1282266--2/28/2006--VALOR_COMMUNICATIONS_GROUP

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Rapid and significant changes in technology in the telecommunications industry could adversely affect our ability to compete effectively in the markets in which we operate. The competitive nature of the telecommunications industry could adversely affect our revenues, results of operations and profitability. Weak economic conditions may decrease demand for our services. We depend on a few key vendors and suppliers to conduct our business and any disruption in our relationship with any one or more of them could adversely affect our results of operations. Disruption in our networks and infrastructure may cause us to lose customers and incur additional expenses. Recent difficulties in the telecommunications industry could negatively impact our revenues and results of operations. We receive revenues from the Texas and federal Universal Service Funds and any adverse regulatory developments with respect to these funds could curtail our profitability. Reductions in the amount of network access revenue that we receive could negatively impact our results of operations. The introduction of new competitors or the better positioning of existing competitors due to regulatory changes could cause us to lose customers and impede our ability to attract new customers. New regulations and changes in existing regulations may force us to incur significant expenses. A reduction by a state regulatory body or the FCC of the rates we charge our customers would reduce our revenues, earnings and cash flow from operations. Our business is subject to extensive regulation that could change in a manner adverse to us. Risks Relating to Our Common Stock and Senior Debt Our dividend policy may limit our ability to pursue growth opportunities. You may not receive any dividends. Our substantial indebtedness could restrict our ability to pay dividends and impact our financing options and liquidity position. We are subject to restrictive debt covenants that impose operating and financial restrictions on our operations and could limit our ability to grow our business. If we fail to comply with the restrictive covenants in our senior credit facility, our senior lenders may accelerate the payment of indebtedness outstanding under our senior credit facility. We are a holding company with no operations, and unless we receive dividends and other payments or distributions, advances and transfers of funds from our subsidiaries, we will be unable to meet our debt service and other obligations. Our interest expense may increase significantly and could cause our results of operations and distributable cash to decline significantly. Limitations on use of our net operating losses may negatively affect our ability to pay dividends to you. Risks Related to Our Pending Merger with Alltel s Wireline Business Failure to complete the merger could adversely impact the market price of Valor s common stock. After the close of the transaction, sales of Newco common stock may negatively affect its market price. The merger agreement will create a new management team and new Board of Directors.

Full 10-K form ▸

1282266--2/28/2006--VALOR_COMMUNICATIONS_GROUP_INC