UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-32422

WINDSTREAM CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	20-0792300
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

4001 Rodney Parham Road, Little Rock, Arkansas	72212
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (501) 748-7000

(Former name, former address and former fiscal year, if changed since last report)

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

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

Large accelerated filer  þ    Accelerated filer  ¨     Non-accelerated filer  ¨    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act).    ¨  YES    þ  NO

Number of common shares outstanding as of July 31, 2008: 439,610,793

The Exhibit Index is located on page 53.

WINDSTREAM CORPORATION

FORM 10-Q

TABLE OF CONTENTS

		Page No.
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Income (Unaudited)	2
	Consolidated Balance Sheets – June 30, 2008 (Unaudited) and December 31, 2007	3
	Consolidated Statements of Cash Flows (Unaudited)	4
	Consolidated Statements of Shareholders’ Equity (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	48
Item 4.	Controls and Procedures	49
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	*
Item 4.	Submission of Matters to a Vote of Security Holders	51
Item 5.	Other Information	*
Item 6.	Exhibits	51

* No reportable information under this item.

1

WINDSTREAM CORPORATION

FORM 10-Q

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
(Millions, except per share amounts)	2008			2007			2008			2007
Revenues and sales:
Service revenues	$	752.7		$	731.7		$	1,512.7		$	1,449.0
Product sales		47.2			95.0			87.2			161.4
Total revenues and sales		799.9			826.7			1,599.9			1,610.4
Costs and expenses:
Cost of services (excluding depreciation of $98.1, $101.7, $195.0 and $201.6, respectively, included below)		244.5			252.6			493.3			487.9
Cost of products sold		42.4			50.2			76.5			94.7
Selling, general, administrative and other		95.7			102.6			192.7			207.0
Depreciation and amortization		123.2			126.9			244.9			252.0
Restructuring charges		0.6			—			1.1			3.2
Merger and integration costs		4.6			1.6			6.2			3.2
Total costs and expenses		511.0			533.9			1,014.7			1,048.0
Operating income		288.9			292.8			585.2			562.4
Other income, net		3.0			6.3			8.6			11.5
Interest expense		(103.6	)		(108.1	)		(208.6	)		(222.8	)
Income from continuing operations before income taxes		188.3			191.0			385.2			351.1
Income taxes		70.4			75.1			145.4			135.3
Income from continuing operations		117.9			115.9			239.8			215.8
Discontinued operations, including tax benefit of $1.0 and $0.4, respectively		(15.9	)		—			(14.1	)		—
Net income	$	102.0		$	115.9		$	225.7		$	215.8
Earnings per share:
Basic:
Income from continuing operations		$.27			$.24			$.54			$.46
Loss from discontinued operations		(.04	)		—			(.03	)		—
Net income		$.23			$.24			$.51			$.46
Diluted:
Income from continuing operations		$.27			$.24			$.54			$.45
Loss from discontinued operations		(.04	)		—			(.03	)		—
Net income		$.23			$.24			$.51			$.45

See the accompanying notes to the unaudited interim consolidated financial statements.

2

CONSOLIDATED BALANCE SHEETS

(Millions) Assets	(Unaudited) June 30, 2008			December 31, 2007
Current Assets:
Cash and short-term investments	$	59.6		$	72.0
Accounts receivable (less allowance for doubtful accounts of $12.9 and $13.1, respectively)		322.2			320.7
Inventories		29.6			29.6
Deferred income taxes		28.5			32.0
Prepaid expenses and other		39.2			40.3
Assets held for sale:
Acquired assets held for sale		9.1			26.6
Assets of discontinued operations		11.5			7.2
Total current assets		499.7			528.4
Goodwill		2,224.2			2,224.2
Other intangibles		1,157.2			1,184.1
Net property, plant and equipment		3,935.2			4,030.3
Other assets		168.4			195.7
Non-current assets of discontinued operations		55.8			78.5
Total Assets	$	8,040.5		$	8,241.2
Liabilities and Shareholders’ Equity
Current Liabilities:
Current maturities of long-term debt	$	24.3		$	24.3
Current portion of interest rate swaps		34.5			16.2
Accounts payable		140.0			158.1
Advance payments and customer deposits		94.7			91.1
Accrued dividends		109.9			113.6
Accrued taxes		29.3			53.2
Accrued interest		137.5			139.6
Other current liabilities		63.3			75.1
Liabilities of discontinued operations		6.0			7.1
Total current liabilities		639.5			678.3
Long-term debt		5,344.7			5,331.2
Deferred income taxes		1,177.6			1,133.4
Other liabilities		376.4			398.5
Total liabilities		7,538.2			7,541.4
Commitments and Contingencies (See Note 7)
Shareholders’ Equity:
Common stock, $0.0001 par value, 1,000.0 shares authorized, 439.6 and 454.5 shares issued and outstanding, respectively		—			—
Additional paid-in capital		94.5			286.8
Accumulated other comprehensive loss		(112.3	)		(103.0	)
Retained earnings		520.1			516.0
Total shareholders’ equity		502.3			699.8
Total Liabilities and Shareholders’ Equity	$	8,040.5		$	8,241.2

See the accompanying notes to the unaudited interim consolidated financial statements.

3

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months Ended June 30,
(Millions)	2008			2007
Cash Provided from Operations:
Net income	$	225.7		$	215.8
Adjustments to reconcile net income to net cash provided from operations:
Loss on net assets held for sale		16.4			—
Depreciation and amortization		247.1			252.0
Provision for doubtful accounts		16.8			11.2
Stock-based compensation expense		9.2			8.3
Pension and postretirement benefits expense		8.8			19.1
Deferred taxes		61.7			1.0
Other, net		(0.1	)		6.3
Changes in operating assets and liabilities, net:
Accounts receivable		(14.3	)		2.5
Accounts payable		(17.3	)		(4.9	)
Accrued interest		(2.1	)		(4.9	)
Accrued taxes		(23.1	)		18.5
Other current liabilities		(15.5	)		(27.3	)
Other, net		(6.4	)		15.9
Net cash provided from operations		506.9			513.5
Cash Flows from Investing Activities:
Additions to property, plant and equipment		(133.3	)		(178.0	)
Disposition of acquired assets held for sale		17.3			—
Other, net		10.6			1.2
Net cash used in investing activities		(105.4	)		(176.8	)
Cash Flows from Financing Activities:
Dividends paid on common shares		(225.4	)		(238.5	)
Stock repurchase		(200.3	)		—
Repayment of debt		(207.1	)		(500.1	)
Debt issued, net of issuance costs		220.0			498.9
Other, net		(1.1	)		—
Net cash used in financing activities		(413.9	)		(239.7	)
(Decrease) increase in cash and short-term investments		(12.4	)		97.0
Cash and Short-term Investments:
Beginning of period		72.0			386.8
End of period	$	59.6		$	483.8

See the accompanying notes to the unaudited interim consolidated financial statements.

4

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (UNAUDITED)

(Millions, except per share amounts)	Additional Paid-In Capital			Accumulated Other Comprehensive Income (Loss)			Retained Earnings			Total
Balance at December 31, 2007	$	286.8		$	(103.0	)	$	516.0		$	699.8
Net income		—			—			225.7			225.7
Other comprehensive income, net of tax: (see Note 10)
Change in employee benefit plans		—			(14.8	)		—			(14.8	)
Unrealized holding gain on interest rate swaps		—			5.5			—			5.5
Comprehensive income (loss)		—			(9.3	)		225.7			216.4
Stock repurchase		(200.3	)		—			—			(200.3	)
Stock-based compensation expense		9.2			—			—			9.2
Tax withheld on vested restricted sock		(1.2	)		—			—			(1.2	)
Dividends of $0.50 per share declared to stockholders		—			—			(221.6	)		(221.6	)
Balance at June 30, 2008	$	94.5		$	(112.3	)	$	520.1		$	502.3

See the accompanying notes to the unaudited interim consolidated financial statements.

5

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

1. Preparation of Interim Financial Statements:

On July 17, 2006, Alltel Corporation (“Alltel”) completed the spin off of its wireline telecommunications division, Alltel Holding Corp., to its shareholders. Immediately after the consummation of the spin off, Alltel Holding Corp. merged with and into Valor Communications Group Inc. (“Valor”), with Valor continuing as the surviving corporation. The resulting company was renamed Windstream Corporation. In this report, Windstream Corporation and its subsidiaries are referred to as “Windstream”, “we”, or “the Company”.

The accompanying unaudited consolidated financial statements have been prepared based upon Securities and Exchange Commission (“SEC”) rules that permit reduced disclosure for interim periods. Certain information and footnote disclosures have been condensed or omitted in accordance with those rules and regulations. The accompanying consolidated balance sheet at December 31, 2007 was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States. In our opinion, these financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. For a more complete discussion of significant accounting policies and certain other information, this report should be read in conjunction with the consolidated financial statements and accompanying notes included in Windstream’s Annual Report on Form 10-K for the year ended December 31, 2007, which was filed with the SEC on February 29, 2008.

The preparation of financial statements, in accordance with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. The estimates and assumptions used in the accompanying consolidated financial statements and accompanying notes are based upon management’s evaluation of the relevant facts and circumstances as of the date of the consolidated financial statements. Actual results may differ from the estimates and assumptions used in preparing the accompanying consolidated financial statements and accompanying notes, and such differences could be material.

During the second quarter of 2008, the Company entered negotiations for the sale of its wireless business. Accordingly, we have presented the related results as discontinued operations, and prior period financial statements, including segment information, have been reclassified to reflect this change in the periods presented (see Notes 15 and 16).

Certain amounts previously reported have been reclassified to conform to the current year presentation of the consolidated financial statements. These reclassifications did not impact net or comprehensive income.

2. Accounting Changes:

Change in Accounting Estimate – Effective October 1, 2007, the Company prospectively reduced the depreciable rates of assets held and used in its operations in New York, Mississippi, Georgia, Ohio, Nebraska, Oklahoma, and Kentucky to reflect the results of studies completed in the fourth quarter of 2007. In addition, during April 2007, the Company completed studies of the depreciable lives of assets held and used in its Missouri operations and in an operating subsidiary in Texas. The related depreciation rates were changed effective April 1, 2007. The depreciable lives were lengthened to reflect the estimated remaining useful lives of the wireline plant based on the Company’s expected future network utilization and capital expenditure levels required to provide service to its customers. The effect of the change on depreciation rates in the operations discussed above resulted in a decrease in depreciation expense of $12.4 million and $26.5 million and an increase in net income of $7.8 million and $16.5 million for the three and six months ended June 30, 2008, respectively.

