 87, "Employers' Accounting for Pension". The separate Northern New England plan covers all active employees of the Northern New
England business at March 31, 2008. Retired employees of the Northern New England business at March 31, 2008 will continue to be covered by the Verizon benefit plans. Verizon contributed
$202.4 million of cash to the Company's trust on April 30, 2008 related to the pension liability for the Company's active employees. Verizon will make an additional contribution of
assets currently estimated at $50.1 million upon final validation by the Company of the census information used in the actuarial calculation as well as finalization of the calculations required
by the Pension Benefit Guaranty Corporation. These assets are held in trust and have been invested by the Company in various equity and fixed income securities.

In
September 2006, the FASB issued Statement SFAS No 158,Employers' Accounting for Defined Benefit Pension and Other Postretirement Plansan
amendment of FASB Statements No. 87, 88, 106, and 132(R)(SFAS No. 158). SFAS No. 158 requires the recognition of a defined benefit postretirement plan's
funded status as either an asset or liability on the balance sheet. SFAS No. 158 also requires the immediate recognition of the unrecognized actuarial gains and losses and prior service costs
and credits that arise during the period as a component of other accumulated comprehensive income, net of applicable income taxes. Additionally, a company must determine the fair value of plan assets
as of the company's year end. The provisions of SFAS 158 are not to be applied retrospectively. The Northern New England business adopted SFAS 158 effective December 31, 2006.

In
addition, the Company sponsors a voluntary 401(k) savings plan that covers substantially all eligible Legacy FairPoint employees. Each 401(k) Plan year, the Company contributes to the
401(k) Plan an amount of matching contributions determined by the Company at its discretion.

(3) Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 addresses how companies should measure fair
value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles. As a result of SFAS 157 there is now a common
definition of fair value to be used throughout GAAP. The FASB believes that the new standard will make the measurement of fair value more consistent and comparable and improve disclosures about those
measures. The provisions of SFAS 157 were to be effective for fiscal years beginning after November 15, 2007. On February 6, 2008, the FASB agreed to defer the effective date of
SFAS 157 for one year for certain non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial
statements on a

16

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(3) Recent Accounting Pronouncements (Continued)

recurring
basis (at least annually). Effective for fiscal 2008, the Company has adopted SFAS 157 except as it applies to those non-financial assets and non-financial
liabilities. The adoption did not have any financial impact on the Company's results of operations and financial position.

In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of FASB Statement No. 115"
("SFAS 159"). SFAS 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement of certain financial assets and liabilities under an
instrument-by-instrument election. Subsequent measurements for the financial assets and liabilities an entity elects to measure at fair value will be recognized in the results
of operations. SFAS 159 also establishes additional disclosure requirements. This standard is effective for fiscal years beginning after November 15, 2007. Effective for fiscal year
2008, the Company has adopted the provisions of SFAS 159. The adoption did not have any financial impact on the Company's results of operations and financial position.

In
December 2007, the FASB issued SFAS No. 141R, "Business Combinations" ("SFAS 141R"). SFAS 141R replaces SFAS 141 and establishes principles and
requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the
goodwill acquired. SFAS 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. This standard is
effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited.

In
December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements" ("SFAS 160"). SFAS 160 establishes
accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the
non-controlling interest, changes in a parent's ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated.
SFAS 160 also establishes reporting requirements that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the
non-controlling owners. This standard is effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited.

In
March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 requires companies with
derivative instruments to disclose information that should enable financial statement users to understand how and why a company uses derivative instruments, how derivative instruments and related
hedged items are accounted for under FASB Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities" and how derivative instruments and related hedged items affect a
company's financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008.

(4) Dividends

The Company's board of directors has adopted a dividend policy which reflects the Company's judgment that its stockholders would be better served if the Company
distributed a substantial portion of the cash generated by the Company's business in excess of operating needs, interest and principal payments on indebtedness, dividends on future senior classes of
capital stock, if any, capital

17

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(4) Dividends (Continued)

expenditures,
taxes and future reserves, if any, as regular quarterly dividend payments to the holders of the Company's common stock, rather than retained and used for other purposes. However, the
Company's board of directors may, in its discretion, amend or repeal the dividend policy to decrease the level of dividends provided for or discontinue entirely the payment of dividends.

As
a condition to the approval of the merger by state regulatory authorities, the Company has agreed to be subject to reductions in its dividend rate and certain other restrictions on
the payment of
dividends. The Company's annual dividend rate may not exceed $1.03 per share until certain conditions contained in the state regulatory orders approving the merger no longer apply. In addition to the
conditions and restrictions imposed by the state regulatory orders, financial covenants in the Company's credit facility and the indenture governing the 131/8 Senior Notes due 2018
issued by Spinco to the Verizon Group and subsequently exchanged for debt obligations of Verizon and sold through a private offering (the "notes") also restrict its ability to pay dividends, and
certain of these restrictions may be more restrictive than the conditions and restrictions imposed by the state regulatory orders.

(5) Acquisitions and Dispositions

Prior to the merger, the Verizon Group engaged in a series of restructuring transactions to effect the transfer of specified assets and liabilities of the local
exchange business of Verizon New England in Maine, New Hampshire and Vermont and the customers of the Verizon Group's related long distance and Internet service provider businesses in those states to
Spinco and the entities (including an entity formed for holding Vermont property) that became Spinco's subsidiaries. In connection with these restructuring transactions, and immediately prior to
closing of the merger on March 31, 2008, the Verizon Group contributed certain of those assets and all of the direct and indirect equity interests of those entities to Spinco in exchange for:



As
a result of these transactions, the Verizon Group received $1.7 billion of combined cash and principal amount of notes.

The
Verizon Group also contributed approximately $316.0 million in cash to Spinco at the time of the spin-off, in addition to the amount of working capital, subject to
adjustment, that it was required to contribute pursuant to the distribution agreement that was in effect prior to the merger.

After
the contribution and immediately prior to the merger, Verizon spun off Spinco by distributing all of the shares of Spinco common stock to a third-party distribution agent to be
held collectively for the benefit of Verizon stockholders. We refer collectively to the transactions described above as the spin-off.

On
March 31, 2008, FairPoint completed the merger with Spinco. The merger of FairPoint and Spinco has been accounted for as a reverse acquisition of FairPoint by Spinco under the
purchase method of accounting because Spinco's stockholders owned a majority of the shares of the combined

18

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(5) Acquisitions and Dispositions (Continued)

company
following the merger. The merger consideration was $316.3 million. Goodwill resulting from this transaction will not be deductible for income tax purposes.

The
merger has been accounted for using the purchase method of accounting for business combinations and, accordingly, the acquired assets and liabilities of Legacy FairPoint have been
recorded at their estimated fair values as of the date of acquisition, and Legacy FairPoint's results of operations have been included in the Company's consolidated financial statements from the date
of acquisition. Based upon the Company's preliminary purchase price allocation, the excess of the purchase price over the fair value of the net tangible assets acquired was approximately
$844.6 million. The Company recorded an intangible asset related to the acquired customer relationships of $197.2 million, an intangible asset related to trade names of
$35.4 million and an intangible asset related to non-compete agreements of $0.4 million. The remaining $611.6 million has been recognized as goodwill. The estimated
weighted average useful lives of the intangible assets are 9.7 years for the customer relationships, one year for the non-compete agreement and the trade name has an indefinite
useful life.

The
preliminary allocation of the total net purchase price of the merger is shown in the table below (in thousands):

Cash

$
11,552Current assets


45,199Property, plant, and equipment


292,124Investments


6,856Excess cost over fair value of net assets acquired


611,624Intangible assets


232,973Other assets


127,034Current liabilities


(139,996
)Long-term debt


(687,491
)Other liabilities


(183,585
)Total net purchase price

$
316,290


The
purchase price allocation is preliminary as the Company is still assessing the fair value of Legacy FairPoint's assets and liabilities. When finalized, material adjustments to
goodwill may result.

The
following unaudited pro forma information presents the combined results of operations of the Company as though the merger had been consummated on January 1, 2007. These
results include certain adjustments, mainly associated with increased interest expense on debt and amortization of intangible assets related to the acquisitions and the related income tax effects. The
pro forma financial information does not necessarily reflect the actual results of operations had the merger been

19

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(5) Acquisitions and Dispositions (Continued)

consummated
at the beginning of the period or which may be attained in the future (in thousands, except per share data).

Pro forma three
months ended March 31,2008

2007(unaudited)Revenues

$
349,418

$
366,622Income (loss) from continuing operations


(9,514
)

10,096Net income


(9,514
)

10,096Earnings per common share from continuing operations:Basic

$
(0.11
)
$
0.11Diluted


(0.11
)

0.11Earnings per common share:Basic

$
(0.11
)
$
0.11Diluted


(0.11
)

0.11


(6) Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes." The Company's effective income tax rate for the
interim periods presented is based on the Company's annualized effective tax rate for the twelve months ended December 31, 2007.

For
the three months ended March 31, 2008, the Company recorded income tax expense of $6.5 million, resulting in an effective rate of 40.4% compared to 38.3% for the three
months ended March 31, 2007. The higher effective income tax rate for 2008 compared to 2007 was primarily due to the permanent tax benefit associated with tax-free Medicare subsidies.

For
the periods through March 31, 2008, the Northern New England business was included in the Verizon consolidated federal tax return and combined state tax returns in the states
of Maine, New Hampshire and Vermont. The operations of the Northern New England business were included in a tax sharing agreement with Verizon and were allocated tax payments based on the respective
tax liability as if they were filing on a separate company basis. Current and deferred tax expense has been determined by applying the provisions of SFAS No. 109, Accounting for Income Taxes,
to each company as if it were a separate taxpayer. At March 31, 2008, the estimated tax liability will be paid by Verizon as stipulated in the merger agreement and therefore is reflected as a
contribution from Verizon in the Condensed Consolidated Statement of Stockholders' Equity.

20

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(6) Income Taxes (Continued)

Due
to the merger consummated on March 31, 2008, the Company's deferred tax assets and liabilities have been combined and disclosed on the March 31, 2008 balance sheet as
follows (in thousands):

FairPoint

Spinco

TotalNet current deferred tax asset

$
12,320

$
15,062

$
27,382Net non-current deferred tax liability


(2,480
)

(246,322
)

(248,802
)Net deferred tax liability

$
9,840

$
(231,260
)
$
(221,420
)


In
assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company expects
that future taxable income will more likely than not be sufficient to recover deferred tax assets.

Effective
January 1, 2007, the Company adopted FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes(FIN 48), which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding
uncertainties in income tax positions. The unrecognized tax benefits under FIN 48 were similar to the income tax reserves reflected prior to adoption under FAS 5, Accounting for Contingencies,whereby reserves were established for probable loss contingencies that could be reasonably estimated. The adoption of
FIN 48 was not material.

FIN 48
requires applying a "more likely than not" threshold to the recognition and de-recognition of uncertain tax positions. The Company's unrecognized tax benefits
totaled $10.4 million as of December 31, 2007 and $11.4 million as of March 31, 2008, of which $1.3 million and $1.0 million, respectively, would impact its
effective tax rate, if recognized. The remaining unrecognized tax benefits relate to temporary items and tax reserves recorded in a business combination, which would not affect the annual effective
tax rate. On January 15, 2007, FairPoint and Spinco executed a tax sharing arrangement covering prior period tax liabilities, current period tax liabilities, tax payments, and tax refunds.

The
Company recognizes any interest and penalties accrued related to unrecognized tax benefits in income tax expense. For the three months ended March 31, 2008, there was an
immaterial change in the interest and penalties. Cumulative interest and penalties as of March 31, 2008 totaled $1.5 million.

The
Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is generally no longer subject to U.S. federal and state income tax
examinations by tax authorities for years before 2000. The Internal Revenue Service (IRS) is currently examining the Company's income tax returns relating to the Spinco business as operated by the
various entities comprising the Verizon Group for fiscal years 2000 through 2003. The company believes that it is adequately reserved for this examination. Furthermore, the Company does not anticipate
any significant increase or decrease to the unrecognized tax benefits within the next twelve months.

21

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(6) Income Taxes (Continued)

The merger between FairPoint and Spinco will be treated as a tax-free "reorganization" within the meaning of Section 368(a)(1)(A) of the
Internal Revenue Code. As such, Spinco and Legacy FairPoint will be a party to that reorganization within the meaning of Section 368(b) of the Code. Spinco will not recognize gain or loss on
the transfer of its assets to FairPoint and the assumption by FairPoint of the liabilities of Spinco, and no gain or loss will be recognized by stockholders of Spinco on the receipt of Company Common
Stock in exchange for Spinco Common Stock. Following the merger on March 31, 2008, FairPoint and Spinco will join in the filing of a consolidated federal tax return for the nine month period
ending December 31, 2008. Due to the tax free nature of the merger, the company expects any federal and state tax attributes of FairPoint and Spinco to carrforward to the Company.

At
March 31, 2008, the Company had federal net operating loss carryforwards of $251.3 million. The Legacy FairPoint losses are subject to a Section 382 limitation
from a prior period ownership change, however, the 382 limitation is not expected to prevent the Company from utilizing these net operating losses over the loss carry forward period.

As
part of the merger, Legacy FairPoint underwent an ownership change subject to Section 382, which places certain limitations on the use of net operating loss carryovers and
other tax attributes. The Company is continuing to evaluate the impact of the section 382 limitation. Based upon our initial estimated projections of this limitation, we believe that any
additional Section 382 limitation would not have a material impact on the financial statements.

(7) Interest Rate Swap Agreements

The Company assesses interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected
future cash flows and by evaluating hedging opportunities. The Company maintains risk management control systems to monitor interest rate cash flow risk attributable to both the Company's outstanding
and forecasted debt obligations. The risk management control systems involve the use of analytical techniques, including cash flow sensitivity analysis, to estimate the expected impact of changes in
interest rates on the Company's future cash flows.

The
Company uses variable and fixed-rate debt to finance its operations, capital expenditures and acquisitions. The variable-rate debt obligations expose the
Company to variability in interest payments due to changes in interest rates. The Company believes it is prudent to limit the variability of a portion of its interest payments. To meet this objective,
from time to time, the Company enters into interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk. These swaps change the variable-rate cash
flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company pays a variable interest rate plus an additional payment if the variable rate payment
is below a contractual rate, or it receives a payment if the variable rate payment is above the contractual rate.

22

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(7) Interest Rate Swap Agreements (Continued)

The
chart below provides details of each of the Company's interest rate swap agreements.

|Effective Date:   |  | Notional Amount |  | Rate  |  | Rate, including
applicable margin |  | Expiration Date  
|----------------- |  | --------------- |  | ----- |  | --------------------------------- |  | -----------------
|February 8, 2005  |  | $130.0 Million  |  | 3.98% |  | 6.73%                             |  | December 31, 2008
|February 8, 2005  |  | $130.0 Million  |  | 4.11% |  | 6.86%                             |  | December 31, 2009
|April 29, 2005    |  | $50.0 Million   |  | 4.72% |  | 7.47%                             |  | March 31, 2012   
|June 30, 2005     |  | $50.0 Million   |  | 4.69% |  | 7.44%                             |  | March 31, 2011   
|June 30, 2006     |  | $50.0 Million   |  | 5.36% |  | 8.11%                             |  | December 31, 2009
|December 31, 2007 |  | $65.0 Million   |  | 4.91% |  | 7.66%                             |  | December 30, 2011
|December 31, 2007 |  | $75.0 Million   |  | 5.46% |  | 8.21%                             |  | December 31, 2010
|December 31, 2008 |  | $100.0 Million  |  | 5.02% |  | 7.77%                             |  | December 31, 2010
|December 31, 2009 |  | $150.0 Million  |  | 5.65% |  | 8.40%                             |  | December 31, 2011
|June 30, 2008     |  | $100.0 Million  |  | 4.99% |  | 7.74%                             |  | December 30, 2010
|June 30, 2008     |  | $100.0 Million  |  | 4.95% |  | 7.70%                             |  | June 30, 2010    
|June 30, 2008     |  | $100.0 Million  |  | 5.45% |  | 8.20%                             |  | December 31, 2010
|June 30, 2008     |  | $100.0 Million  |  | 5.30% |  | 8.05%                             |  | December 30, 2010
|June 30, 2008     |  | $100.0 Million  |  | 4.50% |  | 7.25%                             |  | December 31, 2010
|June 30, 2008     |  | $100.0 Million  |  | 4.50% |  | 7.25%                             |  | December 31, 2010
|December 31, 2010 |  | $300.0 million  |  | 4.49% |  | 7.24%                             |  | December 31, 2012
|June 30, 2008     |  | $250.0 million  |  | 3.25% |  | 6.00%                             |  | December 31, 2010

As
a result of these swap agreements, as of March 31, 2008, approximately 50% of the Company's indebtedness bore interest at fixed rates rather than variable rates. At
March 31, 2008, the fair market value of these swaps was a net liability of approximately $74.7 million, of which $27.1 million has been included in current liabilities and
$47.6 million has been included in long-term liabilities. As a result of the merger, beginning on April 1, 2008, these swaps will not meet the criteria for hedge
accounting. Therefore, the changes in fair value of the swap contracts will be recorded as other income (expense) on the condensed consolidated statement of operations.

