2012 Hargray Annual Report

2012

Annual Report

Marlowe Richardson, 2012 Hargray Award winner and newly-promoted Installation & Repair Supervisor; Gwynne Lastinger, Director of Operations; Dwain Wright, Installation & Repair Supervisor

At Hargray, our mission is to envision and deliver customer delight.

From our boardroom to our front lines, Hargray is made up of individuals who have a single focus … our customers.

Every day, we strive to achieve our mission of envisioning and delivering customer delight through exceptional customer care and initiatives designed to enhance our networks and products, expand our service area, and elevate our people and our community.

For more than 60 years, we’ve been connecting our customers to each other and to the world. Based in Beaufort County, South Carolina, our service area today encompasses Beaufort and Jasper Counties in southeastern South Carolina and Chatham County on the northern coast of Georgia. We provide high-quality Internet, television, telephone and wireless services to tens of thousands of residences and businesses of varied sizes, from the local diner to multinational enterprises.

We believe in continuous improvement, and prioritize our time and invest our resources in what is best for our customers.

If our customers are delighted, our business will naturally grow and prosper. We are proud of our strong local presence: most of our more than 300 employees live in the communities we serve, so our customers are also our neighbors. Further, we recognize the important role we play in the community, fueling the regional economy through employment, providing products and services that promote business and enable commerce, and supporting local events and charities that enhance all of our lives.

ensuring our customers are receiving the best and most reliable services possible.

We’re expanding our service area,

having made strategic acquisitions and significant network investments throughout our region.

We’re elevating our people and our community,

PAGE 18

PAGE 24

2012 Annual Report

improving the professional lives of our employees and the quality of life throughout the communities we serve.

PAGE 6

2012 Annual Report

Our company is owned by Quadrangle Group, a premier private equity firm that makes long-term investments in companies with compelling growth opportunities and superior management. Our Board includes Peter Ezersky, Managing Principal, Quadrangle; Michael Gottdenker, our Chairman and CEO; Michael Huber, President and Managing Principal, Quadrangle; Steve McCall, Co-founder, Blackpoint Equity; Bret Oettmeier, Vice President, Quadrangle; and Tom Reed, President, Morningstar Management.

We’re enhancing our network and products,

2

3

As we reflect back on 2012, we are simultaneously pleased with our many accomplishments, humbled by our successes, and cognizant of our ability to always do better. We began the year with an ambitious plan to continue our investments in our network aimed at improving its capabilities and reliability. These plans included completing the installation of fiber to Daufuskie Island to replace an aging microwave solution, upgrading our core network routers, significantly augmenting our fiber network in downtown Savannah, and completing our fully modernized network operations control center. Had we just accomplished these plans, it would have made for a busy year for our engineering and operations personnel.

2012 Annual Report

Then early in the year, important multi-year initiatives broke our way: we were awarded multi-million dollar contracts by the Beaufort County School District to provide data and voice services to its 30 schools and four administrative buildings, something we had been working on for over two years; we were awarded major contracts by two additional wireless companies – AT&T and Sprint – to provide fiber connectivity to cellular tower sites; and we entered into a contract to purchase Charter’s cable system in Beaufort, SC. Each of these 2012 initiatives was completed in an exemplary manner as further described in this report. Finally, we sold our directory publishing business to its largest customer, freeing us to focus more intently on our core communications business while placing our directory assets in the capable hands of a trusted partner.

4

We are also proud of our success in Savannah, where we significantly expanded our fiber network and signed multi-year contracts with over 30 businesses including Gulfstream, Savannah College of Art and Design, and St. Joseph’s Candler Hospital.

I am particularly proud of the responsiveness of our front-line personnel in helping Gulfstream before it became a customer, an act that undoubtedly accelerated Gulfstream’s decision to do business with Hargray (please see page 22 for the full story). In addition, we continued to secure additional business from our existing commercial customers, many of which have been our customers for decades.

Even as we successfully accomplished our investment plans and these initiatives, we asked ourselves how we could do better.

We routinely perform “after-action reports” to examine not only what we could have done better, but also what worked well,

As we begin 2013, in addition to our regular network upgrades, we plan to upgrade the middleware for our Hilton Head Island and Sun City television customers. This replacement will enhance our customers’ television experience but will require that we visit each customer’s home or business to swap out set top boxes. This is similar in many respects to the Charter integration which we completed during 2012, which also required an in-home visit and change-out of equipment. We are adding more staff to our customer care and technical support centers for this migration, and we are optimistic we will complete it with minimal disruption.

