(Amounts in thousands, except select operating metrics and share and per share amounts)

Certain statements included in this report, including that which relates to the impact on future revenue sources and potential sharing obligations of pending and future regulatory orders, continued expansion of the telecommunications network and expected changes in the sources of our revenue and cost structure resulting from our entrance into new communications markets, are forward-looking statements and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. These forward looking statements generally are identified by the words "believe", "expect", "anticipate", "estimate", "intend", "should", "may", "will", "would", "will be", "will continue" or similar expressions. Such forward looking statements involve known and unknown risks, the impact of current economic conditions, uncertainties and other factors that may cause actual results, performance or achievements of SureWest Communications (the "Company, "we" or "our) to be different from those expressed or implied in the forward-looking statements. A detailed discussion of these and other risks and uncertainties that could cause actual results and events to differ materially from such forward-looking statements is included in our 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC"). We disclaim any intention or obligation to update or revise publicly any forward-looking statements. Management's Discussion and Analysis should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes to the financial statements ("Notes") as of and for the three months ended March 31, 2009 included in Item 1 of this Quarterly Report on Form 10-Q.

We are one of the nation's leading integrated communications providers and are the bandwidth leader in the markets we serve. We classify our operations in two reportable segments: Broadband and Telecommunications ("Telecom"). We market our services individually and as bundled services to both residential and business customers in the greater Sacramento, California and greater Kansas City, Kansas and Missouri areas ("Kansas City area").

Our Broadband segment earns revenues primarily through subscriptions to our video, high-speed Internet and digital phone services. Our video services range from a limited basic service to a full digital cable service. Many of our services are delivered utilizing fiber-to-the-premise and fiber-to-the-node networks, which allow us to offer a high quality experience with our digital TV Packages. Our full digital cable service provides access to over 340 and 260 channels in our California and Kansas City markets, respectively, including premium and pay-per-view channels (which include concerts, wrestling, boxing, sporting events and movies); video on demand ("VOD") service (which allows access to a library of movies and the ability to start a selection at any time and to pause, rewind and fast-forward and replay); premium VOD channels, music channels and an interactive, on-screen program guide (which allows the subscriber to navigate the channel lineup and the video on demand library). Digital cable subscribers can also subscribe to additional digital cable services, including a digital video recorder ("DVR") (which allows subscribers to record two programs at the same time and pause, replay and rewind "live" television) and high-definition ("HD") television, which provides multiple channels in high definition.

Our high-speed Internet service can provide Internet access at symmetrical speeds of up to 50 Mbps, depending on the level of service selected. As of March 31, 2009, approximately 32% of the homes in the areas we serve subscribed to one of our high-speed Internet services. In March 2008, we launched our new Voice over Internet Protocol ("VoIP") digital phone product in the Sacramento market. Our digital phone service is available in packages ranging from basic service to unlimited local and domestic long distance calling plans. Nearly all of our digital phone service plans include an extensive array of calling features including Caller ID and Call Waiting, Find Me/Follow Me, sequential ringing and selective call acceptance and rejection. As of March 31, 2009, approximately 9% of the homes in our Sacramento market have subscribed to our new VoIP phone service.

Our Telecom segment, which operates only in the Sacramento area, offers a broad selection of telecommunications services including, traditional landline voice services, Digital Subscriber Line ("DSL"), long distance services and certain non-regulated services. Traditional landline services are offered from basic local service to bundled packages ranging from unlimited local calling to unlimited local and domestic long distance calling plans. Our voice products include long distance services and value-added services such as voicemail, call waiting, caller identification and many other calling feature options. Long distance services are offered by our subsidiary SureWest Long Distance, which is a reseller of long distance services.

In February 2009, we sold our fifty-two wireless communications towers ("Tower Assets") owned by our subsidiary West Coast PCS, LLC ("West Coast PCS") to Global Tower Partners. West Coast PCS was a component of our Broadband segment. The sale was completed for an aggregate cash purchase price of $9,222, based on the tower cash flow generated by commenced tenant leases, resulting in a gain as of March 31, 2009 of $2,465, net of tax. Proceeds from the sale of the Tower Assets were used to repay a portion of outstanding long-term debt.

In May 2008, we completed the sale of the operating assets of our Wireless business, SureWest Wireless, to Verizon Wireless ("Verizon") for an aggregate cash purchase price of $69,746, resulting in a gain of $18,864, net of tax. Under the agreement, Verizon acquired the spectrum licenses and operating assets of SureWest Wireless, excluding our owned communication towers. SureWest Wireless was previously reported as a separate reportable segment.

