CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)


The Securities and Exchange Commission ("SEC") encourages companies to disclose
forward-looking information so that investors can better understand a company's
future prospects and make informed investment decisions.  Certain statements in
this Quarterly Report on Form 10-Q, including those which relate to the impact
on future revenue sources, 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 reflect, among other things, our current
expectations, plans, strategies and anticipated financial results.  There are a
number of risks, uncertainties and conditions that may cause our actual results
to differ materially from those expressed or implied by these forward-looking
statements including the impact of the ongoing novel coronavirus ("COVID-19")
pandemic and our response to it.  Many of these circumstances are beyond our
ability to control or predict.  Moreover, forward-looking statements necessarily
involve assumptions on our part.  These forward-looking statements generally are
identified by the words "believe," "expect," "anticipate," "estimate,"
"project," "intend," "plan," "should," "may," "will," "would," "will be," "will
continue" or similar expressions.  Such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause actual
results, performance or achievements of Consolidated Communications
Holdings, Inc. and its subsidiaries ("Consolidated," the "Company," "we" or
"our") to be different from those expressed or implied in the forward-looking
statements.  All forward-looking statements attributable to us or persons acting
on our behalf are expressly qualified in their entirety by the cautionary
statements that appear throughout this report.  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 2021
Annual Report on Form 10-K filed with the SEC and in Item 1A - "Risk Factors" of
this report.  Furthermore, undue reliance should not be placed on
forward-looking statements, which speak only as of the date they are made.
 Except as required under federal securities laws or the rules and regulations
of the SEC, we disclaim any intention or obligation to update or revise publicly
any forward-looking statements. Management's Discussion and Analysis ("MD&A")
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 quarter and nine months ended September 30, 2022
included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Throughout this MD&A, we refer to certain measures that are not measures of
financial performance in accordance with accounting principles generally
accepted in the United States ("US GAAP" or "GAAP").  We believe the use of
these non-GAAP measures on a consolidated basis provides the reader with
additional information that is useful in understanding our operating results and
trends. These measures should be viewed in addition to, rather than as a
substitute for, those measures prepared in accordance with GAAP. See the
"Non-GAAP Measures" section below for a more detailed discussion on the use and
calculation of these measures.

Overview

Consolidated is a broadband and business communications provider offering a wide
range of communication solutions to consumer, commercial and carrier customers
across a 22-state service area.  We operate an advanced fiber network spanning
approximately 57,500 fiber route miles across many rural areas and metro
communities.  We offer residential high-speed Internet, video, phone and home
security services as well as multi-service residential and small business
bundles. Our business product suite includes: data and Internet solutions,
voice, data center services, security services, managed and IT services, and an
expanded suite of cloud services.  We provide wholesale solutions to wireless
and wireline carriers and other service providers including data, voice, network
connections and custom fiber builds and last mile connections.



We generate the majority of our consolidated operating revenues primarily from
monthly subscriptions to our broadband, data and transport services
(collectively "broadband services") marketed to residential and business
customers. As consumer demands for bandwidth continue to increase, our focus is
on expanding our fiber broadband services and upgrading data speeds in order to
offer a highly competitive fiber product. Our investment in more competitive
broadband speeds is critical to our long-term success.  Our strategic investment
with Searchlight Capital Partners L.P. ("Searchlight") combined with the
refinancing of our capital structure in 2020 has provided us with additional
capital that has enabled us

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to accelerate our fiber expansion plans and provided significant benefits to our
consumer, commercial and carrier customers. With this strategic investment, we
are enhancing our fiber infrastructure and accelerating our investments in
high-growth and competitive areas.  By leveraging our existing dense core fiber
network and an accelerated build plan, we expect to be able to significantly
increase data speeds, expand our multi-Gig coverage and strategically extend our
network across our strong existing commercial and carrier footprint to attract
more on-net and near-net opportunities.  As part of our fiber expansion plan, we
plan to upgrade approximately 1.6 million passings to fiber over five years
across select service areas to enable multi-Gig capable services to these homes
and small businesses including more than 1 million passings within our northern
New England service areas.

Our fiber build plan includes the upgrade of 400,000 homes and small businesses
in 2022. During the quarter and nine months ended September 30, 2022, we
upgraded approximately 116,200 and 342,200 passings, respectively, and added
approximately 12,100 and 29,400 consumer fiber Gig-capable subscribers,
respectively. During the year ended December 31, 2021, we upgraded approximately
330,000 passings. In our northern New England service areas, approximately 31%
of the homes we serve were 1 Gig capable as of September 30, 2022 compared to
12% during the same period in 2021. As of September 30, 2022, approximately 41%
of the homes we serve in all other markets had availability to broadband speeds
of up to 1 Gbps compared to 27% during the same period in 2021.

Fidium Fiber, our new Gigabit consumer fiber internet product with an all-new
customer experience, launched in November 2021 in select northern New England
markets, reinforcing our broadband-first strategy. In May 2022, Fidium Fiber was
expanded to additional markets in California, Illinois, Minnesota, Pennsylvania
and Texas. In June 2022, we launched symmetrical 2 Gig speeds across the entire
Fidium fiber network.  Our Fidium plans offer symmetrical speeds from 50 Mbps to
2 Gbps with no data caps.

As we continue to increase broadband speeds, we believe that we will also be
able to simultaneously expand the array of services and content offerings that
our network provides.  We continue to focus on expanding our commercial and
carrier product offerings including broadband and our commercial product suite,
and are continually enhancing our commercial product offerings to meet the needs
of our business customers.  By leveraging our advanced fiber network, we can
tailor our services for business customers by developing solutions to fit their
specific needs.  Additionally, we are continuously enhancing our suite of
managed and cloud services by adding new functionality and support, which
increases efficiency and enables greater scalability and reliability for
businesses. We anticipate future momentum in commercial and carrier services as
these products gain traction as well as from the demand from customers for
additional bandwidth and data-based services.

However, operating revenues continue to be impacted by the industry-wide trend
of declines in voice services, access lines and related network access
revenue. Many customers are choosing to subscribe to alternative communication
services, and competition for these subscribers continues to increase. Total
voice connections decreased 10% as of September 30, 2022 compared to 2021. We
have been able to mitigate some of the access line losses through alternative
product offerings, such as our VoIP service.

Our competitive broadband speeds enable us to meet consumer demand for higher
bandwidth for streaming programming or on-demand content on any device.  The
consumers demand for streaming services, either to augment their current video
subscription plan or to entirely replace their linear video subscription may
impact our future video subscriber base and, accordingly, reduce our video
revenue as well as our video programing costs.  Total video connections
decreased 23% as of September 30, 2022 compared to 2021 as we continue to
de-emphasize our linear video services and transition customers to streaming and
over-the-top video services. We believe the trend in changing consumer viewing
habits will continue to impact our business results and complement our strategy
of providing consumers with higher broadband speeds to facilitate streaming
content including services offered through our streaming partnerships.



Our operating revenues are impacted by legislative or regulatory changes at the
federal and state levels, which could reduce or eliminate the current subsidies
revenue we receive. A number of proceedings and recent orders relate to
universal service reform, inter-carrier compensation ("ICC") and network access
charges. Recent orders adopted in 2020 resulted in a reduction in the federal
subsidies we receive of approximately $42.2 million annually as of January 1,
2022.  See the "Regulatory Matters" section below for a further discussion
of
the subsidies we receive.

