(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 six months ended June 30, 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 area 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 ("HDTV"), 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 June 30, 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 identification and call waiting, Find Me/Follow Me, sequential ringing and selective call acceptance and rejection. As of June 30, 2009, approximately 12% 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 June 30, 2009 of $2,525, 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", "SureWest Kansas" 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. SureWest Kansas is a competitive provider of high-speed data, video and voice services in the greater Kansas City area. The addition of our Kansas City operations 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 and six months ended June 30, 2009 and 2008.

                                 Financial Data



                           Quarter Ended June 30,                   Six Months Ended June 30,
                                            $        %                                $         %
                     2009       2008     Change    Change      2009       2008      Change    Change
Operating
revenues (1)
Broadband          $ 40,259   $ 35,301   $ 4,958       14 %  $ 79,481   $ 62,132   $ 17,349       28 %
Telecom              20,671     24,551    (3,880 )    (16 )    42,391     49,033     (6,642 )    (14 )
Operating
revenues             60,930     59,852     1,078        2     121,872    111,165     10,707       10

Income (loss)
from operations
Broadband            (5,224 )   (5,978 )     754       13     (12,226 )  (13,435 )    1,209        9
Telecom               9,839     11,852    (2,013 )    (17 )    20,161     22,000     (1,839 )     (8 )
Income from
operations            4,615      5,874    (1,259 )    (21 )     7,935      8,565       (630 )     (7 )

Income (loss)
from continuing
operations
Broadband            (4,884 )   (5,391 )     507        9     (10,282 )  (11,161 )      879        8
Telecom               5,783      7,120    (1,337 )    (19 )    11,260     12,912     (1,652 )    (13 )
Income from
continuing
operations         $    899   $  1,729   $  (830 )    (48 )% $    978   $  1,751   $   (773 )    (44 )%

                            Select Operating Metrics



                                                    As of June 30,
                                       2009        2008       Change     % Change
Broadband
Total residential subscribers (1)     101,800      99,000       2,800           3 %
Broadband residential
revenue-generating units (2)          224,800     207,700      17,100           8
Data                                   97,700      94,000       3,700           4
Video                                  59,100      57,100       2,000           4
Voice                                  68,000      56,600      11,400          20
Total business customers (3)            6,800       6,200         600          10

Telecom
Voice revenue-generating units
(4)                                    45,100      62,900     (17,800 )       (28 )
Total business customers (3)            8,900       9,600        (700 )        (7 )%

Operating Revenues

Operating revenues in the Broadband segment increased $4,958 and $17,349 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. The Broadband segment results of operations in the current year periods compared to the same prior year periods have been impacted by the effects of the Everest acquisition in February 2008, as described above.

At June 30, 2009, the Broadband segment experienced a 3% annual increase in the number of residential subscribers compared to the prior year. Data and video RGUs both increased 4% compared to 2008 which was reflective of our ability to offer subscribers high-speed data, HDTV, HD DVR and other enhanced services. In addition, Broadband operating revenues increased as a result of higher pricing for video and data services in 2009 as well as 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 in 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 20% as of June 30, 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 $3,880 and $6,642 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. Residential revenues accounted for nearly all of the decrease in operating revenues in the current year periods. 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 28% decline in the Telecom segment voice RGUs as of June 30, 2009 compared to the same period in 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 and $1,020 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. See the Regulatory Matters section below for a further discussion regarding the regulatory subsidies we receive.

Operating Expenses

Consolidated operating expenses, excluding depreciation and amortization, increased $2,184 and $8,441 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. The Broadband segment accounted for substantially all of the increases in our consolidated operating expenses primarily as a result of the addition and growth of our Kansas City operations. The increase in operating expenses in the current year periods was offset in part by a decline in operating expenses in the Telecom segment consequential to the decline in Telecom operating revenues and voice RGUs.

Cost of services and products expense increased $2,804 and $9,265 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. The increase was largely due to increases in programming and network costs related to providing video services and to the growth in Broadband subscribers. Customer operations and selling expense decreased $230 and increased $561 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008 due in part to a decrease in sales and advertising costs as a result of a reduction in radio and television advertising in the current year periods. General and administrative expenses decreased $390 and $1,385 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008 primarily as a result of (i) a decline in consulting and advisory fees related to strategic initiatives and (ii) information technology costs related to production support projects in the prior year periods.

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"). As a result of an increase in costs related to the Plans, consolidated operating expenses increased $1,077 and $2,223 during the quarter and six-month period ended June 30, 2009 compared to the same periods in 2008. See Note 7 for more information on the Plans.

