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Good afternoon my name is Jennifer and I will be your conference operator today. At this time I’d like to welcome everyone to the Embarq conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question and answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you Mr. Erxleben, you may begin your conference.

Thank you, good afternoon everyone and thanks for joining us for Embarq Corporation’s fourth quarter 2007 investment community update. With me today are interim Chief Executive Officer Tom Gerke and Chief Financial Officer, Gene Betts. In addition, Tom McEvoy, President of our business markets group and Harry Campbell, President of our consumer markets group will be here participating in the Q&A session at the end of the call. Before we get started there are two important items I’d like to bring to your attention. First, if you downloaded the fourth quarter presentation from our website, please turn to the cautionary statement on slide 2. As that slide indicates our comments today will be inclusive of some forward looking information and expectations involving a number of risks and uncertainties that could cause actual results to differ from our expectations. With that in mind I would strongly encourage everyone to review the detailed discussion of risks and uncertainties included in our SEC filings, in particular the risk factors section of our annual report on form 10K. Second, during our remarks today we will be referring to certain non GAAP measures. These measures are reconciled to the appropriate GAAP measures in the appendix of the presentation as well as in the definitions section of our press release. One non GAAP measure in particular I would bring to your attention is cash flow before dividends. This measure can be calculated simply by adding depreciation and amortization to net income and subtracting net capital expenditures. It can also be reconciled to our GAAP cash flow statement as shown in the presentation and press release. Another non GAAP measure I would highlight is our as adjusted basis of reporting. Those of you who’ve listened to our previous calls may be familiar with the differences between our as adjusted and GAAP reporting, but I’ll go ahead and review those again briefly. As part of our spinoff on May 17, 2006, Embarq received from Sprint Nextel certain customer relationships, assets and liabilities, the most notable of which were the long distance voice customers in our service territory. Our GAAP results only reflect those transfers after May 17, 2006, which means our pre spin GAAP results are not fully comparable to our post spin GAAP results. Our as adjusted results, however, assume the transfers from Sprint Nextel occurred on January 1, 2006, which we believe makes them more useful for historical comparisons. Thus, throughout the call when we refer to results for any period prior to the third quarter of 2006, we will be referring to our results reported on an as adjusted basis. Okay, with those two, as I said very important points covered, I will now go ahead and turn the call over to Tom.

