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UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
      Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934.For the fiscal year ended
    December 31, 2007.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 001-32408
      FairPoint Communications,
    Inc.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Delaware

13-3725229(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)521 East Morehead Street,  Suite 250
    Charlotte, North Carolina(Address of Principal
    Executive Offices)

28202(Zip
    code)       Registrants Telephone Number, Including Area Code:
 (704) 344-8150.
  Securities registered pursuant to Section 12(b) of the
    Act:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, par value $0.01 per share

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Act:
 None
   o þ
  o þ
  þ o
  o
   o þ o
  o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE







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ANNUAL
    REPORT ON
    FORM 10-K
    FOR THE YEAR ENDED DECEMBER 31, 2007
  Item



PageNumber



NumberIndex


iPART I1.


Business


21A.


Risk Factors


211B.


Unresolved Staff Comments


402.


Properties


403.


Legal Proceedings


404.


Submission of Matters to a Vote of Security
    Holders


40PART II5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


416.


Selected Financial Data


477.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


487A.


Quantitative and Qualitative Disclosures about
    Market Risk


688.


Financial Statements and Supplementary Data


699.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure


1089A.


Controls and Procedures


1089B.


Other Information


111PART III10.


Directors, Executive Officers and Corporate
    Governance


11211.


Executive Compensation


11212.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


11213.


Certain Relationships and Related Transactions,
    and Director Independence


11214.


Principal Accounting Fees and Services


112PART IV15.


Exhibits, Financial Statement Schedules


113Signatures


114Exhibit Index


115EX-2.18: AMENDMENT TO LETTER AGREEMENTEX-21: SUBSIDIARIES OF FAIRPOINTEX-23.1: CONSENT OF KPMG LLPEX-23.2: CONSENT OF DELOITTE & TOUCHE LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATIONEX-32.2: CERTIFICATIONEX-99.1: AUDITED FINANCIAL STATEMENTS   i




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PART I  CAUTIONARY
    NOTE REGARDING FORWARD-LOOKING STATEMENTS
    
    future performance generally;
    material adverse changes in economic and industry conditions and
    labor matters, including workforce levels and labor
    negotiations, and any resulting financial or operational impact,
    in the markets we serve;
    our dividend policy and expectations regarding dividend payments;
    restrictions imposed by the agreements governing our
    indebtedness;
    anticipated cost savings from the proposed merger with a
    subsidiary of Verizon Communications Inc.;
    anticipated business development activities and future capital
    expenditures;


    financing sources and availability, and future interest expense;
    availability of net operating loss carryforwards to offset
    anticipated tax liabilities;
    material technological developments and changes in the
    communications industry, including disruption of our
    suppliers provisioning of critical products or services;
    use by customers of alternative technologies;
    availability and levels of regulatory support payments;
    the effects of regulation, including restrictions and
    obligations imposed by federal and state regulators as a
    condition to approvals needed to consummate the merger with a
    subsidiary of Verizon Communication Inc.;
    the effects of competition on the markets we serve; and
    changes in accounting assumptions that regulatory agencies,
    including the Securities and Exchange Commission, or the SEC,
    may require or that result from changes in the accounting rules
    or their application, which could result in an impact on
    earnings.  Forms 10-K, 10-Q 8-K
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ITEM 1.
    BUSINESS  Except as otherwise required by the context, references in
    this Annual Report to FairPoint, our
    company, we, us, or
    our refer to the combined business of FairPoint
    Communications, Inc. and all of its subsidiaries. Except as
    otherwise required by the context, all references to the
    Company refer to FairPoint Communications, Inc.
    excluding its subsidiaries.
  Our
    Business
          Recent
    Developments
  Merger
   2




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Distribution,
    Spin-Off and Notes Offering
    
    issue additional shares of Spinco common stock to the Verizon
    Group, referred to as the distribution;
    pay a special $1,160 million cash payment to the Verizon
    Group; and
    issue senior notes due 2018 in an aggregate principal amount of
    approximately $540 million, or the notes, to the Verizon
    Group.       3




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New
    Credit Facility
  non-amortizing
    Other
    Agreements
  and/or
  Regulatory
    Conditions
      
    a 35% reduction in the rate of dividends to be paid by us
    following the merger (as compared to the dividend rate paid by
    us since our initial public offering in 2005), which could be
    effective for up to ten years following the merger unless we
    meet certain financial conditions set forth in the orders, and
    our repayment of debt related to the merger until the date these
    requirements and other requirements terminate as set forth in
    the orders, referred to as the termination of conditions date,
    with funds that would otherwise be available to pay dividends;
    restrictions on our ability to pay dividends beginning with the
    third full fiscal quarter following the closing of the merger,
    if we are unable to satisfy specified financial ratio tests set
    forth in the orders;
    a requirement that we limit the cumulative amount of our
    dividend to not more than the cumulative adjusted free cash flow
    generated by us after the closing of the merger;
    a requirement that if on December 31, 2011, our ratio of
    total indebtedness to adjusted EBITDA is 3.6 or higher, then we
    will reduce our debt by $150 million by December 31,
    2012, and if our debt is not reduced by $150 million by
    December 31, 2012, then we will suspend the payment of
    dividends until the debt under the new credit facility is
    refinanced; 4




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
    the required capital contribution of approximately
    $316.2 million by the Verizon Group;
    requirements that we make (a) average capital expenditures
    in Maine of $48 million, $48 million and
    $47 million, respectively in the first three years
    following the closing, (b) average capital expenditures in
    New Hampshire of $52 million each of the first three years
    following the closing and $49 million in each of the fourth
    and fifth years following the closing, (c) $50 million
    in additional capital expenditures in New Hampshire on other
    network improvement expenditures approved by the New Hampshire
    Public Utilities Commission, referred to as the NHPUC, using an
    equivalent portion of the required capital contribution provided
    by the Verizon Group, and (d) capital expenditures in
    Vermont of $41 million for the first year and averaging
    $40 million per year for the first two years and
    $40 million averaged for the first three years following
    the closing;
    a requirement that we remove double poles in Vermont, make
    service quality improvements and address certain broadband
    buildout commitments under a performance enhancement plan in
    Vermont; and it in the case of double pole removal and service
    quality improvements under the performance enhancement plan
    using funds, including up to $6.7 million and
    $25.0 million, respectively, provided by the Verizon Group
    as part of the required capital contribution;
    a requirement that we pay annually the greater of
    $45 million or 90% of our annual free cash flow (defined as
    the cash flow remaining after all operating expenses, interest
    payments, tax payments, capital expenditures, dividends and
    other routine cash expenditures have occurred) to reduce the
    principal amount of the term loan portion of our new credit
    facility;
    requirements that we expand substantially the availability of
    broadband service (such as DSL) to specified levels in each of
    Maine, New Hampshire and Vermont; and
    a requirement that the Verizon Group pay $15 million to us
    for each of the first and second years after the closing of the
    merger if in either such year our line losses in New Hampshire
    are greater than 10%.        Amendment
    to Our Existing Credit Facility
   5




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Our
    Services
   6




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Generation
    of Revenue
        Local
    Calling Services
    Network
    Access Charges
    Intrastate Access Charges.
  Interstate Access Charges.
  Universal
    Service Fund High Cost Loop
   7




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Long
    Distance Services
    Data
    and Internet Services
  dial-up, e-mail 24-hour, 7-day
  Other
    Services
    Cable TV and Video.
  Enhanced Services. store-and-forward
  Billing and Collection.
  Directory Services.
  Our
    Markets
     8




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State

Access Line EquivalentsMaine


65,947Florida


54,919New York


51,652Washington


46,788Ohio


14,928Missouri


14,783Virginia


8,538Vermont


8,025Kansas


7,287Illinois


7,256Idaho


6,884Pennsylvania


6,515Oklahoma


4,289Colorado


3,899Other States(1)


4,067Total:


305,777     (1)
    
    Includes Massachusetts, New Hampshire, Georgia and Alabama.  Sales and
    Marketing
          Information
    Technology and Support Systems
   9




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Network
    Architecture and Technology
    and/or
  and/or
    Competition
      
    the offering of long distance services and prepaid calling card
    services and the resale of local exchange service;
    the offering of products and services to business and government
    customers other than as the incumbent local exchange carrier,
    including but not limited to carrier services, data customer
    premises equipment and software, structured cabling, call center
    solutions and the products and services formerly offered by MCI,
    Inc.; and
    the offering of wireless voice, wireless data and other wireless
    services. 10




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Wireless
    Competition
    Wireline
    Competition
      Voice
    Over Internet Protocol Competition
    Internet
    Competition
   11




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Long
    Distance Competition
    Other
    Competition
    Employees
      Intellectual
    Property
    Regulatory
    Environment
      Federal
    Regulation
   12




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Interstate
    Access Charges
        Universal
    Service Support
     13




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Universal
    Service Contributions
    Local
    Service Competition
   14




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15




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Long-Distance
    Operations
    Other
    Obligations Under Federal Law
        Broadband
    and Internet Regulation
     16




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Computer Inquiry
    State
    Regulation
        Regulatory
    Conditions to the Merger
   17




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
    a 35% reduction in the rate of dividends to be paid by us
    following the merger (as compared to the dividend rate paid by
    us since our initial public offering in 2005), which could be
    effective for up to ten years following the merger unless we
    meet certain financial conditions set forth in the orders, and
    our repayment of debt related to the merger until the
    termination of conditions date with funds that would otherwise
    be available to pay dividends;
    restrictions on our ability to pay dividends beginning with the
    third full fiscal quarter following the closing of the merger if
    we are unable to satisfy specified financial ratio tests set
    forth in the orders;
    a requirement that we limit the cumulative amount of our
    dividend to not more than the cumulative adjusted free cash flow
    generated by us after the closing of the merger;
    a requirement that if on December 31, 2011, our ratio of
    total indebtedness to adjusted EBITDA is 3.6 or higher, then we
    will reduce our debt by $150 million by December 31,
    2012, and if our debt is not reduced by $150 million by
    December 31, 2012, then we will suspend the payment of
    dividends until the debt under the new credit facility is
    refinanced;
    the required capital contribution of approximately
    $316.2 million by the Verizon Group;
    requirements that we make (a) average capital expenditures
    in Maine of $48 million, $48 million and
    $47 million, respectively in the first three years
    following the closing, (b) average capital expenditures in
    New Hampshire of $52 million each of the first three years
    following the closing and $49 million in each of the fourth
    and fifth years following the closing, (c) $50 million
    in additional capital expenditures in New Hampshire on other
    network improvement expenditures approved by the NHPUC using an
    equivalent portion of the required capital contribution provided
    by the Verizon Group, and (d) capital expenditures in
    Vermont of $41 million for the first year and averaging
    $40 million per year for the first two years and
    $40 million averaged for the first three years following
    the closing;
    a requirement that we remove double poles in Vermont, make
    service quality improvements and address certain broadband
    buildout commitments under a performance enhancement plan in
    Vermont; and it in the case of double pole removal and service
    quality improvements under the performance enhancement plan
    using funds, up to $6.7 million and $25.0 million,
    respectively, provided by the Verizon Group as part of the
    required capital contribution;
    a requirement that we pay annually the greater of
    $45 million or 90% of our annual free cash flow (defined as
    the cash flow remaining after all operating expenses, interest
    payments, tax payments, capital expenditures, dividends and
    other routine cash expenditures have occurred) to reduce the
    principal amount of the term loan portion of our new credit
    facility;
    requirements that we expand substantially the availability of
    broadband service (such as DSL) to specified levels in each of
    Maine, New Hampshire and Vermont; and
    a requirement that the Verizon Group pay $15 million to us
    for each of the first and second years after the closing of the
    merger if in either such year our line losses in New Hampshire
    are greater than 10%.     18




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Maine 
    Retail Regulation
    Maine 
    Unbundling of Network Elements
   19




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New
    Hampshire
          Vermont
   20