On February 13, 2008, we acquired 100% of the issued and outstanding stock of Everest Broadband, Inc. ("Everest" or the "Kansas City operations") for a total purchase price of $181,459, including transaction costs. Subsequent to the acquisition, the Kansas City operations have been included in our Broadband segment. Everest is a competitive provider of high-speed data, video and voice services in the greater Kansas City area. The acquisition of Everest accelerates our growth strategy and has positioned us as the premier provider of network services to residential and business customers in the markets we serve.

Consolidated Overview

The tables below reflect certain financial data (on a consolidated and segment basis) and select operating metrics for each of our reportable segments as of and for the quarters ended March 31, 2009 and 2008.

                                 Financial Data



                                                   Quarter Ended March 31,
                                                                    $         %
                                             2009       2008      Change    Change
Operating revenues (1)
Broadband                                  $ 39,222   $ 26,831   $ 12,391       46 %
Telecom                                      21,720     24,482     (2,762 )    (11 )
Operating revenues                           60,942     51,313      9,629       19

Income (loss) from operations
Broadband                                    (7,002 )   (7,457 )      455        6
Telecom                                      10,322     10,148        174        2
Income from operations                        3,320      2,691        629       23

Income (loss) from continuing operations
Broadband                                    (5,398 )   (5,770 )      372        6
Telecom                                       5,477      5,792       (315 )     (5 )
Income from continuing operations          $     79   $     22   $     57      259 %

                            Select Operating Metrics



                                                        As of March 31,
                                            2009        2008       Change     % Change
Broadband
Total residential subscribers (1)          102,800      96,900       5,900           6 %
Broadband residential
revenue-generating units (2)               224,400     200,800      23,600          12
Data                                        98,100      91,800       6,300           7
Video                                       60,000      55,200       4,800           9
Voice                                       66,300      53,800      12,500          23
Total business customers (3)                 6,700       6,000         700          12

Telecom
Voice revenue-generating units (4)          49,500      66,800     (17,300 )       (26 )
Total business customers (3)                 9,000       9,600        (600 )        (6 )%

(2) We can deliver multiple services to a customer. Accordingly, we maintain statistical data regarding revenue-generating units ("RGUs") for digital video, voice and data, in addition to the number of subscribers. For example, a single customer who purchases digital video, voice and data services would be reflected as three RGUs.

(3) Total business customers are customers who receive business data, voice or video services and represent a distinct customer account.

(4) Voice RGUs are residential customers who subscribe to one or more voice access lines.

Operating Revenues

Operating revenues for the Broadband segment increased $12,391 in the quarter ended March 31, 2009 compared to the same period in 2008. The Broadband segment results of operations in the current year compared to the same prior year period have been impacted by the effects of the Everest acquisition in February 2008, as described above. The Kansas City operations contributed approximately $9,451 of the increase in operating revenues during the quarter ended March 31, 2009 compared to the same prior year period.

At March 31, 2009, the Broadband segment experienced a 6% annual increase in the number of residential subscribers compared to the prior year. Data and video RGUs increased 7% and 9%, respectively, compared to 2008 which was reflective of our ability to offer subscribers high-speed data, HD TV, HD DVR and other enhanced services. In addition, Broadband operating revenues increased due to the continued expansion of the broadband network and growth in the demand for digital video, voice and data offered as a bundled triple-play package.

The introduction of our VoIP Digital Phone product in the Sacramento market during 2008, including the Telecom segment service territory, has resulted in an elevated take rate and an increase in broadband residential triple-play RGUs, while successfully mitigating access line losses in the Telecom segment by migrating these customers to voice RGUs in the Broadband segment. Broadband voice RGUs in the Sacramento market increased 55% as of March 31, 2009 compared to the same prior year period.

We will continue to invest in success-based capital and building and deploying the broadband infrastructure primarily within the Kansas City area, while focusing on the generation of new customers and increasing residential penetration on existing marketable homes.

Operating revenues in the Telecom segment decreased $2,762 in the quarter ended March 31, 2009 compared to the same period in 2008. Residential revenues accounted for $2,040 of the decrease in the current year period. Residential services were largely impacted by our customer's migration toward alternative communication services, including those offered by our Broadband segment, which contributed to an approximate 26% decline in the Telecom segment voice RGUs as of March 31, 2009 compared to 2008. In an effort to mitigate future operating revenue and voice RGU declines, we offer various flat-rate and bundled service packages and provide a broadband VoIP service to customers residing within SureWest Telephone's service area. The decrease in operating revenues was also impacted by the scheduled reduction in California High Cost Fund ("CHCF") subsidies of approximately $510 during the quarter ended March 31, 2009 compared to the same period in 2008. See the Regulatory Matters section within the Telecom Segment Result of Operations section below, for a further discussion regarding the regulatory subsidies we receive.

