##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 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 000-51446
 
 CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.
  Delaware
    
    02-0636095(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 121 South 17 th Street
Mattoon, Illinois 61938-3987
 (217) 235-3311
  (Title of each class)Common Stock, $0.01 par value per share
    
    (Name of each exchange on which registered)NASDAQ Global Select Market
  Yes o No þ
 Yes o No þ
 þ o
 o
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 Yes o No þ
  Part of Form 10-K
    
    Document Incorporated by ReferencePart III, Items 10, 11, 12, 13, and 14
    
    Portion of the Registrants proxy
statement to be filed in connection
with the Annual Meeting of the
Stockholders of the Registrant to
be held on May 5, 2009.




---



##### 



TABLE OF CONTENTS
 Acronyms Used in this Annual Report on Form 10-K
    
    
    1Terminology Used in this Annual Report on Form 10-K
    
    
    2Forward Looking Statements
    
    
    3Market and Industry Data
    
    
    3PART 1Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    22Item 1B. Unresolved Staff Comments
    
    
    33Item 2. Properties
    
    
    33Item 3. Legal Proceedings
    
    
    34Item 4. Submission of Matters to a Vote of Security Holders
    
    
    34PART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    34Item 6. Selected Financial Data
    
    
    35Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    40Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    62Item 8. Financial Statements and Supplementary Data
    
    
    63Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    98Item 9A. Controls and Procedures
    
    
    98Item 9B. Other Information
    
    
    98PART IIIItem 10. Directors, Executive Officers and Corporate Governance
    
    
    98Item 11. Executive Compensation
    
    
    98Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    98Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    98Item 14. Principal Accountant Fees and Services
    
    
    98PART IVItem 15. Exhibits and Financial Statement Schedules
    
    
    99Schedule IIValuation Reserves
    
    
    100SIGNATURES
    
    
    130INDEX TO EXHIBITS
    
    
    131Exhibit 21Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1




---



##### Table of Contents



Acronyms Used in this Annual Report on Form 10-K
 CLEC
    
    Competitive local exchange carrierDSL
    
    Digital subscriber lineEBITDA
    
    Earnings before interest, taxes, depreciation and amortizationETFL
    
    East Texas Fiber Line, Inc.FASB
    
    Financial Accounting Standards BoardFCC
    
    Federal Communications CommissionGAAP
    
    Generally accepted accounting principlesICC
    
    Illinois Commerce CommissionICTC
    
    Illinois Consolidated Telephone CompanyILEC
    
    Incumbent local exchange carrierIP
    
    Internet protocolIPO
    
    Initial public offeringIPTV
    
    Internet protocol digital televisionISP
    
    Internet service providerLIBOR
    
    London interbank offer rateNECA
    
    National Exchange Carrier AssociationNOL
    
    Net operating lossPAPUC
    
    Pennsylvania Public Utility CommissionPAUSF
    
    Pennsylvania Universal Service FundPUCT
    
    Public Utility Commission of TexasPURA
    
    Texas Public Utilities Regulatory ActSFAS
    
    Statement of Financial Accounting StandardsTXUCV
    
    TXU Communications Ventures CompanyUNE
    
    Unbundled network elementUNE-P
    
    Unbundled network element platformVOIP
    
    Voice over Internet Protocol
  1




---



##### Table of Contents



Terminology Used in this Annual Report on Form 10-K
 Access line equivalents
 Competitive local exchange carriers
 Digital telephone, or VOIP service
 exchange
 Hosted VOIP
 Incumbent local exchange telephone companies
 Metro Ethernet
 MPLS or Multiprotocol Label Switching
 Rural telephone companies
 Unified messaging
  2




---



##### Table of Contents



FORWARD-LOOKING STATEMENTS
     
 MARKET AND INDUSTRY DATA
   
 PART I
 
 Item 1. Business
   Website Access to Securities and Exchange Commission Reports
 www.consolidated.com
  3




---



##### Table of Contents



Overview
   th
  History of the Company
     Our Strengths
 Stable local telephone business
   4




---



##### Table of Contents



Attractive markets
      Technologically advanced network
    5




---



##### Table of Contents



Broad service offerings and bundling of services
   Favorable regulatory environment
  Experienced management team with proven track record
  
    
    providing superior quality services to rural customers in a regulated environment;
    
    implementing successful business integrations and acquisitions; and
    
    launching and growing new services, such as DSL and IPTV, along with managing CLEC
businesses and complementary services, such as operator, telemarketing, and order
fulfillment services and directory publishing.
 Business Strategy
 Increase revenues per customer
    6




---



##### Table of Contents



Improve operating efficiency
  Maintain capital expenditure discipline
  Pursue selective acquisitions
  
    
    the market is attractive;
    
    the network is of appropriate quality;
    
    we can integrate the acquired company efficiently;
    
    there are potential operating synergies; and
    
    the transaction is cash flow accretive from day one.
 Source of Revenues
  2008
    
    
    2007% of Total
    
    
    
    
    
    
    % of Total$ (millions)
    
    
    Revenues
    
    
    $ (millions)
    
    
    RevenuesRevenuesTelephone OperationsLocal calling services
    
    $
    104.6
    
    
    
    25.0
    %
    
    $
    82.8
    
    
    
    25.2
    %Network access services
    
    
    94.6
    
    
    
    22.6
    
    
    
    70.2
    
    
    
    21.3Subsidies
    
    
    55.2
    
    
    
    13.2
    
    
    
    46.0
    
    
    
    14.0Long distance services
    
    
    24.0
    
    
    
    5.7
    
    
    
    14.0
    
    
    
    4.2Data and Internet
services
    
    
    62.7
    
    
    
    15.0
    
    
    
    38.0
    
    
    
    11.5Other services
    
    
    36.9
    
    
    
    8.8
    
    
    
    35.8
    
    
    
    10.9Total Telephone
Operations
    
    
    378.0
    
    
    
    90.3
    
    
    
    286.8
    
    
    
    87.1Other Operations
    
    
    40.4
    
    
    
    9.7
    
    
    
    42.4
    
    
    
    12.9Total operating revenues
    
    $
    418.4
    
    
    
    100
    %
    
    $
    329.2
    
    
    
    100
    %
  7




---



##### Table of Contents



Telephone Operations
  
    
    264,323 local access lines in service, of which approximately 61.3% served residential
customers and 38.7% served business customers;
    
    165,953 long distance lines, which represented 62.8% penetration of our local access lines;
    
    91,817 DSL lines; and
    
    16,666 IPTV subscribers.
  Local calling services
   Network access services
  Subsidies
  8




---



##### Table of Contents



Long distance services
 Data and Internet services
 Other services
 Wireless partnership
       9




---



##### Table of Contents



Other Operations
  
    
    Public Servicesprovides local and long distance service and automated calling service
for correctional facilities.
 
    
    Business Systemssells and installs telecommunications equipment, such as key, private
branch exchange (PBX), and IP-based telephone systems, to business customers in Texas and
Illinois.
 
    
    Market Responseprovides telemarketing and order fulfillment services.
 
    
    Operator Servicesoffers both live and automated local and long distance operator
services and national directory assistance on a wholesale and retail basis.
 
    
    Mobile Servicesprovides one-way messaging service predominantly to our Illinois
business customers. A portion of the 2008 revenues included our Illinois cellular agency
and Texas Mobile Virtual Network Operator (MVNO) operations, which were discontinued in
2008. Beginning in 2009, the remaining product, paging services, will be classified as a
product in our Telephone Operations segment rather than as a business within Other
Operations.
  Customers and Markets
        10




---



##### Table of Contents



Sales and Marketing
 Telephone Operations
  
    
    positioning ourselves as a single point of contact for our customers communications needs;
 
    
    providing customers with a broad array of voice and data services, and bundling services
where possible;
 
    
    providing excellent customer service, including 24-hour, 7-day a week centralized
customer support to coordinate installation of new services, repair and maintenance
functions;
 
    
    developing and delivering new services; and
 
    
    leveraging our history and involvement with local communities and expanding
Consolidated Communications and Consolidated brand recognition.
       Other Operations
   11




---



##### Table of Contents



Information Technology and Support Systems
   Network Architecture and Technology
        12




---



##### Table of Contents



Employees
  Competition
 Local telephone market
     13




---



##### Table of Contents



Wireless service
  Internet service
   Long distance service
  Other competition
   14




---



##### Table of Contents



Regulatory Environment
 The following summary does not describe all existing and proposed legislation and regulations
affecting the telecommunications industry. Regulation can change rapidly, and ongoing proceedings
and hearings could alter the manner in which the telecommunications industry operates. We cannot
predict the outcome of any of these developments, nor their potential impact on us. See Risk
FactorsRegulatory Risks.
 Overview
    Federal regulation
  Removal of entry barriers
   
    
    allow other carriers to resell their services;
    
    provide number portability where feasible;
    
    ensure dialing parity, meaning that consumers can choose their default local or long
distance telephone company without having to dial additional digits;
    
    ensure that competitors customers receive nondiscriminatory access to telephone
numbers, operator service, directory assistance, and directory listing;
    
    afford competitors access to telephone poles, ducts, conduits, and rights-of-way; and
    
    establish reciprocal compensation arrangements with other carriers for the transport and
termination of telecommunications traffic.
  15




---



##### Table of Contents




    
    negotiate interconnection agreements with other carriers in good faith;
 
    
    interconnect their facilities and equipment with any requesting telecommunications
carrier, at any technically feasible point, at nondiscriminatory rates and on
nondiscriminatory terms and conditions;
 
    
    offer their retail services to other carriers for resale at discounted wholesale rates;
 
    
    provide reasonable notice of changes in the information necessary for transmission and
routing of services over the incumbent telephone companys facilities or in the information
necessary for interoperability; and
 
    
    provide, at rates, terms, and conditions that are just, reasonable, and
nondiscriminatory, for the physical collocation of other carriers equipment necessary for
interconnection or access to UNEs at the premises of the incumbent telephone company.
 Access charges
        16




---



##### Table of Contents



Unbundled network element rules
   17




---



##### Table of Contents



Promotion of universal service
   18




---



##### Table of Contents



State regulation of CCI Illinois
      19




---



##### Table of Contents



State regulation of CCI Texas
       Texas universal service
   20




---



##### Table of Contents



State regulation of North Pittsburgh
  Price regulation in Pennsylvania
  Pennsylvania universal service and access charges
   Local government authorizations
    21




---



##### Table of Contents



Broadband and Internet regulatory obligations
     
 Item 1A. Risk Factors
 Risks Relating to Current Economic Conditions
 The current volatility in economic conditions and the financial markets may adversely affect our
industry, business, and financial performance.
   22




---



##### Table of Contents



Adverse changes in the value of assets or obligations associated with our employee benefit plans
could adversely affect our results.
  Poor economic conditions in our service areas could cause us to lose subscriber connections and
revenues.
  
    
    demographic trends;
 
    
    in Illinois, the strength of the agricultural markets and the light manufacturing and
services industries, continued demand from universities and hospitals, and the level of
government spending;
 
    
    in Pennsylvania, the strength of small- to medium-sized businesses, health care, and
education spending; and
 
    
    in Texas, the strength of the manufacturing, health care, waste management, and retail
industries and continued demand from schools and hospitals.
  Risks Relating to Dividends
  Our board of directors could, in its discretion, depart from or change our dividend policy at any
time.
   
    
    the state of our business, the environment in which we operate, and the various risks we
face, including competition, technological change, changes in our industry, and regulatory
and other risks summarized in this Annual Report on Form 10-K;
 
    
    changes in the factors, assumptions, and other considerations made by our board of
directors in reviewing and adopting the dividend policy, as described under Dividend
Policy and Restrictions in Item 5 of this Annual Report;
 
    
    our results of operations, financial condition, liquidity needs, and capital resources;
 
    
    our expected cash needs, including for interest and any future principal payments on
indebtedness, capital expenditures, taxes, and pension and other postretirement
contributions; and
 
    
    potential sources of liquidity, including borrowing under our revolving credit facility
or possible asset sales.
  23




---



##### Table of Contents



We might not have sufficient cash to maintain current dividend levels.
  
    
    reduce or eliminate dividends;
 
    
    fund dividends by incurring additional debt (to the extent we are permitted to do so
under the agreements governing our then-existing debt), which would increase our leverage,
debt repayment obligations, and interest expense, decrease our interest coverage, and
reduce our capacity to incur debt for other purposes, including to fund future dividend
payments;
 
    
    amend the terms of our credit agreement, if our lenders agree, to permit us to pay
dividends or make other payments the agreement would otherwise restrict;
 
    
    fund dividends by issuing equity securities, which could be dilutive to our stockholders
and negatively affect the price of our common stock;
 
    
    fund dividends from other sources, such as by asset sales or working capital, which
would leave us with less cash available for other purposes; and
 
    
    reduce other expected uses of cash, such as capital expenditures.
  Because we are a holding company with no operations, we can only pay dividends if our subsidiaries
transfer funds to us.
  Restrictions in our debt agreements or applicable state legal and regulatory requirements may
prevent us from paying dividends.
     24




---



##### Table of Contents



We expect that our cash income tax liability will increase in 2009, which will reduce our after-tax
cash available to pay dividends.
   Risks Relating to Our Common Stock
 If we continue to pay dividends at the level currently anticipated under our dividend policy, our
ability to pursue growth opportunities may be limited.
  Our organizational documents could limit or delay another partys ability to acquire us and,
therefore, could deprive our investors of a possible takeover premium for their shares.
  
    
    divide our board of directors into three classes, which results in roughly one-third of
our directors being elected each year;
 
    
    require the affirmative vote of holders of 75% or more of the voting power of our
outstanding common stock to approve any merger, consolidation, or sale of all or
substantially all of our assets;
 
    
    provide that directors may only be removed for cause and then only upon the affirmative
vote of holders of two-thirds or more of the voting power of our outstanding common stock;
 
    
    require the affirmative vote of holders of two-thirds or more of the voting power of our
outstanding common stock to amend, alter, change, or repeal specified provisions of our
amended and restated certificate of incorporation and bylaws;
  25




---



##### Table of Contents




    
    require stockholders to provide us with advance notice if they wish to nominate any
candidates for election to our board of directors or if they intend to propose any matters
for consideration at an annual stockholders meeting; and
 
    
    authorize the issuance of so-called blank check preferred stock without stockholder
approval upon such terms as the board of directors may determine.
  The concentration of the voting power of our common stock could limit a shareholders ability to
influence corporate matters.
  
    
    the election of directors;
    
    significant corporate transactions, such as a merger or other sale of our company or its assets;
    
    acquisitions that increase our indebtedness or sell revenue-generating assets;
    
    corporate and management policies;
    
    amendments to our organizational documents; and
    
    other matters submitted to our stockholders for approval.
  Risks Relating to Our Indebtedness and Our Capital Structure
 We have a substantial amount of debt outstanding and may incur additional indebtedness in the
future, which could restrict our ability to pay dividends and fund working capital and planned
capital expenditures.
  
    
    we may be required to use a substantial portion of our cash flow from operations to make
interest payments on our debt, which will reduce funds available for operations, future
business opportunities, and dividends;
 
    
    we may have limited flexibility to react to changes in our business and our industry;
    
    it may be more difficult for us to satisfy our other obligations;
 
    
    we may have a limited ability to borrow additional funds or to sell assets to raise
funds if needed for working capital, capital expenditures, acquisitions, or other purposes;
 
    
    we may become more vulnerable to general adverse economic and industry conditions,
including changes in interest rates; and
 
    
    we may be at a disadvantage compared to our competitors that have less debt.
  26




---



##### Table of Contents



Our credit agreement contains covenants that limit managements discretion in operating our
business and could prevent us from capitalizing on opportunities and taking other corporate
actions.
  
    
    incur additional debt and issue preferred stock;
 
    
    make restricted payments, including paying dividends on, redeeming, repurchasing, or
retiring our capital stock;
 
    
    make investments and prepay or redeem debt;
 
    
    enter into agreements restricting our subsidiaries ability to pay dividends, make
loans, or transfer assets to us;
 
    
    create liens;
    
    sell or otherwise dispose of assets, including capital stock of subsidiaries;
    
    engage in transactions with affiliates;
    
    engage in sale and leaseback transactions;
    
    make capital expenditures;
    
    engage in a business other than telecommunications; and
    
    consolidate or merge.
    27




---



##### Table of Contents



We may not be able to refinance our existing debt if necessary, or we may only be able to do so at
a higher interest expense.
  Risks Relating to Our Business
 The telecommunications industry is constantly changing and competition is increasing.
  
    
    increased competition within established markets from providers that may offer competing
or alternative services;
 
    
    the blurring of traditional dividing lines between, and the bundling of, different
services, such as local dial tone, long distance, wireless, cable, and data and Internet
services; and
 
    
    an increase in mergers and strategic alliances that allow one telecommunications
provider to offer increased services or access to wider geographic markets.
   The use of new technologies by other companies may increase our costs and cause us to lose
customers and revenues.
    28




---



##### Table of Contents



We will incur additional integration and restructuring costs in connection with the completed North
Pittsburgh merger.
  Future acquisitions could be expensive and may not be successful.
    A system failure could cause delays or interruptions of service, which could cause us to lose
customers.
   The State of Illinois is a significant customer, and our contracts with the state are favorable to
the government.
  
    
    permits the applicable state agency to terminate the contract without cause and without
penalty under some circumstances;
 
    
    has renewal provisions that require decisions of state agencies that are subject to
political influence;
  29




---



##### Table of Contents




    
    gives the State of Illinois the right to renew the contract at its option but does not
give us the same right; and
 
    
    could be cancelled if state funding becomes unavailable.
  If we cannot obtain and maintain necessary rights-of-way for our network, our operations may be
interrupted and we would likely face increased costs.
  We are dependent on third-party vendors for our information, billing, and network systems, as well
as IPTV service.
  We depend on certain key management personnel, and need to continue to attract and retain highly
qualified management and other personnel in the future.
  Regulatory Risks
 The telecommunications industry is subject to extensive regulation that could change in a manner
adverse to us.
   30




---



##### Table of Contents



Legislative or regulatory changes could reduce or eliminate the revenues our rural telephone
companies receive from network access charges.
       Legislative or regulatory changes could reduce or eliminate the government subsidies we receive.
    31




---



##### Table of Contents



Proposed access and universal service reforms could have an adverse impact on our revenues.
  The high costs of regulatory compliance could make it more difficult for us to enter new markets,
make acquisitions, or change our prices.
   Legislative and regulatory changes in the telecommunications industry could raise our costs and
reduce potential revenues.
  We are subject to extensive laws and regulations relating to the protection of the environment,
natural resources, and worker health and safety.
  
