Luke Szymczak - Vice President of Investor Relations Maggie Wilderotter - Chairman of the Board, Chief Executive Officer Daniel McCarthy - President, Chief Operating Officer John Jureller - Executive Vice President and Chief Financial Officer

Batya Levi - UBS Investment Bank Mike McCormack - Nomura Securities Phil Cusick - JPMorgan Frank Louthan - Raymond James Kevin Smithen - Macquarie Jonathan Epstein - Deutsche Bank Securities Scott Goldman - Goldman Sachs

Good day, everyone, and welcome to the Frontier Communications first quarter 2013 results conference call. This call is being recorded. At this time, I would like to hand the call over to Mr. Luke Szymczak. Please go ahead, sir.

Thank you and welcome to the Frontier Communications first quarter earnings call. My name is Luke Szymczak, Vice President of Investor Relations. With me today are Maggie Wilderotter, Chairman and Chief Executive Officer of Frontier, Dan McCarthy, President and Chief Operating Officer and John Jureller, Executive Vice President and Chief Financial Officer, as well as Su D'Emic, Senior Vice President and Chief Accounting Officer. The press release, earnings presentation and supplemental financials are available in the Investor Relation section of our website at frontier.com. During this call, we will be making certain forward-looking statements. Please review the Safe Harbor language found in our press release and SEC filings. On this call, we will also be discussing GAAP and non-GAAP financial measures as defined under SEC rules. Reconciliation between GAAP and non-GAAP is provided in our earnings release. Please refer to this material during our discussion. I will now turn this call over to Maggie.

Thank you, Luke, and good afternoon, everyone. We appreciate you joining Frontier's first quarter 2013 earnings call. Before we discuss the results of the quarter, I would like to mention that earlier today the Board of Directors declared a quarterly dividend payment of $0.10 per share in line with expectation. Let me start with highlights from our first quarter. Please turn to slide five. If you are following along on the slides on our website. So, adding new customers and retaining existing customers are the most significant factors impacting our revenues. Our continued improvement of these metrics is vital. So, we are very pleased to report that our net residential customer losses improved 38% from Q4 2012 and 57% for Q1 2012. Second, we had 28,177 net broadband additions in Q1. This is a record achievement since the 2010 acquisition of the Verizon properties. The first quarter performance was greater than the entire net additions for all of 2012. Both of these achievements reflect the benefit of extensive work we've done to improve our network, to sharpen our focus on customer service, to promote our attractive new offers and to engage locally. Today, we have seen sustained improvements in customer metrics and broadband net additions into Q2, which is extremely encouraging. Our Q1 total revenue quarter-over-quarter decline was a disappointment. The primary reasons include lost customers, lower voice revenues and slower business purchase decision cycle. However we do expect the improved Q1 retention of current customer along with higher broadband net additions, will start to close the quarterly revenue declines over the next few quarters. We still expect low single-digit revenue declines for 2013. Residential ARPC increased in Q1, reflecting the improvement in broadband product mix and the progress we continue to make in selling new services to customers. We were able to maintain sequentially stable margins in Q1, reflecting the success of our expense reduction efforts. Another highlight for our Q1 results is that our growth in data revenues is up quarter-over-quarter for the last three quarters. For example, residential data grew 3.7% from Q4 2012 to Q1 2013. This is significant progress, and together with the continuing improvement in our customer and broadband metrics, it lays the foundation for quarterly revenue improvements in the future. These trends are encouraging, because as we outlined on slide six, our top strategic objective is to drive revenue growth. We've been very aggressive in developing new alternative channels, such as online, aggregators and agents Alternate channels now account for over 20% of our broadband adds. Our efforts to improve customer service are yielding results in the form of improved customer satisfaction and higher call center sales conversion rate. We are making progress with our efforts to sell more services and products into our existing customer base to simplify pricing and bundles. This drives average revenue per customer higher. For example, Satellite Broadband and Frontier Secure are gaining traction. We are seeking to make our offering even more robust with additional products and services. Our mobility, energy and [check-at-home] trials are promising and we plan to trial a small business cloud service offerings later this year. Turning to slide seven, I mentioned earlier that keeping customers is a top priority. Improving our customer retention will have the biggest impact on changing our revenue trends. So, we continue to put great emphasis on efforts to retain customers. In addition to excellent customer service and network enhancements, we have been broadening the range of our product offerings. These efforts are yielding results. Churn has declined over the last year, and since we have been successful at reducing churn in the acquired properties and maintaining low churn elsewhere, churn is down substantially from the levels following the Verizon acquisition. Please turn to slide eight. We continue to lead with broadband. Indeed, broadband is at the core of our strategy. And as I mentioned, we had extremely strong results in Q1 with 28,177 net broadband additions. These additions are coming from double and triple-play custom value pricing packages, from Simply Broadband, as well as Satellite Broadband. Moreover, we are seeing positive momentum on these key customer metrics into Q2. This year we plan to build broadband to connect another 130,000 homes, and of those being built this year, approximately 55,000 will be funded by the Federal Connect America Fund. In addition, we plan to participate in this Connect America Fund Phase I Part II if the FCC approves the release of additional funds for unserved households in rural America. We believe an order could be forthcoming this quarter. Frontier is proud to be a participant in these FCC sponsored programs to build out broadband plans to areas that lack data service as well as to upgrade speed very low population density markets. Finally, regarding broadband, I would like to take a moment to highlight the two significant broadband opportunities that lie ahead for Frontier. We have 1.8 million broadband customers today but our network passes 7.1 million households. We penetrate about a quarter of the market on average and we believe our broadband market share can reach at least 40%. Many of our legacy markets already have broadband market share at or above 40% of the homes they pass. We have run rate to drive our broadband share higher over time, and this represents a substantial revenue opportunity for Frontier. The second element of our broadband opportunity is the potential to migrate our customers to higher speed tiers. The vast majority of our existing and new customers are being served today with only a basic speed tier. Yet over half of our footprint currently has the capacity for higher speeds of 12 or 20 megabits per second and that capability is continuing to increase. Therefore, our opportunity in broadband revenue lift is about driving penetration and market share substantially higher and migrating both existing and new customers to higher speed tiers. Moving to slide nine. Last quarter, we discussed our goal of reducing cash operating expenses by a net $100 million in 2013. We got off to a good start in Q1 and remain committed to our target for the year. We are reducing compensation costs including the use of contractors and are also focused on enterprise wide cost reduction. In summary, we have had a strong start to the first quarter of 2013. Frontier added a record number of broadband customers. Our new offerings are attracting more customers to our platform, and we are improving customer retention metrics. We believe this provides the foundation for improved revenue performance going forward. I will now hand the call over to Dan McCarthy to cover operational trends as well as an update on our network. Dan?