Thanks Trevor. Looking back, 2007 has been a successful year at Embarq and we made progress in a number of areas. We’ve continued to improve our competitiveness, demonstrate our commitment to innovation and deliver solid financial results. Relative to the outlook we provided last quarter, full year revenue, operating income and capital expenditures were in the upper half of our guidance ranges or better and going back to the original outlook we provided a year ago, our results exceeded expectations in all three areas. Looking at revenue in more detail, fourth quarter telecommunications revenue was $1.46 billion, which is 2.5% lower than Q4 2006. Keep in mind, however, that the year ago quarter benefitted from a $34 million nonrecurring settlement which accounts for almost all of the $38 million year over year difference. For the full year, telecom revenue declined just 1.5% to $5.9 billion, again the $34 million settlement accounted for a significant portion of the $90 million difference in full year revenue. As you can see on slide 4, we’ve made solid progress against our goal of returning to top line growth, which is particularly notable in light of the ongoing increase in consumer competition. At the end of the year, cable VOIP service was available to roughly 70% of the households in our operating area, up from about 60% at the end of 2006 and 40% at the end of 2005. The rate of wireless substitution, meanwhile, has been relatively steady over the last several quarters and the impact of the economy continues to be evident but modest. Taken together, those factors contributed to a loss of 91,000 access lines in the fourth quarter, 6,000 more than the 85,000 lines we lost a year ago. Looking ahead to 2008, we expect absolute line losses to be flat or slightly higher than the 2007 level. Over the longer term, however, we are encouraged by what we’re seeing in the markets where we’ve been competing against cable the longest. As expected, line losses in those markets are moderating after reaching a peak a few quarters after cable entry. This is true in both small markets and large markets, in states like North Carolina and Florida, that have had cable exposure for an extended period of time. The fact that our telecom revenue comparisons have improved while the rate of access line loss has increased highlights the strength we’re seeing in other areas of our business. Two of those areas are wholesale special access and high capacity business data, which together are reported in our data revenue line. In the fourth quarter, data revenue grew 5.5% to $193 million and full year revenue totaled $765 million, 6.8% higher than 2006. Looking ahead to 2008, data is an area where we have good visibility and we continue to expect solid growth. Another key area of growth I would highlight is average revenue per household, which is being driven largely by our increasing penetration of high speed internet service. In the fourth quarter, average revenue per household grew 5.9% year over year, to almost $55 per month. Net additions for HSI totaled 61,000 in the quarter, raising our subscriber base to 1.28 million at year end. HSI demand remains strong, evidenced by the fact that our gross additions have been relatively stable over the last several quarters. The 768 kilobits service we launched in third quarter is contributing to sales, but our 1.5 megabit tier remains the most popular among our new subscribers. Meanwhile, the 10 megabit service we launched in Las Vegas made a small contribution to subscriber growth and generated a roughly equal number of migrations from lower speed tiers. Driven by strong growth in subscribers, HSI revenue was up 19% to $128 million in the fourth quarter and up 24% to $489 million for the full year. HSI [arpu] in the fourth quarter was $34, a slight decline from the third quarter. Launching our HSI portal myembarq.com, was one of our key milestones in 2007 and we continue to enhance the site to increase its value to users. In Q4, we introduced Embarq unlimited music, a service that provides subscribers with access to over 3 million songs. This service enables subscribers to stream music over the internet, create playlists, download individual tracks or complete albums and transfer music to an MP3 player so they can listen on the go. We’ve also added video content to myembarq.com, including more than 5,000 music videos, 5,000 movies and 2,000 TV shows. The Embarq video store gives consumers three viewing options, rent and download, purchase and download or purchase and burn to DVD. The final revenue stream I’d highlight today is wireless which grew to $16 million in the fourth quarter and $51 million for the full year. Subscriber additions were a relatively modest 4,000 in Q4, as we refined our approach to customer targeting to mitigate dilution. At $14 million, fourth quarter wireless dilution improved by $7 million sequentially and for the full year was $3 million better than our guidance of $80 million. In 2008, we expect our current approach to reduce the level of dilution by as much as 75%. As we scrutinize the contribution of wireless to our portfolio, it’s important to keep in mind that its value isn’t limited to its direct results. The integration of wire-line and wireless service makes communication simpler and easier for our customers and is part of our efforts to increase customer satisfaction and loyalty to Embarq. Our wire-line wireless integration strategy continues to receive recognition from experts in the industry, with Frost & Sullivan recently naming Embarq together plan its 2007 consumer communication services product of the year. Launched in the first quarter of 2007, the Embarq together plan includes benefits such as a single voicemail box, a single bill and unlimited calling between customer’s home and wireless phones. In the second half of the year, we enhanced the together plan with the innovative find me, follow me and call transfer functionality. These features work not only with Embarq wireless service but the features also work with wireless service provided by other carriers. In 2008, this kind of common sense innovation will continue to be a key role in a key area of focus. Innovation is important to our success in the competitive marketplace and we expect it to become increasingly important to our financial results. Since our spinoff in mid 2006, we introduced more than 15 new products and services, like myembarq.com portal and advanced computer support that provide incremental revenue opportunities. Although today the revenue contribution from these items is still relatively small, we expect to reach a meaningful run rate over the course of the next few years. Among the innovative new products and services we expect to roll out in 2008 is a broadband home phone that will provide consumers with cool features and functionality, like personalize content and visual voicemail. We’re also planning to further expand the functionality that integrates wire-line and wireless services, whether provided by Embarq or other wireless carriers. For businesses, our plan includes expanding our portfolio of integrated IP products and services. The first of these offerings was the innovative smart IP bundle for small businesses that we launched in late 07. Another area of continued emphasis in 2008 will be customer satisfaction. Since the spinoff, we’ve seen improvement across our four market groups in third party measures of customer satisfaction. And in 2007, we received customer driven service award from JD Power & Associates in our business group and from research and consulting firm Atlantic ACM in our wholesale group. Although we’re proud of these awards and the overall progress we’ve made, we’re still working to get better. For example, in our consumer group, we’ve engaged both the customers and our front line employees to help us understand and prioritize the steps we can take to drive continued improvement going forward. The final focus area for 2008 I would highlight is operational excellence, in other words, what can we do to increase both our effectiveness and our efficiency. In 2007, we started projects to improve our technician dispatch operations and simplify our product and offer infrastructure which in addition to benefitting customers will deliver an annual operating income benefit we expect to reach $50 million over the next few years. We also increased our utilization of online capabilities in areas such as billing, which again, benefit customers and lower costs. However, there’s still margin improvement we need to realize to enhance our competitiveness and our performance relative to peers. Thus, we’ll continue to look across the company, utilizing benchmarking and other methods to help identify and capture future opportunities. In summary, the success we enjoyed in 2007 has positioned us well for continued success in 2008. We have good momentum and the nature of our business provides stability in the current economic environment. Among the other things Gene will cover are the specific expectations we’ve established for 2008 which reflect our optimism about the year ahead. In addition, he’ll provide more detail on our results for Q4 and the full year 2007. Gene.