    
    Hazardous materials may have been released at properties we currently own or formerly
owned (perhaps through our predecessors). Under certain environmental laws, we could be
held liable, without regard to fault, for the costs of investigating and remediating any
actual or threatened contamination at these properties, and for contamination associated
with disposal by us or our predecessors of hazardous materials at third-party disposal
sites.
 
    
    We could incur substantial costs in the future if we acquire businesses or properties
subject to environmental requirements or affected by environmental contamination. In
particular, environmental laws regulating wetlands, endangered species, and other land use
and natural resource issues may increase costs associated with future business or expansion
opportunities or delay, alter, or interfere with such plans.
 
    
    The presence of contamination can adversely affect the value of our properties and make
it difficult to sell any affected property or to use it as collateral.
 
    
    We could be held responsible for third-party property damage claims, personal injury
claims, or natural resource damage claims relating to contamination found at any of our
current or past properties.
   32




---



##### Table of Contents



Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   ApproximateLocation
    
    Primary Use
    
    Owned/Leased
    
    Operating Segment
    
    Square FeetGibsonia, PA
    
    Office and Switching
    
    Owned
    
    Telephone & Other
    
    
    111,931Conroe, TX
    
    Regional Office
    
    Owned
    
    Telephone & Other
    
    
    51,900Mattoon, IL
    
    Order Fullfillment
    
    Leased
    
    Other Operations
    
    
    50,000Mattoon, IL
    
    Corporate Headquarters
    
    Leased
    
    Telephone & Other
    
    
    49,100Mattoon, IL
    
    Operator Services and Operations
    
    Owned
    
    Telephone & Other
    
    
    36,300Charleston, IL
    
    Communications Center and Office
    
    Leased
    
    Telephone & Other
    
    
    34,000Mattoon, IL
    
    Operations and Distribution Center
    
    Leased
    
    Telephone & Other
    
    
    30,900Mattoon, IL
    
    Sales and Administration Office
    
    Leased
    
    Telephone & Other
    
    
    30,700Lufkin, TX
    
    Office and Switching
    
    Owned
    
    Telephone & Other
    
    
    28,707Conroe, TX
    
    Warehouse and Plant
    
    Owned
    
    Telephone & Other
    
    
    28,500Terre Haute, IN
    
    Communications Center and Office
    
    Leased
    
    Telephone & Other
    
    
    25,450Lufkin, TX
    
    Communications Center and Office
    
    Owned
    
    Telephone & Other
    
    
    23,190Katy, TX
    
    Warehouse and Office
    
    Owned
    
    Telephone & Other
    
    
    19,716Butler, PA
    
    Office and Switching
    
    Owned
    
    Telephone & Other
    
    
    18,564Taylorville, IL
    
    Office and Communications Center
    
    Owned
    
    Telephone & Other
    
    
    15,900Taylorville, IL
    
    Operations and Distribution Center
    
    Leased
    
    Telephone & Other
    
    
    14,700Lufkin, TX
    
    Warehouse
    
    Owned
    
    Telephone & Other
    
    
    14,200Cranberry Twp, PA
    
    Office and Switching
    
    Owned
    
    Telephone & Other
    
    
    13,110Charleston, IL
    
    Office and Communications Center
    
    Owned
    
    Telephone & Other
    
    
    12,661Litchfield, IL
    
    Office and Switching
    
    Owned
    
    Telephone & Other
    
    
    12,190Lufkin, TX
    
    Office and Data Center
    
    Owned
    
    Telephone & Other
    
    
    11,900Conroe, TX
    
    Office
    
    Owned
    
    Telephone & Other
    
    
    10,650Mattoon, IL
    
    Office
    
    Owned
    
    Telephone & Other
    
    
    10,100
   33




---



##### Table of Contents



Item 3. Legal Proceedings
    
 Item 4. Submission of Matters to a Vote of Security Holders
  
 PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases
of Equity Securities
  DividendsQuarter Ended
    
    Low
    
    
    High
    
    
    DeclaredMarch 31, 2007
    
    $
    18.71
    
    
    $
    23.00
    
    
    $
    0.39June 30, 2007
    
    $
    19.30
    
    
    $
    23.71
    
    
    $
    0.39September 30, 2007
    
    $
    15.72
    
    
    $
    23.11
    
    
    $
    0.39December 31, 2007
    
    $
    15.50
    
    
    $
    21.45
    
    
    $
    0.39March 31, 2008
    
    $
    14.00
    
    
    $
    19.19
    
    
    $
    0.39June 30, 2008
    
    $
    13.70
    
    
    $
    15.71
    
    
    $
    0.39September 30, 2008
    
    $
    13.48
    
    
    $
    15.74
    
    
    $
    0.39December 31, 2008
    
    $
    7.82
    
    
    $
    14.65
    
    
    $
    0.39
  34




---



##### Table of Contents



Dividend Policy and Restrictions
    Issuer Purchases of Common Stock During the Quarter Ended December 31, 2008
  Total number of
    
    
    Maximum numbershares purchased
    
    
    of shares that mayTotal number of
    
    
    Average price paid
    
    
    as part of publically
    
    
    yet be purchasedPurchase period
    
    shares purchased
    
    
    per share
    
    
    announced plans
    
    
    under the plansFebruary 20, 2008
    
    
    535
    
    
    $
    14.46
    
    
    Not applicable
    
    Not applicableOctober 13, 2008
    
    
    2,646
    
    
    $
    11.55
    
    
    Not applicable
    
    Not applicableNovember 10, 2008
    
    
    1,622
    
    
    $
    11.05
    
    
    Not applicable
    
    Not applicableDecember 5, 2008
    
    
    18,843
    
    
    $
    10.61
    
    
    Not applicable
    
    Not applicable
 
 Item 6. Selected Financial Data
   35




---



##### Table of Contents



Consolidated Communications Holdings, Inc.Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars in millions except per share amounts)Consolidated Statement of Operations
Data:Telephone operations revenues
    
    $
    378.0
    
    
    $
    286.8
    
    
    $
    280.4
    
    
    $
    282.3
    
    
    $
    230.4Other operations revenues
    
    
    40.4
    
    
    
    42.4
    
    
    
    40.4
    
    
    
    39.1
    
    
    
    39.2Total operating revenues
    
    
    418.4
    
    
    
    329.2
    
    
    
    320.8
    
    
    
    321.4
    
    
    
    269.6Cost of services and products (exclusive
of depreciation and amortization shown
separately below)
    
    
    143.5
    
    
    
    107.3
    
    
    
    98.1
    
    
    
    101.1
    
    
    
    80.6Selling, general and administrative
    
    
    108.8
    
    
    
    89.6
    
    
    
    94.7
    
    
    
    98.8
    
    
    
    87.9Intangible assets impairment
    
    
    6.1
    
    
    
    
    
    
    
    11.3
    
    
    
    
    
    
    
    11.6Depreciation and amortization
    
    
    91.7
    
    
    
    65.7
    
    
    
    67.4
    
    
    
    67.4
    
    
    
    54.5Income from operations
    
    
    68.3
    
    
    
    66.6
    
    
    
    49.3
    
    
    
    54.1
    
    
    
    35.0Interest expense, net (1)
    
    
    (66.3
    )
    
    
    (46.5
    )
    
    
    (42.9
    )
    
    
    (53.4
    )
    
    
    (39.6
    )Other, net (2)
    
    
    9.9
    
    
    
    (4.0
    )
    
    
    7.3
    
    
    
    5.7
    
    
    
    3.7Income (loss) before income taxes and extraordinary item
    
    
    11.9
    
    
    
    16.1
    
    
    
    13.7
    
    
    
    6.4
    
    
    
    (0.9
    )Income tax expense
    
    
    (6.6
    )
    
    
    (4.7
    )
    
    
    (0.4
    )
    
    
    (10.9
    )
    
    
    (0.2
    )Income before extraordinary item
    
    
    5.3
    
    
    
    11.4
    
    
    
    13.3
    
    
    
    (4.5
    )
    
    
    (1.1
    )Extraordinary item, net of tax
    
    
    7.2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    12.5
    
    
    
    11.4
    
    
    
    13.3
    
    
    
    (4.5
    )
    
    
    (1.1
    )Dividends on redeemable preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10.2
    )
    
    
    (15.0
    )Net income (loss) applicable to common shares
    
    $
    12.5
    
    
    $
    11.4
    
    
    $
    13.3
    
    
    $
    (14.7
    )
    
    $
    (16.1
    )Net income (loss) per common share:Basic:Income (loss) before extraordinary item
    
    $
    0.18
    
    
    $
    0.44
    
    
    $
    0.48
    
    
    $
    (0.83
    )
    
    $
    (1.79
    )Extraordinary item
    
    
    0.25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    0.43
    
    
    $
    0.44
    
    
    $
    0.48
    
    
    $
    (0.83
    )
    
    $
    (1.79
    )Diluted:Income (loss) before extraordinary item
    
    $
    0.18
    
    
    $
    0.44
    
    
    $
    0.48
    
    
    $
    (0.83
    )
    
    $
    (1.79
    )Extraordinary item
    
    
    0.24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    0.42
    
    
    $
    0.44
    
    
    $
    0.48
    
    
    $
    (0.83
    )
    
    $
    (1.79
    )Consolidated Cash Flow Data:Cash flows from operating activities
    
    $
    92.4
    
    
    $
    82.1
    
    
    $
    84.6
    
    
    $
    79.3
    
    
    $
    79.8Cash flows used in investing activities
    
    
    (48.0
    )
    
    
    (305.3
    )
    
    
    (26.7
    )
    
    
    (31.1
    )
    
    
    (554.1
    )Cash flows from (used in) financing
activities
    
    
    (63.3
    )
    
    
    230.9
    
    
    
    (62.7
    )
    
    
    (68.9
    )
    
    
    516.3Capital expenditures
    
    
    48.0
    
    
    
    33.5
    
    
    
    33.4
    
    
    
    31.1
    
    
    
    30.0Dividends declared per common share
    
    $
    1.55
    
    
    $
    1.55
    
    
    $
    1.55
    
    
    $
    0.80
    
    
    $
    Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    15.5
    
    
    $
    34.3
    
    
    $
    26.7
    
    
    $
    31.4
    
    
    $
    52.1Total current assets
    
    
    78.6
    
    
    
    99.6
    
    
    
    74.2
    
    
    
    79.0
    
    
    
    98.9Net plant, property and equipment (3)
    
    
    400.3
    
    
    
    411.6
    
    
    
    314.4
    
    
    
    335.1
    
    
    
    360.8Total assets
    
    
    1,241.6
    
    
    
    1,304.6
    
    
    
    889.6
    
    
    
    946.0
    
    
    
    1,006.1Total long-term debt (including current
portion) (4) (5)
    
    
    881.3
    
    
    
    892.6
    
    
    
    594.0
    
    
    
    555.0
    
    
    
    629.4Redeemable preferred shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    205.5Stockholders equity/members
deficit/parent company investment
    
    
    70.1
    
    
    
    155.4
    
    
    
    115.0
    
    
    
    199.2
    
    
    
    (18.8
    )Other Financial Data (unaudited):Consolidated EBITDA (6)
    
    $
    189.8
    
    
    $
    143.8
    
    
    $
    139.8
    
    
    $
    136.8
    
    
    $
    115.8
  36




---



##### Table of Contents



Consolidated Communications Holdings, Inc.Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(unaudited)Other Data (as of end of period) (7):Local access lines in service:Residential
    
    
    162,067
    
    
    
    183,070
    
    
    
    155,354
    
    
    
    162,231
    
    
    
    168,778Business
    
    
    102,256
    
    
    
    103,116
    
    
    
    78,335
    
    
    
    79,793
    
    
    
    86,430Total local access lines
    
    
    264,323
    
    
    
    286,186
    
    
    
    233,689
    
    
    
    242,024
    
    
    
    255,208CLEC access line equivalents
    
    
    74,687
    
    
    
    70,063
    
    
    
    
    
    
    
    
    
    
    
    Digital telephone subscribers
    
    
    6,510
    
    
    
    2,494
    
    
    
    
    
    
    
    
    
    
    
    IPTV subscribers
    
    
    16,666
    
    
    
    12,241
    
    
    
    6,954
    
    
    
    2,146
    
    
    
    101ILEC DSL subscribers
    
    
    91,817
    
    
    
    81,337
    
    
    
    52,732
    
    
    
    39,192
    
    
    
    27,445Total connections
    
    
    454,003
    
    
    
    452,321
    
    
    
    293,375
    
    
    
    283,362
    
    
    
    282,754
 
 (1)
    
    Interest expense includes amortization of deferred financing costs totaling $1.4
million for the year ended December 31, 2008, $3.2 million for 2007, $3.3 million for 2006, $5.5
million for 2005, and $6.4 million for 2004.(2)
    
    We recognized $0.3 million and $2.8 million of net proceeds in other income in 2007 and 2005,
respectively, because we received key-man life insurance proceeds relating to the passing of former
TXUCV employees.(3)
    
    Property, plant and equipment are recorded at cost. The cost of additions, replacements, and
major improvements is capitalized, while repairs and maintenance are charged to expenses. When
property, plant and equipment are retired from our regulated subsidiaries, the original cost, net
of salvage, is charged against accumulated depreciation, with no gain or loss recognized in
accordance with composite group life remaining methodology used for regulated telephone plant
assets.(4)
    
    In connection with the TXUCV acquisition on April 14, 2004, we issued $200.0 million in
aggregate principal amount of senior notes and entered into credit facilities. In connection with
the IPO and related transactions, we retired $70.0 million of senior notes and amended and restated
our credit facilities. In connection with the acquisition of North Pittsburgh on December 31, 2007,
we incurred $296.0 million new term debt, net of payoffs of existing debt. All remaining senior
notes were retired on April 1, 2008.(5)
    
    In July 2006, we repurchased and retired approximately 3.8 million shares of our common stock
for approximately $56.7 million, or $15.00 per share. We financed this transaction using
approximately $17.7 million of cash on hand and $39.0 million of additional term-loan borrowings.(6)
    
    We present Consolidated EBITDA for three reasons: we believe it is a useful indicator of our
historical debt capacity and our ability to service debt and pay dividends; it provides a measure
of consistency in our financial reporting; and covenants in our credit facilities contain ratios
based on Consolidated EBITDA.   plus
       37




---



##### Table of Contents



minus plus
 minus plus
 plus minus
 plus minus
 plus minus
 plus
 minus
 (7)
    
    Beginning with 2007, Other data includes access lines, CLEC access line equivalents, and DSL
subscribers for our North Pittsburgh operations, which were acquired on December 31, 2007.    38




---



##### Table of Contents



CCI HoldingsYear Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars in millions)(unaudited)EBITDA:Net cash provided by operating activities
    
    $
    92.4
    
    
    $
    82.1
    
    
    $
    84.6
    
    
    $
    79.3
    
    
    $
    79.8Adjustments:Compensation from restricted share plan
    
    
    (1.9
    )
    
    
    (4.0
    )
    
    
    (2.5
    )
    
    
    (8.6
    )
    
    
    Other adjustments, net (a)
    
    
    3.8
    
    
    
    (9.5
    )
    
    
    (2.0
    )
    
    
    (18.0
    )
    
    
    (22.0
    )Changes in operating assets and liabilities
    
    
    9.9
    
    
    
    8.5
    
    
    
    0.6
    
    
    
    10.2
    
    
    
    (4.4
    )Interest expense, net
    
    
    66.3
    
    
    
    46.5
    
    
    
    42.9
    
    
    
    53.4
    
    
    
    39.6Income taxes
    
    
    6.6
    
    
    
    4.7
    
    
    
    0.4
    
    
    
    10.9
    
    
    
    0.2EBITDA (b)
    
    
    177.1
    
    
    
    128.3
    
    
    
    124.0
    
    
    
    127.2
    
    
    
    93.2Adjustments to EBITDA (c):Intergration, restructuring and
Sarbanes-Oxley (d)
    
    
    4.8
    
    
    
    1.2
    
    
    