Recently Adopted Accounting Standards

SFAS No. 157 – Effective January 1, 2008, Windstream adopted Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements”, for financial assets and liabilities recognized at fair value. The adoption of SFAS No. 157 did not have a material impact on our consolidated financial statements. SFAS No. 157 clarified the definition of fair value, established a framework for measuring fair value and expanded the disclosures related to fair value measurements that are included in a company’s financial statements. It emphasized that fair value is a market-based measurement and not an entity-specific measurement, and that it should be based on an exchange transaction in which a company sells an asset or transfers a liability. SFAS No. 157 also established a fair value hierarchy in which observable market data would be considered the highest level, while fair value measurements based on an entity’s own assumptions would be considered the lowest level. See Note 6 for information and related disclosures regarding Windstream’s fair value measurements.

6

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

2. Accounting Changes, Continued:

In February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. 157-2 which allowed a one-year deferral of implementation for non-financial assets and liabilities, except items recognized or disclosed at fair value on an annual or more frequently recurring basis until fiscal years beginning after November 15, 2008 and interim periods within those years. The Company continues to evaluate the effects, if any, that SFAS No. 157 will have on its non-financial assets and liabilities that are recognized or disclosed at fair value on a non-recurring basis. Therefore, it has not yet been determined what impact, if any, that SFAS No. 157 will have on these assets and liabilities upon full adoption.

SFAS No. 159 – Windstream adopted SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115”, on January 1, 2008, but did not elect the fair value option for any of its eligible financial assets and liabilities. Therefore, the adoption of SFAS No. 159 did not impact the Company’s consolidated financial statements. SFAS No. 159 allowed the measurement at fair value of eligible financial assets and liabilities that are not otherwise required to be measured at fair value. If the fair value option for an eligible item is elected, unrealized gains and losses for that item are reported in current earnings at each subsequent reporting date. SFAS No. 159 also established presentation and disclosure requirements designed to draw comparison between the different measurement attributes the company elects for similar types of assets and liabilities.

FIN 48 – Windstream adopted FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes” (“FIN 48”) on January 1, 2007. FIN 48 clarifies the accounting for and disclosure of uncertainty in tax positions and provides guidance on the recognition, measurement, derecognition, classification, and disclosure of tax positions and on the accounting for related interest and penalties. As a result of the adoption of FIN 48, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. Although the adoption of this standard has not had a significant impact on the Company’s tax provision thus far, the recognition of tax uncertainties through earnings in the future could be materially impacted by this new accounting policy.

Recently Issued Accounting Pronouncements

SFAS No. 141(R) – In December 2007, the FASB issued SFAS No. 141(R), “Business Combinations”, a revision of SFAS No. 141. Under SFAS No. 141(R), an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition date fair value with limited exceptions. SFAS No. 141(R) will change the accounting treatment for certain specific items, including acquisition costs, acquired contingent liabilities, restructuring costs, deferred tax asset valuation allowances and income tax uncertainties after the acquisition date. SFAS No. 141(R) also includes a substantial number of new disclosure requirements. For calendar year companies like Windstream, SFAS No. 141(R) is effective for all business combinations for which the acquisition date is on or after January 1, 2009. The Company is currently evaluating the effects that SFAS No. 141(R) will have on its consolidated financial statements with regards to future business combinations.

SFAS No. 160 – In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements - An Amendment of Accounting Research Bulletin No. 51”. SFAS No. 160 requires noncontrolling interests to be recognized as equity in the consolidated financial statements, separate from the parent’s equity. In addition, net income attributable to the noncontrolling interest will be included in consolidated net income. SFAS No. 160 clarifies that changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation are equity transactions if the parent retains its controlling financial interest. In addition, when a subsidiary is deconsolidated, the parent must recognize a gain or loss in net income, measured using the fair value of the noncontrolling equity investment on the deconsolidation date. Expanded disclosures are also required regarding the interests of the parent and its noncontrolling interest. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The Company does not expect SFAS No. 160 to have any impact on its consolidated financial statements.

SFAS No. 161 – In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities”. SFAS No. 161 requires companies with derivative instruments to disclose information that should enable financial statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and how derivative instruments and related hedged items affect a company’s financial position, financial performance and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Windstream is currently evaluating the impact, if any, that SFAS No. 161 will have on its consolidated financial statements.

7

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

2. Accounting Changes, Continued:

FASB Staff Position (“FSP”) No. FAS 142-3 – In April 2008, the FASB issued FSP No. FAS 142-3, “Determination of the Useful Life of Intangible Assets”. FSP No. FAS 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets” for intangible assets acquired after adoption. Under FSP No. FAS 142-3 an entity should consider its own historical experience in renewing similar arrangements or market participant assumptions in the absence of historical experience. FSP No. FAS 142-3 also requires disclosures to enable users of financial statements to assess the extent to which the expected future cash flows associated with the asset are affected by the entity’s intent and/or ability to renew or extend the arrangement. FSP No. FAS 142-3 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2008. Windstream is currently evaluating the impact FSP No. FAS 142-3 will have on our financial statements.

SFAS No. 162 – On May 9, 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements for nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. SFAS No. 162 will be effective 60 days after the SEC’s approval of the Public Company Accounting Oversight Board’s (“PCAOB”) amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles”. The Company is currently evaluating the effects, if any, that SFAS No. 162 will have on its consolidated financial statements.

FSP No. EITF 03-6-1 – In June 2008, the FASB issued FSP No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities”. FSP No. EITF 03-6-1, concluded that unvested share-based payment awards that contain a nonforfeitable right to receive dividends, whether paid or unpaid, are participating securities and should be included in the computation of earnings per share pursuant to the two-class method prescribed under SFAS No. 128, “Earnings per Share”. This standard is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those years, with early adoption prohibited. We are evaluating the impact of this standard but do not believe it will have a material impact on basic or diluted earnings per share.

3. Acquisitions and Dispositions:

Disposition of Directory Publishing Business – On November 30, 2007, Windstream completed the split off of its directory publishing business. In connection with the consummation of the transaction, the parties and their affiliates entered into a publishing agreement whereby Windstream granted Local Insight Yellow Pages, Inc. (“Local Insight Yellow Pages”), the successor to the Windstream subsidiary that once operated the publishing business, an exclusive license to publish Windstream directories in each of its markets other than the newly acquired CT Communications, Inc. (“CTC”) markets. Local Insight Yellow Pages will, at no charge to Windstream or its affiliates or subscribers, publish directories with respect to each Windstream service area covered under the agreement in which Windstream or its affiliates are required to publish such directories by applicable law, tariff or contract. Subject to the termination provisions in the agreement, the publishing agreement will remain in effect for a term of fifty years. As part of this agreement, Windstream agreed to forego future royalty payments from Local Insight Yellow Pages on advertising revenues generated from covered directories for the duration of the publishing agreement.

Acquisition of CTC – On August 31, 2007, Windstream completed the acquisition of CTC in a transaction valued at $584.3 million. Under the terms of the agreement the shareholders of CTC received $31.50 in cash for each of their shares with a total cash payout of $652.2 million. The transaction value also includes a payment of $37.5 million made by Windstream to satisfy CTC’s debt obligations, offset by $105.4 million in cash and short-term investments held by CTC. Including $25.3 million in severance and other transaction-related expenses, the total net consideration paid in the acquisition was $609.6 million. Windstream financed the transaction using the cash acquired from CTC, $250.0 million in borrowings available under its revolving line of credit, and additional cash on hand. The premium paid by Windstream in this transaction is attributable to the strategic importance of the CTC acquisition. The access lines and high-speed Internet customers added through the acquisition significantly increased Windstream’s presence in North Carolina and provided the opportunity to generate significant operating efficiencies with contiguous Windstream markets.

8

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

3. Acquisitions and Dispositions, Continued:

In accordance with SFAS No. 142, certain assets acquired from CTC are classified as held for sale and are included in acquired assets held for sale in the accompanying consolidated balance sheets. During the first six months of 2008, Windstream received net proceeds of $17.3 million, which approximated the fair value at the date of acquisition, on the sale of the corporate headquarters building, a license for wireless spectrum, and various investments which were designated as held for sale.

Pro forma financial results related to the disposition of the publishing business and the acquisition of CTC have not been included because the Company does not consider the results of the publishing business, prior to the recognition of a gain on its sale, nor the results of the former CTC operations to be significant.

4. Goodwill and Other Intangible Assets:

During the second quarter of 2008, the Company entered negotiations for the sale of its wireless business and reclassified the associated assets as held for sale, including $52.2 million of goodwill and $13.4 million of other intangible assets as of June 30, 2008. Once the assets were classified as held for sale, the Company recognized an impairment loss on goodwill to reduce the carrying value of the assets to their contemplated transaction price less cost to sell (see Notes 15 and 16).

During the six months ended June 30, 2008, there were no changes in the carrying amounts of wireline and product distribution goodwill and indefinite-lived intangible assets.

As of January 1, 2008, the Company completed the annual impairment reviews of its goodwill and franchise rights according to the guidance in SFAS No. 142, and determined that no write-down in the carrying value of these assets was required.

Intangible assets subject to amortization were as follows:

	June 30, 2008
(Millions)	Gross Cost		Accumulated Amortization			Net Carrying Value
Wireline customer list	$	322.6	$	(122.8	)	$	199.8
Cable franchise rights		22.5		(20.1	)		2.4
	$	345.1	$	(142.9	)	$	202.2
	December 31, 2007
(Millions)	Gross Cost		Accumulated Amortization			Net Carrying Value
Wireline customer list	$	322.6	$	(96.6	)	$	226.0
Cable franchise rights		22.5		(19.4	)		3.1
	$	345.1	$	(116.0	)	$	229.1

Amortization expense for intangible assets subject to amortization was $13.6 million and $26.9 million for the three and six month periods ended June 30, 2008, respectively, as compared to $12.4 million and $24.0 million for the same periods of 2007. Amortization expense for intangible assets subject to amortization is estimated to be $51.9 million in 2008, $46.4 million in 2009, $39.3 million in 2010, $33.5 million in 2011 and $27.9 million in 2012.

9

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

5. Debt and Derivative Instruments:

Long-term debt was as follows:

	June 30,			December 31,
(Millions)	2008			2007
Issued by Windstream Corporation:
Senior secured credit facility, Tranche A - variable rates, due July 17, 2011	$	283.3		$	283.3
Senior secured credit facility, Tranche B - variable rates, due July 17, 2013 (a)		1,386.0			1,393.0
Senior secured credit facility, Revolving line of credit - variable rates, due July 17, 2011 (b)		120.0			100.0
Debentures and notes, without collateral:
2016 Notes - 8.625%, due August 1, 2016 (c)		1,746.0			1,746.0
2013 Notes - 8.125%, due August 1, 2013 (c)		800.0			800.0
2019 Notes - 7.000%, due March 15, 2019 (a) (c)		500.0			500.0
Issued by subsidiaries of the Company:
Valor Telecommunications Enterprises LLC and Valor Telecommunications Finance Corp. - 7.75%, due February 15, 2015 (c) (d)		400.0			400.0
Windstream Holdings of the Midwest, Inc. - 6.75%, due April 1, 2028 (c) (d)		100.0			100.0
Debentures and notes, without collateral:
Windstream Georgia Communications LLC - 6.50%, due November 15, 2013		60.0			60.0
Teleview, LLC - 7.00%, due January 2, 2010 and May 2, 2010		0.4			0.6
Discount on long-term debt, net of premiums		(26.7	)		(27.4	)
		5,369.0			5,355.5
Less current maturities		(24.3	)		(24.3	)
Total long-term debt	$	5,344.7		$	5,331.2

(a) On February 27, 2007, Windstream issued $500.0 million aggregate principal amount of senior notes due 2019, with an interest rate of 7.0 percent (“the refinancing transaction”). Windstream used the net proceeds of the offering to repay $500.0 million of amounts outstanding under the term loan portion of its senior secured credit facilities. Additionally, Windstream received the consent of lenders to an amendment and restatement of its $2.9 billion senior secured credit facilities. Windstream amended and restated its senior secured credit facilities to, among other things, reduce the interest payable under Tranche B of the term loan portion of the facilities; modify the pre-payment provision; and modify certain covenants to permit the consummation of the previously announced split off of its directory publishing business.

