Brigid Smith - Assistant VP, Corporate Communications Maggie Wilderotter - Chairman and CEO Donald R. Shassian - CFO

Jonathan Chaplin - JP Morgan Jason Armstrong - Goldman Sachs Simon Flannery - Morgan Stanley Ana Goshko - Banc of America Michael McCormack - Bear Stearns Gaurav Jaitley - UBS Christopher Larsen - Credit Suisse Christopher King - Stifel Nicolaus & Company, Inc. Frank Louthan - Raymond James

Good day everyone and welcome to the Citizens Communications Second Quarter Earnings Release Conference Call. This call is being recorded. At this time, I would like to turn the conference cover to Ms. Brigid Smith, please go ahead ma'am. Brigid Smith - Assistant Vice President, Corporate Communications: Thank you, Dana, and good morning. The purpose of this call is to discuss 2007 second quarter results for Citizens Communications, which were released this morning. If anyone needs a copy of this material, please call Lisa Lombardo at 203-614-5064. We anticipate the Form 10-Q will be filed later this week. On today's call are Maggie Wilderotter, our Chairman and Chief Executive Officer, and Don Shassian, Chief Financial Officer. During this call, we will be making certain forward-looking statements, particularly on matters related to 2007 results and guidance. Please review the Safe Harbor language found in our press release and SEC filings. On this call, we will be discussing GAAP and non-GAAP financial measures as defined under SEC rules. In our earnings release and on our website, czn.net, we have provided a reconciliation of non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. Please refer to this material during our discussion. And I'll now turn the call over to Maggie. Maggie Wilderotter - Chairman and Chief Executive Officer: Thanks very much Brigid and good morning everyone. Thank you for joining us. Citizens Communications had a good second quarter of 2007. Revenues for the quarter were $578.8 million, expense management resulted in a 54% margin, and capital expenditures were $66.7 million. All of these factors resulted in free cash flow generation of $116.3 million. We achieved a dividend payout ratio of 73% for the quarter and 56% for the first six months for the year. Don Shassian will elaborate on the financials for the quarter including details on our Commonwealth acquisition synergies and on our recently announced Global Valley acquisition. Global Valley is a great tuck-in acquisition for us. The 15,000 access line operation is located in a few areas in Northern California, specifically in the Patterson and Livingston areas of Central Valley and contiguous to our Elk Grove and Susanville markets. These properties have been growing access lines over the past several years, and we believe this will continue. There are many new housing developments that are being built in this territory. This acquisition is cash flow accretive for us on day one, and there are nominal operational and system synergies that we can leverage. We also believe that we can grow revenues in these markets by layering in our Digital Phone product, our DISH Network Triple Play product, and our commercial bundles. Our west region will manage the integration efforts and we believe the transaction will take us 6 to 9 months to get through the regulatory approval processes at both the Federal and State of California levels. During the quarter we have made solid progress integrating our Pennsylvania properties. Since we closed on the transaction in early March, we have streamlined the organization structure, removed layers from management, consolidated sales teams for the ILEC, CLEC, and equipment sales, have sold a large portion of the equipment business to Shared Technologies, and completed key financial and human resource software conversions. Our billing system conversion is still on track for the fourth quarter. We remain very confident that we'll achieve the $30 million in reoccurring annual synergies. On April 2nd, we launched all of our Frontier packages and bundles in the new Pennsylvania markets, and early results are showing strong take rates. For example, we surpassed 10,000 Digital Phone sales in mid-June. All packages and bundles require a minimum one-year price protection agreement. There were no contract commitments in these markets prior to the acquisition. Thus far, 98% of customers taking bundles are signing up for these one or two-year commitments. Our second quarter company results do reflect seasonality. Since we plan for these fluctuations in the business, our revenue and sales performance is as we anticipated. There are over 50 colleges and universities in our market and in May and June, we do see bulk disconnects on these campuses for both access lines and high-speed. However, even with these seasonal trends, our June high-speed sales were the second highest this year due to targeted promotions and offers. During the quarter, our high-speed data customers increased to approximately 479,000. Our company-wide average revenue per high-speed customer continues to be over $40 and residential broadband penetration increased to 28%. Our total net adds were 15,300 and we were very successful with a dial-up conversion program in June. We did not run any new mass market promotions during the second quarter, and instead focused on value selling and selective offers in key competitive areas. Our Digital Phone offer continued to gain strength in the second quarter. This national product bundle, which we rolled out in the fourth quarter last year, includes local and unlimited national long distance, as well as four key features for a very competitive monthly price. We now have 197,000 residential customers or 13% penetration on this bundle after just three quarters. We believe Digital Phone is a strategic weapon in the marketplace to fight against access line losses to competitive alternatives like cable phone offerings or wireless. Access line losses for the quarter were 34,700. As I mentioned earlier, a lot of this activity is seasonal with colleges and universities, and includes our dial-up conversions to high-speed. We also changed our door to door vendor early in the quarter that we were not actively selling through this channel for close to 60 days. We have started to ramp up again in June and results from this channel have rebounded. We have also seen some softness in new housing starts in certain areas in our West region. Finally, on the product front, DISH sales remain strong. Our total customers with DISH are 81,100 with over 23,800 sales thus far this