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Local
    Government Authorizations
    Environmental
    Regulations
    Other
    Information
  Form 10-K, Form 10-Q, Form 8-K www.sec.gov 1-800-SEC-0330
 ITEM 1A.  RISK
    FACTORS    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.
   21




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To operate and expand our business, service our indebtedness
    and complete future acquisitions, 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 pay dividends with respect to shares of our
    common stock, repay or refinance our indebtedness at maturity or
    otherwise, to consummate future acquisitions or fund our
    operations.
   22




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Our substantial indebtedness could restrict our ability to
    pay dividends on our common stock and have an adverse impact on
    our financing options and liquidity position.
    
    limiting our ability to pay dividends on our common stock or
    make payments in connection with our other obligations,
    including under our existing credit facility;
    limiting our ability in the future to obtain additional
    financing for working capital, capital expenditures or
    acquisitions;
    causing us to be unable to refinance our indebtedness on terms
    acceptable to us or at all;
    limiting our flexibility in planning for, or reacting to,
    changes in our business and the communications industry
    generally;
    requiring a significant portion of our cash flow from operations
    to be dedicated to the payment of interest and, to a lesser
    extent, the principal on our indebtedness, thereby reducing
    funds available for future operations, dividends on our common
    stock, capital expenditures or acquisitions;
    making us more vulnerable to economic and industry downturns and
    conditions, including increases in interest rates; and
    placing us at a competitive disadvantage compared to those of
    our competitors that have less indebtedness.       23




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In anticipation of the merger, we have spent and will
    continue to spend a significant amount of money on assets and
    services that are not useful in our existing business.
    The Company is a holding company and relies on dividends,
    interest and other payments, advances and transfers of funds
    from its operating subsidiaries and investments to meet its debt
    service and other obligations.
    
    the laws of their jurisdiction of organization;
    the rules and regulations of state regulatory authorities;
    agreements of those subsidiaries;
    the terms of agreements governing indebtedness of those
    subsidiaries; and


    regulatory orders.    Our existing credit facility and other agreements governing
    our indebtedness contain covenants that limit our business
    flexibility by imposing operating and financial restrictions on
    our operations and the payment of dividends.
    
    the incurrence of additional indebtedness and the issuance by
    our subsidiaries of preferred stock;


    the payment of dividends on, and purchases or redemptions of,
    capital stock;
    a number of other restricted payments, including investments; 24




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
    the creation of liens;
    the ability of each of our subsidiaries to guarantee
    indebtedness;
    specified sales of assets;
    the creation of encumbrances or restrictions on the ability of
    our subsidiaries to distribute and advance funds or transfer
    assets to us or any other subsidiary;
    specified transactions with affiliates;
    sale and leaseback transactions;
    our ability to enter lines of business outside the
    communications business; and


    certain consolidations and mergers and sales
    and/or
    transfers of assets by or involving us.            Limitations on usage of 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 pay
    dividends to our stockholders.
   25




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Investors holding shares of our common stock immediately
    prior to the merger will, in the aggregate, have a significantly
    reduced ownership and voting interest after the merger and will
    exercise less influence over management.
    The price of our common stock may fluctuate substantially,
    which could negatively affect holders of our common stock.
    Future sales or the possibility of future sales of a
    substantial amount of our common stock, including as a result of
    the merger, may depress the price of our common stock.
         26




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Our certificate of incorporation and by-laws and several
    other factors could limit another partys ability to
    acquire us and deprive our investors of the opportunity to
    obtain a takeover premium for their securities.
      We may, under certain circumstances, suspend the rights of
    stock ownership the exercise of which would result in any
    inconsistency with, or violation of, any applicable
    communications law.
    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.
     27




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The merger may present significant challenges to our
    management that could divert managements attention from
    day-to-day operations and have a negative impact on our
    business.
    We are subject to competition that may adversely impact our
    business, financial condition and results of operations.
      
    the offering of long distance services and prepaid calling card
    services and the resale of local exchange service;
    the offering of products and services to business and government
    customers other than as the incumbent local exchange carrier,
    including but not limited to carrier services, data customer
    premises equipment and software, structured cabling, call center
    solutions and the products and services formerly offered by MCI,
    Inc.; and
    the offering of wireless voice, wireless data and other wireless
    services.   28




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
    loss of customers (in general, when we lose a customer for local
    service we also lose that customer for all related services);
    reduced usage of our network by our existing customers who may
    use alternative providers for long distance and data services;
    reductions in the prices for our services which may be necessary
    to meet competition;
    and/or
    increases in marketing expenditures and discount and promotional
    campaigns.    We may not be able to successfully integrate new
    technologies, respond effectively to customer requirements or
    provide new services.
  and/or
  Our relationships with other communications companies are
    material to our operations and their financial difficulties may
    adversely affect our business, financial condition and results
    of operations.
    Our business, financial condition and results of operations
    could be adversely affected if we fail to maintain satisfactory
    labor relations.
   29




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We face risks associated with acquired businesses and
    potential acquisitions.
    
    strain on our financial, management and operational resources,
    including the distraction of our management team in identifying
    potential acquisition targets, conducting due diligence and
    negotiating acquisition agreements;
    difficulties in integrating the network, operations, personnel,
    products, technologies and financial, computer, payroll and
    other systems of acquired businesses;
    difficulties in enhancing our customer support resources to
    adequately service our existing customers and the customers of
    acquired businesses;
    the potential loss of key employees or customers of the acquired
    businesses;
    unanticipated liabilities or contingencies of acquired
    businesses;
    unbudgeted costs which we may incur in connection with pursuing
    potential acquisitions which are not consummated;
    failure to achieve projected cost savings or cash flow from
    acquired businesses;
    fluctuations in our operating results caused by incurring
    considerable expenses to acquire businesses before receiving the
    anticipated revenues expected to result from the acquisitions;
    difficulties in finding suitable acquisition candidates;
    difficulties in making acquisitions on attractive terms due to a
    potential increase in competitors; and
    difficulties in obtaining and maintaining any required
    regulatory authorizations in connection with acquisitions.     30




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A network disruption could cause delays or interruptions of
    service, which could cause us to lose customers.
    
    physical damage to access lines;
    wide spread power surges or outages;
    software defects in critical systems; and
    disruptions beyond our control.    Our billing systems may not function properly.
    We depend on third parties for our provision of long distance
    and bandwidth services.
    We may not be able to maintain the necessary rights-of-way
    for our networks.
    Our success depends on our ability to attract and retain
    qualified management and other personnel.
   31




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We may face significant future liabilities or compliance
    costs in connection with environmental and worker health and
    safety matters.
    We are exposed to risks relating to evaluations of controls
    required by Section 404 of the Sarbanes-Oxley Act.
    Sarbanes-Oxley
      We have identified a material weakness in our internal
    controls over financial reporting as of December 31, 2007.
    If we fail to remedy this material weakness, that failure could
    result in material
 32




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misstatements in our financial statements, cause investors to
    lose confidence in our reported financial information and have a
    negative effect on the trading price of our common stock.
    
    Our management oversight and review procedures designed to
    monitor the effectiveness of control activities in our northern
    New England division, which was formed in 2007 to handle
    transactions relating to the merger, referred to as the northern
    New England division, 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.    Risks
    to the Company If the Transactions are Consummated
  The integration of our business and Spincos business
    may not be successful.
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The integration of our business and Spincos business
    may present significant systems integration risks, including
    risks associated with the ability to convert from Spincos
    customer sales, service and support operations platform into our
    new customer care, service delivery and network monitoring and
    maintenance platforms.
        We may not realize the anticipated synergies, cost savings
    and growth opportunities from the merger.
    If the assets transferred to Spinco by Verizon are
    insufficient to operate our business, it could adversely affect
    our business, financial condition and results of operations.
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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.
      Our business, financial condition and results of operations
    may be adversely affected following the merger if we are not
    able to replace certain contracts which will not be assigned to
    Spinco.
      The geographic concentration of our operations in Maine, New
    Hampshire and Vermont following the merger will 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.
      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
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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.
         36




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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.
    
    generally, for two years after the spin-off, taking, or
    permitting any of its subsidiaries to take, an action that might
    be a disqualifying action;
    for two years after the spin-off, 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 capital stock, or options to
    acquire or other rights in respect of our capital stock unless,
    generally, the shares are issued to our qualifying employees or
    retirement plans, each in accordance with safe
    harbors under regulations issued by the Internal Revenue
    Service;
    for two years after the spin-off, repurchasing our capital
    stock, except to the extent consistent with guidance issued by
    the Internal Revenue Service;
    for two years after the spin-off, permitting certain wholly
    owned subsidiaries that were wholly owned subsidiaries of Spinco
    at the time of the spin-off to cease the active conduct of the
    Spinco business to the extent it was conducted immediately prior
    to the spin-off; and
    for two years after the spin-off, voluntarily dissolving,
    liquidating, merging or consolidating with any other person,
    unless the Company is the survivor of the merger or
    consolidation and the transaction otherwise complies with the
    restrictions in the tax sharing agreement.      Risks Related to Our Regulatory Environment
  We are subject to significant regulations that could change
    in a manner adverse to us.
    Risk of loss or reduction of network access
    revenues.
 37




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Risk of loss or reduction of Universal Service Fund
    support.
    Risk of loss of statutory exemption from burdensome
    interconnection rules imposed on incumbent local exchange
    carriers.
  Risks posed by costs of regulatory
    compliance.
 38




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non-rural
          Risk of loss from rate reduction.
  Regulatory changes in the communications industry could
    adversely affect our business by facilitating greater
    competition, reducing potential revenues or raising our
    costs.
     39




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ITEM 1B.
    UNRESOLVED
    STAFF COMMENTS    ITEM 2.
    PROPERTIES      ITEM 3.
    LEGAL
    PROCEEDINGS    ITEM 4.
    SUBMISSION
    OF MATTERS TO A VOTE OF SECURITY HOLDERS   40




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PART II  ITEM 5.
    MARKET
    FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER
    MATTERS AND
    ISSUER PURCHASES OF EQUITY SECURITIES  General
      Year Ended December 31, 2007

High


LowFirst quarter

$
21.41


$
18.38Second quarter


19.18



17.33Third quarter


19.79



14.87Fourth quarter


19.34



13.02   Year Ended December 31, 2006

High


LowFirst quarter

$
14.41


$
10.92Second quarter


14.40



12.91Third quarter


18.10



13.81Fourth quarter


19.74



17.40   and/or
  Per ShareYear Ended

DividendDecember 31, 2007

Declared


Date Declared


Record Date


Date PaidFirst quarter

$
0.39781



March 14, 2007



March 30, 2007



April 17, 2007Second quarter


0.39781



June 14, 2007



June 29, 2007



July 17, 2007Third quarter


0.39781



September 13, 2007



September 28, 2007



October 16, 2007Fourth quarter


0.39781



December 14, 2007



December 31, 2007



January 16, 2008   Per ShareYear Ended

DividendDecember 31, 2006

Declared


Date Declared


Record Date


Date PaidFirst quarter

$
0.39781



March 15, 2006



March 31, 2006



April 18, 2006Second quarter


0.39781



June 21, 2006



July 6, 2006



July 21, 2006Third quarter


0.39781



September 19, 2006



October 3, 2006



October 18, 2006Fourth quarter


0.39781



December 13, 2006



December 29, 2006



January 16, 2007     Performance
    Graph
   41




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##### Table of Contents



Comparison
    of Cumulative Total Return Among FairPoint Communications,
    Inc.,
 NYSE Index and Peer Group Index
  