Our consolidated depreciation and amortization expense increased $153 and $2,896 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. The increase in depreciation and amortization expense was primarily due to the addition and growth of our Kansas City operations, continued network build-out and success-based capital projects undertaken within the residential broadband service territories; however, was 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 Assets as a discontinued operation.

Segment Results of Operations



Broadband



                           Quarter Ended June 30,                    Six Months Ended June 30,
                                            $         %                                  $        %
                     2009       2008      Change    Change      2009        2008      Change    Change

Data               $ 11,184   $ 10,338   $    846        8 %  $  21,947   $  19,127   $ 2,820       15 %
Video                11,995     10,365      1,630       16       23,684      17,734     5,950       34
Voice                 6,594      5,395      1,199       22       12,993       9,144     3,849       42
Total
residential
revenues             29,773     26,098      3,675       14       58,624      46,005    12,619       27
Business              9,615      8,374      1,241       15       19,200      14,722     4,478       30
Access                  398        370         28        8          782         590       192       33
Other                   473        459         14        3          875         815        60        7
Total operating
revenues from
external
customers            40,259     35,301      4,958       14       79,481      62,132    17,349       28
Intersegment
revenues                 94        141        (47 )    (33 )        185         281       (96 )    (34 )
Operating
expenses*            34,294     31,085      3,209       10       68,989      57,108    11,881       21
Depreciation and
amortization         11,283     10,335        948        9       22,903      18,740     4,163       22
Loss from
operations           (5,224 )   (5,978 )      754       13      (12,226 )   (13,435 )   1,209        9
Loss from
continuing
operations         $ (4,884 ) $ (5,391 ) $    507        9 %  $ (10,282 ) $ (11,161 ) $   879        8 %

Operating revenues from external customers in the Broadband segment increased $4,958 and $17,349 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. The increase in operating revenues was due in part to the acquisition of Everest in February 2008, as described above, and growth in residential RGUs and business customers.

Residential Revenues

Broadband residential revenues increased $3,675 and $12,619 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. Broadband residential subscribers and RGUs increased 3% and 8%, respectively, as of June 30, 2009 compared to the same period in 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 $846 and $2,820 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008 as a result of subscriber growth and the addition of our Kansas City operations. Data RGUs increased 4% as of June 30, 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 guide. Digital cable subscribers can also subscribe to additional digital cable services, including a DVR and HDTV.

Residential video revenues increased $1,630 and $5,950 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. The Broadband segment experienced growth in Video RGUs and residential subscribers of 4% and 3%, respectively, as of June 30, 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 our 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 June 30, 2009, approximately 12% 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 continue to increase throughout 2009. We also offer traditional voice services in some of the areas we serve.

Residential voice revenues increased $1,199 and $3,849 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. The increase was due in part to the growth in voice RGUs of 20% as of June 30, 2009 compared to the same period in 2008. As anticipated, the launch of our VoIP Digital Phone product in the Sacramento market, including in 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 $1,241 and $4,478 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008 due primarily to a 10% increase in business customers as of June 30, 2009 compared to the same period in 2008. We continue to expand our business broadband services in Sacramento; however, a portion of the business revenue growth was due to the addition of our Kansas City operations.

Total operating expenses in the Broadband segment increased $3,209 and $11,881 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. The increase was due in part to the addition of our Kansas City operations in February 2008 and an increase in costs related to the Plans of approximately $754, as described in the Consolidated Overview section above.

Cost of services and products (exclusive of depreciation and amortization) increased $3,385 and $10,951 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. The increase in costs in the current year periods was largely due to direct costs incurred to provide video services. Programming costs have been increasing over the last several years due to an increase in our video RGUs and on a per subscriber basis due to an increase in costs per program channel, particularly for sports and HD channels. Further, in 2009 local commercial television broadcast stations began charging retransmission fees, similar to fees charged by other program providers. Costs to provide data and voice services increased due to the additional capacity required to handle the increasing volume of data usage, including our VoIP digital phone product in the Sacramento market.

Customer operations expense increased $111 and $1,484 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008. Substantially all of the increase in the current year period was attributable to 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 six-month period ended June 30, 2009.

General and administrative expense decreased $287 and $554 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008 primarily due to decreases in (i) information technology costs related to system maintenance and development, including integration of our 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 $948 and $4,163 during the quarter and six-month period ended June 30, 2009, respectively, compared to the same periods in 2008 due primarily to the acquisition of the Kansas City operations in February 2008, as well as the continued expansion of the broadband network and success-based capital projects.

Telecom



                          Quarter Ended June 30,                   Six Months Ended June 30,
. . .