8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549	OMB APPROVAL
	OMB Number:    3235-0060 Expires:      March 31, 2006 Estimated average burden hours per response.....28.00

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported ) February 21, 2006

FairPoint Communications, Inc.

(Exact name of registrant as specified in its charter)

Delaware	333-56365	13-3725229
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

521 East Morehead Street, Suite 250, Charlotte, North Carolina	28202
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (704) 344-8150

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

|_|  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

|_|  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

|_|  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

|_|  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition

On February 21, 2006 FairPoint Communications, Inc. (the “Company”) issued a press release reporting the financial results for its fourth quarter ended December 31, 2005 (the “Earnings Announcement”). A copy of the Earnings Announcement is attached to this Current Report as Exhibit 99.1 and is incorporated herein solely for purposes of this Item 2.02 disclosure.

On February 21, 2006, the Company held a conference call to discuss the financial results of the Company for its fourth quarter ended December 31, 2005. A copy of the transcript (the “Transcript”) of the call is attached to this Current Report as Exhibit 99.2 and is incorporated herein solely for purposes of this Item 2.02 disclosure. The Transcript has been selectively edited to facilitate the understanding of the information communicated during the conference call.

Item  7.01 Regulation FD Disclosure.

A copy of the Earnings Announcement is being furnished by being attached hereto as Exhibit 99.1.

A copy of the Transcript is being furnished by being attached hereto as Exhibit 99.2.

Item 9.01		Financial Statements and Exhibits.
	(c) Exhibits

Exhibit Number	Description
99.1 99.2	Earnings Announcement Transcript

The information in this Current Report, including the exhibits attached hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of such section. The information in this Current Report, including the exhibits, shall not be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any incorporation by reference language in any such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

FAIRPOINT COMMUNICATIONS, INC.

By: /s/ John P. Crowley                            

Name:		John P. Crowley
Title:		Executive Vice President and
	Chief Financial Officer

Date: February 23, 2006

EX-99

Exhibit 99.1

FOR IMMEDIATE RELEASE

FAIRPOINT REPORTS RESULTS FOR THE FOURTH QUARTER OF 2005;

INCREASES CUMULATIVE CASH AVAILABLE FOR DIVIDENDS BY 29%

CHARLOTTE, N.C. (February 21, 2006) – FairPoint Communications, Inc. (NYSE:FRP) (“FairPoint” or the “Company”) today announced its financial results for the fourth quarter ended December 31, 2005. The Company announced that it generated $18.9 million of Cash Available for Dividends (as defined herein) during the fourth quarter compared to dividends paid during the quarter of $13.8 million and it increased its Cumulative Cash Available for Dividends (as defined herein) to $23.0 million at December 31, 2005, up from $17.8 million at September 30, 2005, an increase of 29%. Additional highlights for the fourth quarter included:

• Revenues for the fourth quarter of 2005 increased $6.1 million or 9.6% over the fourth quarter of 2004. Excluding the impact of operations acquired in 2005, revenues increased $3.5 million or 5.5% compared to the fourth quarter of 2004.

• Adjusted EBITDA (as defined herein) for the fourth quarter of 2005 was $37.6 million versus $35.6 million for the same period last year.

• Earnings per share on a fully diluted basis for the fourth quarter of 2005 were $0.23 compared to a loss per share on a fully diluted basis of ($1.14) in the fourth quarter of 2004.

• High speed data (“HSD”) penetration increased to 18.6% of voice access lines as of December 31, 2005, compared to 14.5% as of December 31, 2004.

• At December 31, 2005, access line equivalents (voice access lines and HSD subscribers, which include DSL, cable modem and wireless broadband) totaled 288,899 compared to 274,934 at December 31, 2004. Excluding acquired lines, access line equivalents increased 1.2%, primarily due to an increase in HSD subscribers.

“FairPoint improved its dividend payout ratio in the fourth quarter and carried forward a strong Cumulative Cash Available for Dividend balance.” said Gene Johnson, Chairman and CEO of FairPoint. “The Board of Directors has indicated its intention to continue paying the quarterly dividend at the current level for 2006.  We believe our results clearly indicate that we entered 2006 with strong financial and operational foundations to support continued growth.  I want to thank the entire FairPoint team for their continued ‘customer-first’ focus.  Their hard work will continue to help our Company grow and provide opportunities for increased shareholder value.”

Results for the three month period ended December 31, 2005

Consolidated revenues for the three months ended December 31, 2005 were $69.9 million, an increase of $6.1 million or 9.6% compared to the three months ended December 31, 2004. Excluding the impact of operations acquired in 2005, revenues increased $3.5 million or 5.5% compared to the fourth quarter of the prior year. This increase of $3.5 million, excluding acquisitions, is primarily the result of an increase in interstate revenue of $1.7 million, an increase in long distance revenue of $1.1 million, an increase in data and Internet services revenue of $0.7 million and an increase in local service revenue of $0.6 million. These increases were partially offset by a decrease in intrastate access revenue of $0.9 million.

The increase in interstate revenue is due to the recognition of $2.4 million of additional revenue from NECA in the fourth quarter of 2005 related to the settlement of over-earnings reserves for the 2003-2004 regulatory earnings period. Long distance revenue increased primarily as a result of increases in the number of subscribers and minutes of use in addition to improved product and bundles pricing. Data and Internet services revenue increased primarily as the number of HSD subscribers, excluding acquisitions, increased by more than 9,300 from December 31, 2004. Local service revenue increased due to an increase in local service rates in Maine and the continued rollout of new bundled packages. Intrastate access revenue continued to decline due to lower minutes of use combined with intrastate rate reductions implemented in Maine.

Operating expenses (excluding depreciation and amortization and stock-based compensation) decreased $1.4 million or 3.7% compared to the third quarter of 2005 but increased $4.1 million or 12.7% compared to the fourth quarter of 2004. In comparison to the third quarter of 2005, the primary driver of the decrease was a reduction in bad debt expense of $0.5 million and a reduction in consulting expenses of $0.6 million. In comparison to the fourth quarter of last year, the $4.1 million increase includes approximately $1.4 million of expenses related to the operations of the companies acquired during 2005. In addition, this increase was driven by an increase in billing expenses of $0.8 million, an increase in legal expenses of $0.7 million, an increase in salaries and benefits of $0.5 million and an increase in long distance and HSD cost of goods sold of $0.5 million. The increase in billing expense is partially a result of conversion expenses and an increase in costs related to on-going billing processes. Depreciation and amortization expense decreased $0.1 million and stock based compensation increased by $0.8 million for the three months ended December 31, 2005 compared to the same period in 2004.

Income from operations increased $1.3 million to $19.4 million for the three months ended December 31, 2005 compared to $18.1 million for the three months ended December 31, 2004. This increase was principally driven by the increases in revenues noted above.

Earnings per share on a fully diluted basis were $0.23 for the three months ended December 31, 2005, compared to a loss per share on a fully diluted basis of ($1.14) for the same period in 2004. This improvement primarily results from the Company’s recapitalization completed on February 8, 2005 associated with the Company’s initial public offering, which substantially de-leveraged the Company and provided a decrease in interest expense and consequently an improvement in earnings.

Adjusted EBITDA for the three months ended December 31, 2005 was $37.6 million, compared to Adjusted EBITDA of $35.6 million for the same period in the prior year.

Cash Available for Dividends of $18.9 million was generated during the three months ended December 31, 2005, up from $12.6 million generated in the three months ended September 30, 2005.

Page 2 of 8

Results for the twelve month period ended December 31, 2005

Consolidated revenues for the twelve months ended December 31, 2005 were $262.8 million, an increase of $10.2 million or 4.0% compared to the twelve months ended December 31, 2004. Excluding the impact of acquisitions, revenues for the twelve months ended December 31, 2005 grew $4.5 million or 1.8% compared to the twelve months ended December 31, 2004. Revenue growth was the result of increases in data and Internet services revenue and long distance revenue as well as positive non-recurring interstate revenue settlement adjustments related to prior years, which offset expected decreases in Universal Service Fund (“USF”) revenue and intrastate access revenue.

Operating expenses (excluding depreciation and amortization and stock-based compensation) increased $12.3 million or 9.6% for the twelve months ended December 31, 2005 compared to 2004. The increase in operating expenses is due primarily to an increase in consulting fees of $1.8 million primarily related to preparation for compliance with Section 404 of the Sarbanes-Oxley Act, an increase in expenses related to HSD and long distance services of $2.3 million principally due to an increase in HSD and long distance subscribers, a $3.0 million increase in expenses related to the Berkshire Telephone Corporation (“Berkshire”) and Bentleyville Communications Corporation (“Bentleyville”) acquisitions, an increase in bad debt expense of $1.4 million and an increase in billing expenses of $2.0 million. The increases in bad debt expense and billing expenses were primarily associated with the Company’s CSG Systems, Inc. (“CSG”) billing conversion project. Depreciation and amortization expense increased $2.1 million, of which $1.0 million related to the acquired companies, and stock based compensation increased $2.3 million for the twelve months ended December 31, 2005 compared to the same period in 2004. 

Income from operations decreased $6.5 million to $67.0 million for the twelve months ended December 31, 2005, driven principally by the increase in expenses noted above and the increased percentage of lower margin unregulated revenues in the total business mix due to HSD and long distance revenue growth. 

Earnings per share on a fully diluted basis were $0.91 for the twelve months ended December 31, 2005, compared to a loss per share on a fully diluted basis of ($2.50) for the same period in 2004. This improvement is primarily the result of the Company’s recapitalization completed on February 8, 2005 associated with the Company’s initial public offering, which substantially de-leveraged the Company and provided a decrease in interest expense and consequently an improvement in earnings. Also impacting financial results in 2005 was the repurchase of the Company’s series A preferred stock and high yield debt as part of the recapitalization, which resulted in significant one-time charges. The income tax benefit of $83.1 million is primarily the result of the recognition of deferred tax benefits of $66.0 million from the reversal of the deferred tax valuation allowance that resulted from the Company’s expectation of generating future taxable income following the recapitalization.

