Telergee Conference

1. Telergee Conference • Discussion Materials prepared for: • 2009 Telergee Conference • October 15, 2009

2. Otelco Overview • Acquired and operate 10 RLECs and 2 facilities based CLECs in Alabama, Maine, Massachusetts, Missouri, New Hampshire and West Virginia • Initial Public Offering on December 16, 2004 • Follow-on offering priced June 28, 2007 • As of 6/30/09, operate over 100,000 voice and data access lines and 122,000 wholesale CLEC network connections • LTM Revenue and Adjusted EBITDA of $92.9 million and $43.9 million respectively

3. Otelco Q2 2009 Metrics Key Operating Statistics

4. Industry Update • Recent Service Provider Observations • “We expect continuing declines in traditional access lines but offsets in growth in broadband and video services.” (2008 10-K) • “Telegraphs aren't relevant. Wireline voice, whether you're in a rural area or urban area, wireline voice-over copper over time will not be relevant. It is the way that it is.” (Q4 2008 Earnings Call) • “We expect competition to intensify as a result of the entrance of new competitors and the rapid development of new technologies, products and services.” (2008 10-K) • “We have lost access lines primarily because of competition, changing consumer behavior, economic conditions, [and] changing technology…” (2008 10-K) • “As consumers look to reduce expenses, they may be more inclined to discontinue their land line and maintain their wireless phone.” (2008 10-K) • “We continue to see an increasing correlation between our triple-play availability and line retention.” (Q4 2008 Earnings Call) • “Competitive expansions primarily from cable facilities into our service areas are expected to slow in 2009, but we could experience some increased competition from high-speed Internet offerings of wireless competitors.” (2008 10-K) Source: Company filings, Company earnings calls, and Stifel Nicolaus analysis

5. Industry Update • RLECs are a declining industry • (millions) 2005 2006 2007 2008 • RLEC access lines 158.5 149.8 142.0 128.5 • CLEC facility based lines 10.2 11.1 11.7 11.8 • Total access lines 168.7 160.9 153.7 140.3 • Access lines lost 7.8 7.2 13.4 • Rate of decline 4.6% 4.6% 8.7% • Source: JSI Capital Advisors, Phone Lines 2009

6. Industry Update • Change in service providers • 2005 2006 2007 2008 • % HH served by telcos 83.7 77.1 71.2 63.0 • % HH served by cable telephony 4.9 7.7 11.8 15.2 • % HH served by wireless only 8.4 12.8 15.8 20.2 • % HH served by telco VOIP .6 1.4 2.0 2.9 • Totals 97.6 99.0 100.8 101.3 • Note: Assumed wireless will have multiple devices beginning in 2007 • Source: NECA Trends Report 2008

7. Industry Response • ILEC / Cable Battleground Source: Company filings, company press releases, and Stifel Nicolaus analysis Note:(1) Data is as of or for the three month period ended March 31, 2009.

8. Industry Response • Wireless Data ARPU Year-Over-Year Growth Across the wireless industry, declining voice ARPU is increasingly offset by growing data service ARPU. Since 4Q 2006, data ARPU as a percent of total ARPU has grown 33% on a compound annual basis. 26% 32% 31% 17% 33% Source: Company press releases, research reports and Stifel Nicolaus analysis

9. Industry Update • Continuing decline in access minutes of use (mou): • 2006 2007 2008 • Access mou 3.671B 3.291B 3.053B • Rate of decline 10.4% 7.24% • Additionally, the revenue per mou is declining due to the increasing percentage of wireless minutes – negative effect on EBITDA • Source: JSI study of 53 companies with access lines ranging from 352 to 80,000

10. Industry Response • Service Provider Strategies • “Our strategy is to offset [our] line losses by increasing non-access-line-related revenues from customer connections for data, video and voice.” (2008 10-K) • “We continue to focus on increasing our revenues per customer, primarily by improving our DSL and IPTV market penetration…” (2008 10-K) • “We believe there is a high correlation between service quality and the likelihood that our customers will remain with us when presented with a competitive alternative.” (2008 10-K) • “We are going to be able to offer a lot of new products and services to our customers… including customizable bundles [and] business services that leverage [our] high-speed IP data network...” (2008 10-K) • “Our message is that customers need not cut back on their must-have high-speed, video, and voice products when they bundle with Frontier.” (Q4 2008 Earnings Call) • “We will utilize value added services such as speed, content, and features along with unparalleled customer service as a differentiator.” (2008 10-K) • “We believe that broadband, having broadband in the homes is an important part of our service offering.” (Q4 2008 Earnings Call) • “We understand that these are tough times and we want to be competitively priced for that.” (Q4 2008 Earnings Call) • “In the consumer segment, we see the near-term competitive battle for data services moving to affordability rather than top end speed…We are very cognizant of the pocketbook, and [are] moving to introduce product sets focused on affordability.” (Q4 2008 Earnings Call) • “In the current market environment, to stay competitive, we must be able to offera Video product on par with our competitors at a competitive price.” (2008 10-K) Source: Company press releases, research reports and Stifel Nicolaus analysis

11. Industry Response • Increased efforts to effectively manage costs and operations • Offset access line losses by increasing revenues for data, video and other products • Bundled service offerings

12. Industry Response • Growth Trends (1) The increased pace of access line erosion in 2008 caused the ILECs to realize negative revenue growth. 2005 2006 2007 2008 Source: Company filings, press releases and Stifel Nicolaus analysis Note: (1) Composite Index is comprised of CenturyTel, D&E, Embarq, Frontier, and Iowa Telecom.

13. Industry Response • Overall broadband availability to customers served by NECA TS pool companies members reached 92% in 2008 • More than 500 NECA RLEC companies are offering video services • Other products include data storage, transport services, fiber lease, etc. • Source: NECA Trend Report 2008

14. Industry Response • Consolidation opportunities: • Currently there are 784 independent telcos in the USA • Combining operations provides economies of scale necessary to compete with wireless and cable operators • Opportunities to improve margins by consolidation of administrative and certain back office functions • Current difficulties for acquisitions include declining RLEC values and tight credit markets

15. Industry Response ILEC Enterprise Valuation Trends – LTM EBITDA Independent ILEC valuations have decreased over time as access line loss continues and DSL and video growth slows. 9.6x 6.7x 6.6x 6.4x 5.3x 5.3x 5.2x 4.8x Source: Company filings, press releases, Stifel Nicolaus Research, Thompson Research, and Stifel Nicolaus analysis.

16. Industry Response • LIBOR – OIS Spread (bps) (1) 10/10/08 Global Financial Crisis 9/15/08 Lehman Brothers 12/10/07 Bank Writedowns 9/14/07 Northern Rock 3/17/08 Bear Stearns Stable Financial System Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Source: Bloomberg and Stifel Nicolaus analysis Note: (1) LIBOR-OIS spread is the difference between the 3-month LIBOR and the Overnight Index Swap Rate.

17. Other Items of Interest • Broadband Stimulus • Fairpoint and Hawaii Telecom