(b) During the first six months of 2008, the Company incurred net borrowings of $20.0 million under the revolving line of credit in its senior secured credit facilities. The revolving line of credit’s variable interest rates ranged from 3.65 percent to 6.10 percent, and the weighted average rate was 4.38 percent during the six months ended June 30, 2008. Letters of credit are deducted in determining the total amount available for borrowing under the revolving credit agreement. Accordingly, the total amount outstanding under the letters of credit and the indebtedness incurred under the revolving credit agreement may not exceed $500.0 million. At June 30, 2008, the amount available for borrowing under the revolving credit agreement was $374.1 million.

(c) Certain of the Company’s debentures and notes are callable by the Company at various premiums on early redemption.

(d) The Company’s collateralized Valor debt is equally and ratably secured with debt under the senior secured credit facilities. Debt held by Windstream Holdings of the Midwest, Inc., a subsidiary of the Company, is secured solely by the assets of the subsidiary.

The terms of the credit facility and indentures include customary covenants that, among other things, require Windstream to maintain certain financial ratios and restrict its ability to incur additional indebtedness. These financial ratios include a maximum leverage ratio of 4.5 to 1.0 and a minimum interest coverage ratio of 2.75 to 1.0. In addition, the covenants include restrictions

10

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

5. Debt and Derivative Instruments, Continued:

on capital expenditures, which must not exceed a specified amount for any fiscal year (for 2008 this amount is $534.3 million, which includes $84.3 million of unused capacity from 2007). The Company was in compliance with these covenants as of June 30, 2008.

Maturities for debt outstanding as of June 30, 2008 for each of the twelve month periods ended June 30, 2009, 2010, 2011, 2012, and 2013 are $24.3 million, $24.2 million, $32.3 million, $415.5 million and $24.0 million, respectively.

Interest expense was as follows for the three and six month periods ended June 30:

	Three Months Ended						Six Months Ended
(Millions)	2008			2007			2008			2007
Interest expense related to long-term debt (a)	$	95.2		$	107.8		$	196.3		$	222.6
Impacts of interest rate swaps		8.5			1.1			13.0			2.0
Other interest expense		—			—			0.1			0.1
Less capitalized interest expense		(0.1	)		(0.8	)		(0.8	)		(1.9	)
Total interest expense	$	103.6		$	108.1		$	208.6		$	222.8

(a) In connection with the refinancing transaction, the Company recorded additional non-cash interest expense of $5.3 million due to a write-off of the unamortized debt issuance costs associated with the term loan that was paid down.

In order to mitigate the interest rate risk inherent in its variable rate senior secured credit facilities, the Company entered into four identical pay fixed, receive variable interest rate swap agreements totaling $1,600.0 million in notional value. The four interest rate swap agreements amortize quarterly to a notional value of $906.3 million at maturity on July 17, 2013. The variable rate received resets on the seventeenth day of each quarter to the three-month LIBOR (London-Interbank Offered Rate). The Company’s interest rate swap agreements are designated as cash flow hedges of the interest rate risk created by the variable interest rate paid on Tranche B of the senior secured credit facilities, which matures on July 17, 2013. The variable interest rate paid on Tranche B is based on the three-month LIBOR, and it also resets on the seventeenth day of each quarter. After the completion of the refinancing transaction in February 2007, a portion of one of the four interest rate swap agreements with a notional value of $125.0 million ($110.1 million as of June 30, 2008) was de-designated and therefore was no longer an effective hedge of the variable interest rate paid on Tranche B.

The effectiveness of the Company’s cash flow hedges is assessed each quarter. At June 30, 2008, the Company concluded that there was no ineffectiveness, in the designated portion, for any of the four interest rate swap agreements.

Set forth below is information related to the Company’s interest rate swap agreements:

(Millions, except for percentages)	June 30,			December 31,
	2008			2007
Unamortized notional value	$	1,343.8		$	1,412.5
Weighted average fixed rate paid		5.60	%		5.60	%
Variable rate received		2.72	%		5.21	%
Fair value of interest rate swap agreements (see Note 6)	$	73.8		$	83.2

In accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities”, the Company recognizes all derivative instruments at fair value in the accompanying consolidated balance sheets as either assets or liabilities depending on the rights or obligations under the related contracts. Changes in the fair value of the effective portion of these derivative instruments were reported as a component of other comprehensive income (loss) in the current period and will be reclassified into earnings as the hedged transaction affects earnings. Changes in the fair value of the undesignated portion of the swaps were recognized in other income, net in the unaudited interim consolidated statements of income.

11

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

5. Debt and Derivative Instruments, Continued:

Changes in fair value of these derivative instruments were as follows for the three and six month periods ended June 30:

	Three Months Ended				Six Months Ended
(Millions)	2008		2007		2008		2007
Increase in fair value of effective portion, net of tax	$	32.5	$	17.2	$	5.5	$	14.4
Increase in fair value of undesignated portion	$	4.7	$	2.5	$	0.8	$	2.9

6. Fair Value Measurements:

The Company’s financial instruments consist primarily of cash and short-term investments, accounts receivable, accounts payable, long-term debt and interest rate swaps. Short-term investments and interest rate swaps are measured at fair value on a recurring basis in accordance with the fair value measurement provisions of SFAS No. 157. Windstream utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. Valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs are used and the fair value balances are classified based on the observability of those inputs. The highest priority is given to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority is given to unobservable inputs (level 3 measurement). As required by SFAS No. 157, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. The fair values of the Company’s short-term investments and interest rate swaps were determined using the following inputs at June 30, 2008:

			Fair Value Measurements at Reporting Date
			Quoted Price in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
(Millions)	Fair Value		Level 1		Level 2		Level 3
Short-term investments (a)	$	49.1	$	49.1	$	—	$	—
Interest rate swaps (b)	$	73.8	$	—	$	73.8	$	—

(a) Included in cash and short-term investments on the unaudited consolidated balance sheets.

(b) Included in current portion of interest rate swaps and other liabilities on the unaudited consolidated balance sheets.

The Company’s short-term investments are primarily highly liquid, actively traded money market funds with next day access. The fair values of the interest rate swaps were determined based on the present value of expected future cash flows using LIBOR swap rates which are observable at commonly quoted intervals for the full term of the swaps using discount rates appropriate with consideration given to the Company’s non-performance risk.

7. Commitments and Contingencies:

During the third quarter of 2007, the staff of a state Public Utility Commission (“PUC Staff”) notified the Company that the PUC Staff believed the Company had been over-compensated from its state universal service fund dating back to 2000 by the amount of $6.1 million plus interest in the amount of $1.2 million (for a total $7.3 million). On October 18, 2007, the PUC Staff issued a Notice of Violation and recommended that the Company be assessed a fine in the amount of $5.2 million in addition to the initial refund request for failure to refund the requested amount. The Company believes its universal service receipts in question are in compliance with all applicable regulatory requirements, that it has not been over-compensated and that no refund or penalty is owed. The Company plans to defend its position in hopes of eliminating or reducing the assessment but at this time cannot

12

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

7. Commitments and Contingencies, Continued:

predict the outcome of the proceeding. A liability of $7.6 million, consisting of the original assessment of $7.3 million plus additional accrued interest from the date of that request, is included in other current liabilities in the accompanying unaudited interim consolidated balance sheet to reserve for this matter.

The Company is party to various other legal proceedings. Although the ultimate resolution of these various proceedings cannot be determined at this time, management of the Company does not believe that such proceedings, individually or in the aggregate, will have a material adverse effect on the future consolidated results of income, cash flows or financial condition of the Company.

In addition, management of the Company is currently not aware of any environmental matters that, individually or in the aggregate, would have a material adverse effect on the consolidated financial condition or results of operations of the Company.

8. Employee Benefit Plans and Postretirement Benefits Other Than Pensions:

Windstream maintains a non-contributory qualified defined benefit pension plan, which covers substantially all employees. Future benefit accruals for all eligible nonbargaining employees covered by the pension plan ceased as of December 31, 2005 (December 31, 2010 for employees who had attained age 40 with two years of service as of December 31, 2005). The Company also maintains supplemental executive retirement plans that provide unfunded, non-qualified supplemental retirement benefits to a select group of management employees. Additionally, the Company provides postretirement healthcare and life insurance benefits for eligible employees. Employees share in, and the Company funds, the costs of these plans as benefits are paid.

The components of pension expense (income), including provision for executive retirement agreements, were as follows for the three and six months ended June 30:

	Three Months Ended						Six Months Ended
(Millions)	2008			2007			2008			2007
Benefits earned during the year	$	2.6		$	3.7		$	6.6		$	7.8
Interest cost on benefit obligation		14.2			13.2			28.1			26.0
Recognition of net actuarial loss		2.2			6.6			3.2			12.1
Amortization of prior service cost		(0.1	)		—			(0.1	)		(0.1	)
Expected return on plan assets		(18.6	)		(19.4	)		(38.1	)		(38.8	)
Net periodic benefit expense (income)	$	0.3		$	4.1		$	(0.3	)	$	7.0
The components of postretirement expense were as follows for the three and six months ended June 30:
	Three Months Ended						Six Months Ended
(Millions)	2008			2007			2008			2007
Benefits earned during the year	$	—		$	0.1		$	0.1		$	0.2
Interest cost on benefit obligation		3.7			3.8			7.0			7.5
Amortization of transition obligation		0.2			0.2			0.4			0.4
Recognition of net actuarial loss		0.5			1.4			0.7			3.0
Amortization of prior service cost		0.4			0.6			0.9			1.0
Net periodic benefit expense	$	4.8		$	6.1		$	9.1		$	12.1

Windstream contributed $6.4 million to the postretirement plan during the six months ended June 30, 2008, and expects to contribute $16.9 million for postretirement benefits in 2008, excluding amounts that will be funded by participant contributions to the plans. Windstream does not expect that any contribution to the qualified pension plan will be required in 2008. Future discretionary contributions to the plan will depend on various factors, including future investment performance, changes in future discount rates and changes in the demographics of the population participating in the Company’s qualified pension plan.