(8) Investments

The Company holds certain investments, totaling $6.9 million at March 31, 2008, in non-marketable securities which are accounted for
using the cost and equity methods of accounting. The Company continually monitors all of these investments for possible impairment by evaluating the financial performance of the businesses in which it
invests and comparing the carrying value of the investment to quoted market prices (if available), or the fair values of similar investments, which in certain instances, is based on traditional
valuation models utilizing multiples of cash flows. When circumstances indicate that a decline in the fair value of the investment has occurred and the decline is other than temporary, the Company
records the decline in value as a realized impairment loss and a reduction in the cost of the investment.

23

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(9) Long Term Debt

Prior to March 31, 2008, debt held by the Northern New England business was recorded at the Verizon consolidated level and interest expense was allocated
to the Northern New England business.

Long
term debt for the Company at March 31, 2008 and for the Northern New England business at December 31, 2007 is shown below:

|                                                                                                                                                |                                              | March 31, 2008 |           | December 31, 2007
|----------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | -------------- | --------- | -----------------
|
|Senior secured credit facility, variable rates ranging from 5.50% to 5.75% (weighted average rate of 5.67%) at March 31, 2008, due 2014 to 2015 |                                              | $              | 1,635,500 |                  
|Senior notes, 11.875%, due 2010(1)                                                                                                              |                                              |                | 2,050     |                  
|Senior notes, 13.125%, due 2018                                                                                                                 |                                              |                | 551,000   |                  
|Discount on senior notes, 13.125%, due 2018                                                                                                     |                                              |                | (11,169   | )                
|                                                                                                                                                |                                              |                |           |                  
|                                                                                                                                                | Total outstanding long-term debt             |                |           | 2,177,381        
|Less current portion                                                                                                                            |                                              |                |          |                  
|                                                                                                                                                |                                              |                |           |                  
|                                                                                                                                                | Total long-term debt, net of current portion |                | $         | 2,177,381        
|                                                                                                                                                |                                              |                |           |                  

---

The
approximate aggregate maturities of long-term debt for each of the five years subsequent to March 31, 2008 are as follows (in thousands):

Quarter ending March 31,2009

$
2010


38,4052011


36,3552012


61,3552013


61,355Thereafter


1,991,080$
2,188,550


On
March 31, 2008, immediately prior to the merger, FairPoint and Spinco entered into a $2,030 million credit facility consisting of a revolver in an aggregate principal
amount of $200 million, a term loan A facility in an aggregate principal amount of $500 million, a term loan B facility in the aggregate principal amount of $1,130 million and
together with the term loan A facility, referred to as the term loan, and a delayed draw term loan in an aggregate principal amount of $200 million. Spinco drew $1,160 million under the
term loan immediately prior to the spin-off, and then the Company drew $470 million under the term loan and $5.5 million under the delayed draw term loan concurrently with
the closing of the merger. Following the merger, the Company assumed all of the obligations under the credit facility.

The
revolver has a swingline subfacility in the amount of $10 million and a letter of credit subfacility in the amount of $30 million, which will allow issuances of standby
letters of credit by the

24

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(9) Long Term Debt (Continued)

Company.
The credit facility also permits interest rate and currency exchange swaps and similar arrangements that we may enter into with the lenders under the credit facility and/or their affiliates.
As of March 31, 2008, letters of credit had been issued for $12.8 million.

The
term loan B facility and the delayed draw term loan will mature in March 2015 and the revolver and the term loan A facility will mature in March 2014. Each of the term loan A
facility, the term loan B facility and the delayed draw term loan, collectively referred to as the term loans, will be repayable in quarterly installments in the manner set forth in the credit
facility.

Interest
rates for borrowings under the credit facility will be, at the Company's option, for the revolver and for the term loans at either (a) the Eurodollar rate, as defined in
the credit agreement, plus an applicable margin or (b) the base rate, as defined in the credit agreement, plus an applicable margin.

The
credit facility provides for payment to the lenders of a commitment fee on the average daily unused portion of the revolver commitments, payable quarterly in arrears on the last
business day of each calendar quarter and on the date upon which the commitment is terminated. The credit facility also provides for payment to the lenders of a commitment fee from the closing date of
the credit facility up through and including the twelve month anniversary thereof on the unused portion of the delayed draw term loan, payable quarterly in arrears, and on the date upon which the
delayed draw term loan is terminated, as well as other fees.

The
credit facility requires the Company first to prepay outstanding term loan A loans in full, including any applicable fees, interest and expenses and, to the extent that no term loan
A loans remain outstanding, term loan B loans, including any applicable fees, interest and expenses, with, subject to certain conditions and exceptions, 100% of the net cash proceeds the Company
receives from any sale, transfer or other disposition of any assets subject to certain reinvestment rights, 100% of net casualty insurance proceeds subject to certain reinvestment rights and 100% of
the net cash proceeds the Company receives from the issuance of debt obligations and preferred stock. In addition, the Company's credit facility requires it to prepay outstanding term loans on the
date the Company delivers a compliance certificate pursuant to the credit agreement beginning with the fiscal quarter ended June 30, 2009 demonstrating that the Company's leverage ratio for the
preceding quarter is greater than 3.50 to 1.00, with an amount equal to the greater of (i) $11,250,000 and (ii) the Company's excess cash flow calculated after its permitted dividend
payment and less its amortization payments made on the term loans pursuant to the Company's credit agreement. Notwithstanding the foregoing, the Company may designate the type of loans which are to be
prepaid and the specific borrowings under the affected facility pursuant to which any amounts mandatorily repaid will be applied in forward order of maturity of the remaining amortization payments.

Voluntary
prepayments of borrowings under the term loan facilities and optional reductions of the unutilized portion of the revolving facility commitments will be permitted upon payment
of an applicable payment fee, which shall only be applicable to certain prepayments of borrowings as described in the credit facility.

Under
the credit facility, the Company is required to meet certain financial tests, including a minimum cash interest coverage ratio and a maximum total leverage ratio.

25

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(9) Long Term Debt (Continued)

The
credit facility contains customary affirmative covenants. The credit facility also contains negative covenants and restrictions, including, among others, with respect to redeeming
and repurchasing the Company's other indebtedness, loans and investments, additional indebtedness, liens, capital expenditures, changes in the nature of our business, mergers, acquisitions, asset
sales and transactions with affiliates. As of March 31, 2008, the Company is not in violation of any covenants in its credit facility.

The
credit facility also contains restrictions on the Company's ability to pay dividends on its common stock.

The
credit facility is guaranteed, jointly and severally, by all existing and subsequently acquired or organized wholly owned first-tier domestic subsidiaries of the Company
that are holding companies. No guarantee is required of a subsidiary that is an operating company. Northern New England Telephone Operations LLC and Enhanced Communications of Northern New
England Inc. are regulated operating subsidiaries and, accordingly, are not guarantors under the credit facility.

The
credit facility contains customary events of default, including, but not limited to, failure to pay principal, interest or other amounts when due (subject to customary grace
periods), breach of covenants or representations, cross-defaults to certain other indebtedness in excess of specified amounts, judgment defaults in excess of specified amounts, certain ERISA defaults,
the failure of any guaranty or security document supporting the credit facility and certain events of bankruptcy and insolvency.

On
March 31, 2008, Spinco issued $551 million aggregate principal amount of 131/8% Senior Notes, referred to as the notes. The notes mature on
April 1, 2018 and are not redeemable at the Company's option prior to April 1, 2013. Interest is payable on the notes semi-annually in cash on April 1 and
October 1 of each year. The notes bear interest at a fixed rate of 131/8% and principal is due at maturity. These securities were issued at a discount, and accordingly, at the
date of their distribution,
the notes had a carrying value of $539.8 million (principal amount at maturity of $551.0 million less discount of $11.2 million).

The
indenture governing the notes limits the Company's ability to incur additional indebtedness and issue certain preferred stock; or repurchase its capital stock or subordinated debt;
make investments; create certain liens; sell certain assets or merge or consolidate with or into other companies; incur restriction on the ability of the Company's subsidiaries to make distributions
or transfer assets to the Company; and enter into transactions with affiliates.

The
indenture governing the notes also restricts the Company's ability to pay dividends on its common stock.

(10) Employee Benefits

The Northern New England business adopted SFAS 158 effective December 31, 2006. The SFAS 158 adjustments related to the funded status of the
plans are not reflected in the Northern New England business' balance sheet for the quarter ended March 31, 2007 because the plan does not provide for the separate attribution of the related
pension and post-retirement assets and obligations due to the fact that the plan is part of Verizon's plans. Upon the effective date of the merger, the

26

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(10) Employee Benefits (Continued)

Northern
New England business benefit plans were separated from Verizon's plans and adjustments related to the funded status of the plans are reflected in the balance sheet for the quarter ended
March 31, 2008. The adoption of SFAS 158 did not affect the Northern New England business' results of operations or liquidity as SFAS 158 does not affect the determination of net
periodic benefit costs recorded in the income statement for the quarters ended March 31, 2008 and 2007. The increase in the pension asset and the decrease in the post-retirement
health care liability recorded to reflect the funded status is included in net liabilities contributed back to Verizon in the Condensed Statement of Stockholders' Equity for the quarter ended
March 31, 2008.

The
following information summarizes benefit costs, benefit obligations, funded status and rate assumptions associated with the pension and postretirement health plans.

Obligations and Funded Status

|                                         |  | Pension |         | Health Care and Life
|---------------------------------------- |  | ------- | ------- | --------------------
|
|
|Projected Benefit Obligation             |  | $       | 182,420 |                     
|Accumulated projected benefit obligation |  |         |        |                     
|Funded Status                            |  |         | 70,080  |                     

|
|

|                                        |                                      | March 31, 2008 |   | December 31, 2007 |  | March 31, 2008 |        | December 31, 2007
|--------------------------------------- | ------------------------------------ | -------------- | - | ----------------- |  | -------------- | ------ | -----------------
|
|Amounts recognized on the balance sheet |                                      |                |   |                   |  |                |        |                  
|                                        | Prepaid pension asset                |                | $ | 70,080            |  | $              | 36,692 |                  
|                                        | Post-retirement healthcare liability |                |   |                  |  |                |       |                  
|                                        |                                      |                |   |                   |  |                |        |                  
|                                        | Total                                |                | $ | 70,080            |  | $              | 36,692 |                  
|                                        |                                      |                |   |                   |  |                |        |                  

Verizon
made an initial contribution of $202.4 million of cash to the Company on April 30, 2008. This amount is held in trust and has been invested by the Company. The
assets are invested in 66% equity securities and 34% fixed income securities.

Net Periodic Benefit Cost

The net periodic benefit (income) costs related to the Northern New England business' pension plans are $0.1 million and $0.2 million for the
quarter ended March 31, 2008 and 2007, respectively. The net periodic benefit costs related to the Northern New England business' postretirement health care plans are $22.5 million and
$22.5 million for the quarter ended March 31, 2008 and 2007, respectively. Because the Northern New England business' operating expenses were determined predominantly through
allocations, separate identifications of the benefit costs for these businesses were not readily available in 2007.

27

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(10) Employee Benefits (Continued)

Assumptions

The weighted-average assumptions used in determining benefit obligations are as follows:

|                                         |  | Pension |  | Health Care and Life
|---------------------------------------- |  | ------- |  | --------------------
|
|Discount rate                            |  | 6.50%   |  | 6.50%               
|Rate of future increases in compensation |  | 4.00%   |  | 4.00%               

The
weighted-average assumptions used in determining net periodic benefit cost follow:

|                               |  | Pension |  | Health Care and Life
|------------------------------ |  | ------- |  | --------------------
|
|Discount rate                  |  | 6.50%   |  | 6.00%               
|Expected return on plan assets |  | 8.50%   |  | 8.50%               
|Rate of compensation increase  |  | 4.00%   |  | 4.00%               

(11) Stock Plans

The Company maintains several stock incentive plans, under which, there were 412,807 shares of restricted stock, 256,060 stock options and 36,817 restricted stock
units outstanding as of March 31, 2008. As a result of the closing of the merger, these outstanding restricted shares, restricted units and stock options will be re-valued as of
March 31, 2008. The Company will recognize stock based compensation expense on these shares beginning April 1, 2008.

(12) Comprehensive Income

Comprehensive income consists of net income and other gains and losses affecting shareowners' investment that, under accounting principles generally accepted in
the United States, are excluded from net income.

Changes
in the components of Other Comprehensive Income were as follows (in thousands):

Three months ended
March 31,2008

2007(Dollars in millions)Net income

$
9,543

$
14,438Other comprehensive income (loss), net of taxes:Defined benefit pension and postretirement plans


(78,725
)

Total comprehensive (loss) income

$
(68,182
)
$
14,438


Defined
benefit pension and postretirement plan activity during the first quarter of 2008 included $78.7 million in connection with the merger, which is reflected
as a reduction to Accumulated Other Comprehensive Loss.

28

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(13) Earnings Per Share

Earnings per share has been computed in accordance with SFAS No. 128,Earnings Per Share. Basic earnings
per share is computed by dividing net income by the weighted average number of shares of common stock outstanding for the period. Except when the effect would be anti-dilutive, the diluted
earnings per share calculation calculated using the treasury stock method includes the impact of stock units, shares of non-vested common stock and shares that could be issued under
outstanding stock options. The weighted average number of common shares outstanding for all periods presented have been restated to reflect the issuance of 53,760,623 shares to the stockholders of
Spinco in connection with the merger.

The
following table provides a reconciliation of the common shares used for basic (loss) earnings per share and diluted (loss) earnings per share:

|                                                                                                           |  | Three Months Ended
|---------------------------------------------------------------------------------------------------------- |  | ------------------
|
|
|Weighted average number of common shares used for basic earnings per share                                 |  | 53,761            
|Effect of potential dilutive shares                                                                        |  |                  
|                                                                                                           |  |                   
|Weighted average number of common shares and potential dilutive shares used for diluted earnings per share |  | 53,761            
|                                                                                                           |  |                   
|Anti-dilutive shares excluded from the above reconciliation                                                |  |                  

(14) Fair Value Measurements

SFAS No. 157,Fair Value Measurements(SFAS No. 157) defines fair value, establishes a framework for
measuring fair value and establishes a hierarchy that categorizes and prioritizes the sources to be used to estimate fair value. SFAS No. 157 also expands financial statement disclosures about
fair value measurements. On February 12, 2008, the FASB issued FASB Staff Position (FSP) 157-2, which delays the effective date of SFAS No. 157 for one year for all
nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company elected a partial deferral
of SFAS No. 157 under the provisions of FSP 157-2 related to the measurement of fair value used when evaluating goodwill, investments, other intangible assets and other
long-lived assets for impairment and valuing asset retirement obligations and liabilities for exit or disposal activities. The Company is currently evaluating the impact of FSP
157-2 on its financial statements. The impact of partially adopting SFAS No. 157 effective January 1, 2008 was not material to the Company's financial statements.

29

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(14) Fair Value Measurements (Continued)

The
following table summarizes our financial assets and liabilities measured at fair value on a recurring basis (at least annually) as of March 31, 2008 (in thousands):

|                                 |  | March 31, 2008 |          | Quoted Prices
in Active
Markets for
Identical Assets
(Level 1) |   | Significant
Other
Observable
Inputs
(Level 2) |  | Significant
Unobservable
Inputs
(Level 3)
|-------------------------------- |  | -------------- | -------- | -------------------------------------------------------------- | - | --------------------------------------------- |  | -----------------------------------------
|Prepaid pension assets(1)        |  | $              | 70,080   |                                                                | $ | 70,800                                        |  | $                                        
|Interest rate swap agreements(2) |  |                | (74,667  | )                                                              |   |                                              |  |                                          
|Employee benefit obligations(1)  |  |                | (170,675 | )                                                              |   |                                              |  |                                          

---

(15) Litigation and Regulatory Commitments

From time to time, the Company is involved in litigation and regulatory proceedings arising out of its operations. Management believes that the Company is not
currently a party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on the Company's financial position or results of
operations.