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Recent Developments

Discontinued Operations – Sale of Investment in Wireless Partnerships


On September 13, 2022, we completed the sale of our five limited wireless
partnership interests to Cellco Partnership ("Cellco") for an aggregate purchase
price of $490.0 million. Cellco is the general partner for each of the five
wireless partnerships and is an indirect, wholly-owned subsidiary of Verizon
Communications, Inc. Our wireless partnership investment consisted of ownership
in five wireless partnerships: 2.34% of GTE Mobilnet of South Texas Limited
Partnership, 20.51% of GTE Mobilnet of Texas RSA #17 Limited Partnership, 3.60%
of Pittsburgh SMSA Limited Partnership, 16.67% of Pennsylvania RSA
No. 6(I) Limited Partnership and 23.67% of Pennsylvania RSA No. 6(II) Limited
Partnership.  We intend to use the proceeds from the sale to support our fiber
expansion plan. The financial results of the limited partnership interests have
been reported as discontinued operations in our condensed consolidated financial
statements for all periods presented. In the statement of cash flows, we have
elected to combine cash flows from discontinued operations with cash flows from
continuing operations. In connection with the sale of the partnership interests,
we recognized a pre-tax gain on sale of $389.9 million during the quarter and
nine months ended September 30, 2022. For the quarters ended September 30, 2022
and 2021, we recognized investment income of $4.7 million and $11.0 million,
respectively, and received cash distributions of $5.5 million and $11.1 million,
respectively, from these wireless partnerships. For the nine months ended
September 30, 2022 and 2021, we recognized investment income of $22.6 million
and $31.8 million, respectively, and received cash distributions of $25.0
million and $33.2 million, respectively, from these wireless partnerships.

Divestitures

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On September 22, 2021, we entered into a definitive agreement to sell
substantially all of the assets of our non-core, rural ILEC business located in
Ohio, Consolidated Communications of Ohio Company ("CCOC"). CCOC provides
telecommunications and data services to residential and business customers in 11
rural communities in Ohio and surrounding areas and included approximately 3,800
access lines, 3,900 data connections and 1,400 video connections. The sale was
completed on January 31, 2022 for approximately $26.0 million in cash, subject
to a customary working capital adjustment. As of December 31, 2021, the assets
and liabilities to be disposed of were classified as held for sale in the
condensed consolidated balance sheet and consisted primarily of allocated
goodwill of $16.3 million and property, plant and equipment of $9.5 million. In
connection with the classification as assets held for sale, we recognized an
impairment loss of $5.7 million during the quarter ended September 30, 2021.
During the nine months ended September 30, 2022, we recognized an additional
loss on the sale of $0.5 million, which is included in selling, general and
administrative expense in the condensed consolidated statement of operations. We
intend to use the proceeds from the asset sale to further our fiber expansion
plans.

On March 2, 2022, we entered into a definitive agreement to sell substantially
all the assets of our business located in the Kansas City market (the "Kansas
City operations") for estimated cash consideration of approximately $90.0
million, subject to certain working capital and other purchase price
adjustments. The Kansas City operations provide data, voice and video services
to customers within the Kansas City metropolitan area and surrounding counties
and includes approximately 17,500 consumer customers and 1,700 commercial
customers. The transaction is expected to close by the end of 2022 and is
subject to the receipt of all customary regulatory approvals and the
satisfaction of other closing conditions.  At September 30, 2022, the assets and
liabilities to be disposed of were classified as held for sale in the condensed
consolidated balance sheet and consisted primarily of allocated goodwill of
$83.7 million and property, plant and equipment of $135.9 million. In connection
with the expected sale, the carrying value of the net assets to be sold was
reduced to their estimated fair value and we recognized an impairment loss of
$126.5 million during the quarter ended March 31, 2022. During the quarter ended
September 30, 2022, we recognized an additional impairment loss of $5.2 million
as a result of an increase in net assets held for sale and estimated selling
costs during the period. The asset sales align with our strategic asset review
and focus on our core broadband regions.

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Searchlight Investment

On September 13, 2020, we entered into an investment agreement (the "Investment
Agreement") with an affiliate of Searchlight.  In connection with the Investment
Agreement, affiliates of Searchlight have invested an aggregate of $425.0
million in the Company.  The investment commitment was structured in two stages.
 In the first stage of the transaction, which was completed on October 2, 2020,
Searchlight invested $350.0 million in the Company in exchange for 6,352,842
shares, or approximately 8%, of the Company's common stock and a contingent
payment right ("CPR") that was convertible, upon the receipt of certain
regulatory and shareholder approvals, into an additional 17,870,012 shares, or
16.9%, of the Company's common stock.  In addition, Searchlight received the
right to an unsecured subordinated note with an aggregate principal amount of
approximately $395.5 million (the "Note"), which, at the time of issuance, was
convertible into shares of a new series of perpetual preferred stock of the
Company with an aggregate liquidation preference equal to the principal amount
of the Note plus accrued interest as of the date of conversion.

On July 15, 2021, the Company received all required state public utility
commission regulatory approvals necessary for the conversion of the CPR into
16.9% additional shares of the Company's common stock. As a result, the CPR was
converted into 17,870,012 shares of common stock, which were issued to
Searchlight on July 16, 2021.

In the second stage of the Investment, which was completed on December 7, 2021
following the receipt of Federal Communications Commission ("FCC") and certain
regulatory approvals and the satisfaction of certain other customary closing
conditions, Searchlight invested an additional $75.0 million and was issued the
Note. The Note bore interest at 9.0% per annum from the date of the closing of
the first stage of the transaction and was payable semi-annually in arrears. The
Note included a paid-in-kind ("PIK") option for a five-year period beginning as
of October 2, 2020. During the year ended December 31, 2021, the Company elected
the PIK option and accrued interest of $38.8 million was added to the principal
balance of the Note.  On December 7, 2021, Searchlight elected to convert the
Note into 434,266 shares of Series A Perpetual Preferred Stock, par value $0.01
per share (the "Series A Preferred Stock"). In addition, on December 7, 2021,
the CPR converted into an additional 15,115,899 shares, or an additional 10.1%,
of the Company's common stock.  As of September 30, 2022 and December 31, 2021,
shares of common stock issued to Searchlight represent approximately 34% and
35%, respectively, of the Company's outstanding common stock. The strategic
investment with Searchlight provides us a valued partner with significant
experience in deploying broadband infrastructure as we continue to execute our
fiber-focused strategy and grow broadband services.

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Results of Operations
The following tables reflect our financial results on a consolidated basis and
key operating metrics as of and for the quarters and nine months ended September
30, 2022 and 2021.

                                 Financial Data

                                                Quarter Ended September 30,                     Nine Months Ended September 30,
                                                                    $          %                                       $          %
(In millions, except for percentages)      2022        2021       Change     Change        2022         2021        Change      Change
Operating Revenues
Consumer:
Broadband (Data and VoIP)                $   69.6    $   68.6    $    1.0         1 %    $   203.1    $   202.4    $     0.7         0 %
Voice services                               36.4        40.6       (4.2)      (10)          110.5        121.2       (10.7)       (9)
Video services                               13.6        16.1       (2.5)      (16)           42.3         49.7        (7.4)      (15)
                                            119.6       125.3       (5.7)   

(5) 355.9 373.3 (17.4) (5)
Commercial:
Data services (includes VoIP)

                56.8        57.5       (0.7)       (1)          171.8        171.4          0.4         0
Voice services                               35.5        38.4       (2.9)       (8)          107.6        117.3        (9.7)       (8)
Other                                         9.9        10.2       (0.3)       (3)           32.8         28.6          4.2        15
                                            102.2       106.1       (3.9)       (4)          312.2        317.3        (5.1)       (2)
Carrier:
Data and transport services                  33.9        33.6         0.3         1          103.7        100.8          2.9         3
Voice services                                3.5         4.2       (0.7)      (17)           11.0         13.1        (2.1)      (16)
Other                                         0.6         0.4         0.2        50            1.4          1.2          0.2        17
                                             38.0        38.2       (0.2)       (1)          116.1        115.1          1.0         1

Subsidies                                     7.2        17.3      (10.1)      (58)           20.3         52.1       (31.8)      (61)
Network access                               27.3        29.9       (2.6)       (9)           78.4         92.6       (14.2)      (15)
Other products and services                   2.3         1.8         0.5        28           12.4         13.4        (1.0)       (7)
Total operating revenues                    296.6       318.6      (22.0)       (7)          895.3        963.8       (68.5)       (7)

Operating Expenses
Cost of services and products
(exclusive of depreciation and
amortization)                               141.2       142.5       (1.3)  

(1) 413.0 431.8 (18.8) (4)
Selling, general and administrative
costs

                                        72.8        64.1         8.7   

14 221.6 200.0 21.6 11
Loss on impairment of assets held for
sale

                                          5.2         5.7       (0.5)   