Thanks, Maggie. I would like to start by elaborating on our revenue performance in Q1. Starting with residential, the decline in total customers was partially offset with our success in selling more broadband products. Simply Broadband, while it does have a lower monthly price point, enables us to retain customers that would have otherwise been lost. Furthermore, keeping customers who would have gone to the competitor for a broadband-only solution not only enables us to retain a portion of their monthly recurring revenue, but it provides us additional selling opportunities. Simply Broadband helps us improve customer retention and also drove a significant increase in new customers that shifted to Frontier in Q1. In addition, higher attach rates of additional products such as Frontier Secure contributed to ARPC. In commercial, the revenue momentum should improve in Q2 as well, driven by stronger sales pipeline and improved close ratios for key product sets. In addition, our regional leaders are deploying sales resources dynamically to take advantage of competitive opportunities, product introductions, and network upgrades. Maggie mentioned we have been aggressive in developing our new alternate channels. During Q1, over 20% of our broadband gross additions came through three key alternate sales channels; online, aggregators, and agents. Further expansion of our alternate distribution channels is a priority for the balance of 2013. In Q1, we launched a new frontier.com web platform. The improved look and feel of the site coupled with enhancements to the online ordering system, are fully in production. Frontier’s goal is to be where the potential customer is, online and offline, providing opportunities to interact with customers on their own terms. If you would turn to slide 10, we continue to upgrade Frontier's advanced broadband network. We've made substantial investment in our network over the last few years and that process continues with a focus on completing our broadband expansion program, investing in speed upgrades, capacity enhancements, and expansion of high-capacity Ethernet capabilities throughout our network. Our network consist of a nationwide IP backbone, which serves all of our markets. Optical ROADM rings connect geographic locations allowing low-cost, high capacity data transport. This technology provides a flexible and scalable middle-mile network minimizing incremental expense as we grow market share. The access path to the customer is generally a hybrid fiber copper network from the central office to the residence. For commercial and carrier customers, we offer high-speed access via Gigabit Ethernet as well as a robust network architecture that provides logical and physical diversity for high reliability. We are continuing to expand and enhance Ethernet capabilities to more central offices, and it is now available in 82% of our exchanges, up over 10 points since Q4. In terms of the broadband reach, since the 2010 acquisition, the number of homes in our region that are passed by broadband has increased by over 1 million. We expect 90% of the homes in our footprint to be passed by broadband by year-end, up from 88% at the end of Q1. Expanding our high-speed coverage provides a great opportunity for revenue growth. As Maggie mentioned earlier, most customers have only the basic Tier of broadband speed. This year, we will continue to improve speeds and capacity in our markets. Slide 10 highlights the improvements we are delivering. In addition to 20-megabit service now reaching 42% of our footprint, we have increased our 12-megabit service to reach 54% of our footprint. We have also substantially expanded our 6-megabit service in the last year, and it now reaches three quarters of our footprint. What is most important is that improving the network capabilities is contributing to our success in the marketplace. On slide 11, you'll find an update on excellent progress we are making on key customer metrics. The loss rate of both, residential and commercial customers continues to decline. We are particularly excited about the progress we have been making on residential customers. And as Maggie discussed earlier, the biggest single impact to our revenue outlook, is retention of existing customers. So, this is a critical focus for the entire organization. Improving our commercial team's focus on customer lifecycle management while enhancing our relationship with additional distribution partners is allowing us to be more responsive and has led to improved business customer retention. And as you can see, video customer additions remain very strong. We enjoyed a great relationship with our partner DISH and our bundled offer continues to resonate with customers. We are seeing substantial improvements in our key customer service metrics. For example, our sales close rate for data product is up about 30% from Q4 and up 45% from Q1, last year. In Q1, we have improved our new customer acquisition processes and has resulted in enhanced customer satisfaction and faster sale to install. Let me close by mentioning, our new master idea that was introduced last week in all of our advertising and marketing. Frank the American Buffalo, Frank is a straight talking spokesperson who will personalize our messaging in our markets. Simplified pricing, no end fees, at-home service, and 100% U.S. based workforce. Frank is off to a great start. I will now hand the call over to John Jureller.