    3.7
    
    
    
    7.4
    
    
    
    7.0Professional service fees (e)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.9
    
    
    
    4.1Other, net (f)
    
    
    (19.9
    )
    
    
    (6.6
    )
    
    
    (7.1
    )
    
    
    (3.0
    )
    
    
    (3.7
    )Investment distributions (g)
    
    
    17.8
    
    
    
    6.6
    
    
    
    5.5
    
    
    
    1.6
    
    
    
    3.6Pension curtailment gain (h)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7.9
    )
    
    
    Loss on extinghishment of debt (i)
    
    
    9.2
    
    
    
    10.3
    
    
    
    
    
    
    
    
    
    
    
    Intangible assets impairment (a)
    
    
    6.1
    
    
    
    
    
    
    
    11.2
    
    
    
    
    
    
    
    11.6Extraordinary item (j)
    
    
    (7.2
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash compensation (k)
    
    
    1.9
    
    
    
    4.0
    
    
    
    2.5
    
    
    
    8.6
    
    
    
    Consolidated EBITDA
    
    $
    189.8
    
    
    $
    143.8
    
    
    $
    139.8
    
    
    $
    136.8
    
    
    $
    115.8
 (a)
    
    Other adjustments, net includes $6.1 million, $11.2 million and $11.6 million of intangible
asset impairment charges for years ended December 31, 2008, December 31, 2006, and December 31,
2004, respectively. During our annual impairment review for 2008, we determined that the projected
future cash flows of the telemarketing business would not be sufficient to support the carrying
value of the goodwill. In addition, based on a decline in estimated future cash flows in the
telemarketing and operator services business, our 2006 annual impairment review determined that the
value of the customer lists associated with these businesses was impaired. Our 2004 impairment
testing determined that the goodwill of our operator services business and the tradenames of our
telemarketing and mobile services businesses were impaired. Non-cash impairment charges are
excluded in arriving at Consolidated EBITDA under our credit facility.(b)
    
    EBITDA is defined as net earnings (loss) before interest expense, income taxes, depreciation,
and amortization on an unadjusted basis.(c)
    
    These adjustments reflect those required or permitted by the lenders under the credit facility
in place at the end of each of the years included in the periods presented.(d)
    
    In connection with the TXUCV acquisition, we incurred certain expenses associated with
integrating and restructuring the businesses. These expenses include severance; employee relocation
expenses; Sarbanes-Oxley start-up costs; and costs to integrate our technology, administrative and
customer service functions, and billing systems. In connection with the North Pittsburgh
acquisition we incurred similar expenses with the exception of Sarbanes-Oxley start-up costs.(e)
    
    Represents the aggregate professional service fees paid to certain large equity investors prior
to our initial public offering. Upon closing of the initial public offering, these service
agreements terminated.  39




---



##### Table of Contents



(f)
    
    Other, net includes the equity earnings from our investments, dividend income, and certain
other miscellaneous non-operating items. Key man life insurance proceeds of $0.3 million and $2.8
million received in 2007 and 2005, respectively, are not deducted to arrive at Consolidated EBITDA.(g)
    
    For purposes of calculating Consolidated EBITDA, we include all cash dividends and other cash
distributions received from our investments.(h)
    
    Represents a $7.9 million curtailment gain associated with the amendment of our Texas pension
plan. The gain was recorded in general and administrative expenses. However, because the gain is
non-cash, it is excluded from Consolidated EBITDA.(i)
    
    Represents the redemption premium and write-off of unamortized debt issuance costs in
connection with the redemption and retirement of our senior notes during 2008 and the write off of
debt issuance costs in connection with retiring the obligations under our former credit facility
and entering into a new credit facility contemporaneously with the North Pittsburgh acquisition.(j)
    
    Upon making the election to discontinue accounting for certain regulated property under
Statement of Financial Accounting Standards No. 71, Accounting for the Effects of Certain Types of
Regulation. Accordingly, we recognized an extraordinary non-cash gain in connection with our
adoption of SFAS No. 101 Regulated Enterprises  Accounting for the Discontinuance of Application
of FASB Statement No. 71. See the financial statements and footnotes for additional information.(k)
    
    Represents compensation expenses in connection with our Restricted Share Plan. Because of their
non-cash nature, these expenses are excluded from Consolidated EBITDA. 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 This Managements Discussion and Analysis of Financial Condition and Results of Operations
(MD&A) of Consolidated Communications Holdings, Inc. and its subsidiaries should be read in
conjunction with our historical financial statements and related notes contained elsewhere in this
Report.
 Overview
  Share repurchase
  
    
    a reduction in our annual dividend obligation of $5.9 million;
 
    
    an increase in our after tax net cash interest of $2.9 million due to the increased
borrowings incurred and increase in the interest rate on our credit facility of 25 basis
points and a decrease in interest income resulting from reduced cash on hand.
  40




---



##### Table of Contents



Acquisition of North Pittsburgh and new credit facility
   Redemption of senior notes
  Discontinuance of the application of SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation
    41




---



##### Table of Contents



Factors affecting results of operations
 Revenues
 Telephone Operations and Other Operations.
 Local access lines and bundled services.
    
    
    aggressively promoting DSL service, including selling DSL as a stand-alone offering;
 
    
    bundling value-adding services, such as DSL or IPTV, with a combination of local service
and custom calling features;
 
    
    maintaining excellent customer service standards; and
    
    keeping a strong local presence in the communities we serve.
   42




---



##### Table of Contents




    
    hosted digital telephone service in certain Texas and Pennsylvania markets to meet the
needs of small- to medium-sized business customers that want robust function without having
to purchase a traditional key or PBX phone system;
 
    
    Digital telephone service for residential customers, which is being offered to our Texas
and Illinois customers and will expand to our Pennsylvania customers in 2009 both as a
growth opportunity and as an alternative to the traditional phone line for customers who
are considering a switch to a cable competitor;
 
    
    DSL serviceeven to users who do not have our access linewhich expands our customer
base and creates additional revenue-generating opportunities;
 
    
    a DSL product with speeds up to 10 Mbps for those customers desiring greater Internet speed; and
    
    High definition video service and digital video recorders in all of our IPTV markets.
     43




---



##### Table of Contents



December 31,
    
    
    December 31,
    
    
    December 31,2008
    
    
    2007 (1)
    
    
    2006Local access lines in service:Residential
    
    
    162,067
    
    
    
    183,070
    
    
    
    155,354Business
    
    
    102,256
    
    
    
    103,116
    
    
    
    78,335Total local access lines
    
    
    264,323
    
    
    
    286,186
    
    
    
    233,689Digital telephone subscribers
    
    
    6,510
    
    
    
    2,494
    
    
    
    IPTV subscribers
    
    
    16,666
    
    
    
    12,241
    
    
    
    6,954ILEC DSL subscribers
    
    
    91,817
    
    
    
    81,337
    
    
    
    52,732Broadband Connections
    
    
    114,993
    
    
    
    96,072
    
    
    
    59,686CLEC Access Line Equivalents
(2)
    
    
    74,687
    
    
    
    70,063
    
    
    
    Total connections
    
    
    454,003
    
    
    
    452,321
    
    
    
    293,375Long distance lines (3)
    
    
    165,953
    
    
    
    166,599
    
    
    
    148,181Dial-up subscribers
    
    
    3,957
    
    
    
    5,578
    
    
    
    11,942
 (1)
    
    In connection with the acquisition of North Pittsburgh, we acquired 36,411 residential access
lines, 25,988 business access lines, 14,713 DSL subscribers, 87 digital telephone subscribers,
70,063 CLEC access line equivalents and 18,223 long distance lines.(2)
    
    CLEC access line equivalents represent a combination of voice services and data circuits.
The calculations represent a conversion of data circuits to an access line basis. Equivalents are
calculated by converting data circuits (basic rate interface, primary rate interface, DSL, DS-1,
DS-3 and Ethernet) and SONET-based (optical) services (OC-3 and OC-48) to the equivalent of an
access line.(3)
    
    Reflects the inclusion of long distance service provided as part of our VOIP offering
while excluding CLEC long distance subscribers. Expenses
  Cost of services and products.
 
    
    operating expenses relating to plant costs, including those related to the network and
general support costs, central office switching and transmission costs, and cable and wire
facilities;
 
    
    general plant costs, such as testing, provisioning, network, administration, power, and
engineering; and
 
    
    the cost of transport and termination of long distance and private lines outside our
rural telephone companies service area.
  Selling, general and administrative expenses.
  44




---



##### Table of Contents



Depreciation and amortization expenses.
  YearsBuildings
    
    
    15-35Network and outside plant facilities
    
    
    5-30Furniture, fixtures and equipment
    
    
    5-17Capital Leases
    
    
    11
   45




---



##### Table of Contents



Year Ended December 31,2008
    
    
    2007
    
    
    2006% of Total
    
    
    
    
    
    
    % of Total
    
    
    
    
    
    
    % of Total$ (millions)
    
    
    Revenues
    
    
    $ (millions)
    
    
    Revenues
    
    
    $ (millions)
    
    
    RevenuesRevenuesTelephone OperationsLocal calling services
    
    $
    104.6
    
    
    
    25.0
    %
    
    $
    82.8
    
    
    
    25.2
    %
    
    $
    85.1
    
    
    
    26.6
    %Network access services
    
    
    94.6
    
    
    
    22.6
    
    
    
    70.2
    
    
    
    21.3
    
    
    
    68.1
    
    
    
    21.2Subsidies
    
    
    55.2
    
    
    
    13.2
    
    
    
    46.0
    
    
    
    14.0
    
    
    
    47.6
    
    
    
    14.8Long distance services
    
    
    24.0
    
    
    
    5.7
    
    
    
    14.0
    
    
    
    4.2
    
    
    
    15.2
    
    
    
    4.7Data and Internet services
    
    
    62.7
    
    
    
    15.0
    
    
    
    38.0
    
    
    
    11.5
    
    
    
    30.9
    
    
    
    9.6Other services
    
    
    36.9
    
    
    
    8.8
    
    
    
    35.8
    
    
    
    10.9
    
    
    
    33.5
    
    
    
    10.5Total Telephone Operations
    
    
    378.0
    
    
    
    90.3
    
    
    
    286.8
    
    
    
    87.1
    
    
    
    280.4
    
    
    
    87.4Other Operations
    
    
    40.4
    
    
    
    9.7
    
    
    
    42.4
    
    
    
    12.9
    
    
    
    40.4
    
    
    
    12.6Total operating revenues
    
    
    418.4
    
    
    
    100.0
    
    
    
    329.2
    
    
    
    100.0
    
    
    
    320.8
    
    
    
    100.0ExpensesOperating expensesTelephone Operations
    
    
    213.0
    
    
    
    50.9
    
    
    
    153.4
    
    
    
    46.6
    
    
    
    152.4
    
    
    
    47.5Other Operations
    
    
    45.4
    
    
    
    10.9
    
    
    
    43.5
    
    
    
    13.2
    
    
    
    51.7
    
    
    
    16.1Depreciation and amortization
    
    
    91.7
    
    
    
    21.9
    
    
    
    65.7
    
    
    
    20.0
    
    
    
    67.4
    
    
    
    21.0Total operating expenses
    
    
    350.1
    
    
    
    83.7
    
    
    
    262.6
    
    
    
    79.8
    
    
    
    271.5
    
    
    
    84.6Income from operations
    
    
    68.3
    
    
    
    16.3
    
    
    
    66.6
    
    
    
    20.2
    
    
    
    49.3
    
    
    
    15.4Interest expense, net
    
    
    (66.3
    )
    
    
    (15.8
    )
    
    
    (46.5
    )
    
    
    (14.1
    )
    
    
    (42.9
    )
    
    
    (13.4
    )Other
income (expense), net
    
    
    9.9
    
    
    
    2.4
    
    
    
    (4.0
    )
    
    
    (1.2
    )
    
    
    7.3
    
    
    
    2.2Income tax expense
    
    
    (6.6
    )
    
    
    (1.6
    )
    
    
    (4.7
    )
    
    
    (1.4
    )
    
    
    (0.4
    )
    
    
    (0.1
    )Income before extraordinary
item
    
    
    5.3
    
    
    
    1.3
    
    
    
    11.4
    
    
    
    3.5
    
    
    
    13.3
    
    
    
    4.1Extraordinary item, net of tax
    
    
    7.2
    
    
    
    1.7
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net Income
    
    $
    12.5
    
    
    
    3.0
    %
    
    $
    11.4
    
    
    
    3.5
    %
    
    $
    13.3
    
    
    
    4.1
    %
 Segments
  Results of Operations
 For the year ended December 31, 2008, compared to December 31, 2007
 Revenues
  Telephone Operations Revenues
 Local calling services
  46




---



##### Table of Contents



Network access services
 Subsidies
 Long distance services
 Data and Internet
 Other services
 Other Operations Revenues
  Operating Expenses
  Telephone Operations Operating Expenses
   47




---



##### Table of Contents



Other Operations Operating Expenses
  Depreciation and Amortization
  Non-Operating Income (Expense)
 Interest Expense, Net
  Other Income (Expense)
  Extraordinary Item
    48




---



##### Table of Contents



Income Taxes
     For the year ended December 31, 2007, compared to December 31, 2006
 Revenues
  Telephone Operations Revenues
 Local calling services
 Network access services
 Subsidies
  49




---



##### Table of Contents



Long distance services
 Data and Internet
 Other services
 Other Operations Revenues
  Operating Expenses
  Telephone Operations Operating Expenses
  Other Operations Operating Expenses
  Depreciation and Amortization
   50




---



##### Table of Contents



Non-Operating Income (Expense)
 Interest Expense, Net
  Other Income (Expense)
  Income Taxes
    Critical Accounting Policies and Use of Estimates
  Derivatives
   51




---



##### Table of Contents



Fair Value Measurements
     Fair Value Measurements at Reporting Date UsingQuoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    December 31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Interest Rate Derivatives
    
    $
    47,908
    
    
    
    
    
    
    
    
    
    
    $
    47,908
  52




---



##### Table of Contents



Fair ValueMeasurementsUsing SignificantUnobservableInputs (Level 3)Interest RateDerivativesBalance at December 31, 2007
    
    $
    12,769Settlements
    
    
    (10,412
    )Total gains or losses (realized/unrealized)Unrealized loss included in earnings
    
    
    395Unrealized loss included in other
comprehensive income
    
    
    45,156Balance at December 31, 2008
    
    $
    47,908The amount of total loss for
the period included in earnings for
the period as a component of interest expense
    
    $
    395
 Income taxes
  Subsidies revenues
  Allowance for uncollectible accounts
   53




---



##### Table of Contents



Valuation of intangible assets
  
    
    a change in the use or perceived value of our tradenames;
    
    significant underperformance relative to historical or projected future operating results;
    
    significant regulatory changes that would impact future operating revenues;
    
    significant changes in our customer base;
    
    significant negative industry or economic trends; or
    
    significant changes in the overall strategy we employ to operate our business.
  Pension and postretirement benefits
      54




---



##### Table of Contents



December 31,Percentage
    
    
    2008 Obligation
    
    
    2008 ExpenseAssumptions
    
    Point Change
    
    
    Higher
    
    
    Lower
    
    
    Higher
    
    
    Lower(in millions)Pension Plan Expense:Discount rate
    
    + or - 0.5
    pts
    
    $
    (10.2
    )
    
    $
    11.1
    
    
    $
    
    
    
    $
    Expected return on assets
    
    + or - 1.0
    pts
    
    $
    
    
    
    $
    
    
    
    $
    (1.6
    )
    
    $
    1.6Other Postretirement Expense:Discount rate
    
    + or - 0.5
    pts
    
    $
    (1.8
    )
    
    $
    1.9
    
    
    $
    
    
    
    $
    
 Liquidity and Capital Resources
 General
        55




---



##### Table of Contents



Year Ended December 31,2008
    
    
    2007
    
    
    2006(In millions)Net Cash Provided by (Used for):Operating activities
    
    $
    92.4
    
    
    $
    82.1
    
    
    $
    84.6Investing activities
    
    
    (48.0
    )
    
    
    (305.3
    )
    
    
    (26.7
    )Financing activities
    
    
    (63.3
    )
    
    
    230.9
    
    
    
    (62.7
    )
 Operating Activities
    Investing Activities
     56




---



##### Table of Contents



Financing Activities
    Debt
  Debt and Capital Leases as of December 31, 2008
(In Millions)
 Balance
    
    
    Maturity Date
    
    
    Rate (1)Capital lease
    
    $
    1.3
    
    
    April 12, 2010
    
    
    
    7.40
    %Revolving credit facility
    
    
    
    
    
    December 31, 2013
    
    
    LIBOR + 2.50%Term loan
    
    
    880.0
    
    
    December 31, 2014
    
    
    LIBOR + 2.50%
 (1)
    
    As of December 31, 2008, the 1-month and 3-month LIBOR rates were 0.43625% and 1.425%,
respectively. As of December 31, 2008, we were electing 1-month LIBOR on the variable portion of
our debt.  57




---



##### Table of Contents



Credit Facilities
   Derivative Instruments
  Senior Notes
  Covenant Compliance
  minus
         58




---



##### Table of Contents



plus
       Dividends
   Surety bonds
   59




---



##### Table of Contents



Table of contractual obligations and commitments
  Less than
    
    
    1  3
    
    
    3  5
    
    
    More thanTotal
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 Years(In thousands)Long-term debt (a)
    