year. In partnership with Echostar, we have started to sell DVD and high-definition packages to our existing DISH customer base. On the operations front, our call center consolidation is moving forward. We have already closed four call centers and announced the closure of two more -- our Kingman call center in Arizona and our Rochester call center. The current calls from these centers will be transitioned into our Burnsville, Minnesota, and Deland, Florida, call centers over the next two quarters. Our Work-At-Home program is enabling us to keep over 70 customer service representatives in Kingman and 25 in Rochester. We have 165 employees who have accepted positions for Work-At-Home, up from 150 last quarter. Work-At-Home now represents over 20% of our customer service work force. Their numbers are also impressive. The Work-At-Home team has the highest revenue per call and the lowest average handle time. During the second quarter, we successfully ratified 60 labor contracts in Sylvan Lake, New York; Kingman, Arizona; Elko, Nevada; Needles, California; the State of Wisconsin; and upstate New York. Today, we have ratified 10 contracts this year covering over 1000 employees. We still have five more contracts to negotiate throughout the rest of the year. The national moves and transfers program continues to gain momentum. In addition to AT&T, Verizon, Embarq, and TDS, we now have CenturyTel, Windstream, Consolidated, Quest, and FairPoint committed to the program. Conversion results continue to be strong and we hope to have all partners up and running by the fourth quarter. Shifting to products, here is the latest update on our wireless data launches. We have successfully launched data networks in Elko, Nevada; Orange County Community College; Cookeville, Tennessee, Carlinville, Illinois; and Shepherdstown, West Virginia. In addition, we have implemented service in multiple hotspots, including the Rochester Airport. We are also actively building four more municipalities for launch in the third quarter -- Elk Grove, California; Wilkes-Barre, Pennsylvania; Fort Dodge, Iowa; and Charlestown, West Virginia. We plan to launch three more key anchor tenants in the third quarter -- Wilkes University and King's College, both in Wilkes-Barre, Pennsylvania; and Blackburn College in Carlinville, Illinois. On the wireless voice front, our Frontier1 Wireless Companion service test was expanded from one market to five markets. We are now in Middletown and Monroe, New York; Elk Grove, California; Rochester, New York; and Cookeville, Tennessee. Our goal between now and your-end will be to test consumer acceptance and adoption of this product. Frontier1 works with any wireless carrier in any handset the customer already have. A customer who signs up for Frontier1 gets the single phone number for their wireless phone and their landline phone service, either home or office or both. With this one number concept, we now provide the customer with simultaneous ring, integrated voice mail, and simple call switching between wireless and wireline. We will assess the results of this test at year-end and then decide on future rollouts. Our priorities for the 2007 remainder of the year are about staying the course, a strong employee and customer focus, integrating Commonwealth, closing Global Valley, improving customer retention, driving sales of high-speed in our packages, improving our service delivery, and maximizing financial returns. Now, here is Don Shassian, our Chief Financial Officer, to give you the financial overview of the 2007 second quarter. Donald R. Shassian - Chief Financial Officer: Thank you Maggie and thank you everybody for joining us this morning. Before I get into discussion of the quarterly highlights, one item to note, I'd like to remind everyone that we closed the Commonwealth Telephone transaction on March 8th, and accordingly have consolidated the results of Commonwealth or as we call it our New Pennsylvania property since March 8th. In order to facilitate our investors' insight to and understanding of the impact that new Pennsylvania property had on our quarterly financial and operational results, we have once again attached to our press release additional schedules that break up the legacy Citizens financial numbers and operating metrics from the new Pennsylvania property numbers. We had another solid quarter with strong revenues, EBITDA or operating cash flow and free cash flow. Quarterly revenue of $578.8 million included $83 million from our new Pennsylvania property. Excluding that increase, our quarterly revenues were $495.8 million, essentially flat when compared with our first quarter of this year, after adjusting that first quarter for the $38.7 million favorable impact from the carrier dispute. Our CZN only second quarter revenues were below last year's second quarter, primarily due to lower subsidy revenue. Our EBITDA or operating cash flow margin was 53.9% for the quarter. Our free cash flow was $116.3 million for the quarter. Our dividend payout ratio for the quarter was 73%, and the business generated $31 million of cash in excess of our dividends for the quarter. For the six months ended June 30, our free cash flow was $303.9 million. Our dividend payout ratio for the six months was 56%, and the business generated $133 million of cash in excess of our dividends. Our second quarter results reflect a full quarter's impact on new Pennsylvania property, which distorts comparisons from one period to another. Accordingly, my prepared remarks will state the impact of our new Pennsylvania operations and then we will discuss comparisons from one period to the next for our legacy business only, excluding the new property. Our Pennsylvania property's revenue in the second quarter was $83 million. Excluding the impact of the new Pennsylvania property, our revenue decreased $11 million or 2.2% from the second quarter of2006, and after excluding the favorable impact of the carrier settlement in the first quarter of 2007, it was slightly lower on a sequential basis. We experienced strong growth in data and non-switched access revenues, offset by reductions in Federal and State subsidies and local revenue. Quarterly data and internet revenue from our new Pennsylvania property was $10.6 million. Excluding the new Pennsylvania property, our second quarter data and internet revenues of $121.4 million increased $17.9 million or 17.3% compared to last year, due to higher volume of high-speed internet customers and high capacity circuits like DS-1s and DS-3s. On a sequential