13

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

9. Merger, Integration and Restructuring Charges:

The following is a summary of the merger, integration and restructuring charges recorded in the three and six month periods ended June 30:

	Three Months Ended				Six Months Ended
(Millions)	2008		2007		2008		2007
Transaction costs associated with the acquisition of CTC	$	—	$	—	$	0.1	$	—
Transaction costs associated with split off of directory publishing		—		1.6		—		3.2
Computer system separation and conversion costs		4.6		—		6.1		—
Total merger and integration costs		4.6		1.6		6.2		3.2
Severance and employee benefit costs		0.6		—		1.1		3.2
Total merger, integration and restructuring charges	$	5.2	$	1.6	$	7.3	$	6.4

Costs triggered by strategic transactions, including transaction costs, rebranding costs and system conversion costs are unpredictable by nature and are not included in the determination of segment income. Restructuring charges, consisting primarily of severance and employee benefit costs, are triggered by the Company’s continued evaluation of its operating structure and identification of opportunities for increased operational efficiency and effectiveness. These costs should not necessarily be viewed as non-recurring, and are included in the determination of segment income. They are reviewed regularly by the Company’s decision makers and are included as a component of compensation targets.

Transaction costs primarily include charges for accounting, legal, broker fees and other miscellaneous costs associated with the acquisition of CTC and the disposition of the publishing business. Other merger and integration costs include computer system and conversion costs. These costs are considered indirect or general and are expensed when incurred in accordance with SFAS No. 141 “Business Combinations”. During the second quarter of 2008, the Company determined not to use certain software acquired in the CTC acquisition; therefore, we recognized a $5.4 million non-cash charge to abandon this asset, of which $0.8 million was related to the wireless business (see Note 15).

The following is a summary of the activity related to the liabilities associated with the Company’s merger, integration and restructuring charges for the six months ended June 30, 2008:

(Millions)
Balance, beginning of period	$	14.7
Merger, integration and restructuring charges, net of non-cash charges		2.8
Cash outlays during the period		(14.2	)
Balance, end of period	$	3.3

This unpaid merger, integration and restructuring liability, which consists of $0.6 million in costs associated with the acquisition of CTC, Valor lease termination costs of $2.6 million, and $0.1 million of employee-related benefit costs, is included in other current liabilities in the Company’s unaudited interim consolidated balance sheet at June 30, 2008. The remaining unpaid CTC transaction costs primarily consist of system conversion and severance and related employee costs related to those CTC employees that were terminated following the billing system conversion in the first quarter of 2008. Valor lease payments will be funded from operating cash flows over the remaining term of the lease.

14

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

10. Comprehensive Income:

Other comprehensive income (loss) was as follows for the three and six month periods ended June 30:

	Three Months Ended						Six Months Ended
(Millions)	2008			2007			2008			2007
Net income	$	102.0		$	115.9		$	225.7		$	215.8
Other comprehensive income (loss):
Change in net actuarial loss for employee benefit plans		(36.4	)		(16.7	)		(35.8	)		(16.7	)
Recognition of net actuarial losses		2.7			7.9			3.9			15.1
Amortization of prior service costs		0.3			0.6			0.8			0.9
Amortization of transition obligations		0.2			0.2			0.4			0.4
Income tax benefit		11.5			3.2			15.9			0.2
Change in employee benefit plans		(21.7	)		(4.8	)		(14.8	)		(0.1	)
Unrealized holding gain on interest rate swaps		52.6			28.3			8.9			23.7
Income tax expense		(20.1	)		(11.1	)		(3.4	)		(9.3	)
Unrealized holding gain on interest rate swaps		32.5			17.2			5.5			14.4
Other comprehensive income (loss) before income taxes		19.4			20.3			(21.8	)		23.4
Income tax benefit (expense)		(8.6	)		(7.9	)		12.5			(9.1	)
Other comprehensive income (loss)		10.8			12.4			(9.3	)		14.3
Comprehensive income	$	112.8		$	128.3		$	216.4		$	230.1

15

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

11. Earnings per Share:

Basic earnings per share of common stock was computed by dividing net income applicable to common shares by the weighted average number of common shares outstanding during each period. Diluted earnings per share reflects the potential dilution that could occur assuming conversion or exercise of all dilutive outstanding stock instruments.

A reconciliation of the net income and numbers of shares used in computing basic and diluted earnings per share was as follows for the three and six month periods ended June 30:

	Three Months Ended					Six Months Ended
(Millions, except per share amounts)	2008			2007		2008			2007
Basic earnings per share:
Income from continuing operations	$	117.9		$	115.9	$	239.8		$	215.8
Loss from discontinued operations		(15.9	)		—		(14.1	)		—
Net income applicable to common shares	$	102.0		$	115.9	$	225.7		$	215.8
Weighted average common shares outstanding for the period		441.3			473.5		445.4			473.5
Basic earnings (loss) per share:
From continuing operations		$.27			$.24		$.54			$.46
From discontinued operations		(.04	)		—		(.03	)		—
Net income		$.23			$.24		$.51			$.46
Diluted earnings per share:
Income from continuing operations	$	117.9		$	115.9	$	239.8		$	215.8
Loss from discontinued operations		(15.9	)		—		(14.1	)		—
Net income applicable to common shares	$	102.0		$	115.9	$	225.7		$	215.8
Weighted average common shares outstanding for the period		441.3			473.5		445.4			473.5
Increase in shares resulting from:
Non-vested restricted stock awards		1.3			1.3		1.2			1.2
Weighted average common shares assuming conversion		442.6			474.8		446.6			474.7
Diluted earnings (loss) per share:
From continuing operations		$.27			$.24		$.54			$.45
From discontinued operations		(.04	)		—		(.03	)		—
Net income		$.23			$.24		$.51			$.45

12. Stock-Based Compensation:

Under the Company’s stock-based compensation plans, Windstream may issue restricted stock and other equity securities to directors, officers and other key employees. The maximum number of shares available for issuance under the Windstream 2006 Equity Incentive Plan is 10.0 million shares. As of June 30, 2008, the balance available for grant was approximately 6.1 million shares.

In February 2008, the Compensation Committee of the Windstream Board of Directors approved grants of restricted stock to officers, executives, non-employee directors and certain management employees totaling approximately 1.3 million common shares with a fair value on the date of the grant of $14.3 million. Under the current compensation philosophy of the Compensation Committee, these management employees are eligible to receive an annual grant of long-term incentives in the form of equity compensation as a significant component of their total compensation. Of the shares granted, approximately 535,000 shares contingently vest over a three-year period if performance-based operating targets are met each period. The operating target for the first vesting period was approved by the Board of Directors on February 6, 2008. While achievement of these performance targets remains uncertain, management has determined that it is probable that such targets will be met for fiscal year 2008. The remaining shares vest ratably over a three-year service period, with the exception of approximately 45,000 shares granted to non-employee directors that vest over a one-year service period.

16

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

12. Stock-Based Compensation, Continued:

Non-vested Windstream restricted stock activity for the six months ended June 30, 2008 was as follows:

	(Thousands)
	Number of Shares		Weighted Average Fair Value Per Share
Non-vested at December 31, 2007	3,098.8		$13.09
Granted	1,299.0		$11.00
Vested	(394.9	)	$13.69
Forfeited	(79.2	)	$12.64
Non-vested at June 30, 2008	3,923.7		$12.35

The weighted average grant date fair value for restricted stock granted was $14.3 million for both the three and six months ended June 30, 2008 as compared to $3.2 million and $11.7 million, respectively for the same periods in 2007.

At June 30, 2008, unrecognized compensation expense for non-vested Windstream restricted shares was $24.2 million. The unrecognized compensation expense for these non-vested restricted shares has a remaining weighted average vesting period of 1.3 years. The total fair value of shares vested during the three and six months ended June 30, 2008 was $0.9 million and $5.4 million, respectively. The total fair value of shares vested was not significant during the three and six months ended June 30, 2007. Stock-based compensation expense was $4.6 million and $9.2 million for the three and six month periods ended June 30, 2008, respectively, as compared to $4.5 million and $8.3 million for the same periods of 2007.

13. Business Segment Information:

The Company disaggregates its business operations based upon differences in products and services. The Company’s wireline segment consists of Windstream’s retail and wholesale telecommunications services, including voice service, long distance, data and special access, switched access and Universal Service Fund revenues and miscellaneous and other services in 16 states. In assessing operating performance and allocating resources, the chief operating decision maker’s focus is at a level that consolidates the results of all services. Accordingly, the Company manages its wireline-based services as a single operating segment. The product distribution segment consists of warehouse and logistics operations, and it procures and sells telecommunications infrastructure and equipment to both affiliated and non-affiliated businesses. It operates four warehouses across the United States.

On November 30, 2007, Windstream completed the split off of its directory publishing business. Prior to the split off, the Company’s publishing subsidiary coordinated advertising, sales, printing, and distribution for 356 telephone directory contracts in 34 states. The directory publishing business was previously presented together with the wireless business in other operations. Commensurate with the classification of the wireless business as discontinued operations (see Note 15), the directory publishing business is now reported separately.

The Company accounts for intercompany sales at current market prices. The evaluation of segment performance is based on segment income, which is computed as revenues and sales less operating expenses, excluding the effects of the merger and integration charges but including restructuring charges as discussed in Note 9. In addition, non-operating items such as other income, net, interest expense and income taxes have not been allocated to the segments.

17

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

13. Business Segment Information, Continued:

Segment operating results were as follows for the three and six month periods ended June 30:

	Three Months Ended						Six Months Ended
(Millions)	2008			2007			2008			2007
Revenues and sales from external customers:
Wireline	$	770.9		$	752.4		$	1,547.1		$	1,485.0
Product distribution		29.0			33.0			52.8			63.8
Directory publishing		—			41.3			—			61.6
Total	$	799.9		$	826.7		$	1,599.9		$	1,610.4
Intersegment revenues and sales:
Wireline	$	13.0		$	28.5		$	24.7		$	46.3
Product distribution		57.1			52.5			99.3			104.9
Directory publishing		—			4.6			—			6.4
Total	$	70.1		$	85.6		$	124.0		$	157.6
Total revenues and sales:
Wireline	$	783.9		$	780.9		$	1,571.8		$	1,531.3
Product distribution		86.1			85.5			152.1			168.7
Directory publishing		—			45.9			—			68.0
Total business segments		870.0			912.3			1,723.9			1,768.0
Less intercompany eliminations		(70.1	)		(85.6	)		(124.0	)		(157.6	)
Total revenues and sales	$	799.9		$	826.7		$	1,599.9		$	1,610.4
	Three Months Ended						Six Months Ended
(Millions)	2008			2007			2008			2007
Segment income:
Wireline	$	293.9		$	289.4		$	592.5		$	563.4
Product distribution		(0.4	)		0.3			(1.1	)		(0.5	)
Directory publishing		—			4.7			—			2.7
Total segment income	$	293.5		$	294.4		$	591.4		$	565.6
Merger and integration costs		(4.6	)		(1.6	)		(6.2	)		(3.2	)
Other income, net		3.0			6.3			8.6			11.5
Interest expense		(103.6	)		(108.1	)		(208.6	)		(222.8	)
Income from continuing operations before income taxes	$	188.3		$	191.0		$	385.2		$	351.1
Segment assets were as follows: (Millions)							June 30, 2008			December 31, 2007
Wireline (a)							$	7,937.7		$	8,119.8
Product distribution								35.5			35.7
Assets of discontinued operations								67.3			85.7
Total consolidated assets							$	8,040.5		$	8,241.2

(a) Wireline segment assets include $9.1 million and $26.6 million in acquired assets held for sale at June 30, 2008 and December 31, 2007, respectively.