    $
    1,249,600
    
    
    $
    61,600
    
    
    $
    123,200
    
    
    $
    123,200
    
    
    $
    941,600Capital lease (b)
    
    
    1,433
    
    
    
    1,051
    
    
    
    382
    
    
    
    
    
    
    
    Operating leases
    
    
    10,294
    
    
    
    4,187
    
    
    
    4,661
    
    
    
    758
    
    
    
    688Other agreements and
commitments (c)
    
    
    3,062
    
    
    
    1,120
    
    
    
    1,692
    
    
    
    140
    
    
    
    110Pension and other
post-retirement obligations (d)
    
    
    107,306
    
    
    
    10,290
    
    
    
    36,858
    
    
    
    36,939
    
    
    
    23,219Total contractual cash
obligations and commitments
    
    $
    1,371,695
    
    
    $
    78,248
    
    
    $
    166,793
    
    
    $
    161,037
    
    
    $
    965,617
 (a)
    
    This item consists of interest and principal payments under our credit facilities. The credit
facilities consist of a $760.0 million term loan facility and a $120.0 delayed draw facility, both
maturing on December 31, 2014, and a $50.0 million revolving credit facility, which was fully
available but undrawn as of December 31, 2008.(b)
    
    Represents payments of principal and interest on a capital lease entered into by North
Pittsburgh for equipment used in its operations.(c)
    
    Represents payments for two operational support systems obligations. Should we terminate
either of the contracts prior to the expiration of their term, we will be liable for minimum
commitment payments as defined in the contracts for the remaining term of the contracts. In
addition, we have a contractual obligation for network maintenance.(d)
    
    Pension funding is an estimate of our minimum funding requirements to provide pension benefits
for employees based on service through December 31, 2008. Obligations relating to other
post-retirement benefits are based on forecasts of future benefit payments, which may change over
time due to factors such as life expectancy, medical costs and trends, the actual rate of return on
the plan assets, discount rates, discretionary pension contributions, and regulatory rules.  Recent Accounting Pronouncements
    60




---



##### Table of Contents



61




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
      62




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 MANAGEMENTS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
  (i)
    
    pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the Company;(ii)
    
    provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the Company are being made only in
accordance with authorizations of management and directors; and(iii)
    
    provide reasonable assurance that any unauthorized acquisition, use, or disposition of the
Companys assets that could have a material effect on the financial statements will be
prevented or detected without delay.
  Internal ControlIntegrated Framework
  63




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal
Control  Integrated Framework
       
  64




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Regulated Enterprises -
Accounting for the Discontinuance of Application of FASB Statement No. 71, Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109,
 Internal
Control  Integrated Framework
  
  65




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Partners of Pennsylvania RSA 6 (I) Limited Partnership: We have audited the accompanying balance sheets of Pennsylvania RSA 6 (I) Limited Partnership (the Partnership) as of
December 31, 2008 and 2007, and the related statements of operations, changes in partners capital, and cash flows for
each of the three years in the period ended December 31, 2008. Such financial statements are not presented separately
herein. These financial statements are the responsibility of the Partnerships management. Our responsibility is to
express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. The Partnership is not required to have, nor were we engaged to
perform, an audit of its internal control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances
but not for the purpose of expressing an opinion on the effectiveness of the Partnerships internal control over
financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the
Partnership as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 2008, in conformity with accounting principles generally accepted in the
United States of America. /s/ Deloitte & Touche LLP Atlanta, GA
March 16, 2009  66




---



##### Table of Contents



Consolidated Communications Holdings, Inc.
Consolidated Balance Sheets  (Amounts in thousands, except share amounts)
 December 31,2008
    
    
    2007ASSETSCurrent assets:Cash and cash equivalents
    
    $
    15,471
    
    
    $
    34,341Accounts receivable, net of allowance of $1,908
and $2,440, respectively
    
    
    45,092
    
    
    
    44,001Inventories
    
    
    7,482
    
    
    
    6,364Deferred income taxes
    
    
    3,600
    
    
    
    4,551Prepaid expenses and other current assets
    
    
    6,931
    
    
    
    10,358Total current assets
    
    
    78,576
    
    
    
    99,615Property, plant and equipment, net
    
    
    400,286
    
    
    
    411,647Intangibles and other assets:Investments
    
    
    95,657
    
    
    
    94,142Goodwill
    
    
    520,562
    
    
    
    526,439Customer lists, net
    
    
    124,249
    
    
    
    146,411Tradenames
    
    
    14,291
    
    
    
    14,291Deferred financing costs and other assets
    
    
    8,005
    
    
    
    12,046Total assets
    
    $
    1,241,626
    
    
    $
    1,304,591LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of capital lease obligation
    
    $
    922
    
    
    $
    1,010Current portion of pension and
postretirement benefit obligations
    
    
    2,960
    
    
    
    8,765Accounts payable
    
    
    12,336
    
    
    
    17,386Advance billings and customer deposits
    
    
    19,102
    
    
    
    18,167Dividends payable
    
    
    11,388
    
    
    
    11,361Accrued expenses
    
    
    24,584
    
    
    
    28,254Total current liabilities
    
    
    71,292
    
    
    
    84,943Capital lease obligation less current portion
    
    
    344
    
    
    
    1,636Long-term debt
    
    
    880,000
    
    
    
    890,000Deferred income taxes
    
    
    58,134
    
    
    
    97,289Pension and postretirement benefit obligations
    
    
    107,741
    
    
    
    56,729Other liabilities
    
    
    48,830
    
    
    
    14,306Total liabilities
    
    
    1,166,341
    
    
    
    1,144,903Minority interest
    
    
    5,185
    
    
    
    4,322Stockholders equityCommon stock, $0.01 par value, 100,000,000 shares
authorized, 29,488,408 and 29,440,587 issued and
outstanding in 2008 and 2007, respectively
    
    
    295
    
    
    
    294Additional paid in capital
    
    
    129,284
    
    
    
    160,723Retained earnings
    
    
    
    
    
    
    Accumulated other comprehensive loss
    
    
    (59,479
    )
    
    
    (5,651
    )Total stockholders equity
    
    
    70,100
    
    
    
    155,366Total liabilities and stockholders equity
    
    $
    1,241,626
    
    
    $
    1,304,591
   67




---



##### Table of Contents



Consolidated Communications Holdings, Inc.
Consolidated Statements of Operations  (Dollars in thousands, except per share amounts)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006Revenues
    
    $
    418,424
    
    
    $
    329,248
    
    
    $
    320,767Operating expenses:Cost of services and products
(exclusive of depreciation and
amortization shown separately below)
    
    
    143,563
    
    
    
    107,290
    
    
    
    98,093Selling, general and administrative expenses
    
    
    108,769
    
    
    
    89,662
    
    
    
    94,693Intangible assets impairment
    
    
    6,050
    
    
    
    
    
    
    
    11,240Depreciation and amortization
    
    
    91,678
    
    
    
    65,659
    
    
    
    67,430Income from operations
    
    
    68,364
    
    
    
    66,637
    
    
    
    49,311Other income (expense):Interest income
    
    
    367
    
    
    
    893
    
    
    
    974Interest expense
    
    
    (66,659
    )
    
    
    (47,350
    )
    
    
    (43,873
    )Investment income
    
    
    20,495
    
    
    
    7,034
    
    
    
    7,691Minority interest
    
    
    (863
    )
    
    
    (627
    )
    
    
    (721
    )Loss on extinguishment of debt
    
    
    (9,224
    )
    
    
    (10,323
    )
    
    
    Other, net
    
    
    (577
    )
    
    
    (167
    )
    
    
    290Income before income taxes and extraordinary item
    
    
    11,903
    
    
    
    16,097
    
    
    
    13,672Income tax expense
    
    
    6,639
    
    
    
    4,674
    
    
    
    405Income before extraordinary item
    
    
    5,264
    
    
    
    11,423
    
    
    
    13,267Extraordinary item (net of income tax of $4,154)
    
    
    7,240
    
    
    
    
    
    
    
    Net income
    
    $
    12,504
    
    
    $
    11,423
    
    
    $
    13,267Net income
per common share Basic:Income per share before extraordinary item
    
    $
    0.18
    
    
    $
    0.44
    
    
    $
    0.48Extraordinary item per share
    
    
    0.25
    
    
    
    
    
    
    
    Net income per share
    
    $
    0.43
    
    
    $
    0.44
    
    
    $
    0.48Diluted:Income per share before extraordinary item
    
    $
    0.18
    
    
    $
    0.44
    
    
    $
    0.47Extraordinary item per share
    
    
    0.24
    
    
    
    
    
    
    
    Net income per share
    
    $
    0.42
    
    
    $
    0.44
    
    
    $
    0.47Cash dividends per common share
    
    $
    1.55
    
    
    $
    1.55
    
    
    $
    1.55
   68




---



##### Table of Contents



Consolidated Communications Holdings, Inc.
Consolidated Statement of Changes in Stockholders Equity
Year Ended December 31, 2008, 2007 and 2006  (Dollars in thousands, except share amounts)
 AccumulatedOtherCommon Stock
    
    
    Additional
    
    
    Retained
    
    
    Comprehensive
    
    
    
    
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Paid in Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Total
    
    
    Income (Loss)Balance, January 1, 2006
    
    
    29,775,010
    
    
    
    297
    
    
    
    202,234
    
    
    
    (5,605
    )
    
    
    2,302
    
    
    
    199,228Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,267
    
    
    
    
    
    
    
    13,267
    
    
    $
    13,267Dividends on common stock
    
    
    
    
    
    
    
    
    
    
    (35,434
    )
    
    
    (7,662
    )
    
    
    
    
    
    
    (43,096
    )
    
    
    Shares issued under employee
plan, net of forfeitures
    
    
    13,841
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    2,482
    
    
    
    
    
    
    
    
    
    
    
    2,482Purchase and retirement of
common stock
    
    
    (3,786,979
    )
    
    
    (37
    )
    
    
    (56,786
    )
    
    
    
    
    
    
    
    
    
    
    (56,823
    )
    
    
    Reversal of minimum pension
liability upon adoption of
SFAS No. 158, net of $303 of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    427
    
    
    
    427
    
    
    
    Recognition of funded status
upon adoption of SFAS No. 158,
net of ($194) of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (324
    )
    
    
    (324
    )
    
    
    Unrealized gain on marketable
securities, net of $34 of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49
    
    
    
    49
    
    
    
    49Change in fair value of cash flow
hedges, net of ($492) of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (252
    )
    
    
    (252
    )
    
    
    (252
    )Balance, December 31, 2006
    
    
    26,001,872
    
    
    
    260
    
    
    
    112,496
    
    
    
    
    
    
    
    2,202
    
    
    
    114,958
    
    
    $
    13,064Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,423
    
    
    
    
    
    
    
    11,423
    
    
    $
    11,423Dividends on common stock
    
    
    
    
    
    
    
    
    
    
    (30,090
    )
    
    
    (11,423
    )
    
    
    
    
    
    
    (41,513
    )
    
    
    Issuance of common stock
    
    
    3,319,142
    
    
    
    34
    
    
    
    74,376
    
    
    
    
    
    
    
    
    
    
    
    74,410
    
    
    
    Shares issued under employee
plan, net of forfeitures
    
    
    126,834
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    4,034
    
    
    
    
    
    
    
    
    
    
    
    4,034Purchase and retirement of
common stock
    
    
    (7,261
    )
    
    
    
    
    
    
    (131
    )
    
    
    
    
    
    
    
    
    
    
    (131
    )
    
    
    Permanent portion of tax on
restricted stock vesting
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    
    
    
    
    
    
    
    
    38
    
    
    
    Recognition of funded status of
pension and other post retirement
benefit plans net of $1,606 of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,785
    
    
    
    2,785
    
    
    
    2,785Change in fair value of cash flow
hedges, net of ($6,139) of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,638
    )
    
    
    (10,638
    )
    
    
    (10,638
    )Balance, December 31, 2007
    
    
    29,440,587
    
    
    
    294
    
    
    
    160,723
    
    
    
    
    
    
    
    (5,651
    )
    
    
    155,366
    
    
    
    3,570Effects of accounting change regarding
postretirement plan measurement dates
pursuant to SFAS No. 158:Service cost, interest cost, and
expected
return on plan assets for October 1,
2007
through December 31, 2007, net of
($88)
of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (154
    )
    
    
    
    
    
    
    (154
    )
    
    
    Amortization of prior service cost and
net loss for October 1, 2007 through
December 31, 2007, net of ($9) of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (169
    )
    
    
    15
    
    
    
    (154
    )
    
    
    Balance, January 1, 2008 as adjusted
    
    
    29,440,587
    
    
    
    294
    
    
    
    160,723
    
    
    
    (169
    )
    
    
    (5,636
    )
    
    
    155,212
    
    
    
    3,570Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,504
    
    
    
    
    
    
    
    12,504
    
    
    $
    12,504Dividends on common stock
    
    
    
    
    
    
    
    
    
    
    (33,141
    )
    
    
    (12,335
    )
    
    
    
    
    
    
    (45,476
    )
    
    
    Shares issued under employee
plan, net of forfeitures
    
    
    71,467
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-cash stock compensation
    
    
    
    
    
    
    1
    
    
    
    1,900
    
    
    
    
    
    
    
    
    
    
    
    1,901Purchase and retirement of common stock
    
    
    (23,646
    )
    
    
    
    
    
    
    (257
    )
    
    
    
    
    
    
    
    
    
    
    (257
    )
    
    
    Permanent portion of tax on
restricted stock vesting
    
    
    
    
    
    
    
    
    
    
    (38
    )
    
    
    
    
    
    
    
    
    
    
    (38
    )
    
    
    Pension tax adjustment
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    
    
    
    
    
    
    
    
    97
    
    
    
    Change in prior service cost and net loss,
net of ($18,730) of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,765
    )
    
    
    (31,765
    )
    
    
    (31,765
    )Change in fair value of cash flow
hedges, net of ($12,666) of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,078
    )
    
    
    (22,078
    )
    
    
    (22,078
    )Balance, December 31, 2008
    
    
    29,488,408
    
    
    $
    295
    
    
    $
    129,284
    
    
    $
    
    
    
    $
    (59,479
    )
    
    $
    70,100
    
    
    $
    (37,769
    )
   69




---



##### Table of Contents



Consolidated Communications Holdings, Inc.
Consolidated Statements of Cash Flows  (Dollars in thousands)
 Year Ended December 31,2008
    
    
    2007
    
    
    2006OPERATING ACTIVITIESNet income
    
    $
    12,504
    
    
    $
    11,423
    
    
    $
    13,267Adjustments to reconcile net income to cash
provided by operating activities:Depreciation and amortization
    
    
    91,678
    
    
    
    65,659
    
    
    
    67,430Loss on extinguishment of debt
    
    
    9,224
    
    
    
    10,323
    
    
    
    Deferred income tax
    
    
    (12,032
    )
    
    
    (4,271
    )
    
    
    (11,379
    )Intangible assets impairment
    
    
    6,050
    
    
    
    
    
    
    
    11,240Extraordinary item, net of income tax
    
    
    (7,240
    )
    
    
    
    
    
    
    Partnership income
    
    
    (2,056
    )
    
    
    (333
    )
    
    
    (1,883
    )Non-cash stock compensation
    
    
    1,901
    
    
    
    4,034
    
    
    
    2,482Minority interest in net income of subsidiary
    
    
    863
    
    
    
    627
    
    
    
    721Amortization of deferred financing costs
    
    
    1,431
    
    
    
    3,128
    
    
    
    3,260Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,091
    )
    
    
    171
    
    
    
    1,107Inventories
    
    
    (1,118
    )
    
    
    (228
    )
    
    
    (750
    )Other assets
    
    
    5,083
    
    
    
    5,544
    
    
    
    (3,089
    )Accounts payable
    
    
    (5,050
    )
    
    
    1,258
    
    
    
    (739
    )Accrued expenses and other liabilities
    
    
    (7,736
    )
    
    
    (15,266
    )
    
    
    2,926Net cash provided by operating activities
    
    
    92,411
    
    
    
    82,069
    
    
    
    84,593INVESTING ACTIVITIESProceeds from sale of investments
    
    
    
    
    
    
    10,625
    
    
    
    5,921Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    815Securities purchased
    
    
    
    
    
    
    (10,625
    )
    
    
    Acquisition, net of cash acquired
    
    
    
    
    
    
    (271,780
    )
    
    
    Capital expenditures
    
    
    (48,027
    )
    
    
    (33,495
    )
    
    
    (33,388
    )Net cash used in investing activities
    
    
    (48,027
    )
    
    
    (305,275
    )
    
    
    (26,652
    )FINANCING ACTIVITIESProceeds from issuance of stock
    
    
    
    
    
    
    12
    
    
    
    Proceeds from long-term obligations
    
    
    120,000
    
    
    
    760,000
    
    
    
    39,000Payments made on long-term obligations
    
    
    (136,337
    )
    
    
    (464,000
    )
    
    
    Repayment of North Pittsburgh long-term
obligation
    
    
    
    
    
    
    (15,426
    )
    
    
    Costs paid to issue common stock
    
    
    
    
    
    
    (400
    )
    
    
    Payment of deferred financing costs
    
    
    (240
    )
    
    
    (8,988
    )
    