The
Company is subject to the orders issued by the state regulatory authorities in Maine, New Hampshire and Vermont in connection with their approval of the merger which provide for,
among other things:



30

---



FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS (Unaudited) (Continued)

(15) Litigation and Regulatory Commitments (Continued)



31

---







Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the financial statements of the Company and the notes thereto. The following discussion includes
certain forward-looking statements. For a discussion of important factors, which could cause actual results to differ materially from the results referred to in the forward-looking statements, see
"Item 1A. Risk Factors" and "Special Note Concerning Forward-Looking Statements."

Overview

On March 31, 2008, the previously announced merger between Spinco and FairPoint was completed. In connection with the merger and in accordance with the
terms of the merger agreement FairPoint issued 53,760,623 shares of common stock to Verizon stockholders. Prior to the merger the Verizon Group engaged in a series of restructuring transactions to
effect the transfer of specified assets and liabilities of the Northern New England business to Spinco and the entities that became Spinco's subsidiaries. Spinco was then spun off from Verizon
immediately prior to the merger. While FairPoint was the surviving entity in the merger, for accounting purposes Spinco is deemed to be the acquirer. As a result the statement of operations and the
financial information derived from the statement of operations, in this Quarterly Report reflect only the financial results of the Northern New England business. The balance sheet and financial
information derived from the balance sheet in this Quarterly Report reflect the combined assets and liabilities of Legacy FairPoint and Spinco at March 31, 2008. Certain assets and liabilities
of the Northern New England business (principally related to pension, other post-employment benefits and associated deferred taxes) were not distributed to Spinco prior to the merger. The statement of
operations in this Quarterly Report reflects the actual results of the Northern New England business for the three months ended March 31, 2008 and may not be indicative of the Company's future
results. For more information see note 1 to the "Condensed Consolidated Financial Statements."

We
are the eighth largest telephone company in the United States, based on number of access lines as of March 31, 2008. We operate in 18 states with approximately
1.9 million access line equivalents (including voice access lines and high-speed data lines, which include DSL, fiber-to-the-premises, wireless
broadband and cable
modem) as of March 31, 2008. We offer an array of services, including local and long distance voice, data, Internet and broadband product offerings to residential and business customers,
primarily in northern New England.

As
our primary source of revenues, access lines are an important element of our business. Over the past several years, communications companies, including Legacy FairPoint and the
Northern New England business, have experienced a decline in access lines due to increased competition, the introduction of DSL services (resulting in customers substituting DSL for a second line) and
challenging economic conditions.

Our
board of directors has adopted a dividend policy that reflects our judgment that our stockholders would be better served if we distributed a substantial portion of the cash generated
by our business in excess of operating needs, interest and principal payments on our indebtedness, dividends on future senior classes of our capital stock, if any, capital expenditures, taxes and
future reserves, if any, as regular quarterly dividend payments to the holders of our common stock, rather than retaining that cash and using it for other purposes. However, our board of directors
may, in its discretion, amend or repeal this dividend policy to decrease the level of dividends provided for or discontinue entirely the payment of dividends. As a condition to the approval of the
merger by state regulatory authorities, we have agreed to be subject to reductions in our dividend rate and certain other restrictions on the payment of dividends. Our annual dividend rate may not
exceed $1.03 per share until certain conditions contained in the state regulatory orders approving the merger no longer apply. In addition to the conditions and restrictions imposed by the state
regulatory orders, financial covenants in our credit

32

---



facility
and the indenture governing the notes also restrict our ability to pay dividends, and certain of these restrictions may be more restrictive than the conditions and restrictions imposed by the
state regulatory orders. See "Item 2. Unregistered Sales of Equity Securities and Use of ProceedsRestrictions on Payment of Dividends."

We
are subject to regulation primarily by federal and state governmental agencies. At the federal level, the Federal Communications Commission (the "FCC"), generally exercises
jurisdiction over facilities and services of communications common carriers, such as us, to the extent those facilities are used to provide, originate, or terminate interstate or international
communications. State regulatory commissions generally exercise jurisdiction over common carriers' facilities and services to the extent those facilities are used to provide, originate or terminate
intrastate communications. In addition, pursuant to the Telecommunications Act of 1996, which amended the Communications Act of 1934, state and federal regulators share responsibility for implementing
and enforcing the domestic pro-competitive policies introduced by that legislation.

FairPoint's
historical operations and the operations of the Northern New England business operate under different regulatory regimes in certain respects. For example, concerning
interstate access, all of the pre-merger regulated interstate services of FairPoint were regulated under a rate-of-return model, while all of the
rate-regulated interstate services provided by the Northern New England business were regulated under a price cap
model. FairPoint has obtained permission to continue to operate under these regimes until the FCC completes its general review of whether to modify or eliminate the
"all-or-nothing" rule. Without this permission, the all-or-nothing rule would require that all of our regulated operations be operated under the price
cap model for federal regulatory purposes. In addition, while all of our operations generally are subject to obligations that apply to all local exchange carriers, our non-rural operations
are subject to additional requirements concerning interconnection, non-discriminatory network access for competitive communications providers, and other matters, subject to substantial
oversight by state regulatory commissions. In addition, the FCC has ruled that the Northern New England business must comply with the regulations applicable to the Bell Operating Companies. The rural
and non-rural operations also are subject to different regimes concerning universal service.

The
preceding summary does not describe all present and proposed federal, state and local legislation and regulations affecting the communications industry. Some legislation and
regulations are or could in the future be the subject of judicial proceedings, legislative hearings and administrative proposals which could change the manner in which this industry operates. Neither
the outcome of any of these developments, nor their potential impact on us, can be predicted at this time. Regulation can change rapidly in the communications industry, and such changes may have an
adverse effect on us in the future. For more information about the regulations governing our operations see "Part 1.Item 1.BusinessRegulatory
Environment" in our Annual Report on Form 10-K for the year ended December 31, 2007.

Effective
April 1, 2008 FairPoint entered into labor agreements with the local chapters of the IBEW and the CWA, which represent our union employees subject to collective
bargaining agreements in northern New England. These new labor agreements assumed the existing Verizon labor agreements and extended the term of those agreements through August 2, 2013. The
collective bargaining agreements with Verizon otherwise would have expired on August 2, 2008.

Recent Developments



On March 31, 2008, in accordance with the terms of the merger agreement, Spinco merged with and into FairPoint. Following the completion of the merger, the
separate existence of Spinco ceased. Based on a calculation set forth in the merger agreement, Verizon stockholders received 53,760,623

33

---



shares
of common stock of FairPoint, as the surviving corporation. As of the closing of the merger on March 31, 2008 (and prior to the elimination of fractional shares), Verizon stockholders
collectively owned approximately 60% and Legacy FairPoint stockholders collectively owned approximately 40% of the shares of our common stock on a fully diluted basis (excluding treasury stock and
certain specified options, restricted stock units, restricted units and restricted shares outstanding). We refer collectively to the transactions described above as the merger. For accounting
purposes, Spinco is treated as the acquirer in the merger. For more information see note 1 to the "Condensed Consolidated Financial Statements."



Prior to the merger, the Verizon Group engaged in a series of restructuring transactions to effect the transfer of specified assets and liabilities of the local
exchange business of Verizon New England in Maine, New Hampshire and Vermont and the customers of the Verizon Group's related long distance and Internet service provider businesses in those states to
Spinco and the entities that became Spinco's subsidiaries. In connection with these restructuring transactions, and immediately prior to closing of the merger on March 31, 2008, the Verizon
Group contributed certain of those assets and all of the direct and indirect equity interests of those entities to Spinco in exchange for:



As
a result of these transactions, the Verizon Group received $1.7 billion of combined cash and principal amount of notes.

The
Verizon Group also contributed approximately $316 million in cash to Spinco at the time of the spin-off, in addition to the amount of working capital that it was
required to contribute pursuant to the distribution agreement that was in effect prior to the merger.

After
the contribution and immediately prior to the merger, Verizon spun off Spinco by distributing all of the shares of Spinco common stock to a third-party distribution agent to be
held collectively for the benefit of Verizon stockholders. We refer collectively to the transactions described above as the spin-off.



Verizon exchanged the notes that were issued by Spinco to the Verizon Group in connection with the contribution for certain outstanding debt obligations of
Verizon, thereby reducing the Verizon Group's outstanding indebtedness. We refer collectively to these transactions as the debt exchange.



After the consummation of the debt exchange, the notes were sold through a private offering. Following consummation of the merger, the Company assumed all
obligations under the notes. We collectively refer to these transactions as the notes offering.



Immediately prior to the merger, FairPoint and Spinco entered into a $2,030 million senior secured credit facility, consisting of a
non-amortizing revolving facility in an aggregate principal amount of $200 million, a senior secured term loan A facility in an aggregate principal amount of $500 million, a
senior secured term loan B facility in the aggregate principal amount of $1,130 million and a delayed

34

---



draw
term loan facility in an aggregate principal amount of $200 million. Spinco drew $1,160 million under the new term loan immediately prior to the spin-off, and then
FairPoint drew $470 million under the new term loan and $5.5 million under the new delayed draw term loan concurrently with the closing of the merger.

The
borrowings under our credit facility were primarily used as follows:





We
collectively refer to the merger, the spin-off, the debt exchange, the notes offering, FairPoint's and Spinco's entry into the credit facility and the use of the
borrowings thereunder described above as the transactions.



In connection with the merger, on January 15, 2007 we also entered into (i) a Transition Services Agreement, as amended on March 31, 2008
(the "transition services agreement"), with certain subsidiaries of Verizon, (ii) an Employee Matters Agreement (the "employee matters agreement"), with Verizon and Spinco, (iii) a Tax
Sharing Agreement (the "tax sharing agreement"), with Verizon and Spinco, and (iv) a Master Services Agreement, as amended on July 6, 2007 and February 25, 2008 (the "master
services agreement"), with Capgemini U.S. LLC, or Capgemini. The transition services agreement allows for the provision of certain services on an interim basis following the closing of the
merger. The employee matters agreement allows for the uninterrupted continuity of employment, compensation and benefits of Spinco employees. Through the master services agreement, we are replicating
and/or replacing certain existing Verizon systems during a phased period through the fourth quarter of 2008.

Regulatory Conditions

We are subject to the orders issued by the state regulatory authorities in Maine, New Hampshire and Vermont in connection with their approval of the merger which
provide for, among other things:



35

---





These
orders also limited rates for existing retail, wholesale and DSL services for fixed periods following the closing of the merger and imposed certain obligations on the Northern New
England business related to the provision of wholesale services.

The
terms of the orders also prohibit us from consummating any acquisition with a transaction value in excess of $100 million during a period of one year following the completion
of the cutover from the systems that will be provided by the Verizon Group during the period of the transition services agreement to our systems, and for a period of up to three years following the
closing of the merger if certain financial tests are not met. The order issued by the NHPUC also prohibits us from consummating any acquisition until we meet specified service quality benchmarks.

We
have agreed to the appointment of an independent third-party monitor for the cutover process contemplated by the transition services agreement. The monitor will consult with
representatives of the Vermont Department of Public Service (the "VDPS"), the Maine Public Utilities Commission (the "MPUC"), and the New Hampshire Public Utilities Commission (the "NHPUC"). The
monitor will evaluate our testing and cutover readiness process to evaluate our readiness to support our operations

36

---



after
the cutover from the systems that will be provided by the Verizon Group during the period of the transition services agreement. If the monitor, the VDPS, the MPUC or the NHPUC disagree with our
decision on the timing of the cutover, the cutover could be delayed.

The
parties also obtained the approval of the Federal Communications Commission (the "FCC"), in an order dated January 9, 2008 that imposed no additional conditions.

Revenues

We derive our revenues from:



Revenues
for the Northern New England business decreased by 1.1% from fiscal 2005 to fiscal 2006 and increased by 0.3% from fiscal 2006 to fiscal 2007. We anticipated that the 2007
revenues for the Northern New England business would be lower than the actual 2007 results. We believe that the revenue trend from fiscal 2005 to fiscal 2006 for the Northern New England business is
more indicative

37

---



of
the revenues expected to be generated by the Spinco business than the fiscal 2006 to fiscal 2007 trend.

The
following table summarizes revenues and the percentage of revenues from the listed sources for the Northern New England business:

|                                      |  | Three Months Ended
March 31, |         | Three Months Ended
March 31, |  
|------------------------------------- |  | ---------------------------- | ------- | ---------------------------- | -
|
|
|Revenue Source:                       |  |                              |         |                              |  
|Local calling services                |  | $                            | 128,812 |                              | $
|Universal Service Fund high-cost loop |  |                              | 5,345   |                              |  
|Interstate access                     |  |                              | 69,844  |                              |  
|Intrastate access                     |  |                              | 7,192   |                              |  
|Long distance services                |  |                              | 41,267  |                              |  
|Data and Internet services            |  |                              | 22,020  |                              |  
|Other services                        |  |                              | 7,934   |                              |  
|                                      |  |                              |         |                              |  
|Total                                 |  | $                            | 282,414 |                              | $
|                                      |  |                              |         |                              |  

Operating Expenses

Our operating expenses are categorized as operating expenses, consisting of cost of services and sales, selling, general and administrative expenses, and
depreciation and amortization.



Because
the Northern New England business has been operating as the local exchange carrier of Verizon in Maine, New Hampshire and Vermont and not as a standalone telecommunications
provider, the historical operating results of the Northern New England business for the three months ended March 31, 2008 and 2007 include approximately $58 million and
$64 million, respectively, of expenses for services provided by the Verizon Group, including information systems and information technology, shared assets including office space outside of New
England, supplemental customer sales and service and operations. Following the merger, during a transition period which is expected to be six months, we will receive these services from internal
operations or from third-party service providers and not from Verizon. We estimate that within six months following the end of this transition period, which is

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expected
to end in 2008, we will realize net cost savings on an annual basis of approximately $110 million to $115 million from internalizing these functions or obtaining these services
from third-party providers. However, there can be no assurance that these or any cost savings will actually be achieved.

Results of Operations

The following table sets forth the percentages of revenues represented by selected items reflected in the Northern New England business's combined statements of
operations. The year-to-year comparisons of financial results are not necessarily indicative of future results:

|                                    |  | Three Months Ended March 31, |        
|----------------------------------- |  | ---------------------------- | -------
|
|Revenues                            |  | $                            | 282,414
|                                    |  |                              |        
|Operating expenses                  |  |                              |        
|Cost of services and sales          |  |                              | 135,837
|Selling, general and administrative |  |                              | 63,116 
|Depreciation and amortization       |  |                              | 53,925 
|                                    |  |                              |        
|Total operating expenses            |  |                              | 252,878
|                                    |  |                              |        
|Income from operations              |  |                              | 29,536 
|Interest expense                    |  |                              | (14,522
|Other income                        |  |                              | 986    
|                                    |  |                              |        
|Income before income taxes          |  |                              | 16,000 
|Income tax expense                  |  |                              | (6,457 
|                                    |  |                              |        
|Net income                          |  | $                            | 9,543  
|                                    |  |                              |        

Three Months Ended March 31, 2008 Compared with Three Months Ended March 31, 2007

Revenues decreased $16 million to $282 million in 2008 compared to 2007. The Northern New England business derived its revenues from the following
sources:

Local calling services.Local calling services revenues decreased $13.1 million to $128.8 million during the
first quarter of 2008 compared to the same period in 2007. Approximately $1.6 million of the decline in revenue is due to non-recurring credits issued to certain customers during
the three months ended March 31, 2008. The remaining decrease was primarily due to lower demand and usage of the Northern New England business' basic local exchange and accompanying services,
as reflected by a decline in total switched access lines in service of 9.6% at March 31, 2008 compared to March 31, 2007. The revenue decline was mainly driven by the effects of
competition and technology substitution. Technology substitution and competition affected local service revenue growth, as access lines at March 31, 2008 declined by 9.7% compared to
March 31, 2007.

Universal Service Fund high-cost loop support.Universal Service Fund high-cost loop payments
decreased $0.4 million to $5.3 million in the first quarter of 2008 compared to the same period in 2007. The national average cost per loop in relation to the Northern New England
business' average cost per loop has increased and, as a result, the Northern New England business' receipts from the Universal Service Fund have declined. We expect this trend to continue as we
anticipate the national average cost per loop will likely continue to increase in relation to our average cost per loop.