Just before the publication of this report we acquired iTech, a managed services company based in Savannah. After surveying a number of companies in this industry over the last year, we found in iTech a company that has a full complement of managed services products; meaningful number of customers across various industries paying recurring monthly fees for IT management; vision for where the industry is heading and is a thought leader in the industry; base of employees with expertise that could be leveraged across our business customers; track record of delivering customer delight; and presence in our existing footprint. We are excited about beginning to capitalize on this acquisition in the coming year.

As one of the largest employers in the communities we serve, we continue to believe that we have a responsibility to support the community with our time and resources. We take this responsibility seriously, and have highlighted in this report several initiatives in this regard.

Finally, we also continue to innovate in the management of our people resources. We continued long-standing traditions like identifying quarterly MVPs and then selecting from among them annually a Hargray Award recipient (this year’s selection, installation and repair technician Marlowe Richardson, is an inspiration to all of us, and he was recently promoted to installation and repair supervisor). We also expanded our Hargray University Learning Center to ensure our personnel have access to the very best skills and management training available. This year we significantly enhanced our training for supervisors and managers related to performance reviews and implemented a Web-based review tool to further improve our performance management process.

We recognize that to continue to earn our customers’ business we must constantly improve and innovate. The employees of Hargray welcome this challenge. Our culture emphasizes personal accountability, and we welcome input from those we serve to help us identify areas for improvement. I encourage you to reach out to me or any member of our team with any ideas you may have regarding how we can better serve you.

Michael Gottdenker Chairman & Chief Executive Officer

2012 Annual Report

2012 was a very busy year at Hargray. We accomplished much while continuing our laser-like focus on our core mission to envision and deliver customer delight.

so we can be sure to repeat our own best practices. We completed the initiatives outlined above with roughly the same fulltime headcount with which we began 2012, adding contractors as needed to supplement our workforce. However, these accomplishments were not achieved without some cost: in addition to the unusually long hours worked by our already hard-working employees, we saw an increase in the number of “complaint” emails sent to thebuckstopshere@hargray.com (an email address designed to make it easy for our customers to contact me directly) and a decrease in our grade of service (i.e., speed to answer) in our customer care center.

We know that these metrics are reflective of the disruption caused by our network improvement initiatives (think of it as changing the tire on a car while driving on a highway) and the temporary strain on our customer-facing groups during the integration of the Charter acquisition. We look forward to improving these metrics during 2013 and know that these investments and this acquisition will enable us to provide better service next year and more scale to make additional investments in the future.

5

enhancing OUR PRODUCTS

In 2012, our significant network investments resulted in product enhancements on several fronts that positively impacted both our business and residential customers.

Staying at the forefront of our industry means meeting the ever-increasing demands for faster and more reliable Internet access.

We did just that in 2012 by increasing the number of homes with access to Internet speeds of at least 30 Mbps to 93%, and introducing the fastest Internet products available in the communities we serve. For business customers, this means access to Internet speeds of up to 10 Gbps, and for residential customers, up to 50 Mbps.

In Bluffton, we opened a new state-of-the-art retail store. Featuring the latest technology and interactive stations, the store is designed to allow customers to experience how our high speed Internet can enable them to do more and live better.

We have begun an initiative to upgrade our television service on Hilton Head Island and in Sun City to Microsoft® Mediaroom®, one of the world’s most popular TV platforms. The upgrade will not only mean a more user-friendly interface, but also will provide access to features like Multiroom DVR and Remote DVR Scheduler.

Finally, we acquired iTech, a Savannah-based managed-services company that will bring a full suite of data center services to our business customers, further leveraging network investments made this year.

6

• I ncreased the percentage of customers in our Rewards Program from 19% in 2011 to 38% in 2012 • Increased the number of customers with HD DVR from 15,709 in 2011 to 19,719 in 2012

2012 Annual Report

2012 Annual Report

• M aintained churn below 1% for customers with our three core services (Internet, television, telephone)

7

Chance Rose, Hargray Cable Maintenance Technician

enhancing OUR PRODUCTS > HSI

Hargray Business Internet Products

2011

2012

56%

93%

2012 Annual Report

Our network investments have allowed us to add several new high speed Internet products.