basis, our data and internet revenue was up $7.5 million, again on higher volumes and the completion of certain promotions. Local service revenue from our Pennsylvania property was $26.4 million. Excluding the new Pennsylvania property, our second quarter local service revenue of $196.2 million decreased $7 million as compared to the comparable second quarter of 2006, primarily due to the loss of access lines. On a sequential basis, our local revenue was essentially flat. Access service revenue from our Pennsylvania property was $22.7 million. Excluding the new Pennsylvania property, our second quarter access service revenue of $90.8 million decreased $13.9 million as compared to the second quarter of '06. That decline was driven primarily by lower subsidy revenue and to a lesser extent, lower switched minutes of use. On a sequential basis, after excluding the one-time carrier settlement in the first quarter, our access revenues declined $3.8 million, again due to lower subsidy revenue and lower switched minutes of use. As I mentioned in our year-end earnings call and again last quarter, we anticipated a significant drop in subsidy revenue in 2007. Excluding the new Pennsylvania property, our second quarter subsidy revenue of $29 million, which again is reflected in access revenue, decreased $12.9 million as compared to the second quarter of 2006, due to reductions in the federal high cost fund receipts and surcharges. On a quarterly sequential basis, our subsidy revenue was down $3.9 million, due to a $3.3 million unfavorable true-up in local switching support related to prior years. Other revenue from our Pennsylvania property was $5 million. Excluding new Pennsylvania property, our second quarter other revenue of $20 million decreased by $8.3 million, driven by higher uncollectibles, fewer equipment sales, and our free TV promotion in certain markets. On a sequential basis, our other revenue was down $3.8 million, driven by higher uncollectibles and fewer equipment sales. As Maggie mentioned, our Q2 marketing activity again focused on value selling with minimal promotions. Our Q2 results were impacted by increased competitive activity in our central region, a reduction in our door-to-door sales personnel in two of our regions, seasonal factors, and by the housing slowdown in certain parts of our west region. The results for the quarter were following: 15,300 new net high-speed adds; 13,500 new net bundles; 5,100 new net video customers; 64,500 new net Digital Phone customers. With respect to high-speed, we added 15,300 high-speed data customers during the quarter, which brought us to approximately 479,300 high-speed internet customers at June 30. Our high-speed penetration rate is 19.1% on total access lines, and residential high-speed penetration is 28.1%. Both of these numbers are slightly diluted by the Pennsylvania property. Penetration rate on total access lines is 12.4% and on residence is 25%. We are making good progress in increasing high-speed penetration in Pennsylvania, as our product mix, pricing distribution channels, and overall marketing are demonstrating strong results. We expect company-wide net addition in high-speed to be stronger in the third quarter based on the number of marketing promotional activities underway, as well as the initiation of new door-to-door sales vendors in several of our markets. Most importantly, however, as Maggie mentioned, our ARPU for high-speed remains above $40 per month per customer. During the quarter, we added 13,500 new bundle customers, which brought our total bundle customers to 593,000 at June 30. The penetration rate for our bundles is up to 24% of total access lines. This rate is also diluted by our Pennsylvania property whose bundle penetration rate is only 9.7%, but is growing quite nicely as we introduce our bundle packages, specifically Digital Phone where we have achieved over 10,000 Pennsylvania customers signing up for this unlimited voice product bundle. As I stated previously, while our bundle penetration has increased significantly, our overall penetration of some of these features like caller ID, call waiting, and voice mail can still improve. Our access line losses were 34,800 during the second quarter of this year, which is up compared to first quarter, as we experienced increased competitive activity in our Central region and a slowdown in new housing starts in certain parts of our West region. Most of the line loss was in residential. The residential line loss during Q2 4500 were second lines, many of which were upgraded to a high-speed internet service. In Rochester, our rate of line loss and absolute number of access line losses increased only slightly over the first quarter, but were still down substantially compared to prior quarters in 2005 and 2006. Business line losses for the entire company for the second quarter were 2800, which is flat with last quarter and down compared to earlier quarters. On the expense side, we continue to demonstrate effective cost management. Our EBITDA or operating cash flow margin for the quarter was 53.9%. Our Pennsylvania property's EBITDA margin for the quarter was 54% when excluding our corporate allocations, but we are tracking quite nicely to plan. I would like to point out that our second quarter results do include incremental expenses of approximately $3 million for CTE integration expenses and severance costs related to employees in other areas of the business. In addition, I also want to mention that we have an early retirement offer out to selected groups of employees and recently announced the closure of several call centers and resultant potential shift of some employees to Work-At-Home and other locations. As a result, we expect that over 100 employees will be leaving Citizens Frontier by the end of the third quarter. And accordingly, we will have a significant one-time termination cost in the third quarter of approximately $5 million to $10 million. With regard to CTE integration, our financial systems were installed for the Pennsylvania property effective July 1. Other mission-critical system conversions and resulting synergies will be realized in the third and fourth quarters of this year. Through the second quarter, we have already achieved over $12 million in annualized cost synergies. Our previously announced estimated annual synergy target of $30 million to be achieved in three years is on plan. And we feel quite confident we will achieve these savings as originally disclosed. Our capital expenditures in the second quarter were $66.7 