    
    (262
    )Payment of capital lease obligation
    
    
    (971
    )
    
    
    
    
    
    
    Purchase and retirement of common stock
    
    
    (257
    )
    
    
    (131
    )
    
    
    (56,823
    )Dividends on common stock
    
    
    (45,449
    )
    
    
    (40,192
    )
    
    
    (44,593
    )Net cash provided by (used in) financing activities
    
    
    (63,254
    )
    
    
    230,875
    
    
    
    (62,678
    )Net increase (decrease) in cash and cash equivalents
    
    
    (18,870
    )
    
    
    7,669
    
    
    
    (4,737
    )Cash and cash equivalents at beginning of the year
    
    
    34,341
    
    
    
    26,672
    
    
    
    31,409Cash and cash equivalents at end of the year
    
    $
    15,471
    
    
    $
    34,341
    
    
    $
    26,672Supplemental cash flow informationInterest paid
    
    $
    65,061
    
    
    $
    44,343
    
    
    $
    44,509Income taxes paid
    
    $
    13,540
    
    
    $
    13,976
    
    
    $
    8,237
   70




---



##### Table of Contents



CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Dollars in thousands, except share and per share amounts)
 1. Description of Business
  2. Summary of Significant Accounting Policies
 Principles of consolidation
  Use of estimates
  Regulatory accounting
 Accounting
for the Effects of Certain Types of Regulation"
  71




---



##### Table of Contents



Regulated
Enterprises  Accounting for the Discontinuance of Application of FASB Statement No. 71,
 Cash equivalents
  Investments
   Accounts receivable and allowance for doubtful accounts
  Inventories
  Goodwill and other intangible assets
 Goodwill and Other
Intangible Assets"
  72




---



##### Table of Contents



Accounting for
the Impairment or Disposal of Long-lived Assets"
 Property, plant and equipment
     YearsBuildings
    
    
    15-35Network and outside plant facilities
    
    
    5-40Furniture, fixtures, and equipment
    
    
    5-17Capital lease asset
    
    
    11
 Revenue recognition
      73




---



##### Table of Contents



How Taxes
Collected from Customers and Remitted to Governmental Authorities
Should Be Presented in the Income Statement
 Advertising costs
  Income taxes
  Accounting for Income Taxes" Accounting for Uncertainty in Income Taxes
   Stock-based compensation
   74




---



##### Table of Contents



Financial instruments and derivatives
  Accounting for Derivative Instruments and Hedging Activity
 Reclassifications
  Recent Accounting Pronouncements
 Determining Whether
Instruments Granted in Share-Based Payment Transactions are Participating Securities
 Employers Disclosures
about Postretirement Benefit Plan Assets
  75




---



##### Table of Contents



Disclosure about Derivative Instruments and Hedging Activitiesan Amendment of FASB
Statement No. 133
 Noncontrolling Interests in Consolidated Financial Statementsan Amendment of ARB No.
51
 Business Combinations
 Fair Value Measurements.
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plansan amendment of
FASB Statements No. 87, 88, 106, and 132(R)
  76




---



##### Table of Contents



3. Acquisition
   Current assets
    
    $
    17,729Property, plant and equipment
    
    
    116,308Customer list
    
    
    49,000Goodwill
    
    
    214,562Investments and other assets
    
    
    53,360Liabilities assumed
    
    
    (103,933
    )Net purchase price
    
    $
    347,026
    December 312007
    
    
    2006Total revenues
    
    $
    424,917
    
    
    $
    424,232Income from operations
    
    $
    59,752
    
    
    $
    67,696Proforma net income
    
    $
    5,592
    
    
    $
    26,888Income per share  basic
    
    $
    0.19
    
    
    $
    0.87Income per share  diluted
    
    $
    0.19
    
    
    $
    0.85
  77




---



##### Table of Contents



4. Prepaids and other current assets
  December 31,2008
    
    
    2007Deferred charges
    
    $
    981
    
    
    $
    1,334Prepaid expenses
    
    
    5,913
    
    
    
    7,864Other current assets
    
    
    37
    
    
    
    1,160$
    6,931
    
    
    $
    10,358
 5. Property, plant and equipment
  December 31,2008
    
    
    2007Property, plant and equipment:Land and buildings
    
    $
    65,840
    
    
    $
    65,128Network and outside plant facilities
    
    
    808,886
    
    
    
    781,684Furniture, fixtures and equipment
    
    
    83,889
    
    
    
    79,944Assets under capital leases
    
    
    5,144
    
    
    
    6,032Work in process
    
    
    10,540
    
    
    
    10,251974,299
    
    
    
    943,039Less: accumulated depreciation
    
    
    (574,013
    )
    
    
    (531,392
    )Net property, plant and equipment
    
    $
    400,286
    
    
    $
    411,647
  6. Investments
  December 31,2008
    
    
    2007Cash surender value of life insurance policies
    
    $
    1,779
    
    
    $
    2,566Cost method investments:GTE Mobilnet of South Texas Limited
Partnership
    
    
    21,450
    
    
    
    21,450Pittsburgh SMSA Limited Partnership
    
    
    22,950
    
    
    
    22,950CoBank, ACB stock
    
    
    2,651
    
    
    
    2,388Other
    
    
    10
    
    
    
    18Equity method investments:GTE Mobilnet of Texas RSA #17 Limited
Partnership (17.02% owned)
    
    
    17,116
    
    
    
    15,359Pennsylvania RSA 6(I) Limited Partnership
(16.6725% owned)
    
    
    7,276
    
    
    
    7,102Pennsylvania RSA 6(II) Limited Partnership
(23.67% owned)
    
    
    22,267
    
    
    
    21,949Boulevard Communications, LLP (50% owned)
    
    
    158
    
    
    
    167Fort Bend Fibernet Limited Partnership
(39.06% owned)
    
    
    
    
    
    
    193$
    95,657
    
    
    $
    94,142
  78




---



##### Table of Contents



2008
    
    
    2007
    
    
    2006For the year ended December 31:Total revenues
    
    $
    212,498
    
    
    $
    180,412
    
    
    $
    49,298Income from operations
    
    
    50,479
    
    
    
    41,682
    
    
    
    15,161Income before income taxes
    
    
    50,479
    
    
    
    42,680
    
    
    
    15,633Net income
    
    
    50,619
    
    
    
    42,680
    
    
    
    15,633As of December 31:Current assets
    
    
    33,586
    
    
    
    31,049
    
    
    
    14,409Non-current assets
    
    
    74,521
    
    
    
    64,172
    
    
    
    34,399Current liabilities
    
    
    8,937
    
    
    
    8,869
    
    
    
    1,844Non-current liabilities
    
    
    567
    
    
    
    468
    
    
    
    246Partnership equity
    
    
    98,603
    
    
    
    85,885
    
    
    
    46,097
  7. Minority Interest
  8. Goodwill and Other Intangible Assets
   79




---



##### Table of Contents



Telephone
    
    
    OtherOperations
    
    
    Operations
    
    
    TotalBalance at December 31, 2006
    
    $
    308,850
    
    
    $
    7,184
    
    
    $
    316,034Utilization and release of NOL valuation
allowance
    
    
    (3,984
    )
    
    
    
    
    
    
    (3,984
    )Purchase of North Pittsburgh
    
    
    214,389
    
    
    
    
    
    
    
    214,389Balance at December 31, 2007
    
    
    519,255
    
    
    
    7,184
    
    
    
    526,439Adjustment to purchase of North Pittsburgh
    
    
    173
    
    
    
    
    
    
    
    173Impairment
    
    
    
    
    
    
    (6,050
    )
    
    
    (6,050
    )Balance at December 31, 2008
    
    $
    519,428
    
    
    $
    1,134
    
    
    $
    520,562
    December 31,2008
    
    
    2007Gross carrying amount
    
    $
    205,648
    
    
    $
    205,648Less: accumulated amortization
    
    
    (81,399
    )
    
    
    (59,237
    )Net carrying amount
    
    $
    124,249
    
    
    $
    146,411
  Calendar 2009
    
    $
    22,163Calendar 2010
    
    
    22,138Calendar 2011
    
    
    22,138Calendar 2012
    
    
    22,138Calendar 2013
    
    
    8,323Thereafter
    
    
    27,349$
    124,249
  80




---



##### Table of Contents



9. Affiliated Transactions
      Year ended December 31,2008
    
    
    2007
    
    
    2006Fees charged from First Mid-Illnois for:Banking fees
    
    $
    11
    
    
    $
    10
    
    
    $
    10401K plan adminstration
    
    
    65
    
    
    
    81
    
    
    
    100Interest income earned by the Company on
deposits at First Mid-Illinois
    
    
    48
    
    
    
    174
    
    
    
    206Fees charged by the Company to First
Mid-Illinois for telecommunication services
    
    
    482
    
    
    
    465
    
    
    
    542
   81




---



##### Table of Contents



10. Income Taxes
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Current:Federal
    
    $
    12,519
    
    
    $
    7,790
    
    
    $
    10,152State
    
    
    6,152
    
    
    
    1,155
    
    
    
    1,63218,671
    
    
    
    8,945
    
    
    
    11,784Deferred:Federal
    
    
    (9,650
    )
    
    
    (1,523
    )
    
    
    (4,568
    )State
    
    
    (2,382
    )
    
    
    (2,748
    )
    
    
    (6,811
    )(12,032
    )
    
    
    (4,271
    )
    
    
    (11,379
    )Income tax expense
    
    $
    6,639
    
    
    $
    4,674
    
    
    $
    405
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Statutory federal income tax rate
    
    
    35.0
    %
    
    
    35.0
    %
    
    
    35.0
    %State income taxes, net of federal
benefit
    
    
    27.0
    
    
    
    2.5
    
    
    
    2.1Stock compensation
    
    
    1.7
    
    
    
    4.7
    
    
    
    6.4Other permanent differences
    
    
    4.3
    
    
    
    1.9
    
    
    
    3.3Change in tax law
    
    
    
    
    
    
    (10.7
    )
    
    
    (45.8
    )Change in deferred tax rate
    
    
    (9.9
    )
    
    
    (5.4
    )
    
    
    2.0Other
    
    
    (2.3
    )
    
    
    1.0
    
    
    
    55.8
    %
    
    
    29.0
    %
    
    
    3.0
    %
   82




---



##### Table of Contents



Deferred Tax Assets
  Year Ended December 31,2008
    
    
    2007Current deferred tax assets:Reserve for uncollectible accounts
    
    $
    862
    
    
    $
    877Accrued vacation pay deducted when paid
    
    
    1,200
    
    
    
    1,259Accrued expenses and deferred revenue
    
    
    1,538
    
    
    
    2,4153,600
    
    
    
    4,551Noncurrent deferred tax assets:Net operating loss carryforwards
    
    
    1,998
    
    
    
    5,968Pension and postretirement obligations
    
    
    40,184
    
    
    
    25,161Stock compensation
    
    
    251
    
    
    
    158Derivative instruments
    
    
    17,321
    
    
    
    4,657State tax credit carryforward
    
    
    2,450
    
    
    
    2,441Valuation Allowance
    
    
    
    
    
    
    (2,871
    )62,204
    
    
    
    35,514Noncurrent deferred tax liabilities:Goodwill and other intangibles
    
    
    (44,487
    )
    
    
    (50,483
    )Partnership investment
    
    
    (22,203
    )
    
    
    (22,096
    )Property, plant and equipment
    
    
    (53,648
    )
    
    
    (60,224
    )(120,338
    )
    
    
    (132,803
    )Net non-current deferred tax liabilities
    
    
    (58,134
    )
    
    
    (97,289
    )Net deferred income tax liabilities
    
    $
    (54,534
    )
    
    $
    (92,738
    )
       83




---



##### Table of Contents



Texas Legislation
  Unrecognized Tax Benefits
        84




---



##### Table of Contents



Liability forUnrecognized TaxBenefitsBalance at January 1, 2008
    
    $
    6,030Additions for tax positions of acquisition
    
    
    Reductions for lapse of 2003 and 2004 federal and state
statute of limitations
    
    
    (562
    )Additions for tax positions of prior years
    
    
    272Reduction for lapse of 2003 federal statute of limitations
    
    
    Reduction for lapse of 2002 state statute of limitations
    
    
    Balance at
December 31, 2008
    
    $
    5,740
 11. Accrued Expenses
  December 31,2008
    
    
    2007Salaries and employee benefits
    
    $
    9,453
    
    
    $
    10,350Taxes payable
    
    
    6,004
    
    
    
    5,180Accrued interest
    
    
    785
    
    
    
    3,614Other accrued expenses
    
    
    8,342
    
    
    
    9,110$
    24,584
    
    
    $
    28,254
 12. Pension Costs and Other Postretirement Benefits
      85




---



##### Table of Contents



Pension Benefits
    
    
    Other BenefitsDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006The change in benefit obligationProjected benefit obligation,
beginning of year
    
    $
    187,851
    
    
    $
    126,910
    
    
    $
    124,334
    
    
    $
    40,895
    
    
    $
    26,994
    
    
    $
    27,831Aquired with the acquisition
of North Pittsburgh
    
    
    
    
    
    
    61,651
    
    
    
    
    
    
    
    
    
    
    
    13,165
    
    
    
    Service cost
    
    
    2,120
    
    
    
    1,802
    
    
    
    2,024
    
    
    
    900
    
    
    
    809
    
    
    
    842Interest cost
    
    
    11,214
    
    
    
    7,378
    
    
    
    7,012
    
    
    
    2,420
    
    
    
    1,527
    
    
    
    1,346Service cost adjustment
to retained earnings
    
    
    202
    
    
    
    
    
    
    
    
    
    
    
    72
    
    
    
    
    
    
    
    Interest cost adjustment
to retained earnings
    
    
    976
    
    
    
    
    
    
    
    
    
    
    
    163
    
    
    
    
    
    
    
    Post-measurement date contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (339
    )
    
    
    
    
    
    
    Plan participant contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375
    
    
    
    246
    
    
    
    109Plan amendments
    
    
    (320
    )
    
    
    
    
    
    
    
    
    
    
    (3,724
    )
    
    
    916
    
    
    
    Special termination benefits and settlements
    
    
    51
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    Benefits paid
    
    
    (17,534
    )
    
    
    (7,743
    )
    
    
    (6,666
    )
    
    
    (2,873
    )
    
    
    (1,792
    )
    
    
    (1,150
    )Actuarial (gain) / loss
    
    
    3,472
    
    
    
    (2,147
    )
    
    
    206
    
    
    
    (207
    )
    
    
    (970
    )
    
    
    (1,984
    )Projected benefit obligation,
end of year
    
    $
    188,032
    
    
    $
    187,851
    
    
    $
    126,910
    
    
    $
    37,723
    
    
    $
    40,895
    
    
    $
    26,994Accumulated benefit obligation
    
    $
    180,795
    
    
    $
    180,003
    
    
    $
    125,377The change in plan assetsFair value of plan assets,
beginning of year
    
    $
    166,638
    
    
    $
    103,790
    
    
    $
    100,446
    
    
    $
    
    
    
    $
    
    
    
    $
    Acquired with the acquisition
of North Pittsburgh
    
    
    
    
    
    
    54,912
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Actual return on plan assets
    
    
    (36,794
    )
    
    
    10,870
    
    
    
    9,685
    
    
    
    
    
    
    
    
    
    
    
    Employer contributions
    
    
    6,139
    
    
    
    4,809
    
    
    
    402
    
    
    
    2,498
    
    
    
    1,546
    
    
    
    1,041Plan participant contributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    375
    
    
    
    246
    
    
    
    109Administrative expenses paid
    
    
    
    
    
    
    
    
    
    
    (77
    )
    
    
    
    
    
    
    
    
    
    
    Benefits paid
    
    
    (17,534
    )
    
    
    (7,743
    )
    
    
    (6,666
    )
    
    
    (2,873
    )
    
    
    (1,792
    )
    
    
    (1,150
    )Fair value of plan assets,
end of year
    
    $
    118,449
    
    
    $
    166,638
    
    
    $
    103,790
    
    
    $
    
    
    
    $
    
    
    
    $
    Funded statusProjected benefit obligation
    
    $
    (188,032
    )
    
    $
    (187,851
    )
    
    $
    (126,910
    )
    
    $
    (37,723
    )
    
    $
    (40,895
    )
    
    $
    (26,994
    )Fair value of plan assets
    
    
    118,449
    
    
    
    166,638
    
    
    
    103,790
    
    
    
    
    
    
    
    
    
    
    
    Employer contributions after
measurement date and before
end of year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    339
    
    
    
    136Funded status
    
    
    (69,583
    )
    
    
    (21,213
    )
    
    
    (23,120
    )
    
    
    (37,723
    )
    
    
    (40,556
    )
    
    
    (26,858
    )Unrecognized prior service
(credit)
    
    
    (455
    )
    
    
    (151
    )
    
    
    (164
    )
    
    
    (3,233
    )
    
    
    (131
    )
    
    
    (1,758
    )Unrecognized net actuarial
(gain) loss
    
    
    50,455
    
    
    
    (3,640
    )
    
    
    1,376
    
    
    
    (169
    )
    
    
    49
    
    
    
    1,064Net amount recognized
    
    $
    (19,583
    )
    
    $
    (25,004
    )
    
    $
    (21,908
    )
    
    $
    (41,125
    )
    