8

ADVANCED HIGH SPEED INTERNET

SYMMETRICAL INTERNET ACCESS

10mbps /1mbps 15mbps /1mbps 20mbps /2mbps 30mbps /2mbps

10mbps /5mbps 20mbps /5mbps 30mbps /5mbps 50mbps /5mbps

10mbps /10mbps 20mbps /20mbps 50mbps /50mbps 100mbps /100mbps

Recognizing the increasing demand for faster Internet download and upload capabilities, we made the addition of these products a top priority and dedicated the necessary resources to bring them to the marketplace. This included enhancing our network through increasing core capacity and extending the reach of our fiber. Together, these enhancements allowed us to offer these much faster speeds and further strengthened what was already the most robust, reliable, and redundant network in our region. As shown above, this led to the launch of new advanced high speed Internet products that allow our business customers to increase their productivity.

With more than 98 million Americans using smartphones, Internet penetration of nearly 80% of homes and 22% of Americans now using tablets, the demand for high speed Internet access continues to increase dramatically across the country. Our region is no exception.

We responded to this demand by also introducing several new Internet products for residential customers. The products include 30x2 Mbps, which replaced our 20x1 Mbps product, and 30x5 Mbps and 50x5 Mbps products available to almost 60% of our residential customers. These new products represent significant upgrades to both the download and upload speeds, and are perfect for professionals who work out of a home office, those who stream video online, and gamers.

• Enabled customers to make use of gigabytes of bandwidth in 2012

154 million

• I ncreased our average revenue per customer for High Speed Internet by 13%

2012 Annual Report

PERCENTAGE OF CUSTOMERS ABLE TO RECEIVE 30 MBPS OR HIGHER

HIGH SPEED INTERNET

9

enhancing OUR PRODUCTS > RETAIL

enhancing OUR PRODUCTS > MICROSOFT® MEDIAROOM®

“Our new store is about entertainment and connectivity in the real world—movie nights with the family, connecting with loved ones or simply downloading a favorite song. It’s a great opportunity for us to introduce new customers to the Hargray brand, as well as enhance relationships with our existing customers.”

During 2012, planning began on a project that will come to fruition during 2013, when Hargray television customers on Hilton Head Island and in Sun City will be upgraded to the new Hargray Digital Television, featuring Microsoft® Mediaroom,® the world’s most comprehensive IPTV platform.

The upgrade will make it easier than ever for our customers to enjoy the best live, recorded and On-Demand programming from anywhere in their homes. Enhanced features will include Multiroom DVR, which will allow customers to watch and share DVR recordings on any TV in their homes, and Remote DVR Scheduler, which will allow customers to remotely program their DVR from a Web browser or smartphone.

—Robert Edwards, Director of Residential Sales, Hargray

2012 Annual Report

To help customers stay ahead of this technological curve, we replaced our prior retail store in Blufton with a new, state-ofthe-art retail store in Belfair Towne Village. Featuring a modern design and the latest in technology, including iPads®, iPhones® and an Apple TV® demo, the store gives customers a unique opportunity to experience our wide range of communications and entertainment products and services.

10

Bluffton Retail Representatives Terrance Richardson and Benjamin Elliott

With its focus on the customer experience, the store is a logical extension of the Hargray brand. Visitors can demo some of the most popular in-home devices available today, each powered by Hargray bandwidth. It truly is an experience store.

The new store, staffed by a knowledgeable team of customer service representatives, also boasts dozens of screens, TiVo® and Wii™ consoles, and a home theater room demonstrating the latest in home entertainment.

2012 Annual Report

Communications and entertainment technology is constantly evolving, with new and exciting products launching every week.

11

Ben Smith, Hargray Cable Maintenance Lead; Terry Fletcher, Hargray Cable Maintenance Technician

The telecommunications industry continues to change faster and more dramatically than almost any other sector in the economy. At Hargray, we continue to succeed by anticipating and adjusting to these changes.

During 2012, we continued investing strategically in advanced technology and in our core network infrastructure. These investments allowed us to enhance our state-of-the-art telecommunications network, improve our reliability, expand our service area, and increase our penetration into key strategic markets.