  Dividend
    Policy and Restrictions
  General
    
    nothing requires us to pay dividends;
    while our current dividend policy contemplates the distribution
    of a substantial portion of our cash 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, this
    policy could be modified or revoked by our board of directors at
    any time;
    the orders issued by the state regulatory authorities in Maine,
    New Hampshire and Vermont impose restrictions on our ability to
    pay dividends following the merger;
    even if our dividend policy was not modified or revoked, the
    actual amount of dividends distributed under this policy and the
    decision to make any distributions are entirely at the
    discretion of our board of directors;
    the amount of dividends distributed is subject to covenant
    restrictions under our existing credit facility and will be
    subject to similar restrictions under our new credit facility
    and the indenture governing the notes;
    the amount of dividends distributed is subject to restrictions
    under Delaware law;
    our stockholders have no contractual or other legal right to
    receive dividends; and 42




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##### Table of Contents




    we may not have enough cash to pay dividends due to changes in
    our cash from operations, distributions we receive from minority
    investments and passive partnership interests, working capital
    requirements
    and/or
    anticipated cash needs.          Restrictions
    on Payment of Dividends
  Delaware
    Law
  and/or
  Existing
    Credit Facility
    
    We may use our cumulative distributable cash to pay dividends,
    but may not in general pay dividends in excess of the amount of
    our cumulative distributable cash. Cumulative
    distributable cash is defined in our existing credit
    facility as the amount of available cash generated
    beginning on April 1, 2005 through the end of the
    Companys most recent fiscal quarter for which financial
    statements are available and a compliance certificate has been
    delivered (a) minus the aggregate amount of dividends paid
    after July 30, 2005 and the aggregate amount of investments
    made after April 1, 2005 using such cash, (b) plus the
    aggregate amount of distributions received from such investments
    (not to exceed the amount originally invested) and
    (c) minus the aggregate principal amount of term loans
    actually repaid (or required to be repaid) on a date of
    determination or the next business day thereafter pursuant to a
    mandatory excess cash flow sweep. Available cash is
    defined in our existing credit facility as Adjusted EBITDA
    (determined without regard to any portion of Adjusted EBITDA
    attributable to merger operating expense add-backs, one-time
    restructuring add-backs and excluded capital expenditure amounts
    pursuant to the terms of the existing credit agreement)
    (a) minus (i) cash interest expense (adjusted for
    amortization and swap interest), (ii) scheduled principal
    payments on indebtedness, (iii) consolidated capital
    expenditures, (iv) investments, (v) cash income taxes,
    and (vi) non-cash items excluded from Adjusted EBITDA and
    paid in cash and (b) plus (i) the cash amount of any
    extraordinary 43




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##### Table of Contents



gains and gains realized on asset sales other than in the
    ordinary course of business and (ii) cash received on
    account of non-cash gains and non-cash income excluded from
    Adjusted EBITDA. Adjusted EBITDA is defined in our
    existing credit facility as Consolidated Net Income (which is
    defined in the existing credit facility and includes
    distributions from investments) (a) plus the following to
    the extent deducted from Consolidated Net Income: provision for
    income taxes, consolidated interest expense, depreciation,
    amortization, losses on sales of assets and other extraordinary
    losses, certain one-time charges recorded as operating expenses
    related to the transactions contemplated by the merger agreement
    and certain other non-cash items, each as defined,
    (b) minus gains on sales of assets and other extraordinary
    gains and all non-cash items increasing Consolidated Net Income.  
    We may not pay dividends if a default or event of default under
    our existing credit facility has occurred and is continuing or
    would exist after giving effect to such payment, if our leverage
    ratio is above 4.50 to 1.00 or if we do not have at least
    $20 million of cash on hand (including unutilized
    commitments under our existing credit facilitys revolving
    facility).      New
    Credit Facility
    
    We may declare and pay dividends, but may not in general pay
    dividends in excess of the amount of our Cumulative
    Distributable Cash. Cumulative Distributable Cash
    will be defined in our new credit facility as the amount of
    Available Cash generated beginning on the first day of the first
    full fiscal quarter ending after the closing date of the merger
    and ending on the last day of the last fiscal quarter for which
    a compliance certificate has been delivered, or the Reference
    Period (a) minus the aggregate amount of Restricted
    Payments (as defined in our new credit facility) paid by us in
    cash during such Reference Period (other than excluded dividend
    payments, certain restricted payments permitted to be made under
    the new credit facility and the payment of dividends by any of
    our subsidiaries to us), (b) minus the aggregate amount of
    Investments (as defined in our new credit facility) made by us
    during such Reference Period, (c) plus the aggregate amount
    of all cash and non-cash returns received from such Investments
    (not to exceed the amount originally invested). Available
    Cash will be defined in our new credit facility as an
    amount of cash equal to (a) the sum of
    (i) $40 million plus (ii) Adjusted Consolidated
    EBITDA, minus (b) the product of (i) 1.4 times
    (ii) Consolidated Interest Expense (as defined in our new
    credit facility), minus (c) the cash cost of any
    extraordinary losses and any losses on asset sales (other than
    in the ordinary course of business), plus (d) the cash
    amount of any extraordinary gains and gains realized on asset
    sales (other than in the ordinary course of business).
    Adjusted Consolidated EBITDA will be defined in our
    new credit facility as Consolidated Net Income (as defined in
    our new credit facility) (a) plus the following add-backs
    to the extent deducted from Consolidated Net Income: provision
    for income taxes; Consolidated Interest Expense; depreciation;
    amortization; losses on asset sales and other extraordinary
    losses; non-cash portion of any retirement or pension plan
    expense incurred; all one-time cash costs and expenses paid with
    respect to advisory services, financing sources and other
    advisors retained prior to the closing date with respect to the
    transactions; cash expenses paid under the TSA; any other
    non-cash charges accrued by us; the acquisition adjustment for
    the Reference Period; and the amount of any permitted junior
    capital issued 44




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##### Table of Contents



by us in accordance with the terms of our new credit facility,
    (b) minus gains on asset sales and other extraordinary
    gains and all non-cash gains and income accrued by us.  
    We may not pay dividends if: (a) a default or event of
    default under our new credit facility has occurred and is
    continuing or would exist after giving effect to such payment;
    (b) our leverage ratio is above 5.00 to 1.00; (c) we
    do not have at least $25 million of cash on hand (including
    unutilized commitments under our new credit facilitys
    revolving facility); and (d) we do not deliver an
    officers certificate on the date of the proposed dividend
    payment certifying that the Cumulative Distributable Cash on
    such date exceeds the aggregate amount of the proposed dividend;
    provided that notwithstanding the foregoing restrictions,
    we will be permitted to make regular quarterly dividends payable
    for the fiscal quarter in which the closing date occurs (which
    payment may be made after the closing date) and the first and
    second full fiscal quarters following the closing date so long
    as the aggregate amount of the dividend payments does not exceed
    $50 million.    The
    Notes
    
    So long as no event of default has occurred and is continuing
    under the indenture governing the notes, we may pay dividends in
    an amount not to exceed $50.0 million in the aggregate for
    the first two quarterly dividend payments immediately following
    the issue date of the notes; and
    So long as no default or event of default has occurred and is
    continuing under the indenture governing the notes and our
    consolidated leverage ratio (as defined in the indenture
    governing the notes) is at least 5.00 to 1.00, we may pay
    dividends (other than as contemplated by clause (1) above)
    in an amount not to exceed the sum of (i) our consolidated
    cash flow (as defined in the indenture governing the notes) less
    1.4 times our consolidated interest expense (as defined in the
    indenture governing the notes) for the period (taken as one
    accounting period) from the beginning of the first fiscal
    quarter commencing after the issue date of the notes to the end
    of the Companys most recently ended fiscal quarter for
    which financial statements are available, (ii) the net
    proceeds received by the Company since the issue date of the
    notes as a contribution to its common equity capital or from the
    issue or sale of equity interests and (iii) the proceeds
    received from certain investments.  Regulatory
    Orders
      
    a 35% reduction in the rate of dividends to be paid by us
    following the merger (as compared to the dividend rate paid by
    us since our initial public offering in 2005), which could be
    effective for up to ten years following the merger unless we
    meet certain financial conditions set forth in the orders, and
    we repay debt related to the merger until the termination of
    conditions date with funds that would otherwise be available to
    pay dividends; 45




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##### Table of Contents




    restrictions on our ability to pay dividends beginning with the
    third full fiscal quarter following the closing of the merger if
    we are unable to satisfy specified financial ratio tests set
    forth in the orders;
    a requirement that we limit the cumulative amount of our
    dividend to not more than the cumulative adjusted free cash flow
    generated by us after the closing of the merger; and
    a requirement that if on December 31, 2011, our total
    indebtedness to adjusted EBITDA is 3.6 or higher, then we will
    reduce our debt by $150 million by December 31, 2012,
    and if our debt is not reduced by $150 million by
    December 31, 2012, then we will suspend the payment of
    dividends until the debt under the new credit facility is
    refinanced.  Equity
    Compensation Plan Information
    Number of securities





Number of securitiesto be issued upon


Weighted average


remaining availableexercise of


exercise price of


for future issuanceoutstanding options,


outstanding options,


under equityPlan Category

warrants and rights(1)


warrants, and rights(1)


compensation plans(2)Equity compensation plans approved by our stockholders


292,009


$
32.39



274,276Equity compensation plans not approved by our stockholders


0


$
0



0Total


292,009


$
32.39



274,276     (1)
    
    Includes 47,373 options to purchase shares of our common stock
    under the FairPoint Communications, Inc. (formerly MJD
    Communications, Inc.) 1998 Stock Incentive Plan, 208,687 options
    to purchase shares of our common stock under the FairPoint
    Communications, Inc. 2000 Employee Stock Incentive Plan, 7,273
    restricted stock units granted under the FairPoint
    Communications, Inc. 2000 Employee Stock Incentive Plan and
    28,676 restricted units granted under the FairPoint
    Communications, Inc. 2005 Stock Incentive Plan.(2)
    
    Includes 274,276 shares under the FairPoint Communications,
    Inc. 2005 Stock Incentive Plan. Available shares shown above for
    the FairPoint Communications, Inc. 2005 Stock Incentive Plan
    include shares that have become available due to forfeitures or
    have been re-acquired by the Company for any reasons without
    delivery of the stock, as allowed under the terms of the plan.  Purchases
    of Equity Securities by the Company and Affiliated
    Purchasers
  Rule 10b-18(a)(3)
  Unregistered
    Sales of Equity Securities
   46




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##### Table of Contents



ITEM 6.
    SELECTED
    FINANCIAL DATA    Year Ended December 31,2007


2006


2005


2004


2003Statement of Operations:Revenues

$
283,462


$
270,069


$
262,843


$
252,645


$
231,432Operating expenses:Operating expenses(1)


218,560



155,463



143,425



128,804



111,203Depreciation and amortization


50,836



53,236



52,390



50,287



48,089Gain on sale of operating assets


(2,164
)














Total operating expenses


267,232



208,699



195,815



179,091



159,292Income from operations


16,230



61,370



67,028



73,554



72,140Interest expense(2)


(39,662
)


(39,665
)


(46,416
)


(104,315
)


(90,224
)Other income (expense), net(3)


38,243



28,671



(75,156
)


6,926



9,600Income (loss) from continuing operations before income taxes


14,811



50,376



(54,544
)


(23,835
)


(8,484
)Income tax (expense) benefit(4)


(9,093
)


(19,858
)


83,096



(516
)


236Minority interest in income of subsidiaries


(1
)


(2
)


(2
)


(2
)


(2
)Income (loss) from continuing operations


5,717



30,516



28,550



(24,353
)


(8,250
)Income from discontinued operations


297



574



380



671



9,921Net income (loss)


6,014



31,090



28,930



(23,682
)


1,671Redeemable preferred stock dividends and accretion(2)


















(8,892
)Gain on repurchase of redeemable preferred stock


















2,905Net income (loss) attributable to common shareholders

$
6,014


$
31,090


$
28,930


$
(23,682
)