Operating Expenses

Consolidated operating expenses, excluding depreciation and amortization, increased $6,257 in the quarter ended March 31, 2009 compared to the same prior year period. Our Broadband segment accounted for substantially all of the increases in our consolidated operating expenses primarily as a result of the addition of our Kansas City operations, which accounted for $8,042 of the current year increase. The change was also impacted by a decline in operating expenses for the Telecom segment in connection with the decline in Telecom operating revenues and voice RGUs.

Cost of services and products expense increased $6,461 in the current year period compared to the same prior year period primarily as a result of the Kansas City operations, as well as increases in programming costs related to the growth in Broadband subscribers. Customer operations and selling expense increased $791 during the quarter ended March 31, 2009 compared to the same prior year period due primarily to the addition of the Kansas City operations, but was also impacted by a decrease in sales and advertising costs as a result of a reduction in radio and television advertising in the current year period. General and administrative expenses decreased $995 during the quarter ended March 31, 2009 compared to the same period in 2008 primarily as a result of
(i) a decline in consulting and advisory fees related to strategic initiatives,
(ii) information technology costs related to production support projects in the prior year and (iii) a decrease in salaries and wages from a reduction in headcount.

The increase in the consolidated operating expenses in 2009 compared to 2008 was also due to an increase in the costs associated with our defined benefit pension plan (the "Pension Plan"), Supplemental Executive Retirement Plan and certain post-retirement benefits other than pensions ("Other Benefits Plan") (collectively the "Plans"). Consolidated operating expenses increased $1,147 as a result of an increase in pension costs related to the Plans during the quarter ended March 31, 2009 as compared to the same period in 2008. See Note 7 for more information on the Plans.

Our consolidated depreciation and amortization expense increased $2,743 during the quarter ended March 31, 2009 compared to the same prior year period due to the Kansas City operations, continued network build-out and success-based capital projects undertaken within the residential broadband service territories, partially offset by certain Telecom assets becoming fully depreciated in the current year period.

Reclassifications

Certain amounts in our 2008 condensed consolidated financial statements have been reclassified to conform to the presentation of our 2009 condensed consolidated financial statements, which primarily consists of the effects of reclassifications from presentation of our Tower business as a discontinued operation.

Revenue and Cost Structure

We expect that the sources of our revenues and our cost structure may be different in future periods, as a result of our entry into new communications markets and regulatory and competitive forces in each of the markets in which we have operations.

Segment Results of Operations



Broadband



                                                          Quarter Ended March 31,
                                                                            $        %
                                                     2009       2008     Change    Change

Data                                               $ 10,763   $  8,789   $ 1,974       22 %
Video                                                11,689      7,369     4,320       59
Voice                                                 6,399      3,749     2,650       71
Total residential revenues                           28,851     19,907     8,944       45
Business                                              9,585      6,348     3,237       51
Access                                                  384        220       164       75
Other                                                   402        356        46       13
Total operating revenues from external customers     39,222     26,831    12,391       46
Intersegment revenues                                    91        140       (49 )    (35 )
Operating expenses*                                  34,695     26,023     8,672       33
Depreciation and amortization                        11,620      8,405     3,215       38
Loss from operations                                 (7,002 )   (7,457 )     455        6
Loss from continuing operations                    $ (5,398 ) $ (5,770 ) $   372        6 %

Operating revenues from external customers in the Broadband segment increased $12,391 during the quarter ended March 31, 2009 compared to the same period in 2008. Our Kansas City operations, as described above, contributed $9,451 of the increase in operating revenues in the current year period due to the acquisition of Everest in February of 2008. The change also included growth in residential and business revenues in the Sacramento markets as described below.

Residential Revenues

Broadband residential revenues increased $8,944 during the quarter ended March 31, 2009 compared to the same period in 2008, of which $6,854 was attributable to our Kansas City operations. Broadband residential subscribers and RGUs increased 6% and 12%, respectively, as of March 31, 2009 compared to 2008. We anticipate continued growth in residential broadband RGUs and average revenue per user resulting from the HD DVR and VoIP digital phone services. The digital phone product presents our customers with a more competitive triple-play offering with increased options and multiple packages.

Data

We offer high speed Internet access at symmetrical speeds of up to 50 Mbps, depending on the level of service selected. The reliability and high speeds of the data service in both the Sacramento and Kansas City markets enhance other services such as the SureWest Digital Phone, where customers manage phone services through the online SureWest portal. Through the SureWest portal customers can manage their SureWest Digital Phone service and access a variety of value added features and enhancements that are designed to take advantage of the speed of the Internet service we provide.

Our residential data revenues increased $1,974 during the quarter ended March 31, 2009 compared to the same period in 2008 as a result of subscriber growth and the addition of our Kansas City operations. Data RGUs increased 7% as of March 31, 2009 compared to the same period in 2008.