Adjusted EBITDA for the twelve months ended December 31, 2005 was $134.8 million, excluding one-time transaction expenses of approximately $87.7 million incurred in connection with the Company’s recapitalization, compared to Adjusted EBITDA of $141.2 million for the same period in the prior year. Distributions from investments decreased $4.2 million in the twelve months ended December 31, 2005 compared to the twelve months ended December 31, 2004, which contributed to the decrease in Adjusted EBITDA. Distributions for the twelve months ended December 31, 2004 included a one-time distribution of $2.5 million related to the sale of a cellular partnership interest and an extra $1.8 million distribution from the Company’s Orange County Poughkeepsie Limited Partnership in 2004.

Cumulative Cash Available for Dividends was $23.0 million as of December 31, 2005, up from $17.8 million at September 30, 2005.

Page 3 of 8

Operational highlights

• Total HSD subscribers increased by 2,263 in the fourth quarter of 2005 to 45,283 at December 31, 2005. Penetration increased to 18.6% of voice access lines compared to 14.5% at the end of 2004.

• DSL average revenue per subscriber (“ARPU”) was $40.60 for the fourth quarter of 2005. The Company’s DSL ARPU has remained fairly consistent throughout 2005.

• At the end of the fourth quarter of 2005, DSL penetration was 16.8% of voice access lines, compared to 13.3% at the end of the fourth quarter of last year.

• In November 2005, the Company announced that it had reached a settlement with its current billing service provider (CSG) pursuant to which the Company will receive total compensation of $5.1 million from CSG. The settlement called for CSG to pay $4.0 million in cash and the Company no longer has to pay a $1.1 million liability owed to CSG.

• As a result of the settlement with CSG, the Company also announced that it had selected a new billing service provider. The Company will convert all of its companies to the Customer Master platform offered by the Mid America Computer Corporation. The conversion of all companies currently on the CSG platform, approximately 17 of our 28 operating companies, is expected to be complete by the middle of 2006 with the remainder of the companies expected to be converted by early 2007 at a total cost estimated to be approximately $5.5 million.

• Interstate long distance penetration as of December 31, 2005 increased to 44.5% of voice access lines compared to 38.3% at the end of the fourth quarter of 2004 and 42.3% at September 30, 2005, primarily as a result of the Company’s continuing efforts to sell a voice bundled offering consisting of local voice, long distance and enhanced calling services.

• Total access line equivalents were 288,899 as of December 31, 2005, representing a decrease of 2,173 or 0.7% from September 30, 2005. Total access line equivalents as of December 31, 2005 increased 5.1% compared to December 31, 2004 and increased 1.2% excluding lines acquired in 2005. Historically, in the fourth quarter access line losses are greater as the Company loses certain access lines in its northern territories for seasonal reasons.

• Voice access lines, excluding acquired lines, decreased during the fourth quarter of 2005 by 1.9% to 233,990 compared to September 30, 2005 and decreased 2.5% for the full year. This decline was partially the result of an increase in non-pay disconnects in the fourth quarter of 2005. The Company disconnected approximately 2,000 voice access lines, net of reconnects, as a result of non-pay in the fourth quarter. In addition, historically, the Company experiences access line losses in the fourth quarter in its northern territories for seasonal reasons.

Page 4 of 8

Access Line Equivalents

	12/31/2005	9/30/2005	12/31/2004	% change 12/31/04 to 12/31/05
Access lines, excluding acquired lines:
Voice access lines(1)	233,990	238,426	240,110	(2.5%)
HSD subscribers	44,128	41,865	34,824	26.7%
Subtotal: Access line equivalents	278,118	280,291	274,934	1.2%
Access lines acquired in last twelve months(2):
Voice access lines	9,626	9,626	-	-
HSD subscribers	1,155	1,155	-	-
Subtotal: Access line equivalents	10,781	10,781	-	-
Total access line equivalents	288,899	291,072	274,934	5.1%

(1) As previously disclosed, a delay in non-pay disconnects earlier in the year resulted in a higher number of non-pay disconnects in the third and fourth quarters as the Company returned to a more normal collections process. In the fourth quarter, the Company recorded non-pay disconnects, net of reconnects, of approximately 2,000 voice access lines.

(2) Represents voice access lines and HSD subscribers at the date of acquisition. Any change in access lines subsequent to the acquisition are reflected in access lines, excluding acquired lines. The Company completed the acquisition of Berkshire in the second quarter of 2005 and the acquisition of Bentleyville in the third quarter of 2005.

Cash Available for Dividends

The following table illustrates the Cash Available for Dividends generated during the twelve months ended December 31, 2005 on an actual basis and on a pro forma basis to give effect to the recapitalization as if it had occurred on January 1, 2005. Dividends are subject to declaration by FairPoint’s board of directors and compliance with Delaware law and the terms of FairPoint’s credit facility.

Twelve Months Ended December 31, 2005
(in thousands)
		Actual		Pro Forma
Adjusted EBITDA (1)	$	134,835	$	134,835
Less:
Scheduled principal repayments		858		858
Cash interest expense		42,200		36,853
Capital expenditures and other		28,142		28,142
Cash income taxes		309		309
Cash Available for Dividends (1)	$	63,326	$	68,673

(1) Adjusted EBITDA and Cash Available for Dividends are non-GAAP financial measures (i.e., they are not measures of financial performance under generally accepted accounting principles) and should not be considered in isolation or as a substitute for consolidated statements of operations and cash flows data prepared in accordance with GAAP. For definitions of and

Page 5 of 8

additional information regarding Adjusted EBITDA and Cash Available for Dividends, and a reconciliation of such measures to the most comparable financial measures calculated in accordance with GAAP, please see Non-GAAP Financial Measures below and review the attachments to this press release.

Notwithstanding the amount of Cash Available for Dividends for the twelve months ended December 31, 2005, the Company’s credit facility contains a covenant that limits its ability to pay cash dividends on its common stock to the amount of Cumulative Cash Available for Dividends that accumulates from April 1, 2005 through the end of the Company’s most recent fiscal quarter for which financial statements are available and a compliance certificate has been delivered (which, as of December 31, 2005, was the quarter ended September 30, 2005) Under this covenant, as of December 31, 2005, the Company had Cumulative Cash Available for Dividends of $17.8 million, from which it paid a dividend on January 18, 2006 of $13.8 million, resulting in a carryover of $4.0 million of Cumulative Cash Available for Dividends. In addition to this $4.0 million carryover, based on the Company’s financial performance through December 31, 2005 as described in this earnings release, the Company generated an additional $18.9 million of Cash Available for Dividends and as a result expects to have approximately $23.0 million of Cumulative Cash Available for Dividends from which to declare and pay its next dividend. Cash Available for Dividends corresponds to the term “Available Cash” in the Company’s credit facility and Cumulative Cash Available for Dividends corresponds to the term “Cumulative Distributable Cash” in the Company’s credit facility.

Outlook

The Company estimates that full year capital expenditures in 2006 will be approximately $28 to $30 million. This estimate of capital expenditures includes the anticipated capital costs of the MACC billing conversion and the anticipated capital expenditures related to the previously announced pending acquisition of Cass County Telephone. The Company estimates that interest expense for 2006 will be $36 to $38 million. This estimate takes into account the pending Cass County Telephone acquisition and the pending sale of our investment in Southern Illinois Cellular Corp.

Conference Call and Webcast

As previously announced, FairPoint will host a conference call and simultaneous webcast to discuss its fourth quarter results at 8:30 a.m. EST on February 21, 2006. Participants should call (888) 253-4456 (US/Canada) or (706) 643-3201 (International) and request the FairPoint Communications call. A telephonic replay will be available for anyone unable to participate in the live call. To access the replay, call (800) 642-1687 and enter the confirmation code 4868243. The recording will be available from Tuesday, February 21, 2006 at 1:00 p.m. through Tuesday, February 28, 2006 at 11:59 p.m. (EST).

A live broadcast of the earnings conference call will be available via the Internet at www.fairpoint.com under the Investor Relations section. An online replay will be available beginning at 1:00 p.m. (EST) on February 21, 2006 and remain available for one year. During the conference call, representatives of FairPoint may discuss and answer one or more questions concerning FairPoint’s business and financial matters. The responses to these questions, as well as other matters discussed during the conference call, may contain information that has not been previously disclosed.

Non-GAAP Financial Measures

EBITDA (as defined herein), Adjusted EBITDA and Cash Available for Dividends are non-GAAP financial measures (i.e., they are not measures of financial performance under generally accepted

Page 6 of 8

accounting principles) and should not be considered in isolation or as a substitute for consolidated statements of operations and cash flows data prepared in accordance with GAAP. In addition, the non-GAAP financial measures used by FairPoint may not be comparable to similarly titled measures of other companies. For definitions of and additional information regarding EBITDA, Adjusted EBITDA and Cash Available for Dividends, and a reconciliation of such measures to the most comparable financial measures calculated in accordance with GAAP, please see the attachments to this press release.

FairPoint believes EBITDA is useful to investors because EBITDA is commonly used in the telecommunications industry to analyze companies on the basis of operating performance, liquidity and leverage. FairPoint believes EBITDA allows a standardized comparison between companies in the industry, while minimizing the differences from depreciation policies, financial leverage and tax strategies.

Certain covenants in FairPoint’s credit facility contain ratios based on Adjusted EBITDA and the restricted payment covenant in FairPoint’s credit facility regulating the payment of dividends on its common stock is based on Adjusted EBITDA. If FairPoint’s Adjusted EBITDA were to decline below certain levels, covenants in FairPoint’s credit facility that are based on Adjusted EBITDA may be violated and could cause, among other things, a default in such credit facility, or result in FairPoint’s inability to pay dividends on its common stock.