18

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

14. Supplemental Guarantor Information:

In connection with the issuance of the 2016 Notes, the 2013 Notes and the 2019 Notes (“the guaranteed notes”), certain of the Company’s wholly-owned subsidiaries (the “Guarantors”), including all former subsidiaries of Valor, provided guarantees of those debentures. These guarantees are full and unconditional as well as joint and several. Certain Guarantors may be subject to restrictions on their ability to distribute earnings to the Company. The remaining subsidiaries (the “Non-Guarantors”) of Windstream are not guarantors of the guaranteed notes. Following the acquisition of CTC, the guaranteed notes were amended to include certain subsidiaries of CTC as guarantors.

The following information presents condensed consolidated statements of income for the three and six months ended June 30, 2008 and 2007, condensed consolidated balance sheets as of June 30, 2008 and December 31, 2007, and condensed consolidated statements of cash flows for the six months ended June 30, 2008 and 2007 of the parent company, the Guarantors, and the Non-Guarantors. Investments in consolidated subsidiaries are held primarily by the parent company in the net assets of its subsidiaries and have been presented using the equity method of accounting.

	Condensed Consolidated Statement of Income (Unaudited) Three Months Ended June 30, 2008
(Millions)	Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues and sales:
Service revenues	$	—		$	191.0		$	562.6		$	(0.9	)	$	752.7
Product sales		—			76.2			15.4			(44.4	)		47.2
Total revenues and sales		—			267.2			578.0			(45.3	)		799.9
Costs and expenses:
Cost of services		—			57.2			188.2			(0.9	)		244.5
Cost of products sold		—			72.0			14.8			(44.4	)		42.4
Selling, general, administrative and other		—			24.5			71.2			—			95.7
Depreciation and amortization		—			42.5			80.7			—			123.2
Merger, integration and restructuring		—			0.4			4.8			—			5.2
Total costs and expenses		—			196.6			359.7			(45.3	)		511.0
Operating income		—			70.6			218.3			—			288.9
Earnings from consolidated subsidiaries		167.9			9.3			—			(177.2	)		—
Other income (expense), net		4.4			(0.1	)		(1.3	)		—			3.0
Intercompany interest income (expense)		(8.6	)		(3.5	)		12.1			—			—
Interest expense		(101.1	)		(1.7	)		(0.8	)		—			(103.6	)
Income from continuing operations before income taxes		62.6			74.6			228.3			(177.2	)		188.3
Income taxes (benefit)		(39.4	)		24.5			85.3			—			70.4
Income from continuing operations		102.0			50.1			143.0			(177.2	)		117.9
Discontinued operations		—			—			(15.9	)		—			(15.9	)
Net income	$	102.0		$	50.1		$	127.1		$	(177.2	)	$	102.0

19

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

14. Supplemental Guarantor Information, Continued:

	Condensed Consolidated Statement of Income (Unaudited) Six Months Ended June 30, 2008
(Millions)	Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues and sales:
Service revenues	$	—		$	380.8		$	1,134.0		$	(2.1	)	$	1,512.7
Product sales		—			136.1			28.2			(77.1	)		87.2
Total revenues and sales		—			516.9			1,162.2			(79.2	)		1,599.9
Costs and expenses:
Cost of services		—			116.8			378.6			(2.1	)		493.3
Cost of products sold		—			127.5			26.1			(77.1	)		76.5
Selling, general, administrative and other		—			49.1			143.6			—			192.7
Depreciation and amortization		—			85.1			159.8			—			244.9
Merger, integration and restructuring		—			0.7			6.6			—			7.3
Total costs and expenses		—			379.2			714.7			(79.2	)		1,014.7
Operating income		—			137.7			447.5			—			585.2
Earnings from consolidated subsidiaries		365.8			44.3			—			(410.1	)		—
Other income (expense), net		1.7			8.3			(1.4	)		—			8.6
Intercompany interest income (expense)		(22.8	)		(7.9	)		30.7			—			—
Interest expense		(204.0	)		(3.2	)		(1.4	)		—			(208.6	)
Income from continuing operations before income taxes		140.7			179.2			475.4			(410.1	)		385.2
Income taxes (benefit)		(85.0	)		50.9			179.5			—			145.4
Income from continuing operations		225.7			128.3			295.9			(410.1	)		239.8
Discontinued operations		—			—			(14.1	)		—			(14.1	)
Net income	$	225.7		$	128.3		$	281.8		$	(410.1	)	$	225.7

20

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

14. Supplemental Guarantor Information, Continued:

	Condensed Consolidated Statement of Income (Unaudited) Three Months Ended June 30, 2007
(Millions)	Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues and sales:
Service revenues	$	—		$	193.7		$	558.4		$	(20.4	)	$	731.7
Product sales		—			122.0			13.9			(40.9	)		95.0
Total revenues and sales		—			315.7			572.3			(61.3	)		826.7
Costs and expenses:
Cost of services		—			59.4			194.4			(1.2	)		252.6
Cost of products sold		—			101.4			8.9			(60.1	)		50.2
Selling, general, administrative and other		(0.4	)		31.5			71.5			—			102.6
Depreciation and amortization		—			41.8			85.1			—			126.9
Merger, integration and restructuring		—			1.6			—			—			1.6
Total costs and expenses		(0.4	)		235.7			359.9			(61.3	)		533.9
Operating income		0.4			80.0			212.4			—			292.8
Earnings from consolidated subsidiaries		186.2			16.7			2.0			(204.9	)		—
Other income (expense), net		6.8			(0.5	)		—			—			6.3
Intercompany interest income (expense)		(11.5	)		(8.4	)		19.9			—			—
Interest expense		(106.1	)		(1.6	)		(0.4	)		—			(108.1	)
Income before income taxes		75.8			86.2			233.9			(204.9	)		191.0
Income taxes (benefit)		(40.1	)		23.9			91.3			—			75.1
Net income	$	115.9		$	62.3		$	142.6		$	(204.9	)	$	115.9

21

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

14. Supplemental Guarantor Information, Continued:

	Condensed Consolidated Statement of Income (Unaudited) Six Months Ended June 30, 2007
(Millions)	Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Revenues and sales:
Service revenues	$	—		$	386.5		$	1,090.8		$	(28.3	)	$	1,449.0
Product sales		—			218.7			25.8			(83.1	)		161.4
Total revenues and sales		—			605.2			1,116.6			(111.4	)		1,610.4
Costs and expenses:
Cost of services		—			111.8			378.2			(2.1	)		487.9
Cost of products sold		—			185.5			18.5			(109.3	)		94.7
Selling, general, administrative and other		—			62.8			144.2			—			207.0
Depreciation and amortization		—			84.5			167.5			—			252.0
Merger, integration and restructuring		—			4.3			2.1			—			6.4
Total costs and expenses		—			448.9			710.5			(111.4	)		1,048.0
Operating income		—			156.3			406.1			—			562.4
Earnings (losses) from consolidated subsidiaries		363.8			26.3			(1.6	)		(388.5	)		—
Other income (expense), net		11.9			(0.3	)		(0.1	)		—			11.5
Intercompany interest income (expense)		(23.0	)		(18.4	)		41.4			—			—
Interest expense		(218.9	)		(3.0	)		(0.9	)		—			(222.8	)
Income before income taxes		133.8			160.9			444.9			(388.5	)		351.1
Income taxes (benefit)		(82.0	)		46.7			170.6			—			135.3
Net income	$	215.8		$	114.2		$	274.3		$	(388.5	)	$	215.8

22

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

14. Supplemental Guarantor Information, Continued:

	Condensed Consolidated Balance Sheet (Unaudited) As of June 30, 2008
(Millions)	Parent			Guarantors		Non- Guarantors			Eliminations			Consolidated
Assets
Current Assets:
Cash and short-term investments	$	38.0		$	0.6	$	21.0		$	—		$	59.6
Accounts receivable (less allowance for doubtful accounts of $12.9)		0.1			95.9		226.2			—			322.2
Inventories		—			18.0		11.6			—			29.6
Deferred income taxes		20.1			—		8.4			—			28.5
Prepaid expenses and other		1.7			4.1		33.4			—			39.2
Assets held for sale		—			9.1		11.5			—			20.6
Total current assets		59.9			127.7		312.1			—			499.7
Investments in consolidated subsidiaries		7,801.8			554.9		4.6			(8,361.3	)		—
Goodwill and other intangibles		0.1			1,873.9		1,507.4			—			3,381.4
Net property, plant and equipment		7.6			1,117.0		2,810.6			—			3,935.2
Other assets		34.4			9.9		124.1			—			168.4
Non-current assets of discontinued operations		—			—		55.8			—			55.8
Total Assets	$	7,903.8		$	3,683.4	$	4,814.6		$	(8,361.3	)	$	8,040.5
Liabilities and Shareholders’ Equity
Current Liabilities:
Current maturities of long-term debt	$	14.0		$	0.3	$	10.0		$	—		$	24.3
Current portion of interest rate swaps		34.5			—		—			—			34.5
Accounts payable		11.0			62.4		66.6			—			140.0
Affiliates payable, net		1,883.0			390.2		(2,273.2	)		—			—
Advance payments and customer deposits		—			19.3		75.4			—			94.7
Accrued dividends		109.9			—		—			—			109.9
Accrued taxes		(30.4	)		23.5		36.2			—			29.3
Accrued interest		134.6			1.7		1.2			—			137.5
Other current liabilities		13.8			10.8		38.7			—			63.3
Liabilities of discontinued operations		—			—		6.0			—			6.0
Total current liabilities		2,170.4			508.2		(2,039.1	)		—			639.5
Long-term debt		5,195.2			99.7		49.8			—			5,344.7
Deferred income taxes		(45.0	)		501.2		721.4			—			1,177.6
Other liabilities		80.9			15.4		280.1			—			376.4
Total liabilities		7,401.5			1,124.5		(987.8	)		—			7,538.2
Commitments and Contingencies (See Note 7)
Shareholders’ Equity:
Common stock		—			—		60.6			(60.6	)		—
Additional paid-in capital		94.5			1,788.6		2,646.8			(4,435.4	)		94.5
Accumulated other comprehensive loss		(112.3	)		—		(68.5	)		68.5			(112.3	)
Retained earnings		520.1			770.3		3,163.5			(3,933.8	)		520.1
Total shareholders’ equity		502.3			2,558.9		5,802.4			(8,361.3	)		502.3
Total Liabilities and Shareholders’ Equity	$	7,903.8		$	3,683.4	$	4,814.6		$	(8,361.3	)	$	8,040.5

