Otelco Declares Distribution Payment to IDS Holders

ONEONTA, AL, Aug. 11, 2011 /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, 2011, to holders of record at the close of business on September 15, 2011. The distribution represents the twenty-seventh consecutive quarterly distribution since the company completed its initial public offering in December 2004.

Each IDS is comprised of one share of 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 common stock and an interest payment on the senior subordinated notes for the period from June 30, 2011, through September 29, 2011, 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 2011 as they were in 2008, 2009 and 2010.

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 98,000 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.