FairPoint believes Cash Available for Dividends is useful to investors as a means to evaluate FairPoint’s ability to pay dividends on its common stock. However, FairPoint is not required to use such cash to pay dividends and any dividends are subject to declaration by FairPoint’s board of directors and compliance with Delaware law and the terms of its credit facility.

While FairPoint uses these non-GAAP financial measures in managing and analyzing its business and financial condition and believes they are useful to its management and investors for the reasons described above, these non-GAAP financial measures have certain shortcomings. In particular, Adjusted EBITDA does not represent the residual cash flows available for discretionary expenditures, since items such as debt repayment and interest payments are not deducted from such measure. FairPoint’s management compensates for the shortcomings of these measures by utilizing them in conjunction with their comparable GAAP financial measures.

The information in this press release should be read in conjunction with the financial statements and footnotes contained in FairPoint’s documents to be filed with the Securities and Exchange Commission.

About FairPoint

FairPoint is a leading provider of communications services to rural communities across the country. Incorporated in 1991, FairPoint’s mission is to acquire and operate telecommunications companies that set the standard of excellence for the delivery of service to rural communities. Today, FairPoint owns and operates 28 rural local exchange companies (RLECs) located in 17 states, offering an array of services, including local and long distance voice, data, Internet and broadband offerings.

Forward Looking Statements

This press release may contain forward-looking statements that are not based on historical fact, including without limitation, statements containing the words “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual

Page 7 of 8

results, events or developments to differ materially from those expressed or implied by these forward-looking statements. Such factors include those risks described from time to time in FairPoint’s filings with the Securities and Exchange Commission, including, without limitation, the risks described in FairPoint’s most recent Annual Report on Form 10-K on file with the Securities and Exchange Commission. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date this press release is issued, and FairPoint undertakes no duty to update this information. FairPoint’s results for the year ended December 31, 2005 are subject to the completion and filing with the Securities and Exchange Commission of its Annual Report on Form 10-K for such period.

Source: FairPoint Communications, Inc. www.fairpoint.com

Investor Contact: Brett Ellis (866) 377-3747, bellis@fairpoint.com

Media Contact: Jennifer Sharpe (704) 227-3629, jsharpe@fairpoint.com

# # #

Attachments

Page 8 of 8

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
		December 31		December 31,
		2005		2004
		(unaudited)
		(Dollars in thousands)
Assets
Current assets:
	Cash	$	5,083	3,595
	Accounts receivable, net		34,985	30,203
	Other		9,200	6,805
	Deferred income tax, net		2,054	—
	Assets of discontinued operations		90	102
Total current assets			51,412	40,705
Property, plant, and equipment, net			242,617	252,262
Investments			39,808	37,749
Goodwill			481,343	468,508
Deferred income tax, net			74,296	—
Deferred charges and other assets			18,663	19,912
Total assets		$	908,139	819,136
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
	Accounts payable	$	12,030	14,184
	Dividends payable		13,789	—
	Current portion of long-term debt		677	524
	Demand notes payable		338	382
	Accrued interest payable		288	16,582
	Other accrued liabilities		20,808	15,972
	Liabilities of discontinued operations		2,495	2,262
Total current liabilities			50,425	49,906
Long-term liabilities:
	Long-term debt, net of current portion		606,748	809,908
	Preferred shares subject to mandatory redemption		—	116,880
	Liabilities of discontinued operations		—	1,580
	Deferred credits and other long-term liabilities		4,108	12,667
Total long-term liabilities			610,856	941,035
Minority interest			10	11
Common stock subject to put options			—	1,136
Stockholders' equity (deficit):
	Common stock		350	94
	Additional paid-in capital		590,129	198,519
	Unearned compensation		(6,475)	—
	Accumulated deficit		(342,634)	(371,565)
	Accumulated other comprehensive income, net		5,478	—
Total stockholders' equity (deficit)			246,848	(172,952)
Total liabilities and stockholders' equity (deficit)		$	908,139	819,136

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
				Three months ended		Twelve months ended
				December 31,		December 31,
				2005	2004	2005	2004
			(Dollars in thousands)
Revenues			$	69,934	63,807	262,843	252,645
Operating expenses:
	Operating expenses, excluding depreciation
		and amortization and stock-based
		compensation		36,500	32,400	141,075	128,755
	Depreciation and amortization			13,327	13,411	52,390	50,287
	Stock-based compensation			691	(84)	2,350	49
Total operating expenses				50,518	45,727	195,815	179,091
Income from operations				19,416	18,080	67,028	73,554
Other income (expense):
	Net gain (loss) on sale of investments and
		other assets		188	344	(11)	104
	Interest and dividend income			829	1,005	2,499	2,335
	Interest expense			(9,832)	(26,617)	(46,416)	(104,315)
	Impairment of investments			(1,200)	(349)	(1,200)	(349)
	Equity in net earnings of investees			3,134	2,970	11,302	10,899
	Realized and unrealized losses on
		interest rate swaps		—	—	—	(112)
	Other nonoperating, net			—	(5,951)	(87,746)	(5,951)
Total other expense				(6,881)	(28,598)	(121,572)	(97,389)
Income (loss) from continuing operations before
	income taxes			12,535	(10,518)	(54,544)	(23,835)
Income tax benefit (expense)				(4,819)	(237)	83,096	(516)
Minority interest in income of subsidiaries				—	(1)	(2)	(2)
Income (loss) from continuing operations				7,716	(10,756)	28,550	(24,353)
Income from discontinued operations				380	—	380	671
Net income (loss)			$	8,096	(10,756)	28,930	(23,682)
Weighted average shares outstanding:
	Basic			34,550	9,468	31,927	9,468
	Diluted			34,571	9,468	31,957	9,468
Basic and diluted earnings (loss) from
	continuing operations per share		$	0.22	(1.14)	0.89	(2.57)
Basic and diluted earnings from discontinued
	operations per share		$	0.01	—	0.02	0.07
Basic and diluted earnings (loss) per share			$	0.23	(1.14)	0.91	(2.50)

FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
								Twelve months ended
								December 31,
								2005		2004
								(Dollars in thousands)
Cash flows from operating activities:
	Net income (loss)							$	28,930	(23,682)
Adjustments to reconcile net income (loss) to net cash provided by
	operating activities of continuing operations:
		Income from discontinued operations							(380)	(671)
		Dividends and accretion on shares subject to mandatory							2,362	20,181
				redemption
		Loss on preferred stock subject to mandatory redemption							9,899	—
		Provision for uncollectible revenue							3,245	1,718
		Deferred income taxes							(84,208)	—
		Amortization of debt issue costs							1,859	4,603
		Depreciation and amortization							52,390	50,287
		Loss on early retirement of debt							77,847	—
		Impairment of assets							1,200	349
		Minority interest in income of subsidiaries							2	2
		Income from equity method investments							(11,302)	(10,899)
		Other non cash items							2,056	5,013
		Changes in assets and liabilities arising from operations:
			Accounts receivable and other current assets						(2,527)	(3,157)
			Accounts payable and accrued expenses						(19,399)	1,868
			Income taxes						(363)	(138)
			Other assets/liabilities						71	501
					Total adjustments				32,752	69,657
						Net cash provided by operating activities of
							continuing operations		61,682	45,975
Cash flows from investing activities of continuing operations:
	Acquisitions of telephone properties, net of cash acquired								(25,690)	(225)
	Acquisition of investments								(12)	—
	Net capital additions								(27,401)	(35,961)
	Distributions from investments								10,859	15,017
	Net proceeds from sales of investments and other assets								175	328
	Other, net								(738)	(145)
		Net cash used in investing activities of continuing operations							(42,807)	(20,986)
Cash flows from financing activities of continuing operations:
	Net proceeds from issuance of common stock								431,921	—
	Debt issue and offering costs								(8,975)	(7,750)
	Proceeds from issuance of long-term debt								699,959	178,550
	Repayments of long-term debt								(905,675)	(193,761)
	Repurchase of preferred and common stock								(129,281)	(1,005)
	Payment of fees and penalties associated with early retirement of
		long term debt							(61,037)	—
	Payment of deferred transaction fee								(8,445)	—
	Proceeds from exercise of stock options								184	—
	Dividends paid to common stockholders								(35,298)	—
		Net cash provided by (used in) financing activities of
				continuing operations					(16,647)	(23,966)
		Net cash contributed from continuing operations to
			operating activities of discontinued operations						(740)	(3,031)
		Net increase in cash							1,488	(2,008)
Cash, beginning of period									3,595	5,603
Cash, end of period								$	5,083	3,595

                         FAIRPOINT COMMUNICATIONS, INC.