23

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

14. Supplemental Guarantor Information, Continued:

	Condensed Consolidated Balance Sheet As of December 31, 2007
(Millions)	Parent			Guarantors		Non- Guarantors			Eliminations			Consolidated
Assets
Current Assets:
Cash and short-term investments	$	47.2		$	1.2	$	23.6		$	—		$	72.0
Accounts receivable (less allowance for doubtful accounts of $13.1)		0.2			94.5		226.0			—			320.7
Inventories		—			17.6		12.0			—			29.6
Deferred income taxes		23.7			—		8.3			—			32.0
Prepaid expenses and other		3.9			7.1		29.3			—			40.3
Acquired assets held for sale		—			26.6		7.2			—			33.8
Total current assets		75.0			147.0		306.4			—			528.4
Investments in consolidated subsidiaries		7,436.6			482.5		34.9			(7,954.0	)		—
Goodwill and other intangibles		0.1			1,891.7		1,516.5			—			3,408.3
Net property, plant and equipment		7.6			1,151.3		2,871.4			—			4,030.3
Other assets		36.2			9.1		150.4			—			195.7
Non-current assets of discontinued operations		—			—		78.5			—			78.5
Total Assets	$	7,555.5		$	3,681.6	$	4,958.1		$	(7,954.0	)	$	8,241.2
Liabilities and Shareholders’ Equity
Current Liabilities:
Current maturities of long-term debt	$	14.0		$	0.3	$	10.0		$	—		$	24.3
Current portion of interest rate swaps		16.2			—		—			—			16.2
Accounts payable		13.0			34.2		110.9			—			158.1
Affiliates payable, net		1,339.6			588.0		(1,927.6	)		—			—
Advance payments and customer deposits		—			17.2		73.9			—			91.1
Accrued dividends		113.6			—		—			—			113.6
Accrued taxes		(33.8	)		7.9		79.1			—			53.2
Accrued interest		136.6			1.7		1.3			—			139.6
Other current liabilities		14.5			11.3		49.3			—			75.1
Liabilities of discontinued operations		—			—		7.1			—			7.1
Total current liabilities		1,613.7			660.6		(1,596.0	)		—			678.3
Long-term debt		5,181.6			99.9		49.7			—			5,331.2
Deferred income taxes		(42.8	)		486.7		689.5			—			1,133.4
Other liabilities		103.2			15.5		279.8			—			398.5
Total liabilities		6,855.7			1,262.7		(577.0	)		—			7,541.4
Commitments and Contingencies (See Note 7)
Shareholders’ Equity:
Common stock		—			—		60.6			(60.6	)		—
Additional paid-in capital		286.8			1,777.1		2,646.3			(4,423.4	)		286.8
Accumulated other comprehensive loss		(103.0	)		—		(53.7	)		53.7			(103.0	)
Retained earnings		516.0			641.8		2,881.9			(3,523.7	)		516.0
Total shareholders’ equity		699.8			2,418.9		5,535.1			(7,954.0	)		699.8
Total Liabilities and Shareholders’ Equity	$	7,555.5		$	3,681.6	$	4,958.1		$	(7,954.0	)	$	8,241.2

24

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

14. Supplemental Guarantor Information, Continued:

	Condensed Consolidated Statement of Cash Flows (Unaudited) Six Months Ended June 30, 2008
(Millions)	Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash Provided from Operations:
Net income	$	225.7		$	128.3		$	281.8		$	(410.1	)	$	225.7
Adjustments to reconcile net income to net cash provided from operations:
Loss on net assets held for sale		—			—			16.4			—			16.4
Depreciation and amortization		—			85.1			162.0			—			247.1
Provision for doubtful accounts		—			2.7			14.1			—			16.8
Stock-based compensation expense		3.9			0.2			5.1			—			9.2
Pension and postretirement benefits expense		0.1			0.8			7.9			—			8.8
Equity in earnings from subsidiaries		(365.8	)		(44.3	)		—			410.1			—
Deferred taxes		(2.0	)		14.6			49.1			—			61.7
Other, net		1.9			(7.7	)		5.7			—			(0.1	)
Changes in operating assets and liabilities, net		539.8			(171.3	)		(447.2	)		—			(78.7	)
Net cash provided from operations		403.6			8.4			94.9			—			506.9
Cash Flows from Investing Activities:
Additions to property, plant and equipment		—			(30.3	)		(103.0	)		—			(133.3	)
Disposition of acquired assets held for sale		—			17.3			—			—			17.3
Other, net		—			3.9			6.7			—			10.6
Net cash used in investing activities		—			(9.1	)		(96.3	)		—			(105.4	)
Cash Flows from Financing Activities:
Dividends paid on common shares		(225.4	)		—			—			—			(225.4	)
Stock repurchase		(200.3	)		—			—			—			(200.3	)
Repayment of debt		(207.0	)		(0.1	)		—			—			(207.1	)
Debt issued, net of issuance costs		220.0						—			—			220.0
Other, net		(0.1	)		0.2			(1.2	)		—			(1.1	)
Net cash from (used in) financing activities		(412.8	)		0.1			(1.2	)		—			(413.9	)
Decrease in cash and short-term investments		(9.2	)		(0.6	)		(2.6	)		—			(12.4	)
Cash and Short-term Investments:
Beginning of the period		47.2			1.2			23.6			—			72.0
End of the period	$	38.0		$	0.6		$	21.0		$	—		$	59.6

25

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

14. Supplemental Guarantor Information, Continued:

	Condensed Consolidated Statement of Cash Flows Six Months Ended June 30, 2007
(Millions)	Parent			Guarantors			Non- Guarantors			Eliminations			Consolidated
Cash Provided from Operations:
Net income	$	215.8		$	114.2		$	274.3		$	(388.5	)	$	215.8
Adjustments to reconcile net income to net cash provided from operations:
Depreciation and amortization		—			84.5			167.5			—			252.0
Provision for doubtful accounts		—			3.2			8.0			—			11.2
Stock-based compensation expense		—			0.7			7.6			—			8.3
Pension and postretirement benefits expense		0.1			3.1			15.9			—			19.1
Equity in (earnings) losses from subsidiaries		(363.8	)		(26.3	)		1.6			388.5			—
Deferred taxes		(18.0	)		9.1			9.9			—			1.0
Other, net		4.8			1.4			0.1			—			6.3
Changes in operating assets and liabilities, net		405.1			(131.0	)		(274.3	)		—			(0.2	)
Net cash provided from operations		244.0			58.9			210.6			—			513.5
Cash Flows from Investing Activities:
Additions to property, plant and equipment		—			(41.4	)		(136.6	)		—			(178.0	)
Other, net		—			—			1.2			—			1.2
Net cash used in investing activities		—			(41.4	)		(135.4	)		—			(176.8	)
Cash Flows from Financing Activities:
Dividends paid on common shares		(238.5	)		—			—			—			(238.5	)
Dividends received from (paid to) subsidiaries		99.0			(16.1	)		(82.9	)		—			—
Repayment of debt		(500.0	)		(0.1	)		—			—			(500.1	)
Debt issued, net of issuance costs		499.3			(0.4	)		—			—			498.9
Net cash used in financing activities		(140.2	)		(16.6	)		(82.9	)		—			(239.7	)
Increase (decrease) in cash and short-term investments		103.8			0.9			(7.7	)		—			97.0
Cash and Short-term Investments:
Beginning of the period		362.4			0.6			23.8			—			386.8
End of the period	$	466.2		$	1.5		$	16.1		$	—		$	483.8

15. Discontinued Operations:

The wireless business provides wireless services to customers in and around Concord, North Carolina and was acquired by Windstream in conjunction with the CTC acquisition on September 1, 2007. During the second quarter of 2008, the Company entered negotiations for the sale of its wireless business, and on August 7, 2008, reached a definitive purchase agreement (see Note 16). This transaction will allow management to divest of a non-core asset to focus on other strategic initiatives. Upon consummation, we will have no significant continuing involvement in the operations or cash flows of the wireless business, and have classified the corresponding assets and liabilities as held for sale in the accompanying consolidated balance sheets, accordingly. In addition, depreciation and amortization of the related assets ceased effective July 1, 2008.

The operating results of the wireless business have been separately presented as discontinued operations in the accompanying consolidated statements of income. Certain shared costs previously allocated to the wireless business totaling $1.1 million and $2.3 million for the three and six months ended June 30, 2008, respectively, have been reallocated to the wireline segment.

26

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

15. Discontinued Operations, Continued:

The following table summarizes the results of the wireless business operations for the three and six month periods ended June 30, 2008:

(Millions)	Three Months Ended			Six Months Ended
Revenues and sales	$	11.8		$	23.5
Income from discontinued operations, net of tax of $0.6 and $1.2, respectively	$	0.5		$	2.3
Loss on net assets held for sale, including tax benefit of $1.6		(16.4	)		(16.4	)
Net loss from discontinued operations	$	(15.9	)	$	(14.1	)

The pre-tax loss on net assets held for sale of $18.0 million reduced the carrying value of the wireless business to the contemplated transaction price less estimated costs to sell of $0.5 million. As of January 1, 2008, the Company completed its annual impairment review of goodwill and wireless licenses on a held for use basis, and determined that no write-down in the carrying value of these assets was required. In connection with the likely sale of this business, the Company performed an event-driven impairment review of these intangible assets as of June 30, 2008 assuming a fair market value equal to the contemplated transaction price less costs to sell. Based on this held for sale impairment analysis, the Company recorded an impairment to goodwill of $17.5 million, which is included in the loss from discontinued operations in the consolidated statements of income. Additionally, the Company updated its purchase price allocation through goodwill of certain tax contingencies related to the CTC acquisition, which resulted in a $3.2 million reduction of deferred tax liabilities in the second quarter of 2008.

The following table summarizes the assets and liabilities of the wireless business that are classified as held for sale in the accompanying consolidated balance sheets:

(Millions)	June 30, 2008		December 31, 2007
Current assets	$	11.5	$	7.2
Goodwill		31.5		52.2
Other intangibles		13.4		14.4
Net property, plant and equipment		10.8		11.9
Other assets		0.1		—
Total assets of discontinued operations	$	67.3	$	85.7
Current liabilities	$	6.0	$	7.1
Total liabilities of discontinued operations	$	6.0	$	7.1

16. Subsequent event:

On August 7, 2008, Windstream entered into a definitive agreement to sell its wireless business to AT&T Mobility II, LLC for approximately $60.0 million. The transaction is expected to close before the end of the year.