Thank you, Dan. Let me review the first quarter's financial results. Overall, Frontier had earnings per share of $0.05 in the first quarter of 2013 as compared to $0.02 in the fourth quarter of 2012 and $0.03 in the first quarter of 2012. Slide 12 shows our revenue composition. Total revenues for the quarter were 1,205.4 million, a decline of $27 million, or 2.2%, sequentially, and a decline of 4.9% from the first quarter 2012. Customer, data and internet services revenue increased $1.3 million versus the fourth quarter of 2012 and increased $11 million as compared to the first quarter of 2012. Offsetting this data revenue improvement was the decline voice revenue. Local and long distance services revenue declined $16.6 million or 3.1% as compared to the fourth quarter of 2012. Regulatory revenue for the quarter was $142 million or a decrease of 2.6% sequentially and a decrease of 9% as compared to the first quarter of 2012. The decline in the quarter is primarily due to the impact of a decline in the USF rate and a decline in minutes of use affecting switched access revenues. Total residential revenue was $514.8 million with an improvement in the rate of decline of approximately 50 basis points. In April 2013, we completed the disposition of our Mohave cellular partnership interest. The Mohave partnership contributed approximately $8 million of revenues in the first quarter of 2013 as compared to $11 million in the fourth quarter of 2012. Pro forma for a disposition of the Mohave partnership interest, the residential revenue decline in the first quarter was less than 1% at 0.79% as compared to the fourth quarter of 2012. We believe this is indicative of the progress that Frontier is making in stabilizing its core residential revenue stream. As discussed on our last call, we anticipate a lower business revenue for 2013 in part due to the planned decline in wireless backhaul revenue. This decline is reflected in our Q1 results. The business revenue results also reflect modest declines in business voice, as customers migrate voice. Slide 13 provides an analysis of our revenue by customer. In residential, average revenue per customer or ARPC increased 0.5% over the fourth quarter of 2012 and an increase of 1.7% over the first quarter of 2012. This was driven by an increasing percentage of our residential customers who have broadband as part of their product mix. Business ARPC was 4% higher as compared to the first quarter of 2012, but approximately 1.2% lower than the fourth quarter of 2012. The decrease versus the fourth quarter was primarily due to some favorable one-time adjustments in wholesale carrier billings in the fourth quarter. After the Q4 one-time adjustments, business ARPC was essentially flat on a quarterly sequential basis. The year-over-year increase was driven by better sales of more advanced products like Ethernet and also reflects a shift in the revenue mix as the vast majority of our customer losses continue to be small business accounts that generate much smaller monthly revenue. Turning to cash operating expenses. On slide 14, you can see that cash expenses decreased by $15 million from the fourth quarter of 2012 and on an estimated annualized basis was $60 million so far As we discussed in our fourth quarter earnings call, we are executing plans to reduce our total cash expenses for 2013 by a net $100 million across wage and non-wage areas. We are on track and as the quarters progress, we believe you will see the impact of our additional cost management actions. Our procurement function is focusing on both direct and indirect expense improvements on an enterprisewide basis. We are beginning additional process improvement initiatives that will further align what we do, how we do it and the customer facing revenue activities to drive operating margins. Frontier's focus on operating efficiency and expense management resulted in an adjusted EBITDA margin of 46.6% for the first quarter of 2013, the same as in the fourth quarter of 2012 even with the sequential revenue decline. We spent $189 million in capital expenditures during the first quarter of 2013, a decrease of $20 million or approximately 9.4% as compared to the first quarter of 2012. We anticipate higher capital expenditures in the first half of this calendar year because of commitments carried forward from year-end. We continue to spend to upgrade network speed and capacity where we can drive the greatest revenue impact and to fund wireless backhaul projects We did spend some cash money in the first quarter to fund network expansion and anticipate an increased level of cap expenditures in 2013 from funds previously received to reach an estimated 55,000 households during this year. Frontier's free cash flow is shown on slide 15, and remains healthy. On a trailing four-quarter basis, our cash flow from operations less capital expenditures was $762 million. Our dividend payout ratio in the first quarter was 48%. On slide 16, we show the decline in our leverage ratio and our liquidity. Our leverage target remains 2.5 times, and Frontier's liquidity remains strong. We ended the quarter with approximately $1.7 billion in cash and credit availability. During the first quarter, we repaid $503 million of maturing debt from cash on hand. On slide 17, we show our long-term debt maturity profile updated for the impact of a $750 million debt issuance in April and related debt repurchases and tenders totaling $906.6 million in principle. We funded the debt purchases from cash on hand and the net proceeds from the debt offering. You will note on the debt maturity schedule that the new debt issued in April matures in 11 years in 2024. This long-term debt maturity fits quite well into our overall maturity profile. As a result of these recent debt transactions, we significantly reduced the principle amounts due in 2015 and 2017, and we currently believe that our free cash flow generation after paying our dividend annual capital expenditures and operating expenses will care for our annual debt maturities through 2017 to 2018 without any refinancing required. Additionally and importantly, you will note that Frontier renegotiated its revolving credit facility with the existing bank group. The effect is that the commitments under the prior revolver that terminated in January 2014 have been extended to November 2016. Frontier was able to improve its growing margin and commitments fees under this new facility. Our 2013 guidance remains unchanged and it is outlined in slide 18. Our free cash flow guidance for 2013 is $825 million to $925 million. Our 2013 capital expenditure guidance remains $625 million to $675 million. Our 2013 cash tax guidance is $125 million to $150 million. In summary, frontier's solid operating results, investments and expense management will enable us to improve our revenue declines in future quarters and to grow market share. Our cash flow and balance sheet provide a solid financial platform for servicing our dividend payments and our debt. With that, let me pass the call back to the operator and open up the call to questions.