    $
    (40,638
    )
    
    $
    (27,552
    )
  86




---



##### Table of Contents



Pension Benefits
    
    
    Other BenefitsDecember 31,
    
    
    December 31,2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Amounts recognized in the
balance sheet included inCurrent liabilities
    
    $
    (52
    )
    
    $
    (5,924
    )
    
    $
    
    
    
    $
    (2,908
    )
    
    $
    (2,841
    )
    
    $
    Noncurrent liabilities
    
    
    (69,531
    )
    
    
    (15,289
    )
    
    
    (23,120
    )
    
    
    (34,815
    )
    
    
    (37,715
    )
    
    
    (26,858
    )$
    (69,583
    )
    
    $
    (21,213
    )
    
    $
    (23,120
    )
    
    $
    (37,723
    )
    
    $
    (40,556
    )
    
    $
    (26,858
    )Amounts in accumulated other
comprehensive income (loss):Unrecognized prior service
(credit)
    
    $
    (455
    )
    
    $
    (151
    )
    
    $
    (164
    )
    
    $
    (3,233
    )
    
    $
    (131
    )
    
    $
    (1,758
    )Unrecognized net actuarial
(gain) loss
    
    
    50,455
    
    
    
    (3,640
    )
    
    
    1,376
    
    
    
    (169
    )
    
    
    49
    
    
    
    1,064$
    50,000
    
    
    $
    (3,791
    )
    
    $
    1,212
    
    
    $
    (3,402
    )
    
    $
    (82
    )
    
    $
    (694
    )
   December 31,2008
    
    
    2007Plan assets by categoryEquity securities
    
    
    52.2
    %
    
    
    38.3
    %Debt securities
    
    
    44.2
    %
    
    
    24.3
    %Other
    
    
    3.6
    %
    
    
    37.4
    %100.0
    %
    
    
    100.0
    %
    87




---



##### Table of Contents



Pension
    
    
    OtherBenefits
    
    
    Benefits2009
    
    $
    12,225
    
    
    $
    2,9682010
    
    
    12,429
    
    
    
    2,9682011
    
    
    12,425
    
    
    
    3,1162012
    
    
    12,617
    
    
    
    3,1312013
    
    
    12,699
    
    
    
    3,0332014 through 2018
    
    
    45,320
    
    
    
    14,926
  Pension Benefits
    
    
    Other Benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Service cost
    
    $
    2,120
    
    
    $
    1,802
    
    
    $
    2,024
    
    
    $
    900
    
    
    $
    809
    
    
    $
    842Interest cost
    
    
    11,214
    
    
    
    7,378
    
    
    
    7,012
    
    
    
    2,420
    
    
    
    1,527
    
    
    
    1,346Expected return on plan assets
    
    
    (12,689
    )
    
    
    (8,034
    )
    
    
    (7,790
    )
    
    
    
    
    
    
    
    
    
    
    Other, net
    
    
    18
    
    
    
    22
    
    
    
    544
    
    
    
    (638
    )
    
    
    (667
    )
    
    
    (772
    )Net periodic benefit cost
    
    $
    663
    
    
    $
    1,168
    
    
    $
    1,790
    
    
    $
    2,682
    
    
    $
    1,669
    
    
    $
    1,416Additional loss due to:Special termination benefits
and settlments
    
    $
    51
    
    
    $
    
    
    
    $
    
    
    
    $
    41
    
    
    $
    
    
    
    $
    
  Pension Benefits
    
    
    Other Benefits2008
    
    
    2007
    
    
    2006
    
    
    2008
    
    
    2007
    
    
    2006Discount rate
    
    
    6.1
    %
    
    
    6.3
    %
    
    
    6.0
    %
    
    
    6.1
    %
    
    
    6.3
    %
    
    
    6.0
    %Compensation rate increase
    
    
    3.9
    %
    
    
    3.5
    %
    
    
    3.3
    %
    
    
    
    
    
    
    
    
    
    
    Return on plan assets
    
    
    8.0
    %
    
    
    8.0
    %
    
    
    8.0
    %
    
    
    
    
    
    
    
    
    
    
    Initial heathcare cost trend rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10.0
    %
    
    
    10.0
    %
    
    
    10.0
    %Ultimate heathcare cost rate
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.0
    %
    
    
    5.0
    %
    
    
    5.0
    %Year ultimate trend rate reached
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2016
    
    
    
    2013
    
    
    
    2012
   88




---



##### Table of Contents



Pension
    
    
    OtherBenefits
    
    
    BenefitsDiscount rate
    
    
    6.4
    %
    
    
    6.1
    %Compensation rate increase
    
    
    4.3
    %
    
    
    4.3
    %Return on plan assets
    
    
    8.0
    %
    
    
    Initial healthcare cost trend rate
    
    
    
    
    
    
    10.0
    %Ultimate healthcare cost rate
    
    
    
    
    
    
    5.0
    %Year ultimate trend rate reached
    
    
    
    
    
    
    2013
  1% Increase
    
    
    1% DecreaseEffect on 2008 service and interest costs
    
    $
    339
    
    
    $
    (291
    )Effect on accumulated postretirement benefit
obligations as of December 31, 2008
    
    $
    3,083
    
    
    $
    (2,692
    )
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans.
  13. Employee 401k Benefit Plans and Deferred Compensation Agreements
 401k benefit plans
  Deferred compensation agreements
   89




---



##### Table of Contents



14. Long-Term Debt
  December 31,2008
    
    
    2007Senior Secured Credit Facility:Revolving loan
    
    $
    
    
    
    $
    Term loan
    
    
    880,000
    
    
    
    760,000Obligations under capital lease
    
    
    1,266
    
    
    
    2,646Senior notes
    
    
    
    
    
    
    130,000881,266
    
    
    
    892,646Less: current portion
    
    
    (922
    )
    
    
    (1,010
    )$
    880,344
    
    
    $
    891,636
  2009
    
    $
    9222010
    
    
    3442011
    
    
    2012
    
    
    2013
    
    
    Thereafter
    
    
    880,000$
    881,266
 Senior secured credit facility
   90




---



##### Table of Contents



Senior notes
  Capital lease
  Derivative instruments
     91




---



##### Table of Contents



15. Fair Value Measurements
   Fair Value Measurements at Reporting Date UsingQuoted Prices
    
    
    Significantin Active
    
    
    Other
    
    
    SignificantMarkets for
    
    
    Observable
    
    
    UnobservableIdentical Assets
    
    
    Inputs
    
    
    InputsDescription
    
    December 31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Interest Rate Derivatives
    
    $
    47,908
    
    
    
    
    
    
    
    
    
    
    $
    47,908
  92




---



##### Table of Contents



MeasurementsUsing SignificantUnobservableInputs (Level 3)Interest RateDerivativesBalance at December 31, 2007
    
    $
    12,769Settlements
    
    
    (10,412
    )Total gains or losses (realized/unrealized)Unrealized loss included in earnings
    
    
    395Unrealized loss included in other
comprehensive income
    
    
    45,156Balance at December 31, 2008
    
    $
    47,908The amount of total loss for
the period included in earnings for
the period as a component of interest expense
    
    $
    395
  16. Restricted Share Plan
   2008
    
    
    2007
    
    
    2006Restricted shares outstanding, beginning of period
    
    
    129,302
    
    
    
    248,745
    
    
    
    422,065Shares granted
    
    
    71,467
    
    
    
    136,584
    
    
    
    18,000Shares vested
    
    
    (95,241
    )
    
    
    (246,277
    )
    
    
    (187,000
    )Shares forfeited or retired
    
    
    
    
    
    
    (9,750
    )
    
    
    (4,320
    )Restricted shares outstanding, end of period
    
    
    105,528
    
    
    
    129,302
    
    
    
    248,745
   93




---



##### Table of Contents



17. Accumulated Other Comprehensive Loss
  December 31,2008
    
    
    2007Fair value of cash flow hedges
    
    $
    (47,513
    )
    
    $
    (12,769
    )Prior service credits and net losses on
postretirement plans
    
    
    (46,598
    )
    
    
    3,873(94,111
    )
    
    
    (8,896
    )Deferred taxes
    
    
    34,632
    
    
    
    3,245Accumulated other comprehensive loss
    
    $
    (59,479
    )
    
    $
    (5,651
    )
 18. Environmental Remediation Liabilities
  19. Commitments and Contingencies
 Legal proceedings
   Operating leases
   94




---



##### Table of Contents



Other commitments
  Other contingencies
    20. Share Repurchase
  21. Net Income per Common Share
  December 31,2008
    
    
    2007
    
    
    2006Net income applicable to common stockholders
    
    $
    12,504
    
    
    $
    11,423
    
    
    $
    13,267Basic weighted average number of common shares outstanding
    
    
    29,321,404
    
    
    
    25,764,380
    
    
    
    27,739,697Effect of dilutive securities
    
    
    209,332
    
    
    
    358,104
    
    
    
    430,804Diluted weighted average number of common shares
outstanding
    
    
    29,530,736
    
    
    
    26,122,484
    
    
    
    28,170,501Basic earnings per share
    
    $
    0.43
    
    
    $
    0.44
    
    
    $
    0.48Diluted earnings per share
    
    $
    0.42
    
    
    $
    0.44
    
    
    $
    0.47
  95




---



##### Table of Contents



22. Business Segments
  Year Ended December 31,2008
    
    
    2007
    
    
    2006Operating revenuesTelephone Operations
    
    $
    377,967
    
    
    $
    286,774
    
    
    $
    280,334Other Operations
    
    
    40,457
    
    
    
    42,474
    
    
    
    40,433Total
    
    $
    418,424
    
    
    $
    329,248
    
    
    $
    320,767Operating income (loss)Telephone Operations
    
    $
    74,554
    
    
    $
    70,162
    
    
    $
    65,939Other Operations
    
    
    (6,190
    )
    
    
    (3,525
    )
    
    
    (16,628
    )Total
    
    
    68,364
    
    
    
    66,637
    
    
    
    49,311Interest income
    
    
    367
    
    
    
    893
    
    
    
    974Interest expense
    
    
    (66,659
    )
    
    
    (47,350
    )
    
    
    (43,873
    )Investment income
    
    
    20,495
    
    
    
    7,034
    
    
    
    7,691Minority interest
    
    
    (863
    )
    
    
    (627
    )
    
    
    (721
    )Loss on extinguishment of debt
    
    
    (9,224
    )
    
    
    (10,323
    )
    
    
    Other, net
    
    
    (577
    )
    
    
    (167
    )
    
    
    290Income before income taxes and extraordinary item
    
    $
    11,903
    
    
    $
    16,097
    
    
    $
    13,672Capital expenditures:Telephone Operations
    
    $
    47,181
    
    
    $
    32,245
    
    
    $
    32,698Other Operations
    
    
    846
    
    
    
    1,250
    
    
    
    690Total
    
    $
    48,027
    
    
    $
    33,495
    
    
    $
    33,388
 Telephone
    
    
    OtherOperations
    
    
    Operations
    
    
    TotalAs of December 31, 2008:Goodwill
    
    $
    519,428
    
    
    $
    1,134
    
    
    $
    520,562Total assets
    
    $
    1,227,320
    
    
    $
    14,306
    
    
    $
    1,241,626As of December 31, 2007:Goodwill
    
    $
    519,255
    
    
    $
    7,184
    
    
    $
    526,439Total assets
    
    $
    1,281,011
    
    
    $
    23,580
    
    
    $
    1,304,591
  96




---



##### Table of Contents



23. Quarterly Financial Information (unaudited)
 Consolidated Communications
Quarterly Consolidated Statements of Income
 March 31
    
    
    June 30
    
    
    September 30
    
    
    December 312008Revenues
    
    $
    105,414
    
    
    $
    106,444
    
    
    $
    103,824
    
    
    $
    102,742Operating expenses:Cost of services and products
    
    
    33,863
    
    
    
    36,108
    
    
    
    37,778
    
    
    
    35,814Selling, general and administrative
expenses
    
    
    28,144
    
    
    
    26,911
    
    
    
    26,162
    
    
    
    27,552Intangible assets impairment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,050Depreciation and amortization
    
    
    22,871
    
    
    
    22,350
    
    
    
    22,841
    
    
    
    23,616Total operating expenses
    
    
    84,878
    
    
    
    85,369
    
    
    
    86,781
    
    
    
    93,032Income from operations
    
    
    20,536
    
    
    
    21,075
    
    
    
    17,043
    
    
    
    9,710Other expenses, net
    
    
    13,949
    
    
    
    20,625
    
    
    
    7,810
    
    
    
    14,077Income (loss) before income taxes and
extraordinary item
    
    
    6,587
    
    
    
    450
    
    
    
    9,233
    
    
    
    (4,367
    )Income tax expense (benefit)
    
    
    2,878
    
    
    
    270
    
    
    
    4,262
    
    
    
    (771
    )Income (loss) before extraordinary item
    
    
    3,709
    
    
    
    180
    
    
    
    4,971
    
    
    
    (3,596
    )Extraordinary item (net of income tax)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,240Net income
    
    $
    3,709
    
    
    $
    180
    
    
    $
    4,971
    
    
    $
    3,644Net income per common shareBasic
    
    $
    0.13
    
    
    $
    0.01
    
    
    $
    0.17
    
    
    $
    0.12Diluted
    
    $
    0.13
    
    
    $
    0.01
    
    
    $
    0.17
    
    
    $
    0.112007Revenues
    
    $
    82,980
    
    
    $
    80,944
    
    
    $
    80,320
    
    
    $
    85,004Operating expenses:Cost of services and products
    
    
    25,629
    
    
    
    25,788
    
    
    
    27,698
    
    
    
    28,175Selling, general and administrative
expenses
    
    
    22,299
    
    
    
    22,296
    
    
    
    21,800
    
    
    
    23,267Depreciation and amortization
    
    
    16,629
    
    
    
    16,606
    
    
    
    16,350
    
    
    
    16,074Total operating expenses
    
    
    64,557
    
    
    
    64,690
    
    
    
    65,848
    
    
    
    67,516Income from operations
    
    
    18,423
    
    
    
    16,254
    
    
    
    14,472
    
    
    
    17,488Other expenses, net
    
    
    10,117
    
    
    
    9,704
    
    
    
    10,119
    
    
    
    20,600Pretax income (loss)
    
    
    8,306
    
    
    
    6,550
    
    
    
    4,353
    
    
    
    (3,112
    )Income tax expense (benefit)
    
    
    3,687
    
    
    
    1,057
    
    
    
    2,012
    
    
    
    (2,082
    )Net income (loss)
    
    $
    4,619
    
    
    $
    5,493
    
    
    $
    2,341
    
    
    $
    (1,030
    )Net income (loss) per common share basic and diluted
    
    $
    0.18
    
    
    $
    0.21
    
    
    $
    0.09
    
    
    $
    (0.04
    )
  97




---



##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
   
 Item 9B. Other Information
  
 PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
   
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accountant Fees and Services
   98




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 Exhibits
  Financial Statement Schedules
     99




---



##### Table of Contents



CONSOLIDATED COMMUNICATIONS HOLDINGS, INC.
 