Investments in Juniper core and edge routers added an improved level of redundancy, diversity, resilience, and network capacity.

Coupled with the use of multiple suppliers for Internet egress and more robust network transport systems and equipment, the dependability and reliability our customers enjoy meets or exceeds the capabilities that may be found in just about any major metropolitan market.

enhancing

The completion of our new state-of-the-art Network Operations Center (NOC) on Hargray’s Pritchardville campus is another example of our dedication to providing our customers with reliable services through a technologically advanced network.

Finally, in the past year, we saw a tremendous increase in our business with major wireless carriers providing advanced fiber to their cell sites, bringing improved 4G service to wireless customers in our service area.

OUR NETWORK

• Secured contracts from major wireless companies to supply fiber connectivity to 122 carrier sites across Beaufort, Jasper and Chatham counties

12

•

More than doubled our core router capacity with a Juniper router upgrade, and provided physical and logistical diversity for all traffic entering and leaving our network

2012 Annual Report

2012 Annual Report

• Invested $1.5 million to upgrade our core network to a state-of-the-art OC-192 optical transport network

13

enhancing OUR NETWORK > JUNIPER

enhancing OUR NETWORK > NOC

To meet the fast-growing demand for bandwidth, this past year significant steps

The real-time monitoring provided by our new Network Operations Center (NOC)

were taken to improve and expand the capacity at the heart of our network with

is critical to providing reliable services across our network and, ultimately, fulfilling

the upgrade of our core routing infrastructure. This router complex is critical to the

our mission of delivering customer delight. In addition, our new NOC enables us

performance of our data and video networks. These improvements enabled us

to provide more in-depth and proactive monitoring for key customers like the

to provide Internet and data speeds of up to 10 GB to end users and to provision

Beaufort County School District and major wireless carriers.

advanced television solutions for customers of all sizes and types.

Dan Thompson, Hargray Central Office Manager

Juniper is one of the world’s leading providers of high-performance network infrastructure, specializing in ensuring the performance, reliability, and security at the scale that we demand of our network. These routers operate as the network controlling mechanism providing additional diversity, redundancy, and resiliency on our network.

Our new NOC is staffed with technicians who provide a direct contact for business and residential customers, as well as Hargray field technicians. They also monitor the network and provide operational troubleshooting. This visibility into our network gives our NOC staff a portal into circuit performance, enables monitoring and control of critical systems, provides the ability to identify weakening components before they fail, and provides information to take necessary steps to avoid service interruptions.

Our goal is to identify and solve issues before they impact customers, and the NOC enables us to achieve this goal on a regular basis. It has also dramatically improved our response time for customers with service-level agreements.

2012 Annual Report

2012 Annual Report

Additionally, this upgrade more than doubled our router processing power, dramatically improved data management ability, and built additional diversity into our ring topology.

14

15

enhancing OUR NETWORK > FTTT

enhancing OUR NETWORK > TBSH

As the nation’s leading wireless carriers migrate to 4G infrastructure, we are helping by providing a pure fiber-based wide area network (WAN) to cellular towers in our service footprint in South Carolina and Georgia.

Recognizing the need for improved wireless services in our region, the nation’s three largest wireless carriers made the decision to connect their cell sites to fiber to bring 4G to area residents and the more than 2 million annual visitors to the region. To make this happen, these companies turned to Hargray.

With a team of dedicated experts and the only network with three physically diverse paths connecting Hilton Head Island with the mainland, we provide unmatched service and reliability. Bringing fiber to cellular towers requires careful engineering design, underground construction to pull fiber, complex installation activities to connect network elements, and the finest in network maintenance expertise and equipment. Hargray delivers all of this to these carriers, and we expect to add more sites and more carriers in 2013.

NUMBER OF UNIQUE TOWERS BUILT OR CONTRACTED TO BUILD FIBER

23

88

12,300 gbps

2012 Annual Report

During 2012, we received a total of 172 emails to this address, an increase over 2011. Similar to past years, about a quarter of those emails were complimentary. We attribute the increase in the number of emails received in part to increased awareness of this contact option, and in part to the disruption caused by our network upgrade activities. Below are two examples of emails we received from this past year.

