Otelco Declares Distribution Payment to IDS Holders and Elects New Director

ONEONTA, AL, Aug. 12 /CNW/ - Otelco Inc. (NASDAQ: OTT; TSX: OTT.un), a wireline telecommunication services provider in Alabama, Maine, Massachusetts, Missouri, New Hampshire and West Virginia, today announced that its Board of Directors has declared a distribution of $0.42 per Income Deposit Security (each an "IDS"), which will be made on September 30, 2010, to holders of record at the close of business on September 15, 2010. The distribution represents the twenty-third consecutive quarterly distribution since the company completed its initial public offering in December 2004.

Each IDS is comprised of one share of Class A Common Stock and $7.50 principal amount of 13% senior subordinated notes due 2019.

The distribution consists of a dividend of $0.17625 per share of Class A common stock and an interest payment on the senior subordinated notes for the period from June 30, 2010, through September 29, 2010, of $0.24375 per note. Currently, it is anticipated that the Company's dividends will continue to be treated as a return of capital for shareholder tax purposes in 2010 as they were in 2008 and 2009.

On August 12, 2010, the Board also elected Robert E. Guth as a Class II director of the company for a term which expires at the annual meeting of stockholders in 2012. Mr. Guth has extensive experience in the competitive telecommunications industry, having held leadership positions at Level 3 Communications, TelCove and AT&T. Mr. Guth also sits on the Board of Directors of nTelos Holding Corp. and Integra Telecom, Inc.

ABOUT OTELCO

Otelco Inc. provides wireline telecommunications services in Alabama, Maine, Massachusetts, Missouri, New Hampshire and West Virginia. The Company's services include local and long distance telephone, network access, transport, digital high-speed data lines and dial-up Internet access, cable television and other telephone related services. With more than 100,000 voice and data access lines which are collectively referred to as access line equivalents, Otelco is among the top 25 largest local exchange carriers in the United States based on number of access lines. Otelco operates ten incumbent telephone companies serving rural markets, or rural local exchange carriers. It also provides competitive retail and wholesale communications services through several subsidiaries. For more information, visit the Company's website at www.OtelcoInc.com.

For further information: Curtis Garner, Chief Financial Officer, Otelco Inc., 205-625-3571, [email protected]