                   Non-GAAP Financial Measures Reconciliation

         For the Three and Twelve Months Ended December 31, 2005 and 2004




                                                      Three Months Ended         Three Months Ended
                                                           12/31/05                   12/31/04
                                                      ------------------          -----------------
                                                                (Dollars in Thousands)

Net cash provided by (used in) operating activities
    from continuing operations                      $            22,857         $           13,117
Adjustments:
    Depreciation and amortization                               (13,327)                   (13,411)
    Other non-cash items                                        (15,707)                    (9,776)
    Changes in assets and liabilities arising from
      continuing operations, net of acquisitions                 13,893                       (686)
                                                      ------------------          -----------------
Income from continuing operations                                 7,716                    (10,756)
Adjustments:
    Interest expense                                              9,832                     26,617
    Provision for income taxes                                    4,819                        237
    Depreciation and amortization                                13,327                     13,411
                                                      ------------------          -----------------
EBITDA                                                           35,694                     29,509
Adjustments:
    Net (gain) loss on sale of investments and other assets        (188)                      (344)
    Impairment of investments                                     1,200                        349
    Equity in earnings of investee                               (3,134)                    (2,970)
    Distributions from investments                                3,550                      3,207
    Non-cash stock based compensation                               691                        (84)
    Write-off of cost associated  with an abandoned
      offering of Income Deposit Securities                           -                      5,951
    Other non-cash item                                            (212)
    Deferred patronage dividends                                     (9)                       (40)
                                                      ------------------          -----------------
Adjusted EBITDA                                     $            37,592         $           35,578
                                                      ==================          =================
Less:
    Scheduled principal payments                                    157                      4,873
    Cash interest expense (adjusted for
      amortization, swap interest and dividend and
      accretion on series A preferred stock)                      9,433                     20,221
    Capital expenditures and other                                9,523                     13,915
    Cash income taxes                                              (458)                       237
                                                      ------------------          -----------------
Cash Available for Dividends                        $            18,937         $           (3,668)
                                                      ==================          =================

===================================================================================================

                                                     Twelve Months Ended         Twelve Months Ended
                                                           12/31/05                   12/31/04
                                                      ------------------          -----------------

Net cash provided by operating activities of continuing
  operation                                                      61,682         $           45,975
Adjustments:
    Depreciation and amortization                               (52,390)                   (50,287)
    Dividends and accretion on shares subject to mandatory
      redemption                                                 (2,362)                   (20,181)
    Other non-cashsitemsmpensation, net of forfeitures             (598)                      (786)
    Changes in assets and liabilities arising from continuing
      operations, net of acquisitions                            22,218                        926
                                                      ------------------          -----------------
Income (loss) from continuing operations                         28,550                    (24,353)
Adjustments:
    Interest expense                                             46,416                    104,315
    Provision for income taxes                                  (83,096)                       516
    Depreciation and amortization                                52,390                     50,287
                                                      ------------------          -----------------
EBITDA                                                           44,260                    130,765
Adjustments:
    Net (gain) loss on sale of investments and other assets          11                       (104)
    Impairment on investments                                     1,200                        349
    Equity in earnings of investee                              (11,302)                   (10,899)
    Distributions from investments                               10,859                     15,017
    Realized and unrealized losses on interest rate swaps             -                        112
    Loss on early retirement of debt                             77,847                          -
    Loss on redemption of preferred stock                         9,899                          -
    Non-cash stock based compensation                             2,350                         49
    Write-off of cost associated  with an abandoned
      offering of Income Deposit Securities                                                  5,951
    Other non-cash item                                            (212)
    Deferred patronage dividends                                    (77)                       (84)
                                                      ------------------          -----------------
Adjusted EBITDA                                     $           134,835         $          141,156
                                                      ==================          =================
Less:
    Scheduled principal payments                                    858                     25,872
    Cash interest expense (adjusted for
      amortization, swap interest and dividend
      and accretion on series A preferred stock)                 42,200                     80,579
    Capital expenditures and other                               28,142                     36,492
    Cash income taxes                                               309                        516
                                                      ------------------          -----------------
Cash Available for Dividends                        $            63,326         $           (2,303)
                                                      ==================          =================


"EBITDA"  means  net  income  (loss)  before  income  (loss)  from  discontinued
operations, interest expense, income taxes, and depreciation and amortization.

"Adjusted  EBITDA" for any period is defined in FairPoint's  credit  facility as
(i) the sum of Consolidated  Net Income (which is defined in FairPoint's  credit
facility and includes distributions from investments), plus the following to the
extent deducted from Consolidated Net Income: provision for taxes,  consolidated
interest  expense,  depreciation,  amortization,  losses on sales of assets  and
other  extraordinary  losses, and certain other non-cash items, each as defined,
minus  (ii)  gains on sales of  assets  and  other  extraordinary  gains and all
non-cash items increasing Consolidated Net Income for the period.

"Cash  Available for  Dividends"  means  Adjusted  EBITDA less (i) cash interest
expense (adjusted for amortization, swap interest and dividends and accretion on
series A preferred stock),  (ii) scheduled  principal  payments on indebtedness,
(iii) capital  expenditures,  (iv) investments,  (v) cash income taxes, and (vi)
non-cash items excluded from Adjusted EBITDA and paid in cash, plus (i) the cash
amount of any  extraordinary  gains and gains realized on asset sales other than
in the  ordinary  course of  business,  and (ii) cash  received  on  account  of
non-cash gains or non-cash income excluded from Adjusted EBITDA.




                         FAIRPOINT COMMUNICATIONS, INC.

     Sequential Financial Information for the Quarters ending December 31,
         September 30, June 30 and March 31, 2005 and December 31, 2004



($ thousands)                                                      Three Months Ended  Three Months Ended   Three Months Ended   Three Months Ended   Three Months Ended
                                                                    December 31,2005   September 30, 2005      June 30, 2005        March 31, 2005    December 31, 2004
                                                                  ------------------   ------------------   ------------------   ------------------   ------------------
Consolidated Results:
    Revenues:
       Local calling services                                  $             16,919 $             16,586  $            15,982 $             15,617 $             15,828
       USF - high cost loop support                                           5,189                5,045                4,707                4,796                5,042
       Interstate access revenue                                             20,627               17,697               20,083               16,880               18,236
       Intrastate access revenue                                             10,165               10,227                9,534               10,083               10,509
       Long distance services                                                 5,694                5,694                4,798                4,682                4,508
       Data and internet services                                             6,409                6,230                5,937                5,592                5,504
       Other services                                                         4,931                4,559                4,165                4,015                4,180
                                                                  ------------------   ------------------   ------------------   ------------------   ------------------
    Total revenues                                                           69,934               66,038               65,206               61,665               63,807
    Operating expenses                                                       50,518               51,417               48,427               45,453               45,727
                                                                  ------------------   ------------------   ------------------   ------------------   ------------------
    Income from operations                                                   19,416               14,621               16,779               16,212               18,080
    Other income (expense) (1)                                               (6,881)              (6,927)              (7,660)            (100,104)             (28,598)
                                                                  ------------------   ------------------   ------------------   ------------------   ------------------
    Earnings (loss) from continuing
          operations before income taxes                                     12,535                7,694                9,119              (83,892)             (10,518)
    Income taxes (2)                                                         (4,819)              (3,504)              (3,515)              94,934                 (237)
    Minority interest in income of subsidiaries                                   -                   (1)                  (1)                   -                   (1)
    Income from discontinued operations                                         380                    -                    -                    -                    -
                                                                  ---------------------------------------   ------------------   ------------------   ------------------
    Net income (loss)                                          $              8,096  $             4,189  $             5,603 $             11,042 $            (10,756)
                                                                  =======================================   ==================   ==================   ==================


Cash Available for Dividends
Adjusted EBITDA                                                $             37,592  $            31,018  $            33,806 $             32,419 $             35,578
Less:
    Scheduled principal payments (4)                                            157                  155                  124                  422                4,873
    Cash interest expense (adjusted for amortization, swap interest and
       dividend and accretion on series A preferred stock)                    9,433                9,663                9,203               13,901               20,221
    Capital expenditures and other                                            9,523                8,355                5,230                5,034               13,915
    Cash income taxes                                                          (458)                 292                  237                  238                  237
                                                                  ---------------------------------------   ------------------   ------------------   ------------------
Cash Available for Dividends                                   $             18,937  $            12,553  $            19,012 $             12,824 $             (3,668)
                                                                  =======================================   ==================   ==================   ==================

Cumulative Cash Available for Dividends (5)
Beginning Balance                                              $             17,800  $            19,012  $                 -
Add:
    Cash Available for Dividends generated during the quarter                18,937               12,553               19,012
Less:
    Dividends declared and/or paid after July 30, 2005                      (13,765)             (13,765)                   -
                                                                  ---------------------------------------   ------------------
Cumulative Cash Available for Dividends                        $             22,972  $            17,800  $            19,012
                                                                  =======================================   ==================


    Other information:
    Gross property, plant and equipment                        $            760,221 $            752,872  $           730,170 $            706,848 $            702,995
    Capital expenditures                                                      9,325                8,256                5,002                4,819               12,100
    Interest expense (adjusted for amortization
       and swap interest)                                                     9,433                9,663                9,203               13,901               20,221
    Access line equivalents (3)                                             288,899              291,072              287,723              276,167              274,934
       Residential access lines                                             188,206              192,149              192,643              186,640              187,526
       Business access lines                                                 55,410               55,903               54,170               52,610               52,584
       High Speed Data subscribers                                           45,283               43,020               40,910               36,917               34,824

          DSL subscribers                                                    40,939               39,035               37,621               33,889               31,876
          Other HSD subscribers (Wireless and Cable modems)                   4,344                3,985                3,289                3,028                2,948


Footnotes:

(1) Other expense during 2005 includes $77.8 million loss on early retirement of
    debt and $9.9 million loss on repurchase of preferred stock.

(2) Income tax benefit for the three months ended March 31, 2005 includes  $28.9
    million  associated  with current  period loss and $66.0  million due to the
    recognition  of deferred  tax benefits  from the  reversal of the  valuation
    allowance.

(3) In the first  quarter of 2005,  access  line  equivalents  were  restated to
    include wireless and cable modems.  In addition,  previous periods have been
    restated to reflect an additional 836 voice lines which our audit  processes
    determined were not properly included in the 2004 reports.

(4) Scheduled  principal  payments  do not include  repayment  of long term debt
    associated  with the  Company's  bank  refinancing  completed on February 8,
    2005.

(5) Cumulative  Cash Available for Dividends  means the amount of Cash Available
    for  Dividends  generated  beginning on April 1, 2005 less (i) the aggregate
    amount of dividends  paid after July 30, 2005 and (ii) the aggregate  amount
    of investments  made after April 1, 2005 using such cash, plus the aggregate
    amount of  distributions  received from such  investments (not to exceed the
    amount originally invested).