27

WINDSTREAM CORPORATION

FORM 10-Q

PART I - FINANCIAL INFORMATION

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

Basis of Presentation

The following is a discussion and analysis of the historical results of operations and financial condition of Windstream Corporation (“Windstream”, “we”, or the “Company”). Windstream was formed on July 17, 2006 through the spin off of Alltel Holding Corp., the holding company for the wireline and communications support operating subsidiaries of Alltel Corporation (“Alltel”), in a pro rata distribution to Alltel shareholders and the immediate merger with and into Valor Communications Corporation (“Valor”) (collectively referred to as the “legacy business”). This discussion should be read in conjunction with the unaudited consolidated financial statements, including the notes thereto, for the interim periods ended June 30, 2008 and 2007 and Windstream’s Annual Report on Form 10-K for the year ended December 31, 2007 filed with the Securities and Exchange Commission (“SEC”) on February 29, 2008.

Management believes that the assumptions underlying the Company’s financial statements are reasonable. These financial statements, however, may not necessarily be indicative of future results of operations, financial position or cash flows. Certain statements set forth below under this caption constitute forward-looking statements. See “Forward-Looking Statements” at the end of this discussion for additional factors relating to such statements, and see “Risk Factors” in Item 1A of Part I of Windstream’s Annual Report on Form 10-K, for a discussion of certain risk factors applicable to our business, financial condition and results of operations.

EXECUTIVE SUMMARY

Windstream is a customer-focused telecommunications company that provides local telephone, high-speed Internet, long distance, network access, and video services to approximately 3.1 million customers primarily located in rural areas in 16 states. Among the highlights in the second quarter of 2008:

• The Company added approximately 23,000 high-speed Internet services customers, increasing its high-speed Internet services customer base to over 934,000. During the quarter, the Company lost approximately 37,000 access lines or approximately 1 percent of its total access lines.

• Revenues and sales decreased $26.8 million, as compared to the second quarter of 2007, primarily due to the sale of the Company’s directory publishing business in the fourth quarter of 2007 and the one time settlement for switched access revenues recorded in the second quarter of 2007 as discussed below. Offsetting these decreases was a $37.2 million increase in revenues due to the acquisition of CT Communications, Inc. (“CTC”).

• Operating income decreased $3.9 million primarily due to the sale of directory publishing, partially offset by the acquisition of CTC, which accounted for an increase of $7.9 million, as well as the favorable effects of reduced depreciation rates discussed below.

• The Company generated cash flows from operations of $506.9 million for the six months ended June 30, 2008, which was used to fund capital expenditures of $133.3 million and to pay $225.4 million in dividends to shareholders. Additionally, the Company repurchased 16.0 million of its common shares at a cost of $200.3 million, leaving $199.7 million remaining under Windstream’s $400.0 million stock repurchase program announced in February 2008 that expires at the end of 2009.

• The Company entered negotiations for the sale of its wireless business, and subsequently reached a definitive purchase agreement on August 7, 2008. As of June 30, 2008, we have reported these operations as discontinued and recognized a pre-tax loss of $18.0 million as discussed below.

28

• On March 18, 2008, the Federal Communications Commission (“FCC”) granted the Company’s request to convert the majority of its remaining interstate rate-of-return regulated operations to price-cap regulation, effective July 1, 2008. Price-cap regulation better aligns the Company’s continued efforts to improve its cost structure for interstate wholesale services and allows high-speed Internet services to be deregulated.

During the remainder of 2008, the Company will continue to face significant challenges resulting from competition in the telecommunications industry. In addressing competition, the Company will continue to focus its efforts on improving customer service, increasing high-speed Internet penetration and expanding its service offerings.

Business Trends

The following risk factors and material non-recurring events and transactions could cause the Company’s reported financial information to be not necessarily indicative of future operating results or future financial conditions.

• As discussed in detail below, the Company’s revenues and sales and operating income in future periods will continue to be positively impacted by the acquisition of CTC. The Company added approximately 132,000 access lines through the acquisition of CTC in the third quarter of 2007.

• Wireline revenues and sales are expected to continue to be adversely impacted by future declines in access lines due to increasing competition in the telecommunications industry from cable television providers, wireless communications providers, and providers using other emerging technologies.

• The Company is also exposed to regulatory uncertainty in state and federal Universal Service Fund (“USF”) programs. Pending regulatory proceedings and other legislative actions could materially reduce the Company’s USF revenues, although near-term expectations are that the Company will maintain its current level of funding absent significant changes in the programs.

• The split off of the Company’s directory publishing business, which was completed in the fourth quarter of 2007, resulted in a reduction in wireline segment revenues due to the elimination of royalties received on sales of advertising in Windstream telephone directories. The Company agreed to forego these royalty payments for a period of fifty years as part of the split off agreement, and received $506.7 million in up-front consideration for the publishing business (see Note 3). The split off of the publishing business also resulted in the loss of directory publishing revenues, as discussed below in “Directory Publishing”.

• Economic trends in markets served by the Company could generate increases in bad debt expense, accelerated access line losses and slower high-speed Internet customer growth.

The foregoing risk factors and material transactions, as well as other risks and events that could cause Windstream’s reported financial information to be not necessarily indicative of future operating results or financial condition are discussed in more detail under “Risk Factors” in Item 1A and in the notes to the unaudited interim consolidated financial statements.

29

STRATEGIC TRANSACTIONS

Discontinued Operations

During the second quarter of 2008, the Company entered negotiations, and subsequently reached a definitive purchase agreement dated August 7, 2008, for the sale of its wireless operations. Accordingly, we have classified these operations as held for sale, and recognized a pre-tax loss of $18.0 million to reduce the carrying value of the assets held for sale to the contemplated transaction price less estimated costs to sell.

For the six months ended June 30, 2008, revenues generated from the wireless operations totaled $23.5 million or approximately one percent of total consolidated revenues. Completion of this transaction will allow management to divest of a non-core asset to focus on other strategic initiatives.

Acquisition

On August 31, 2007, Windstream completed the acquisition of CTC in a transaction valued at $584.3 million. Under the terms of the agreement the shareholders of CTC received $31.50 in cash for each of their shares with a total cash payout of $652.2 million. The transaction value also includes a payment of $37.5 million made by Windstream to satisfy CTC’s debt obligations, offset by $105.4 million in cash and short-term investments held by CTC. Including $25.3 million in severance and other transaction-related expenses, the total net consideration paid in the acquisition was $609.6 million. Windstream financed the transaction using the cash acquired from CTC, $250.0 million in borrowings available under its revolving line of credit, and additional cash on hand. The accompanying unaudited interim consolidated financial statements reflect the combined operations of Windstream and CTC following the acquisition.

The premium paid by Windstream in this transaction is attributable to the strategic importance of the CTC acquisition. The access lines and high-speed Internet customers added through the acquisition significantly increased Windstream’s presence in North Carolina and provide the opportunity to generate significant operating efficiencies with contiguous Windstream markets. The transaction has increased Windstream’s position in these markets where it can leverage its brand and bring significant value to customers by offering competitive bundled services.

Disposition

On November 30, 2007, Windstream completed the split off of its directory publishing business (the “publishing business”) in a tax-free transaction with entities affiliated with Welsh, Carson, Anderson & Stowe (“WCAS”), a private equity investment firm and Windstream shareholder.

To facilitate the split off transaction, Windstream contributed the publishing business to a newly formed subsidiary (“Holdings”). Holdings paid a special cash dividend to Windstream in an amount of $40.0 million, issued additional shares of Holdings common stock to Windstream, and distributed to Windstream certain debt securities of Holdings having an aggregate principal amount of $210.5 million. Windstream exchanged the Holdings debt securities for outstanding Windstream debt securities with an equivalent fair market value, and then retired those securities. Windstream used the proceeds of the special dividend to repurchase approximately three million shares of Windstream common stock during the fourth quarter. Windstream exchanged all of the outstanding equity of Holdings (the “Holdings Shares”) for an aggregate of 19,574,422 shares of Windstream common stock (the “Exchanged WIN Shares”) owned by WCAS, which were then retired. Based on the price of Windstream common stock of $12.95 at November 30, 2007, the Exchanged WIN Shares had a value of $253.5 million. The total value of the transaction was $506.7 million, including an adjustment for net working capital of approximately $2.7 million. As a result of completing this transaction, Windstream recorded a gain on the sale of its publishing business of $451.3 million in the fourth quarter of 2007, after substantially all performance obligations had been fulfilled.

In connection with the consummation of the transaction, the parties and their affiliates entered into a publishing agreement whereby Windstream granted Local Insight Yellow Pages, Inc. (“Local Insight Yellow Pages”), the successor to the Windstream subsidiary that once operated the publishing business, an exclusive license to publish Windstream directories in each of its markets other than the newly acquired CTC markets. Local Insight Yellow Pages will, at no charge to Windstream or its affiliates or subscribers, publish directories with respect to each Windstream service area covered under the agreement in which Windstream or its affiliates are required to publish such directories by applicable law, tariff or contract. Subject to the termination provisions in the agreement, the publishing agreement will remain in effect for a term of fifty years. As part of this agreement, Windstream agreed to forego future royalty payments, which totaled $28.1 million during the six months ended June 30, 2007, from Local Insight Yellow Pages on advertising revenues generated from covered directories for the duration of the publishing agreement.

30

ORGANIZATION AND RESULTS OF OPERATIONS

The Company is organized based on the products and services that it offers. Under this organizational structure, its operations consist of its wireline and product distribution segments, and directory publishing operations. The Company’s wireline segment consists of its retail and wholesale telecommunications services, including local telephone, high-speed Internet, long distance, network access and video services. The product distribution segment consists of warehouse and logistics operations, and it procures and sells telecommunications infrastructure equipment to both affiliated and non-affiliated businesses. Effective with the completion of the split off of its directory publishing business, as discussed above, the Company’s publishing operations have ceased.

Consolidated Results of Operations

	Three Months Ended June 30,						Six Months Ended June 30,
(Millions)	2008			2007			2008			2007
Segment revenues and sales:
Wireline	$	783.9		$	780.9		$	1,571.8		$	1,531.3
Product distribution		86.1			85.5			152.1			168.7
Directory publishing		—			45.9			—			68.0
Total business segment revenues and sales		870.0			912.3			1,723.9			1,768.0
Less affiliated eliminations		70.1			85.6			124.0			157.6
Consolidated revenues and sales		799.9			826.7			1,599.9			1,610.4
Segment income:
Wireline		293.9			289.4			592.5			563.4
Product distribution		(0.4	)		0.3			(1.1	)		(0.5	)
Directory publishing		—			4.7			—			2.7
Total business segment income		293.5			294.4			591.4			565.6
Merger and integration costs		(4.6	)		(1.6	)		(6.2	)		(3.2	)
Consolidated operating income		288.9			292.8			585.2			562.4
Other income, net		3.0			6.3			8.6			11.5
Interest expense		(103.6	)		(108.1	)		(208.6	)		(222.8	)
Income from continuing operations before income taxes		188.3			191.0			385.2			351.1
Income taxes		70.4			75.1			145.4			135.3
Income from continuing operations		117.9			115.9			239.8			215.8
Discontinued operations, net of tax		(15.9	)		—			(14.1	)		—
Net income	$	102.0		$	115.9		$	225.7		$	215.8

The following discussion and analysis details results for Windstream Consolidated Revenues.