$
(4,316
)Basic shares outstanding


34,752



34,629



31,927



9,468



9,483Diluted shares outstanding


34,980



34,754



31,957



9,468



9,483Basic and diluted earnings (loss) from continuing operations per
    share

$
0.16


$
0.88


$
0.89


$
(2.57
)

$
(1.50
)Cash dividends paid per share

$
1.59


$
1.59


$
1.42


$



$
Operating Data:Capital expenditures

$
59,152


$
32,317


$
28,099


$
36,492


$
33,595Access line equivalents(5)


305,777



311,150



288,899



271,150



264,308Residential access lines


182,182



194,119



188,206



189,668



196,145Business access lines


55,892



57,587



55,410



49,606



50,226High Speed Data subscribers


67,703



59,444



45,283



31,876



17,937Summary Cash Flow Data:Net cash provided by operating activities of continuing
    operations

$
35,829


$
81,766


$
61,682


$
45,975


$
32,834Net cash provided by (used in) investing activities of
    continuing operations


3,819



(27,361
)


(42,807
)


(20,986
)


(54,010
) 47




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##### Table of Contents



Year Ended December 31,2007


2006


2005


2004


2003Net cash used in financing activities of continuing operations


(40,505
)


(54,668
)


(16,647
)


(23,966
)


(1,976
)Balance Sheet Data (at period end):Cash

$
2,942


$
3,805


$
5,083


$
3,595


$
5,603Property, plant and equipment, net


268,890



246,264



242,617



252,262



266,706Total assets


896,467



885,230



908,139



819,136



843,068Total long term debt


624,972



607,986



607,425



810,432



825,560Preferred shares subject to mandatory redemption(6)














116,880



96,699Total stockholders equity (deficit)


161,898



224,719



246,848



(172,952
)


(147,953
)     (1)
    
    Operating expenses for 2007 and 2006 include $52.1 million
    and $2.4 million, respectively, of expenses related to the
    merger.(2)
    
    Interest expense includes amortization of debt issue costs
    aggregating $1.5 million, $1.6 million,
    $1.9 million, $4.6 million and $4.2 million for
    the fiscal years ended December 31, 2007, 2006, 2005, 2004
    and 2003. We prospectively adopted the provisions of Statement
    of Financial Accounting Standards (SFAS) No. 150,
    Accounting for Certain Financial Instruments with
    Characteristics of Liabilities and Equity, effective
    July 1, 2003. SFAS No. 150 required us to
    classify as a long-term liability our series A preferred
    stock and to reclassify dividends and accretion from the
    series A preferred stock as interest expense. Such stock
    was described as Preferred Shares Subject to Mandatory
    Redemption in the consolidated balance sheet and dividends
    and accretion on these shares are included in pre-tax income
    prior to repurchase in 2005 whereas previously they were
    presented as a reduction to equity (a dividend), and, therefore,
    a reduction of net income available to common stockholders. For
    the years ended December 31, 2005, 2004 and 2003, interest
    expense includes $2.4 million, $20.2 million and
    $9.0 million, respectively, related to dividends and
    accretion on preferred shares subject to mandatory redemption.(3)
    
    In 2007, other income (expense) includes a gain on sale of
    investments of $49.5 million resulting primarily from the
    sale of our interests in the Orange County Poughkeepsie Limited
    Partnership and loss on derivative instruments of
    $17.2 million. In 2006, other income (expense) includes
    gains on sales of investments and other assets of
    $14.7 million. In 2005, other income (expense) includes an
    $87.7 million loss on early retirement of debt and loss on
    repurchase of series A preferred stock. In 2004, other
    income (expense) includes a $6.0 million loss for the
    write-off of debt issuance and offering costs associated with an
    abandoned offering of Income Deposit Securities. In 2003, other
    income (expense) includes a $3.5 million gain on the
    extinguishment of debt and a $5.0 million loss for the
    write-off of debt issue costs related to this extinguishment of
    debt.(4)
    
    In 2005, we recorded an income tax benefit of $83.1 million
    which is primarily the result of the recognition of deferred tax
    benefits of $66.0 million from the reversal of the deferred
    tax valuation allowance that resulted from our expectation of
    generating future taxable income following the recapitalization
    that occurred as part of our initial public offering in February
    2005.(5)
    
    Total access line equivalents includes voice access lines and
    high speed data lines, which include DSL lines, wireless
    broadband and cable modem.(6)
    
    In connection with our initial public offering, we repurchased
    all of our series A preferred stock from the holders
    thereof.  ITEM 7.
    MANAGEMENTS
    DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
    OPERATIONS   48




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##### Table of Contents



Overview
           49




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##### Table of Contents



and/or 98-1,
     50




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##### Table of Contents



Revenues
    
    Local calling services.  We receive revenues
    from providing local exchange telephone services, including
    monthly recurring charges for basic service, usage charges for
    local calls and service charges for special calling features.


    Universal Service Fund high-cost loop support.  We receive payments from the Universal Service
    Fund, or USF, to support the high cost of our operations in
    rural markets. This revenue stream fluctuates based upon our
    average cost per loop compared to the national average cost per
    loop. For example, if the national average cost per loop
    increases and our operating costs (and average cost per loop)
    remain constant or decrease, the payments we receive from the
    USF would decline. Conversely, if the national average cost per
    loop decreases and our operating costs (and average cost per
    loop) remain constant or increase, the payments we receive from
    the USF would increase. The national average cost per loop in
    relation to our average cost per loop has increased, and we
    believe that the national average cost per loop will likely
    continue to increase in relation to our average cost per loop.
    As a result, the payments we receive from the USF have declined
    and will likely continue to decline.
    Interstate access revenue.   These revenues are
    primarily based on a regulated return on rate base and recovery
    of allowable expenses associated with the origination and
    termination of toll calls both to and from our customers.
    Interstate access charges to long distance carriers and other
    customers are based on access rates filed with the FCC. These
    revenues also include USF payments for local switching support,
    long term support and interstate common line support.
    Intrastate access revenue.   These revenues
    consist primarily of charges paid by long distance companies and
    other customers for access to our networks in connection with
    the origination and termination of long distance telephone calls
    both to and from our customers. Intrastate access charges to
    long distance carriers and other customers are based on access
    rates filed with the state regulatory agencies.
    Long distance services.   We receive revenues
    from long distance services we provide to our residential and
    business customers. In addition, Carrier Services provides
    communications providers not affiliated with us with wholesale
    long distance services.
    Data and Internet services.   We receive
    revenues from monthly recurring charges for services, including
    HSD, special access, private lines, Internet and other services.
    Other services.   We receive revenues from
    other services, including video services (including cable
    television and video-over  DSL), billing and
    collection, directory services and sale and maintenance of
    customer premise equipment.   51




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##### Table of Contents



Year Ended December 31,


Year Ended December 31,2007


2006


2005


2007


2006


2005Revenue(1) (In thousands)


% of RevenueLocal calling services

$
69,655


$
67,656


$
65,846



24
%


25
%


25
%Universal Service Fund high cost loop


19,090



20,046



19,737



7



7



7Interstate access


71,558



72,404



75,292



25



27



29Intrastate access


41,418



37,340



39,262



15



14



15Long distance services


30,157



24,051



20,940



11



9



8Data and Internet services


33,576



28,199



24,176



12



10



9Other services


18,008



20,373



17,590



6



8



7Total

$
283,462


$
270,069


$
262,843



100
%


100
%


100
%     (1)
    
    Beginning in the second quarter of 2007, we re-categorized
    certain revenues to more accurately reflect the nature of those
    revenues. Prior year amounts were re-categorized to be presented
    on a comparable basis.  Operating
    Expenses
    
    Operating expenses include cash expenses incurred in connection
    with the operation of our central offices and outside plant
    facilities and related operations. In addition to the
    operational costs of owning and operating our own facilities, we
    also purchase long distance services from the regional Bell
    Operating Companies, large independent telephone companies and
    third party long distance providers. In addition, our operating
    expenses include expenses relating to sales and marketing,
    customer service and administration and corporate and personnel
    administration. Also included in operating expenses are non-cash
    expenses related to stock based compensation. Stock based
    compensation consists of compensation charges incurred in
    connection with the employee stock options, stock units and
    non-vested stock granted to our executive officers and
    directors. Operating expenses also include certain costs
    associated with the merger.
    Depreciation and amortization includes depreciation of our
    communications network and equipment and amortization of
    intangible assets.  Acquisitions
    and Dispositions
  
    On July 31, 2007, we completed the sale of the assets of
    Yates City Telephone Company, or Yates, for $2.5 million.
    Yates is located in Yates City, Illinois and had less than 500
    access lines at the time of the sale. We recognized a gain on
    the sale of $2.2 million.
    On January 15, 2007, we entered into the merger agreement
    pursuant to which the Company and Spinco will merge, with the
    Company continuing as the surviving corporation for legal
    purposes. Spinco is a newly formed wholly-owned subsidiary of
    Verizon that will own or indirectly own Verizons local
    exchange and related business activities in Maine, New Hampshire
    and Vermont. For accounting purposes, we expect that we will be
    the acquiree. Consequently, merger related costs have been
    expensed as incurred and our assets and liabilities will be
    recorded at fair value at acquisition.
    On November 15, 2006, we completed a merger with The
    Germantown Independent Telephone Company, or GITC. The merger
    consideration was $10.7 million (or $9.2 million net
    of cash acquired). GITC is a single exchange rural incumbent
    local exchange carrier located in the Village of Germantown,
    Ohio, which served approximately 4,400 access line equivalents
    as of the date of acquisition. 52




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##### Table of Contents




    On August 17, 2006, we completed the purchase of Unite
    Communications Systems, Inc., or Unite, for approximately
    $11.5 million (or $11.4 million net of cash acquired).
    Unite owns ExOp of Missouri, Inc., which is a facilities-based
    voice, data and video service provider located outside of Kansas
    City, Missouri. Unite served approximately 4,200 access lines in
    Kearney and Platte City, Missouri, approximately 50 miles
    north of the Cass County service territory, as of the date of
    acquisition.
    On July 26, 2006, we completed the purchase of the assets
    of Cass County Telephone Company Limited Partnership and LEC
    Long Distance, Inc., or Cass County, for approximately
    $28.7 million. Cass County served approximately 8,600
    access line equivalents, as of the date of acquisition, in
    Missouri and Kansas.
    On May 2, 2005, we completed the acquisition of Berkshire
    Telephone Corporation, or Berkshire, for a purchase price of
    approximately $20.3 million (or $16.4 million net of
    cash acquired). Berkshire is an independent local exchange
    carrier that provides voice communication, cable and internet
    services to over 7,200 access line equivalents, as of the date
    of acquisition, serving five communities in New York State.
    Berkshires communities of service are adjacent to those of
    Taconic Telephone Corp., one of the Companys subsidiaries.
    On September 1, 2005, we completed the acquisition of
    Bentleyville Communications Corporation, or Bentleyville, for a
    purchase price of approximately $11.0 million (or
    $9.3 million net of cash acquired). Bentleyville, which had
    approximately 3,600 access line equivalents as of the date of
    acquisition, provides telecommunications, cable and internet
    services to rural areas of Southwestern Pennsylvania that are
    adjacent to our existing operations in Pennsylvania.  Discontinued
    Operations
     53




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##### Table of Contents



Results
    of Operations
    Year Ended December 31,


Year Ended December 31,


Year Ended December 31,2007


% of revenue


2006


% of revenue


2005


% of revenueRevenues

$
283,462



100.0
%

$
270,069



100.0
%

$
262,843



100.0
%Operating expenses, excluding depreciation and amortization


218,560



77.1



155,463



57.6



143,425



54.6Depreciation and amortization


50,836



17.9



53,236



19.7



52,390



19.9Gain on sale of operating assets


(2,164
)


(0.8
)














Total operating expenses


267,232



94.2



208,699



77.3



195,815



74.5Income from operations


16,230



5.8



61,370



22.7



67,028



25.5Other income (expense):Net gain (loss) on sale of investments and other assets