(9) 131.7 5.7 126.0 2,211
Gain on disposal of assets

                 (19.2)           -      (19.2)     (100)         (19.2)            -       (19.2)     (100)
Depreciation and amortization                75.7        73.8         1.9  

3 220.6 225.5 (4.9) (2)
Total operating expenses

                    275.7       286.1      (10.4)   

(4) 967.7 863.0 104.7 12
Income (loss) from operations

                20.9        32.5      (11.6)   

(36) (72.4) 100.8 (173.2) (172)
Interest expense, net

                      (32.0)      (43.2)      (11.2)   

(26) (91.7) (137.0) (45.3) (33)
Loss on extinguishment of debt

                  -           -           -         -              -       (17.1)         17.1       100
Change in fair value of contingent
payment rights                                  -       (2.2)         2.2       100              -       (99.6)         99.6       100
Other income, net                             3.0         2.4         0.6        25            9.4          4.5          4.9       109
Income tax expense (benefit)                (1.0)         2.6       (3.6)  

(138) (17.8) (1.9) (15.9) (837)
Loss from continuing operations

             (7.1)      (13.1)         6.0   

46 (136.9) (146.5) 9.6 7
Income from discontinued operations,
net of tax

                                  299.9         8.6       291.3   

3,387 312.5 24.8 287.7 1,160
Dividends on Series A preferred stock 10.4

           -        10.4       100           29.8            -         29.8       100
Net income attributable to
noncontrolling interest                       0.1         0.2       (0.1)      (50)            0.4          0.5        (0.1)      (20)
Net income (loss) attributable to
common shareholders                      $  282.3    $  (4.7)    $  287.0     6,106      $   145.4    $ (122.2)    $   267.6       219

Adjusted EBITDA (1)                      $   97.2    $  127.4    $ (30.2)      (24) %    $   311.9    $   380.7    $  (68.8)      (18) %


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(1) A non-GAAP measure.  See the "Non-GAAP Measures" section below for additional
    information and reconciliation to the most directly comparable GAAP measure.


                            Key Operating Statistics

                                         As of September 30,
                               2022       2021       Change     % Change
Consumer customers            505,302    527,327    (22,025)         (4) %

Fiber Gig+ capable            115,598     81,539      34,059          42
DSL/Copper                    266,314    309,122    (42,808)        (14)
Consumer data connections     381,912    390,661     (8,749)         (2)

Consumer voice connections    294,441    341,135    (46,694)        (14)
Video connections              51,339     66,971    (15,632)        (23)


Operating Revenues

Consumer

Broadband Services

Broadband services include revenues from residential customers for subscriptions
to our VoIP and data products.  We offer high-speed Internet access at speeds of
up to 2 Gbps, depending on the network facilities that are available, the level
of service selected and the location.  Our VoIP digital phone service is also
available in certain markets as an alternative to the traditional telephone
line.

Broadband services revenues increased $1.0 million and $0.7 million during the
quarter and nine months ended September 30, 2022, respectively, compared to the
same periods in 2021. Excluding the sale of COCC, broadband services revenues
increased $1.7 million and $2.5 million during the quarter and nine months ended
September 30, 2022, respectively, despite a decrease in data connections of 2%,
primarily as a result of price increases as well as growth in fiber Internet
services.

Voice Services

We offer several different basic local phone service packages and long-distance
calling plans, including unlimited flat-rate calling plans. The plans include
options for voicemail and other custom calling features such as caller ID, call
forwarding and call waiting. Voice services revenues decreased $4.2 million and
$10.7 million during the quarter and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021 primarily due to a 16%
decline in access lines.  The number of local access lines in service directly
affects the recurring revenues we generate from end users and continues to be
impacted by the industry-wide decline in access lines. We expect to continue to
experience erosion in voice connections due to competition from alternative
technologies.

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Video Services
Depending on geographic market availability, our video services range from
limited basic service to advanced digital television, which includes several
plans, each with hundreds of local, national and music channels including
premium and Pay-Per-View channels as well as video On-Demand service.  Certain
customers may also subscribe to our advanced video services, which consist of
high-definition television, digital video recorders ("DVR") and/or a whole home
DVR.  Our video subscribers can also watch their favorite shows, movies and
livestreams on any device.  In addition, we offer other in-demand streaming TV
services, which provide endless entertainment options.

Video services revenues decreased $2.5 million and $7.4 million during the
quarter and nine months ended September 30, 2022, respectively, compared to the
same periods in 2021 primarily due to a 26% decrease in connections as consumers
are choosing to subscribe to alternative video services such as over-the-top
streaming or other competitive services. We expect to continue to experience a
decline in video connections as we de-emphasize our linear video subscriptions
and transition customers to streaming services, which may amplify the demand for
higher broadband speeds to facilitate streaming content.

Commercial

Data Services


We provide a variety of business communication services to business customers of
all sizes, including voice and data services over our advanced fiber
network. The services we offer include scalable high-speed broadband Internet
access and VoIP phone services, which range from basic service plans to virtual
hosted systems.  In addition to Internet and VoIP services, we also offer a
variety of commercial data connectivity services in select markets including
Ethernet services; private line data services; software defined wide area
network ("SD-WAN") and multi-protocol label switching. Our networking services
include point-to-point and multi-point deployments from 2.5 Mbps to 10 Gbps to
accommodate the growth patterns of our business customers. We offer a suite of
cloud-based services, which includes a hosted unified communications solution
that replaces the customer's on-site phone systems and data networks, managed
network security services and data protection services.  Data center and
disaster recovery solutions provide a reliable and local colocation option for
commercial customers.

Data services revenues decreased $0.7 million and increased $0.4 million during
the quarter and nine months ended September 30, 2022, respectively, compared to
the same periods in 2021 as declines in Metro Ethernet due to customer churn
during the quarter were reduced in part by the continued growth in dedicated
Internet access, VoIP and SD-WAN services.

Voice Services

Voice services include basic local phone and long-distance service packages for
business customers. The plans include options for voicemail, conference calling,
linking multiple office locations and other custom calling features such as
caller ID, call forwarding, speed dialing and call waiting.  Services can be
charged at a fixed monthly rate, a measured rate or can be bundled with selected
services at a discounted rate.  Voice services revenues decreased $2.9 million
and $9.7 million during the quarter and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021 primarily due to a 10%
decline in access lines as commercial customers are increasingly choosing
alternative technologies and the broad range of features that Internet based
voice services can offer.

Other

Other services include business equipment sales and related hardware and
maintenance support, video services and other miscellaneous revenues, including
911 service revenues.  Other services revenues decreased $0.3 million during the
quarter ended September 30, 2022 compared to the same period in 2021 primarily
due to a reduction in structured cabling projects, but was offset in part by an
increase in custom construction revenues. Other services revenues increased $4.2
million during the nine months ended September 30, 2022 compared to the same
period in 2021 primarily due to an increase in business systems and custom
construction revenues.

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Carrier

Data and Transport Services

We provide high-speed fiber data transmission services to regional and national
interexchange and wireless carriers including Ethernet, cellular backhaul, dark
fiber and colocation services.  Data services revenues increased $0.3 million
and $2.9 million during the quarter and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021 primarily due to an increase
in dark fiber revenue as a result of a new IRU agreement entered into during the
nine months ended September 30, 2022. However, continued growth in Ethernet
services was offset in part by a decline in cellular backhaul as a result of
price compression and a reduction in pricing of recent contract renewals with
our wireless backhaul partners. We expect to recognize further declines in
cellular backhaul revenue as a result of the delayed timing of new pricing in
2022 and ongoing contract renewals.

Voice Services

We provide basic local phone service packages with customized features for
resell by wholesale customers. The plans include options for voicemail,
conference calling, linking multiple office locations and other custom calling
features.  Voice services revenues decreased $0.7 million and $2.1 million
during the quarter and nine months ended September 30, 2022, respectively,
compared to the same periods in 2021 as customers continue to choose alternative
technology solutions.

Other

Other services revenues include conduit and other asset lease revenue as well as
other miscellaneous revenue. Other services revenues increased $0.2 million
during each of the quarter and nine month periods ended September 30, 2022
compared to the same periods in 2021 due to an increase in conduit lease
revenue.