 SCHEDULE IIVALUATION RESERVES
 (Dollars in thousands)
 2008
    
    
    2007
    
    
    2006Allowance for Doubtful Accounts:Balance at beginning of year
    
    $
    2,440
    
    
    $
    2,110
    
    
    $
    2,825North Pittsburgh acquisition
    
    
    
    
    
    
    471
    
    
    
    Provision charged to expense
    
    
    4,819
    
    
    
    4,734
    
    
    
    5,059Write-offs, less recoveries
    
    
    (5,351
    )
    
    
    (4,875
    )
    
    
    (5,774
    )Balance at end of year
    
    $
    1,908
    
    
    $
    2,440
    
    
    $
    2,110Inventory reserves:Balance at beginning of year
    
    $
    400
    
    
    $
    429
    
    
    $
    630North Pittsburgh acquisition
    
    
    
    
    
    
    171
    
    
    
    Provision charged to expense
    
    
    597
    
    
    
    125
    
    
    
    Write-offs
    
    
    (119
    )
    
    
    (325
    )
    
    
    (201
    )Balance at end of year
    
    $
    878
    
    
    $
    400
    
    
    $
    429Income tax valuation allowance:Balance at beginning of year
    
    $
    2,871
    
    
    $
    5,349
    
    
    $
    16,040North Pittsburgh acquisition
    
    
    
    
    
    
    1,530
    
    
    
    North Pittsburgh ETFL adjustment to goodwill
    
    
    (1,530
    )
    
    
    
    
    
    
    Reduction of related deferred
tax asset
    
    
    (1,341
    )
    
    
    (3,984
    )
    
    
    (5,021
    )Provision (benefit) charged to expense
    
    
    
    
    
    
    (24
    )
    
    
    (283
    )Release of valuation allowance
    
    
    
    
    
    
    
    
    
    
    (5,387
    )Balance at end of year
    
    $
    
    
    
    $
    2,871
    
    
    $
    5,349
  100




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      
  101




---



##### Table of Contents



PENNSYLVANIA RSA 6 (II) LIMITED PARTNERSHIP
 BALANCE SHEETS
DECEMBER 31, 2008 AND 2007
(Dollars in Thousands)
 2008
    
    
    2007ASSETSCURRENT ASSETS:Accounts receivable, net of allowance of $225 and $154
    
    $
    7,964
    
    
    $
    6,638Unbilled revenue
    
    
    784
    
    
    
    727Due from General Partner
    
    
    6,412
    
    
    
    6,527Prepaid expenses and other current assets
    
    
    17
    
    
    
    17Total current assets
    
    
    15,177
    
    
    
    13,909PROPERTY, PLANT AND EQUIPMENTNet
    
    
    12,418
    
    
    
    12,373OTHER ASSETS
    
    
    140
    
    
    
    TOTAL ASSETS
    
    $
    27,735
    
    
    $
    26,282LIABILITIES AND PARTNERS CAPITALCURRENT LIABILITIES:Accounts payable and accrued liabilities
    
    $
    2,173
    
    
    $
    2,388Advance billings and customer deposits
    
    
    2,392
    
    
    
    2,097Total current liabilities
    
    
    4,565
    
    
    
    4,485LONG TERM LIABILITIES
    
    
    187
    
    
    
    160Total liabilities
    
    
    4,752
    
    
    
    4,645COMMITMENTS AND CONTINGENCIES (see Notes 6 and 7)PARTNERS CAPITAL
    
    
    22,983
    
    
    
    21,637TOTAL LIABILITIES AND PARTNERS CAPITAL
    
    $
    27,735
    
    
    $
    26,282
   102




---



##### Table of Contents



PENNSYLVANIA RSA 6 (II) LIMITED PARTNERSHIP
 STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(Dollars in Thousands)
 2008
    
    
    2007
    
    
    2006OPERATING REVENUESService revenues, net
    
    $
    83,807
    
    
    $
    72,777
    
    
    $
    69,795Equipment, net and other revenues
    
    
    24,652
    
    
    
    23,332
    
    
    
    21,480Total operating revenues
    
    
    108,459
    
    
    
    96,109
    
    
    
    91,275OPERATING COSTS AND EXPENSES:Cost of service (excluding depreciation and amortization
related to network assets included below)
    
    
    31,276
    
    
    
    26,726
    
    
    
    31,139Cost of equipment
    
    
    25,329
    
    
    
    22,718
    
    
    
    19,701Selling, general and administrative
    
    
    26,566
    
    
    
    24,645
    
    
    
    21,634Depreciation and amortization
    
    
    2,177
    
    
    
    2,356
    
    
    
    2,607Total operating costs and expenses
    
    
    85,348
    
    
    
    76,445
    
    
    
    75,081OPERATING INCOME
    
    
    23,111
    
    
    
    19,664
    
    
    
    16,194INTEREST INCOME, NET
    
    
    235
    
    
    
    270
    
    
    
    292NET INCOME
    
    $
    23,346
    
    
    $
    19,934
    
    
    $
    16,486Allocation of Net Income:Limited Partners
    
    $
    9,417
    
    
    $
    8,042
    
    
    $
    6,651General Partner
    
    $
    13,929
    
    
    $
    11,892
    
    
    $
    9,835
   103




---



##### Table of Contents



PENNSYLVANIA RSA 6 (II) LIMITED PARTNERSHIP
 STATEMENTS OF CHANGES IN PARTNERS CAPITAL
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(Dollars in Thousands)
 GeneralPartner
    
    
    Limited PartnersConsolidated
    
    
    VenusCommunications
    
    
    Cellularof Pennsylvania
    
    
    Telephone
    
    
    TotalCellco
    
    
    Company
    
    
    Services,
    
    
    PartnersPartnership
    
    
    (Note 1)
    
    
    Inc.
    
    
    CapitalBALANCEJanuary 1, 2006
    
    $
    11,018
    
    
    $
    4,371
    
    
    $
    3,078
    
    
    $
    18,467Distributions
    
    
    (10,291
    )
    
    
    (4,083
    )
    
    
    (2,876
    )
    
    
    (17,250
    )Net income
    
    
    9,835
    
    
    
    3,902
    
    
    
    2,749
    
    
    
    16,486BALANCEDecember 31, 2006
    
    
    10,562
    
    
    
    4,190
    
    
    
    2,951
    
    
    
    17,703Distributions
    
    
    (9,546
    )
    
    
    (3,787
    )
    
    
    (2,667
    )
    
    
    (16,000
    )Net income
    
    
    11,892
    
    
    
    4,719
    
    
    
    3,323
    
    
    
    19,934BALANCEDecember 31, 2007
    
    
    12,908
    
    
    
    5,122
    
    
    
    3,607
    
    
    
    21,637Distributions
    
    
    (13,125
    )
    
    
    (5,207
    )
    
    
    (3,668
    )
    
    
    (22,000
    )Net income
    
    
    13,929
    
    
    
    5,525
    
    
    
    3,892
    
    
    
    23,346BALANCEDecember 31, 2008
    
    $
    13,712
    
    
    $
    5,440
    
    
    $
    3,831
    
    
    $
    22,983
   104




---



##### Table of Contents



PENNSYLVANIA RSA 6 (II) LIMITED PARTNERSHIP
 STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(Dollars in Thousands)
 2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    23,346
    
    
    $
    19,934
    
    
    $
    16,486Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    2,177
    
    
    
    2,356
    
    
    
    2,607Provision for losses on accounts receivable
    
    
    483
    
    
    
    278
    
    
    
    230Changes in certain assets and liabilities:Accounts receivable
    
    
    (1,809
    )
    
    
    (1,149
    )
    
    
    (798
    )Unbilled revenue
    
    
    (57
    )
    
    
    409
    
    
    
    (442
    )Prepaid expenses and other current assets
    
    
    
    
    
    
    (1
    )
    
    
    (3
    )Accounts payable and accrued liabilities
    
    
    58
    
    
    
    (390
    )
    
    
    634Advance billings and customer deposits
    
    
    295
    
    
    
    302
    
    
    
    156Other long term liabilities
    
    
    27
    
    
    
    11
    
    
    
    56Net cash provided by operating activities
    
    
    24,520
    
    
    
    21,750
    
    
    
    18,926CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures, including purchases from affiliates, net
    
    
    (2,453
    )
    
    
    (3,206
    )
    
    
    (2,115
    )Purchase of Customers from an affiliate
    
    
    (182
    )
    
    
    
    
    
    
    Change in due from General Partner, net
    
    
    115
    
    
    
    (2,544
    )
    
    
    439Net cash used in investing activities
    
    
    (2,520
    )
    
    
    (5,750
    )
    
    
    (1,676
    )CASH FLOWS FROM FINANCING ACTIVITIES:Distributions to partners
    
    
    (22,000
    )
    
    
    (16,000
    )
    
    
    (17,250
    )Net cash used in financing activities
    
    
    (22,000
    )
    
    
    (16,000
    )
    
    
    (17,250
    )CHANGE IN CASH
    
    
    
    
    
    
    
    
    
    
    CASHBeginning of year
    
    
    
    
    
    
    
    
    
    
    CASHEnd of year
    
    $
    
    
    
    $
    
    
    
    $
    NONCASH TRANSACTIONS FROM INVESTING
AND FINANCING ACTIVITIES:Accruals for capital expenditures
    
    $
    15
    
    
    $
    14
    
    
    $
    148
   105




---



##### Table of Contents



PENNSYLVANIA RSA 6 (II) LIMITED PARTNERSHIP
 NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(Dollars in Thousands)
 1.
    
    ORGANIZATION AND MANAGEMENT
 Pennsylvania RSA 6 (II) Limited Partnership
  General Partner:Cellco Partnership* (General Partner)
    
    
    59.66
    %Limited Partners:Consolidated Communications of Pennsylvania Company**
    
    
    23.67
    %Venus Cellular Telephone Services, Inc
    
    
    16.67
    %
 *
    
    Cellco Partnership (Cellco) doing business as Verizon Wireless.**
    
    On January 1, 2008 North Pittsburgh Telephone Company changed its name to Consolidated
Communications of Pennsylvania Company. 2.
    
    SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates
 Revenue Recognition Accounting for Revenue Arrangements with Multiple Deliverables, Revenue
Recognition in Financial Statements, Revenue Recognition,
  106




---



##### Table of Contents



How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be
Presented in the Income Statement,
  Operating Costs and Expenses
 Retail Stores
 Income Taxes
 Inventory
 Allowance for Doubtful Accounts
 Property, Plant and Equipment
   107




---



##### Table of Contents



Other Assets 
 FCC Licenses
 Valuation of Assets
 Goodwill and Other Intangible Assets.
  Unit of Accounting for Testing Impairment of Indefinite-Lived
Intangible Assets Use of the Residual Method to Value Acquired Assets other than Goodwill
  108




---



##### Table of Contents



Fair
Value Measurements  Fair Value Measurements,
    Effective Date of FASB Statement
No. 157, Determining the Fair Value of a Financial
Asset When the Market for That Asset Is Not Active
 Business Combinations (Revised)
 Concentrations
   Financial Instruments
 Due from General Partner
  109




---



##### Table of Contents



Distributions 
 Recently Issued Accounting Pronouncements Determination of the Useful Life of Intangible Assets
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133
  110




---



##### Table of Contents



Business Combinations (Revised) Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 The Fair Value Option for Financial Assets and
Financial Liabilities
  111




---



##### Table of Contents



3.
    
    PROPERTY, PLANT AND EQUIPMENT
  Useful Lives
    
    
    2008
    
    
    2007Buildings and improvements
    
    10-40 years
    
    
    $
    5,915
    
    
    $
    5,650Cellular plant equipment
    
    3-15 years
    
    
    
    22,043
    
    
    
    25,770Furniture, fixtures and equipment
    
    2-5 years
    
    
    
    346
    
    
    
    695Leasehold improvements
    
    5 years
    
    
    
    1,068
    
    
    
    93029,372
    
    
    
    33,045Less accumulated depreciation and amortization
    
    
    
    
    
    
    16,954
    
    
    
    20,672Property, plant and equipment, net
    
    
    
    
    
    $
    12,418
    
    
    $
    12,373
  4.
    
    CURRENT LIABILITIES
  2008
    
    
    2007Accounts payable
    
    $
    1,785
    
    
    $
    2,035Accrued liabilities
    
    
    389
    
    
    
    353Accounts payable and accrued libilities
    
    $
    2,174
    
    
    $
    2,388
  2008
    
    
    2007Advance billings
    
    $
    2,220
    
    
    $
    1,935Customer deposits
    
    
    172
    
    
    
    162Advance billings and customer deposits
    
    $
    2,392
    
    
    $
    2,097
  112




---



##### Table of Contents



5.
    
    TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
  2008
    
    
    2007
    
    
    2006Service revenues (a)
    
    $
    15,720
    
    
    $
    13,707
    
    
    $
    18,065Equipment and other revenues (b)
    
    
    1,066
    
    
    
    1,084
    
    
    
    1,244Cost of service (c)
    
    
    29,439
    
    
    
    25,803
    
    
    
    30,319Cost of equipment (d)
    
    
    1,354
    
    
    
    1,089
    
    
    
    756Selling, general and administrative (e)
    
    
    17,040
    
    
    
    15,889
    
    
    
    13,733
 (a)
    
    Service revenues include roaming revenues relating to customers of other affiliated
markets, long distance, data and allocated contra-revenues including revenue concessions.(b)
    
    Equipment and other revenues include cell sharing revenues, sales of handsets and
accessories and allocated contra-revenues including equipment concessions and coupon
rebates.(c)
    
    Cost of service includes roaming costs relating to customers roaming in other
affiliated markets, switch costs, cell sharing costs and allocated cost of telecom, long
distance, and handset applications.(d)
    
    Cost of equipment includes handsets, accessories, and allocated warehousing and
freight.(e)
    
    Selling, general and administrative expenses include salaries, commissions and
billing, and allocated office telecom, customer care, sales and marketing, advertising,
and commissions.       113




---



##### Table of Contents



6.
    
    COMMITMENTS
   Years
    
    Amount2009
    
    $
    7942010
    
    
    6462011
    
    
    4762012
    
    
    3492013
    
    
    2582014 and thereafter
    
    
    399Total minimum payments
    
    $
    2,922
  7.
    
    CONTINGENCIES
    114




---



##### Table of Contents



8.
    
    RECONCILIATION OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
 Balance at
    
    
    Additions
    
    
    Write-offs
    
    
    Balance atBeginning
    
    
    Charged to
    
    
    Net of
    
    
    Endof the Year
    
    
    Operations
    
    
    Recoveries
    
    
    of the YearAccounts Receivable
Allowances:2008
    
    $
    154
    
    
    $
    483
    
    
    $
    (412
    )
    
    $
    2252007
    
    
    202
    
    
    
    278
    
    
    
    (326
    )
    
    
    1542006
    
    
    105
    
    
    
    290
    
    
    
    (193
    )
    
    
    202
   115




---



##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      
  116




---



##### Table of Contents



GTE MOBILNET OF TEXAS #17 LIMITED PARTNERSHIP
 BALANCE SHEETS
DECEMBER 31, 2008 AND 2007
(Dollars in Thousands)
 2008
    
    
    2007ASSETSCURRENT ASSETS:Accounts receivable, net of allowance of $385 and $373
    
    $
    3,388
    
    
    $
    3,006Unbilled revenue
    
    
    1,051
    
    
    
    952Due from General Partner
    
    
    6,320
    
    
    
    7,403Prepaid expenses and other current assets
    
    
    20
    
    
    
    8Total current assets
    
    
    10,779
    
    
    
    11,369PROPERTY, PLANT AND EQUIPMENTNet
    
    
    50,719
    
    
    
    40,062TOTAL ASSETS
    
    $
    61,498
    
    
    $
    51,431LIABILITIES AND PARTNERS CAPITALCURRENT LIABILITIES:Accounts payable and accrued liabilities
    
    $
    1,896
    
    
    $
    1,579Advance billings and customer deposits
    
    
    940
    
    
    
    773Total current liabilities
    
    
    2,836
    
    
    
    2,352LONG TERM LIABILITIES
    
    
    335
    
    
    
    270Total liabilities
    
    
    3,171
    
    
    
    2,622COMMITMENTS AND CONTINGENCIES (see Notes 6 and 7)PARTNERS CAPITAL
    
    
    58,327
    
    
    
    48,809TOTAL LIABILITIES AND PARTNERS CAPITAL
    
    $
    61,498
    
    
    $
    51,431
   117




---



##### Table of Contents



GTE MOBILNET OF TEXAS #17 LIMITED PARTNERSHIP
 STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(Dollars in Thousands)
 2008
    
    
    2007
    
    
    2006OPERATING REVENUES (see Note 5 for Transactions with Affiliates
and Related Parties):Service revenues
    
    $
    55,376
    
    
    $
    48,096
    
    
    $
    45,295Equipment and other revenues
    
    
    5,081
    
    
    
    4,341
    
    
    
    4,003Total operating revenues
    
    
    60,457
    
    
    
    52,437
    
    
    
    49,298OPERATING COSTS AND EXPENSES (see Note 5 for Transactions
with Affiliates and Related Parties):Cost of service (excluding depreciation and amortization related
to network assets included below)
    
    
    17,327
    
    
    
    15,028
    
    
    
    13,536Cost of equipment
    
    
    6,609
    
    
    
    5,085
    
    
    
    3,709Selling, general and administrative
    
    
    16,132
    
    
    
    14,142
    
    
    
    12,401Depreciation and amortization
    
    
    6,013
    
    
    
    5,020
    
    
    
    4,491Total operating costs and expenses
    
    
    46,081
    
    
    
    39,275
    
    
    
    34,137OPERATING INCOME
    
    
    14,376
    
    
    
    13,162
    
    
    
    15,161OTHER INCOME:Interest income, net
    
    
    142
    
    
    
    550
    
    
    
    472Total other income
    
    
    142
    
    
    
    550
    
    
    
    472NET INCOME
    
    $
    14,518
    
    
    $
    13,712
    
    
    $
    15,633Allocation of Net Income:Limited partners
    
    $
    11,614
    
    
    $
    10,970
    
    
    $
    12,504General Partner
    
    $
    2,904
    
    
    $
    2,742
    
    
    $
    3,129
   118




---



##### Table of Contents



GTE MOBILNET OF TEXAS #17 LIMITED PARTNERSHIP
 STATEMENTS OF CHANGES IN PARTNERS CAPITAL
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(Dollars in Thousands)
 GeneralPartner
    
    
    Limited PartnersSan
    
    
    Eastex
    
    
    
    
    
    
    Consolidated
    
    
    ALLTEL
    
    
    SanAntonio
    
    
    Telecom
    
    
    Telecom
    
    
    Communications
    
    
    Communications
    
    
    Antonio
    
    
    TotalMTA,
    
    
    Investments,
    
    
    Supply,
    
    
    Transport
    
    
    Investments,
    
    
    MTA,
    
    
    PartnersL.P.
    
    
    L.P.
    
    
    Inc.
    
    
    Company
    
    
    Inc.
    
    
    L.P.
    
