FORWARD-LOOKING STATEMENTS

The information set forth in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, including, among others (i) expected changes in NTS, Inc.'s (referred to herein as the "Company", or "NTSI", "we", "our", "ours" and "us") revenues and profitability,
(ii) prospective business opportunities and (iii) our strategy for financing our business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as "believes", "anticipates", "intends" or "expects". These forward-looking statements relate to our plans, objectives and expectations for future operations. Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this Quarterly Report should not be regarded as a representation by us or any other person that our objectives or plans will be achieved.

You should read the following discussion and analysis in conjunction with the Condensed Consolidated Financial Statements and Notes attached hereto, and the other financial data appearing elsewhere in this Quarterly Report.

Our revenues and results of operations could differ materially from those projected in the forward-looking statements as a result of numerous factors, including, but not limited to, the following: the risk of significant natural disaster, the inability of the Company to insure against certain risks, inflationary and deflationary conditions and cycles, currency exchange rates, and changing government regulations domestically and internationally affecting our businesses.

US Dollars are denoted herein by "USD", New Israeli Shekels are denoted herein by "NIS", and the UK Pound Sterling is denoted herein by "GBP".

OVERVIEW

NTS, Inc. ("NTSI") was incorporated in the State of Nevada, U.S.A. in September 2000 under the name Xfone, Inc. We are a holding and managing company providing, through our subsidiaries, integrated communications services which include voice, video and data over our Fiber-To-The-Premise ("FTTP") and other networks. We currently have operations in Texas, Mississippi and Louisiana. Effective as of February 1, 2012, the Company changed its name to "NTS, Inc." and as of February 2, 2012 the Company's shares of Common Stock are traded on the NYSE Amex and the TASE under the new ticker symbol "NTS". The name change is a reflection of our refined and enhanced business strategy which began with our acquisition of NTS Communications, Inc. ("NTSC") in 2008 and its focus on the build out of our high-speed FTTP network.

Our principal executive offices are located in Lubbock, Texas.

Purchase of assets and liabilities of CoBridge Telecom, LLC

On April 25, 2011, NTSC entered into an Asset Purchase Agreement (the "Agreement") with CoBridge Telecom, LLC, ("CoBridge"), pursuant to which CoBridge agreed to sell NTSC all of CoBridge's assets in and around the communities of Colorado City, Levelland, Littlefield, Morton, and Slaton Texas pursuant to the terms of the Agreement. CoBridge provided cable television service in those communities via coaxial cable facilities and the Company acquired these assets to accelerate its penetration in these markets. As part of the transaction, NTSC also agreed to assume certain contracts of CoBridge which are necessary to continue operation of the assets that were acquired. The sale and purchase closed on July 1, 2011 but the purchase price was adjusted in November based on the number of CoBridge's customers who failed to pay their accounts or cancelled service (offset by customers who converted to NTSC's service in relevant markets). The Company is still in negotiations with CoBridge to agree on the final purchase price.

Purchase of assets and liabilities of Reach Broadband

On September 16, 2011, NTSC entered into an Asset Purchase Agreement (the "Agreement") with RB3, LLC, and Arklaoktex, LLC, each doing business as Reach Broadband ("Reach"), pursuant to which Reach agreed to sell NTSC all of Reach's assets in and around the communities of Abernathy, Anton, Brownfield, Hale Center, Idalou, Levelland, Littlefield, Meadow, New Deal, O'Donnell, Olton, Reese, Ropesville, Shallowater, Smyer, Tahoka, and Wollforth Texas pursuant to the terms of the Agreement. Reach provided those communities with cable television service via coaxial cable facilities and Internet service via a wireless network and the Company acquired these assets to accelerate its penetration in these markets. The sale and purchase closed on December 1, 2011, but is subject to a purchase price adjustment based on the number of Reach's customers who failed to pay their accounts or cancelled service (offset by customers who converted to NTSC's service in relevant markets). The Company has not yet agreed on the final purchase price with Reach.

RESULTS OF OPERATIONS

Financial Information - Percentage of Revenues:

                                                               Three months ended
                                                                    March 31,
                                                                2012          2011
Revenues:
Services on Fiber-To-The-Premise network                           27.3 %       20.7 %
Leased local loop services and other                               72.7 %       79.3 %
Total Revenues                                                      100 %        100 %

Expenses:
Cost of services (excluding depreciation and amortization)         47.7 %       49.2 %
Selling, general and administrative                                34.4 %       37.3 %
Depreciation and amortization                                      10.3 %        8.2 %
Financing expenses, net                                             9.7 %       10.7 %
Other expenses                                                      1.3 %        1.0 %
Total expenses                                                    103.4 %      106.4 %

Loss before taxes                                                 (3.4) %      (6.4) %