Interstate access.Interstate access revenues decreased $2.8 million to $69.8 million in the first quarter of
2008 compared to the first quarter of 2007. Switched minutes of use declined 12.5% in the

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first
quarter of 2008 compared to the same period in 2007, reflecting the impact of the access line loss and technology substitution. The decline in revenues due to the decrease in switched minutes of
use and access lines was partially offset by an increase in special access revenues, reflecting continuing demand in the business market for high-capacity, high speed data services.

Intrastate access.Intrastate access revenues increased $0.5 million to $7.2 million in the first quarter of
2008 compared to the same period in 2007, primarily due to an increased in minutes of use in the first quarter of 2008 compared to the first quarter of 2007.

Long distance services.Long distance services revenues decreased $0.5 million to $41.3 million in the first
quarter of 2008 compared to the same period in 2007. The decrease was primarily attributable to a decrease in the number of subscriber lines in 2008, partially offset by increased revenue from bundled
product offerings, such as the Northern New England business' Freedom service plans, designed to retain customer and generate more revenue.

Data and Internet services.Data and Internet services revenues increased $2.8 million to $22 million in the
first quarter of 2008 compared to the same period in 2007. The increase was primarily driven by an increase in the number of high speed data customers as the Northern New England business continues to
actively market its high speed data services. The Northern New England business added 17,257 new subscribers since March 31, 2007 for a total of 225,410 subscribers at March 31, 2008.

Other services.Other services revenues decreased $2 million to $7.9 million in the first quarter of 2008
compared to the same period in 2007. The decrease was principally due to decreased revenues from late payment charges, billing and collection and public payphone services, partially offset by
increased revenues from affiliates for the provision of sales and service support and local telephone services to other Verizon subsidiaries.



Cost of services and sales.Cost of services and sales remained flat in the first quarter of 2008 compared to the same period
in 2007. The higher costs associated with the continuing growth in the Internet and high speed data business were offset by a decrease in allocated costs from other Verizon subsidiaries.

Selling, general and administrative.Selling, general and administrative expenses decreased $0.9 million to
$63.1 million in the first quarter of 2008 compared to the same period in 2007. The decrease was primarily driven by lower allocated costs from other Verizon affiliates and bad debt expenses in
2008, partially offset by higher costs in the Internet and high speed data business.

Depreciation and amortization.Depreciation and amortization expense decreased $4.0 million to $54.0 million in
the first quarter of 2008 compared to the same period in 2007. The decrease was primarily due to lower rates of depreciation as a result of changes in the estimated useful lives of depreciable assets
and increases in reserve levels.



Interest expense.Interest expense decreased $3.3 million to $14.5 million in the first quarter of 2008
compared to the same period in 2007. The decrease was primarily driven by a decrease in borrowings from the Northern New England businesses' parent company (Verizon) during the first quarter of 2008.

Other income.Other income includes interest income and other non-operating income and expense items. Other
income remained flat in the quarter of 2008 compared to the same period in 2007.

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Income taxes.The effective income tax rate is the provision for income taxes stated as a percentage of income before the
provision for income taxes. The effective income tax rate for the Northern New England business in the first quarter of 2008 and 2007 was 40.4% and 38.3%, respectively. The higher effective income tax
rate in 2008 compared to 2007 was primarily due to a reduction in the actuarially determined value of tax-free Medicare subsidies.

Net income.Net income for the three months ended March 31, 2008 was $9.5 million compared to
$14.4 million for the same period in 2007. The difference in net income between 2008 and 2007 is a result of the factors discussed above.



We do not have any off-balance sheet arrangements.



Our critical accounting policies are as follows:



Revenue Recognition.We recognize service revenues based upon usage of our local exchange network and facilities and contract
fees. Fixed fees for local telephone, long distance, Internet services and certain other services are recognized in the month the service is provided. Revenue from other services that are not fixed
fee or that exceed contracted amounts is recognized when those services are provided. Non-recurring customer activation fees, along with the related costs up to, but not exceeding the
activation fees, are deferred and amortized over the customer relationship period.

Accounting for Pension and Other Postretirement Benefits.Most of our employees participate in our pension plans and other
postretirement benefit plans. In the aggregate, the fair value of pension plan assets exceeds pension plan benefit obligations, which contributes to pension plan income. Other post-retirement benefit
plans have larger benefit obligations than plan assets, resulting in expense. Significant pension and other postretirement benefit plan assumptions, including the discount rate used, the
long-term rate of return on plan assets, and medical cost trend rates are periodically updated and impact the amount of benefit plan income, expense, assets and obligations.

Accounting for Income Taxes.Our current and deferred income taxes are affected by events and transactions arising in the
normal course of business, as well as in connection with the adoption of new accounting standards and non-recurring items. Assessment of the appropriate amount and classification of income
taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax assets and the timing of income tax payments. Actual payments may differ from these
estimates as a result of changes in tax laws, as well as unanticipated future transactions affecting related income tax balances. We account for tax benefits taken or expected to be taken in its tax
returns in accordance with FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes(FIN 48), which requires the use of a
two step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions.

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Depreciation of Plant, Property and Equipment.We recognize depreciation on plant, property, and equipment principally on the
composite group remaining life method and straight-line composite rates over estimated useful lives ranging from three to 50 years. This method provides for the recognition of the
cost of the remaining net investment in telephone plant, less anticipated net salvage value (if any), over the remaining asset lives. This method requires the periodic revision of depreciation rates.
Changes in the estimated useful lives of plant, property, and equipment or depreciation methods could have a material effect on our results of operations.

Valuation of long-lived assets, including goodwill.We review our long-lived assets, including
goodwill for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Several factors could trigger an impairment review such as:



Goodwill
was $611.6 million at March 31, 2008. We have recorded intangible assets related to the acquired companies' customer relationships of $233.0 million as of
March 31, 2008. As of March 31, 2008, there was no accumulated amortization recorded as of March 31, 2008. These intangible assets are being amortized over a weighted average of
approximately 9.7 years. The intangible assets are included in intangible assets on our consolidated balance sheet.

We
are required to perform an annual impairment review of goodwill as required by SFAS No. 142, "Goodwill and Other Intangible Assets." No impairment of goodwill resulted from the
annual valuation of goodwill in 2007.

Accounting for software development costs.We capitalize certain costs incurred in connection with developing or obtaining
internal use software in accordance with American Institute of Certified Public Accountants Statement of Position 98-1, "Accounting for the Costs of Computer Software Developed or Obtained
for Internal Use" (98-1). Capitalized costs include direct development costs associated with internal use software, including direct labor costs and external costs of materials and
services. Costs incurred during the preliminary project stage, as well as maintenance and training costs are expensed as incurred.



In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 addresses how companies should measure fair
value when they are required to use a fair value measure for recognition or disclosure purposes under generally accepted accounting principles. As a result of SFAS 157 there is now a common
definition of fair value to be used throughout GAAP. The FASB believes that the new standard will make the measurement of fair value more consistent and comparable and improve disclosures about those
measures. The provisions of SFAS 157 were to be effective for fiscal years beginning after November 15, 2007. On February 6, 2008, the FASB agreed to defer the effective date of
SFAS 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis
(at least annually). Effective for fiscal 2008, we adopted SFAS 157 except as it applies to those nonfinancial assets and nonfinancial liabilities. The adoption did not have any financial
impact on our results of operations and financial position.

In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of FASB Statement No. 115"
("SFAS 159"). SFAS 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent

42

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measurement
of certain financial assets and liabilities under an instrument-by-instrument election. Subsequent measurements for the financial assets and liabilities an entity
elects to measure at fair value will be recognized in the results of operations. SFAS 159 also establishes additional disclosure requirements. This standard is effective for fiscal years
beginning after November 15, 2007. Effective for fiscal year 2008, we adopted the provisions of SFAS 159. The adoption did not have any financial impact on our results of operations and
financial position.

In
December 2007, the FASB issued SFAS No. 141R, "Business Combinations" ("SFAS 141R"). SFAS 141R replaces SFAS 141 and establishes principles and
requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non controlling interest in the acquiree and the
goodwill acquired. SFAS 141R also establishes disclosure requirements which will enable users to evaluate the nature and financial effects of the business combination. This standard is
effective for fiscal years beginning after December 15, 2008 and early adoption is prohibited.

In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements" ("SFAS 160"). SFAS 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interest,
changes in a parent's ownership interest and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated. SFAS 160 also establishes reporting requirements
that provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This standard is effective for fiscal
years beginning after December 15, 2008 and early adoption is prohibited.

In
March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 requires companies with
derivative instruments to disclose information that should enable financial statement users to understand how and why a company uses derivative instruments, how derivative instruments and related
hedged items are accounted for under FASB Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities" and how derivative instruments and related hedged items affect a
company's financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years beginning after November 15, 2008.

Liquidity and Capital Resources

Our short-term and long-term liquidity needs arise primarily from: (i) interest payments on our indebtedness; (ii) capital
expenditures; (iii) working capital requirements as may be needed to support the growth of our business; (iv) dividend payments on our common stock, to the extent permitted by the
agreements governing our indebtedness, including our credit facility and the indenture governing the notes, and by restrictions imposed by state regulatory authorities as conditions to their approval
of the merger; (v) obligations under our employee benefit plans; and (vi) potential acquisitions. Our board of directors has announced that it intends to cause us to continue a dividend
policy which reflects the judgment that our stockholders would be better served if we distributed a substantial portion of our excess cash to them instead of retaining it in our business.

We
anticipate that our primary source of liquidity will continue to be cash flow from operations. We also have available funds under our revolving credit facility and the delayed draw
term loan facility of our credit facility, subject to certain conditions.

Our
board of directors has adopted a dividend policy which reflects our judgment that our stockholders would be better served if we distributed a substantial portion of our excess cash
to them instead of retaining it in our business. Since Legacy FairPoint's initial public offering in February 2005, Legacy FairPoint has paid dividends at an annual rate of $1.59 per share. As a
result of the conditions

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imposed
by state regulatory authorities in connection with the approval of the merger, until the date that certain financial and other requirements set forth in the state regulatory orders approving
the merger, we refer to this date as the termination of conditions date, the annual dividend rate paid by us on our common stock may not exceed $1.03 per share. Financial covenants in our credit
facility and the indenture governing the notes also restrict our ability to pay dividends. See "Item 2. Unregistered Sales of Equity Securities and Use of ProceedsRestrictions on
Payment of Dividends."

Our
$2,030 million senior secured credit facility consists of a non-amortizing revolving facility in an aggregate principal amount of $200 million, a senior
secured term loan A facility in an aggregate principal amount of $500 million, a senior secured term loan B facility in the aggregate principal amount of $1,130 million and a delayed
draw term loan facility in an aggregate principal amount of $200 million. Spinco drew $1,160 million under the term loan immediately prior to the spin-off, and then FairPoint
drew $470 million under the term loan and $5.5 million under the delayed draw term loan concurrently with the closing of the merger.

The
revolver has a swingline subfacility in the amount of $10 million and a letter of credit subfacility in the amount of $30 million, which allows for issuances of standby
letters of credit for our account. Our credit facility also permits interest rate and currency exchange swaps and similar arrangements that we may enter into with the lenders under our credit facility
and/or their affiliates.

The
term loan B facility and the delayed draw term loan, will mature in March 2015 and the revolver and the term loan A facility will mature in March 2014. Each of the term loan A
facility, the term loan B facility and the delayed draw term loan are repayable in quarterly installments in the manner set forth in our credit facility.

Interest
rates for borrowings under our credit facility are, at our option, for the revolver and for the term loans at either (a) the Eurodollar rate, as defined in the credit
agreement plus an applicable margin or (b) the base rate, as defined in the credit agreement, plus an applicable margin.

Our
existing credit facility contains customary affirmative covenants and also contains negative covenants and restrictions, including, among others, with respect to the redemption or
repurchase of our other indebtedness, loans and investments, additional indebtedness, liens, capital expenditures, changes in the nature of our business, mergers, acquisitions, asset sales and
transactions with affiliates.

Borrowings
under our credit facility bear interest at variable interest rates. We entered into various interest rate swap agreements which are detailed in Note 7 of the condensed
consolidated financial statements for the three months ended March 31, 2008. As a result of these swap agreements, as of March 31, 2008, approximately 50% of our indebtedness bore
interest at fixed rates rather than variable rates. After these interest rate swap agreements expire, our annual debt service obligations on such portion of the term loans will vary from year to year
unless we enter into a new interest rate swap or purchase an interest rate cap or other interest rate hedge. To the extent interest rates increase in the future, we may not be able to enter into new
interest rate swaps or to purchase interest rate caps or other interest rate hedges on acceptable terms.

Spinco
issued and we assumed in the merger $551.0 aggregate principal amount of 131/8% Senior Notes. The notes mature on April 1, 2018 and are not redeemable at our
option prior to April 1, 2013. Interest is payable on the notes semi-annually in cash on April 1 and October 1 of each year. The notes bear interest at a fixed rate of
131/8% and principal is due at maturity. These notes were issued at a discount, and accordingly, at the date of their distribution, the notes had a carrying value of
$539.8 million (principal amount at maturity of $551.0 million less discount of $11.2 million).

The
indenture governing the notes limits our ability to incur additional indebtedness and issue certain preferred stock; or repurchase our capital stock or subordinated debt; make
investments; create certain liens; sell certain assets or merge or consolidate with or into other companies; incur restriction

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on
the ability of our subsidiaries to make distributions or transfer assets to us; and enter into transactions with affiliates.

In
connection with the transactions, we used borrowings under our credit facility as well as cash on hand to repay in full an aggregate of $684 million of outstanding loans under
our old credit facility which bore interest at the Eurodollar rate plus 2.0% per annum, to redeem all $2.1 million aggregate principal amount of Legacy FairPoint's 117/8% senior
notes due 2013 (which were redeemed on May 1, 2008) and to repay in full $1.9 million aggregate principal amount of senior secured floating rate notes and fixed notes issued by two of
our operating subsidiaries which bore interest at a range of 8.2% to 9.2%.

For
the three months ended March 31, 2008 and 2007, net cash (used in) provided by operating activities of continuing operations was $(0.3) million and
$45.7 million, respectively.

Net
cash used in investing activities of continuing operations was $13.1 million and $28.4 million for the three months ended March 31, 2008 and 2007, respectively.
These cash flows primarily reflect capital expenditures of $24.6 million and $36.2 million for the three month ended March 31, 2008 and 2007, respectively. Net cash used in
investing activities also includes acquired cash of $11.6 million for the three months ended March 31, 2008.

Net
cash provided by (used in) financing activities from continuing operations was $24.3 million and $(17.3) million for the three months ended March 31, 2008 and
2007, respectively. For the three months ended March 31, 2008, net proceeds from FairPoint's issuance of long-term debt were $1,636 million, repayment of
long-term debt was $685.4 million and dividends to stockholders was $1,160 million. The dividend was paid to Verizon by Spinco in connection with the merger.

We
expect our annual maintenance capital expenditures will be approximately $180 million to $190 million in the first full year following the closing of the merger. We
expect to spend approximately $120 million to $130 million in 2008, primarily on network and system upgrades related to the integration of the Spinco business. In addition, pursuant to
the orders issued by the state regulatory authorities in connection with the merger, we expect to spend approximately $53 million in the next twelve months to expand our broadband availability
in Maine, New Hampshire and Vermont. We anticipate that we will fund these expenditures through cash flow from operations, borrowings under the delayed draw term loan facility of our credit facility
and, if necessary, borrowings under the revolving credit facility of our credit facility.

In
addition, as a condition to the approval of the transactions by state regulatory authorities, we have agreed to make additional capital expenditures following the completion of the
merger. As a condition to the approval of the transactions by the state regulatory authority in Maine, we agreed that, following the closing of the merger, we will make capital expenditures in Maine
during the first three years after the closing of $48 million in the first year and an average of $48 million in the first two years and $47 million in the first three years. We
are also required to expend over a five year period not less than $40 million on equipment and infrastructure to expand the availability of broadband services in Maine, which is expected to
result in capital expenditures in Maine in excess of the minimum capital expenditure requirements described above.

The
order issued by the state regulatory authority in Vermont also requires us to make capital expenditures in Vermont during the first three years after the closing of the merger in the
amount of $41 million for the first year and averaging $40 million per year in the first two years and $40 million per year in the first three years following the closing.
Pursuant to the Vermont order, we are required to remove double poles in Vermont, make service quality improvements and address certain broad-band buildout commitments under a performance
enhancement plan in Vermont, using, in the case of double pole removal, $6.7 million provided by the Verizon Group and, in the case of service quality improvements under the performance
enhancement plan, $25 million provided by the Verizon Group.

