UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(Mark One)

|X|   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

      For the quarterly period ended March 31, 2004.

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

      For the transition period from __________________ to __________________

                         Commission file number: 0-26525

                              BREDA TELEPHONE CORP.
        (Exact name of small business issuer as specified in its charter)

               Iowa                                              42-0895882
  (State or other jurisdiction                                (I.R.S. Employer
of incorporation or organization)                            Identification No.)

                  112 E. Main, P.O. Box 190, Breda, Iowa 51436
                    (Address of principal executive offices)

                                 (712) 673-2311
                           (Issuer's telephone number)

      Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.

Yes |X| No |_|

      State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 31,493 shares of common stock,
no par value, at March 31, 2004.

      Transitional Small Business Disclosure Format (Check one): Yes |_| No |X|


<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 For the Periods
                          Ended March 31, 2004 and 2003
                      and the Year Ended December 31, 2003


<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                            March 31,      December 31,
                                                              2004            2003
                                                           (Unaudited)      (Audited)
                                                           ------------    ------------
<S>                                                        <C>            <C>
                                     ASSETS

CURRENT ASSETS
     Cash and cash equivalents                             $  1,189,813    $  1,205,550
     Temporary investments                                      319,307         361,543
     Accounts receivable                                        530,310         563,542
     Interest receivable                                         59,196          52,742
     Current portion of notes receivable                        144,000         144,000
     Inventory, at average cost                                 126,374         108,007
     Other                                                       34,724          25,407
                                                           ------------    ------------
                                                              2,403,724       2,460,791
                                                           ------------    ------------

OTHER NONCURRENT ASSETS
     Marketable securities                                    4,396,832       3,928,354
     Investments in unconsolidated affiliates at equity       4,110,556       3,942,275
     Other investments at cost                                  850,398         857,147
     Goodwill                                                   896,812         896,812
     Notes receivable, less current portion                     270,144         291,134
                                                           ------------    ------------
                                                             10,524,742       9,915,722
                                                           ------------    ------------

PROPERTY, PLANT AND EQUIPMENT                                 4,989,328       5,141,009
                                                           ------------    ------------
TOTAL ASSETS                                               $ 17,917,794    $ 17,517,522
                                                           ============    ============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       2
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                    March 31,     December 31,
                                                                      2004           2003
                                                                   (Unaudited)     (Audited)
                                                                  ------------    ------------
<S>                                                               <C>             <C>
                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Current portion of long-term debt                            $    146,580    $    144,183
     Accounts payable                                                  290,208         233,802
     Dividends payable                                                  94,479              --
     Accrued taxes                                                     197,605         106,592
     Other                                                             115,682         137,042
                                                                  ------------    ------------
                                                                       844,554         621,619
                                                                  ------------    ------------

LONG-TERM DEBT, less current portion                                 1,595,905       1,633,461
                                                                  ------------    ------------

DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES                      539,481         497,795
                                                                  ------------    ------------

STOCKHOLDERS' EQUITY
     Common stock - no par value, 5,000,000 shares authorized,
        31,493 and 31,694 shares issued and outstanding at
        $303 stated value, respectively                              9,542,379       9,603,282
     Retained earnings                                               5,395,475       5,161,365
                                                                  ------------    ------------
                                                                    14,937,854      14,764,647
                                                                  ------------    ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $ 17,917,794    $ 17,517,522
                                                                  ============    ============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       3
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
               For the Three Months Ended March 31, 2004 and 2003

                                                        2004            2003
                                                    -----------     -----------

OPERATING REVENUES                                  $ 1,521,977     $ 1,690,649
                                                    -----------     -----------

OPERATING EXPENSES
     Cost of services                                   636,216         663,843
     Depreciation and amortization                      241,772         260,467
     Selling, general, and administrative               490,151         493,020
                                                    -----------     -----------
                                                      1,368,139       1,417,330
                                                    -----------     -----------

OPERATING INCOME                                        153,838         273,319
                                                    -----------     -----------

OTHER INCOME (EXPENSES)
     Interest and dividend income                        57,634          56,675
     Interest expense                                   (32,664)        (35,144)
     Income from equity investments                     315,248         287,997
     Other, net                                          (3,133)         (3,252)
                                                    -----------     -----------
                                                        337,085         306,276
                                                    -----------     -----------