Net loss                                                          (2.3) %      (4.4) %

COMPARISON OF THE THREE MONTHS PERIODS ENDED MARCH 31, 2012 AND MARCH 31, 2011

Revenues. Revenues for the quarter ended March 31, 2012 increased by 4.7% to $14,923,829 from $14,257,218 for the same period in 2011. Revenues from our Fiber-To-The-Premise ("FTTP") network in the quarter ended March 31, 2012 increased 38.3% to $4,072,667 from $2,945,400 in the same period in 2011. As a percentage of total sales, FTTP revenues in the quarter ended March 31, 2012 increased to 27.3% from 20.7% for the same period in 2011. The growth of FTTP revenues is expected to continue due to the increase in our market share in Levelland, TX and the communities which are located in the areas of the PRIDE Network projects, a subsidiary of NTS, Inc.

Revenues from our leased local loop include revenues from wholesale, other carriers and other non-FTTP customers. Revenues from leased local loop in the quarter ended March 31, 2012 decreased 4.1% to $10,851,162 from $11,311,818 for the same period in 2011. As a percentage of total sales, leased local loop revenues in the quarter ended March 31, 2012 decreased to 72.7% from 79.3% for the same period in 2011. The decrease in revenue was caused by the aggressive promotional packages and incentives launched by the competitors and was partially offset with revenues from assets that were purchased from CoBridge and Reach. The transactions with CoBridge and Reach were closed in July 1, 2011 and December 1, 2011, respectively, and revenues from these assets were recorded from the closing date as non-FTTP revenues. We generated cable television services revenue of $599,510 from the acquisition of Cobridge and Reach's assets in the West Texas area. We expect that the decline in revenues from non-FTTP residential customer will continue in 2012 but will be offset by the increase in revenues in FTTP from business and residential customers.

Cost of services (excluding depreciation and amortization). Cost of services consists primarily of facilities and traffic time purchased from other telephone companies and content for our video services. Cost of services for the quarter ended March 31, 2012 increased 1.6% to $7,122,654 from $7,011,475 for the same period in 2011. Cost of services, as a percentage of revenues in the quarter ended March 31, 2012, decreased to 47.7% from 49.2% in the same period in 2011. The decrease in the cost of services, as a percentage of revenues, is the result of an increase in high-margin FTTP revenues and a decrease in low-margin revenues from non-FTTP residential customers and wholesale. We expect that the cost of services, as a percentage of revenues, will decline as we increase the portion of revenues generated from our high-margin FTTP services.

Selling, General and Administrative Expenses. Selling expenses consist primarily of compensation costs for our sales, administrative and management employees. Selling, general and administrative expenses for the quarter ended March 31, 2012, decreased 3.4% to $5,136,761 from $5,317,448 for the same period in 2011. General and administrative expenses include stock options compensation which relates to stock options that were granted to our employees and directors and vest during the reported period. Total stock option compensation in the quarter ended March 31, 2012 decreased by $42,466 (or 51.2 %) to $40,530 from $82,996 for the same period in 2011. The decrease in the expenses resulted mainly from savings in the corporate expenses.

Depreciation and amortization. Depreciation and amortization expenses for the quarter ended March 31, 2012, increased by $364,691 (or 31.2%) to $1,533,973 from $1,169,282 for the same period in 2011. The increase was due to the large investments in the development of the FTTP networks.

Financing Expenses. Financing expenses, net, for the quarter ended March 31, 2012 decreased by $82,731 (or 5.4%) to $1,441,699 from $1,524,430 for the same period in 2011. Financing expenses consist of interest payable on our financial obligations, the measurement of the Bonds which are stated in NIS and linked to the Israeli Consumer Price Index (the "CPI"). The decrease in financing expenses is a result of the decrease in principal of our outstanding bonds and an evaluation of 2.8% in the USD against the NIS and no inflation during the first quarter of 2012 versus an evaluation of 1.9% in the USD against the NIS and adjustment to the inflation of 0.9% in the same period in 2011. The financial expenses are presented net of unearned gain on the hedging of interest and principal Bond payments in 2012 which offsets an increase in financing expense incurred for new loans in 2011. Financial expenses also includes expenses related to warrants that were issued to Burlingame Equity Investors, LP ("Burlingame") on March 2010 and expenses of the difference between the allocated relative fair value and the principal amount of the loan from Burlingame from March 2010.

Other Expenses. Other expenses for the quarter ended March 31, 2012 increased by approximately 35.4% to $198,669 from $146,732 for the same period in 2011. Other expenses consist of mainly real estate taxes. The increase in other expenses is due to the increase in property tax for PRIDE Network, Inc.