49,455



17.4



14,740



5.5



(11
)


Interest and dividend income


965



0.3



3,315



1.2



2,499



1.0Interest expense


(39,662
)


(14.0
)


(39,665
)


(14.7
)


(46,416
)


(17.7
)Impairment of investments


















(1,200
)


(0.5
)Equity in net earnings of investees


5,025



1.8



10,616



3.9



11,302



4.3Loss on derivative instruments


(17,202
)


(6.1
)














Other nonoperating, net


















(87,746
)


33.4Total other expense


(1,419
)


(0.5
)


(10,994
)


(4.1
)


(121,572
)


46.3Income (loss) from continuing operations before income taxes


14,811



5.2



50,376



18.6



(54,544
)


(20.8
)Income tax benefit (expense)


(9,093
)


(3.2
)


(19,858
)


(7.3
)


83,096



31.6Minority interest in income of subsidiaries


(1
)






(2
)






(2
)


Income from continuing operations

$
5,717



2.0
%

$
30,516



11.3
%

$
28,550



10.9
%  54




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##### Table of Contents



Year
    Ended December 31, 2007 Compared with Year Ended
    December 31, 2006
  Revenues
    Local calling services.
  Universal Service Fund high-cost loop
    support.
  Interstate access.
  Intrastate access.
  Long distance services.
  Data and Internet services.
  Other services.
  Operating
    Expenses
  Operating expenses, excluding depreciation and
    amortization
 55




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##### Table of Contents



Depreciation and amortization.
  Income from operations.
  Other income (expense).
  Income tax expense.
    Discontinued operations.
  Net income.
  Year
    Ended December 31, 2006 Compared with Year Ended
    December 31, 2005
  Revenues
    Local calling services.
 56




---



##### Table of Contents



Universal Service Fund high-cost loop
    support.
  Interstate access.
  Intrastate access.
  Long distance services.
  Data and Internet services.
  Other services.
  Operating
    Expenses
  Operating expenses, excluding depreciation and
    amortization
    Depreciation and amortization.
  Income from operations.
 57




---



##### Table of Contents



Other income (expense). and/or 1 2 1 2 1 2 1 2 7 8 7 8
  Income tax expense.
      Discontinued operations.
  Net income (loss).
  Liquidity
    and Capital Resources
  Historical
     58




---



##### Table of Contents



59




---



##### Table of Contents



60




---



##### Table of Contents



1 2 1 2 7 8 1 2 1 2
  7 8 7 8 7 8
    O-P Disposition.
       61




---



##### Table of Contents



non-amortizing
    Following
    the Transactions
       62




---



##### Table of Contents



60-month
     63




---



##### Table of Contents



Off-Balance
    Sheet Arrangements
    Summary
    of Contractual Obligations
   64




---



##### Table of Contents



Payments due by periodLess than


1-3


3-5


More thanTotal


1 year


years


years


5 years(Dollars in thousands)Contractual obligations:Long term debt

$
624,972


$
753


$
2,372


$
621,553


$
294Fixed interest payments


124,508



35,204



68,726



20,458



120Variable interest payments


99,135



6,976



37,108



55,051



Operating leases


6,336



1,295



1,575



1,215



2,251Total contractual cash obligations

$
854,951


$
44,228


$
109,781


$
698,277


$
2,665     Fair Value of Contracts at Period-EndTotal


Less than 1 year


1-3 years


3-5 years


More than 5 years(Dollars in thousands)Source of fair value:Derivative financial instruments(1)

$
(34,105
)


(7,035
)


(25,041
)


(2,029
)


     (1)
    
    Fair value of interest rate swaps at December 31, 2007 was
    provided by the counterparties to the underlying contracts using
    consistent methodologies.  Critical
    Accounting Policies
    
    Revenue recognition;
    Allowance for doubtful accounts;
    Accounting for income taxes;
    Valuation of long-lived assets, including goodwill; and
    Accounting for software development costs.  Revenue recognition.
    Allowance for doubtful accounts.
 65




---



##### Table of Contents



Accounting for income taxes.
    Accounting
    For Uncertainty in Income Taxes  an Interpretation of
    FASB Statement No. 109 de-recognition
    Valuation of long-lived assets, including
    goodwill.
  
    significant underperformance relative to expected historical or
    projected future operating results;
    significant regulatory changes that would impact future
    operating revenues;
    significant negative industry or economic trends; and


    significant changes in the overall strategy in which we operate
    our overall business.      Accounting for software development
    costs.
 66




---



##### Table of Contents



98-1, (98-1).
  New
    Accounting Standards
    instrument-by-instrument
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
  Inflation
   67




---



##### Table of Contents



ITEM 7A.
    QUANTITATIVE
    AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK            Rate, includingEffective Date:

Notional Amount


Rate


applicable margin


Expiration DateFebruary 8, 2005

$
130.0 Million



3.98
%


5.73
%


December 31, 2008February 8, 2005

$
130.0 Million



4.11
%


5.86
%


December 31, 2009April 29, 2005

$
50.0 Million



4.72
%


6.47
%


March 31, 2012June 30, 2005

$
50.0 Million



4.69
%


6.44
%


March 31, 2011June 30, 2006

$
50.0 Million



5.36
%


7.11
%


December 31, 2009December 31, 2007

$
65.0 Million



4.91
%


6.66
%


December 30, 2011December 31, 2007

$
75.0 Million



5.46
%


7.21
%


December 31, 2010December 31, 2008

$
100.0 Million



5.02
%


6.77
%


December 31, 2010December 31, 2009

$
150.0 Million



5.65
%


7.40
%


December 31, 2011June 30, 2008*

$
100.0 Million



4.99
%


6.74
%


December 30, 2010June 30, 2008*

$
100.0 Million



4.95
%


6.70
%


June 30, 2010June 30, 2008*

$
100.0 Million



5.45
%


7.20
%


December 31, 2010June 30, 2008*

$
100.0 Million



5.30
%


7.05
%


December 30, 2010June 30, 2008*

$
100.0 Million



4.50
%


6.25
%


December 31, 2010June 30, 2008*

$
100.0 Million



4.50
%


6.25
%


December 31, 2010     *
    
    Contingent upon the closing of the transactions. 68




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##### Table of Contents



ITEM 8.
    FINANCIAL
    STATEMENTS AND SUPPLEMENTARY DATA  INDEX TO
    FINANCIAL STATEMENTS
  PageFAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES:Report of Independent Registered Public
    Accounting Firm


70CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER
    31, 2007, 2006 AND 2005:Consolidated Balance Sheets as of
    December 31, 2007 and 2006


71Consolidated Statements of Operations for the
    Years Ended December 31, 2007, 2006, and 2005


72Consolidated Statements of Stockholders
    Equity (Deficit) for the Years Ended December 31, 2007,
    2006, and 2005


73Consolidated Statements of Comprehensive Income
    (Loss) for the Years Ended December 31, 2007, 2006, and
    2005


74Consolidated Statements of Cash Flows for the
    Years Ended December 31, 2007, 2006, and 2005


75Notes to Consolidated Financial Statements for
    the Years Ended December 31, 2007, 2006, and 2005


77  69




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm           Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement
    No. 109 Share-Based Payment
  Internal Control  Integrated Framework
  KPMG
    LLP
    70




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##### Table of Contents



FAIRPOINT
    COMMUNICATIONS, INC. AND SUBSIDIARIESConsolidated Balance Sheets 
    December 31, 2007 and 2006
    (in thousands, except share data)
  2007


2006AssetsCurrent assets:Cash

$
2,942


$
3,805Current receivables, net


22,705



27,940Other receivables


6,744



593Materials and supplies


5,349



5,128Prepaid and other


4,301



2,631Deferred income tax


4,459



33,648Interest rate swaps






5,425Total current assets


46,500



79,170Property, plant, and equipment, net


268,890



246,264Goodwill


498,725



499,184Investments


6,654



12,057Intangible assets, net


12,257



13,197Debt issue costs, net


6,663



7,574Deferred income tax


56,042



23,830Interest rate swaps






3,190Other


736



764Total assets

$
896,467


$
885,230Liabilities And Stockholders EquityCurrent liabilities:Accounts payable

$
35,256


$
14,337Dividend payable


13,952



13,908Other accrued liabilities


14,120



12,713Accrued interest payable


580



560Accrued bonuses


4,509



3,304Current portion of long-term debt


753



714Demand notes payable


258



312Interest rate swaps


7,035



Liabilities of discontinued operations






486Total current liabilities


76,463



46,334Long-Term Liabilities:Long-term debt, net of current portion


624,219



607,272Interest rate swaps


27,070



Other liabilities


6,810



6,897Total long-term liabilities


658,099



614,169Minority interest


7



8Stockholders equity:Common stock, $0.01 par value, 200,000,000 shares
    authorized, issued and outstanding 35,222,445 shares at
    December 31, 2007 and 35,218,443 at December 31, 2006


352



352Additional paid-in capital


477,625



530,536Accumulated other comprehensive (loss) income, net


(10,548
)


5,376Accumulated deficit


(305,531
)


(311,545
)Total stockholders equity


161,898



224,719Total liabilities and Stockholders Equity

$
896,467


$
885,230    71




---



##### Table of Contents



FAIRPOINT
    COMMUNICATIONS, INC. AND SUBSIDIARIESConsolidated Statements of Operations 
    Years ended December 31, 2007, 2006, and 2005
    (in thousands, except per share data)
  2007


2006


2005Revenues

$
283,462


$
270,069


$
262,843Operating expenses:Operating expenses, excluding depreciation and amortization


218,560



155,463



143,425Depreciation and amortization


50,836



53,236



52,390Gain on sale of operating assets


(2,164
)






Total operating expenses


267,232



208,699



195,815Income from operations


16,230



61,370



67,028Other income (expense):Net gain (loss) on sale of investments and other assets


49,455



14,740



(11
)Interest and dividend income


965



3,315



2,499Interest expense


(39,662
)


(39,665
)


(46,416
)Impairment of investments










(1,200
)Equity in net earnings of investees


5,025



10,616



11,302Loss on derivative instruments


(17,202
)






Other nonoperating, net










(87,746
)Total other expense


(1,419
)


(10,994
)


(121,572
)Income (loss) from continuing operations before income taxes


14,811



50,376



(54,544
)Income tax (expense) benefit


(9,093
)


(19,858
)


83,096Minority interest in income of subsidiaries


(1
)


(2
)


(2
)Income from continuing operations


5,717



30,516



28,550Discontinued operations:Income on disposal of assets of discontinued operations


297



574



380Income from discontinued operations


297



574



380Net income

$
6,014


$
31,090


$
28,930Basic weighted average shares outstanding


34,752



34,629



31,927Diluted weighted average shares outstanding


34,980



34,754



31,957Basic earnings per common share:Continuing operations

$
0.16


$
0.88


$
0.89Discontinued operations


0.01



0.02



0.02Net income

$
0.17


$
0.90


$
0.91Diluted earnings per common share:Continuing operations

$
0.16


$
0.88


$
0.89Discontinued operations


0.01



0.01



0.02Net income

$
0.17


$
0.89


$
0.91    72




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##### Table of Contents





FAIRPOINT
    COMMUNICATIONS, INC. AND SUBSIDIARIESConsolidated Statements of Stockholders
    Equity (Deficit) 
    Years ended December 31, 2007, 2006, and 2005
    (in thousands)
  Accumulated





TotalClass A


Class C


Additional





other





stockholdersCommon Stock


Common


Common


paid-in


Unearned


comprehensive


Accumulated


equityShares


Amount


Shares


Amount


Shares


Amount


capital


compensation


(loss) income


deficit


(deficit)Balance at December 31, 2004










8,643



86



809



8



198,519











(371,565
)


(172,952
)Net income






































28,930



28,930Net proceeds from issuance of common stock


25,000



250



















431,671















431,921Transfer of Class A and Class C to common stock


9,452



94



(8,643
)