Thank you very much. (Operator Instructions). We'll take our first question from Batya Levi. Batya Levi - UBS Investment Bank: Great. Thanks. A question on the strong momentum you saw in operating metrics. And, you mentioned that you expect this to continue into the second quarter, which is typically seasonally a weak quarter. Can you provide a little bit more color on what you mean by the momentum continuing? Can we expect a similar rate of improvement into the second quarter? And a follow-up question on tying the strong success in operating metrics, but not really being reflected in the revenue trends. Can you provider a little bit more color if you had some maybe pricing promotions during the quarter, and what will drive the rate of declines improving through the second quarter? Thanks.

Hi, Batya. It's Maggie. On the operating metrics, you are absolutely right. First quarter is a very strong quarter always and we do go more seasonal in the second quarter. But, what we've seen in the month of April is, we are holding up on putting more broadband customers on and also managing to have good retention metrics in the month of April as well, now one month doesn't make a trend for the quarter. But we are encouraged by the momentum continuing on both the broadband net sales metrics as well as customer retention. We haven't seen any major follow-up of that compared to the momentum we built over the quarter. So we do know that it is more of a seasonal quarter. We do know we take less calls during that period of time, but we have also, as Dan mentioned, seen our close rates go up in our channels. So, we think because we haven’t changed our offers and our reps, both in our call centers and contact centers as well as our aggregator partners and our online ordering capability, everyone's getting comfortable selling what we have got as we transitioned off of the Apple promotion to the new offers, and that has resonated well and has continued at least through April . On the operating metrics translating to revenue, when we did our first quarter call, we were starting to see some build in the momentum for broadband net. But we really hit the stride late February into March. So, we do think that the translation of those additional ads on to service and billing is going to pickup in the second quarter versus being in the first quarter. So, we just think it’s more of a timing issue that will start to see some lift based upon the positive results that we had in the first quarter.

We will take our next question from Mike McCormack with Nomura Securities. Mike McCormack - Nomura Securities: Maggie, , if you could give us a little more color on decision to stop the Apple Gift Card and move to the other promotional bundled offer, maybe some more detail around what those promotions might look like versus the competition? Then secondly, maybe just to discuss on the business side, how much exposure do you have to the migration from legacy voice to – legacy voice on legacy data to IP Ethernet services would be great. Thanks.

Mike, this is Dan McCarthy. So first off, we made the switch in mid-February. The Apple Gift Card promo, although attractive to a certain segment, I would say, I would categorize this as people that were familiar with the Apple product family as well as their ecosystem. So when we switched to the new marketing platform, which is a very simple, easy to sell offer, it resonated not only in our contact centers but also in all of our alternate channels. So, as Maggie pointed out, we started to build momentum at the back-end of the quarter and what we saw ran out the gate as we shifted was better customer response rates, improved sales conversion efficiency, improvements immediately from the alternate channels, and really the success in strong win backs from competition. That’s something that we hadn’t seen with many -- really any other offer that we had tried previously. So that, coupled with moving our contact centers to a state queue basis where we let them get very good at selling in a specific community and aligning marketing, engineering, operations resources allowed us to meet all of the demand increases that came with the offer, maintaining intervals and also low-cost structure. So we are very happy with it. We think it is very competitive. If you look at what our competition is doing today for triple plays, they are averaging $89 to $99 from one year moving to $105 to $149 in year two. On the standalone internet product, our competitors, on the revenue side are doing $29.99 for one year, but it quickly ramps to $49 to $62. So when you look at where we are compared to that we think we are well positioned for bundled customers as well as standalone and I think the evidence is that we are taking market share right now pretty heavily. So we saw, as Maggie pointed out, good momentum as we came out of the first quarter through April, and we are continuing to see that momentum there.