Income taxes. We conduct our business in several states in the US. Therefore, our operating income is subject to varying rates of state tax in the US. Consequently, our effective tax rate is dependent upon the geographic distribution of our earnings or losses. However, we expect that our income taxes will not materially vary in relation to the geographic distribution of our profits inside the US. Due to non-deductible compensation related to stock options and non-deductible amortization of intangible assets, our effective tax rate was 33.52% and 30.54% for the quarter ended March 31, 2012 and 2011, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents as of March 31, 2012 amounted to $7,672,192, compared to $6,563,514 as of December 31, 2011, an increase of $1,108,678. Net cash provided by operating activities in the quarter ended March 31, 2012 was $1,369,265, an increase of $683,458 compared to $685,807 which were provided by operating activities in the quarter ended March 31, 2011. An increase in cash flow from operating activities is mostly related to the following changes in working capital: (1) an increase in accounts receivable of $378,856 in the quarter ended March 31, 2012 compared to an increase of $1,191,587 in the same period of 2011; (2) an increase in prepaid expenses and other receivables of $349,831 in the quarter ended March 31, 2012 compared to a decrease of $1,246,350 in the same period of 2011; (3) an increase in the provision for bad debt of $140,524 is attributable in the quarter ended March 31, 2012 compared to an increase of $86,117 in the same period of 2011; (4) an increase in long term receivables of $29,023 in the quarter ended March 31, 2012 compared to an increase of $2,923 in the same period of 2011; and (5) a decrease in other liabilities and accrued expenses of $212,460 in the quarter ended March 31, 2012 compared to a decrease of $835,085 in the same period of 2011. Cash used for investing activities in the quarter ended March 31, 2012 was $3,309,512 compared to $2,442,267 in the same period of 2011. Of that amount, $2,686,524 is attributable to the build out of our FTTP projects under the United States Department of Agriculture in Levelland, TX, and the PRIDE Network projects and $622,988 to the purchase of other equipment. Net cash provided by financing activities for the quarter ended March 31, 2012 was $3,048,925 and is primarily attributable to proceeds from long-term loans from the United States Department of Agriculture which are offset by repayment of the capital lease obligations and loans from a bank.

Capital lease obligations. We are the lessee of switching and other telecom equipment under capital leases expiring on various dates through 2014.

As of March 31, 2012, we reported a working capital deficit of $6,753,113 compared to a working capital deficit of $3,596,693 on December 31, 2011. We believe that we can refinance our short-term debt and together with the increase in revenues from our higher margin Fiber-To-The-Premise network which will result in increased profitability, we will improve our working capital deficit and meet our anticipated cash requirements for operating needs for at least the next 12 months. If, however, we do not generate sufficient cash from operations, or if we incur additional unanticipated liabilities or we are unable to renew and extend a portion of our short-term credit line and notes payable, we may be required to seek additional financing or sell equity or debt on terms which may not be as favorable as we could have otherwise obtained. No assurance can be given that any refinancing, additional borrowing or sale of equity or debt will be possible when needed or that we will be able to negotiate acceptable terms. In addition, our access to capital is affected by prevailing conditions in the financial and equity capital markets, as well as our own financial condition. While management believes that we will be able to meet our liquidity needs for at least the next 12 months, no assurance can be given that we will be able to do so.

The following table represents our contractual obligations and commercial commitments, excluding interest expense, as of March 31, 2012:

                                                               Payments Due by Period
                                                    Less than                                          More than
    Contractual Obligations          Total            1 Year         1-3 Years        4-5 Years         5 Years

Domestic Note Payable             $  8,523,845     $    841,674     $  2,807,171     $  4,875,000     $          -
Other notes payable                  3,313,105        3,313,105                                 -                -
Notes Payable from the United
States Department of
Agriculture                         26,132,926        1,247,799        2,495,598        2,495,598       19,893,931
Bonds                               15,246,325        3,954,209        7,528,078        3,764,038                -
Capital leases                         718,466          418,294          300,172                -                -
Operating leases                     2,645,727        1,588,376          913,987          143,364                -

Total contractual cash
obligations                       $ 56,580,394     $ 11,363,457     $ 14,045,006     $ 11,278,000     $ 19,893,931

NTS, Inc.

The Series A Bonds

On December 13, 2007 (the "Date of Issuance"), we issued non-convertible bonds to Israeli institutional investors, for total gross proceeds of NIS 100,382,100
(approximately $25,562,032, based on the exchange rate as of December 13, 2007)
(the "Series A Bonds"). The Series A Bonds were issued for an amount equal to their par value.

The Series A Bonds accrue annual interest that is paid semi-annually on the 1st of June and on the 1st of December of every year from 2008 until 2015 (inclusive). The principal of the Series A Bonds is repaid in eight equal annual payments on the 1st of December of every year from 2008 until 2015 (inclusive). The principal and interest of the Series A Bonds are linked to the Israeli CPI.