(86
)


(809
)


(8
)


















Exercise of stock options


98



1



















183















184Issuance of restricted shares, net of forfeitures


471



5



















8,545



(8,550
)










Recognition of compensation expense


























275



2,075











2,350Dividends declared


























(49,062
)














(49,062
)Other comprehensive income from cash flow hedges


































5,477







5,477Balance at December 31, 2005


35,021


$
350






$







$



$
590,131


$
(6,475
)

$
5,477


$
(342,635
)

$
246,848Net income






































31,090



31,090Issuance of restricted shares


216



2



































2Restricted stock cancelled for withholding tax


(42
)






















(633
)














(633
)Exercise of stock options and restricted units


23























24















24Stock based compensation expense


























2,859















2,859Reclassify unearned compensation


























(6,475
)


6,475











Dividends declared


























(55,370
)














(55,370
)Other comprehensive loss from cash flow hedges


































(101
)






(101
)Balance at December 31, 2006


35,218


$
352






$







$



$
530,536


$



$
5,376


$
(311,545
)

$
224,719Net income






































6,014



6,014Issuance of restricted shares


56



1



































1Restricted stock cancelled for withholding tax


(61
)


(1
)


















(1,127
)














(1,128
)Exercise of restricted units


9







































Stock based compensation expense


























3,966















3,966Dividends declared


























(55,750
)














(55,750
)Other comprehensive loss from cash flow hedges


































(15,924
)






(15,924
)Balance at December 31, 2007


35,222


$
352






$







$



$
477,625


$



$
(10,548
)

$
(305,531
)

$
161,898    73




---



##### Table of Contents





FAIRPOINT
    COMMUNICATIONS, INC. AND SUBSIDIARIESConsolidated Statements of Comprehensive (Loss)
    Income 
    Years ended December 31, 2007, 2006, and 2005
    (in thousands) 2007


2006


2005Net income

$
6,014


$
31,090


$
28,930Other comprehensive (loss) income:Cash flow hedges:Change in net unrealized (loss) gain, net of tax (benefit)
    expense of ($9,618), ($61) and $3,308 for the years ended
    December 31, 2007, 2006 and 2005, respectively


(15,924
)


(101
)


5,477Other comprehensive (loss) income


(15,924
)


(101
)


5,477Comprehensive (loss) income

$
(9,910
)

$
30,989


$
34,407    74




---



##### Table of Contents



FAIRPOINT
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Cash Flows
  Years
    ended December 31, 2007, 2006, and 2005
  (in
    thousands)
  2007


2006


2005Cash flows from operating activities:Net income

$
6,014


$
31,090


$
28,930Adjustments to reconcile net income to net cash provided by
    operating activities of continuing operations:Income from discontinued operations


(297
)


(574
)


(380
)Dividends and accretion on shares subject to mandatory redemption










2,362Depreciation and amortization


50,836



53,236



52,390Loss of preferred stock subject to mandatory redemption










9,899Amortization of debt issue costs


1,538



1,571



1,859Provision for uncollectible revenue


2,733



1,798



3,245Deferred income taxes


7,547



17,474



(84,208
)Income from equity method investments


(5,025
)


(10,616
)


(11,302
)Deferred patronage dividends


(55
)


(1
)


(77
)Minority interest in income of subsidiaries


1



2



2Loss on early retirement of debt










77,847Net (gain) loss on sale of investments and other assets


(49,455
)


(14,740
)


11Gain on sale of operating assets


(2,164
)






Net loss on derivative instruments


17,202







Impairment of investments










1,200Amortization of investment tax credits


(11
)


(12
)


(16
)Stock-based compensation


3,966



2,859



2,350Other non-cash item






(637
)


(212
)Changes in assets and liabilities arising from continuing
    operations, net of acquisitions:Accounts receivable


(3,627
)


5,500



(3,103
)Prepaid and other assets


(1,084
)


(790
)


576Accounts payable


6,494



(1,289
)


(3,428
)Accrued interest payable


20



272



(16,309
)Other accrued liabilities


3,186



(2,647
)


338Income taxes


(867
)


29



(363
)Other assets/liabilities


(1,123
)


(759
)


71Total adjustments


29,815



50,676



32,752Net cash provided by operating activities of continuing
    operations


35,829



81,766



61,682Cash flows from investing activities of continuing operations:Acquisition of telephone properties, net of cash acquired






(49,837
)


(26,258
)Purchase of property, plant, and equipment


(59,152
)


(32,317
)


(28,099
)Proceeds from sale of property, plant, and equipment


371



327



698Distributions from investments


2,672



10,654



10,859Payment on covenants not to compete


(20
)


(20
)


(110
)Acquisition of investments










(12
)Proceeds from sale of operating assets


2,496







Proceeds from sale of investments and other assets


57,452



43,832



115Net cash provided by (used in) investing activities of
    continuing operations


3,819



(27,361
)


(42,807
)   75




---



##### Table of Contents



FAIRPOINT
    COMMUNICATIONS, INC. AND SUBSIDIARIES
  Consolidated
    Statements of Cash Flows (Continued)
  Years ended December 31, 2007, 2006, and 2005
  (in thousands)
  2007


2006


2005Cash flows from financing activities of continuing operations:Proceeds from issuance of long-term debt


163,545



129,200



699,959Repayment of long-term debt


(146,586
)


(128,651
)


(905,675
)Payment of fees and penalties associated with early retirement
    of long term debt










(61,037
)Payment of deferred transaction fee










(8,445
)Payment of tax withholdings on vested restricted shares


(1,127
)






Repurchase of shares of common stock subject to put options










(136
)Repurchase of redeemable preferred stock










(129,141
)Loan origination and offering costs


(628
)






(8,975
)Dividends paid to minority stockholders


(3
)


(4
)


(4
)Proceeds from the exercise of stock options






24



184Net proceeds from issuance of common stock










431,921Dividends paid to common stockholders


(55,706
)


(55,237
)


(35,298
)Net cash used in financing activities of continuing
    operations


(40,505
)


(54,668
)


(16,647
)Cash flows of discontinued operations:Operating cash flows


(6
)


(1,015
)


(740
)Net (decrease) increase in cash


(863
)


(1,278
)


1,488Cash, beginning of year


3,805



5,083



3,595Cash, end of year

$
2,942


$
3,805


$
5,083Supplemental disclosure of cash flow information:Interest paid

$
38,922


$
37,822


$
58,494Income taxes paid, net of refunds

$
2,482


$
2,369


$
946Non-cash capital expenditures

$
14,034


$



$
    76




---



##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes
    to Consolidated Financial Statements
  (1)
    ORGANIZATION,
    PRINCIPLES OF CONSOLIDATION & LIQUIDITY  (a)
    Organization        (b)
    Principles
    of Consolidation and Basis of Presentation    Accounting for the
    Effects of Certain Types of Regulation
   77




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
  (c)
    Liquidity    and/or
   78




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
        (2)
    SUMMARY
    OF SIGNIFICANT ACCOUNTING POLICIES  (a)
    Use of
    Estimates    (b)
    Revenue
    Recognition    bill-and-keep bill-and-keep
   79




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    (c)
    Cash
    and Cash Equivalents    (d)
    Accounts
    Receivable      2007


2006


2005Balance, beginning of period

$
1,815


$
2,121


$
1,255Acquisition adjustments






212



28Provision charged to expense


2,733



1,798



3,245Amounts written off, net of recoveries


(2,422
)


(2,316
)


(2,407
)Balance, end of period

$
2,126


$
1,815


$
2,121   (e)
    Credit
    Risk    (f)
    Investments       80




---



##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
      (g)
    Property,
    Plant, and Equipment    98-1, SOP 98-1. SOP 98-1
  SOP 98-1 .
    (h)
    Debt
    Issue Costs   81




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
      (i)
    Goodwill
    and Other Intangible Assets  Goodwill and Other Intangible Assets,
    (j)
    Impairment
    of Long-lived Assets    (k)
    Income
    Taxes      Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109,
   82




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    (l)
    Interest
    Rate Swap Agreements      Rate, includingEffective Date:

Notional Amount


Rate


applicable margin


Expiration DateFebruary 8, 2005

$
130.0 Million



3.98
%


5.73
%

December 31, 2008February 8, 2005

$
130.0 Million



4.11
%


5.86
%

December 31, 2009April 29, 2005

$
50.0 Million



4.72
%


6.47
%

March 31, 2012June 30, 2005

$
50.0 Million



4.69
%


6.44
%

March 31, 2011June 30, 2006

$
50.0 Million



5.36
%


7.11
%

December 31, 2009December 31, 2007

$
65.0 Million



4.91
%


6.66
%

December 30, 2011December 31, 2007

$
75.0 Million



5.46
%


7.21
%

December 31, 2010December 31, 2008

$
100.0 Million



5.02
%


6.77
%

December 31, 2010December 31, 2009

$
150.0 Million



5.65
%


7.40
%

December 31, 2011      83




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
        (m)
    Stock
    Option Plans  Share-Based Payment
  Accounting for Stock Issued to
    Employees
  (n)
    Business
    Segments  Disclosures
    about Segments of an Enterprise and Related Information,
  (o)
    Earnings
    Per Share  Earnings Per Share.
 84




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    Year ended December 312007


2006


2005Weighted average number of common shares used for basic earnings
    per share


34,752



34,629



31,927Effect of potential dilutive shares


228



125



30Weighted average number of common shares and potential dilutive
    shares used for diluted earnings per share


34,980



34,754



31,957Anti-dilutive shares excluded from the above reconciliation


521



1,579



1,215     (p)
    New
    Accounting Pronouncements    The
    Fair Value Option for Financial Assets and Financial
    Liabilities  Including an Amendment of
    SFAS No. 115 instrument-by-instrument
  Business Combinations
  Noncontrolling Interests in Consolidated Financial
    Statements  an amendment of ARB No. 51
 85




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    (3)
    Certain
    Transactions  (a)
    Merger      (b)
    Initial
    Public Offering     86




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    1 2
  1 2
    (c)
    Dividends      (4)
    Acquisitions
    and Dispositions       87




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
              Current assets

$
3,226Property, plant, and equipment


28,166Investments


869Excess cost over fair value of net assets acquired


16,410Intangible assets


10,000Current liabilities


(5,751
)Other liabilities


(1,913
)Total net purchase price

$
51,007    88




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
      (5)
    Goodwill
    and Other Intangible Assets    Balance, December 31, 2005

$
481,343Acquisition of GITC, Unite and Cass County


16,869Acquisition adjustment to Berkshire goodwill


972Balance, December 31, 2006


499,184Acquisition adjustment to GITC goodwill


(271
)Acquisition adjustment to Unite


(188
)Balance, December 31, 2007

$
498,725       (6) Property,
    Plant, and Equipment
    Estimatedlife


2007


2006(in years)Land





$
4,000


$
4,256Buildings and leasehold improvements


2 -- 40



43,217



41,486Telephone equipment


3 -- 50



719,541



704,146Cable equipment


3 -- 20



13,632



12,190Furniture and equipment


3 -- 34



24,887



22,718Vehicles and equipment


3 -- 20



28,058



27,458Computer software


3 -- 5



9,699



6,880Plant under construction


--



53,335



10,100Total property, plant, and equipment






896,369



829,234Accumulated depreciation






(627,479
)


(582,970
)Net property, plant, and equipment





$
268,890


$
246,264  89




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    (7)
    Investments    2007


2006(in thousands)Equity method investments in cellular companies and partnerships:Orange County  Poughkeepsie Limited Partnership

$



$
5,006Chouteau Cellular Telephone Company


26



28Syringa Networks, LLC


1,645



1,277Other equity method investments


286



961Investments in securities carried at cost:CoBank stock and unpaid deferred CoBank patronage


3,343



3,630RTFC secured certificates and unpaid deferred RTFC patronage


219



263Other nonmarketable minority equity investments


154



166Nonqualified deferred compensation plan assets


981



726Total investments

$
6,654


$
12,057   (a)
    Equity
    Method Investments    2007


2006Chouteau Cellular Telephone Company


33.7
%


33.7
%Orange County  Poughkeepsie Limited Partnership


0.0
%


7.5
%Syringa Networks, LLC


12.56
%


12.56
%     2007


2006


2005Orange County  Poughkeepsie Limited Partnership

$
4,497


$
10,018


$
10,523Syringa Networks, LLC


368



213



81Illinois Valley Cellular RSA 2, Inc.