million, which is up compared to first quarter and includes $8.6 million related to our Pennsylvania properties. Capital expenditures through June were $111.8 million, including $12.9 million pertaining to the new Pennsylvania properties. Capital spending will continue to ramp up throughout the rest of the year. Our spending is focused on initiatives, which utilize return on investment criteria and are focused on our growth opportunities and our competitive position in the marketplace. During the second quarter and into July, we accomplished a number of other financial-related initiatives. First, in April, we retired our outstanding $495 million senior notes due 2008. We also retired approximately $17.9 million in industrial revenue bonds and real utilization debt in the second quarter. As a result, our next significant debt obligation on our maturity ladder is not until 2011. Secondly, on July 3, we signed an agreement to buy Global Valley Networks for $62 million. Global Valley is an ILEC, privately owned by Country Road Communications. It has approximately 15,000 access lines and operates in the towns of Patterson, Livingston, San Antonio, Guinda in Northern California. It is a great property providing excellent consumer service to geographic areas that has had a 3% to 5% access on growth in the past two years. Its EBITDA margins are in excess of 50% and the purchase price represents a 7.5 times multiple of trailing EBITDA. The acquisition is accretive from day one and we expect regulatory approvals to take six to nine months. Third, on July 13, we sold a portion of the equipment business that we acquired from Commonwealth. This was a sale of customer contracts in the Southern and the Southeastern portions of Pennsylvania. While we still retain all of the customer contracts in the Wilkes-Barre/Scranton and Lehigh Valley areas. The sales price equates to one times recurring revenue and was less than $2 million. Fourth item is our Bangor lawsuit settlement and consent decree, which is pending approval by the US District Court for the District of Maine was approved late last month and accordingly, our settlement payment of $7.6 million has been made. Lastly, our stock repurchase program gained steam in the second quarter. During the quarter, we repurchased 3.8 million shares for $58.7 million, which brings the total repurchase program through June to 4.6 million shares or $70.7 million, which is 28% of our $250 million authorized program. As for our 2007 guidance, we reaffirm that our capital expenditures will be between $315 million and $325 million, and our free cash flow will be between $500 million and $520 million. You will note in this quarter that our cash taxes increased significantly to $40.6 million and therefore, $47.4 million through the first six months. We estimate that our cash taxes for the second half of 2007 will be approximately $30 million to $35 million. In closing, we have a very positive outlook for the future performance of our business and its ability to generate free cash flow. With the successful integration of our new Pennsylvania property, we expect to be able to keep our annual dividend payout ratio well below 70%, even when we become full cash taxpayers, we will maintain a reasonable level of leverage. Thank you for your interest. Dana, I would ask you to please open this up to questions. Question And Answer

Thank you sir. Today's question and answer session will be conducted electronically. [Operator Instructions]. And we will go first to Jonathan Chaplin of JP Morgan. Jonathan Chaplin - JP Morgan: Good morning. Thanks for taking the question. Just a couple of quick questions on access lines, and then a couple of housekeeping questions, I think you said that second lines were down 4,800. I just wanted to confirm that number. And then I was wondering how much of the pressure on second lines was from the CTE properties where second line penetration was historically very high. And then just looking at the increase in primary line pressure, if you could give us a little bit more color on some of the... on some of the impacts there, how much of it came from incremental cable VoIP exposure that might have been rolled out during the course of the quarter. And then I think you said on... I think the commentary on subsidies was that there was a $3.3 million negative impact and I'm assuming that unwinds in the back half of the year so that subsidy should bounce back to about $32 million a year. I just wanted to make sure of that as well. Thanks. Donald R. Shassian - Chief Financial Officer: Jonathan, you got a lot of questions there. Let me take a shot and Maggie, keep me honest what I am missing. Maggie Wilderotter - Chairman and Chief Executive Officer: Okay. Donald R. Shassian - Chief Financial Officer: On the second line loss, it was 4,500. Jonathan Chaplin - JP Morgan: 45. Donald R. Shassian - Chief Financial Officer: About half of that was Pennsylvania property. Line losses, we did see increased competitive activity, specifically in the Central region. The cable VoIP competition we still estimate to be between 50% and 55%, so we did see some increased competition from a couple of cable providers in the Central region with more promotions. Not ruling out VoIP, but just more aggressive promotions. Maggie Wilderotter - Chairman and Chief Executive Officer: And maybe just, Jonathan, to add some color to that, in the CTE properties, all of our bundles that we've rolled out, we are keeping second lines in those bundles. So we are being pretty successful in keeping a fairly high level of second lines, even though we've accelerated greatly the high-speed internet conversions. And then also on the primary lines, I will say our deactivations are very good. We have seen some softness in gross adds. As Don said, we had a couple of cable operators launch some pretty aggressive price promotions in a couple of markets in the Central region. We've been watching that and actively responding to that competitively. We do believe by the end of this year about 75% of our markets will have a cable VoIP provider active in those markets. Donald R. Shassian - Chief Financial Officer: And Jonathan, the other question on the subsidy, a $3.3 million negative true-up from local switching support. It is a one timer, it is not recurring, you are correct. So obviously, we are not anticipating any negative true-ups like that for the second half of the year. Jonathan Chaplin - JP Morgan: Great. Thank you very much. Donald R. Shassian - Chief Financial Officer: Thank you.