Subsidies


Subsidies consist of both federal and state subsidies, which are designed to
promote widely available, quality broadband services at affordable prices with
higher data speeds in rural areas.  Subsidies revenues decreased $10.1 million
and $31.8 million during the quarter and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021 primarily due to a reduction
in federal subsidies support.  In 2020, the FCC adopted an order establishing
the Rural Digital Opportunity Fund ("RDOF"), which resulted in a reduction in
our annual support of approximately $42.2 million as of January 1, 2022.  See
the "Regulatory Matters" section below for a further discussion of the subsidies
we receive.

Network Access Services
Network access services include interstate and intrastate switched access,
network special access and end user access. Switched access revenues include
access services to other communications carriers to terminate or originate
long-distance calls on our network. Special access circuits provide dedicated
lines and trunks to business customers and interexchange carriers.  Network
access services revenues decreased $2.6 million and $14.2 million during the
quarter and nine months ended September 30, 2022, respectively, compared to the
same periods in 2021 primarily due to the continuing decline in interstate
rates, minutes of use, voice connections and carrier circuits as carriers
transition to Ethernet based transport solutions. In addition, for the nine
months ended September 30, 2022, end user access revenue decreased due to a
reduction in the Federal Universal Service Fund Contribution Factor during
the
first half of 2022.

Other Products and Services

Other products and services include revenues from telephone directory
publishing, video advertising, billing and support services and other
miscellaneous revenues. We have entered into numerous Public Private Partnership
agreements with several towns in New Hampshire to build new fiber to the premise
("FTTP") Internet networks.  The new town networks provide broadband speeds of
up to 1 Gbps to residential and commercial customers. Public Private
Partnerships are a key component of Consolidated's commitment to expand rural
broadband access.

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Other products and services revenues increased $0.5 million and decreased $1.0
million during the quarter and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021 primarily due to the
recognition of Public Private Partnership construction projects during 2022
and
2021.

Operating Expenses

Cost of Services and Products


Cost of services and products decreased $1.3 million and $18.8 million during
the quarter and nine months ended September 30, 2022, respectively, compared to
the same periods in 2021. Video programming costs decreased as a result of a 23%
decline in video connections, which were offset in part by an increase in
utility and fuel costs in the current year periods. In addition, for the nine
months ended September 30, 2022, required contributions to the Federal Universal
Service Fund ("USF") decreased $6.7 million as a result of a reduction in the
annual funding rate for the first half of the year. Access expense also
decreased as a result of access charges of $3.4 million incurred during the nine
months ended September 30, 2021 related to the early termination of a contract
obligation for fixed wireless services.

Selling, General and Administrative Costs

Selling, general and administrative costs increased $8.7 million and $21.6
million during the quarter and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021. Advertising expense
increased due to greater promotional activities surrounding the continued
marketing of our new fiber broadband products. Property and real estate taxes
increased primarily due to refunds and settlements received in 2021. Employee
labor costs also increased from the prior year periods.

Gain on Disposal of Assets


During the quarter and nine months ended September 30, 2022, we completed the
sale of certain non-strategic communication towers for cash proceeds of $19.4
million and recognized a pre-tax gain on the sale of $19.2 million.

Depreciation and Amortization

Depreciation and amortization expense increased $1.9 million and decreased $4.9
million during the quarter and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021 primarily due to a decline in
amortization expense for customer relationships, which are amortized under the
accelerated method. Depreciation expense also declined due to the sale of the
Ohio assets and the classification of the Kansas City assets as held for sale in
the first quarter of 2022. These declines in depreciation and amortization
expense were offset by ongoing capital expenditures related to the fiber network
expansion and customer service improvements as well as success-based capital
projects for consumer and commercial services.

Reclassifications


Certain amounts in our 2021 condensed consolidated financial statements have
been reclassified to conform to the 2022 presentation, primarily related to the
presentation of the financial results for our wireless partnership interests as
discontinued operations. Certain operating revenues have also been reclassified
to report commercial and carrier revenues separately. The change in the
classification of these revenues had no impact to total operating revenues
as
previously reported.

Regulatory Matters

Our revenues are subject to broad federal and/or state regulations, which
include such telecommunications services as local telephone service, network
access service and toll service.  The telecommunications industry is subject to
extensive federal, state and local regulation. Under the Telecommunications Act
of 1996, federal and state regulators share responsibility for implementing and
enforcing statutes and regulations designed to encourage competition and to
preserve and advance widely available, quality telephone service at affordable
prices.

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At the federal level, the FCC generally exercises jurisdiction over facilities
and services of local exchange carriers, such as our rural telephone companies,
to the extent they are used to provide, originate or terminate interstate or
international communications. The FCC has the authority to condition, modify,
cancel, terminate or revoke our operating authority for failure to comply with
applicable federal laws or FCC rules, regulations and policies. Fines or
penalties also may be imposed for any of these violations.

State regulatory commissions generally exercise jurisdiction over carriers'
facilities and services to the extent they are used to provide, originate or
terminate intrastate communications. In particular, state regulatory agencies
have substantial oversight over interconnection and network access by
competitors of our rural telephone companies. In addition, municipalities and
other local government agencies regulate the public rights-of-way necessary to
install and operate networks. State regulators can sanction our rural telephone
companies or revoke our certifications if we violate relevant laws or
regulations.

FCC Matters


In general, telecommunications service in rural areas is costlier to provide
than service in urban areas. The lower customer density means that switching and
other facilities serve fewer customers and loops are typically longer, requiring
greater expenditures per customer to build and maintain. By supporting the
high-cost of operations in rural markets, USF subsidies promote widely
available, quality telephone service at affordable prices in rural areas.

Our annual support through the FCC's Connect America Fund ("CAF") Phase II
funding was $48.1 million through 2021.  The specific obligations associated
with CAF Phase II funding included the obligation to serve approximately 124,500
locations by December 31, 2020 (with interim milestones of 40%, 60% and 80%
completion by December 2017, 2018 and 2019, respectively); to provide broadband
service with speeds of 10 Mbps downstream and 1 Mbps upstream; to achieve
latency of less than 100 milliseconds; to provide data of at least 100 gigabytes
per month; and to offer pricing reasonably comparable to pricing in urban
areas. The Company met the buildout milestones and performance metrics
requirements for 2017 through 2020 for all states where it received funding.

In April 2019, the FCC announced plans for the RDOF, the next phase of the CAF
program. The RDOF is a $20.4 billion fund to bring speeds of 25 Mbps downstream
and 3 Mbps upstream to unserved and underserved areas of America. The FCC issued
a Notice of Proposed Rulemaking at their August 2019 Open Commission Meeting.
The order prioritizes terrestrial broadband as a bridge to rural 5G networks by
providing a significant weight advantage to traditional broadband providers.
Funding will occur in two phases with the first phase auctioning $16.0 billion
and the second phase auctioning $4.4 billion, each to be distributed over
10 years. The minimum speed required to receive funding is 25 Mbps downstream
and 3 Mbps upstream. CAF Phase II funding was extended through December 31, 2021
for price cap holding companies. The FCC issued the final census block groups
with locations and reserve price. We filed the RDOF short form application on
July 14, 2020 and were listed as a qualified bidder by the FCC on October 13,
2020 and participated in the auction. The auction began on October 29, 2020 and
ended on November 24, 2020. Consolidated won 246 census block groups serving in
seven states. The bids we won are at the 1 Gbps downstream and 500 Mbps upstream
speed tier to approximately 27,000 locations at an annual funding level of
$5.9 million, which resulted in a reduction of approximately $42.2 million in
annual support as of January 1, 2022 through December 31, 2031. Consolidated
filed its long form application with supporting documents on January 29, 2021
and received final FCC approval on December 14, 2021. Consolidated began
receiving RDOF funding in January 2022.

The annual FCC price cap filing was made on June 16, 2022 and became effective
on July 1, 2022.  The net impact is an increase of approximately $2.0 million in
network access and CAF ICC support funding for the July 2022 through June 2023
tariff period.