NUMBER OF EMAILS SENT TO THEBUCKSTOPSHERE@HARGRAY.COM

2011

129

2012

172

2012

TOTAL BANDWIDTH CONTRACTED TO PROVIDE TO CARRIERS AT TOWERS

16

At Hargray, we constantly strive to improve in all areas, and the reason we enhance our network is to provide better and more reliable service. That’s why we encourage our customers to reach out directly to our CEO via TheBuckStopsHere@hargray.com, to tell us about their experiences—great, or not so great. In short, we want to know when we get it right, and we want to improve when we don’t.

Mr. Gottdenker,

Dear Hargray,

As a last resort, I am sending this e-mail in the hope that something can be done regarding very bad reception in this area. I have had a multitude of service calls, and your techs have been very dedicated in trying to resolve the problems of getting good reception. But it seems that they have exhausted all of their resources, and the issue at present is that they are unable to fix a problem that has to do with network issues and your equipment.

I have been a customer of Hargray since April of 2007, and I have always received great service.

Yesterday, I had Tim Fournier at my home to hook up a new TV and HD box. He is such a pleasant young man and an asset to your company. I was ready to return the TV, as I was not getting the picture that I should. Tim diagnosed the problem immediately and corrected it. I know you recognize the professionalism and courtesy that each of your employees has and that why Hargray is such a great company.

As a consumer and someone who pays his bills on time, I know that I deserve better, and as a company I know that you will have to do better, or you will be losing business to the point that it affects your bottom line.

I would like to have a bundle as I do, of cable TV and telephone. If I can’t receive better than present, I will have to explore other options for my peace of mind.

Thanks, [Hargray Customer]

Thank you [Hargray Customer]

2012 Annual Report

2011

Almost $5 million spent or committed to spend on fiber-to-the-tower projects for the three largest carriers.

172 = Number of emails sent to TheBuckStopsHere@hargray.com in 2012

17

This year, we increased our service area in Beaufort and began offering our full suite of advanced business services in Savannah.

2012 Annual Report

OUR SERVICE AREA

18

Our significant fiber investments in downtown Savannah opened the door in 2012 for us to begin serving major Savannah businesses. We have completed our primary ring construction, secured fiber-to-the-tower contracts with major wireless carriers, and signed service agreements with dozens of customers, including some of the largest employers in the area like Gulfstream, Savannah College of Art & Design, and St. Joseph’s Candler Hospital. Many of these customers are already augmenting service with Hargray due to the high quality service we provide. Our expansion into Savannah is off to a very strong start.

• Spent $4.6 million to upgrade our network as part of the Charter acquisition • Upgraded more of our network such that 98% of our hybrid fiber-coaxial (HFC) network is now DOCSIS 3.0

2012 Annual Report

expanding

With the acquisition of Charter Communications’ Beaufort cable system in June, we are now able to deliver our full suite of advanced services to areas of Beaufort County we were heretofore unable to serve. For the 7,538 former Charter customers, this acquisition and our subsequent network upgrade provided new additional services, and, for the first time, provided the opportunity to bundle Internet, television and telephone services.

19

expanding OUR SERVICE AREA > CHARTER

By upgrading Charter’s legacy distribution network to DOCSIS 3.0 and integrating it into our core network, we are able to deliver industry-leading products and services previously unavailable to these customers, including faster Internet service, more HD channels, On-Demand movies, and the opportunity to bundle unlimited nationwide telephone service with Internet and television services.

• Provisioned additional services for 18% of customers during the Charter integration • Dispatched to homes 8,200 times • Integrated/upgraded 29 nodes

The successful completion of the Charter integration can be attributed to several key factors, including significant network and product investments made over the past several years, a dedicated project team, and the implementation of a comprehensive communications strategy.

Converting these Charter customers to our network required a great deal of coordination and communication, both internally and externally. From the beginning, Hargray’s “Charter Team” implemented a comprehensive communications plan designed to ensure Charter customers were kept well informed about integration activities. By proactively reaching out via email, phone and mail, we far exceeded our goal for inbound customer contact, increased customer delight, and made the transition process smoother. Further, our technicians made the installation process as non-intrusive as possible, ensuring these new Hargray customers were fully apprised about their new products and services.