And we'll go next to Jason Armstrong of Goldman Sachs. Jason Armstrong - Goldman Sachs: Great. Thank You. Good morning. Jason Armstrong - Goldman Sachs: Good morning, Jason. Maggie Wilderotter - Chairman and Chief Executive Officer: Hi, Jason. Jason Armstrong - Goldman Sachs: A couple of questions. So, first on the free cash flow payout ratio, 73% this quarter, but there is a number of different sort of one-timers back and fourth. Maybe, Don, if you can just help us out with all these, $3 million USF hit, $3 million Commonwealth integration charges, you had taxes which were higher than usual, just talk at the Bangor settlement. Can you help us think through all these and get to a normalized level? It seems like it should be in the 60s somewhere. And then maybe just a comment on M&A, you announced the recent deal and sort of characterized it as a tick-in deal. Any granularity out there on the M&A front, what can be expected? Is the opportunity from here mostly sort of tuck-in acquisitions like this or are there Commonwealth-type deals still out there? Thanks. Donald R. Shassian - Chief Financial Officer: Jason, I haven't gone through the calculation of backing those items out, but included in our free cash flow are the incremental items of the CTE integration expenses, the severance, the local switching support, unfavorable true-up is in there, there is the increased taxes for the quarter. Bangor is not... Bangor was something that was accrued for in prior years. So that is not negatively impacting that. It does... if you take some of those out significantly, especially the increase in the taxes, because if you look at $47.4 million for 6 months and then only $30 million to $35 million for the rest of the year, it does change that payout ratio pretty significantly. So, I have not done a pro forma, I can do something after the call and do a calculation, but I think you could probably do it as well, it does drive it down pretty significantly. Maggie, do you want to cover M&A or -- Maggie Wilderotter - Chairman and Chief Executive Officer: Yes, I think, and Don, you can tag team with me. We are looking at opportunities as they come up, Jason, from an M&A perspective. We will be opportunistic as we have been in the past. We have a very disciplined set of criteria that we look at for acquisitions to make sense for us, which does include criteria like the ability for the area to be rural, that there is growth potential on the revenue side, that the network is in good shape etc. So we continue to look out in the marketplace and see what's available, and we will do either tuck-in or larger transformational acquisitions depending on the opportunity and depending on the criteria. Jason Armstrong - Goldman Sachs: Okay, great, thanks.

And we will take our next question from Simon Flannery of Morgan Stanley. Simon Flannery - Morgan Stanley: Okay, thanks very much. Good morning. Maggie Wilderotter - Chairman and Chief Executive Officer: Hi, Simon. Donald R. Shassian - Chief Financial Officer: Good morning. Simon Flannery - Morgan Stanley: How are you? You still have over $400 million on your balance sheet, you did a reasonably sizable buyback in the quarter, but you still got a lot of flexibility even if you continue at that pace. M&A, you just talked about, but sounds like it will be somewhat smaller deals. So, can you just think about it, could we accelerate the buyback program, might you look to retire some more debt if the bond market continues to weaken here, other alternatives for use of cash since you probably don't want to be earning money market yields on it for too long? Donald R. Shassian - Chief Financial Officer: Simon, we have $250 million stock buyback, we have accomplished about $70 million through six months, we have got about $180 million to go. Obviously, the equity markets have taken a turn. We have a 10b5 program setup today that makes purchases based on varying levels of prices, and just it runs. So we are not making daily decision. So that is going to continue. We have expected it to be accomplished by year-end, and by the equity markets dropping, I expected it will be accelerated based on the nature of the program. Cash-wise, we also rolled out about $62 million in cash that we may need either at the end of the year or some time in the first quarter of next year. And we are continuing to look at our debt structure. Our next, tranche, as you know, is the 11s. The premium to buy them has dropped significantly. We are looking at it and it's a constant strategy approach for us to figure out ways to strategically reduce that. So we are looking at that. Money markets are not a great yield, you are right, but we are just continuing to true-up the balance sheet, it's pretty strong as it is, and we will be opportunistic where it makes some sense. Maggie Wilderotter - Chairman and Chief Executive Officer: And Simon, the Board actually looks at our uses of cash at every meeting. So we will continue to look at that and make the appropriate decisions based upon the excess cash that we have in the business. Simon Flannery - Morgan Stanley: Thank you.