EX-99

FINAL TRANSCRIPT

                                    

Conference Call Transcript

FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

Event Date/Time: Feb. 21. 2006 / 8:30AM ET

Thomson StreetEvents www.streetevents.com Contact Us 1

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

CORPORATE PARTICIPANTS

Brett Ellis

FairPoint Communications, Inc. - IR

Gene Johnson

FairPoint Communications, Inc. - Chairman, CEO

John Crowley

FairPoint Communications, Inc. - CFO

CONFERENCE CALL PARTICIPANTS

Jonathan Chaplin

JP Morgan - Analyst

Jason Armstrong

Goldman Sachs - Analyst

Kevin Moore

Wachovia Securities - Analyst

Edward Yang

CIBC World Markets - Analyst

Jessica Yau

Morgan Stanley - Analyst

Tom Seitz

Lehman Brothers - Analyst

Sheila Donahue

Marlin Capital - Analyst

Marcus Shaw

Banc of America Securities - Analyst

PRESENTATION

Operator

Mr. Ellis, you may begin your conference.

Brett Ellis - FairPoint Communications, Inc. - IR

Good morning, everyone and thank you for joining the FairPoint fourth quarter earnings conference call. Participating on today's call are Gene Johnson, our CEO, and John Crowley, our CFO. Before we begin, I would like to remind you that certain statements made during this conference call which are not based on historical facts may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events, or developments to differ materially from those expressed or implied by these forward-looking statements. Such factors include those risks described from time to time in FairPoint's filings with the Securities and Exchange Commission, including, without limitation, the risks described in FairPoint's most recent annual report on Form 10-K, on file with the Securities and Exchange Commission.

All information is current as of the date of this earnings call and FairPoint undertakes no duty to update this information. In addition, FairPoint's results for the year ended December 31, 2005, are subject to the completion and filing with the Securities and Exchange Commission of its annual report on Form 10-K for such period. Having said this, allow me to introduce Gene Johnson, our Chairman and CEO.

Thomson StreetEvents www.streetevents.com Contact Us 2

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Thanks, Brett. Good morning, everyone. Hopefully you've all had a chance to see our press release for the fourth quarter. We're going to discuss it in more detail in a couple of moments. But before I get into a top line review of the financials, I just wanted to talk about the progress that we've made and tell you that it's indicative of the really hard work and the effort of a team that's focused on improving the operating and financial results of our company.

Operationally, there is no question that we're focused. As the analysts who cover the space continually point out there are a few financial metrics that really define our success. Perhaps most importantly the ability to pay and sustain our dividend is foremost in the minds of analysts and the investment community. Not only does the dividend provide our shareholders with a catalyst for investment, but the sustainability of the dividend also indicates the health of the overall enterprise. We are extremely focused on our dividend policy. I've said that before. In the fourth quarter, we generated cash available for dividends of $18.9 million. We paid a dividend of $13.8 million. At December 31, 2005, our cumulative cash available for dividends grew significantly to $23.0 million.

Now, we've previously announced that our Board of Directors has indicated its intention to continue paying the quarterly dividend at the current level for 2006. We believe the increased cumulative cash available for dividends that we announce today puts us in a strong position, relative to the dividend and we will strive to improve upon that balance in the future. Making strategic acquisitions that are accretive to the bottom line will help to ensure that FairPoint can continue to increase its cumulative cash available for dividends balance and provide a sustainable dividend for the benefit of our shareholders. In addition, these acquisitions will increase our footprint and our efficiencies and allow us to continue to be a consolidator. I'm also happy to tell you that both the Bentleyville and Berkshire acquisitions are well ahead of the acquisition projections at this time. So we're very pleased with that integration.

I think that the proof of this proposition is clearly evidenced in today's results. This quarter's performance is a strong statement that our business strategy works. John will go into more detail about the financials during his remarks. But I want to take a minute to acknowledge the hard work and effort that our team has put forth. I'm proud to be a part of a company whose customer first focus is translating into tangible and measurable results. Part of the reason for the strong fourth quarter results and this can't be minimized, was the continuing growth of our high-speed data subscribers. Our HSD penetration increased to 18.6% at December 31, 2005, up from 17.3% at the end of the third quarter. In addition to the increase in HSD subscribers, our DSL ARPU remained consistent to prior quarters in the $40 to $41 range. Our consistency in DSL ARPU is a very good indicator that we are not subject to high levels of competition in most of our markets and therefore not forced to discount our services in order to compete.

Now, that's not to say we're ignoring the prospects of competition. We recognize there are new technologies, some on the horizon, some that are already here, which could have an impact on our ability to maintain and grow the penetration rates that I referenced earlier. We are constantly exploring ways to partner with or acquire complementary service providers to ensure that we can not only remain competitive as new technologies emerge and remain at the forefront in providing our customers with value-added services that will enhance their lives and improve FairPoint's operating results.

As I look back over the last quarter, I'd be remiss if I didn't provide an update on the billing system conversion. Like any business, we're going to experience challenges and our billing conversion certainly qualifies. I think it's safe to say that companies are defined by how they execute in times of difficulty. And I think by any measure, our management team should be proud of the expediency with which the issue was first addressed as well as the execution related to the ongoing resolution of the going conversion. For instance, within 22 business days after notification by CSG of their intent to sell the service bureau platform, we negotiated a favorable settlement in which they effectively paid us $5.1 million to release us from their service bureau contract. We're pleased to report that we have made great progress with the outstanding conversion issues and are vigorously preparing for our 2006 conversion to the MACC billing platform and their customer master product. There will be an incremental cost associated with the upcoming conversion.

As we have previously announced, we anticipate that the MACC conversion cost will approximate $5.5 million. Of this, we estimate that approximately 70 to 75% will be capitalized and the remaining amount will be expensed. We still anticipate that all of the Companies currently on the ICMS billing platform, which represents about 2/3 of our access lines, are going to be converted to MACC by the middle of 2006. We have established rigorous performance milestones to test the process. We expect that the remaining companies will be converted by early to mid-2007.

We will maintain various manual controls, provide some temporary staffing to the CSG system and will diligently manage the process until we are absolutely satisfied that MACC is ready to go online. Thus far, the process is going exceedingly well and we are taking all necessary steps to

Thomson StreetEvents www.streetevents.com Contact Us 3

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

ensure that the conversion is a continued success. The end result will be a system and process that's going to allow us to better serve our customers. We will keep you posted on the progress as we move forward with the conversion this year and next year.

Subsequent to year-end, we announced our purchase of the assets of Cass County Telephone, which we hope to close in the second quarter of 2006. Cass County serves approximately 8600 access line equivalents in Kansas and Missouri. The transaction fits very nicely into our acquisition profile as it is very rural in nature. It has DSL service available to roughly 90% of its access lines and is not subject to significant cable modem competition in its markets. We are very excited about this deal and importantly, we expect it to be immediately accretive to free cash flow and expect that it will improve our dividend payout ratio. Let me say that again, we expect it to be immediately accretive to free cash flow and expect it will improve our dividend payout ratio.

Looking ahead to 2006, we intend to continue delivering on our promise to provide a platform for growth and sustainable shareholder value. You might remember I've talked in the past about our four point strategy, which includes increasing sales, increasing efficiencies, continued cultivation of customer loyalty and prudent M&A activity. On the sales front, we continue to advance our HSD penetration, which now stands at 18.6%. It's an indication of the creativity and the hard work of our CSRs and our entire marketing team. Our goal is to increase penetration over the coming quarters by providing our customers with bundles of services that are both cost-effective and, most importantly, well-supported.

As to efficiencies, we're making steady progress on the MACC billing conversion which I've already discussed. But I also want to mention capital efficiency where we are unlocking the value of some of our non-core assets and strategically investing the proceeds to build shareholder value. An example of this is our announcement yesterday that we've entered into an agreement to sell our investment in Southern Illinois Cellular Corp. and John will comment a little bit more on that. While our focus will never waiver from our core, as I discussed earlier, we need to be ever-mindful of the changing landscape in our industry and be ready to adapt as the marketplace evolves.

Customer loyalty is a term that I believe is overused and underappreciated. Customer loyalty takes a lifetime to forge, but only a moment to break. New services are one way to build it. We're enhancing our product bundles and enhancing features, but customer loyalty proposition goes well beyond the product. Support and service for these offerings is paramount to anything we provide because it gives us the opportunity to interface with our customers when they need us most. It is my goal that every FairPoint team member will recognize that every service call, every customer service request, and every sales opportunity is not only an opportunity to fix a problem or make a sale, but to deepen a tie to our most important asset, our customers.

And finally, we think the Cass County Telephone transaction is evidence of our acquisition strategy. We believe that seeking out similar opportunities that provide growth potential at a reasonable price will provide a good return on investment. Looking forward, we remain optimistic about the M&A environment, and we're currently looking at quite a few additional opportunities.

While I can't disclose the details of any potential acquisitions, I can tell you that my pledge to you is that we will never overpay for assets, we never have. And we will always look to maximize your investment in FairPoint and we've always done that. After all, it's the support of our shareholders that allowed us to significantly delever the Company just over a year ago. We will continue to seek acquisition that will increase shareholder value and we will be sure to update the investment community as appropriate. Now that you have the broader picture, let me ask John Crowley, our CFO, to discuss the fourth quarter in more detail.

John Crowley - FairPoint Communications, Inc. - CFO

Thanks, Gene and good morning, everyone. In the fourth quarter, we achieved revenues of $69.9 million, an increase of 9.6% over the same quarter in 2004. As you know, we completed two acquisitions in 2005 and if we exclude the effect of those acquisitions, our revenues were up 5.5% relative to last year and up 1.4% compared to the third quarter of 2005. Excluding the impact of the acquired companies, in the fourth quarter, interstate access revenue increased $1.7 million, due to $2.4 million of favorable settlement of the NECA pool. Long distance and HSD revenues increased as a result of continuing sales and increased subscribers.