FORMER CHARTER COMMUNICATIONS EMPLOYEES, NOW HARGRAY EMPLOYEES

2012 Annual Report

Matthew Colter, Joshua Rhoden, Wendy Sedrick, Matthew Donnelly, Della Scott, Ross Bradham and Michael White

20

7,538

NEW CUSTOMERS FROM CHARTER

2012 Annual Report

It required 8,200 dispatches and thousands of conversations with our new customers to convert them to our network, and we worked hard to ensure the process was completed as quickly as possible with minimal inconvenience. We were pleased with the results of our efforts as measured by the over 1,000 Charter customers who elected to purchase our newly-available triple play bundle.

21

expanding OUR SERVICE AREA > SAVANNAH Hargray has invested millions of dollars to bring the fiber-based connectivity that is essential over the long term to attract businesses, foster innovation, and maintain a thriving economy in Savannah. Unlike the incumbent providers, Hargray seized the opportunity to partner with businesses in the Savannah area and provide them with the suite of services they need to continue to be successful. SEE ARTICLE >

We also launched our portfolio of advanced products, including Symmetrical Advanced High Speed Internet (providing speeds up to 10 Gbps), Metro-Ethernet (Metro-E), High-Definition Video, and Data Center Services. Further, the recent acquisition of iTech, a managed-services company based in Savannah, enables us to bring a full panoply of business services to our customers in both Savannah and our service area in South Carolina.

We have several unique competitive advantages in the Savannah market. We operate the only 100% facilities-based, self-healing SONET network built entirely with fiber, which provides substantially more bandwidth throughout the network, making it 1,000 times faster than legacy copper networks. It also allows us to deliver the fastest and most reliable service and provide seamless scalability and flexibility for future bandwidth growth.

Our Savannah customers also benefit from the fact that we are truly a local company, from technical support to customer care to account executives. This allows us not only to be more responsive, but also to provide truly customized system designs through in-person sales engineering interactivity and on-site operational system design.

2012 Annual Report

At Hargray, we encourage all of our employees to take ownership and, when an opportunity presents itself, act with confidence. Such an opportunity recently presented itself and our employees seized the moment.

22

A Savannah Airport contractor accidentally cut a fiber cable that was providing connectivity to Gulfstream’s research and development facility at its world headquarters campus in Savannah. As a result, the facility and its 1,200 employees were left completely disconnected.

After several frantic phone calls to their service provider (at the time) and no acceptable response,

Gulfstream reached out to its Hargray account manager. Within an hour of that call, a team of Hargray technicians was on site repairing the fiber. By the next business day, the cut was repaired, and Gulfstream’s facility was back up and running.

While the quality of work and response time were excellent, most impressive is that this all happened without anyone seeking approval from someone in senior management, demonstrating that the individuals involved felt confident that they could make these decisions on their own.

Today, Gulfstream is one of our largest customers, recently adding new services to its multi-year contract, and the efforts of these individuals are constantly referenced as a model for all Hargray employees.

©

WEDNESDAY, FEBRUARY 8, 2012

LIGHT OF THE COASTAL EMPIRE

Hargray expands while Comcast defends Savannah service

BY LESLEY CONN

years have asked Comcast to prov ide mit data, but eventually wou ld expect to high-speed Internet. The cable gian t has expand to residential Inte Round 2 of Comcast’s customer serv rnet serv ice, ice hesitated, saying the customer base didn’t Rein said. outreach continued Tuesday. merit the cost of expansion. Alde rman The Hargray fiber would allow a busi More than 50 people attended the seco ness nd Tony Thomas sees it as a cruc ial step to to upload and downloa of four city of Savannah town hall mee d at up to 1 gigabyte tings transforming downtown into a world-class per second. Most hom designed to evaluate Comcast’s response e Internet providers to office environment. offer 3 to 6 megabytes. customer service issues, and the cabl e and First-term Aldermen John Hall and Tom Internet service provider continued to Sava nna h city offic ials, Rein said offer Bordeaux had similar assessme , nts. reached out to Hargray, which has assurances it would aggressively resp been ond “If (Comcast) did not want to offer that planning the downtown expa to complaints. nsion since service previously and someone else is com- last year.