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State Matters

Texas

The Texas Universal Service Fund ("TUSF") is administered by the National
Exchange Carrier Association ("NECA").  The Texas Public Utilities Regulatory
Act directs the Public Utilities Commission of Texas ("PUCT") to adopt and
enforce rules requiring local exchange carriers to contribute to a state
universal service fund that helps telecommunications providers offer basic local
telecommunications service at reasonable rates in high-cost rural areas.  The
TUSF is also used to reimburse telecommunications providers for revenues lost by
providing lifeline service.  Our Texas rural telephone companies receive
disbursements from this fund.

Our Texas Incumbent Local Exchange Carriers (“ILECs”) have historically received
support from two state funds, the small and rural incumbent local exchange
company plan High Cost Fund (“HCF”) and the High Cost Assistance Fund (“HCAF”).

 In December 2020, the PUCT announced a TUSF funding shortfall and would be
reducing all funded carriers support by 64% beginning January 15, 2021. The
potential impact of the decision by the PUCT was a reduction in support we
receive of approximately $4.0 million annually.  The Texas Telephone Association
("TTA"), which Consolidated is a member, and the Texas Statewide Telephone
Cooperative, Inc. ("TSTCI"), filed a lawsuit seeking to overturn the PUCT
decision as well as a temporary injunction on the funding reduction.  On June 7,
2021, the court ruled in favor of the PUCT.  The TTA and TSTCI filed a notice to
appeal on July 2, 2021.  We filed our brief on September 18, 2021, along with a
Motion to Expedite.  The motion to expedite was granted.  On June 30, 2022, the
Third Court of Appeals in Austin ruled in favor of the rural phone companies
requiring the state to increase the state surcharge to fully fund the TUSF and
reimburse rural phone companies for the shortfall.  The state had 45 days from
the ruling date to decide whether to appeal the decision. The state did not
appeal the ruling and in October 2022, the TTA, TSTCI and PUCT reached an
agreement on how the outstanding funding would be repaid. Monthly support
payments will resume in full in October 2022 and the funding shortfall for the
periods from January 2021 through September 2022 will be reimbursed to carriers
evenly over a 15-month period.  All reimbursements are expected to be completed
by December 2023.

American Rescue Plan Act Funding


President Biden signed the American Rescue Plan Act of 2021 ("ARPA") on March
11, 2021.  States have been allocated federal funds to be utilized for capital
infrastructure, including broadband deployment, and are in various stages of
implementation.  We are working with the states and municipalities to
participate in this broadband grant program.

COVID-19


On March 13, 2020, the FCC issued a pledge to Keep America Connected through May
13, 2020, which was later extended to June 30, 2020.  The pledge asked all
communications providers to not terminate service to any residential or small
business customers because of their inability to pay their bills due to the
disruptions caused by the coronavirus pandemic; to waive any late fees that any
residential or small business customers incur because of their economic
circumstances related to the coronavirus pandemic; and to open their Wi-Fi
hotspots to any American who needs them.  Consolidated signed on to the pledge
through June 30, 2020. Several states took the FCC pledge a step further by not
allowing any carrier to disconnect service within their state during the
Governors' declared state of emergency, which Consolidated also supported.  Most
state moratoriums on disconnections have expired; however, certain states such
as Washington and New York were extended to July 31, 2021 and December 31, 2021,
respectively.

In February 2021, the FCC created the Emergency Broadband Benefit Program
("EBB"), a temporary program to help low income households stay connected during
the COVID-19 pandemic by providing broadband service discounts for eligible
households. Consolidated is a participant in this program. The EBB ended
December 31, 2021.  EBB recipients fully enrolled as of December 31, 2021
automatically continued to receive their current monthly benefit until March 1,
2022 when the Affordable Connectivity Program took its place.

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Affordable Connectivity Program


The Affordable Connectivity Program ("ACP") is a permanent broadband
affordability program set up to replace the EBB. The ACP program helps ensure
that households can afford the broadband access they need for work, school,
healthcare and more. The benefit provides a discount of up to $30 per month
toward internet service for eligible households and up to $75 per month for
households on qualifying Tribal lands. Eligible households can also receive a
one-time discount of up to $100 to purchase a laptop, desktop computer, or
tablet from participating providers if they contribute more than $10 and less
than $50 toward the purchase price. The ACP is limited to one monthly service
discount and one device discount per household. The program began funding March
1, 2022.  Consolidated is participating in this program.

Infrastructure Investment and Jobs Act


The Infrastructure Investment and Jobs Act (the "Infrastructure Act") passed on
June 30, 2021 included $65.0 billion toward broadband.  The broadband internet
portion of the Infrastructure Act is aimed at increasing internet coverage for
more universal access, including for rural, low-income, and tribal communities.

65% of this funding is set aside specifically for underserved communities.
Additionally, this measure is designed to help make internet access more
affordable and increase digital literacy.

The Infrastructure Act set aside $42.5 billion for Broadband Equity, Access and
Deployment grants. The National Telecommunications and Information
Administration administers the grant program and is in the process of soliciting
comments before issuing final rules.



Other Regulatory Matters

We are also subject to a number of regulatory proceedings occurring at the
federal and state levels that may have a material impact on our operations. The
FCC and state commissions have authority to issue rules and regulations related
to our business. A number of proceedings are pending or anticipated that are
related to such telecommunications issues as competition, interconnection,
access charges, ICC, broadband deployment, consumer protection and universal
service reform. Some proceedings may authorize new services to compete with our
existing services. Proceedings that relate to our cable television operations
include rulemakings on set top boxes, carriage of programming, industry
consolidation and ways to promote additional competition. There are various
on-going legal challenges to the scope or validity of FCC orders that have been
issued. As a result, it is not yet possible to fully determine the impact of the
related FCC rules and regulations on our operations.

Non-Operating Items

Interest Expense, Net

Interest expense, net of interest income, decreased $11.2 million and $45.3
million during the quarter and nine months ended September 30, 2022,
respectively, compared to the same periods in 2021. During the quarter and nine
months ended September 30, 2021, we recognized interest expense, including
amortized costs, of $10.9 million and $32.0 million, respectively, on the Note
issued to Searchlight as part of the investment agreement entered into in
October 2020. The Note was converted into perpetual preferred stock in
conjunction with the closing of the second stage of the Searchlight investment
in December 2021. In addition, the maturity of an interest rate swap agreement
in July 2021 reduced interest expense $0.9 million and $6.3 million during the
quarter and nine months ended September 30, 2022, respectively, as compared to
2021. Interest expense on our outstanding term loan also decreased during the
nine months ended September 30, 2022 due a reduction in the annual interest rate
as part of the refinancing of our credit agreement in April 2021, as described
in the "Liquidity and Capital Resources" section below.

Loss on Extinguishment of Debt


As described in the "Liquidity and Capital Resources" section below, we incurred
a loss on the extinguishment of debt of $12.0 million in connection with the
repayment of $397.0 million of outstanding term loans under our credit agreement
during the nine months ended September 30, 2021.  In addition, we recognized a
loss of $5.1 million on the extinguishment

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of debt during the nine-month period ended September 30, 2021 related to the
refinancing of our credit agreement in April 2021.

Change in Fair Value of Contingent Payment Rights


We were required to measure our contingent payment rights at fair value until
they were converted into shares of the Company's common stock. During the
quarter and nine months ended September 30, 2021, we recognized a loss of $2.2
million and $99.6 million, respectively, on the increase in the fair value of
the contingent payment right issued to Searchlight.

Other Income

Other income increased $0.6 million and $4.9 million during the quarter and nine
months ended September 30, 2022, respectively, compared to the same periods in
2021. Pension and post-retirement expense decreased $0.9 million and $1.5
million, respectively. See Note 13 to the condensed consolidated financial
statements for a more detailed discussion regarding our pension and
post-retirement plans. In addition, during the nine months ended September 30,
2021, we recognized a loss of $3.6 million on the disposition of wireless
spectrum licenses.

Income Taxes


Income taxes decreased $3.6 million and $15.9 million during the quarter and
nine months ended September 30, 2022, respectively, compared to the same periods
in 2021. Our effective tax rate was 11.9% and (24.2)% for the quarters ended
September 30, 2022 and 2021, respectively, and 11.5% and 1.3% for the nine-month
periods ended September 30, 2022 and 2021, respectively.