DSL ARPU has been fairly consistent and averaged $40.60 in the fourth quarter. These increases were partially offset by a decrease in intrastate revenue and USF revenue was flat in the quarter, but as we previously disclosed, we expect USF receipts to decline about 6% from 2005 into 2006. Operating expenses, excluding depreciation and stock-based compensation, increased $2.7 million, excluding the impact of acquisitions compared to the fourth quarter of 2004. However, operating expenses decreased $1.4 million compared to the third quarter of 2005. The improvement in operating expenses was primarily driven by decreases in consulting expenses and bad debt expense, which related to the billing conversion. Adjusted EBITDA was $37.6 million for the quarter, compared to $35.6 million in the same period of the previous year. The increase in adjusted EBITDA was principally due to the increase in income from operations and distributions from investments. Earnings per share on a

Thomson StreetEvents www.streetevents.com Contact Us 4

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

fully diluted basis for the fourth quarter were $0.23, compared to a loss of $1.14 in the fourth quarter of 2004. Net income for the quarter was $8.1 million, versus a loss last year of $10.8 million.

In the quarter, we generated cash available for dividends of $18.9 million and we declared a dividend in the quarter totaling $13.8 million. Significant items that affected cash available for dividends generated in the quarter were a distribution from Orange County Poughkeepsie of $3.3 million and capital expenditures of $9.3 million, up $1.1 million from the third quarter. Therefore, the cumulative cash available for dividends as defined in the earnings release increased $5.2 million in the fourth quarter to a balance of $23 million. Because of the focus on our ability to pay our dividend, I want to point out the effect on our cash available for dividends of some of our recent announcements.

We expect to receive a liquidating distribution from the Rural Telephone Bank in the middle of 2006. We expect to receive total proceeds of $26.7 million, but in 2006 and thereafter, we will no longer receive dividends from the RTB and to put this in perspective, we received dividends of $1.4 million in 2005 from RTB. Also, as Gene mentioned, late on Friday we finalized an agreement to sell our ownership interest in Southern Illinois Cellular Corporation to ALLTEL. We expect to receive proceeds of 16 to $17 million from the sale at closing. With an additional $3 million of potential proceeds to be held in escrow. Our book basis at SICC is $4.6 million. We, therefore, expect to record a gain of approximately $12 to $16 million in the transaction, pending on the final settlement of the amounts held in escrow. Upon receipt of the proceeds, the gained portion of the proceeds will be added to our cash available for dividends. And again, to provide some perspective, we have historically received annual dividends of $400,000 to $600,000 from the SICC investment.

On another cellular holding, although we can't predict the actual results of Orange County Poughkeepsie, as we previously announced, their 2006 budget indicates a decline in distributions of $1.5 million in 2006. In 2005, we received total distributions of $10 million from that investment. And finally, I want to describe the effect on cash available for dividends of the CSG settlement that we talked about. As we announced, of the $5.1 million settlement, we will be receiving $4 million in cash in the course of 2006. That cash will not be reflected at the adjusted EBITDA line. But it will increase cash available for dividends by $1 million per quarter as each payment is received.

Looking at the year, revenue was $252.8 million and adjusting for the effect of acquisitions, our revenue was up 1.8% over 2004. The increase in revenue was a result of increases in HSD revenue, long distance revenue and the acquisitions. Operating expenses, excluding depreciation and amortization and stock-based compensation, increased $12.3 million or 9.6% for the 12 months ended December 31, 2005, compared to 2004. This increase is due primarily to an increase in consulting fees related to our preparation for compliance with Section 404 of the Sarbanes-Oxley Act, an increase in expenses related to high speed data sales and long distance services, an increase in expenses related to Berkshire and Bentleyville, the recent acquisitions, an increase in bad debt expense and an increase in billing expense. Again, that was for the full year.

Primarily as a result of the increase in operating expenses, adjusted EBITDA for the year decreased $6.3 million to $134.8 million versus 2004. In addition, the mix of our revenue continues to change as a larger percentage of our revenues from high-speed data and long distance, rather than support revenues, which have a different gross margin. At the end of December, our access line equivalents were nearly 289,000 versus 275,000 last year. This increase is primarily due to the acquisition of Berkshire Telephone and Bentleyville Communications and an increase in HSD subscribers. The acquisitions added 10,800 access line equivalents in 2005. Excluding acquired lines, we added over 9,300 HSD subscribers in 2005. These increases were offset by a decrease in voice access lines of approximately 6,100, a 2.5% decline from the previous year. Our HSD success is in part due to the rural nature of our markets. We have virtually no wireline competition in our markets and we have not seen a meaningful impact from wireless substitution in a measurable way.

In addition, a modem offering by a cable competitor is only available to 39% of our homes passed. The level of cable competition was virtually unchanged from the end of the third quarter. In fact, in one of our markets, where we likely face the most competitive pressure, we've actually been able to increase our market penetration and maintain our prices. Part of the reason we've been able to accomplish this is that we are continuing our rollout of bundled packages and enhanced features that are intended to better meet the needs of our customers. And with that, we are happy to take questions.

QUESTION AND ANSWER

Operator

[OPERATOR INSTRUCTIONS] Your first question is from Jonathan Chaplin with JP Morgan.

Thomson StreetEvents www.streetevents.com Contact Us 5

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

Jonathan Chaplin - JP Morgan - Analyst

Thanks very much for taking the question. –I actually have two quick questions. The first was it seems like in the press release for the asset sale you mentioned -- it seemed like you were going to use the proceeds to repurchase debt. When I did a quick analysis on the savings, the impact on free cash flow, it seems like it would be a lot more beneficial if you repurchased shares rather than paid down debt. I'm just wondering if there's anything -- given that you've built up some headroom under your restricted payments basket, I'm wondering if that wouldn't make sense? And if not, why? And I guess at the beginning of Gene's comments, he made a reference to the fact that you've committed to paying the dividend through 2006 but you may be in a position to extend that. I'm wondering if you could give us just a little bit more color on exactly what you meant, what the implications might be? Thanks.

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Yes, let me take the second question first. The Board and the management team continue to have a lot of discussion about the dividend. It's extremely important to us. I said before that I wake up in the morning thinking about the dividend. I go to bed at night thinking about the dividend. I realize how important it is. I'm a big shareholder of the Company, as well. So we will do everything we can to sustain that dividend. And that is the first priority we have is to pay the regular quarterly dividend and beyond that, we're going to utilize all of our excess cash to maximize shareholder value and that would include possibly share buybacks. We don't have anything to announce at this time in that regard. So I don't want to go any further than that.

John Crowley - FairPoint Communications, Inc. - CFO

The important thing to know, Jonathan, in the short-term of course we will use it to pay down debt. What we may do it in the long-term more strategically, that depends on what options are available to us.

Jonathan Chaplin - JP Morgan - Analyst

Is there any way you could give us an indication of what you're expecting for the payouts in 2006?

John Crowley - FairPoint Communications, Inc. - CFO

Of SICC?

Jonathan Chaplin - JP Morgan - Analyst

What's that?

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Pay off the debts, you mean?

Jonathan Chaplin - JP Morgan - Analyst

No, no, no, the payout of the dividend over cash available to pay dividends.

John Crowley - FairPoint Communications, Inc. - CFO

Oh, no, we're not going put a specific number on that. But we're going to work to make that as strong a ratio as we possibly can.

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Thomson StreetEvents www.streetevents.com Contact Us 6

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

Our goal is to continue dropping that, Jon.

Jonathan Chaplin - JP Morgan - Analyst

Okay. Thank you very much for taking the questions.

John Crowley - FairPoint Communications, Inc. - CFO

Thanks, Jonathan.

Operator

Your next question is from Jason Armstrong with Goldman Sachs.

Jason Armstrong - Goldman Sachs - Analyst

Great, thanks. Good morning. A couple of questions. I'm just wondering if you could give us a little more granularity on access line loss? You talked about through minimal wireless competition, only 39% of lines with cable modem overlap. So I'm wondering if you can sort of give us more granularity as to where the line loss is coming from, maybe the second line disconnects or involuntary churn? And then second question, maybe just a follow-up on Jonathan's, if you adjust out the NECA one time for this quarter and a couple of other items is seems like dividends as a percent of free cash flow was somewhere in the 85 to 90% range, which is better than recent trends in terms of the cushion built in but I'm wondering if this is sort of the range you feel comfortable with headed into 2006? Thanks.

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Let me just make one comment. Then I will let John answer both of those questions. The comment I want to make is I think we have to remember about NECA. We are fairly conservative in the way we book revenues from NECA. And so as a result of that, we constantly have revenue adjustments. That's part of the equation. So if people talk about the NECA adjustment as if it's an extraordinary adjustment. I wouldn't describe it that way. I think it's a normal ongoing thing which we have historically had. If you go back and look at our financials for the last 13 years you will find NECA adjustments continually, every year. So beyond that I will let John answer your questions. Because he can give you the granularity you're looking for.

John Crowley - FairPoint Communications, Inc. - CFO

Gene is absolutely right. Both settlements and true-ups in NECA are pretty regular. The amount is not necessarily definable, but the concept is pretty regular. Jason, with regard to the granularity and the access lines and the access lines equivalent, you made reference to the 39% cable modem competition we have. That, of course, is not necessarily so significant relative to the access lines themselves, but it is significant on the DSL side. That's what allows us to have the strong DSL penetration that we have and I think probably more importantly that's what allows us to maintain the ARPU in our DSL. Our ARPU in the fourth quarter for DSL was $40.60.