As it handled its public relations issue s, ing in to provide the service, whe re is the though, the cable giant expressed The city has limited authority over cabl some sticking point?” he said. e and Internet prov iders because of reservations about whether the city franof Bordeaux, an attorney and former state chise agreements allowing the com Savannah was playing favorites by panies prom- legislator, had little fear the city was acting access to city righ ising to expedite the permitting proc ts-of-way. City officials ess unfairly toward Comcast. also have wanted faster Internet serv for Hargray and its push to bring highice “Tell them to sue us,” he said. for downtown, viewing it as an econ speed Internet into new areas of Sava omic nnah, Hargray by the end of the year plan s development tool. That led to assu including downtown. rances to have completed installation of a fiber city staff would assist Hargray Andy Macke, Comcast’s vice presiden in the pert network that will offer business es from mitting process. of government and community affa irs, Pooler to downtown Savannah and south said his company understands ther “The city has been very helpful to us,” e has to DeRenne Avenue and Abe rcorn Street Rein said. “I think they never been a limit on competing busi understand to light nesses high-speed Internet. up Savannah in a way that’s not possible entering a market, but Comcast does “want for It represents a $2 million investme nt most cities of similar size sets a level playing field.”

Savannah downtown, said Andrew Rein, Har gray’s apart in attracting and reta That rank led some members of City ining worldvice president of sales and marketin g. class business.”

Council, who were quick to point out the Hargray primarily is focusing on busi city and downtown business owners for nesses that need high bandwidt h to transReprinted from Savannah Morning News

2012 Annual Report

This past year, we installed fiber into downtown Savannah and, in doing so, shortened the distance between our network and dozens of businesses.

™

23

Nicholas Woodruff, Training & Development Specialist

elevating OUR PEOPLE > MVP, HARGRAY UNIVERSITY, CERTIFIED TECHS

Our achievements during the past year would not have been possible without our dedicated employees.

At Hargray, we recognize the vital role each of our more than 300 employees plays in our efforts to deliver customer delight, and that’s why we continue to invest the resources necessary to develop their professional skills and recognize and reward their hard work.

elevating OUR PEOPLE

In 2012, we continued recognizing our MVPs, those employees who best exhibit our mission of envisioning and delivering customer delight. Each quarter, these outstanding employees were recognized and at the end of the year one of the MVPs was selected to win the annual Hargray Award. The 2012 Hargray Award winner was installation and repair technician Marlowe Richardson, selected for his dedication to serving both our internal and external customers, and his willingness to lead. He is now installation and repair supervisor Marlowe Richardson.

Our innovative program, Hargray University Learning Center, continued to expand in 2012 with construction of a new training facility. The new facility will be able to accommodate additional learners, and will offer an enhanced learning environment.

A key component of delivering customer delight is providing the best installation, support, and repair. That’s why 100% of our Certified Business Technicians were required to complete our Business Data Services Boot Camp, which included comprehensive training through hands-on workshops, group troubleshooting, and trouble ticket resolution.

NUMBER OF COLLECTIVE HOURS EMPLOYEES SPENT IN TRAINING

2011

5,643

2012

6,513

TOTAL TRAINING INVESTMENT

2011

$265k

2012

$383k

2012 Annual Report

2012 Annual Report

Hargray University Learning Center continues to be an efficient and effective resource for improving job performance, increasing overall productivity, and aiding in the development of specific professional skills. Finally, as a new-employee orientation tool, it also allows us to connect with all new employees, inspiring them to envision and deliver customer delight from their first day with the company.

24

25

Celebrity chef, Hilton Head resident and restaurant owner Robert Irvine, with special guests from Hargray’s 2012 Hope Dinner

As one of the largest employers and service providers in the area, Hargray is proud to take a leadership role in the community.

elevating OUR COMMUNITY

In 2012, we once again took the lead as a key sponsor for numerous local events and charities that touch the lives of thousands of people throughout our community.

In recognition of National Breast Cancer Awareness Month, Hargray hosted nearly 50 breast cancer survivors from the area for the second annual Hope Dinner at Robert Irvine’s eat! on Hilton Head Island. The event honors the incredible strength of these women, all of whom have battled and continue to battle breast cancer.

This past year, in honor of our financial donation toward the purchase of their new building, Bluffton Self Help named a room in our honor. Started in 1987, Bluffton Self Help provides a wide range of assistance to Bluffton families and individuals in crisis. The Hargray Community Room is now used for volunteer training, board meetings, presentations, special events, and meeting space for other nonprofits.