[Operator Instructions]. We will go next to Ana Goshko of Banc of America. Ana Goshko - Banc of America: Hi, thanks very much. I have got two questions, one on cash flow and then second on Commonwealth. But, on cash flow, can you talk more about working capital and what your working capital outlook is for the year? Because that's something that I believe you do not include in your definition of free cash flow and in your press release, you really only give a condense statement. I can sort of get what I think working capital use was. It was pretty... it was a big use in the first quarter, looks like it probably swung back in the second, but once I take working capital into account, and if just do cash from ops less CapEx, and I also back out the settlement to get sort of a more normalized first half cash flow, I think your dividends are running about 85%. So, it's... of your... of the free cash flow defined that way. So it's much tighter. So wondering what your expectations are for any working capital swings in the second half of the year, particularly with the ongoing integrations that you have. And then on Commonwealth, I just wanted an update on what you guys are feeling about the CLECs that they have, the Edge Out, how that's trending. I think it was a little bit under a third of their lines and if any of the experiences there are making you consider pursuing such a strategy in your legacy business? Donald R. Shassian - Chief Financial Officer: Ana, I am not sure how you are coming up with those numbers. I think we need to chat later on today. First quarter, there is an outflow of a number of activities, including on accruals at the end of the year, including the bonuses and a number of other incentive payments, and other accruals for any CapEx that is installed in the fourth quarter and [indiscernible] coming in the first quarter. That is a seasonal activity, and you always see more cash going out in that first quarter. Second quarter and third and fourth, second and third look pretty normal, no activity of any significant swings. Fourth quarter usually a little bit light on cash going out. So, I think I need to understand your calculation of how you're coming up with that 80% number. That's a little foreign for me. Ana Goshko - Banc of America: Okay. It was just... I think it's pretty straight forward, but we can talk about later. All I did was, I took cash from ops for first half, subtracted CapEx for the first half and then also just backed out the settlement that you have got in the first quarter, and that was a one-time event. But... okay. But in general, nothing... no big use of working capital expected in the second half? Donald R. Shassian - Chief Financial Officer: No big uses, no major swings in the business, we don't see any major... there is no major investments that are peeking in the next six months at all. We just have got normal CapEx plans, strategic builds, and business as usual. Nothing building. Ana Goshko - Banc of America: Okay. Donald R. Shassian - Chief Financial Officer: On the CLEC side, I will just start and I will pass to Maggie, but I think we have been very pleased about what we have been seeing in the CLEC operation, feel very good about it. We have integrated it with our ILEC operation, and Ken Arndt and his team at Pennsylvania are doing a very nice job. Maggie Wilderotter - Chairman and Chief Executive Officer: I think as we look at that CLEC operation, we look at it as an extension of our ILEC business in these markets. So it's contiguous to our ILEC business. And in an addition to that, it's an on-net CLEC. So we are running it contiguously and integrated. So we can have one view to the customer. So we feel pretty good about the results that we have seen so far and we also feel pretty good about the plan that the Pennsylvania leadership has to continue to grow that asset profitably. Ana Goshko - Banc of America: But my question was based upon that performance, do you think there is an opportunity to pursue a strategy in your legacy business? Maggie Wilderotter - Chairman and Chief Executive Officer: Well, we have not really looked at using a CLEC Edge Out strategy in other areas of our business because traditionally we are not in those markets. I think you have to start and build a presence. It does cost you a lot when you go competitively head to head with incumbents that are already providing services in that area. And frankly, if the Pennsylvania properties didn't have Edge Out CLEC, we wouldn't go and put one in. So what we are doing is we are maximizing what is already there, but we don't really foresee us doing that in other markets. Ana Goshko - Banc of America: Okay. Donald R. Shassian - Chief Financial Officer: May I just also embellish, the Pennsylvania CLEC was a very heavily facility-based build, and so, therefore a very significant investment had already been made, that was being leveraged and we see that we can continue to leverage that. Most other CLECs you have to start from ground. One, either you can put a lot of CapEx in or you go and get involved in the unigame [ph] and the economics are a little bit more daunting. Maggie Wilderotter - Chairman and Chief Executive Officer: And we are actually even in Pennsylvania not aggressively focused on the entire CLEC footprint that Commonwealth was focused on. We are really focused on the areas that we think we can maximize profitability that are in sort of the sweet spot heartlands for where our properties are. Ana Goshko - Banc of America: Okay, great. Thanks very much. Donald R. Shassian - Chief Financial Officer: Thank you.

[Operator instructions] We will go next to Mike McCormack of Bear Stearns. Michael McCormack - Bear Stearns: Hi guys, congratulations, Maggie, on your Yahoo! Board appointment. Maggie Wilderotter - Chairman and Chief Executive Officer: Well, thanks, Mike. Michael McCormack - Bear Stearns: Just a couple of questions, first on the business line trends. Can you give us a sense for how business is reacting right know, whether you are seeing some pressures there? And secondly, your thoughts on the 700 megahertz auction rules that came out, any thoughts on how you guys may or may not participate there? Thanks. Maggie Wilderotter - Chairman and Chief Executive Officer: Okay. Basically on the commercial side, we are no seeing any pressure coming from competition in the marketplace. Our big thing right know is to try to get our small and SOHO customers on bundled packages that would include not just an access line, but also business high-speed. We've launched some aggressive packages in our markets. We also in a couple of our regions have launched a commercial voice-over-IP system, that's both a Centrex and PBX version in both our East region and Rochester. And we are having some pretty good success there. So I think overall we feel good about commercial, we still think there is a lot of upside there. And we are continuing to push that side of our business. But competitively, I think we are in good shape. With regard to the 700 megahertz auction, we like everyone else have sort of read the preliminary of what the SEC is going to do. We have been assessing and looking at the opportunity for participation in the auction, but I think as you know, based upon our footprint and the size of our rural markets, there has to be small enough footprints that are auctioned off to have it really make sense for us to pay the price for the entire footprint in each of these CMAs that the SEC is looking at. So we are still in an assessment mode, but we will take whatever this order is that comes out and the text of it over the next couple of weeks, and really drill down and see what makes sense. But at the end of the day, we don't want to have to buy the whole condominium project to get one condo. And for some our markets, these footprints are very, very large and the builds requirement that the SEC has put out as a part of this auction would require us to overbuild in a fairly substantial area, no matter where we would get a license. Michael McCormack - Bear Stearns: Just quickly back on the business access line, you are not seeing any change in business formation in your markets or sort of employee headcount coming down and access lines being hit by that? Maggie Wilderotter - Chairman and Chief Executive Officer: No. Donald R. Shassian - Chief Financial Officer: We are not seeing it as of yet Mike. The only place we have seen access line losses from employment or economy, is as mentioned, some housing starts we have seen in the Western region. We have not seen that translate into business lines. Our business lines have been holding pretty well. The wholesale side has been very, very strong, in the carrier side, wireless backhaul has been very strong. Maggie Wilderotter - Chairman and Chief Executive Officer: And we have traditionally seen some condensing of access lines up in the Rochester area with certain downsizing of larger businesses we have up there and that does continue. But we haven't seen anything out of the ordinary happen on the commercial side. Michael McCormack - Bear Stearns: All right. Thanks guys. Donald R. Shassian - Chief Financial Officer: Thank you.