With respect to the access lines themselves, I wouldn't necessarily draw any long-term trends from the fourth quarter because, of course, there were some unusual items there. We are continuing, as you mentioned, to press non-pay disconnects, which is still a bit of a holdover from the billing conversion, and we disconnected net 2,000 access lines, just actually slightly over 2,000 access lines in the fourth quarter. Those would be what you refer to as involuntary churn. In addition, the fourth quarter is typically seasonal for us. We estimate, based on surveys of disconnecting customers that somewhere around 750 subscribers disconnected on a seasonal basis, that we would hope to get back next spring. And, in fact, if you eyeball the numbers, based on the areas that we have that are highly seasonal, I would guess that the actual seasonal disconnect was probably a little bit higher. I think what's more useful is to draw a long-term trend from the 2005 overall number -- overall our access lines for the year were down 2.5%, which is somewhat consistent with what we've done in the past. In 2004 we were down 2.9%.

Jason Armstrong - Goldman Sachs - Analyst

Thomson StreetEvents www.streetevents.com Contact Us 7

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

And John, what percent of the 2.5% decline is second line disconnects?

John Crowley - FairPoint Communications, Inc. - CFO

We don't necessarily track that. So I can't really tell you, Jason.

Jason Armstrong - Goldman Sachs - Analyst

Okay. And then the second question about the free cash flow headroom?

John Crowley - FairPoint Communications, Inc. - CFO

I think Gene really answered that. Which is that we're going to continue to make whatever progress we can on that. We're very, very committed to having a comfortable dividend payout ratio and to maintaining the dividend.

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

And we clearly don't think that that high level is where we're going to be operating at.

Jason Armstrong - Goldman Sachs - Analyst

Okay, thanks.

Operator

Your next question comes from Kevin Moore with Wachovia Securities.

Kevin Moore - Wachovia Securities - Analyst

Morning. Three questions, first on the sale of the wireless assets, do you see any other opportunities to monetize your other wireless assets? It seems like you have very favorable price for that. Second, on the bad debt reduction in the fourth quarter, I guess about $0.5 million, can you just talk about why that was reduced? And finally, when you get the money from the RTB distribution does that whole $26.7 million go into your cash available for dividends?

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

I will take the first question and then let John take the other two. The question about our non-core assets. We talked about capital efficiency in my remarks as well as operating efficiencies. We look at every one of our non-core assets as being non-core. So therefore, are constantly looking for the opportunity to maximize the value of those. We will continue to do that. There is nothing I could tell you that's on the horizon right now. But we actually have announced really the three different non-core assets, I think, this quarter.

The first was the RTB, second, which I believe we announced this quarter. The second was a small interest -- I'm not sure we announced it in a partnership that we sold, that was very immaterial but we worked hard to sell that and have, in fact, sold it. And then third, of course, SICC. Tom Griffin, our Treasurer, spends a tremendous amount of time working on these kinds of things. I tell you, he was very actively involved in the discussions in the work around the RTB and was very, very active in the work on RTB and he's a member of the Board at SICC and was very instrumental in that work, as well. So, I will just stop by saying we pay a lot of attention to those non-core assets.

John Crowley - FairPoint Communications, Inc. - CFO

Thomson StreetEvents www.streetevents.com Contact Us 8

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

Hi, Kevin, this is John.

Kevin Moore - Wachovia Securities - Analyst

Hi.

John Crowley - FairPoint Communications, Inc. - CFO

With regard to the bad debt, what's essentially happening there is that after the problems with the billing conversion came to light last summer, we started aggressively going after that. But because some time had passed and as you know, the problems that we identified in the second and third quarter in terms of getting out late notices, disconnect notices, making the disconnects, what have you, the bills at the time that we were disconnecting people were larger and as we're making progress on that, we're disconnecting people with smaller bills and in fact as a consequence of that, as we get farther and farther into the process, we tend to pick up more reconnects of the disconnects. So I think that's the explanation for why the bad debt is coming down.

With regard to the cash available for dividends effect of the RTB, no, we will use the $26 or $27 million in proceeds to pay down debt in the short-term. The only portion that would be additive to cash available for dividends would be the gain. And the capital gain on that investment will be $3.9 million. We expect to collect that in the second quarter.

Kevin Moore - Wachovia Securities - Analyst

Thanks.

Operator

Our next question is from Edward Yang with CIBC World Markets.

Edward Yang - CIBC World Markets - Analyst

Thank you. A few quick questions. First, how far are you along in the nonpaid disconnects on access lines?

John Crowley - FairPoint Communications, Inc. - CFO

Well, they will never be over -- they're continuing to be high, but we'll always have nonpay disconnects obviously. But the amounts that are due at the time of the disconnect now are much, much smaller than they were early on in the process.

Edward Yang - CIBC World Markets - Analyst

Okay, well, I guess my question was more on -- related to the billing conversion, you said that there was a buildup of some non-pay disconnects above normal trend. Are we essentially done with that process now?

John Crowley - FairPoint Communications, Inc. - CFO

We've managed to complete that process. We're down to more normal trends now, I think.

Edward Yang - CIBC World Markets - Analyst

Thomson StreetEvents www.streetevents.com Contact Us 9

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

Okay, great. And on the bad debt expense, has your assumptions changed at all from the fourth quarter versus historically, if any, and I'm talking about bad debt expense as a percentage of revenue or your allowance for doubtful accounts -- provisions for allowances for doubtfuls versus receivables?

John Crowley - FairPoint Communications, Inc. - CFO

Yes, once we've passed through that period, we would expect those to be normalized.

Edward Yang - CIBC World Markets - Analyst

Okay, so, the fourth quarter run rate is sort of the normalized run rate going forward?

John Crowley - FairPoint Communications, Inc. - CFO

I think the fourth quarter is still a bit high.

Edward Yang - CIBC World Markets - Analyst

Okay.

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Because -- remember, the fourth quarter had some of those charges in there. But what I think John is saying, is that in the first quarter of '06, we think we will be back at more normalized levels.

Edward Yang - CIBC World Markets - Analyst

So potentially you might have some additional reductions in bad debt expense?

John Crowley - FairPoint Communications, Inc. - CFO

No, no, but not out of the ordinary course of business.

Edward Yang - CIBC World Markets - Analyst

And just looking at revenue a little bit closer, the $2.4 million NECA reserve reversal, it's my understanding that this happens once every two years. First, is that true? And all things equal, should we see the next quarter's run rate for interstate access down $2.4 million?

John Crowley - FairPoint Communications, Inc. - CFO

Well, we're not going to comment on future predictions. But you are correct that the $2.4 million is a settlement that occurs every two years. We can't make any prediction about what the next one will be. Nor can we make any particular prediction about what the first or second quarter settlements or true-ups might be.

Edward Yang - CIBC World Markets - Analyst

Okay.

Thomson StreetEvents www.streetevents.com Contact Us 10

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

John Crowley - FairPoint Communications, Inc. - CFO

But the $2.4 is in the short-term not recurring.

Edward Yang - CIBC World Markets - Analyst

Okay. And were there any other one-timers in revenue? Because as I look down the revenue line items, for example, USF was down more than 10% in every other quarter aside from the fourth quarter, but it was up 3% this quarter. And also on the local revenue side, I was surprised that the local revenue was up sequentially and you mentioned that you had some rate increases in Maine, but it was my understanding that occurred in the June/July time frame. So we should have seen that in the third quarter numbers. So, I'm surprised to see the sequential revenue growth there, as well, and just wanted some other additional clarification on that. On USF and local.

John Crowley - FairPoint Communications, Inc. - CFO

The change that you're seeing there is principally related to acquisitions.

Edward Yang - CIBC World Markets - Analyst

I'm sorry -- is that on the local side? Or?

John Crowley - FairPoint Communications, Inc. - CFO

Right, because the Maine re-balance has principally passed through our books, and so really across the board, most of the increases other than the increase in high-speed data, which are the consequence of continuing sales and long distance, which is a consequence of continuing sales, most of the other increases were because of acquisitions.

Edward Yang - CIBC World Markets - Analyst

Okay. But you didn't have any acquisitions in the fourth quarter time frame, did you? Because Berkshire and Bentleyville closed in the second and third quarter.

John Crowley - FairPoint Communications, Inc. - CFO

Right, but the Bentleyville acquisition, which closed in the third quarter, was not fully reflected in all of the third quarter.

Edward Yang - CIBC World Markets - Analyst

I see, I see. And just on the USF?

John Crowley - FairPoint Communications, Inc. - CFO

Same thing.

Edward Yang - CIBC World Markets - Analyst

So it was just acquisition-related?

John Crowley - FairPoint Communications, Inc. - CFO

Thomson StreetEvents www.streetevents.com Contact Us 11

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

Right.

Edward Yang - CIBC World Markets - Analyst

Okay. And just lastly, the Cass Tel acquisition, I'd like to get a better sense of your thought process here. I mean you mentioned that it was accretive. Can you provide us with any sort of high-level financials that would give us comfort with that? And the price paid for access lines, I don't have the exact access line figure, but I came up with a figure that was above 4,000. Is that sort of in the right range? If so, it seems a much higher price paid than what you paid for your other acquisitions and it looked like the assets were somewhat troubled in some respects, as well.

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

I will comment on that. We don't spend much time worrying about what the value is per access line except that it's an indicator of the revenue mix and so we pay a lot of attention to it from a standpoint of the revenue mix. What we're concerned about is the multiple of EBITDA -- whether it's going to be accretive to cash available for dividends, whether it's going to drive down the payout ratio. Those are the things we look at and look at it very closely.

I can tell you on all of those accounts, this transaction will look very, very good. We're not in a position to talk about the details of the transaction yet. We will talk about those at some point in the future. The reason for that is we are still currently before three commissions, the FCC, the state of Kansas, and the state of Missouri and finally working through the transaction.

Let me make one other comment about it being a troubled transaction. It's really not a troubled company. It was a company with troubled ownership that was committing a fraud. The people involved in committing the fraud have all been either convicted or have pled guilty. Two have been sentenced, the third is awaiting sentencing and it really didn't impact the operations of the business at all. We acquired the business from effectively a receiver and the PUCs. We we didn't negotiate with the people that owned the business. We negotiated with effectively a receiver. And I don't want to comment any further about it right now. We will, though, however, make comments about it as soon as the regulatory approvals are all received. We will give you more color and I think at that time you will recognize that this will be a very, very good acquisition.