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In
Vermont, we have also agreed to certain broadband buildout milestones that requires us to reach 100% broadband availability in 50% of our exchanges in Vermont, which could result in capital
expenditures of $44 million in addition to the minimum capital expenditures required by the Vermont order as set forth above.

We
are also required to make capital expenditures in New Hampshire of at least $52 million during each of the first three years after the closing of the merger and
$49 million during each of the fourth and fifth years after the closing of the merger. The amount of any shortfall in any year must be expended in the following year, and the amount of any
excess in any year may be deducted from the amount required to be expended in the following year. If any shortfall in any year exceeds $3 million, then the amount that we are required to spend
in the following year shall be increased by 150% of the amount of such shortfall. If there is any shortfall at the end of the fifth year after the closing of the merger, we will be required to spend
150% of the amount of such shortfall at the direction of the New Hampshire Public Utilities Commission. The New Hampshire Public Utilities Commission may require that a portion of these increased
capital expenditures be directed toward state programs rather than invested in our assets. We are required to spend at least $56.4 million over the 60-month period following the
closing of the merger on broadband infrastructure in New Hampshire, which is expected to result in capital expenditures in New Hampshire in excess of the minimum capital expenditure requirements
described above. We also have the availability of $49.2 million contributed to us by the Verizon Group to make capital expenditures in New Hampshire in addition to those described above for
unexpected infrastructure improvements proposed by us and approved by the New Hampshire Public Utilities Commission.

Our
ability to service our indebtedness will depend on our ability to generate cash in the future. Scheduled amortization payments will begin on the term loan A facility of our credit
facility in 2009, on the term loan B facility of our credit facility in 2010 and on the delayed draw facility in 2011. No principal payments are due on the notes prior to their maturity. We will need
to refinance all or a portion of our indebtedness on or before maturity and may not be able to refinance our indebtedness on commercially reasonable terms or at all.

We
entered into a letter agreement with Capgemini on January 17, 2008, as amended on February 28, 2008. This agreement, as amended, provides that, if, following the nine
month anniversary of the consummation of the merger, we continue to receive or request certain services under the transition services agreement, Capgemini will pay an amount not to exceed
$49.5 million of such fees for the tenth through the twelfth months, if applicable, following the consummation of the merger. In exchange for the payment of any fees under the transition
services agreement, we expect that we would issue to Capgemini shares of our preferred stock in an amount equal to the aggregate amount of such fees paid by Capgemini. The preferred stock would have a
6.75% cumulative annual dividend in year one and an 8.75% cumulative annual dividend in year two and each succeeding year, which dividend would be payable in additional shares of preferred stock. The
preferred stock issued to Capgemini would be non-voting, would not be convertible and would have no other rights or preferences. The preferred stock would be redeemable after we meet
certain financial tests and after the expiration or termination of the transition services agreement.

We
believe that cash generated from operations and borrowings under our credit facility will be sufficient to meet our debt service, dividend, capital expenditures, and employee benefit
plan obligations and other working capital requirements for the next twelve months, and to complete the back office and systems integration. We may consider additional capital expenditures if cash is
available beyond these requirements and we believe they are beneficial. Subject to restrictions in the agreements governing our indebtedness, we may incur more indebtedness for working capital,
capital expenditures, dividends, acquisitions and for other purposes. In addition, we may require additional financing or may be required to reduce our dividend payments if our results of operations
or plans materially change in
an adverse manner or prove to be materially inaccurate. Additional financing, even if permitted under the terms of the agreements governing our indebtedness, may not be available on terms acceptable
to us or at all.

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The following contractual obligations table represents a summary of future repayments of long-term debt obligations and related interest expense
resulting from the issuance of long-term debt as of March 31, 2008. Our management is currently in the process of evaluating the capital and operating leases of the Company and
negotiating certain contracts necessary to our operations. The capital and operating lease obligations included in the following contractual obligations table are our current obligations:

|                                                   |  | Payments Due by Period |           | 
|-------------------------------------------------- |  | ---------------------- | --------- | 
|
|
|Long-term debt, including current maturities(a)    |  | $                      | 2,188,550 | 
|Interest payments on long-term debt
obligations(b) |  |                        | 1,386,435 | 
|Capital lease obligations                          |  |                        | 16,790    | 
|Operating leases                                   |  |                        | 28,088    | 
|                                                   |  |                        |           | 
|Total projected contractual obligations            |  | $                      | 3,619,863 | 
|                                                   |  |                        |           | 

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The
following table discloses aggregate information about our derivative financial instruments as of March 31, 2008, the source of fair value of these instruments
and their maturities.

|                      |                                     | Fair Value of Contracts at Period-End
|--------------------- | ----------------------------------- | -------------------------------------
|
|
|Source of fair value: |                                     |                                      
|                      | Derivative financial instruments(1) |                                      
|                      |                                     |                                      

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Item 3.    Quantitative and Qualitative Disclosures about Market Risk.

As of March 31, 2008, approximately 50% of our indebtedness bore interest at fixed rates or effectively at fixed rates. As of March 31, 2008, we had
total debt of $2,177 million consisting of both fixed rate and variable rate debt with interest rates ranging from 5.5% to 13.125% per annum, including applicable margins. As of
March 31, 2008, the fair value of our debt was approximately $2,177 million. Our term loan A facility and revolver mature in 2014, our term loan B facility and delayed draw term loan
mature in 2015 and the notes mature in 2018.

We
use variable and fixed-rate debt to finance our operations, capital expenditures and acquisitions. The variable-rate debt obligations expose us to variability
in interest payments due to changes in interest rates. We believe it is prudent to limit the variability of a portion of our interest payments. To meet this objective, from time to time, we enter into
interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk. These swaps change the variable-rate cash flow exposure on the debt obligations to
fixed cash flows. Under the terms of the interest rate swaps, we pay a variable interest rate plus an additional payment if the variable rate payment is below a contractual rate, or we receive a
payment if the variable rate payment is above the contractual rate. Pursuant to our credit facility, we are required to reduce the risk of interest rate volatility with respect to at least 50%of our
term loan borrowings.

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The
chart below provides details of each of our interest rate swap agreements.

|Effective Date:   |  | Notional Amount |  | Rate |   | Rate, including
applicable margin |   | Expiration Date  
|----------------- |  | --------------- |  | ---- | - | --------------------------------- | - | -----------------
|February 8, 2005  |  | $130.0 Million  |  | 3.98 | % | 6.73                              | % | December 31, 2008
|February 8, 2005  |  | $130.0 Million  |  | 4.11 | % | 6.86                              | % | December 31, 2009
|April 29, 2005    |  | $50.0 Million   |  | 4.72 | % | 7.47                              | % | March 31, 2012   
|June 30, 2005     |  | $50.0 Million   |  | 4.69 | % | 7.44                              | % | March 31, 2011   
|June 30, 2006     |  | $50.0 Million   |  | 5.36 | % | 8.11                              | % | December 31, 2009
|December 31, 2007 |  | $65.0 Million   |  | 4.91 | % | 7.66                              | % | December 30, 2011
|December 31, 2007 |  | $75.0 Million   |  | 5.46 | % | 8.21                              | % | December 31, 2010
|December 31, 2008 |  | $100.0 Million  |  | 5.02 | % | 7.77                              | % | December 31, 2010
|December 31, 2009 |  | $150.0 Million  |  | 5.65 | % | 8.40                              | % | December 31, 2011
|June 30, 2008     |  | $100.0 Million  |  | 4.99 | % | 7.74                              | % | December 30, 2010
|June 30, 2008     |  | $100.0 Million  |  | 4.95 | % | 7.70                              | % | June 30, 2010    
|June 30, 2008     |  | $100.0 Million  |  | 5.45 | % | 8.20                              | % | December 31, 2010
|June 30, 2008     |  | $100.0 Million  |  | 5.30 | % | 8.05                              | % | December 30, 2010
|June 30, 2008     |  | $100.0 Million  |  | 4.50 | % | 7.25                              | % | December 31, 2010
|June 30, 2008     |  | $100.0 Million  |  | 4.50 | % | 7.25                              | % | December 31, 2010
|December 31, 2010 |  | $300.0 Million  |  | 4.49 | % | 7.24                              | % | December 31, 2012
|June 30, 2008     |  | $250.0 Million  |  | 3.25 | % | 6.00                              | % | December 31, 2010

At
March 31, 2008, the fair market value of these swaps was a liability of approximately $74.7 million, of which $27.1 million has been included in other current
liabilities and $47.6 million has been included in other long-term liabilities. Our Annual Report on Form 10-K for the year ended December 31, 2007
contains information about market risks under "Item 7A. Quantitative and Qualitative Disclosures about Market Risk."

Our
earnings are affected by changes in interest rates as our long-term indebtedness under our credit facility has variable interest rates based on either the prime rate or
LIBOR. If interest rates on our variable rate indebtedness (excluding variable rate indebtedness which has its interest rate effectively fixed under interest rate swap agreements) outstanding at
March 31, 2008 increased by 10%, our interest expense would have increased, and our income before taxes would have decreased, by approximately $1.5 million for the three months ended
March 31, 2008.

We
do not hold or issue derivative financial instruments for trading or speculative purposes.

Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, we carried out an evaluation, under the supervision and with the participation of our management,
including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our "disclosure controls and procedures" (as defined in Rule 13a-15(e) of the Exchange
Act). Disclosure controls and procedures are controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

Based
upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that
information required to be disclosed by us in this Quarterly Report has been recorded, processed, summarized and reported within the time periods specified in the rules of the SEC and
(b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated
and communicated to our management,

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including
our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls over Financial Reporting

We continue to update our internal controls over financial reporting as necessary to accommodate any modifications to our business processes or accounting
procedures. During the quarter ended March 31, 2008, there have been no changes that have materially affected, or are reasonably likely to materially affect, our internal controls over
financial reporting, except as indicated below.

On
March 31, 2008, we completed the acquisition of Spinco, which was accounted for as a "reverse acquisition" with Spinco being the acquirer for accounting purposes. As a result
of the transaction, certain process-level controls covered by this report have been developed and executed by Verizon. Some of these controls will continue to be executed by Verizon in accordance with
the transition services agreement. Our management has extended our overall financial reporting controls to evaluate the output from these processes, as well as existing FairPoint processes.

In
our Annual Report on Form 10-K for the year ended December 31, 2007, we disclosed that our management determined that our internal controls over financial
reporting were not effective as of December 31, 2007, because our management oversight and review procedures designed to monitor the effectiveness of control activities in the northern New
England division of Legacy FairPoint, which was formed in 2007 to handle transactions relating to the merger, were ineffective. As a result, errors existed in capitalized software costs, operating
expenses, accounts receivable, prepaid expenses, accounts payable and accrued expenses in our preliminary 2007 consolidated financial statements. These identified errors were corrected prior to the
finalization of those financial statements. During the quarter ended March 31, 2008, we have implemented additional management review procedures, similar to those already performed for all
other divisions, to address the above-referenced material weakness. These procedures include detailed review of the general ledger for the northern New England division, additional reviews of more
complex accounting entries, and detailed review of accounts payable transactions to ensure timely recording of expenses. Based on our evaluation as of March 31, 2008, we believe these
additional procedures have effectively corrected the material weakness that was identified as of December 31, 2007, and that no material weakness exists as of March 31, 2008.

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PART IIOTHER INFORMATION

Item 1.    Legal Proceedings.

From time to time, we are involved in other litigation and regulatory proceedings arising out of our operations. Management believes that we are not currently a
party to any legal proceedings, the adverse outcome of which, individually or in the aggregate, would have a material adverse effect on our financial position or results of operations.

Item 1A.    Risk Factors

The risk factors presented below amend and restate the risk factors previously disclosed in Item 1A of our Annual Report on Form 10-K
for the year ended December 31, 2007.

Any
of the following risks could materially adversely affect our business, consolidated financial condition, results of operations or liquidity or the market price of our common stock.
The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely
affect our business operations.

Risks Related to Our Common Stock and Substantial Indebtedness

Our stockholders may not receive the level of dividends provided for in the dividend policy our board of directors has adopted or any dividends at all.

Our board of directors has adopted a dividend policy which reflects an intention to distribute a substantial portion of the cash generated by our business in
excess of operating needs, interest and principal payments on our indebtedness, dividends on our future senior classes of capital stock, if any, capital expenditures, taxes and future reserves, if
any, as regular quarterly dividends to our stockholders. Our board of directors may, in its discretion, amend or repeal this dividend policy. Our dividend policy is based upon our directors' current
assessment of our business and the environment in which we operate, and that assessment could change based on regulatory, competitive or technological developments (which could, for example, increase
our need for capital expenditures) or new growth opportunities. In addition, future dividends with respect to shares of our common stock, if any, will depend on, among other things, our cash flows,
cash requirements, financial condition, contractual restrictions, provisions of applicable law and other factors that our board of directors may deem relevant. Our board of directors may decrease the
level of dividends provided for in the dividend policy or entirely discontinue the payment of dividends. The orders of the state regulatory authorities approving the merger, the indenture governing
the notes and our credit facility contain significant restrictions on our ability to make dividend payments and the terms of our future indebtedness are expected to contain similar restrictions. In
addition, as a condition to the approval of the transactions by state regulatory authorities, we have agreed that we may not pay annual dividends in excess of approximately $1.03 per share until
certain conditions are satisfied.

There
can be no assurance that we will generate sufficient cash from continuing operations in the future, or have sufficient surplus or net profits, as the case may be, under Delaware
law, or be permitted under the terms of the regulatory orders and the agreements governing our indebtedness to pay dividends on our common stock in accordance with our dividend policy. The reduction
or elimination of dividends may negatively affect the market price of our common stock.

We have substantial indebtedness which could have a negative impact on our financing options and liquidity position, our ability to pay dividends on our
common stock and could prevent us from fulfilling our obligations under our debt obligations, including our credit facility and the notes.

We had approximately $2,177 million of total debt outstanding as of March 31, 2008. In addition, as of March 31, 2008, we had
$394.5 million available for additional borrowing under our credit facility.

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Our
overall leverage and the terms of our financing arrangements could:



In
addition, a substantial portion of our indebtedness, including borrowings under our credit facility, bears interest at variable rates. If market interest rates increase,
variable-rate debt will create higher debt service requirements, which could adversely affect our cash flow. While we may enter into agreements limiting our exposure to higher interest
rates, these agreements may not offer complete protection from this risk.

Despite our indebtedness levels, we may be able to incur substantially more debt. This could further exacerbate the risks associated with our
substantial indebtedness.

We may be able to incur substantial additional indebtedness in the future, including under the $195 million revolver of our credit facility and the
$200 million delayed draw term loan of our credit facility. The terms of our credit facility and the indenture governing the notes do not fully prohibit us from doing so. If new debt is added
to our current debt levels, the related risks we could face would be magnified, including limiting our ability to pay dividends on our common stock. We currently expect that we will borrow
approximately $150 million under the delayed draw term loan during the one-year period following the closing of the merger to fund certain capital expenditures and other expenses
associated with the merger. Any decrease in our revenues (and corresponding reduction in our cash flow) would further increase our leverage.

We are a holding company and rely on dividends, interest and other payments, advances and transfers of funds from our operating subsidiaries and
investments to pay dividends on our common stock and meet our debt service and other obligations.

We are a holding company and conduct no operations. Accordingly, our cash flow and our ability to make payments on, or repay or refinance, our indebtedness, and
to fund planned capital expenditures, dividends and other cash needs will depend largely upon the cash flows of our operating subsidiaries and the payment of funds by those subsidiaries to us in the
form of repayment of loans, dividends, management fees or otherwise. Distributions to us from our subsidiaries will depend on their respective operating results and will be subject to restrictions
under, among other things,



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Our
subsidiaries have no obligation, contingent or otherwise, to pay amounts pursuant to the notes or to make funds available therefor, whether in the form of loans, dividends or other
distributions.

To operate and expand our business, service our indebtedness and meet our other cash needs, we will require a significant amount of cash, which may not
be available to us. We may not generate sufficient funds from operations to pay dividends on our common stock, repay or refinance our indebtedness at maturity or otherwise, or fund our operations.