The following table reflects the primary drivers of year-over-year changes in consolidated revenues and sales:

Consolidated revenues and sales

	Three Months Ended June 30, 2008					Six Months Ended June 30, 2008
(Millions)	Increase (Decrease)			%		Increase (Decrease)			%
Due to increases in wireline segment revenues and sales	$	3.0				$	40.5
Due to changes in product distribution segment revenues and sales		0.6					(16.6	)
Due to decreases in revenues and sales from directory publishing		(45.9	)				(68.0	)
Due to changes in affiliated eliminations		15.5					33.6
Total consolidated revenues and sales	$	(26.8	)	(3	)%	$	(10.5	)	(1	)%

Consolidated revenues and sales decreased $26.8 million, or 3 percent, and $10.5 million, or 1 percent in the three and six month periods ended June 30, 2008, respectively, as compared to the same periods of 2007. The decreases are primarily due to the sale of the Company’s directory publishing business in the fourth quarter of 2007, as discussed above, and a one time settlement for switched access revenues recorded in the second quarter of 2007, partially offset by the acquisition of CTC. Additionally, consolidated revenues and sales increased due to increases in high-speed Internet customers, partially offset by declines in

31

revenues associated with continued access line losses. The decline in product distribution revenues and associated change in affiliate eliminations were the result of lower sales to affiliates primarily due to the decline in revenues from directory publishing rights and changes in capital expenditures in the Company’s wireline operations during the three and six months ended June 30, 2008.

See below a detailed discussion and analysis of segment revenues and sales in our discussion of segment operating results.

The following discussion and analysis details results for each of Windstream’s operating segments.

Wireline Operations

	Three Months Ended June 30,				Six Months Ended June 30,
(Millions, access lines and customers in thousands)	2008		2007		2008		2007(a)(b)
Revenues and sales:
Voice service	$	304.5	$	314.2	$	610.9	$	630.8
Long distance		70.9		63.9		142.7		126.0
Data and special access		194.4		170.7		388.6		335.6
Switched access and USF		149.9		154.7		303.5		295.3
Miscellaneous		43.6		42.1		87.9		85.8
Directory publishing rights		1.7		19.1		3.8		28.1
Product sales		18.9		16.2		34.4		29.7
Total revenues and sales		783.9		780.9		1,571.8		1,531.3
Costs and expenses:
Cost of services		256.9		264.0		518.0		510.7
Cost of products sold		18.3		10.6		32.4		21.9
Selling, general, administrative and other		91.1		89.8		183.2		180.6
Depreciation and amortization		123.1		127.1		244.6		251.6
Restructuring charges		0.6		—		1.1		3.1
Total costs and expenses		490.0		491.5		979.3		967.9
Segment income	$	293.9	$	289.4	$	592.5	$	563.4
Access lines in service (excludes high-speed Internet lines):
Residential		2,059.6		2,102.1
Business		927.2		904.3
Wholesale (c)		22.3		35.7
Special circuits		115.1		112.1
Total access lines in service		3,124.2		3,154.2
Average access lines in service		3,140.7		3,173.0		3,161.7		3,187.2
Average revenue per customer per month (d)		$83.20		$82.04		$82.86		$80.08
High-speed Internet customers		934.3		752.6
Digital satellite television customers		231.1		150.2
Long distance customers		2,049.7		1,941.0

(a) In the discussion and analysis provided below regarding changes in wireline revenues and expenses in 2007, the impact of the acquisition of CTC on these changes is considered to be the revenues and expenses recognized by the former CTC operations during the three and six month periods ended June 30, 2008.

(b) On March 18, 2008, the FCC released an order granting approval for Windstream to convert the majority of its remaining interstate rate-of-return regulated operations to price-cap regulation effective on July 1, 2008. Price-cap regulation better aligns the Company’s continued efforts to improve its cost structure because rates for interstate wholesale services are not required to be periodically adjusted based on the Company’s cost structure. In conjunction with the approval, the Company changed its presentation of certain wireline segment revenues and expenses to be consistent with the effects of price-cap regulation. Prior year revenues and expenses were changed to reflect the current presentation.

(c) Wholesale units include unbundled network elements and pay stations.

(d) Average revenue per customer per month is calculated by dividing total wireline revenues and sales by average access lines in service for the period.

32

Wireline revenues and sales increased $3.0 million, or less than one percent, and $40.5 million, or 3 percent, in the three and six month periods ended June 30, 2008, respectively, as compared to the same periods of 2007. The acquisition of CTC accounted for $37.2 million and $73.2 million of the year-over-year increase in the three and six month periods ended June 30, 2008, respectively, as compared to the same periods of 2007. Partially offsetting this increase was the decrease in revenues derived from directory publishing rights as a result of the split off of the publishing business and the one time settlement for switched access revenues recorded in the second quarter of 2007.

Customer access lines decreased by 1 percent during the twelve months ended June 30, 2008, which reflects declines in both residential and wholesale lines, partially offset by the acquisition of approximately 132,000 access lines from CTC.

During the three and six month periods ended June 30, 2008, the Company’s legacy operations lost approximately 36,000 and 75,000 access lines, respectively, as compared to approximately 35,000 and 65,000 access lines lost during the same periods in 2007. During the three and six month periods ended June 30, 2008, respectively, the Company’s CTC operations lost approximately 1,000 and 4,000 access lines. These declines in access lines primarily reflect the effects of fixed line competition, and wireless substitution. The Company expects access lines to continue to be impacted by these effects in 2008.

To slow the decline of revenue from access line loss in 2008, the Company will continue to emphasize sales of additional services and bundling of its various product offerings, including voice, high-speed Internet, and digital satellite television into one convenient billing solution for its customers. In an effort to further develop enhanced services and bundled product offerings, the Company will continue to invest in its network to offer faster speeds in its high-speed Internet offerings. As of June 30, 2008, the Company could deliver speeds of 3Mb to 93 percent of its addressable lines. Additionally, speeds of 6Mb and 12Mb are available to 57 percent and 28 percent of its high-speed Internet customers, respectively.

During the three and six month periods ended June 30, 2008, the Company added approximately 23,000 and 63,000 high-speed Internet customers, respectively. This increased the Company’s high-speed Internet customer base to over 934,000 customers at June 30, 2008, and represents a penetration rate of 30 percent of total access lines in service, and 45 percent of residential access lines in service.

Voice Service Revenues

Voice service revenues consist of traditional telephone services provided to both residential and business customers. These revenues include monthly recurring charges for basic services such as local dial-tone and enhanced services such as caller identification, voicemail and call waiting. The following table reflects the primary drivers of year-over-year changes in voice service revenues:

Voice service

	Three Months Ended June 30, 2008					Six Months Ended June 30, 2008
(Millions)	Increase (Decrease)			%		Increase (Decrease)			%
Due to CTC acquisition	$	15.4				$	30.3
Due to reductions in expanded calling area rate plans		(2.4	)				(4.5	)
Due to decrease in local number portability surcharge		(2.2	)				(4.5	)
Due to access line losses and other		(20.5	)				(41.2	)
Total voice revenues	$	(9.7	)	(3	)%	$	(19.9	)	(3	)%

The decreases in revenues were primarily due to the overall decline in access lines discussed above and reductions in customers on expanded calling area rate plans. As further discussed below, the Company is offering long distance packaged rate plans, which has resulted in customers moving from expanded calling area plans to package calling plans shifting revenues from voice service revenues to long distance revenues. Voice service revenues also decreased in part due to the expiration during the third quarter of 2007 of a five-year period during which the Company was allowed to bill customers a surcharge to recover costs associated with local number portability. Partially offsetting these decreases were increases in voice service revenues due to the acquisition of CTC.

33

Long Distance Revenues

Long distance revenues resulted from switched interstate and intrastate long distance, long distance calling cards, international calls and operator services. The following table reflects the primary drivers of year-over-year changes in long distance revenues:

Long distance

	Three Months Ended     June 30, 2008					Six Months Ended     June 30, 2008
(Millions)	Increase (Decrease)			%		Increase (Decrease)			%
Due to CTC acquisition	$	2.8				$	4.9
Due to increases in customer billing rates		2.8					5.7
Due to increases in package plans		8.5					14.5
Due to one plus calling and other		(7.1	)				(8.4	)
Total long distance	$	7.0		11	%	$	16.7		13	%

As discussed above, increases in long distance packages were offset by decreases in voice service revenues related to expanded area calling packages. Partially offsetting these increases were declines in one plus calling primarily attributable to customer migration to long distance package offerings and wireless substitution.

Data and Special Access Revenues

Data and special access revenues primarily consist of retail high-speed Internet services and the provision of special access and next generation data services. The following table reflects the primary drivers of year-over-year changes in data and special access revenues:

Data and special access

	Three Months Ended     June 30, 2008					Six Months Ended     June 30, 2008
(Millions)	Increase (Decrease)			%		Increase (Decrease)			%
Due to CTC acquisition	$	8.6				$	17.0
Due to increases in high-speed Internet customers		11.1					25.3
Due to increases in special access revenues		5.1					9.6
Due to increases in next generation data services		1.7					3.8
Other		(2.8	)				(2.7	)
Total data and special access	$	23.7		14	%	$	53.0		16	%

Increases in data and special access revenues are due in part to the acquisition of CTC as well as the significant increase in high-speed Internet customers over the last year, as previously discussed. The remaining increases are due primarily to increases in special access revenues, which represent monthly flat-rate end user charges for dedicated circuits, and virtual networking services. In addition, the Company has realized increases in special access revenues due to strong demand from wireless and other carriers. Increases in next generation data services resulted from the introduction of these services to new markets.

34

Switched Access and USF Revenues

Switched access and USF revenues include usage sensitive charges to long distance companies for access to the Company’s network in connection with the completion of interstate and intrastate long distance calls, as well as receipts from federal and state universal service funds that subsidize the cost of providing wireline services. The following table reflects the primary drivers of year-over-year changes in switched access and USF revenues:

Switched access and USF
	Three Months Ended June 30, 2008				Six Months Ended June 30, 2008
(Millions)	Increase (Decrease)			%	Increase (Decrease)			%
Due to CTC acquisition	$	6.9			$	13.8
Due to increase in federal universal service support		5.2				10.0
Due to settlement of inter-carrier traffic dispute in 2007		(13.3	)			(13.3	)
Other		(3.6