Thanks Tom and good afternoon everyone. I’ll begin on slide 7 with an overview of revenue which was down only modestly year over year. Adjusting for the $34 million settlement reflected in 2006, the comparison is even better. Our 2007 guidance for telecom revenue was $5.87-$5.92 billion and we reported telecom revenue of $5.9 billion which was in the upper half of the range. Looking at our four market groups, consumer again posted strong growth in average revenue per household mitigating the impact of access line erosion. The year over year decline in revenue was less than 2% despite a more than 8% decline in consumer access lines. Our business markets group continues to post solid top line growth driven by strong demand for high capacity data services. Year over year business revenues were up 2.4% in the fourth quarter and 1.8% for the full year. Wholesale markets is where the $34 million settlement was recorded last year, making the year over year trends look more negative than they actually are. The impact of the settlement notwithstanding, wholesale is performing very well with solid special access growth, largely offsetting declines in switched access. At Embarq logistic revenue was down for the full year, but it has been relatively stable since the middle of last year. At the same time, there has been improvement in the profitability of the logistics segment with full year operating income increasing by $14 million. Looking at the profitability of the company overall on slide 8, operating income was relatively stable in the fourth quarter. In fact, despite competitive pressures, there hasn’t been much volatility in operating income since the middle of 2006. As you may recall, in the first half of 06, expenses were relatively low because we were still in the process of building the functions necessary to support the business on a standalone basis. That was obviously a unique circumstance that makes calendar year 2007 look worse than 2006 but is not a factor looking forward. Taking a more detailed look at our fourth quarter results, operating income in Q4 was $370 million. This is slightly better than the third quarter and only below the year ago period due to the impact of nonrecurring items. In total, nonrecurring items negatively impacted Q4 2007 by $36 million, including $5 of spinoff expenses and $31 million in severance costs related to the workforce reduction we announced last quarter. Conversely, the year ago quarter reflected a benefit of $19 million, consisting of the $34 million settlement included in revenue, partially offset by $13 million of spinoff expenses and $2 million of severance cost. For the full year, operating income declined a little more than $100 million to $1.5 billion. This compares favorably to our guidance for the year, which adjusted to reflect severance charges recorded in Q3 and Q4, was $1.45-$1.5 billion. Below the operating income line, interest expense declined to $104 million in the fourth quarter and $432 million for the full year. This reflects a nearly $600 million year over year decline in our net debt balance to $5.8 billion at the end of 2007. Our income tax rate in the fourth quarter was well below the normal at 29%. This was attributable to the modification of our legal entity structure following our spinoff from Sprint Nextel. Going forward, we expect our tax rate to be roughly 37.5% or about 150 basis points lower than our previous run rate, calculated based on our 2007 income before taxes, this 150 basis point improvement will provide an additional $16 million of recurring cash flow. Finally, diluted earnings per share in the fourth quarter was $1.23 for the full year, diluted EPS was $4.44. Turning to slide 9, capital expenditures in 2007 were well below 2006, about half of which was due to lower spinoff requirements. In addition, the housing slowdown continues to have a positive impact on capital spending. Total 2007 cap ex was $819 million, net of $10 million of proceeds from construction reimbursements. Due in part to continued favorability in new service addresses, this was $11 million better than our outlook of $830 million net of reimbursements. The relatively low level of capital spending contributed to strong cash flow before dividends of $921 million in 2007. In 2006, since our spinoff occurred in the middle of Q2, we can only make cash flow comparisons over the second half of the year. So focusing then on the second half, cash flow before dividends was almost flat from 2006 to 2007. The second half of both years were negatively impacted by nonrecurring items but the amount was larger in 2007. Thus, the comparison is even more favorable on a run rate basis. In light of our strong cash profile, the Board recently approved a 10% increase in our quarterly dividend and a $500 million share repurchase program. This was our second dividend increase in less than a year, underscoring our commitment to returning cash to shareholders. In closing, I would echo what Tom said earlier about our optimism for the coming year. Our 2008 expectations for key metrics are outlined on slide 10. Starting with access lines, we expect absolute line losses in 2008 to be flat or slightly higher than the 434,000 we reported in 2007. However, over the longer term, we expect to see the rate of access line loss begin to moderate. Cable telephony offers are nearing complete rollout across our footprint and our experience in mature markets shows a lessening impact over time. Despite the uptick in line losses, we expect telecommunications revenue to again decline only modestly as high speed internet, wholesale special access and high capacity business data continue to grow at healthy rates. The expected range we’ve established for telecom revenue in 2008 is $5.75-$5.83 billion which would represent a year over year decline of just 1.2-2.5%. In contrast to revenue, we expect marked improvement in consolidated cash flow before dividends. The expected range is $950-$990 million which would be an increase of between 3.1-7.5%. Among the factors driving this expected improvement are the actions we’ve taken over the last few quarters to improve our operating efficiency. In addition, the spinoff and severance costs we incurred in 2007 will help our 2008 comparisons. Finally, capital expenditures is another area where we expect improvement in 2008 to benefit cash flow. We think cap ex will be approximately $800 million but there may be additional opportunity based on the level of new service addresses. The expected decline in cap ex for 2006 through 2008 underscores a point I made on our last earnings call about the effects of a softer economy on our business. What we’re seeing right now is fairly typical, significant improvement in capital expenditures offsetting some negative impact on line metrics and bad debt. Our experience is certainly much different than homebuilders and related businesses that have seen very sharp drop-offs over the last year or so. For us, slowing home development has a limited impact on revenue and net positive near term impact on cash flow. On that note, let me pause so that we can take questions, I’ll hand the call over to Trevor.