Video

Many of our video services range from a limited basic service to a full digital cable service. Our services are delivered utilizing fiber-to-the-premise and fiber-to-the-node networks, which allow us to offer a high quality experience with digital TV Packages. Our full digital cable service provides access to over 340 and 260 channels in our California and Kansas City markets, respectively, including premium and pay-per-view channels, VOD service, premium VOD channels, music channels and an interactive, on-screen program. Digital cable subscribers can also subscribe to additional digital cable services, including a DVR and HDTV.

Residential video revenues increased $4,320 during the quarter ended March 31, 2009 compared to the same period in 2008. The Broadband segment (including our Kansas City operations) experienced growth in Video RGUs and residential subscribers of 9% and 6%, respectively, as of March 31, 2009 compared to the same period in 2008. Revenues also increased as a result of higher pricing on our video services effective January 2009 and demand for enhanced video offerings such as VOD, DVR and HDTV.

Voice

In March 2008, we launched our new VoIP digital phone product in the Sacramento market. Our digital phone service is available in packages ranging from basic service to unlimited local and domestic long distance calling plans. Nearly all of digital phone service plans include a broad array of calling features; including Caller ID and Call Waiting, Find Me/Follow Me, sequential ringing and selective call acceptance and rejection. As of March 31, 2009, approximately 9% of the homes in our Sacramento market have subscribed to our new digital phone service and we anticipate that the take rate on this service will increase to 13% by the end of 2009. We also offer traditional voice services in some of the areas we serve.

Residential voice revenues increased $2,650 during the quarter ended March 31, 2009 compared to the same period in 2008. The increase was due in part to the growth in voice RGUs of 23% as of March 31, 2009 compared to 2008 and the addition of our Kansas City operations in February of 2008. As anticipated, the launch of our VoIP Digital Phone product in the Sacramento market, including the Telecom service territory, has resulted in elevated take rates and an increase in Broadband residential triple-play RGUs.

Business Revenues

We provide a variety of business communications services to small, medium and large business customers. The services we offer to our business customers include: fiber-optics based high-speed Internet, customized data and Ethernet transport services, data center and disaster recovery solutions, traditional landline and VoIP phone services and digital TV.

Business revenues increased $3,237 during the quarter ended March 31, 2009 compared to the same period in 2008 due primarily to a 12% increase in business customers as of March 31, 2009 compared to 2008. We continue to expand our business broadband services in Sacramento; however, a significant portion of the business revenue growth was due to the addition of our Kansas City operations.

Total operating expenses in the Broadband segment increased $8,672 during the quarter ended March 31, 2009 compared to the same period in 2008. The increase was due to the addition of Kansas City operations in February 2008 of $8,042 and an increase in costs related to the Plans of approximately $487, as described in the Consolidated Overview section above.

Cost of services and products (exclusive of depreciation and amortization) increased $7,566 during the quarter ended March 31, 2009 compared to the same period in 2008. The increase in costs in the current year period was primarily due to the Kansas City operations, contributing $6,046 in additional expenses due to the acquisition in February of 2008. The increase was also attributable to (i) an increase in programming, transport and access costs related to the growth in Broadband subscribers, residential broadband RGUs and business customers and (ii) an increase in maintenance costs corresponding to the increased subscriber count, as well as the expanded network footprint.

Customer operations expense increased $1,373 during the quarter ended March 31, 2009 compared to the same period in 2008. Substantially all of the increase in the current year period was attributable to our Kansas City operations resulting from the acquisition in February of 2008, and from increased advertising in the Kansas City market. We have experienced a modest decrease in the Sacramento market in sales and advertising costs due to decreases in radio and television advertising in the current year period.

General and administrative expense decreased $267 during the quarter ended March 31, 2009 compared to the same period in 2008 primarily due to decreases in
(i) information technology costs related to system maintenance and development, including integration of Kansas City operations and increased production support projects in the prior year period and (ii) headcount in the current year period.

Depreciation and amortization increased $3,215 during the quarter ended March 31, 2009 compared to the same period in 2008 due to the continued expansion of the broadband network and success based capital projects. Our Kansas City operations increased depreciation and amortization expense by $2,939 in the current year period due to the acquisition of Everest in February of 2008.

Telecom



                                                          Quarter Ended March 31,
                                                                          $         %
                                                    2009      2008      Change    Change

Residential                                        $ 6,862   $ 8,902   $ (2,040 )    (23 )%
Business                                             9,048     9,047          1        0
Access                                               5,647     6,342       (695 )    (11 )
Other                                                  163       191        (28 )    (15 )
Total operating revenues from external customers    21,720    24,482     (2,762 )    (11 )
Intersegment revenues                                4,874     4,343        531       12
Operating expenses*                                 13,082    15,015     (1,933 )    (13 )
Depreciation and amortization                        3,190     3,662       (472 )    (13 )
Income from operations                              10,322    10,148        174        2
Income from continuing operations                  $ 5,477   $ 5,792   $   (315 )     (5 )%
. . .