26

During 2012, Hargray’s Caring Coins Foundation celebrated reaching $2 million in total grants to nonprofit organizations throughout the area. The grants are made possible by the generous contributions of Hargray customers who opt to round up their Hargray bills and donate the spare change to the foundation.

2012 Annual Report

2012 Annual Report

In addition to the examples above, Hargray was proud to be a sponsor of a variety of events and charities throughout the year, including: Beaufort Water Festival, RBC Heritage, Boys and Girls Club of Beaufort County, Programs for Exceptional People, and Hilton Head Celebrity Golf Foundation, which supports 20 local children’s charities.

27

elevating OUR COMMUNITY > BEAUFORT COUNTY SCHOOL DISTRICT

The Beaufort County School District educates more than 20,000 students each year through its 30 schools and four administration buildings. In late 2011, it issued an RFP outlining its need for comprehensive voice and data solutions. In early 2012, the school district selected Hargray and entered into a multi-year contract.

Over the course of several months, Hargray engineers designed and deployed a 10 Gb Metro-Ethernet network specifically tailored to the school district’s unique needs. The network supports voice and high speed data, and it provides a wide area network (WAN) for private, point-to-point connectivity across the district.

Hargray worked closely with members of the school district’s IT team to successfully migrate the district’s telephone services, while providing 1 Gbps connectivity to each school, enhancing the district’s ability to deliver technology to its students in the classroom.

2012 Annual Report

Following the completion of the project, we were very pleased to receive the following feedback to Chris McCorkendale, our Vice President, Engineering, Operations & Strategic Sales, from David Earnest, Project Manager for IT and Facilities for the Beaufort County School District.

28

From: Earnest, David Subject: A word or two about Hargray

Mr. McCorkendale, I was fortunate to be able to work with your team of professionals on the migration of telephone services in the Beaufort County School District. Working with your team made managing the project from the customers perspective easy and one of the smoothest migrations that I have been a part of in over 30 years of service to the Information Technology industry. At this time I am expressing not only gratitude for the job performed by each member of the team, but expressing that during the project I saw the team come upon a few challenges — taking them head on leaving very few of them for follow-up the next day.

The great part of this was not the performance of the work (although it was great), it was the attitude the staff took throughout the process. Planning and preparation as we all know are key to great results, and this was evident with the successful migration of each of the schools.

Truly, I can attest that the attitude of true “Customer Focused Service” prevails in your company as it was displayed by everyone I came in contact with during the project.

Hargray and Beaufort County Schools: Partners in Learning

Job Well Done — Thank You!

19119_BCSD_BBv1_F.indd 1

HARG19119 BB Version 1

22’9”w x 10’6”h

8/7/12 9

4C

The partnership between Hargray and the Beaufort County School District extends beyond professional services. As a symbol of gratitude and support for all our community’s teachers, students and families, Hargray launched a co-branded marketing campaign designed to highlight the important role of the school district in the community.

Finally, representatives from Hargray were on hand at the district’s two Back-to-School Expos in July to distribute new backpacks and gift cards to deserving students. In addition, hundreds more backpacks were donated to students as part of Hargray’s third annual Backpack Giveback program.

2012 Annual Report

This past year, through a multi-phase RFP process, the Beaufort County School District awarded multiple contracts to Hargray that highlight our technical expertise, our dedication to our customers, and our commitment to the community.

29

In 2012, we focused on enhancing our products and network, expanding our service area, and elevating our people and community. That focus resulted in tremendous achievements this year, and the promise of many more successful years to come.

We enhanced our network and products,

allowing us to deliver the best and most reliable services available.

We expanded our service area,

making it possible to deliver customer delight to even more areas of the Lowcountry.

We elevated our people and our community,

further enhancing Hargray as an employee-centric company and as a philanthropic leader in the Lowcountry.

2012 Annual Report

2012 Annual Report

The successes of 2012 were made possible by the hard work and dedication of our employees, who, in each of their own ways, envisioned and delivered customer delight.

30

31

Hargray Communications Group, Inc. 1.877.HARGRAY | hargray.com

Š 2013, Hargray Communications Group, Inc.; logos are registered trademarks and as such, protected property of their respective companies; all rights reserved.