49



477Other, net


160



336



221Total

$
5,025


$
10,616


$
11,302  90




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    2007


2006


2005Orange County  Poughkeepsie Limited Partnership

$
2,206


$
9,150


$
9,975Chouteau Cellular Telephone Company










40CoBank, ACB


342



1,034



634Distributions from other equity investments


124



470



210Total

$
2,672


$
10,654


$
10,859       March 31, 2007(dollars in thousands)Current assets

$
10,201Property, plant, and equipment, net


39,234Total assets

$
49,435Current liabilities

$
1,386Noncurrent liabilities


330Partners capital


47,719Total liabilities and partners capital

$
49,435   Three Months EndedMarch 31, 2007(dollars in thousands)Operating revenue

$
32,750Operating income


24,656Net income


24,928    91




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
  (b)
    Investments
    in Equity Securities Carried at Cost  Disclosures About Fair Value
    of Financial Instruments,
      (8)
    Long-term
    Debt    2007


20062005 Senior secured notes, variable rates ranging from 7.00% to
    8.53% (weighted average rate of 7.1%) at December 31, 2007,
    due 2011 to 2012

$
621,200


$
603,5002003 Senior notes, 11.875%, due 2010


2,050



2,050Senior notes to RTFC:Fixed rate, ranging from 8.2% to 9.20%, due 2009 to 2014


1,722



2,436Total outstanding long-term debt


624,972



607,986Less current portion


(753
)


(714
)Total long-term debt, net of current portion

$
624,219


$
607,272  92




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    Fiscal year:2008

$
7532009


1612010


2,2102011


32,8712012


588,682Thereafter


295$
624,972   (a)
    2005
    Senior Secured Notes  Debtors Accounting for a Modification
    or Exchange of Debt Instruments
       93




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
  and/or
      
    The Company may use all of its available cash accumulated after
    April 1, 2005 plus certain incremental funds to pay
    dividends, but may not in general pay dividends in excess of
    such amount. Available Cash is defined in the
    existing credit facility as Adjusted Consolidated EBITDA
    (a) minus (i) cash interest expense,
    (ii) repayments of indebtedness other than repayments of
    the revolving facility (unless funded by debt or equity),
    (iii) consolidated capital expenditures (unless funded by
    long-term debt, equity or the proceeds from asset sales or
    insurance recovery events or related to the Merger),
    (iv) cash taxes, (v) cash consideration paid for
    acquisitions (unless funded by debt or equity), (vi) cash
    paid to make certain investments, and (vii) certain
    non-cash items excluded from Adjusted Consolidated EBITDA and
    paid in cash and (b) plus (i) the cash amount of
    extraordinary gains and gains on sales of assets (excluding the
    gain realized on the sale of the Companys investment in
    the Orange County-Poughkeepsie Limited Partnership) and
    (ii) certain non-cash items excluded from Adjusted
    Consolidated EBITDA and received in cash. Adjusted
    Consolidated EBITDA is defined in the existing credit
    facility as Consolidated Net Income (which is defined in the
    existing credit facility and includes distributions from
    investments) (a) plus the following to the extent deducted
    from Consolidated Net Income: provision for income taxes,
    interest expense, depreciation, amortization, losses on sales of
    assets and other extraordinary losses, certain one-time charges
    recorded as operating expenses related to the transactions
    contemplated by the Merger Agreement (subject to an overall cap
    on the amount of such charges which may be added back) and
    certain other non-cash items, and (b) minus, to the extent
    included in Consolidated Net Income, gains on sales of assets
    and other extraordinary gains and all non-cash items.  
    The Company may not pay dividends if a default or event of
    default under the existing credit facility has occurred and is
    continuing or would exist after giving effect to such payment,
    if the Companys leverage ratio is above 5.25 to 1.00 or if
    the Company does not have at least $10.0 million of cash on hand
    (including unutilized commitments under the existing credit
    facilitys revolving facility).    and/or
 94




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
        (b)
    Senior
    Notes Issued in 2003  7 8
          (c)
    Other      (9)
    Redeemable
    preferred stock   95




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
      (10)
    Employee
    Benefit Plans       96




---



##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
  (11)
    Income
    Taxes    2007


2006


2005Current:Federal

$
(240
)

$
(1,422
)

$
State


(1,317
)


(1,456
)


(1,128
)Total current income tax expense from continuing operations


(1,557
)


(2,878
)


(1,128
)Investment tax credits


11



12



16Deferred:Federal


(6,965
)


(15,806
)


78,385State


(582
)


(1,186
)


5,823Total deferred income tax (expense) benefit from continuing
    operations


(7,547
)


(16,992
)


84,208Total income tax (expense) benefit from continuing operations

$
(9,093
)

$
(19,858
)

$
83,096       2007


2006


2005Computed expected Federal tax (expense) benefit from
    continuing operations

$
(5,184
)

$
(17,632
)

$
19,090State income tax (expense) benefit, net of Federal income tax
    expense


(1,235
)


(2,251
)


167Merger transaction costs


(5,543
)






Change in FIN 48 reserve


2,725







Dividends and loss on redemption on preferred stock










(4,291
)Dividends received deduction


15



605



153Rate change










1,585Change in valuation allowance (Federal and state)










66,011Other


129



(580
)


381Total income tax (expense) benefit from continuing operations

$
(9,093
)

$
(19,858
)

$
83,096    97




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    2007


2006Deferred tax assets:Federal and state tax loss carryforwards

$
69,724


$
84,934Employee benefits


1,970



1,756Self insurance reserves


1,096



1,110Allowance for doubtful accounts


806



697Alternative minimum tax and other state credits


4,308



3,210Basis in interest rate swaps


12,880



Total gross deferred tax assets


90,784



91,707Deferred tax liabilities:Property, plant, and equipment


6,090



8,967Goodwill and other intangible assets


24,149



21,189Basis in interest rate swaps






3,240Basis in investments


44



833Total gross deferred tax liabilities


30,283



34,229Net deferred tax assets

$
60,501


$
57,478       Accounting for Uncertainty in Income Taxes  an
    Interpretation of FASB Statement No. 109
 98




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    Balance as of January 1, 2007

$
3,710Additions for tax positions related to the current year


Additions for tax positions of prior years


Reductions for tax positions of prior years


Reductions as a result of audit settlements


(2,725
)Balance as of December 31, 2007

$
985     non-U.S. income
  (12)
    Stockholders
    Equity      (13)
    Stock
    Option Plans   99




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    For The Year ended December 31,2007


2006


2005Amounts charged against income, before income tax benefit

$
3,966


$
2,859


$
2,350Amount of related income tax benefit recognized in income


1,491



1,075



884Total net income impact

$
2,475


$
1,784


$
1,466   (a)
    1995
    Stock Incentive Plan        2007


2006


2005Outstanding at January 1:






18,013



112,265Granted










Exercised






(18,013
)


(94,252
)Forfeited










Outstanding at December 31










18,013Exercisable at December 31, 2007


Stock options available for grant at December 31, 2007


   (b)
    1998
    Stock Incentive Plan     100




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
          WeightedaverageOptions


exerciseoutstanding


priceOutstanding at December 31, 2005


832,888


$
10.80Granted






Exercised






Forfeited






Outstanding at December 31, 2006


832,888



10.80Granted






Exercised






Forfeited


(785,515
)


9.22Outstanding at December 31, 2007


47,373


$
36.94Stock options available for grant at December 31, 2007


   Options outstandingAggregate


Options exercisableNumber


Remaining


Intrinsic


Numberoutstanding at


contractual


Value


exercisable atExercise price


December 31, 2007


life (years)


(In thousands)


December 31, 2007$
36.94



47,373



4.0







47,373     (c)
    2000
    Employee Stock Incentive Plan   101




---



##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
          WeightedaverageOptions


exerciseoutstanding


priceOutstanding at December 31, 2004


240,638


$
36.94Granted






Exercised






Forfeited






Outstanding at December 31, 2005


240,638



36.94Granted






Exercised






Forfeited


(31,563
)


36.94Outstanding at December 31, 2006


209,075



36.94Granted






Exercised






Forfeited


(388
)


36.94Outstanding at December 31, 2007


208,687


$
36.94Stock options available for grant at December 31, 2007


      102




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
  (d)
    2005
    Stock Incentive Plan        WeightedUnits


averageStock units

outstanding


exercise priceOutstanding at December 31, 2004





$
Granted


7,888



16.13Outstanding at December 31, 2005


7,888



16.13Granted


13,017



14.15Outstanding at December 31, 2006


20,905



14.90Granted


12,377



18.86Exercised


(4,017
)


21.41Forfeited


(589
)


21.41Outstanding at December 31, 2007


28,676


$
15.10    103




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##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
    Weightedaverage grantShares


date fair valueNon-vested stock

outstanding


per shareNon-vested at December 31, 2004





$
Granted


523,716



18.16Vested






Forfeited


(53,687
)


18.50Non-vested at December 31, 2005


470,029



18.13Granted


233,926



16.93Vested


(131,721
)


18.17Forfeited


(19,421
)


17.83Non-vested at December 31, 2006


552,813



17.62Granted


57,500



14.66Vested


(204,663
)


17.72Forfeited


(2,009
)


16.33Non-vested at December 31, 2007


403,641


$
17.16     (14)
    Discontinued
    Operations and Restructuring Charges  (a)
    Competitive
    Communications Business Operations     104




---



##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
  (15)
    Quarterly
    Financial Information (Unaudited)  First


Second


Third


Fourthquarter


quarter


quarter


quarter(in thousands, except per share data)2007:Revenue

$
69,672



69,897



75,707



68,186Income (loss) from continuing operations


(33
)


30,779



(5,191
)


(19,838
)Net income (loss)


(33
)


30,779



(5,191
)


(19,541
)Earnings (loss) per share from continuing operationsBasic






0.89



(0.15
)


(0.57
)Diluted






0.89



(0.15
)


(0.57
)Earnings (loss) per shareBasic






0.88



(0.15
)


(0.56
)Diluted






0.88



(0.15
)


(0.56
)2006:Revenue

$
64,791



64,196



70,700



70,382Income from continuing operations


5,720



15,074



5,977



3,745Net income


5,720



15,074



5,977



4,319Earning per share from continuing operationsBasic


0.13



0.44



0.17



0.11Diluted


0.13



0.44



0.17



0.11Earnings per shareBasic


0.13



0.44



0.17



0.12Diluted


0.13



0.44



0.17



0.12       (16)
    Disclosures
    About the Fair Value of Financial Instruments  (a)
    Cash,
    Accounts Receivable, Accounts Payable, and Demand Notes
    Payable    (b)
    Investments     105




---



##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
  (c)
    Long-term
    Debt    (d)
    Limitations    (17)
    Revenue
    Concentrations    (18)
    Revenue
    Settlements  and/or
  (19)
    Related
    Party Transactions     106




---



##### Table of Contents



Fairpoint
    Communications, Inc. and Subsidiaries
  Notes to
    Consolidated Financial Statements (Continued)
  (20)
    Commitments
    and Contingencies  (a)
    Operating
    Leases    ContinuingoperationsYear ending December 31:2008