And, Mike, if I can just elaborate, the major offer that we have in the marketplace is a $19.99 broadband offer with a double or triple play. So the customers would take a digital phone package that could be – it is local and long distance, either unlimited for state or unlimited for national along with broadband, and then they can add dish as well. So it’s a no contract, so there is no termination fees, it is all in. So there are no surcharges. There is no modem fees on top of that. So, it’s a very clean offer. We found that it really does resonate in the market place, and we have been taking share across the board. We also have a Simply Broadband offer in the marketplace as well for the customers that want broadband only. We did see, in the first quarter, which was encouraging a number of our one customers upgrading to packages as well. So, we are seeing both new customers coming on board and selling incremental products to existing customers. On the IP services, we do have a voice-over-IP offer for small and medium businesses that's called Tandem. We've launched it in 14 markets, so it's not nationwide yet, so we have been selling an aggressive price point offer for broadband and voice services together that includes voice-over-IP, so it is a lesser priced product than we have normally in the marketplace with our TDM service, so that choice point has picked up some momentum. We would launch a voice-over-IP residential product towards the back end of this year, so we haven't put a VoIP product in place for resi yet, but plan to do so later this year.

And the only other thing I would add, Mike, is that on the VoIP side, we also offer pretty extensive IP PBX family of products which is very successful with small and mid-sized companies. We have a partnership with Avaya and Mitel on that, and we combined with Adtran and Cisco to provide a full complement of data products and ancillary services, so that we could provide a total solution for anybody who is looking to an IP solution. Mike McCormack - Nomura Securities: Okay. Then just thinking about the impact on pricing margin from that migration, is that something that we should be thinking about going forward as being a significant issue over the next couple of years?

For certain customers, Mike, I think the application especially the large side is really Centrax customers, and their prices that have been negotiated down, so I don't see it as a major impact there. And I think on the IP PBXs , we start to see adding larger data pipes and SIP trunking that is really offsetting a lot of the trunking losses and in some cases it is actually slightly higher MRC for those customers.

Yes, Mike. One of the other things that we are going to – we just put into place at the end of March, that we are going to start to really push especially with our small business customers is 24/7 premium tech support. As they get more and more reliant on the broadband networks in terms of how they run their businesses and with the threats of cybersecurity, we can provide them with a great peace of mind, product set that includes 24/7 tech support, and so far we've seen good take in just getting out of the gates with that product.

And we'll go next to Phil Cusick with JPMorgan. Phil Cusick - JPMorgan: Hi. Thanks. Let's just go back to the Buffalo bundle for a second. So, 19.99 add on to voice or triple play, can you just help me understand what that is versus sort of what have been a normal pricing and so what the sort of net discount is. What the risk of cannibalization is and then how it compares in terms of the three-year price guarantee to what you are giving away an Apple promotion? Thanks.

Phil, this is Dan. So, first off, if you look at the current promotions Maggie laid out is 19.99 for three years for the broadband product and thus for [match] product. If a customer wanted to buy up to the ultra/ultimate, it would be $10 increment on the broadband side and then it's married up with our digital phone unlimited which is roughly $39 price point in most markets and then it can also be bolted into a triple-play. So, for us, the triple paid price point turns out to be somewhere between $75 and $100 based on some DISH promos that we were running, but it is very competitive compared to where we were before in the Apple promo it is probably $10 to $20 lower on the broadband side, but it is a full price on the voice and the video, but I would say that this is exclusively offered to new customers. It's not offered to existing customers. Now we've adjust that and we think that we have seen virtually no cannibalization happen today and we are confident that we can keep that as we move forward.

Phil, if you think about the basic high speed max product is one, three or six meg, depending on the market and the location and we have also been pretty careful to say that as we grow this product set out, Wednesday and we relevant product set out. We targeted win backs for this product set. That's really what we want out of this product set and the only thing customer that qualify for this product would be a customer coming off of a contract. We would honor this for someone who has come off of a contract with Frontier. We also knew that if we got a specific amount of lift that tradeoff of more customers taking the test versus essentially win back only grows to resonate for the company. So we are not seeing any degradation in the revenue. Because this is about lift and market share. Phil Cusick - JPMorgan: Then what percentage of customers take that either the higher speed package for $10 or more month or an ancillary product like security?

So, Phil, I think in the first quarter we had about 15% of the sales were taking the higher speed and we had attach rates for Frontier Secure in the first quarter that was 27%. Phil Cusick - JPMorgan: Okay, and then as you think about the second quarter, it sounds like you are really excited about the broadband momentum. Do you think that broadband adds could actually be higher in 2Q against seasonality or is that just looking for too much?

Well, your lips to gods ears as far as I am concerned. We would love to see that happen but we are hoping to maintain momentum in terms of what we built in the first quarter. We are rational about some seasonality that could influence that but we are cautiously optimistic that we can keep the momentum.