INCOME BEFORE INCOME TAXES                              490,923         579,595
                                                    -----------     -----------

INCOME TAXES                                            162,334         222,168
                                                    -----------     -----------

NET INCOME                                          $   328,589     $   357,427
                                                    ===========     ===========

NET INCOME PER COMMON SHARE                         $     10.41     $     10.88
                                                    ===========     ===========

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       4
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

            CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                  Common Stock               Retained
                                             Shares          Amount          Earnings           Total
                                          ------------    ------------     ------------     ------------

<S>                                             <C>       <C>              <C>              <C>
Balance at December 31, 2002 (Audited)          33,000    $  9,240,000     $  4,824,971     $ 14,064,971

  Comprehensive Income:
    Net income                                                                1,189,506        1,189,506

  Dividends paid                                                                (98,436)         (98,436)

  Stated value stock adjustment                                754,676         (754,676)

  Common stock redeemed, net                    (1,306)       (391,394)              --         (391,394)
                                          ------------    ------------     ------------     ------------

Balance at December 31, 2003 (Audited)          31,694       9,603,282        5,161,365       14,764,647

  Comprehensive Income:
    Net income                                                                  328,589          328,589

  Dividends declared                                                            (94,479)         (94,479)

  Common stock redeemed, net                      (201)        (60,903)                          (60,903)
                                          ------------    ------------     ------------     ------------

Balance at March 31, 2004 (Unaudited)           31,493    $  9,542,379     $  5,395,475     $ 14,937,854
                                          ============    ============     ============     ============
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       5
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
               For the Three Months Ended March 31, 2004 and 2003

<TABLE>
<CAPTION>
                                                                                    2004           2003
                                                                                -----------    -----------
<S>                                                                             <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                                                 $   328,589    $   357,427
       Adjustments to reconcile net income to net cash provided by operating
       activities:
        Depreciation and amortization                                               241,772        260,467
        Deferred income taxes                                                        44,129          5,117
        Amortization of investment tax credits                                       (2,443)        (2,443)
        Equity income in unconsolidated affiliates, net of distribution
          received of $146,967 in 2004                                             (168,281)      (287,997)
        Note receivable discount                                                     (3,010)        (3,905)
     Changes in assets and liabilities:
        (Increase) Decrease in assets:                                                 (906)       102,462
        Increase (Decrease) in liabilities:                                         126,059        125,350
                                                                                -----------    -----------
        Net cash provided by operating activities                                   565,909        556,478
                                                                                -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures                                                           (90,091)      (409,792)
     Purchase of investments                                                       (485,884)      (357,013)
     Proceeds from the sale of investments                                           59,642        397,577
     Sale of other investments                                                        6,749          6,319
     Repayment of notes receivable                                                   24,000        160,000
                                                                                -----------    -----------
        Net cash used in investing activities                                      (485,584)      (202,909)
                                                                                -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
     Repayment of long term debt                                                    (35,159)       (32,915)
     Common stock redeemed, net                                                     (60,903)       (52,640)
                                                                                -----------    -----------
        Net cash used in financing activities                                       (96,062)       (85,555)
                                                                                -----------    -----------

Net Increase (Decrease) in Cash and Cash Equivalents                                (15,737)       268,014

Cash and Cash Equivalents at Beginning of Period                                  1,205,550      1,032,734
                                                                                -----------    -----------

Cash and Cash Equivalents at End of Period                                      $ 1,189,813    $ 1,300,748
                                                                                ===========    ===========

Supplemental Disclosures of Cash Flow Information
     Cash paid during the period for:
         Interest                                                               $    32,664    $    35,144
         Income taxes                                                           $        --    $    10,500
</TABLE>

              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                       6
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

      In the opinion of management, the accompanying condensed consolidated
      financial statements contain all adjustments (consisting of only normal
      recurring items) necessary to present fairly the financial position as of
      March 31, 2004 and December 31, 2003 and the results of operation and
      changes in cash flows for the three months ended March 31, 2004 and 2003.