On March 2, 2022, we entered into a definitive agreement to sell substantially
all the assets of our Kansas City operations.  On September 22, 2021, we entered
into a definitive agreement to sell substantially all of the assets of our
non-core, rural ILEC business located in Ohio (the "Ohio transaction").  The
Ohio transaction closed on January 31, 2022.   As a result of the Kansas City
and Ohio transactions, we recorded an increase of $1.9 million and $23.2 million
to our current tax expense for the quarter and nine months ended September 30,
2022, respectively, related to the writedown of noncash goodwill included in the
transactions that is not deductible for tax purposes.  For the Ohio transaction,
we recorded an increase to our current tax expense of $1.5 million for the
quarter and nine-month period ended September 30, 2021 related to the writedown
of noncash goodwill in 2021. The Company does not consider these sales
transactions and related goodwill adjustments unusual or infrequent and
therefore the corresponding tax impact is recorded through continuing
operations.

The investment made by Searchlight in 2020 is treated as a contribution of
equity for federal tax purposes. Accordingly, the impact of the non-cash PIK
interest expense, discount and issuance costs, and fair value adjustments on the
CPR are not recognized for federal income tax purposes, resulting in an increase
to our current tax expense of $3.6 million and $34.7 million for the quarter and
nine months ended September 30, 2021, respectively.

For the quarter and nine months ended September 30, 2021, the Company utilized
the discrete effective tax rate method, as allowed by Accounting Standards
Codification ("ASC") 740-270-30-18, "Income Taxes - Interim Reporting," to
calculate its interim income tax provision. The Company applied the discrete
method, at that time, because the application of the estimated annual effective
tax rate method (i) was not reliable due to the high degree of uncertainty in
estimating annual pretax earnings and (ii) would result in small changes to the
projected ordinary annual income causing significant changes in the estimated
annual effective rate.

Exclusive of the discrete effective tax rate method and permanent income tax
impact related to the Kansas City, Ohio and Searchlight transactions, our
effective tax rate for the quarters ended September 30, 2022 and 2021 would have
been approximately 28.2% and 23.9%, respectively, and approximately 26.1% and
25.6% for the nine months ended September 30, 2022 and 2021, respectively. The
effective tax rate differed from the federal and state statutory rates primarily
due to permanent income tax differences related to the Kansas City, Ohio, and
Searchlight transactions, recurring permanent tax differences, and differences
in allocable income for the Company's state tax filings.

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Non-GAAP Measures
In addition to the results reported in accordance with US GAAP, we also use
certain non-GAAP measures such as EBITDA and adjusted EBITDA to evaluate
operating performance and to facilitate the comparison of our historical results
and trends. These financial measures are not measures of financial performance
under US GAAP and should not be considered in isolation or as a substitute for
net income as a measure of performance and net cash provided by operating
activities as a measure of liquidity. They are not, on their own, necessarily
indicative of cash available to fund cash needs as determined in accordance with
GAAP. The calculation of these non-GAAP measures may not be comparable to
similarly titled measures used by other companies. Reconciliations of these
non-GAAP measures to the most directly comparable financial measures presented
in accordance with GAAP are provided below.

EBITDA is defined as net earnings before interest expense, income taxes and
depreciation and amortization.  Adjusted EBITDA is comprised of EBITDA, adjusted
for certain items as permitted or required under our credit facility as
described in the reconciliations below. These measures are a common measure of
operating performance in the telecommunications industry and are useful, with
other data, as a means to evaluate our ability to fund our estimated uses of
cash.

The following table is a reconciliation of loss from continuing operations to
adjusted EBITDA for the quarters and nine months ended September 30, 2022 and
2021:

                                             Quarter Ended              Nine Months Ended
                                             September 30,                September 30,
(In thousands, unaudited)                  2022          2021          2022           2021
Loss from continuing operations         $  (7,257)    $ (13,100)    $ (136,944)    $ (146,542)
Add (subtract):
Interest expense, net of interest
income                                      32,071        43,176         91,742        137,022
Income tax expense (benefit)                 (978)         2,552       (17,814)        (1,860)
Depreciation and amortization               75,659        73,765        220,552        225,455
EBITDA                                      99,495       106,393        157,536        214,075

Adjustments to EBITDA:
Other, net (1)                               3,236       (1,288)          8,857          3,865
Gain on disposal of assets                (19,163)             -       (19,163)              -
Loss on extinguishment of debt                   -             -              -         17,101
Loss on impairment                           5,208         5,704        131,698          5,704
Change in fair value of contingent
payment rights                                   -         2,205              -         99,619
Non-cash, stock-based compensation           2,939         3,217          7,971          7,160
Adjusted EBITDA from continuing
operations                                  91,715       116,231        286,899        347,524
Investment distributions from
discontinued operations                      5,478        11,127         25,023         33,160
Adjusted EBITDA                         $   97,193    $  127,358    $   311,922    $   380,684

Includes dividend income, income attributable to noncontrolling interests in
(1) subsidiaries, acquisition and transaction related costs including integration

and severance, non-cash pension and post-retirement benefits and certain

other miscellaneous items.

Liquidity and Capital Resources

Outlook and Overview


Our operating requirements have historically been funded from cash flows
generated from our business and borrowings under our credit facilities. We
expect that our future operating requirements will continue to be funded from
cash flows from operating activities, existing cash and cash equivalents,
proceeds from sales of nonstrategic assets and, if needed, borrowings under our
revolving credit facility and our ability to obtain future external financing.
 We anticipate that we

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will continue to use a substantial portion of our cash flow to fund capital
expenditures for our accelerated fiber network expansion and growth plan and
invest in future business opportunities.

The following table summarizes our cash flows:


                                          Nine Months Ended September 30,
(In thousands)                               2022                 2021
Cash flows provided by (used in):
Operating activities
Continuing operations                  $        193,108     $        262,819
Discontinued operations                          25,023               33,160
Investing activities
Continuing operations                         (338,059)            (493,127)
Discontinued operations                         489,567                    -
Financing activities                            (7,225)              140,269

Change in cash and cash equivalents $ 362,414 $ (56,879)

Cash Flows Provided by Operating Activities


Net cash provided by operating activities from continuing operations was $193.1
million during the nine-month period ended September 30, 2022, a decrease of
$69.7 million compared to the same period in 2021. Cash flows provided by
operating activities decreased in part due to a decline in earnings as a result
of a decrease in operating revenue and a reduction in our annual federal
subsidies support. The decline is also as a result of changes in working capital
and the timing of expenditures. These reductions in cash provided by operating
activities were offset in part by a decrease in cash paid for interest of $1.9
million and cash contributions to our defined benefit pension plan of $6.1
million during the nine-month period ended September 30, 2022 compared to the
same period in 2021. In addition, in response to the potential impacts of the
COVID-19 pandemic in 2020, we deferred certain employer payroll tax payments
under the CARES Act. The portion of the taxes deferred until 2021 of
approximately $6.0 million were paid during the nine months ended September 30,
2021.

Cash Flows Used In Investing Activities

Net cash used in investing activities from continuing operations was $338.1
million during the nine-month period ended September 30, 2022 and consisted
primarily of cash used for capital expenditures, the purchase and maturity of
short-term investments and proceeds received from business dispositions and the
sale of assets.

Capital expenditures continue to be our primary recurring investing activity and
were $497.0 million and $339.5 million during the nine-month periods ended
September 30, 2022 and 2021, respectively. Capital expenditures for 2022 are
expected to be $565.0 million to $585.0 million, which will be used for our
planned fiber projects and broadband network expansion, which will include the
upgrade in 2022 of approximately 400,000 fiber passings, and to support
success-based capital projects for commercial, carrier and consumer initiatives.
We expect to continue to invest in the enhancement and expansion of our fiber
network in order to retain and acquire more customers through a broader set of
products and an expanded network footprint.

During the nine months ended September 30, 2022, we received proceeds from the
maturity and sale of investments of $151.6 million, which was offset in part by
the purchase of $40.0 million in short-term investments consisting primarily of
held-to-maturity debt securities with original maturities of three to twelve
months. During the nine months ended September 30, 2021, we purchased $155.0
million in short-term investments.



