AT&T this week agreed to pay $37.5 million to Citizens Communications to settle billing disputes between the two carriers, Citizens disclosed in regulatory filings.

Citizens filed suit against AT&T in January 2006, claiming it had not been properly compensated for terminating AT&T calls. AT&T disputed the origination of those calls. In February, the suit was combined with similar suits from other plaintiffs. In November 2006, AT&T counter-sued Citizens.

“During the pendency of the dispute, we became better able to estimate the true ‘origination’ of the calls and minutes in dispute and back-billed AT&T for the difference in rates, including interest,” Citizens said in regulatory filings earlier this month.

Thirteen percent of Citizens’ total revenue last year (or $263 million) came from originating and terminating traffic for interexchange carriers. Last year the company increased its reserve for doubtful accounts by more than $78 million to cover carrier disputes. Its “principal” dispute was with AT&T, Citizens said.