$
1,2952009


1,0452010


5302011


5822012


633Thereafter


2,251Total minimum lease payments

$
6,336       (b)
    Legal
    Proceedings  Form S-1 and/or
   107




---



##### Table of Contents



ITEM 9.
    CHANGES
    IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
    FINANCIAL DISCLOSURE    ITEM 9A.
    CONTROLS
    AND PROCEDURES  (a)  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
    (b)  Managements
    Report on Internal Control Over Financial
    Reporting
      Internal Control 
    Integrated Framework
  
    Our management oversight and review procedures designed to
    monitor the effectiveness of control activities in the northern
    New England division 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.   108




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm
       Internal Control  Integrated
    Framework
         109




---



##### Table of Contents



Internal Control 
    Integrated Framework
  KPMG
    LLP
    110




---



##### Table of Contents



(c)
    Changes
    in Internal Controls  Rule 13a-15(f)
    ITEM 9B.
    OTHER
    INFORMATION   111




---



##### Table of Contents



PART III  ITEM 10.
    DIRECTORS,
    EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE  Regulation S-K
  ITEM 11.
    EXECUTIVE
    COMPENSATION  Regulation S-K
  ITEM 12.
    SECURITY
    OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
    RELATED STOCKHOLDER MATTERS  Regulation S-K
  ITEM 13.
    CERTAIN
    RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
    INDEPENDENCE  Regulation S-K
  ITEM 14.
    PRINCIPAL
    ACCOUNTING FEES AND SERVICES   112




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##### Table of Contents



PART IV  ITEM 15.
    EXHIBITS,
    FINANCIAL STATEMENT SCHEDULES  (a)
    Financial
    Statements    (b)
    Exhibits   113




---



##### Table of Contents



SIGNATURES    Fairpoint Communications,
    Inc.
   By:
    /s/  Eugene
    B. Johnson   Title:
    Chairman of the Board of Directors and Chief Executive Officer     Signatures

Title

Date/s/  Eugene
    B. JohnsonEugene
    B. Johnson

Chairman of the Board of Directors and Chief Executive Officer
    (Principal Executive Officer)

February 28, 2008/s/  John
    P. CrowleyJohn
    P. Crowley

Executive Vice President and Chief Financial Officer (Principal
    Financial Officer)

February 28, 2008/s/  Lisa
    R. HoodLisa
    R. Hood

Controller (Principal Accounting Officer)

February 28, 2008/s/  Patricia
    Garrison-CorbinPatricia
    Garrison-Corbin

Director

February 28, 2008/s/  David
    L. HauserDavid
    L. Hauser

Director

February 28, 2008/s/  Robert
    S. LilienRobert
    S. Lilien

Director

February 28, 2008/s/  Claude
    C. LillyClaude
    C. Lilly

Director

February 28, 2008/s/  Jane
    E. NewmanJane
    E. Newman

Director

February 28, 2008  114




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Exhibit Index  Exhibit No.

Description2.1

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.(29)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.(29)2.13

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)2.14

Master Services Agreement, dated as of January 15, 2007, by and
    between FairPoint and Capgemini U.S. LLC.(2)2.15

Amendment No. 1 to Master Services Agreement, dated as of July
    6, 2007, by and between FairPoint and Capgemini U.S. LLC.(4)2.16

Amendment No. 2 to Master Services Agreement, dated as of
    February 25, 2008, by and between FairPoint and Capgemini
    U.S. LLC.(29)2.17

Letter Agreement, dated as of January 17, 2008, by and between
    FairPoint and Capgemini U.S. LLC.(6)2.18

Amendment to Letter Agreement, dated as of February 28,
    2008, by and between FairPoint and Capgemini U.S. LLC.*2.19

Employee Matters Agreement, dated as of January 15, 2007, by and
    among Verizon Communications Inc., Northern New England Spinco
    Inc. and FairPoint.(2)2.20

Tax Sharing Agreement, dated as of January 15, 2007, by and
    among FairPoint, Verizon Communications Inc. and Northern New
    England Spinco Inc.(7)2.21

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.(8)2.22

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.(8)3.1

Eighth Amended and Restated Certificate of Incorporation of
    FairPoint.(9) 115




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##### Table of Contents



Exhibit No.

Description3.2

Amended and Restated By Laws of FairPoint.(9)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.(10)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.(9)4.3

Form of Initial Senior Note due 2010.(10)4.4

Form of Exchange Senior Note due 2010.(10)10.1

Credit Agreement, dated as of February 8, 2005, by and among
    FairPoint, various lending institutions, Bank of America, N.A.,
    CoBank ACB, General Electric Capital Corporation and Deutsche
    Bank Trust Company Americas.(9)10.2

First Amendment to Credit Agreement, dated as of March 11, 2005,
    among FairPoint, various lending institutions, Bank of America,
    N.A., CoBank ACB, General Electric Capital Corporation and
    Deutsche Bank Trust Company Americas.(9)10.3

Second Amendment and Consent to Credit Agreement, dated as of
    April 29, 2005, among FairPoint, various lending institutions,
    Bank of America, N.A., CoBank ACB, General Electric Capital
    Corporation and Deutsche Bank Trust Company Americas.(11)10.4

Third Amendment to Credit Agreement, dated as of September 14,
    2005, among FairPoint, various lending institutions, Bank of
    America, N.A., CoBank ACB, General Electric Capital Corporation
    and Deutsche Bank Trust Company Americas.(12)10.5

Fourth Amendment and Waiver to Credit Agreement, dated as of
    January 25, 2007, among FairPoint, various lending institutions,
    Bank of America, N.A., CoBank ACB, General Electric Capital
    Corporation and Deutsche Bank Trust Company Americas.(13)10.6

Fifth Amendment to Credit Agreement, dated as of
    February 25, 2008, among FairPoint, various leading
    institutions, Bank of America, N.A., CoBank ACB, General
    Electric Capital Corporation and Deutsche Bank Trust Company
    Americas.(29)10.7

Pledge Agreement, dated as of February 8, 2005, by FairPoint, ST
    Enterprises, Ltd., FairPoint Broadband, Inc., MJD Services
    Corp., MJD Ventures, Inc., C-R Communications, Inc., Comerco,
    Inc., GTC Communications, Inc., Ravenswood Communications, Inc.,
    Utilities, Inc., FairPoint Carrier Services, Inc. and St. Joe
    Communications, Inc.(9)10.8

Subsidiary Guaranty, dated as of February 8, 2005, by FairPoint
    Broadband, Inc., MJD Ventures, Inc., MJD Services Corp., ST
    Enterprises, Ltd. and FairPoint Carrier Services, Inc.(9)10.9

Form of Swingline Note.(9)10.10

Form of RF Note.(9)10.11

Form of B Term Note.(9)10.12

Amended and Restated Tax Sharing Agreement, dated as of November
    9, 2000, by and among FairPoint and its Subsidiaries.(14)10.13

Affiliate Registration Rights Agreement, dated as of February 8,
    2005.(9)10.14

Employment Agreement, dated as of March 17, 2006, by and between
    FairPoint and Eugene B. Johnson.(15)10.15

Change in Control and Severance Agreement, dated as of March 14,
    2007, by and between FairPoint and Walter E. Leach, Jr.(16)10.16

Change in Control and Severance Agreement, dated as of March 14,
    2007, by and between FairPoint and Peter G. Nixon.(16)10.17

Change in Control and Severance Agreement, dated as of March 14,
    2007, by and between FairPoint and Shirley J. Linn.(16)10.18

Change in Control and Severance Agreement, dated as of March 14,
    2007, by and between FairPoint and John P. Crowley.(16)10.19

Letter Agreement, dated as of March 23, 2007, by and between
    FairPoint and Patrick T. Hogan.(17) 116




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##### Table of Contents



Exhibit No.

Description10.20

FairPoint Amended and Restated 1998 Stock Incentive Plan.(18)10.21

FairPoint Amended and Restated 2000 Employee Stock Incentive
    Plan.(19)10.22

FairPoint 2005 Stock Incentive Plan.(9)10.23

FairPoint Annual Incentive Plan.(9)10.24

Form of February 2005 Restricted Stock Agreement.(20)10.25

Form of Director Restricted Stock Agreement.(21)10.26

Form of Director Restricted Unit Agreement.(21)10.27

Form of Non-Director Restricted Stock Agreement.(22)11

Statement Regarding Computation of Per Share Earnings (included
    in the financial statements contained in this Annual Report).14.1

FairPoint Code of Business Conduct and Ethics.(23)14.2

FairPoint Code of Ethics for Financial Professionals.(9)21

Subsidiaries of FairPoint.*23.1

Consent of KPMG LLP.*23.2

Consent of Deloitte & Touche LLP.*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.*99.1

Audited financial statements for the Orange County-Poughkeepsie
    Limited Partnership for the year ended December 31, 2007, 2006
    and 2005.*99.2

Stipulation filed with the Maine Public Utilities Commission,
    dated December 12, 2007.(24)99.3

Order of the Maine Public Utilities Commission, dated February
    1, 2008.(25)99.4

Stipulation filed with the Vermont Public Service Board, dated
    January 8, 2008.(28)99.5

Order of the Vermont Public Service Board, dated February 15,
    2008.(27)99.6

Stipulation filed with the New Hampshire Public Utilities
    Commission, dated January 23, 2008.(28)99.7

Order of the New Hampshire Public Utilities Commission, dated
    February 25, 2008.(29)     *
    
    Filed herewith.
    
    Pursuant to Securities and Exchange Commission Release
    No. 33-8238,
    this certification will be treated as accompanying
    this Annual Report on Form
    10-K and not
    filed as part of such report for purposes of
    Section 18 of the Securities Exchange Act of 1934, or
    otherwise subject to the liability of Section 18 of the
    Securities Exchange Act of 1934 and this certification will not
    be deemed to be incorporated by reference into any filing under
    the Securities Act of 1933 or the Securities Exchange Act of
    1934, except to the extent that the registrant specifically
    incorporates it by reference.(1)
    
    Incorporated by reference to the Quarterly Report on
    Form 10-Q
    of FairPoint for the period ended September 30, 2006.(2)
    
    Incorporated by reference to the Registration Statement on
    Form S-4
    of FairPoint, declared effective as of July 16, 2007.(3)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on June 28, 2007.(4)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on July 9, 2007.(5)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on November 16, 2007.(6)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on January 24, 2008. 117




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##### Table of Contents



(7)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on January 19, 2007.(8)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on April 10, 2007.(9)
    
    Incorporated by reference to the Annual Report on
    Form 10-K
    of FairPoint for the year ended December 31, 2004.(10)
    
    Incorporated by reference to the Annual Report on
    Form 10-K
    of FairPoint for the year ended December 31, 2002.(11)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on May 4, 2005.(12)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on October 3, 2005.(13)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on January 26, 2007.(14)
    
    Incorporated by reference to the Quarterly Report on
    Form 10-Q
    of FairPoint for the period ended September 30, 2000.(15)
    
    Incorporated by reference to the Quarterly Report on
    Form 10-Q
    of FairPoint for the period ended March 31, 2006.(16)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on March 19, 2007.(17)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on April 23, 2007.(18)
    
    Incorporated by reference to the Registration Statement on
    Form S-4
    of FairPoint, declared effective as of August 9, 2000.(19)
    
    Incorporated by reference to the Annual Report on
    Form 10-K
    of FairPoint for the year ended December 31, 2003.(20)
    
    Incorporated by reference to the Registration Statement on
    Form S-1
    of FairPoint, declared effective as of February 3, 2005.(21)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on June 20, 2005.(22)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on September 23, 2005.(23)
    
    Incorporated by reference to the Annual Report on
    Form 10-K
    of FairPoint for the year ended December 31, 2005.(24)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on December 13, 2007.(25)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on February 6, 2008.(26)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on January 8, 2008.(27)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on February 21, 2008.(28)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on January 24, 2008.(29)
    
    Incorporated by reference to the Current Report on
    Form 8-K
    of FairPoint filed on February 27, 2008. 118