Our ability to make payments on, or repay or refinance, our debt, and to fund planned capital expenditures, unanticipated capital expenditures, dividends on our
common stock and other cash needs will depend largely upon our future operating performance. Our future operating performance, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our control. In addition, our ability to borrow funds in the future to make payments on our indebtedness will depend on the
satisfaction of the covenants in our credit facility and our other financing arrangements, including the indenture governing the notes, and other agreements we may enter into in the future.
Specifically, we will need to maintain specified financial ratios and satisfy financial condition tests, including a maximum total leverage ratio and minimum interest coverage ratio. Furthermore, our
board of directors has adopted a dividend policy that reflects an intention to distribute a substantial portion of the cash generated by our business in excess of operating
needs, interest and principal payments on our indebtedness, dividends on our future senior classes of capital stock, if any, capital expenditures, taxes and future reserves, if any, as regular
quarterly dividends to our stockholders (subject to restrictions imposed by the regulatory orders approving the merger and the agreements governing our indebtedness). We cannot assure you that our
business will generate sufficient cash flow from operations or that future borrowings will be available to us under our credit facility or from other sources in an amount sufficient to enable us to
pay dividends on our common stock, make payments on our indebtedness or fund our other liquidity needs.

In
addition, we cannot assure you that we would be able to refinance any of our indebtedness, including our credit facility and the notes, on commercially reasonable terms, or at all. If
we are unable to make payments or refinance our debt or obtain new financing under these circumstances, we would have to consider other options, including:



The
credit agreement governing our credit facility and the indenture governing the notes may restrict, or market or business conditions may limit, our ability to take some of these
actions or the effectiveness of these actions. In addition, the orders of the state regulatory authorities approving the spin-off and the merger and certain tax related agreements limit
our ability to engage in certain of these actions following the completion of the spin-off.

Our financing arrangements subject us to various restrictions that could limit our operating flexibility, our ability to make payment on our debt and to
fund dividends on our common stock.

Our financing arrangements contain restrictions, covenants and events of default that, among other things, require us to satisfy certain financial tests and
maintain certain financial ratios and restrict our ability to incur additional indebtedness and to refinance our existing indebtedness. The terms of these financing arrangements impose, and any future
indebtedness may impose, various restrictions and

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covenants
on us that could limit our ability to pay dividends, respond to market conditions, provide for capital investment needs or take advantage of business opportunities by limiting the amount of
additional borrowings we may incur. These restrictions may include compliance with, or maintenance of, certain financial tests and ratios, including minimum interest coverage ratio and maximum
leverage ratio, and may limit or prohibit our ability to, among other things:



These
restrictions on our ability to operate our business could seriously harm our business by, among other things, limiting our ability to take advantage of financing, merger and
acquisition and other corporate opportunities.

Various
risks, uncertainties and events beyond our control could affect our ability to comply with these covenants and maintain these financial tests and ratios. Failure to comply with
any of the covenants in our existing or future financing arrangements would result in a default under those arrangements and under other arrangements containing cross-default provisions. A default
would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt owed to these lenders and to terminate any commitments of
these lenders to lend. Under these circumstances, we might have insufficient funds or other resources to satisfy all our obligations, including our obligations under the notes. In addition, the
limitations imposed by any financing arrangements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing.

Limitations on our ability to use net operating loss carryforwards, and other factors requiring us to pay cash to satisfy our tax liabilities in future
periods, may affect our ability to repay our indebtedness and may affect our ability to pay dividends to our stockholders.

Our initial public offering in February 2005 resulted in an "ownership change" within the meaning of the U.S. federal income tax laws addressing net operating
loss carryforwards, alternative minimum tax credits and other similar tax attributes. Moreover, the merger with Spinco resulted in a further ownership change for these purposes. As a result of these
ownership changes, there are specific limitations on our ability to use these net operating loss carryforwards and other tax attributes from periods prior to the initial public offering and the
merger. Although we do not expect that these limitations will materially affect our U.S. federal and state income tax liability in the near term, it is possible in the future if we were to generate
taxable income in excess of the limitation on usage of net operating loss carryforwards that these limitations could limit our ability to utilize the carryforwards and, therefore, result in an
increase in our U.S. federal and state income tax payments. In addition, in
the future we will be required to pay cash to satisfy our tax liabilities when all of our net operating loss carryforwards have been used or have expired. Limitations on our usage of net operating
loss carryforwards, and other factors requiring us to pay cash taxes in the future, would reduce the funds available to service our debt and pay dividends.

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The price of our common stock may fluctuate substantially, which could negatively affect holders of our common stock.

The market price of our common stock may fluctuate widely as a result of various factors, such as period-to-period fluctuations in our
operating results, the volume of sales of our common stock, developments in the communications industry, the failure of securities analysts to cover our common stock or changes in financial estimates
by analysts, competitive factors, regulatory developments, economic and other external factors, general market conditions and market conditions affecting the stock of communications companies in
particular. Communications companies have in the past experienced extreme volatility in the trading prices and volumes of their securities, which has often been unrelated to operating performance.
High levels of market volatility may have a significant adverse effect on the market price of our common stock. In addition, in the past, securities class action litigation has often been instituted
against companies following periods of volatility in their stock prices. This type of litigation could result in substantial costs and divert management's attention and resources.

Future sales or the possibility of future sales of a substantial amount of our common stock may depress the price of our common stock.

Future sales, or the availability for sale in the public market, of substantial amounts of our common stock could adversely affect the prevailing market price of
our common stock, and could impair our ability to raise capital through future sales of equity securities. The market price of our common stock could decline as a result of sales of a large number of
shares of our common stock in the market or the perception that these sales could occur. These sales, or the possibility that these sales may occur, may also make it more difficult for us to obtain
additional capital by selling equity securities in the future at a time and at a price that we deem appropriate.

We
may issue shares of our common stock, or other securities, from time to time as consideration for future acquisitions and investments. In the event any such acquisition or investment
is significant, the number of shares of our common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be significant. We may also
grant registration
rights covering those shares or other securities in connection with any such acquisitions and investments.

Risks Relating to the Merger

The integration of FairPoint's and Spinco's businesses may not be successful.

The merger is the largest and most significant acquisition we have undertaken. Our management will be required to devote a significant amount of time and
attention to the process of integrating the operations of FairPoint's business and Spinco's business, which will decrease the time they will have to manage our business, service customers, attract new
customers, develop new services or strategies and respond to increasing forms of competition. Due to, among other things, the size and complexity of the Northern New England business and the
activities required to separate Spinco's operations from Verizon's, we may be unable to integrate the Spinco business into FairPoint's operations in an efficient, timely and effective manner. Our
inability to complete this integration successfully could have a material adverse effect on our business, financial condition and results of operations.

All
of the risks associated with the integration process could be exacerbated by the fact that we may not have a sufficient number of employees to integrate FairPoint's and Spinco's
businesses or to operate our business. Furthermore, Spinco offers services that we have no experience in providing, the most significant of which are competitive local exchange carrier wholesale
services. Our failure or inability to hire or retain employees with the requisite skills and knowledge to run the combined business, may have a material adverse effect on our business. The inability
of our management to manage the integration process effectively, or any significant interruption of business activities as a result of the integration process, could have a material adverse effect on
our business, financial condition and results of operations.

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The cutover from the Verizon systems utilized to provide services under the transition services agreement to our own systems may be delayed, which could
result in additional costs to us.

If we continue to require transition services agreement services from Verizon beyond the projected six month period, we will incur an additional cost of
$16.4 million per month for months seven and eight. Since the transition services agreement permits us to cutover only every other month, a delay at the end of the initial six month period
would result in at least two additional months of service under the transition services agreement.

In
addition, if we continue to require services from Verizon under the transition services agreement after the one-year anniversary of the closing of the merger, the fees
payable by us to Verizon pursuant to the transition services agreement will increase significantly, which could have a material adverse effect on our business, financial condition and results of
operations. The aggregate fees expected to be payable by us under the transition services agreement for the six-month period following the merger are approximately $132.9 million.
However, if we require twelve or eighteen months of transition services following the merger, the aggregate fees expected to be payable will be approximately $226.9 million or
$336.3 million, respectively.

We
have agreed to the appointment of an independent third-party monitor for the cutover process contemplated by the transition services agreement. The monitor will consult with
representatives of the Department of Public Service in Vermont, the Maine Public Utilities Commission and the New Hampshire Public Utilities Commission. The monitor will evaluate our testing and
cutover readiness process to evaluate our readiness to support our operations after the cutover from the systems that will be provided by the Verizon Group during the period of the transition services
agreement and could disagree with the timing of our decision to implement the cutover, which could delay the cutover. Any delay caused by the evaluation and approval process would result in the
payment of monthly fees to Verizon for an additional period and limits our ability to introduce new services.

The integration of FairPoint's and Spinco's businesses may present significant systems integration risks, including risks associated with the ability to
convert from Spinco's customer sales, service and support operations platforms into our new customer care, service delivery and network monitoring and maintenance platforms.

We are required to identify, acquire or develop, test, implement, maintain and manage systems and processes which provide the functionality performed for the
Northern New England business by over 600 systems of Verizon. Of these Verizon systems, approximately one third relate to customer sales, service and support. Another third of the Verizon systems
support network monitoring and related field operations. The remaining Verizon systems enable finance, payroll, logistics and other administrative activities. Over 80% of the information systems used
in support of the Northern New England business are Verizon proprietary systems.

We
have entered into a master services agreement with an independent consulting firm to assist in the identification and conversion of systems to be deployed following the merger. Our
collective experience and knowledge, together with that of the consulting firm (during the term of the master services agreement) and Verizon (during the pre-closing period and the period
of the transition services agreement), will be essential to the success of the integration. The parties' inability or failure to implement successfully their plans and procedures or the insufficiency
of those plans and procedures could result in failure of or delays in the merger integration and could adversely impact our business, results of operations and financial condition. This could require
us to acquire and deploy additional systems, extend the transition services agreement and pay increasing monthly fees under the transition services agreement.

Our
ability to complete the transition from Verizon's systems to our systems could be further delayed or affected by the appointment by regulatory authorities in Maine, New Hampshire and

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Vermont
of an independent third-party monitor to certify if we are ready to transition off of Verizon's systems to our own back office systems. Any delay would result in the payment of monthly fees to
Verizon for an additional period and will limit our ability to introduce new services.

The
failure of any of our systems could result in our inability to adequately bill and provide service to our customers or meet our financial and regulatory reporting obligations, which
could have a material adverse effect on our business, financial condition and results of operations. We are also implementing new systems to provide for and meet financial and regulatory reporting
obligations. A failure of these systems could impair our ability to meet our financial and regulatory reporting obligations.

We may not realize the anticipated cost savings and growth opportunities from the merger.

The success of the merger will depend, in part, on our ability to realize the anticipated cost savings and growth opportunities from integrating FairPoint's and
Spinco's businesses. Our success in realizing these cost savings and growth opportunities, and the timing of this realization, depends on the successful integration of Spinco's and FairPoint's
businesses and operations. Even if we are able to integrate the FairPoint and Spinco businesses successfully, this integration may not result in the realization of the full benefits of cost savings
and growth opportunities that we currently expect from this integration within the anticipated time frame or at all. For example, we may be unable to eliminate duplicative costs, or the benefits from
the merger may be offset by costs incurred or delays in integrating the businesses.

If our spending exceeds budgeted amounts on network systems integration and planning related to the merger, it could adversely affect our business,
financial condition and results of operations.

We expect to spend approximately $200 million on systems integration pursuant to the master services agreement in connection with the merger,
$76 million of which was spent as of March 31, 2008. Verizon agreed to reimburse us for up to $40 million of pre-closing transition costs. As of March 31, 2008,
Verizon has reimbursed us the full $40 million. If we spend in excess of the budgeted amounts on systems integration and other transition costs, it could adversely affect our business,
financial condition and results of operations.

If the assets transferred to Spinco by the Verizon Group are insufficient to operate our business, it could adversely affect our business, financial
condition and results of operations.

Pursuant to a distribution agreement, referred to as the distribution agreement, the Verizon Group contributed to Spinco and subsidiaries of Spinco
(i) specified assets and liabilities associated with the local exchange business of Verizon New England in Maine, New Hampshire and Vermont, and (ii) the customers of the Verizon Group's
related long distance and Internet service provider businesses in those states. The contributed assets may not be sufficient to operate our business. Accordingly, we may have to use assets or
resources from our business prior to the merger or acquire additional assets in order to operate the Spinco business, which could adversely affect our business, financial condition and results of
operations.

Pursuant
to the distribution agreement, we have certain rights to cause the Verizon Group to transfer to us any assets required to be transferred to Spinco or its subsidiaries under that
agreement which were not transferred as required. If the Verizon Group were unable or unwilling to transfer those assets to us, or the Verizon Group and we were to disagree about whether those assets
were required to be transferred to Spinco under the distribution agreement, we might not be able to obtain those assets or similar assets from others.

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We may be affected by significant restrictions following the merger with respect to certain actions that could jeopardize the tax-free
status of the spin-off or the merger.

The tax sharing agreement restricts us from taking certain actions that could cause the spin-off to be taxable to Verizon under Section 355(e)
of the Internal Revenue Code of 1986, or the Code, or otherwise jeopardize the tax-free status of the spin-off or the merger, which actions the tax sharing agreement refers to
as disqualifying actions, including:



Nevertheless,
we will be permitted to take any of the actions described above in the event that we obtain Verizon's consent, or an opinion of counsel or a supplemental IRS ruling to the
effect that the disqualifying action will not affect the tax-free status of the spin-off and the merger. To the extent that the tax-free status of the transactions
is lost because of a disqualifying action taken by us or any of our subsidiaries after the distribution date, whether or not the required consent, opinion or ruling was obtained, we generally would be
required to indemnify, defend and hold harmless Verizon and its subsidiaries (or any successor to any of them) from and against any resulting tax-related losses incurred by Verizon.

Because
of these restrictions, we may be limited in the amount of capital stock that we can issue to make acquisitions or raise additional capital in the two years subsequent to the
spin-off and merger.

If the spin-off does not constitute a tax-free spin-off under section 355 of the Internal Revenue Code, or
the merger does not constitute a tax-free reorganization under section 368(a) of the Internal Revenue Code, including as a result of actions taken in connection with the
spin-off or the merger or as a result of subsequent acquisitions of stock of Verizon or our stock, then Verizon, us or Verizon stockholders may be responsible for payment of substantial
United States federal income taxes.

The spin-off and merger were conditioned upon Verizon's receipt of a private letter ruling from the Internal Revenue Service to the effect that the
spin-off, including (i) the contribution of specified assets and liabilities associated with the local exchange business of Verizon New England in Maine, New Hampshire and Vermont,
and the customers of the Verizon Group's related long distance and Internet service provider businesses in those states, to Spinco, (ii) the receipt by the Verizon Group of the Spinco
securities and the special cash payment and (iii) the exchange by the Verizon Group of the Spinco securities for Verizon Group debt, will qualify as tax-free to Verizon, Spinco and
the Verizon stockholders for United States federal income tax purposes under Section 355 and related provisions of the Internal Revenue Code, referred to as the Code. The private letter ruling
was issued by the

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Internal
Revenue Service on October 5, 2007. Although a private letter ruling from the Internal Revenue Service generally is binding on the Internal Revenue Service, if the factual
representations or assumptions made in the letter ruling request are untrue or incomplete in any material respect, then Verizon and we will not be able to rely on the ruling.

The
spin-off and merger were also conditioned upon the receipt by Verizon of an opinion of its counsel to the effect that the spin-off will be
tax-free to Verizon, Spinco and the stockholders of Verizon under Section 355 and other related provisions of the Code. The opinion relied on the Internal Revenue Service letter
ruling as to matters covered by the ruling. Lastly, the spin-off and the merger were conditioned on Verizon's receipt of an opinion of its counsel and our receipt of an opinion of our
counsel, each to the effect that the merger would be treated as a tax-free reorganization within the meaning of Section 368(a) of the Code. All of these opinions are based on, among
other things, current law and certain representations and assumptions as to factual matters made by Verizon, Spinco and us. Any change in currently applicable law, which may or may not be retroactive,
or the failure of any factual representation or assumption to be true, correct and complete in all material respects, could adversely affect the conclusions reached by counsel in their respective
opinions. The opinions are not binding on the Internal Revenue Service or the courts, and the Internal Revenue Service or the courts may not agree with the opinions.

The
spin-off would become taxable to Verizon pursuant to Section 355(e) of the Code if 50% or more of the shares of either Verizon common stock or Spinco common stock
(including our common stock, as successor to Spinco) were acquired, directly or indirectly, as part of a plan or series of related transactions that included the spin-off. Because Verizon
stockholders owned more than 50% of our common stock following the merger, the merger, standing alone, did not cause the spin-off to be taxable to Verizon under Section 355(e).
However, if the Internal Revenue Service were to determine that other acquisitions of Verizon common stock or our common stock, either before or after the spin-off and the merger, were
part of a plan or series of related transactions that included the spin-off, this determination could result in the recognition of gain by Verizon under Section 355(e). In that
case, the gain recognized by Verizon likely would be substantial. In connection with the request for the Internal Revenue Service private letter rulings and the opinion of Verizon's counsel, Verizon
represented that the spin-off is not part of any such plan or series of related transactions.