Thanks Gene, while the operator opens the line questions I would also my usual reminder about limited multiple or multi part questions. Looks like we have about 20 minutes available for Q&A at this point and if possible we would like to get to everyone who has a question. Jennifer when you’re ready would you mind reviewing the process for submitting a question before you introduce the first person in the queue?

Yes sir, at this time I would like to remind everyone, if you would like to ask a question press star then the number one on your telephone keypad. We’ll pause for just a moment. Your first question comes from Gaurav Jaitly from UBS, your line is now open.

Great, thank you, good afternoon. Gene I just wanted to follow up on your comments on the economy. Obviously it’s a big focus of investors. Could you tell us what you’re seeing in your markets, Vegas, Florida and also your other markets. Have trends kind of gotten worse since third quarter in terms of your bad debt or non pay disconnects? And related to that point, in terms of guidance for 2008 for access lines, what are you factoring in there, I mean you’ve said cable competition I think you said it’s about 70% right now, how high does that get and what are you factoring in there in terms of your economic outlook for housing? That’d be great, thank you.

Okay, yeah on the economy, not a lot more I think to add other than what I just said. I guess maybe just a couple of amplifications. First of all, I think your specific question was have we seen it get any worse? I think generally we would say third quarter and fourth quarter were roughly the same. We obviously saw a difference coming into third quarter but haven’t seen a lot of difference since then. In terms of the economy, particularly later in the year, obviously we’re not experts on predicting general economic conditions, that would be probably silly for us to try and predict where the S&P 500 will close the year. I think you and others on the call have many more resources capable of making projections on the economy in general. I would just say that in terms of setting our guidance, we have assumed in 2008 that the economic conditions stay roughly the same as they’ve been in Q3 and Q4 and as you know our drivers are somewhat counter cyclical, particularly to the extent there’s a housing slowdown that actually increases our cash flow near term. So, you know I think that really says about what we can on the economy and hopeful we’ve given you the guidance you need in terms of your modeling.

Can you just remind us Gene on some of what your cable VOIP overlap is, where do you think that gets to a steady state?

I think we’re roughly at 70% now and we would expect it to go to 80% ultimately. So we’re nearing the end of the expansion of the footprint in a meaningful way. We are not through what we call the opening market bonanza effect yet, you know because some of the markets, particularly the Adelphia properties which were changed ownership and came online this year and are still coming online next year, those are playing out. But the actual expansion of the footprint in the next year or so, we would expect it to be completed and would also expect what I call the bonanza effect of the opening markets to start to level out as well.

Great, thank you.

And your next question comes from Chris Larsen, your line is now open from Credit Suisse.

Hi, thank you, I’m going to follow on I guess the same line of questioning. Gene you mentioned that you get the benefit from lower cap ex. Can you give us an idea what percent of homes were added in say one-half 07 versus how many housing builds in the delta in the second half. What was the sort of delta, the run rate of homes being added versus not being added so that we can think in terms of access line impact and then as long as the economic slash housing stays there we can build that into our models as well.

You know, directionally I think comments I’ve made before are that over a longer period of time, kind of during the boom years if you will of the real estate markets, we were running in the 250,000 zip code for new service addresses, you know it could have been two [very bibe] or 240, but in that range. I think 2007 we probably came in the 215,000 type zip code and you know looking forward you know guess of a you know it was probably at the 200,000 zip code now. What that number could really be, I mean there’s a lot of factors here at play and it’s obviously something we’re going to stay on top of very closely and for sure try to make sure that we don’t build out plant where it’s not needed but again I think in terms of trying to forecast you know what that number would be over the next year, it gets back to the comments I made earlier and we’re more focused on making sure that we have the right operating procedures or react properly rather than trying to precisely forecast what that number is in the future.

No, that’s very helpful, thank you.

Your next question comes from David Barden from Banc of America, your line is now open.

Hey guys, thanks, Tom maybe I could just follow up on the comments about wireless. You know I guess for the last few quarters I’ve been kind of pinging the management team on you know the comfort level with kind of absorbing the losses that have been absorbed to this point in time in wireless. It looks like you know your gearing towards a significant reduction in those loses year over year. It’s not apparent at least I guess to me that the subscriber trajectory would be able to get you there. So I was wondering if maybe you could kind of walk us through how do we get to that 75% reduction in the dilution level from the wireless business. Thanks a lot.