The nice thing we have seen, Phil, is that historically, we have been very reliant upon the inbound call for a call center which was very seasonal, as you pointed out. But going where customers are today, with aggregators and some of our partners, we are actually seeing acceleration of the sales in those channels. It is replacing some of the seasonality that we had seen in the call centers. So it’s a very steady production.

We have not, as I said, we have not seen the fall off in April.

We will go next to Frank Louthan with Raymond James. Frank Louthan - Raymond James: So, following up a little bit on the broadband side, you have got about 25% market share. What do you think it would realistically take to get that up to 40%. I am not sure the cable guy is just going to hand you 20% of their market share. Do you think that’s going to come with pricing and what exactly is the ARPU currently in your broadband customer base. I know historically it has been around $39 but where is it now?

So let me start by saying, Frank, we are pretty confident that with the investments we have made in the network, the improvements we have done on service, our go to market, from a local engagement perspective, we have certain differentiators in addition to, I think, great price points in the marketplace to successfully compete and to bring customers over. We have also done a lot of customer research on not just these new product sets that that we have but also the opportunity that’s in the market for us to grab more share. I think we feel we are in pretty good shape based upon the fact that many customers don’t have that high level of trust with their cable operators today and are willing to try other products and services if it meets their needs. So that’s what we are very focused on, is going after that set. We did see that happen, especially in the first quarter with a broadband net asset we brought on. So we are seeing customers coming over from cable because they like what we have to offer and all the networks have the ability now to handle what we said we wanted to do. So we think that that will continue. We think that we growing from 25% share and grabbing 10% or 15 year over time is something that’s absolutely doable. We have done it in our legacy markets against cable and we are going to doing it in the new markets as well.

Frank, this is John. Let me just answer that question with respect to ARPC and we don’t disclose individual ARPCs. We have residential as a whole. But what we certainly can say is that the ARPC for customers who are broadband customers for the company is substantially more than for non-broadband customers. So that’s why when we talk about key metric across this growing broadband and growing share as we look at the blended impact across all of our single play, double, triple play, quad play packages of why broadband is so important. So we will continue to focus on and we will continue to look at our residential mix and how many of them take broadband and that’s been increasing as well. So we are really encouraged on all those points. Frank Louthan - Raymond James: Is any handicap on how many more homes you think you could pass with the CAF money? What the payout might be and what the opportunity is for that?

Well, you mean if we get a second round? Frank Louthan - Raymond James: Correct. You mentioned we might some releasing order in the near-term. Any thoughts on that?

Yes. We've done some homework on it to take a look at what the opportunity that is, we got a little over $70 million for first time round and we had room. We had headroom to continue to expand out to build to more locations and we are also working with the FCC, because they consider un-served in some of our markets is also underserved, so they are looking at 4 meg down, 1 meg up as un-served, and that definition alone would allow us to upgrade in existing markets where we already are. So, we think there is opportunity and we are hopeful that this order will come out and we'll put our hand up for the money that we can get out of them, so we are keeping our fingers crossed that that will happen sooner rather than later.

And, we'll go next to David Barden with Bank of America.

Hey, guys. This is (Inaudible) for Dave. Appreciate you taking the question. Just going back to promotional offerings real quick, and if broadband adds were improving, we stopped the Apple gift cards. Is the lesson here that the market is really price-led and if that's the case, should we expect promotional offerings to be mostly concentrated around bundles of those two, the incentive based offerings you guys typically do? Then secondly, revenues down by $89 year-over-year, when you back out, the data revenue gains? Can you talk about how much of that is actually coming from the step down in ICC, and should we expect so this to be step down in the third quarter now with the next phase? Thank you.

[Julie], on the question of the Apple incentive, I think that we have provided incentive as you know over the years. we tried everything free TVs to the Apple SIP card that we just ran. I think we experiment or we are determined whether or not it really moved the market? I think in this case, we it was successful, but didn't really move the market expenses and civilian the other question on I think that we have tried as you know over the years. We have tried everything from receiving the two of capital because of the threat I think we are we can we determine whether it really move the market. We are very happy with the clarity and simplicity in the current offer. It not only resonates in our contact centers, but it really has resonated with all of our operating channels, which is really driven quite a bit of production for us? So, I think you are going to see us stay with our current offerings for foreseeable future. I don't think you will see us probably do anything with other incentive in the short-term. Doesn't mean we won't do it. At some point in time, but we'll evaluate it, but I don't think you will see it for the foreseeable future.

I do think that we are in a marketplace now that is very value-driven in terms of products and services and bundles, so we are taking advantage of that. We spend a lot of time putting these (Inaudible) great formulas and we are getting good feedback on the take rate that it is and we've got a lot of network out there that we want to fill. So, this is an opportunity for us to do that and grab share, put these customers on and then sell them in and up-sell them more products and services. With regard to the intercarrier compensation step down, I think there's an opportunity of course to increase end user, what is called the subscriber line charge or flick or in that case for this case ICC reform they code and ARPC. And, what we do is, look at each market and the competitive environment of those markets to make a determination as to how much replacement revenue we can put through to an end user increase. In some cases, it is 100% replacement and in some cases it's not, and we make those decisions dynamically. So, we'll take a look in the third quarter when we get a step down again, and we will take a look to make those determinations as to what's the right thing for the marketplace. When [we] step down this year, it was pretty much covered with the New York. We were able to pretty much cover dollar-for-dollar, but you are right. As we go forward, there could be some choice point that we'll make from a competitive perspective.