During the nine months ended September 30, 2022, we completed the sale of
substantially all of the assets of CCOC, our non-core, rural ILEC business
located in Ohio, for cash proceeds of $26.0 million. Cash proceeds from the sale
of assets increased $21.1 million during the nine-month period ended September
30, 2022, primarily from cash proceeds of $19.4 million for the sale of certain
non-strategic communication towers.

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Net cash provided by discontinued operations of $489.6 million consists of the
net proceeds from the sale of our five limited wireless partnership interests
during the nine months ended September 30, 2022. The proceeds from the sale are
expected to be used to support the fiber expansion plan.

Cash Flows Used In Financing Activities

Net cash used in financing activities consists primarily of our proceeds from
and principal payments on long-term borrowings.

Long-term Debt

Credit Agreement


On October 2, 2020, the Company, through certain of its wholly-owned
subsidiaries, entered into a Credit Agreement with various financial
institutions (as amended, the "Credit Agreement") to replace the Company's
previous credit agreement in its entirety.  The Credit Agreement consisted of
term loans in an original aggregate amount of $1,250.0 million (the "Initial
Term Loans") and a revolving loan facility of $250.0 million.  The Credit
Agreement also includes an incremental loan facility which provides the ability
to borrow, subject to certain terms and conditions, incremental loans in an
aggregate amount of up to the greater of (a) $300.0 million plus (b) an amount
which would not cause its senior secured leverage ratio not to exceed 3.70:1.00
(the "Incremental Facility"). Borrowings under the Credit Agreement are secured
by substantially all of the assets of the Company and its subsidiaries, subject
to certain exceptions.

The Initial Term Loans were issued in an original aggregate principal amount of
$1,250.0 million with a maturity date of October 2, 2027 and contained an
original issuance discount of 1.5% or $18.8 million, which is being amortized
over the term of the loan.  Prior to amendments to the Credit Agreement, as
described below, the Initial Term Loans required quarterly principal payments of
$3.1 million, which commenced December 31, 2020, and bore interest at a rate of
4.75% plus the London Interbank Offered Rate ("LIBOR") subject to a 1.00% LIBOR
floor.

On January 15, 2021, the Company entered into Amendment No. 1 to the Credit
Agreement in which we borrowed an additional $150.0 million aggregate principal
amount of incremental term loans (the "Incremental Term Loans"). The Incremental
Term Loans have terms and conditions identical to the Initial Term Loans
including the same maturity date and interest rate. The Initial Term Loans and
Incremental Term Loans, collectively (the "Term Loans"), comprise a single class
of term loans under the Credit Agreement.

On March 18, 2021, the Company repaid $397.0 million of the outstanding Term
Loans with the net proceeds received from the issuance of $400.0 million
aggregate principal amount of 5.00% senior secured notes due 2028 (the "5.00%
Senior Notes"), as described below. The repayment of the Term Loans was applied
to the remaining principal payments in direct order of maturity, thereby
eliminating the required quarterly principal payments through the remaining term
of the loan.  In connection with the repayment of the Term Loans, we recognized
a loss on extinguishment of debt of $12.0 million during the nine months ended
September 30, 2021.

On April 5, 2021, the Company, entered into a second amendment to the Credit
Agreement (the "Second Amendment") to refinance the outstanding Term Loans of
$999.9 million. The terms and conditions of the Credit Agreement remain
substantially similar and unchanged except with respect to the interest rate
applicable to the Term Loans and certain other provisions.  As a result of the
Second Amendment, the interest rate of the Term Loans was reduced to 3.50% plus
LIBOR subject to a 0.75% LIBOR floor. The maturity date of the Term Loans of
October 2, 2027 remained unchanged. In connection with entering into the Second
Amendment, we recognized a loss of $5.1 million on the extinguishment of debt
during the nine months ended September 30, 2021.

The revolving credit facility has a maturity date of October 2, 2025 and an
applicable margin (at our election) of 4.00% for LIBOR-based borrowings or 3.00%
for alternate base rate borrowings, with a 0.25% reduction in each case if the
consolidated first lien leverage ratio, as defined in the Credit Agreement, does
not exceed 3.20 to 1.00.  At September 30, 2022 and December 31, 2021, there
were no borrowings outstanding under the revolving credit facility. Stand-by
letters of credit of $26.4 million were outstanding under our revolving credit
facility as of September 30, 2022.  The stand-by

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letters of credit are renewable annually and reduce the borrowing availability
under the revolving credit facility.  As of September 30, 2022, $223.6 million
was available for borrowing under the revolving credit facility.

The weighted-average interest rate on outstanding borrowings under our credit
facility was 6.06% and 4.25% as of September 30, 2022 and December 31, 2021,
respectively.  Interest is payable at least quarterly.

Credit Agreement Covenant Compliance

The Credit Agreement contains various provisions and covenants, including, among
other items, restrictions on the ability to pay dividends, incur additional
indebtedness, and issue certain capital stock.  We have agreed to maintain
certain financial ratios, including a maximum consolidated first lien leverage
ratio, as defined in the Credit Agreement.  Among other things, it will be an
event of default, with respect to the revolving credit facility only, if our
consolidated first lien leverage ratio is greater than 5.85:1.00 as of the end
of any fiscal quarter, if on such date the testing threshold is met. The testing
threshold is met if the aggregate amount of our borrowings outstanding under the
revolving credit facility exceeds 35%.  As of September 30, 2022, the testing
threshold was not met and our consolidated first lien leverage ratio under the
Credit Agreement was 5.12:1.00.  As of September 30, 2022, we were in compliance
with the Credit Agreement covenants.

Senior Notes


On October 2, 2020, we completed an offering of $750.0 million aggregate
principal amount of 6.50% unsubordinated secured notes due 2028 (the "6.50%
Senior Notes").  The 6.50% Senior Notes were priced at par and bear interest at
a rate of 6.50%, payable semi-annually on April 1 and October 1 of each year,
beginning on April 1, 2021.  The 6.50% Senior Notes mature on October 1, 2028.

On March 18, 2021, we issued $400.0 million aggregate principal amount 5.00%
Senior Notes, together with the 6.50% Senior Notes (the "Senior Notes").  The
5.00% Senior Notes were priced at par and bear interest at a rate of 5.00% per
year, payable semi-annually on April 1 and October 1 of each year, beginning on
October 1, 2021.  The 5.00% Senior Notes mature on October 1, 2028. The net
proceeds from the issuance of the 5.00% Senior Notes were used to repay $397.0
million of the Term Loans outstanding under the Credit Agreement.

The Senior Notes are unsubordinated secured obligations of the Company, secured
by a first priority lien on the collateral that secures the Company's
obligations under the Credit Agreement. The Senior Notes are fully and
unconditionally guaranteed on a first priority secured basis by the Company and
the majority of our wholly-owned subsidiaries. The offerings of the Senior Notes
have not been registered under the Securities Act of 1933, as amended or any
state securities laws.

Senior Notes Covenant Compliance

Subject to certain exceptions and qualifications, the indentures governing the
Senior Notes contains customary covenants that, among other things, limits the
Company and its restricted subsidiaries' ability to: incur additional debt or
issue certain preferred stock; pay dividends or make other distributions on
capital stock or prepay subordinated indebtedness; purchase or redeem any equity
interests; make investments; create liens; sell assets; enter into agreements
that restrict dividends or other payments by restricted subsidiaries;
consolidate, merge or transfer all or substantially all of its assets; engage in
transactions with its affiliates; or enter into any sale and leaseback
transactions.  The indentures also contain customary events of default.  As of
September 30, 2022, the Company was in compliance with all terms, conditions and
covenants under the indentures governing the Senior Notes.

Finance Leases


We lease certain facilities and equipment under various finance leases which
expire between 2022 and 2040.  As of September 30, 2022, the present value of
the minimum remaining lease commitments was approximately $29.0 million, of
which $10.3 million was due and payable within the next twelve months. The
leases require total remaining rental payments of $31.8 million as of September
30, 2022.

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Sufficiency of Cash Resources

The following table sets forth selected information regarding our financial
condition.