On November 4, 2008, we filed a public prospectus (the "Prospectus") with the Israel Securities Authority and the TASE for listing of the Series A Bonds for trading on the TASE. On November 11, 2008 (the "Date of Listing"), the Series A Bonds commenced trading on the TASE. From the Date of Issuance until the Date of Listing, the Series A Bonds accrued annual interest at a rate of 9%. As of the Date of Listing, the interest rate for the unpaid balance of the Series A Bonds was reduced by 1% to an annual interest rate of 8%.

The Series A Bonds may only be traded in Israel. The Series A Bonds are currently rated Baa3 with a negative outlook by Midroog Limited, an Israeli rating company which is a subsidiary of Moody's Investor Services.

On March 25, 2008, we issued the holders of the Series A Bonds, for no additional consideration, 956,020 (non-tradable) warrants, each exercisable at an exercise price of $2.04 (as adjusted in November 2011) with a term of 4 years, commencing on September 2, 2008.

Other Events

Our Board adopted a buy-back plan (the "Plan"), effective as of February 13, 2012, according to which we may, from time to time, repurchase our Series A Bonds which are traded on the TASE.

Under the Plan we are authorized to repurchase Series A Bonds for up to a total amount of NIS 5 million (approximately USD 1.35 million) in transactions on the TASE or outside the TASE, until December 31, 2012. Any repurchases of the Series A Bonds will be financed from our internal sources, as available from time to time. The Board has authorized our management ("Management") to manage the performance of repurchases according to the Plan, including the conduct of negotiations, at such times, scopes, prices and other terms as Management deems fit. The timing, amounts and terms of any Series A Bonds repurchased by us will be determined, at the discretion of Management, based on market conditions and opportunities, economic advisability and other customary criteria and factors.

Repurchases of the Series A Bonds may be carried out by us and/or our subsidiaries, either directly and/or through a third party. Series A Bonds repurchased by us will be canceled and removed from trading on the TASE and will not be permitted to be reissued.

The Board's resolution is not a commitment to repurchase any Series A Bonds under the Plan. The Plan may be suspended or discontinued by us at any time. As of the date of this filing, we have not repurchased any Series A Bonds.

US subsidiaries

NTS Telephone Company, LLC, a wholly owned subsidiary of NTSC has received approval from the Rural Utilities Service ("RUS"), a division of the United States Department of Agriculture, for an $11.8 million debt facility to complete a telecommunications overbuild project in Levelland, Texas. The principal of the RUS loan is repaid monthly starting one year from the initial advance date until full repayment after 17 years. The loan bears interest at the average yield on outstanding marketable obligations of the United States having the final maturity comparable to the final maturity of the advance. Advances are provided as the construction progresses, and the interest rate is set based upon the prevailing rate at the time of each individual advance. The note is non-recourse to NTSC and all other NTSC subsidiaries and is secured by NTS Telephone's assets which were $13.3 million at March 31, 2012. As of March 31, 2012, the annual average weighted interest rate on the outstanding advances was 3.54%. The total aggregate amount of these loans as of March 31, 2012 is $10,134,121. The loans are to be repaid in monthly installments until 2024.

PRIDE Network, Inc., a wholly owned subsidiary of NTSC has received approval from the Broadband Initiative Program of the American Recovery and Reinvestment Act, for a total $99.9 million funding in form of $45.9 million in grants and $54 million in 19 to 20-year loans. The loans bear interest at the U.S. Treasury rate for comparable loans with comparable maturities. The funding will allow us to develop our FTTP infrastructure, known as the PRIDE Network projects, in northwestern Texas and further expand it to communities in southern Louisiana. Construction work of PRIDE Network's FTTP infrastructure started in October 2010. The total aggregate amount of these loans and grants as of March 31, 2012 is $15,998,804 and $12,652,992, respectively. The loans are non-recourse to NTSC and all other NTSC subsidiaries and are secured by PRIDE Network's assets which were $19 million at March 31, 2012. As of March 31, 2012, the annual average weighted interest rate on the outstanding advances was 3.48%. As of March 31, 2012, the total amount of loan and grant to be available in the future is $37,764,942 and $33,223,928 respectively.

IMPACT OF INFLATION AND CURRENCY FLUCTUATIONS

Following the divestiture of our UK and Israeli operations, all of our assets, liabilities (except the Series A Bonds), revenues and expenditures are in USD.

Notwithstanding having our Series A Bonds stated in NIS and linked to the Israeli CPI, during the three months ended March 31, 2012, our outstanding liability was increased by approximately $589,789 as a result of the devaluation of the NIS in relation with the USD and exchange rate hedging.