And, when you look at the next step down that will happen in July, we are just seeing $13 million to $13.5 million of impact, but being able to offset 12 million of the $13 million to $13.5 million, which is very similar to last year as made point will do surgical raids on different feeds or the residential as well as the multi line or selects or ARPC.

Do you guys actually really notice a pickup in churn, where you implement the ARPC?

We really haven't, Julie.

Okay.

It’s the one thing we monitor pretty carefully and we have not seen and uptick.

We will go next to Kevin Smithen with Macquarie. Kevin Smithen - Macquarie: Yes, excluding storm cost, it looks like you took down the cash OpEx by about $8 million sequentially in Q1. You mentioned that you expect addition wage and non-wage actions during 2013. Could you just remind us what you did in Q4 what's still the comp? Do you think this will be enough, given where revenue came out in Q1 to drive sequentially EBITDA growth later this year?

Yes, Kevin. This is John. We took out close to 600 people in Q4 more towards the latter part of the quarter. We took out additional headcount contractors, et cetera during the first quarter of this year. We have line of sight and are executing on some further organizational change in reductions that we will take in Q2. We focus on effectively using our contractors and so really consolidating that. We consolidated real estate locations where we have some significant opportunity, we think on the procurement side, particularly as we get more efficient in purchasing on an enterprisewide basis. So we believe those opportunities are there as well. Then just in becoming more effective and how to win backs process and our provisioning process as well with our field tracks, our engineers for all of those things, we think we have some supportable plans. Some that we are already executing against. Others that we have planned for the remainder of this quarter and in to the next.

One of the other things that I will mention, Kevin, is we are working hard to revamp a number of the customer facing processes we have to take steps out, and to simplify how we are doing business which will increase productivity and effectiveness in the marketplace. So in addition to basic reductions that John talked about, both wage and non-wage, we are also looking at streamlining which we think will allow existing staff and to basically do more without having a large overhead as part of that process. So I think I mentioned this. We have just improved our online website. So we have now can to do full ordering. Do from marketing, sales to full order completion and scheduling an appointment online which we also know will start to improve the efficiencies of our total cost per order. Kevin Smithen - Macquarie: Well, just as a follow-up, should we think about the priority being on broadband additions now. Would you consider other Apple Card type promotions at the expense of EBITDA or should we think about EBITDA being as an important part of the mix balancing that with broadband and revenue growth?

I think that EBITDA is absolutely an important part of the mix in balancing that with broadband growth with revenue. We are not going to do anything at the expense of our cash flow on the bottom line unless we see the right kind of trade-off for that. So we are very mindful that accelerating broadband is a priority because we know that’s one of the basic tenets of revenue growth but also customer retention is a major priority. Because it is the number one driver of profitability. So you will see us do the combinations to make sure that we can drive to continue strong EBITDA margins.

We will go next to Jonathan Epstein with Deutsche Bank. Jonathan Epstein - Deutsche Bank Securities: I have a couple questions. First on the go to market strategy on the commercial side. You mentioned the win back success you are having but can you provide an update specifically on the hunter strategy? You mentioned last quarter to win new share and how that program might affect customer metrics through the year? Second, on the regulatory revenue which is obviously a small slice to total, presumably the margins on those are well above average but can you give us a sense of how high they are? Thanks.

Jonathan, this is Dan. And the commercial go to market, we revamped our commercial small bundles. So that is probably one of the biggest things that we did right out of the gate that will help in a big way. So we think we are very competitive whether in the small space, whether a customer wants broadband alone or they want a double-play where they use voice. As we have taken that offer, we've put it in the hands of not only the hunters, but the entire commercial sales force. So, we've really made everybody's job hunting for new logo for the company, so the hunters are doing well. They are gaining traction, but the growth is really coming from small business executives. It's coming from take-the-lead, coming from our technicians who are out there meeting with our customers. So, there's no one point of life on that. I think that the interesting thing is as we put the decision making in the hands of the regional president, they are actually aligning the resources much more efficiently to take advantage of different opportunities, so if we are turning up an Ethernet system in a certain area, they are moving hunters and small business account executives in there, going door-to-door looking for opportunities. The net result is, that the magnitude of our commercial pipeline as we exited the quarter is probably at the highest level that we've seen since we completed the Verizon transaction and the conversion rate from that pipeline continues to improve every single month, and probably the nicest addition as we've gone through it is really as we have added ADTRAN and Cisco to our CPE partnership, it's given all of our reps a total package of equipment that can solve everything from firewall to phone to IP PBX to routers and everything in between. And, all four of those partners are very committed and they have really helped us drive productivity, so we are doing really well on total solution selling which is really quite a differentiation for us from almost everybody else in the market, because they are not really in that business, so the combination of those three things really gives me a lot of confidence that we are starting to turn the corner on the commercial and we are starting to drive that right now.