                                                         September 30,      December 31,
(In thousands, except for ratio)                             2022          

2021

Cash and cash equivalents and short-term investments    $       462,049    $      210,436
Working capital                                                 431,058           142,270
Current ratio                                                      2.42              1.50


Our net working capital increased $288.8 million as of September 30, 2022
compared to December 31, 2021. Cash, cash equivalents and short-term investments
increased $251.6 million primarily as a result of the cash proceeds from the
sale of our limited wireless partnership interests, which was reduced in part by
capital expenditures for the fiber build plan during 2022. Working capital also
included net assets classified as held for sale of $88.2 million at September
30, 2022 related to the pending sale of substantially all of the assets of our
Kansas City operations compared to net assets held for sale of $26.0 million at
December 31, 2021 for the ILEC business located in Ohio.  However, working
capital was reduced by an increase in accrued interest of $17.3 million at
September 30, 2022 related to the timing of the semi-annual interest payments
for our Senior Notes.

Our most significant use of funds for the remainder of 2022 is expected to be
for: (i) interest payments on our indebtedness of between $50.0 million and
$52.0 million; and (ii) capital expenditures of between $88.0 million and $108.0
million.  The recent refinancing of our capital structure combined with the
Searchlight investment provides us the capital and financial flexibility to fund
our accelerated fiber network expansion and growth plans. In the future, our
ability to use cash may be limited by our other expected uses of cash and our
ability to incur additional debt will be limited by our existing and future debt
agreements.

We are closely monitoring the ongoing impact on our business of the novel strain
of coronavirus (“COVID-19”) and its variants. We are taking precautions to
ensure the safety of our employees, customers and business partners, while
assuring business continuity and reliable service and support to our customers.

 While we have not seen a material adverse impact to our financial results from
COVID-19 to date, if the pandemic worsens or new variants of the virus become
more dominant and were to cause significant negative impacts to economic
conditions, our results of operations, financial condition and liquidity could
be materially and adversely impacted.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act
("CARES Act") was enacted by the U.S. government as an emergency economic
stimulus package that includes spending and tax breaks to strengthen the US
economy and fund a nationwide effort to curtail the economic effects of
COVID-19.  The CARES Act included, among other things, deferral of certain
employer payroll tax payments.  In 2020, we deferred the payment of
approximately $12.0 million for the employer portion of Social Security taxes
otherwise due in 2020 with 50% due by December 31, 2021 and the remaining 50% by
December 31, 2022. The portion of the taxes deferred until 2021 were paid during
the third quarter of 2021 and we expect to pay the remaining portion during the
fourth quarter of 2022.

We believe that cash flows from operating activities, together with our existing
cash and borrowings available under our revolving credit facility, will be
sufficient for at least the next twelve months to fund our current anticipated
uses of cash.  After that, our ability to fund expected uses of cash and to
comply with the financial covenants under our debt agreements will depend on the
results of future operations, performance and cash flow. Our ability to fund
expected uses from the results of future operations will be subject to
prevailing economic conditions and to financial, business, regulatory,
legislative and other factors, many of which are beyond our control. Due to the
uncertainty and unpredictability related to the potential impacts of the
COVID-19 pandemic on our business, we will continue to closely manage our cash
and monitor liquidity.

To the extent that our business plans or projections change or prove to be
inaccurate, we may require additional financing or require financing sooner than
we currently anticipate. Sources of additional financing may include commercial
bank borrowings, other strategic debt financing, sales of nonstrategic assets,
vendor financing or the private or public sales of equity and debt securities.

There can be no assurance that we will be able to generate sufficient cash
flows from operations in the future, that anticipated revenue growth will be
realized or that future borrowings or equity issuances will be available


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in amounts sufficient to provide adequate sources of cash to fund our expected
uses of cash. Failure to obtain adequate financing, if necessary, could require
us to significantly reduce our operations or level of capital expenditures which
could have a material adverse effect on our financial condition and the results
of operations.  In addition, the COVID-19 pandemic has caused a disruption in
the capital markets, which could make obtaining additional financing more
difficult and we may not be able to obtain financing on favorable terms or at
all.

We may be unable to access the cash flows of our subsidiaries since certain of
our subsidiaries are parties to credit or other borrowing agreements, or are
subject to statutory or regulatory restrictions, that restrict the payment of
dividends or making intercompany loans and investments, and those subsidiaries
are likely to continue to be subject to such restrictions and prohibitions for
the foreseeable future.  In addition, future agreements that our subsidiaries
may enter into governing the terms of indebtedness may restrict our
subsidiaries' ability to pay dividends or advance cash in any other manner
to
us.

Surety Bonds

In the ordinary course of business, we enter into surety, performance and
similar bonds as required by certain jurisdictions in which we provide services.

As of September 30, 2022, we had approximately $6.6 million of these bonds
outstanding.

Defined Benefit Pension Plans


As required, we contribute to qualified defined pension plans and non-qualified
supplemental retirement plans (collectively the "Pension Plans") and other
post-retirement benefit plans, which provide retirement benefits to certain
eligible employees as described in the Note 13 to the Condensed Consolidated
Financial Statements, included in this report in Part I - Item 1 "Financial
Statements". Contributions are intended to provide for benefits attributed to
service to date. Our funding policy is to contribute annually an actuarially
determined amount consistent with applicable federal income tax regulations.

The cost to maintain our Pension Plans and future funding requirements are
affected by several factors including the expected return on investment of the
assets held by the Pension Plans, changes in the discount rate used to calculate
pension expense and the amortization of unrecognized gains and losses. Returns
generated on the Pension Plans assets have historically funded a significant
portion of the benefits paid under the Pension Plans. We estimate the long-term
rate of return on assets will be 6.00%.  The Pension Plans invest in marketable
equity securities which are exposed to changes in the financial markets.
COVID-19 has also impacted the financial markets, which could significantly
impact the returns on our plan assets.  If the financial markets experience a
sustained downturn and returns fall below our estimate, we could be required to
make material contributions to the Pension Plans, which could adversely affect
our cash flows from operations.

In 2022, we expect to make contributions totaling approximately $10.0 million to
our Pension Plans and $8.2 million to our other post-retirement benefit plans.
As of September 30, 2022, we have contributed $10.0 million and $5.1 million to
our Pension Plans and our other post-retirement benefit plans, respectively. Our
contribution amounts meet the minimum funding requirements as set forth in
employee benefit and tax laws. We elected to participate in ARPA beginning with
the 2021 plan year.  ARPA, which was signed into law in March 2021, included
changes to the employer funding requirements and is designed to reduce the
amounts of required contributions as a relief. During 2021 and the six months
ended June 30, 2022, we elected to fund our pension contributions at the
pre-ARPA levels, which has created a pre-funded balance. We expect that for the
remainder of 2022 and 2023, no additional pension contributions will be required
as we have now adopted the ARPA minimum required contributions and will use our
current pre-funded balance to satisfy those minimum contribution requirements.

Income Taxes


The timing of cash payments for income taxes, which is governed by the Internal
Revenue Service and other taxing jurisdictions, will differ from the timing of
recording tax expense and deferred income taxes, which are reported in
accordance with GAAP. For example, tax laws in effect regarding accelerated or
"bonus" depreciation for tax reporting resulted in less cash payments than the
GAAP tax expense. Acceleration of tax deductions could eventually result in
situations where cash payments will exceed GAAP tax expense.

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Regulatory Matters
In 2020, the FCC adopted an order establishing the RDOF, the next phase of the
CAF program, which resulted in a reduction of approximately $42.2 million in the
annual support we receive as of January 1, 2022 through December 31, 2031.

Critical Accounting Estimates

Our condensed consolidated financial statements and accompanying notes are
prepared in accordance with US GAAP. Preparing financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenue and expenses. These estimates and assumptions are
affected by management's application of accounting policies. Our judgments are
based on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making estimates about the carrying values of assets and liabilities
that are not readily apparent from other sources. For a full discussion of our
accounting estimates and assumptions that we have identified as critical in the
preparation of our condensed consolidated financial statements, refer to our
2021 Annual Report on Form 10-K filed with the SEC.

Recent Accounting Pronouncements


For information regarding the impact of certain recent accounting
pronouncements, see Note 1 "Summary of Significant Accounting Policies" to the
Condensed Consolidated Financial Statements, included in this report in Part I -
Item 1 "Financial Statements".

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CONSOLIDATED COMMUNICATIONS HOLDINGS, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (form 10-Q)

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