    
    CapitalBALANCEJanuary 1, 2006
    
    $
    7,292
    
    
    $
    6,207
    
    
    $
    6,207
    
    
    $
    6,207
    
    
    $
    6,207
    
    
    $
    4,344
    
    
    $
    36,464Distributions
    
    
    (1,201
    )
    
    
    (1,021
    )
    
    
    (1,021
    )
    
    
    (1,021
    )
    
    
    (1,021
    )
    
    
    (715
    )
    
    
    (6,000
    )Net income
    
    
    3,129
    
    
    
    2,660
    
    
    
    2,660
    
    
    
    2,660
    
    
    
    2,660
    
    
    
    1,864
    
    
    
    15,633BALANCEDecember 31, 2006
    
    
    9,220
    
    
    
    7,846
    
    
    
    7,846
    
    
    
    7,846
    
    
    
    7,846
    
    
    
    5,493
    
    
    
    46,097Distributions
    
    
    (2,200
    )
    
    
    (1,872
    )
    
    
    (1,872
    )
    
    
    (1,872
    )
    
    
    (1,872
    )
    
    
    (1,312
    )
    
    
    (11,000
    )Net income
    
    
    2,742
    
    
    
    2,334
    
    
    
    2,334
    
    
    
    2,334
    
    
    
    2,334
    
    
    
    1,634
    
    
    
    13,712BALANCEDecember 31, 2007
    
    
    9,762
    
    
    
    8,308
    
    
    
    8,308
    
    
    
    8,308
    
    
    
    8,308
    
    
    
    5,815
    
    
    
    48,809Distributions
    
    
    (1,000
    )
    
    
    (851
    )
    
    
    (851
    )
    
    
    (851
    )
    
    
    (851
    )
    
    
    (596
    )
    
    
    (5,000
    )Net income
    
    
    2,904
    
    
    
    2,471
    
    
    
    2,471
    
    
    
    2,471
    
    
    
    2,471
    
    
    
    1,730
    
    
    
    14,518BALANCEDecember 31, 2008
    
    $
    11,666
    
    
    $
    9,928
    
    
    $
    9,928
    
    
    $
    9,928
    
    
    $
    9,928
    
    
    $
    6,949
    
    
    $
    58,327
   119




---



##### Table of Contents



GTE MOBILNET OF TEXAS #17 LIMITED PARTNERSHIP
 STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(Dollars in Thousands)
 2008
    
    
    2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    14,518
    
    
    $
    13,712
    
    
    $
    15,633Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization
    
    
    6,013
    
    
    
    5,020
    
    
    
    4,491Provision for losses on accounts receivable
    
    
    936
    
    
    
    887
    
    
    
    717Changes in certain assets and liabilities:Accounts receivable
    
    
    (1,318
    )
    
    
    (1,291
    )
    
    
    (937
    )Unbilled revenue
    
    
    (99
    )
    
    
    95
    
    
    
    (138
    )Prepaid expenses and other current assets
    
    
    (12
    )
    
    
    5
    
    
    
    1Accounts payable and accrued liabilities
    
    
    542
    
    
    
    (149
    )
    
    
    76Advance billings and customer deposits
    
    
    167
    
    
    
    152
    
    
    
    4Long term liabilities
    
    
    65
    
    
    
    24
    
    
    
    109Net cash provided by operating activities
    
    
    20,812
    
    
    
    18,455
    
    
    
    19,956CASH FLOWS FROM INVESTING ACTIVITIES:Capital expenditures, including purchases from affiliates, net
    
    
    (16,895
    )
    
    
    (10,799
    )
    
    
    (10,044
    )Change in due from General Partner, net
    
    
    1,083
    
    
    
    3,344
    
    
    
    (3,912
    )Net cash used in investing activities
    
    
    (15,812
    )
    
    
    (7,455
    )
    
    
    (13,956
    )CASH FLOWS FROM FINANCING ACTIVITIES:Distributions to partners
    
    
    (5,000
    )
    
    
    (11,000
    )
    
    
    (6,000
    )Net cash used in financing activities
    
    
    (5,000
    )
    
    
    (11,000
    )
    
    
    (6,000
    )CHANGE IN CASH
    
    
    
    
    
    
    
    
    
    
    CASHBeginning of year
    
    
    
    
    
    
    
    
    
    
    CASHEnd of year
    
    $
    
    
    
    $
    
    
    
    $
    NONCASH TRANSACTIONS FROM INVESTING AND FINANCING ACTIVITIES:Accruals for capital expenditures
    
    $
    178
    
    
    $
    242
    
    
    $
    214
   120




---



##### Table of Contents



GTE MOBILNET OF TEXAS #17 LIMITED PARTNERSHIP
 NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006
(Dollars in Thousands)
 1.
    
    ORGANIZATION AND MANAGEMENT
 GTE Mobilnet of Texas #17 Limited Partnership
  General Partner:San Antonio MTA, L.P.*
    
    
    20.0000
    %Limited Partners:Eastex Telecom Investments, L.P.
    
    
    17.0213
    %Telecom Supply, Inc.
    
    
    17.0213
    %Consolidated Communications Transport Company
    
    
    17.0213
    %ALLTEL Communications Investments, Inc.
    
    
    17.0213
    %San Antonio MTA, L.P.*
    
    
    11.9148
    %
 *
    
    San Antonio MTA, L.P. (General Partner) is a wholly-owned subsidiary of Cellco Partnership
(Cellco) doing business as Verizon Wireless. 2.
    
    SIGNIFICANT ACCOUNTING POLICIES
 Use of Estimates
 Revenue Recognition Accounting for Revenue Arrangements with Multiple Deliverables Revenue
Recognition in Financial Statements Revenue Recognition
  121




---



##### Table of Contents



How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be
Presented in the Income Statements,
 Operating Costs and Expenses
 Income Taxes
 Inventory
 Allowance for Doubtful Accounts
 Property, Plant and Equipment
   FCC Licenses
  122




---



##### Table of Contents



Valuation of Assets
 Goodwill and Other Intangible Assets
  Unit of Accounting for Testing Impairment of Indefinite-Lived
Intangible Assets Use of the Residual Method to Value Acquired Assets other than Goodwill
 Fair
Value Measurements  Fair Value Measurements,
     123




---



##### Table of Contents



Effective Date of FASB Statement
No. 157, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active
 Business Combinations (Revised)
 Concentrations
   Financial Instruments
 Due from General Partner
  Distributions 
  124




---



##### Table of Contents



Recently Issued Accounting Pronouncements  Determination of the Useful Life of Intangible Assets
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133
 Business Combinations (Revised) Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 The Fair Value Option for Financial Assets and
Financial Liabilities
  125




---



##### Table of Contents



3.
    
    PROPERTY, PLANT AND EQUIPMENT
  Useful lives
    
    
    2008
    
    
    2007Buildings and improvements
    
    10-40 years
    
    
    $
    18,790
    
    
    $
    16,290Cellular plant equipment
    
    3-15 years
    
    
    
    54,396
    
    
    
    51,268Furniture, fixtures and equipment
    
    2-5 years
    
    
    
    75
    
    
    
    75Leasehold improvements
    
    5 years
    
    
    
    3,563
    
    
    
    3,11876,824
    
    
    
    70,751Less accumulated depreciation and amortization
    
    
    
    
    
    
    26,105
    
    
    
    30,689Property, plant and equipment, net
    
    
    
    
    
    $
    50,719
    
    
    $
    40,062
  4.
    
    CURRENT LIABILITIES
  2008
    
    
    2007Accounts payable
    
    $
    551
    
    
    $
    749Non-income based taxes and regulatory fees
    
    
    600
    
    
    
    618Texas margin tax payable
    
    
    520
    
    
    
    Accrued commissions
    
    
    225
    
    
    
    212Accounts payable and accrued liabilities
    
    $
    1,896
    
    
    $
    1,579
  2008
    
    
    2007Advance billings
    
    $
    732
    
    
    $
    595Customer deposits
    
    
    208
    
    
    
    178Advance billings and customer deposits
    
    $
    940
    
    
    $
    773
  126




---



##### Table of Contents



5.
    
    TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
  2008
    
    
    2007
    
    
    2006Service revenues (a)
    
    $
    15,459
    
    
    $
    13,035
    
    
    $
    15,819Equipment and other revenues (b)
    
    
    (289
    )
    
    
    (259
    )
    
    
    (278
    )Cost of service (c)
    
    
    13,517
    
    
    
    11,909
    
    
    
    10,838Cost of equipment (d)
    
    
    1,140
    
    
    
    1,037
    
    
    
    531Selling, general and administrative (e)
    
    
    9,180
    
    
    
    8,330
    
    
    
    6,712
 (a)
    
    Service revenues include roaming revenues relating to customers of other affiliated
markets, long distance, paging, data and allocated contra-revenues including revenue
concessions.(b)
    
    Equipment and other revenues include sales of handsets and accessories and allocated
contra-revenues including equipment concessions and coupon rebates.(c)
    
    Cost of service includes roaming costs relating to customers roaming in other
affiliated markets, paging, switch usage and allocated cost of telecom, long distance and
handset applications.(d)
    
    Cost of equipment includes handsets, accessories, and allocated warehousing and
freight.(e)
    
    Selling, general and administrative expenses include commissions and billing, and
allocated office telecom, customer care, billing, salaries, sales and marketing,
advertising, and commissions.    6.
    
    COMMITMENTS
   127




---



##### Table of Contents



Years
    
    Amount2009
    
    $
    2,4232010
    
    
    1,3502011
    
    
    1,0002012
    
    
    8532013
    
    
    7372014 and thereafter
    
    
    1,901Total minimum payments
    
    $
    8,264
  7.
    
    CONTINGENCIES
     128




---



##### Table of Contents



8.
    
    RECONCILIATION OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
 Balance at
    
    
    Additions
    
    
    Write-offs
    
    
    Balance atBeginning
    
    
    Charged to
    
    
    Net of
    
    
    Endof the Year
    
    
    Operations
    
    
    Recoveries
    
    
    of the YearAccounts Receivable Allowances:2008
    
    $
    373
    
    
    $
    936
    
    
    $
    (924
    )
    
    $
    3852007
    
    $
    329
    
    
    $
    887
    
    
    $
    (843
    )
    
    
    3732006
    
    
    385
    
    
    
    717
    
    
    
    (773
    )
    
    
    329
   129




---



##### Table of Contents



SIGNATURES
  Consolidated Communications Holdings, Inc.
(Registrant)Date: March 16, 2009
    By:
    /s/ Robert J. CurreyRobert J. CurreyPresident and Chief Executive Officer
(Principal Executive Officer)  Signature
    
    
    
    Title/s/ Robert J. Currey

Robert J. Currey
    
    
    
    President , Chief Executive Officer and Director
(Principal Executive Officer)/s/ Steven L. Childers

Steven L. Childers
    
    
    
    Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)/s/ Richard A. Lumpkin

Richard A. Lumpkin
    
    
    
    Chairman of the Board of Directors/s/ Jack W. Blumenstein

Jack W. Blumenstein
    
    
    
    Director/s/ Roger H. Moore

Roger H. Moore
    
    
    
    Director/s/ Maribeth S. Rahe

Maribeth S. Rahe
    
    
    
    Director
  130




---



##### Table of Contents



INDEX TO EXHIBITS
 ExhibitNumber
    
    Description2.1
    
    
    Agreement and Plan of Merger, dated as of July 1, 2007, by and among Consolidated
Communications Holdings, Inc., North Pittsburgh Systems, Inc. and Fort Pitt Acquisition Sub
Inc. (incorporated by reference to Exhibit 2.1 to Current Report on Form 8-K dated July 12,
2007).3.1
    
    
    Form of Amended and Restated Certificate of Incorporation (incorporated by reference to
Exhibit 3.1 to Amendment No. 7 to Form S-1 dated July 19, 2005).3.2
    
    
    Form of Amended and Restated Bylaws, as amended (incorporated by reference to Exhibit 3.2 to
Current Report on Form 8-K dated September 11, 2007).4.1
    
    
    Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 to Amendment No.
7 to Form S-1 dated July 19, 2005).10.1
    
    
    Credit Agreement, dated December 31, 2007, among Consolidated Communications Holdings, Inc.,
as Parent Guarantor, Consolidated Communications, Inc., Consolidated Communications
Acquisition Texas, Inc. and Fort Pitt Acquisition Sub Inc., as Co-Borrowers, the lenders
referred to therein, Wachovia Bank, National Association, as administrative agent, issuing
bank and swingline lender, CoBank, ACB, as syndication agent, General Electric Capital
Corporation, as co-documentation agent, The Royal Bank of Scotland PLC, as co-documentation
agent, and Wachovia Capital Markets, LLC, as sole lead arranger and sole bookrunner
(incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K dated December 31,
2007).10.2
    
    
    Form of Collateral Agreement, dated December 31, 2007, by and among Consolidated
Communications Holdings, Inc., Consolidated Communications, Inc., Consolidated Communications
Acquisition Texas, Inc., Fort Pitt Acquisition Sub Inc., certain subsidiaries of Consolidated
Communications Holdings, Inc. identified on the signature pages thereto, in favor of Wachovia
Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.2
to Form 10-K for the period ended December 31, 2007).10.3
    
    
    Form of Guaranty Agreement, dated December 31, 2007, made by Consolidated Communications
Holdings, Inc. and certain subsidiaries of Consolidated Communications Holdings, Inc.
identified on the signature pages thereto, in favor of Wachovia Bank, National Association, as
Administrative Agent (incorporated by reference to Exhibit 10.3 to Form 10-K for the period
ended December 31, 2007).10.4
    
    
    Lease Agreement, dated December 31, 2002, between LATEL, LLC and Consolidated Market
Response, Inc. (incorporated by reference to Exhibit 10.11 to Form S-4 dated October
26, 2004).10.5
    
    
    Lease Agreement, dated December 31, 2002, between LATEL, LLC and Illinois Consolidated
Telephone Company (incorporated by reference to Exhibit 10.12 to Form S-4 dated October 26,
2004).10.6
    
    
    Master Lease Agreement, dated February 25, 2002, between General Electric Capital Corporation
and TXU Communications Ventures Company (incorporated by reference to Exhibit 10.13 to Form
S-4 dated October 26, 2004).10.7
    
    
    Amendment No. 1 to Master Lease Agreement, dated February 25, 2002, between General
Electric Capital Corporation and TXU Communications Ventures Company, dated
March 18, 2002 (incorporated by reference to Exhibit 10.14 to Form S-4 dated October
26, 2004).10.8
    
    
    Amended and Restated Consolidated Communications Holdings, Inc. Restricted Share Plan
(incorporated by reference to Exhibit 10.11 to Amendment No. 7 to Form S-1 dated
July 19, 2005).
  131




---



##### Table of Contents



ExhibitNumber
    
    Description10.9
    
    
    Form of 2005 Long-term Incentive Plan (incorporated by reference to Exhibit 10.12 to
Amendment No. 7 to Form S-1 dated July 19, 2005).10.10
    
    
    Stock Repurchase Agreement, dated July 13, 2006, by and among Consolidated Communications
Holdings, Inc., Providence Equity Partners IV L.P. and Providence Equity Operating Partners IV
L.P. (incorporated by reference to Exhibit 10.1 to Form 8-K dated July 17, 2006).10.11
    
    
    Form of Employment Security Agreement with certain of the Companys executive officers
(incorporated by reference to Exhibit 10.1 to Form 8-K dated February 23, 2007).10.12
    
    
    Form of Employment Security Agreement with the Companys and its subsidiaries vice president
and director level employees (incorporated by reference to Exhibit 10.12 to Form 10-K for the
period ended December 31, 2007).10.13
    
    
    Executive Long-Term Incentive Program, as revised March 12, 2007 (incorporated by reference
to Exhibit 10.1 to Form 8-K dated March 12, 2007).10.14
    
    
    Form of 2005 Long-Term Incentive Plan Performance Stock Grant Certificate (incorporated by
reference to Exhibit 10.2 to Form 8-K dated March 12, 2007).10.15
    
    
    Form of 2005 Long-Term Incentive Plan Restricted Stock Grant Certificate (incorporated by
reference to Exhibit 10.3 to Form 8-K dated March 12, 2007).10.16
    
    
    Form of 2005 Long-Term Incentive Plan Restricted Stock Grant Certificate for Directors
(incorporated by reference to Exhibit 10.4 to Form 8-K dated March 12, 2007).10.17
    
    
    Description of the Consolidated Communications Holdings, Inc. Bonus Plan (incorporated by
reference to Exhibit 10.5 to Form 8-K dated March 12, 2007).10.18
    
    
    Letter Agreement, dated March 31, 2008, by Wachovia Bank, National Association, and agreed
to and acknowledged by Consolidated Communications Holdings, Inc., Consolidated
Communications, Inc., Consolidated Communications Acquisition Texas, Inc. and North Pittsburgh
Systems, Inc. (formerly known as Fort Pitt Acquisition Sub Inc.) (incorporated by reference to
Exhibit 10.1 to Form 8-K dated March 31, 2008).10.19
    
    
    Letter Agreement dated August 6, 2008 by Wachovia Bank, National Association, and agreed to
and acknowledged by Consolidated Communications Holdings, Inc., Consolidated Communications,
Inc., Consolidated Communications Acquisition Texas, Inc. and North Pittsburgh Systems, Inc.
(formerly known as Fort Pitt Acquisition Sub Inc.) (incorporated by reference to Exhibit 10.1
to Form 10-Q for the period ended June 30, 2008).21
    
    
    List of Subsidiaries of Consolidated Communications Holdings, Inc.23.1
    
    
    Consent of Independent Registered Public Accounting Firm.23.2
    
    
    Consent of Independent Registered Public Accounting Firm.31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906
of the Sarbanes-Oxley Act of 2002.
  132