Valor Communications Group, Inc. (Valor) is a provider of telecommunications services in rural communities in the southwestern United States. Valor operates approximately 518,000 telephone access lines in primarily rural areas of Texas, Oklahoma, New Mexico and Arkansas. The Company operates its business through telephone company subsidiaries that qualify as rural local exchange carriers under the Telecommunications Act of 1996. Valor offers a range of telecommunications services to residential, business and government customers. The Company's services include local exchange telephone services, which covers basic dial-tone service, as well as enhanced services, such as caller identification, voicemail and call waiting; long distance services, and data services, such as providing digital subscriber lines. Valor also provides access services that enable inter-exchange carriers to complete interstate and intrastate long-distance calls. On December 9, 2005, the Company approved a merger that will combine Valor and the wireline telecommunications business of Alltel Corporation. Pursuant to the Agreement and Plan of Merger Valor entered into on December 8, 2005, with Alltel and Alltel Holding Corp. (which the Company refers to as Spinco), Spinco will merge with and into Valor and Valor will survive as a stand-alone company and will hold and conduct the combined business operations of Valor and Spinco. The merger will take place immediately after Alltel contributes the assets making up its wireline telecommunications business to Spinco and distributes the common stock of Spinco to its stockholders. Immediately following the merger, Valor expects to change its name and that its common stock will be quoted on the New York Stock Exchange under that new name and with a new ticker symbol, each of which has yet to be determined. Local Services Local calling services include basic local lines and private lines, as well as enhanced services, such as voicemail and caller identification. Valor provides local calling services to residential, business and government customers, generally for a fixed monthly charge. In the markets the Company serves, the amount that Valor can charge a customer for local service is generally determined by the appropriate state regulatory authorities pursuant to the laws and regulations of the particular state. The Company also generates revenue from non-recurring services, such as service activation and reconnection of service. Data Services Valor provides high-speed Internet access with its digital subscriber line (DSL) products for a monthly fee. The Company also provides Internet access services to dial-up Internet subscribers. Its dial-up Internet service provides customers, primarily residential customers, with a local dial-up number they can use to establish a connection to the Internet over their existing phone lines for a flat, monthly fee. The Company's Internet access services also enable customers to establish an e-mail account and to send and receive e-mail. Long Distance Services Valor generates revenue from the provision of long distance calling services either based on usage or pursuant to flat-rate calling plans. These services include traditional switched and dedicated long distance, toll free calling, international, calling card and operator services. Access Services Long distance carriers pay the Company network access charges when its local customers make or receive long-distance telephone calls. Since these calls are generally billed to the customer originating the call, a mechanism is required to compensate each rural telephone company, regional Bell operating company or long distance carrier providing services relating to the call. Access services include switched access, charges that depend on call volume, and special access, involving dedicated circuits for which long-distance telephone companies pay a flat fee. Valor bills access charges to long distance companies and other customers for the use of its facilities to access the customer, as described below.

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