1. [ www.kiesling.com ] 1 2012 Telergee Conference For CFO’s and Controllers October 17 and 18, 2012 Management Reporting Improvements Matt Macdonald, Partner

2. [ www.kiesling.com ] 2 Agenda Future – Impact on Financial Reporting Wholesale & Retail Centers Payroll and Cost Allocations Example

3. [ www.kiesling.com ] 3 Future – Impact on Reporting ARRA Access Lines Declining Regulated Revenues and Operating Margins Declining USF/ICC Uncertainty

4. [ www.kiesling.com ] 4 Retail Profit Segments Voice Data Video LD Other Customer Revenues -Direct Expenses Contribution Margin

5. [ www.kiesling.com ] 5 Measuring Results Recurring Monthly Expenses Nonrecurring Expenses Depreciation Expense Customer Revenues Operating Margin Cash Flow Margin Contribution Margin

6. [ www.kiesling.com ] 6 Wholesale Segments Network General Support Corporate Customer

7. [ www.kiesling.com ] 7 Wholesale Income Expenses Revenues Switched Access/USF Special Access Network Leases Depreciation 22-2400’s Plant Specific 62-6400’s Plant Nonspecific 6530’s General Taxes 7240’s

8. [ www.kiesling.com ] 8 Operating Income This is the report card How do we plan to have operating income How do we break operating income into operating decisions?

9. [ www.kiesling.com ] 9 Tools ARPU – Average Revenue per user ACPU – Average Cost per user Service Users = Subscribers Network Users = Households Variable Costs CM = Contribution Margin Budget = One Year Locked Down Forecast

10. [ www.kiesling.com ] 10 Do you prepare a Budget? 1.Capital Expenditure Only 2.Capital Expenditures and Income Statement Only 3.Full Budget for Income Statement, Balance Sheet, and Cash Flows 4.We do not prepare a Budget

11. [ www.kiesling.com ] 11 How Often Do You Compare the Budget to Actual? 1.Monthly 2.Quarterly 3.Annually 4.Never

12. [ www.kiesling.com ] 12 Customer Revenues Historical Revenues Subscribers ARPU Direct Costs Fixed Variable Count ACPU

13. [ www.kiesling.com ] 13 Payroll Labor Distribution by Employee Account Separate Labor from other account activity Pay rates Employees Distribution Overheads Clearing

14. [ www.kiesling.com ] 14 Cost Allocations Expense Incurred Cost Assignment Directly Assign – Regulated ILECCLEC Directly Assign – Non- regulated VideoInternetCellularCommon Cost Indirect Allocators BuildingPlant AdminVehiclesProperty Tax General Allocator

15. [ www.kiesling.com ] 15 Wholesale Cost Centers Network per Household General Support per Household Corporate per Household Customer per Household Net Cost per Household $30 $50

16. [ www.kiesling.com ] 16 Retail Profit Centers Today Voice CM per Sub$15100%$15 Data CM per Sub$3560%$21 Video CM per Sub$040%$0 Other CM per Sub$??%$? $36 Tomorrow $15100%$15 $3590%$31 $450%$2 $1050%$5 $53

17. [ www.kiesling.com ] 17

18. [ www.kiesling.com ] 18 Questions? Matt Macdonald, Partner mmacdonald@kiesling.com 608.664.9110 Madison, WI 53593 Thank you!