And we will take our next question from Gaurav Jaitley of UBS. Gaurav Jaitley - UBS: Great, thanks, good morning guys. Just a quick question on the cost side, you have a couple of initiatives going on right now with the call center closures and also the headcount reduction coming up. Can you help us quantify the savings you expect to see from that? And then also on the Commonwealth synergies, I think you mentioned, Don, a $12 million annualized run rate at the end of the second quarter. Would you expect that to be by the end of the year? Are you still... I mean, you have talked about $30 million over three years, should we expect to see a steady ramp to that level or should we... would it be a step function? That will be great. Thanks. Donald R. Shassian - Chief Financial Officer: We have not given out numbers on the call center closures, on the headcount. We have going on, as I mentioned before of these call centers, as we are trying to consolidate. So we are increasing headcounts at certain locations as we then decrease in other areas. And it's a little bit a moving target because a number of these areas... a number of our employees are moving to Work-At-Home. So, there is not a very significant synergy benefit that we are going to see this year as we go through this, but we are going to have this whole call center consolidation done by the end of the year. By the end of the year we will give you an estimate of the dollar impact, but it will be a nice lift for '08, but there is not a very significant lift in '07. Gaurav Jaitley - UBS: And you expect that... just reminder us, it's 13 going to 3, right, in terms of call centers total? Maggie Wilderotter - Chairman and Chief Executive Officer: It's 14 going to 3, it is significant. Gaurav Jaitley - UBS: Okay. And then on the headcount reduction and Commonwealth? Donald R. Shassian - Chief Financial Officer: Well, on the Commonwealth, the $12 million of annualized synergies, both wage and non-wage, it will continue to ramp up in the third quarter and fourth quarter. There is... the benefit really comes on the billing system conversion, which Maggie said is in the fourth quarter. So really start to see that in the fourth quartet and then really kicking in for next year. I am not giving out an amount by the end of the year. I would rather just see the system conversions get done and for the activities to occur and then we will give out estimates when those are... people or non-wage costs go away. Gaurav Jaitley - UBS: Okay, great, thanks guys. Maggie Wilderotter - Chairman and Chief Executive Officer: Thanks. Donald R. Shassian - Chief Financial Officer: Thank you.

And we will take our next question from Chris Larsen of Credit Suisse. Christopher Larsen - Credit Suisse: Hi, thank you. Two questions. Don, you mentioned something earlier in your comments about the free PC TV promos, am I clear in that you've expanded that, I think, to the CTE markets? And can you give us an idea what sort of the expense impact that was, may be what we can expect going forward? And then secondly, Maggie, we saw you're appointed to the Yahoo! Board. Is there anything we can read through on that? Maggie Wilderotter - Chairman and Chief Executive Officer: Well, on the free TV promotion, I think what Don was referring to is in the forth quarter we offered free TV in a number of markets, fourth quarter of '06. So, as customers utilize that service, that's where we are seeing the drawdown on revenue on a monthly basis, from the customers that came on in the forth quarter of '06. So we did not in the second quarter launch any free PC or free TV promotions in Pennsylvania or anywhere else. Donald R. Shassian - Chief Financial Officer: And let me... and Chris, comparing the second quarter '07 to second quarter '06, in the second quarter '06, there were no promotions like that. So, we are just now seeing obviously first, second, third, and forth quarter of this year we have these monthly credits, if you would, or payments that we are covering for our customers for that 12-month period that they have signed up. When comparing to the comparable period last year, there were no similar programs. That's what I was referring to. Does that helps? Christopher Larsen - Credit Suisse: Yes, it does, thank you. Maggie Wilderotter - Chairman and Chief Executive Officer: And then Chris, on the Yahoo! Board, I think as you know, with us being in the broadband business and we do provide our customers with a portal, we are also very active in advertising from a local advertising perspective and national advertising as well on our portal. We have also been monetizing search. So there's a number of areas that Yahoo! is a leader in, especially in what's happening in all of the business models and modernization of the web that I think we can learn a lot from and also leverage that for Citizens. And in addition, I think the background that I have, both from a telecommunications perspective as well as technology, wireless, cable, and advertising will also help Yahoo!. Christopher Larsen - Credit Suisse: Well, congratulations on that and thank you. Maggie Wilderotter - Chairman and Chief Executive Officer: Thanks.