In
certain circumstances, under the tax sharing agreement, we would be required to indemnify Verizon against tax-related losses to Verizon that arise as a result of a
disqualifying action taken by us or our subsidiaries after the distribution (including for two years after the spin-off (i) entering into any agreement, understanding or arrangement
or engaging in any substantial negotiations with respect to any transaction involving the acquisition or issuance of our stock, (ii) repurchasing any shares of our stock, except to the extent
consistent with guidance issued by the Internal Revenue Service, (iii) ceasing or permitting certain subsidiaries to cease the active conduct of the Spinco business and (iv) voluntarily
dissolving, liquidating, merging or consolidating with any other person unless the Company is the survivor of the merger or consolidation, except in accordance with the restrictions in the tax sharing
agreement) or a breach of certain representations and covenants. See "We may be affected by significant restrictions following the merger with respect to certain actions that could
jeopardize the tax-free status of the spin-off and the merger." If Verizon were to recognize a gain on the spin-off for reasons not related to a disqualifying
action or breach by us, Verizon would not be entitled to be indemnified under the tax sharing agreement.

Conditions imposed by state regulatory authorities in connection with their approval of the spin-off and the merger may diminish the
anticipated benefits of the merger.

Completion of the spin-off and the merger required certain government consents, approvals, orders and authorizations. The parties received the
required approvals of the FCC, and of state regulatory authorities.

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However,
the state regulatory authorities in Maine, New Hampshire and Vermont that approved the spin-off and the merger have imposed conditions on us that could have a
material adverse effect on our business, financial condition and results of operations. These conditions include mandatory capital expenditures, minimum service quality standards, commitments to
expand substantially the availability of broadband service and restrictions on our payment of dividends.

Risks Related to Our Business

We provide services to customers over access lines, and if we lose access lines, our business, financial condition and results of operations may be
adversely affected.

We generate revenue primarily by delivering voice and data services over access lines. Legacy FairPoint and the Northern New England business have both
experienced net voice access line losses in the past few years. Legacy FairPoint experienced a 15.3% decline in the number of voice access lines (adjusted for acquisitions and divestitures) for the
period from January 1, 2003 through December 31, 2007 and a 5.2% decline for the period from January 1, 2007 through December 31, 2007. The Northern New England business
experienced a 25.6% decline in number of voice access lines for the period from January 1, 2003 through December 31, 2007 and a 8.5% decline for the period from January 1, 2007
through December 31, 2007. These losses resulted mainly from competition, including competition from bundled offerings by cable companies, and use of alternate technologies and, to a lesser
degree, challenging economic conditions and the offering of DSL services, which prompts some customers to cancel second line service. We believe that the long period between the announcement of the
merger in January 2007 and the closing of the merger also may have contributed to the Northern New England business's voice access line losses. Legacy FairPoint's 2007 revenues from switched access
lines comprised approximately 80% of its total 2007 revenues, down from 89% in 2003. Legacy FairPoint's
revenues from switched access lines have declined by 2.2% from fiscal 2003 to fiscal 2007, while the number of access lines has declined by 13.9% excluding acquisitions. The Northern New England
business's 2007 revenues from switched access lines comprised nearly 77% of total 2007 revenues, down from 84% in 2002. Since 2003, the Northern New England business's revenues from switched access
lines have declined by 10%, while the number of switched access lines has declined by 22.6%. Over this period, the Northern New England business has been able to increase pricing for switched access
line service and has also sold more ancillary services (including high-speed data), partially offsetting the decline in revenues from the lower number of switched access lines.

We
may continue to experience net access line losses. Our inability to retain access lines could adversely affect our business, financial condition and results of operations.

We are subject to competition that may adversely impact our business, financial condition and results of operations.

Many of the competitive threats now confronting large regulated communications companies, such as competition from cable television providers, are more prevalent
in the small urban markets that we serve. Regulations and technology change quickly in the communications industry, and changes in these factors historically have had, and may in the future have, a
significant impact on competitive dynamics. In most of our rural and small urban markets, we face competition from wireless technology, which may increase as wireless technology improves. We may face
increasing competition from cable television operators and additional competition from new market entrants, such as providers of wireless broadband, voice over Internet protocol, referred to as VoIP,
satellite communications and electric utilities. The Internet services market is also highly competitive, and we expect that this competition will intensify. We estimate that as of March 31,
2008, at least a majority of the customers we serve had access to a cable modem offering. Many of our competitors have brand recognition, offer online content services and have financial, personnel,
marketing and other resources that may be significantly

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greater
than ours. Verizon has informed us of its current intention to compete with us by continuing to provide the following services in the northern New England areas in which we operate:



Although
Verizon could compete with us in the offering of long distance services to residences and small businesses, Verizon currently does not actively market the sale of these services
to residences and small businesses in Maine, New Hampshire and Vermont. If we enter into an agreement with Verizon or another wireless services provider to be a mobile virtual network operator,
referred to as an MVNO, we will compete with Verizon to provide wireless services in those areas where the Northern New England business historically operated and Cellco currently operates. In
addition, consolidation and strategic alliances within the communications industry or the development of new technologies could affect our competitive position. We cannot predict the number of
competitors that will emerge, particularly in light of possible regulatory or legislative actions that could facilitate or impede market entry, but increased competition from existing and new entities
could have a material adverse effect on our business, financial condition and results of operations.

Competition
may lead to loss of revenues and profitability as a result of numerous factors, including:



In
addition, our provision of long distance service is subject to a highly competitive market served by large nationwide carriers that enjoy brand name recognition.

During
the term of the transition services agreement, we will also be restricted in our ability to change service offerings, including bundled service offerings and retention programs,
and to modify prices of certain service offerings.

We may not be able to successfully integrate new technologies, respond effectively to customer requirements or provide new services.

Rapid and significant changes in technology and frequent new service introductions occur frequently in the communications industry and industry standards evolve
continually. We cannot predict the effect of these changes on our competitive position, profitability or industry. Technological developments may reduce the competitiveness of our networks and require
unbudgeted upgrades or the procurement of additional products that could be expensive and time consuming. In addition, new products and services arising out of technological developments may reduce
the attractiveness of our services. If we fail to adapt successfully to technological changes or obsolescence or fail to obtain access to important new technologies, we could lose customers and be
limited in our ability to attract new customers and sell new services to our existing customers. Our ability to respond to new technological

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developments
may be diminished or delayed while our management devotes significant effort and resources to integrating FairPoint's business and Spinco's business.

The geographic concentration of our operations in Maine, New Hampshire and Vermont make our business susceptible to local economic and regulatory
conditions, and an economic downturn, recession or unfavorable regulatory action in any of those states may adversely affect our business, financial condition and results of operations.

As of March 31, 2008, approximately 88% of our access line equivalents were located in Maine, New Hampshire and Vermont. As a result of this geographic
concentration, our financial results will depend significantly upon economic conditions in these markets. A deterioration or recession in any of these markets could result in a decrease in demand for
our services and resulting loss of access lines which could have a material adverse effect on our business, financial condition and results of operations.

In
addition, if state regulators in Maine, New Hampshire or Vermont were to take an action that is adverse to our operations in those states, we could suffer greater harm from that
action by state regulators than we would from action in other states because of the concentration of our operations in those states.

To operate and expand our business we will require a significant amount of cash. Our ability to generate cash will depend on many factors beyond our
control. We may not generate sufficient funds from operations to fund our future growth.

A significant amount of our cash flow from operations will be dedicated to capital expenditures and debt service. In addition, we currently expect that we will
distribute a significant portion of our remaining cash flow to our stockholders in the form of quarterly dividends. As a result, we may not retain a sufficient amount of cash to finance growth
opportunities, including acquisitions.

Our business, financial condition and results of operations could be adversely affected if Verizon fails to maintain satisfactory labor relations.

FairPoint is dependent heavily on Verizon during the TSA period and any failure of Verizon to maintain satisfactory labor relations during this period may impact
us and our transition off the TSA.

We face risks associated with acquired businesses and potential acquisitions.

Prior to entering into the merger agreement, we grew rapidly by acquiring other businesses. Subject to restrictions in the tax sharing agreement limiting our
ability to take certain actions during the two years following the spin-off that could jeopardize the tax-free status of the spin-off or merger, we expect that a
portion of our future growth will result from additional acquisitions, some of which may be material. Growth through acquisitions entails numerous risks, including:



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We
may need additional capital to continue growing through acquisitions. This additional capital may be raised in the form of additional debt, which would increase our leverage and could
have an adverse effect on our ability to pay dividends. We may not be able to raise sufficient additional capital on terms that we consider acceptable, or at all.

As
a condition to their approval of the merger, state regulatory authorities in Maine, New Hampshire and Vermont have imposed restrictions on our ability to consummate further business
acquisitions.

We
may not be able to complete successfully the integration of Spinco or other businesses that FairPoint has acquired or successfully integrate any businesses that we might acquire in
the future. If we fail to do so, or if we do so but at greater cost than we anticipated, our business, financial condition and results of operations may be adversely affected.

A network disruption could cause delays or interruptions of service, which could cause us to lose customers.

To be successful, we will need to continue to provide our customers reliable service over our expanded network. Some of the risks to our network and
infrastructure include:



Disruptions
may cause interruptions in service or reduced capacity for customers, either of which could cause us to lose customers and incur expenses.

Our relationships with other communications companies will be material to our operations and their financial difficulties may adversely affect our
future business, financial condition and results of operations.

We originate and terminate calls for long distance carriers and other interexchange carriers over our network. For that service, we receive payments for access
charges. These payments represent a significant portion of our revenues. If these carriers go bankrupt or experience substantial financial difficulties, our inability to then collect access charges
from them could have a negative effect on our business, financial condition and results of operations.

We depend on third parties for our provision of long distance and bandwidth services.

Our provision of long distance and bandwidth services are dependent on underlying agreements with other carriers that provide us with transport and termination
services. These agreements are based, in part, on our estimate of future supply and demand and may contain minimum volume commitments. If we overestimate demand, we may be forced to pay for services
we do not need. If we underestimate demand, we may need to acquire additional capacity on a short-term basis at unfavorable prices, assuming additional capacity is available. If additional
capacity is not available, we will not be able to meet this demand. In addition, if we cannot meet any minimum volume commitments, we may be subject to underutilization charges, termination charges,
or rate increases that may adversely affect our business, financial condition and results of operations.

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Our success will depend on our ability to attract and retain qualified management and other personnel.

Our success depends upon the talents and efforts of our senior management team. None of our senior executives, with the exception of Eugene B. Johnson, our
Chairman and Chief Executive Officer, are employed pursuant to an employment agreement. Mr. Johnson's current employment agreement expires on December 31, 2009. The loss of any member of
our senior management team, due to retirement or otherwise, and the inability to attract and retain highly qualified technical and management personnel in the future, could have a material adverse
effect on our business, financial condition and results of operations.

We will be exposed to risks relating to evaluations of internal control systems required by the Sarbanes-Oxley Act.

As a public reporting company, we are required to comply with the Sarbanes-Oxley Act and the related rules and regulations of the SEC, including accelerated
reporting requirements and expanded disclosures regarding evaluations of internal control systems. We concluded that a material weakness in our internal controls over financial reporting existed as of
December 31, 2007, which we believe was subsequently remediated. Standards established by the Public Company Accounting Oversight Board define a material weakness as a deficiency in internal
controls over financial reporting that results in a reasonable possibility that a material misstatement of a company's annual or interim financial statements will not be prevented or detected on a
timely basis. If our management identifies one or more material weaknesses in internal controls over financial reporting in the future in accordance with the annual assessments and quarterly
evaluations required by the Sarbanes-Oxley Act, we will be unable to assert that our internal controls are effective which could result in sanctions or investigations by regulatory authorities. In
addition, any such material weakness could result in material misstatements in our financial statements and cause investors to lose confidence in our reported financial information.

In
addition, we have begun evaluating our internal control systems with respect to the Spinco business to allow management to report on, and our independent auditors to attest to, the
internal controls of the Spinco business as required by Section 404 of the Sarbanes-Oxley Act. We will be performing the systems and process evaluation and testing (and any necessary
remediation) required to comply with the management certification and independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act. It is
expected that we will be able to implement fully the requirements relating to internal controls and all other aspects of Section 404 with respect to
the Spinco business for the year ending December 31, 2009. Due to the magnitude of the merger and the new processes and controls being developed in conjunction with the integration of the
Spinco business, we may not be able to successfully perform this assessment for the year ending December 31, 2009.

If
we are not able to implement the requirements of Section 404 with respect to the Spinco business in a timely manner or with adequate compliance we might be subject to sanctions
or investigation by regulatory authorities.

Risks Relating to Our Regulatory Environment

We are subject to significant regulations that could change in a manner adverse to us.

We operate in a heavily regulated industry. Laws and regulations applicable to us and our competitors may be, and have been, challenged in the courts, and could
be changed by the U.S. Congress or regulators. In addition, the following factors could have a significant impact on us:

Risk of loss or reduction of network access charge revenues.A portion of our revenues comes from network access charges,
which are paid to us by intrastate and interstate long-distance carriers for originating and terminating calls in the regions served. This also includes universal service support

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payments
for local switching support, long-term support, and interstate common line support. In recent years, several of these long-distance carriers have declared bankruptcy.
Future declarations of bankruptcy by a carrier that utilizes our access services could negatively affect our business, financial condition and results of operations.

The
amount of access charge revenues that we receive is based on rates set by federal and state regulatory bodies, and those rates could change in the future. Further, from time to time
federal and state regulatory bodies conduct rate cases, "earnings" reviews, or make adjustments to price cap formulas that may result in rate changes. In addition, reforms of the federal and state
access charge systems, combined with the development of competition, have caused the aggregate amount of access charges paid by long-distance carriers to decrease. Additional reforms have
been proposed. If any of the currently proposed reforms were adopted by the FCC it would likely involve
significant changes in the access charge system and, if not offset by a revenue replacement mechanism, could potentially result in a significant decrease in or elimination of access charges. Decreases
in or loss of access charges may or may not result in offsetting increases in local, subscriber line or universal service support revenues. Regulatory developments of this type could adversely affect
our business, financial condition and results of operations.

Risk of loss or reduction of Universal Service Fund support.We receive federal universal service support, referred to as the
Universal Service Fund, and in some cases, state universal support, to support our operations in high-cost areas. These federal revenues include universal service support payments for
local switching support, interstate common line support, or interstate access support. High-cost support for the operations conducted by the Northern New England business prior to the
merger, referred to as our non-rural operations or non-rural local exchange carriers, and for FairPoint's traditional, rural local exchange operations, referred to as our rural
operations or rural local exchange carriers, is determined pursuant to different methodologies, aspects of which are now under review. Any changes to the existing rules could reduce the Universal
Service Fund revenues we receive. Corresponding changes in state universal service support could likewise have a negative effect on the revenues we receive.

Further,
the total payments from the Universal Service Fund to our rural operations will fluctuate based upon our rural company average cost per loop compared to the national average
cost per loop and are likely to decline based on historical trends. We also receive other Universal Service Fund support payments including Interstate Access Support in all three of our price cap
study areas (Maine, New Hampshire, and Vermont) and Interstate Common Line Support in our rate-of-return study areas. If we were unable to receive such support, or if that
support was reduced, many of the operations of the Northern New England business would be unable to operate as profitably as they have historically. Moreover, if we raise prices for services to offset
these losses of Universal Service Fund payments, the increased pricing of our services may disadvantage us competitively in the marketplace, resulting in additional potential revenue loss.
Furthermore, any changes in the FCC's rules governing the distribution of such support or the manner in which entities contribute to the Universal Service Fund could have a material adverse effect on
our financial condition and results of operations and on the revenues we receive.

Risk of loss of statutory exemption from burdensome interconnection rules imposed on incumbent local exchange carriers.Our
rural local exchange carriers are exempt from the more burdensome requirements of the Telecommunications Act of 1996, referred to as the 1996 Act, governing the rights of competitors to interconnect
to incumbent local exchange carrier networks and to utilize discrete network elements of the incumbent's network at favorable rates. To the extent state regulators decide that it is in the public
interest to extend some or all of these requirements to our rural local exchange carriers, we would be required to provide unbundled network elements to competitors in our rural telephone company
areas. As a result, more competitors could enter our traditional telephone markets

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than
are currently expected, which could have a material adverse effect on our business, financial condition, and results of operations.