Sure, well first, how we are going to achieve the 75% reduction is simply by being very targeted and very specific in how we spend money and just the audience that we go after. In terms of the ongoing aspect of your question, I think I used the word scrutinize in the script. You know I have a concept here of each of us, whether it’s me, my fellow executives or initiatives like the wireless one have to earn their ticket to get back on the train each day and to do that with this wireless one, that means us talking about profits with you instead of dilution or losses. And so we’re going to as kind of this new team just really focus on that and either we’re going to see a path to get back to talking about profit or we’ll take other action.

So is it fair to say then that within the confines of scrutiny and targets and all that, is that kind to say that you’re just going to sell less of it and advertise it less and make it smaller until you know the revenues and the cost come back into balance because you haven’t seen the return on it yet? Is that [overlay].

Yeah I think what I’m trying to say there is we think we have a mix that we’ve come into this year targeting that should allow us to stabilize it and run it in a much more efficient, much more profitable or at least in the trajectory gets us to where we want to go. As we watch that and as we scrutinize it, if we’re not making the required progress then it will get additional action.

Okay, great, I appreciate it, thanks guys.

Your next question comes from David Janazzo from Merrill Lynch, your line is now open.

Good afternoon. Tom your team has done quite a bit of work on the benchmarking looking at processes and the cost structure, what is your assessment of that work, you mentioned a few items but what’s your overall assessment on that work, the cost structure and specific areas for improvement.

Well I think there’s still some gap that we can close between us and some of our peers. I think we’ve done a pretty darn good job of within individual departments, you know flushing that out, getting it out in the open and then capturing the benefit. We’ve done a pretty darn good job across some of the departments and like reducing our dispatch that took coordination between the call centers and the consumer group and the dispatch function within the network group. I think we could look at a lot more across functional efforts using process improvement end to end process examination, to continue to get that out. I would say the low hanging fruit is probably gone but there’s more fruit on this tree and this management team and I personally plan on continuing to go after it because I just have a difficult time stomaching the EBITDA margin and cash flow as a percentage of revenue between us and our peers. Some of it clearly can be explained with different geographies, different USF, different top levels of competition. But I think there’s some areas of improvement and we want to go after those.

And how do you quantify that, how do you think of your level of margin versus some of the peers.

I’m going to let Gene kind of quantify it a little bit for you.

Yeah as we have indicated before, as a minimum threshold we think there’s a 300 basis point EBITDA margin gap on average between us and our next three smaller peers. We have in motion already actions that we’ve announced before which once they’re fully operationalized which will take you know another year or so on some of them, should address about 250 basis points of that gap. So you haven’t seen it yet but it’s in motion and we feel very good about that. So that leaves another 50 to get to the benchmark. Now candidly, as Tom said, our objective is to go beyond that. We’re benchmarking not just to peers but to world class levels by process. So our objective is to get to best in class of any relevant comparable which presumably would be beyond some [overlay] benchmarks.

Thank you.

Your next question comes from Michael Rollins from Citi Investment Research, your line is now open.

Hi, good afternoon. Just a follow up, in terms of what is in the margin expectation as you look at the opportunity versus your peers, is that inclusive or exclusive of the wireless dilution and as a part of this answer, when you look at your cash flow before dividend guidance, how much margin expansion is in your expectations for 2008 in terms of the initiatives that you have ongoing. Thank you.

Okay, well Mike, in general the wireless is not a factor in our 300 basis point comparison, okay, we recognize that’s a separate activity so in our benchmarking and everything we are not using the reduction of wireless dilution to close that gap. In terms of the trajectory, you know just directionally I think you can kind of think of the 300 basis point improvement coming in somewhat ratably over the next two to three years. And the reason of course is that we are still spending to do some of these things to improve our workforce dispatch and all that and building systems so there’s both cap ex and expense related to that and we don’t really get the benefit until some of these projects are completed.

Thank you.

Your next question comes from Mike McCormack from Bear Stearns, your line is now open.

Thanks, hey guys, just two questions. First one the guidance for telecom revenue and access lines, if you do, I think I’m doing the math correctly but it looks like the year over year rate of decline on telco revenue is accelerating just a tad with relatively flat access on guidance I guess. Just trying to get a sense for what the dynamic there is, you think you’re going to be losing higher [arpu] customers or what went into those numbers. And then secondly, I guess just on a technical issue, Gene your thoughts on the free cash flow calculations and why working capital shouldn’t be included in free cash flow guidance and then maybe attached to that just some comments on where bad debt expense has gone over the past two quarters or so.

Mike, this is Trevor, let me take the guidance question. You know we guide to flat absolute line loss flat or slightly higher absolute line loss. That would lead to slightly higher percentage rate of loss so that obviously factors into the telecom revenue guidance and again the revenue guidance is range and so at the low end of the range I think the revenue decline is probably fairly close to what we saw this year, excuse me, at the high end of the range is probably close to the decline we saw at the low end it’d be slightly higher. So I think that syncs up pretty well with the access line guidance. On free cash flow I’ll just get started and let Gene chime in, again we didn’t guide, the word free was not in the guidance. We’re guiding to cash flow before dividends, which we’ve defined in the presentation and the press release so I’ll let Gene kind of pick it up from there.