Edward Yang - CIBC World Markets - Analyst

It was my understanding, Gene, that some of the state and federal regulators were withholding subsidies from the Company. So that wouldn't impact you once you receive Cass Tel?

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

No, Ed. Without going into too much detail on it, and violating any confidences. It will not have an impact on us post-closing. I am going to stop at that point and I will be able to explain that in more detail at some point in the future, but not right now.

Edward Yang - CIBC World Markets - Analyst

Okay. Thank you.

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Yes.

Operator

Your next question is from Simon Flannery from Morgan Stanley.

Thomson StreetEvents www.streetevents.com Contact Us 12

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

Jessica Yau - Morgan Stanley - Analyst

Hi, this is Jessica Yau for Simon Flannery. I have two questions. If we excluded the NECA settlement what would the margin, EBITDA margin have been for Q4? And also could you comment a little about your M&A strategy? What is the environment like right now? What are you seeing out there? And are there any other criterias you look at when you consider acquisitions besides the free cash flow accretives?

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Let me take the second question first and then John will take the first question second. We think that the acquisition pipeline right now is better than we've seen it in some time. We are very active. Walt Leach, who you remember was our former CFO, has been with the Company, literally since the second year of its existence is running that effort. He's very, very busy and his team is very, very busy. We previously talked about the acquisition criteria. We prefer the acquisitions to be in market areas that we're already in or else be large enough to support us going into a new area. We will continue to look that way. We absolutely insist that the acquisitions have to be accretive immediately and we work very hard to make sure they do that. We are exceptionally thorough in our due diligence. You all remember that we've done 32 transactions. Every transaction we've ever done two years out exceeded its acquisition projections.

So our due diligence process is very thorough and we look for transactions that ultimately will add shareholder value. We think that that means that it has to make a good strategic fit. We think that it has to be accretive from a free cash flow standpoint and we think that that means it has to be able to drive down the payout ratio. Those are the things we're focused on. Remember, we're very, very focused on the dividend. That's what we think is a key driver for the business. We also look at many other things. I don't want to go into all of the criteria, but one of the things that we look at is the people and we picked up many of our strong leaders in the Company from acquisitions we've done and will continue to look at that.

So with that, I think I will stop and not talk anymore about the M&A strategy. I don't want to jinx anything Walt's doing, but I can tell you that we're very, very focused in this area. It's certainly a core competency of FairPoint as is evidenced by our results in 32 previous acquisitions, I am going to let John answer your first question.

John Crowley - FairPoint Communications, Inc. - CFO

Hi, Jessica, this is John Crowley. Rather than put a hypothetical number out there, let me give you the information that you need to make that calculation. You're correct, the $2.4 million in settlement in the fourth quarter was somewhat unusual. The margin on that is 100%. So you can adjust our revenue and our adjusted EBITDA accordingly and calculate that margin. Is that helpful?

Jessica Yau - Morgan Stanley - Analyst

Yes, great, thanks.

John Crowley - FairPoint Communications, Inc. - CFO

Thanks, Jessica.

Operator

Your next question is from Tom Seitz with Lehman Brothers.

Tom Seitz - Lehman Brothers - Analyst

Good morning. Can you give us any sort of guidance as to when you expect to see billing expense savings as you transition off the old system and on to the new? And then to any extent that you can, can you quantify how much savings you expect on a run rate basis once the conversion is complete?

Thomson StreetEvents www.streetevents.com Contact Us 13

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

John Crowley - FairPoint Communications, Inc. - CFO

Hi, Tom.

Tom Seitz - Lehman Brothers - Analyst

Hello.

John Crowley - FairPoint Communications, Inc. - CFO

Let me give you some information about what's going on with the billing conversion. We are running expenses somewhat higher than we would ordinarily at the moment because the time necessary to support the ICMS system for an individual call in order to upgrade the DSL, in order to disconnect, what have you. I mean all the various sort of ordinary course of business orders are taking longer than they ordinarily would have. So we're continuing to run a number of temps in our various offices and call centers to support that. Tom, did you have a follow-up?

Tom Seitz - Lehman Brothers - Analyst

No, no, no. I was just saying, yes.

John Crowley - FairPoint Communications, Inc. - CFO

No, I won't put a number on that. Let me just give you a little bit of information, though, about the conversion that is coming up. The cost to do the MACC conversion will roll out over the next 18 months. In broad terms, we expect that cost to be about $5.5 million and we expect that about 25% of that amount will be expensed. The remainder can be properly capitalized. Offsetting that but below the EBITDA line will be $1 million a quarter coming from CSG and that will be additive to cash available for dividends, but it will not be additive to adjusted EBITDA. So although those receipts will offset our billing conversion costs, it won't necessarily be reflected at the adjusted EBITDA line. The final conversion, which will be the GT Com conversion, will be sometime next summer. At that point, we would start to really see some efficiencies kick in from the process. It could be sooner, but let's use that date for the moment.

Tom Seitz - Lehman Brothers - Analyst

Okay, great. Thank you very much.

John Crowley - FairPoint Communications, Inc. - CFO

Thanks, Tom.

Operator

Your next question is from Sheila Donahue with Marlin Capital.

Sheila Donahue - Marlin Capital - Analyst

Good morning. I guess I wish to commend the management team for the diligence and focus relative to the third quarter, which the numbers reflect in the fourth quarter. With that in mind, on the third quarter call you mentioned that the management is incented relative to the dividend. I was hoping you could elaborate on that.

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Thomson StreetEvents www.streetevents.com Contact Us 14

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

Yes, I will make a comment or two on that. If you remember, we reported in December, Shirley Linn is telling me, our General Counsel, the metrics that we used for our executive pay. And I and the comp committee looked very hard at each of the individual executives and determined what are the key performance areas that are critical for us to maintain and support the dividend in the long-term. And principally focused on EBITDA as kind of the key metric there. Then we established the performance metrics for each of the executives slightly different to focus specifically on supporting the dividend in the long-term. We believe that we came up with an approach this year that was better than the approach we used last year that really focuses on the dividend even better than it did last year.

Now, in addition to that, we have various compensation plans for all of our employees. For instance, I will mention one that focuses strongly on the dividend and customer loyalty and customer service are such a critical part of that. We actually have a quarterly performance metric for every employee in the Company, if we meet certain of those criteria and exceed those, every employee in the Company gets a bonus for that quarter. And we think that focuses every employee on customer service, which ultimately results in cash available to pay dividends. So I hope that answers the question.

Sheila Donahue - Marlin Capital - Analyst

It doesn't quite. I'm curious to know what the ratio is. Do you have a target payout ratio? That management is paid -- or incented to target?

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

I don't want to go beyond what we've previously disclosed in December. I would point you to that, however, I think it's pretty clear, so take a look at that.

Sheila Donahue - Marlin Capital - Analyst

Okay.

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Okay?

Sheila Donahue - Marlin Capital - Analyst

Thank you.

Operator

Your next question is from Marcus Shaw with Banc of America Securities.

Marcus Shaw - Banc of America Securities - Analyst

Hey, how's it going? This is Marcus Shaw calling for Dave Barden. Guys, I just had a question in terms of going forward on additional gains that could come from sales, what the impact would be there on your NOL balance and how you look at that bringing tax responsibilities forward?

John Crowley - FairPoint Communications, Inc. - CFO

Yes, Marcus, I think we've talked about what the gains on the various asset sales are. I mean we're not going to talk about hypothetical future asset sales, but we talked about the gain on the RTB liquidation, we've talked about the gain on the SICC sale. Let me also just update you on the NOLs. As of the end of the year, our net operating loss carry forwards are $291.9 million. And just to put that in perspective for everyone, because I know people talk about when does FairPoint become taxable? Although we had basically anticipated this because of the first quarter,

Thomson StreetEvents www.streetevents.com Contact Us 15

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

FINAL TRANSCRIPT

Feb. 21. 2006 / 8:30AM, FRP - Q4 2005 FairPoint Communications, Inc. Earnings Conference Call

so, this doesn't actually change the point at which we become taxable. We estimate that to be in 2012 as the point at which it becomes taxable in any material way. Is that helpful?

Marcus Shaw - Banc of America Securities - Analyst

Yes, thank you very much.

John Crowley - FairPoint Communications, Inc. - CFO

Thanks, Marcus.

Operator

And there are no further questions at this time.

John Crowley - FairPoint Communications, Inc. - CFO

Thanks, everyone.

Gene Johnson - FairPoint Communications, Inc. - Chairman, CEO

Good, thank you, everyone. We really appreciate your taking time this morning and we will look forward to answering any other questions you might have. Have a great day.

Operator

This concludes today's conference call. You may now disconnect.

Disclaimer

Thomson Financial reserves the right to make changes to documents, content, or other information on this web site without obligation to notify any person of such changes.

In the conference calls upon which Event Transcripts are based, companies may make projections or other forward-looking statements regarding a variety of items. Such forward-looking statements are based upon current expectations and involve risks and uncertainties. Actual results may differ materially from those stated in any forward-looking statement based on a number of important factors and risks, which are more specifically identified in the companies' most recent SEC filings. Although the companies mayindicate and believe that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate or incorrect and, therefore, there can be no assurance that the results contemplated in the forward-looking statements will be realized.

THE INFORMATION CONTAINED IN EVENT TRANSCRIPTS IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE CONFERENCE CALLS. IN NO WAY DOES THOMSON FINANCIAL OR THE APPLICABLE COMPANY OR THE APPLICABLE COMPANY ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY EVENT TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S CONFERENCE CALL ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

© 2005, Thomson StreetEvents All Rights Reserved.

Thomson StreetEvents www.streetevents.com Contact Us 16

© 2006 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.