Risks posed by costs of regulatory compliance.Regulations create significant compliance costs for us. Subsidiaries that
provide intrastate services are generally subject to certification, tariff filing, and other ongoing regulatory requirements by state regulators. Our interstate and intrastate access services are
currently provided in accordance with tariffs filed with the FCC and state regulatory authorities, respectively. Challenges in the future to our tariffs by regulators or third parties or delays in
obtaining certifications and regulatory approvals could cause us to incur substantial legal and administrative expenses, and, if successful, these challenges could adversely affect the rates that we
are able to charge our customers.

In
addition, our non-rural operations are subject to regulations not applicable to our rural operations, including but not limited to requirements relating to
interconnection, the provision of unbundled network elements, and the other market-opening obligations set forth in the 1996 Act. In approving the transfer of authorizations to us, the FCC determined
that we would be considered a Bell Operating Company following the completion of the transactions, subject to the same regulatory requirements that currently apply to the other Bell Operating
Companies. The FCC also stated that we would be entitled to the same regulatory relief that Verizon New England has obtained in the region. Any changes made in connection with these obligations could
increase our non-rural operations' costs or otherwise have a material adverse effect on our business, financial condition, and results of operations. Moreover, we cannot predict the
precise manner in which the FCC will apply the Bell Operating Company regulatory framework to us.

State
regulators have also imposed conditions on their approval of the transactions that could adversely affect our business, financial condition or results of operations.

Our
business also may be affected by legislation and regulation imposing new or greater obligations related to assisting law enforcement, bolstering homeland security, minimizing
environmental impacts, protecting customer privacy, or addressing other issues that affect our business. For example, existing provisions of the Communications Assistance for Law Enforcement Act and
FCC regulations implementing that legislation require communications carriers to ensure that their equipment, facilities, and services are able to facilitate authorized electronic surveillance. We
cannot predict whether or to what extent the FCC might modify its Communications Assistance for Law Enforcement Act rules or any other rules or what compliance with those new rules might cost.
Similarly, we cannot predict whether or to what extent federal or state legislators or regulators might impose new security, environmental, or other obligations on our business.

Risk of losses from rate reduction.Our local exchange companies that operate pursuant to intrastate rate of return
regulation are subject to state regulatory authority over their intrastate telecommunications service rates. State review of these rates could lead to rate reductions, which in turn could have a
material adverse effect on our business, financial condition and results of operations.

Regulatory changes in the communications industry could adversely affect our business by facilitating greater competition, reducing potential revenues
or raising our costs.

The 1996 Act provides for significant changes and increased competition in the communications industry, including competition for local communications and long
distance services. This statute and the FCC's implementing regulations could be submitted for judicial review or affected by future rulings of the FCC, thus making it difficult to predict whether the
legislation will have a material adverse effect on our business, financial condition and results of operations and our competitors. Several regulatory and judicial proceedings have concluded, are
underway or may soon be commenced, that address issues affecting our current operations and those of our competitors. We cannot predict the

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outcome
of these developments, nor can there be any assurance that these changes will not have a material adverse effect on us or our industry.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

Unregistered Sales of Equity Securities

We did not sell any unregistered equity securities during the quarter ended March 31, 2008.

Restrictions on Payment of Dividends

Under Delaware law, our board of directors may declare dividends only to the extent of our "surplus" (which is defined as total assets at fair market value minus
total liabilities, minus statutory capital) or, if there is no surplus, out of our net profits for the then current and/or immediately preceding fiscal year.

Our
credit facility restricts our ability to declare and pay dividends on our common stock as follows:



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Our
credit facility also permits us to use available cash to repurchase shares of our capital stock, subject to the same conditions.

The
indenture governing the notes restricts our ability to pay dividends on our common stock as follows:



The
indenture also permits us to use the dividend basket to repurchase shares of our capital stock.

In
addition, the indenture governing the notes permits us to make certain restricted payments, which may include, among other things, the payment of dividends, in an amount not to exceed
$40 million in the aggregate.

The
orders issued by the state regulatory authorities in Maine, New Hampshire and Vermont provide for the following dividend restrictions:



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Item 3.    Defaults Upon Senior Securities.

Not applicable.

Item 4.    Submission of Matters to a Vote of Security Holders.

Not applicable.

Item 5.    Other Information.

Not applicable.

Item 6.    Exhibits.

The exhibits filed as part of this Quarterly Report are listed in the index to exhibits immediately preceding such exhibits, which index to exhibits is
incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Quarterly Report to be
signed on its behalf by the undersigned, thereunto duly authorized, and the undersigned also has signed this Quarterly Report in his capacity as the Registrant's Executive Vice President and Chief
Financial Officer (Principal Financial Officer).

|                   |  |     |  | FAIRPOINT COMMUNICATIONS, INC.
|------------------ |  | --- |  | ------------------------------
|                   |  |     |  |                               
|Date: May 16, 2008 |  | By: |  | /s/JOHN P. CROWLEY            
|                   |  |     |  | Name:  John P. Crowley        
|                   |  |     |  | Title:                        
|                   |  |     |  |                               

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Exhibit Index

|Exhibit No. |  | Description                                                                                                                                                                                                                                              
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1         |  | Agreement and Plan of Merger, dated September 13, 2006, among FairPoint, MJD Ventures, Inc., FairPoint Germantown Corporation and The Germantown Independent Telephone Company.(1)                                                                       
|2.2         |  | Agreement and Plan of Merger, dated as of January 15, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(2)                                                                                                 
|2.3         |  | Amendment No. 1 to the Agreement and Plan of Merger, dated as of April 20, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(2)                                                                            
|2.4         |  | Amendment No. 2 to the Agreement and Plan of Merger, dated as of June 28, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(3)                                                                             
|2.5         |  | Amendment No. 3 to the Agreement and Plan of Merger, dated as of July 3, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(4)                                                                              
|2.6         |  | Amendment No. 4 to the Agreement and Plan of Merger, dated as of November 16, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(5)                                                                         
|2.7         |  | Amendment No. 5 to the Agreement and Plan of Merger, dated as of February 25, 2008, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(6)                                                                         
|2.8         |  | Distribution Agreement, dated as of January 15, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(2)                                                                                                                 
|2.9         |  | Amendment No. 1 to Distribution Agreement, dated as of March 30, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(2)                                                                                                
|2.10        |  | Amendment No. 2 to Distribution Agreement, dated as of June 28, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(2)                                                                                                 
|2.11        |  | Amendment No. 3 to Distribution Agreement, dated as of July 3, 2007, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(2)                                                                                                  
|2.12        |  | Amendment No. 4 to Distribution Agreement, dated as of February 25, 2008, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(6)                                                                                             
|2.13        |  | Amendment No. 5 to the Distribution Agreement, dated as of March 31, 2008, by and between Verizon Communications Inc. and Northern New England Spinco Inc.(7)                                                                                            
|2.14        |  | Transition Services Agreement, dated as of January 15, 2007, by and among Verizon Information Technologies LLC, Northern New England Telephone Operations Inc., Enhanced Communications of Northern New England Inc. and
FairPoint.(2)                   
|2.15        |  | Amendment No. 1 to the Transition Services Agreement, dated as of March 31, 2008, by and among FairPoint, Northern New England Telephone Operations LLC, Enhanced Communications of Northern New England Inc. and Verizon Information
Technologies LLC(7)
|2.16        |  | Master Services Agreement, dated as of January 15, 2007, by and between FairPoint and Capgemini U.S. LLC.(2)                                                                                                                                             
|2.17        |  | Amendment No. 1 to Master Services Agreement, dated as of July 6, 2007, by and between FairPoint and Capgemini U.S. LLC.(4)                                                                                                                              

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|2.18 |  | Amendment No. 2 to Master Services Agreement, dated as of February 25, 2008, by and between FairPoint and Capgemini U.S. LLC.(6)                                                                         
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.19 |  | Letter Agreement, dated as of January 17, 2008, by and between FairPoint and Capgemini U.S. LLC.(8)                                                                                                      
|2.20 |  | Amendment to Letter Agreement, dated as of February 28, 2008, by and between FairPoint and Capgemini U.S. LLC.(9)                                                                                        
|2.21 |  | Employee Matters Agreement, dated as of January 15, 2007, by and among Verizon Communications Inc., Northern New England Spinco Inc. and FairPoint.(2)                                                   
|2.22 |  | Tax Sharing Agreement, dated as of January 15, 2007, by and among FairPoint, Verizon Communications Inc. and Northern New England Spinco Inc.(10)                                                        
|2.23 |  | Partnership Interest Purchase Agreement, dated as of January 15, 2007, by and among Verizon Wireless of the East LP, Cellco Partnership d/b/a Verizon Wireless and Taconic Telephone Corp.(11)           
|2.24 |  | Joinder Agreement, dated as of April 5, 2007, by and among Warwick Valley Telephone Company, Taconic Telephone Corp., Cellco Partnership d/b/a Verizon Wireless and Verizon Wireless of the East LP.(11) 
|2.25 |  | Publishing Agreement, dated as of March 31, 2008, by and between FairPoint and Idearc Media Corp.(7)                                                                                                     
|2.26 |  | Branding Agreement, dated as of March 31, 2008, by and between FairPoint and Idearc Media Corp.(7)                                                                                                       
|2.27 |  | Non-Competition Agreement, dated as of March 31, 2008, by and between FairPoint and Idearc Media Corp.(7)                                                                                                
|2.28 |  | Listing License Agreement, dated as of March 31, 2008, by and between FairPoint and Idearc Media Corp.(7)                                                                                                
|2.29 |  | Intellectual Property Agreement, dated as of March 31, 2008, by and between FairPoint and Verizon Communications Inc.(7)                                                                                 
|2.30 |  | Transition Period Trademark License Agreement, dated as of March 31, 2008, by and between FairPoint and Verizon Communications Inc.(7)                                                                   
|3.1  |  | Eighth Amended and Restated Certificate of Incorporation of FairPoint.(12)                                                                                                                               
|3.2  |  | Amended and Restated Bylaws of FairPoint.(12)                                                                                                                                                            
|4.1  |  | Indenture, dated as of March 6, 2003, by and between FairPoint and The Bank of New York, relating to FairPoint's $225,000,000 117/8% Senior Notes due 2010.(13)                                          
|4.2  |  | Supplemental Indenture, dated as of January 20, 2005, by and between FairPoint and The Bank of New York, amending the Indenture dated as of March 6, 2003 between FairPoint and The Bank of New York.(12)
|4.3  |  | Form of Initial Senior Note due 2010.(13)                                                                                                                                                                
|4.4  |  | Form of Exchange Senior Note due 2010.(13)                                                                                                                                                               
|4.5  |  | Indenture, dated as of March 31, 2008, by and between Northern New England Spinco Inc. and U.S. Bank National Association.(7)                                                                            
|4.6  |  | First Supplemental Indenture, dated as of March 31, 2008, by and between FairPoint Communications, Inc. and U.S. Bank National Association.(7)                                                           

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|4.7   |  | Registration Rights Agreement, dated as of March 31, 2008, by and among FairPoint Communications, Inc., Banc of America Securities LLC, Lehman Brothers Inc. and Morgan Stanley & Co. Incorporated.(7)                                                                                                                                                                                                                                                                                                       
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.8   |  | Form of 131/8% Senior Note due 2018 (included in Exhibit 4.6).(7)                                                                                                                                                                                                                                                                                                                                                                                                                                            
|10.1  |  | Credit Agreement, dated as of March 31, 2008, by and among FairPoint, Northern New England Spinco Inc., Bank of America, N.A, as syndication agent, Morgan Stanley Senior Funding, Inc. and Deutsche Bank Securities Inc., as
co-documentation agents, and Lehman Commercial Paper Inc., as administrative agent and lenders party thereto.(7)                                                                                                                                                               
|10.2  |  | Subsidiary Guaranty, dated as of March 31, 2008, by and among FairPoint Broadband, Inc., MJD Ventures, Inc., MJD Services Corp., S T Enterprises, Ltd., FairPoint Carrier Services, Inc., FairPoint Logistics, Inc. and
Lehman Commercial Paper Inc.(7)                                                                                                                                                                                                                                                      
|10.3  |  | Pledge Agreement, dated as of March 31, 2008, by and among FairPoint, MJD Ventures, Inc., MJD Services Corp., S T Enterprises, Ltd., FairPoint Carrier Services, Inc., FairPoint Broadband, Inc., FairPoint Logistics, Inc.,
Enhanced Communications of Northern New England, Inc., Utilities, Inc., C-R Communications, Inc., Comerco, Inc., GTC Communications, Inc., St. Joe Communications, Inc., Ravenswood Communications, Inc., Unite
Communications Systems, Inc. and Lehman Commercial Paper Inc.(7)
|10.4  |  | Deposit Agreement, dated as of March 31, 2008, by and among Northern New England Telephone Operations LLC, Telephone Operating Company of Vermont LLC and Lehman Commercial Paper Inc.(7)                                                                                                                                                                                                                                                                                                                    
|10.5  |  | Amended and Restated Tax Sharing Agreement, dated as of November 9, 2000, by and among FairPoint and its Subsidiaries.(14)                                                                                                                                                                                                                                                                                                                                                                                   
|10.6  |  | Affiliate Registration Rights Agreement, dated as of February 8, 2005.(12)                                                                                                                                                                                                                                                                                                                                                                                                                                   
|10.7  |  | Amended and Restated Employment Agreement, dated as of April 1, 2008, by and between FairPoint and Eugene B. Johnson.(15)                                                                                                                                                                                                                                                                                                                                                                                    
|10.8  |  | Form of Performance Unit Award Agreement 2008-2009 Award (Performance Unit Award, dated as of April 1, 2008, by and between FairPoint and Eugene B. Johnson).(15)                                                                                                                                                                                                                                                                                                                                            
|10.9  |  | Form of Performance Unit Award Agreement 2008 Award.*                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.10 |  | Change in Control and Severance Agreement, dated as of March 14, 2007, by and between FairPoint and Walter E. Leach, Jr.(16)                                                                                                                                                                                                                                                                                                                                                                                 
|10.11 |  | Change in Control and Severance Agreement, dated as of March 14, 2007, by and between FairPoint and Peter G. Nixon.(16)                                                                                                                                                                                                                                                                                                                                                                                      
|10.12 |  | Change in Control and Severance Agreement, dated as of March 14, 2007, by and between FairPoint and Shirley J. Linn.(16)                                                                                                                                                                                                                                                                                                                                                                                     
|10.13 |  | Change in Control and Severance Agreement, dated as of March 14, 2007, by and between FairPoint and John P. Crowley.(16)                                                                                                                                                                                                                                                                                                                                                                                     
|10.14 |  | FairPoint Amended and Restated 1998 Stock Incentive Plan.(17)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.15 |  | FairPoint Amended and Restated 2000 Employee Stock Incentive Plan.(18)                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.16 |  | FairPoint 2005 Stock Incentive Plan.(12)                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.17 |  | FairPoint Annual Incentive Plan.(19)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|10.18 |  | Form of February 2005 Restricted Stock Agreement.(19)                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|10.19 |  | Form of Director Restricted Stock Agreement.(20)                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|10.20 |  | Form of Director Restricted Unit Agreement.(20)                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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|10.21 |  | Form of Non-Director Restricted Stock Agreement.(21)                                                                                                      
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|10.22 |  | Stipulation filed with the Maine Public Utilities Commission, dated December 12, 2007.(22)                                                                
|10.23 |  | Amended Stipulation filed with the Maine Public Utilities Commission dated December 21, 2007(7)                                                           
|10.24 |  | Stipulation filed with the Vermont Public Service Board, dated January 8, 2008.(23)                                                                       
|10.25 |  | Stipulation filed with the New Hampshire Public Utilities Commission, dated January 23, 2008.(8)                                                          
|10.26 |  | Letter Agreement, dated as of March 30, 2008, by and between the Staff of the New Hampshire Public Utilities Commission and Verizon Communications Inc.(7)
|21    |  | Subsidiaries of FairPoint.*                                                                                                                               
|31.1  |  | Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                      
|31.2  |  | Certification as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*                                                                      
|32.1  |  | Certification required by 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                     
|32.2  |  | Certification required by 18 United States Code Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*                     
|99.2  |  | Order of the Maine Public Utilities Commission, dated February 1, 2008.(25)                                                                               
|99.3  |  | Order of the Vermont Public Service Board, dated February 15, 2008.(26)                                                                                   
|99.4  |  | Order of the New Hampshire Public Utilities Commission, dated February 25, 2008.(6)                                                                       

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