Yeah, Mike, the reason we’ve defined it that way is hopefully to be useful to you and others because what we’re trying to get is a number that you can essentially run rate. So and that’s by the way why we have not included working capital in it, although we obviously are trying to improve our working capital as well but we have things like a good example is the severance charges where we accrued all that as an expense this year but a lot of the cash goes out next year, so it creates kind of warps in the run rate. Similarly, because of our spinoff, we issued all of our long term debt at one time which is very unusual, so we have interest payments in Q2 in the second quarter and the fourth quarter and nothing in the first and the third quarter. So you know if we go strictly on cash flow, it provides a lot of volatility. So what we’ve done basically, another way to think about it is, we’ve taken operating cash flow, EBITDA minus cap ex then we take off basically GAAP interest expense and GAAP tax effect to give you sort of a normalized cash before dividends run rate and then obviously as you point out working capital would be plus or minus of that, but we’re trying to provide useful information for modeling and then we’ll also provide updates on our working capital efforts over time. I think finally your question was bad debt expense and what has happened. As we’ve said I think third quarter release, we were running at about $20 million a quarter, give or take, we bumped that 50% to $30 million and have been continuing to run at that rate. I think in terms of a percentage of revenue overall, that’s like 2.3% or something like that. However you’ve got, recall that, it’s really a lot higher percentage were it for the relevant customers because we have a lot of wholesale where like our customer is AT&T or Verizon and we also have a lot of state and local governments and hospitals and things like that. So as a percentage of kind of the likely bad debt, it’s a much higher percentage than what it would indicate on total telecom revenue.

Great, thanks guys.

Your next question comes from Simon Flannery of Morgan and Stanley, your line is now open.

Thanks very much, good evening. Could you talk a little bit about operating income guidance. You’ve given that in the past but didn’t give it today, any sort of moving parts we should know about on depreciation or on the EBITDA line and also with the wireless dilution coming down, is that going to come down steadily during the year and could we even get to break even at the end of the year? And then finally any update on the CEO announcement timing? Thanks.

Yeah, let me take the last one and then I’ll ask Gene to cover the first. The important thing there is that as you can see the company really hasn’t experienced any problems at all with the change. The Board was able to move forward very promptly with the dividend, buyback, we put together an outlook that we believe has a lot of optimism in it. It couldn’t have happened at a better time in the sense that we had plans and budgets in place, the people to put those together here executing. Most of us worked together literally for years before Dan arrived and we’re still working together like a well oiled machine in my view. So that’s kind of the backdrop to consider that question. The Board’s doing exactly what it said it was going to do in the press release, go through an orderly process, they’re doing that cognizant of the benefits of bringing this to a prompt closure. We don’t have anything to announce today, as soon as we do we’ll be getting out a press release.

Yeah, segment on the operating income question, no there’s nothing, no real major drivers. The reason we are changing is just that we like to go as far down the income or cash flow statement as we can, obviously to give you a more comprehensive economic view. The reason we were sticking at operating income up to this point is with the spinoff we had so much noise and the low operating income that it was just run rate difficult to communicate. So now that we’re sufficiently passed the spinoff we feel comfortable going down to the free cash flow before dividends which we again would have done at the time of the spinoff had that have been possible to easily communicate that. So it’s really just trying to be more comprehensive in our communication and give more of the economics in the metrics, but there isn’t really big story in amortization or depreciation. On wireless dilution, that you know it’s probably declining somewhat over the year but there isn’t a huge anomaly during the year and I would say also on that, that some of the increased targeting that Tom referred to and other actions, we have actually put in effect during the fourth quarter, so we’re actually coming into the year with some of these. And you notice that our the change in net ads versus prior quarters so this isn’t something that’s out in the future, it’s something that will be happening throughout the years.

We’ll see a decent improvement from Q4 to Q1?

Yes [overlay].

Thank you.

Next question comes from Michael Nelson from Stanford Group, your line is now open.

Thanks a lot for taking the question, my question is regarding your previously announced share repurchase program. I was wondering if your window was open to buy back shares since you made the announcement. If so did you buy back any shares during the quarter and more importantly, giving where you stock is currently trading, can we expect you to be in the market as soon as possible buying back shares and are you considering an accelerated buy back program? Thanks.

In terms of the first question, the blackout, we have been in continual blackout until after this earnings release call so we have not been legally permitted to execute a repurchase until now. Once the blackout ends, which we contemplate the next day or two, we will do what we think is prudent and rational in terms of executing the repurchase plan. You know I think we consider all options and we’ll do whatever we think makes the most economic sense for our shareholders.

Thank you.

Your next question comes from Dave Coleman from RBC Capital Markets, your line is now open.

