SureWest Communications Reports First Quarter 2008 Results

ROSEVILLE, CALIFORNIA — Leading independent communications holding company SureWest Communications (NASDAQ: SURW) today announced operating results for the quarter ended March 31, 2008.

Residential Broadband

Broadband residential revenues increased 66% in the first quarter compared to the prior year quarter, with 12% attributable to the Sacramento region. Subscriber counts grew 77% from the prior year (8% in Sacramento), with a 119% growth in RGUs (8% in Sacramento). Consistent with the strategy of growing broadband data, voice and video organically and through acquisition, Broadband RGUs increased on a year-over-year basis, as detailed in the chart below.

                                                          Y-O-Y comparison
                                                1Q08      1Q07        Change
    Broadband Residential RGUs                 200,800   91,700        119%
     Data RGUs                                  91,800   52,800         74%
     Video RGUs                                 55,200   19,700        180%
     Voice RGUs                                 53,800   19,200        180%

In the triple-play marketable homes footprint, which consists of fiber-to-the-home (FTTH) in Sacramento and hybrid fiber coaxial (HFC) in Kansas City, RGUs per subscriber increased to 2.59 from 2.41 in the first quarter 2007 and average revenue per user (ARPU) increased from $108 to $110.

The company expects to see a greater impact in residential Broadband RGUs and ARPU from SureWest Digital Phone, which launched in the Sacramento region in March 2008. SureWest Digital Phone is a Broadband voice over IP (VoIP) product that presents the company with a more competitive triple-play offering featuring increased options and multiple packages.

“SureWest is engaged in initiatives designed to increase our competitive advantage while achieving growth in RGUs and ARPU,” Oldham said. “The launch of SureWest Digital Phone has already surpassed our expectations and due to the product’s superior features and multiple price points, we have seen elevated take rates from our customers and are successfully winning back voice subscribers in Sacramento. Additionally, the recent launch of DVR in Sacramento and an increase from 36 to 50 HD channels during the quarter represent major contributors in increasing video sales and ARPU. We will continue to make our high-end video and data packages more attractive for customers through enhanced marketing and sales campaigns.”

• Data: Data RGUs increased 74% in the first quarter compared to the prior year, with 66% attributable to the Kansas City operations. The 8% growth in Sacramento reflects strong demand for SureWest’s high-speed data service, which delivers symmetrical Internet speeds of up to 10, 20 and 50 megabits per second. The reliability and speed of the network enhances other services like SureWest Digital Phone, where customers manage phone services through the online SureWest Portal. Data ARPU increased in Sacramento by $1.08, but decreased overall from $42 in the first quarter 2007 to $39 due to the integration of the Kansas City market. The company continues to enhance data service in both regions with new offerings such as the recently announced Wi-Fi Hotspots and the national online remote home monitoring product. As the company continues to upgrade copper customers in Sacramento to the fiber platform, more subscribers are taking enhanced high-end data packages.
   
• Video: Video RGUs increased 180% in the first quarter compared to the prior year, with 172% attributable to the Kansas City operations. The 8% growth in Sacramento reflects the continued high demand for the company’s recently launched HD DVR, as well as increased demand for other premium features including On Demand and HDTV. Video ARPU increased overall from $61 in the first quarter 2007 to $64, including a $5.61 ARPU increase in Sacramento, as customers responded positively to enhanced features and content, and targeted promotions for high-end packages featuring premium content. During the quarter, SureWest enhanced its DVR feature package and expects to add over 15 additional high-quality HD channels in each market during the second quarter.
   
• Voice: Voice RGUs increased 180% in the first quarter from the prior year, with 174% attributable to the Kansas City operations. The 6% growth in Sacramento reflects the strength of the triple-play bundle. Voice ARPU decreased from $35 in the first quarter 2007 to $33 due to the introduction of unlimited voice packages launched to increase triple-play take rates. SureWest Digital Phone VoIP service adds to the strength of the voice package and an anticipated increase in triple-play RGUs. It also presents a more competitive broadband triple-play option with price flexibility and the inclusion of such features as Find Me/Follow Me, Sequential Ringing and Selective Call Screening, in addition to traditional telephone service options.

Residential triple-play marketable homes increased 103% to 211,000 at the end of the first quarter compared to 104,100 at the end of the first quarter of 2007. This increase was comprised of 91,100 new marketable homes from the Kansas City operations, 7,700 new fiber homes in Sacramento and 8,100 homes upgraded from copper to fiber, where the expectation is to achieve greater than 35% penetration.

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