Yeah. I would just mention, Jonathan, on the regulatory revenue, as a company over the years, we made a conscious decision probably eight, nine years ago that we were going to focus on customer revenues not regulatory revenues, because we knew over time regulatory revenues were going to continue to go down and that [process] has come true. So, we also know its highly profitable revenue, but we also know that the sustainable revenue for our business is all about customer which is why our regulatory revenue is a lot lower today. It's sub-10%, and I know when I started here almost nine years ago, it was up by 60%. So, we have really driven that number down and we are going to continue to do that. I think as you have seen, we always keep very high margins, so what we do is we translate into efficiencies as well as revenue growth to make up for that. We'll take one more question.

And our follow-up question comes from Scott Goldman with Goldman Sachs. Scott Goldman - Goldman Sachs.: I guess just a follow-up on the commercial side first. Maggie going back to the very first question, talking about the revenue trajectory from here and talking about hitting this stride in sort of late February into March which seemed to be very much a residential consumer focus there. But given Dan's comments on the commercial side, can you help frame for us what you think the commercial opportunity or commercial trajectory looks like from here, still down year-over-year, sequentially, in the first quarter, but Dan talked about the hunters doing well in gaining traction there, but you also mentioned the slower decision making, presumably on the larger enterprise. So, seeing if you're seeing any shift there and how you think that translates into improvements on the commercial revenue side going forward? Then I have a follow-up on the residential side.

So, Scott, it's Dan. I would say that what I'm seeing is that the activity level on a sales force is increasing quite a bit, so we are actually out there, knocking on more doors. So, I think the opportunity to take share in the marketplace is still very strong. There's an opportunity to take not only the traditional MRC sales, but also to provide that total bundled solution which is not only a nice NRC, but also allows them to provide maintenance services which helps the MRC over the long-term. I'm seeing that in almost every region, pick up. You're absolutely under the long-term. I'm seeing that in almost every region pick up. You're absolutely right. There are some larger customers, and also some municipalities that are entertaining much larger CP investments, for instance, changing out an entire 911 system. It's just taking them a little bit longer to make those decisions, but once we do, I think that we'll wind up in a place where we'll not only win that business, but it will also be a partnership for us for an extended period of time because we will be supporting that customer's decision for many years. So it’s a little patience on the larger side but in the mean time, we have ramped up the activity level both with our direct sales forces or of our indirect partners. I think, at this point, the pipeline, as I said, is at the best point in stance in many years.

We do think that that's a combination of decentralizing our sales force to the regions. So now general managers and the region presidents are allocating those resources dynamically within the markets where they serve. They works side by side with our technicians. It's really made a difference in the depth and breadth of coverage that we have been able to start to build. Scott Goldman - Goldman Sachs: Great, and then just on the broadband side. Obviously a lot of questions on that throughout the call. But wondering if you can just give us a little bit of a breakdown in terms of where the net adds, if you are able to breakdown the net adds for us in terms of Simply Broadband versus satellite versus how many came in through the Apple promo versus what came in with the new bundled pricing, post the promotion? What churn looked like in the legacy DSL markets outside of where you have been building?

Scott, we traditionally don't disclose the entire mix. I would say that if you looked at all the categories, so looking at Simply, also bundled products, we saw very strong results. That's why I threw it. I think that the current offer is probably yielding stronger results, as Maggie pointed out, than the Apple offer. I would say that churn in general has been stable if not improving as we have solved a lot of network issues that we have had in the past and have upgraded speed opportunistically.

Yes, and I think that we get a lot of calls in on the offer. We are able to upsell to double and triple plays, even when we get calls in for Simply Broadband. So we have not seen the change in mix to have Simply Broadband overwhelm the ad. We are really seeing very nice growth on double and triple plays. So we feel good about that. I think we are also showing, with the net growth of customers, that we are doing a very good job of keeping customers, not just with these current offers, but with the network enhancements we have done and the initiatives and customer service that's really made a huge difference. So I think overall the momentum has been very strong.

Just the last thing I would say, Scott, is when you look at the mix we have certainly introduced the satellite delivered broadband at the end of last year. It was a contributor but it really wasn’t a major contributor for this quarter. The vast majority of the sales were on our terrestrial broadband network which is where we wanted to be.

But I will tell you on the satellite broadband side it's a very high ARPU for us because it's typically a triple play with those customers. So we have seen good results and we are actually on forecast for what we had expected for the satellite broadband segment. That has gotten good traction especially in these areas where we haven't built and we still have hundreds of thousands of customers that we can offer that product set too. Scott Goldman - Goldman Sachs: Great, that’s helpful detail. I appreciate it.

Well, thank you very much everyone for joining us for the first quarter 2013 earnings call. We look forward to updating you again at the end of the second quarter. Take care. Thanks.

Ladies and gentlemen, that does conclude today's conference. We thank you for your participation.