Great, thank you, just want to go back to the wireless question. You mentioned wanting to get that business back to profitability. I was wondering if you could just lay out for us some of the levers you have to pull to make that segment profitable. And then on the DSL business, the 61,000 DSL subs that you’ve added during the quarter, what was the breakout between I guess 768 versus 1.5 megs and higher speeds and then of the existing 1.2 million DSL subs, was there any discernable trend between moving to a higher or lower speed? Thank you.

Harry, do you want to take that one?

Sure, Dave this is Harry Campbell in the consumer markets group, let me start with wireless. I don’t think any of the things I talk about are going to surprise you but frankly taken together they’ve had a pretty important impact on our ability to start to run the business better. So I’ll just talk about this for a second. What we’re doing is some fundamental things is that we’ve tightened our coverage in our maps that we have so that we’re not selling to people that have, I’ll call it, less than good wireless coverage. We’ve also tightened some our credit policies. We have a very good base of customers that have a lot of history with us, particularly on the home phone, but we’re finding that some of those have been struggling with us in our wireless, so we’ve tightened that down some by raising deposits. We’ve also taken a real close look at the importance of families and how to attack that, because they tend to have better payment schedules and like and want our home phone, therefore the integrated product. So if you take all those together, what’s happened is this [cheemo] effect is starting to make a difference already. Particularly on the high speed, I don’t know that we get specific numbers out there but we’re having a success, I’ll call it bi-modally on both ends of this. The 768 product has been really nice, I think as the economy’s gotten a bit soft, not dramatically but a little bit soft, it’s nice to have a 1995 product out there that has enabled people to do some shifting from the dial up. So that’s been nice, that’s running in the acquisition basis, high teens, occasionally it’ll pop up maybe 20% of our sales. At the same time, we came out with 10 meg, it was pretty successful in Las Vegas, it was over 10% of our sales during our test period. We’re in the midst of rolling out that so I don’t know national results. But what also is happening is we’re starting to sell more 3 and 5 meg. So I feel very good about kind of the range of speeds we have because frankly the one size fits all doesn’t work with either our customer base or the economic conditions so they’re working well. We have not seen a material change in the over million customer base that was another question you asked. Right now we’re having more upgrades of speed than we do downgrades. We’re please with that, we think that’s because our customers are choosing to do that and it is helping us with regard to our average revenue per household.

Alright, thank you very much.

Your next question comes from Jason Armstrong from Goldman Sachs, your line is now open.

Thanks for taking my question, just one follow up question on the free cash flow guidance and just sort of understanding the underlying parts and what’s been mentioned in this call. You know we’ve got wireless dilution which I guess sort of goes down by $50 million or so, you’ve got a tax rate change which sort of takes the tax expense down $16 million or so. You’ve got $20 million in lower cap ex, I think there’s some severance items that impacted 07 you know that don’t necessarily show up in the 08 income number. You know it seems like in total these are $100-$120 million worth of impacts that you could sort of add back to the cash flow before dividends number in 07 which kind of means you’re obviously forecasting a pretty big decline in the 08 outlook. Am I thinking about it wrong here and if that’s the case given the revenue declines you’re talking about that actually implies we’re shrinking margins in the core business, so maybe I’m looking at this totally wrong but if you could just sort of step through the math there I’d appreciate it. Thanks.

Yeah, maybe rather than trying to get into the details on the call and certainly Trevor can follow up afterwards, but I would say generally not in terms of deteriorating margins, we don’t foresee major margin shifts and kind of having trouble correlating all the numbers you were throwing out on the fly. But you know I think the way I would describe it is I think the business is just fundamentally stronger going forward. I mean it’s true we have improved our tax rate but that was something we caused to happen as well and we’re taking costs out, we’re basically increasing [arp] and offsetting the effect of access lines pretty substantially and so I say it’s really pretty much fundamental improvement. You know the spinoff cost jumping around from year to year make it very difficult but when you just kind of look at the underlying business and ask how are we doing on the business, I think it’s a positive story.

That’s great, thank you.

Your next question comes from Tim Horan from Oppenheimer, your line is now open.

Thanks guys, just two questions. Can you give us what you think the normalized earnings were in the quarter, they seemed to me to be maybe one or two cents below reported earnings if you kind of normalize the tax rate and the onetime items. And any kind of range you could give for 08 on the earnings also I think would help some of the confusion. And then on a marketing question, can you talk a little bit about maybe other ways you can stem the market share losses here in the access line side, I know we’re very focuses here and the company is on expanding margins but does it make some sense to maybe focus more on bundles and marketing and let the margins decline a little bit to slow down the access line growth for the long term. Thanks.

Let me take the first one, on the so called kind of normalized run rate, as I touched on in my script earlier, when you really normalize these various out of period or onetime items, there really hasn’t been a lot of variability in operating income for really since the spinoff. So notwithstanding some decline in, obviously access lines and some lesser decline in revenue, that’s remained largely pretty flat actually when you normalize those items. And I’m sorry your question on 2008 guidance?