And we will take our question today from Chris King of Stifel Nicolaus. Christopher King - Stifel Nicolaus & Company, Inc.: Good morning. Just a quick follow-up question with respect to the margins in your schedule C, the pro forma breakout between Commonwealth and Citizens, just wanted to make sure that I'm looking at the numbers correctly. It looks like the legacy Citizens business was running at an EBITDA margin of just under 56% or so, which has been pretty much very consistent with your most recent quarters despite the various one-time items that occurred in the quarter. The Commonwealth business, on the other hand, at least by my math, is coming in just over 42%, which is, call it, 600 to 700 basis points really below where that business was a couple of quarters ago. Are those reasonable numbers to rely upon or are several of the one-time items in the quarter really impacting the Commonwealth business really more so than the Citizens business? Donald R. Shassian - Chief Financial Officer: Chris, the one timers are not, but I would like to refer you on that schedule C, there is a footnote number 3 which talks about the fact that the expenses... other operating expenses for CTE have been charged $9.7 million of common corporate costs. It's an important footnote put out there. That represents the corporate governance and common support cost of our entire business that are allocated based on GAAP, has to be allocated on a fully distributed basis to all of our operations. None of that pool of dollars though is incremental for the Commonwealth transaction. So, there are still in the Commonwealth operation, call centers, and IT, etc. But the Commonwealth numbers here are being burdened with a share of all of our other common support costs of the entire Citizens operation. So, if you look at that on an incremental basis, you should exclude that $9.7 million of cost, which we have allocated. If you pull them out, the Commonwealth margins go to 54% and the Citizens legacy margins go from 55.8% to 53.8%. Christopher King - Stifel Nicolaus & Company, Inc.: Okay. Donald R. Shassian - Chief Financial Officer: That is the more appropriate way to look at that. Christopher King - Stifel Nicolaus & Company, Inc.: Okay, thanks very much. So, in other words, the synergies that will be achieved over time include much of the $9.7 million. Donald R. Shassian - Chief Financial Officer: There's some in $9.7 million, but there's also costs that are within the Commonwealth operation that will also be achieved. Christopher King - Stifel Nicolaus & Company, Inc.: Right, got you. Donald R. Shassian - Chief Financial Officer: We'll see a comparable footnote, Chris, on schedule D as well. Christopher King - Stifel Nicolaus & Company, Inc.: Okay, thank you very much. Donald R. Shassian - Chief Financial Officer: Thank you.

And it does appear we have time for one more question. We will take our final question from Frank Louthan of Raymond James. Frank Louthan - Raymond James: Great, thank you very much. On the access universal service decline, even with the true-up, we are continuing to see a pretty material decrease in that line. Is this a run rate we can kind of expect going forward or is there more changes to USF? May be you can give us an idea, are there some timing issues with how those payments have come during the year? And from the access side, is the minute of use degradation, are you seeing that sort of across all of your customers or is that more directly related to the access line losses? If you can give us more color on what's actually driving those line items. Donald R. Shassian - Chief Financial Officer: The USF, Frank, I mentioned last quarter that I was expecting approximately 20% reduction in revenue. That's still... we're looking at I think for the year, ballpark, a little more, maybe slightly above that. It look to be pretty steady for the next two quarters unless we get a surprise in average cost per loop. But I think that's what's going to be. I think there will be continued reductions in our receipts in the future, not to this magnitude, however. The main reduction here for us was the fact that we went from an '04 base year to an '05 base year where cost structure was a lot lower. And then we go next year, to '06, still a little bit lower, but not that kind of a drop off. So, I think it's getting a little most stabilized. There was a true-up, as I mentioned, which won't recur, but it's getting to a lower level for us, which is a good scenario. We are not relying upon those funds. On the access minutes of use, not seeing a drop off on a customer basis. I think it's more directly related to the access line losses. There has not been a significant reduction in minutes of use per sub, but it's been more related to the access line losses. Frank Louthan - Raymond James: Okay, thank you. And then now you've had 6 months to settle through and look at the PC and DISH offerings that you have. What are your thoughts on doing some of those promotions going forward? I am sure you can't comment specifically, but are those types of promotions things that you are still interested in and going forward maybe slightly different flavors, and is that something maybe we could expect again in the forth quarter? Maggie Wilderotter - Chairman and Chief Executive Officer: Frank, we have done some analysis on those promotions. We are very pleased with the results that we have seen from those promotions, and we are right now in the throes of evaluating what we are going to do from a forth quarter perspective. But I will say this, the other benefit is you get customers on double play with high-speed and access lines, or a triple play with both of those products in DISH. And we do see material reductions in churn. So, there is a double benefit to this in terms of higher revenue and more stickiness for the customer. And we will be looking to do different flavors of promotions in the fourth quarter. Another thing that we are actually working on is some analysis in all of our markets on PC penetration. So, we can actually do a better job of segmenting and targeting promotions that make sense in specific markets, instead of just doing it mass market across the board. So for example, if one of our markets has 80% to 90% PC penetration, it probably doesn't make sense for us to do a free PC offer in that market. But in some of our markets, that has 50% penetration or less, it would make a lot more sense to do it there because you are really stimulating an increase in the market. So, there will be more to come on those promotions and we are going to be working on that over the third quarter for fourth quarter. Frank Louthan - Raymond James: Great. Thank you very much. Maggie Wilderotter - Chairman and Chief Executive Officer: Thanks.

And that does conclude today's question and answer session. I would like to turn the call back over to our speakers for any additional remarks. Maggie Wilderotter - Chairman and Chief Executive Officer: Yes, I just want to say thanks to everyone for participating on the call. Again, we feel very good about the results we have had in the second quarter and we are also very positive about the rest of the year in terms of staying the course. Have a good day.

And that does conclude today's conference call. Thank you for your participation. You may disconnect at this time.