Sorry, just the earnings per share, what you think the earnings actually came in on the quarter and maybe some range for next year.

Tim, the press release talks about it, I think an $0.18 impact from the income tax benefit in the fourth quarter and then we talked about severance charges of about $31 million, so net effect that would be about $0.12 on EPS. So those would be the adjustments you’d make to fourth quarter earnings and our guidance practices on EPS have been in the past, we kind of stick to income and cash flow oriented guidance and that’s our approach for 08 as well and likely to be our approach going forward beyond that.

Great and so you can focus on the bundles a bit?

Yeah this is Harry, I’ll take that one. I believe your question was spot on what we wrestle with everyday and it’s the idea of coming at the balance between line loss and I’ll call it marginary yield from a household. And we balance that and decided that first of all as a fundamental marketing principle, we treat our current customers and new customers exactly the same. We don’t come out with offers that are available only to new ones we think that’s critically important because of importance is the base place. The thing we’re doing is we are attacking the new orders and trying aggressively to go after them and I think you’d appreciate that. What we’re doing is we’re diversifying our channels, we’ve got a really solid retail footprint right now, our website is getting better and better and becoming more robust. We’re getting partners, utility partners and other folks that can help us get new customers and our win back programs are getting better. So we’re trying to go after folks from a new order standpoint that way and at the same time we’re attacking the disconnects to try to make sure our customers are happier, they buy more because the folks that buy more tend to stay longer. So we’re coming at this at a bunch of different angles but frankly we don’t intend to lower our prices in order to mitigate the line loss any more. What we want to do is use the full variety of marketing and sales efforts in order to win in the marketplace.

Yeah I would, this is Tom Gerke, I would just emphasize with the way Harry closed there is we’ve got a lot of levers and approaches that we can utilize, we will utilize those but given our position with the base, price is not the direction we’re going.

Thank you.

Your next question comes from Frank Louthan from Raymond James, your line is now open.

Great, thank you, can you give us some idea on the trends in your businesses, the business side I’ve seen a little positive there, any differences in different regions there or is that generally fairly strong across the board. And give us an idea of the success you’ve had in moving dial up customers over, hearing some anecdotal evidence that’s getting a little, having a little more success in the market by some of the folks out there. Have you seen any change in that with your marketing efforts and some of the lower tier broadband speeds? Thanks.

Okay, let me ask McEvoy to answer your first question on the business piece and then Harry will pick up on our ability to migrate people up on the capacity.

Great, hey Frank, this is Tom and as you know I’m responsible for the retail business side. Similar to what Harry was talking about on the bundles, on our low end small business soho segment, we’re in a constant marketing push for new value added type bundles and we’ve rolled out three just in the last quarter, one having to do with our new smart IP bundle which you’ve probably read about. Second one we’ve put a multi line bundle out there and then third we’ve refreshed a very competitive bundle in some of our more competitive markets and I’m proud to say exiting 07 we had one of our best bundle years in sales and netting up in customers. So we’re continuing to see a real strong trend, small business soho and we’ve seen growth in that area. As you move up into our larger markets where we have a lot of competition, a lot of enterprise customers, we continue to see growth in those markets due to the capacity issues that large businesses are really screaming for and so our data products, specifically in our Ethernet product portfolio have really been successful in that market. And one of the strategies that we’ve put in place is fill in our footprint. Where we have our assets, we’ve got a very targeted marketing campaign with feet on the street hitting up our customers and talking about the value proposition we bring with some of our high capacity data networks. So from a business perspective you saw the overall growth and we’re seeing that in each one of our segments as we look at our customers, soho all the way up to enterprise.

And the comment I would tag on is we’re have a very coordinated effort between our special access and wholesale where we might be putting fiber into towers et cetera and then the notion that Tom just shared that we get the business sales force right on top of making sure we capitalize on that fiber with respect to businesses that may be along that route. Harry.

Sure, I’m going to talk about penetration with regard to some of our key strategic products and the migration we’re seeing. We continue to see really nice migration up across the board, particularly in HSI speed upgrades which gets us more revenue, I think it also provides a better customer experience. But the thing that really is working for us also is that our voice package penetration bundle of features such as voicemail caller id, that is actually increasing, so it’s outpacing the access line client and our long distance pick is going up too. So if you really think of it as a migration, what we’re doing is taking our base and trying to get them migrated up in either speed or dollars appropriately and when we sell new customers we try to attach these at the point of sale. So we’re being pretty successful there.

Any changes on the enterprise side on the momentum in the quarter, did that change from the third quarter materially, has it remained fairly strong or did it grow?

Frank, the trends in business over the last several quarters the last few years frankly, have been pretty strong. So we continue to feel good about business. Thanks Frank, unfortunately that will have to be the last question today, if you’d like to listen to a replay of this call, please visit our website, investors.embarq.com. Thanks again for joining us and have a good evening.