      Certain information and footnote disclosures normally included in annual
      financial statements prepared in accordance with accounting principles
      generally accepted in the Unites States of America have been condensed or
      omitted. It is suggested that these financial statements be read in
      conjunction with the financial statements and notes thereto included in
      the Company's December 31, 2003 audited financial statements. The results
      of operations for the period ended March 31, 2004 are not necessarily
      indicative of the operating results of the entire year.

      Certain reclassifications have been made to the 2003 financial statements
      to conform with the 2004 presentations.

NOTE 2. OPERATING SEGMENTS

      The Company organizes its business into three reportable segments: local
      exchange carrier (LEC) services, broadcast services and internet service
      provider (ISP) services. The LEC services segment provides telephone, data
      services and other services to customers in local exchanges. The broadcast
      services segment provides cable television services to customers in Iowa
      and Nebraska. The ISP services segment provides internet access to
      customers within the local exchanges and the surrounding areas.

      The Company's reportable business segments are strategic business units
      that offer different products and services. Each reportable segment is
      managed separately primarily because of different products, services and
      regulatory environments. LEC segments have been aggregated because of
      their similar characteristics.

      The segment's accounting policies are the same as those described in the
      summary of significant accounting policies.

<TABLE>
<CAPTION>
                                    Local                      Internet
         Three months ended        Exchange                    Service
           March 31, 2004          Carrier      Broadcast      Provider         Total
      ------------------------   ------------  -----------    -----------    -----------
<S>                              <C>           <C>            <C>            <C>
      Revenues
         External customers      $ 1,160,763   $   207,493    $   153,721    $ 1,521,977
         Intersegment                     --            --             --             --
         Segment profit (loss)       419,217       (62,171)       (28,457)       328,589
</TABLE>


                                       7
<PAGE>

                  BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
                                   BREDA, IOWA

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2.  OPERATING SEGMENTS (continued)

<TABLE>
<CAPTION>
                                    Local                       Internet
         Three months ended        Exchange                     Service
           March 31, 2003          Carrier      Broadcast       Provider        Total
      ------------------------   ------------  -----------    -----------    -----------
<S>                              <C>           <C>            <C>            <C>
      Revenues
         External customers      $ 1,290,803   $   238,664    $   161,182    $ 1,690,649
         Intersegment                     --            --             --             --
         Segment profit (loss)       443,039       (46,384)       (39,228)       357,427
</TABLE>

      Reconciliation of Segment Information               Three months ended
                                                       March 31,      March 31,
                                                         2004           2003
                                                      -----------    -----------
      REVENUES:
         Total revenues for reportable segments       $ 1,521,977    $ 1,690,649
         Other revenues                                        --             --
                                                      -----------    -----------
             Consolidated Revenues                    $ 1,521,977    $ 1,690,649
                                                      ===========    ===========

      PROFIT:
         Total Profit for reportable segments         $   328,589    $   357,427
         Other profit (loss)                                   --             --
                                                      -----------    -----------
             Net Income                               $   328,589    $   357,427
                                                      ===========    ===========

NOTE 3. NET INCOME PER COMMON SHARE

      Net income per common share for March 31, 2004 and 2003 was computed by
      dividing the weighted average number of shares of common stock outstanding
      into the net income. The weighted average number of shares of common stock
      outstanding for the three months ended March 31, 2004 and 2003 were 31,564
      and 32,848, respectively.

NOTE 4. STOCK VALUE ADJUSTMENT

      During May 2003, the board of directors authorized a $23 increase in the
      stated value of each share of common stock from $280 to $303. There were
      32,812 shares outstanding at the time of the value adjustment, which
      reduced earnings by $754,676.


                                       8
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and Results
        of Operations.

      Breda organizes its business into three reportable segments. Those
      segments are local exchange carrier services, broadcast services, and
      Internet service provider services. Breda has organized its business into
      those segments because the segments are each strategic business units that
      are managed separately and that offer different products and services in
      different regulatory environments.

      The local exchange carrier services segment provides telephone, data
      services, and other services to customers in the local exchanges served by
      Breda and its telephone subsidiaries. Breda has offered local exchange
      carrier services in the Carroll, Iowa market area since October, 2003,
      through BTC, Inc. Breda also provides long distance services to its
      customers in the local exchanges served by Breda and its telephone
      subsidiaries. The broadcast services segment provides cable television
      services to customers in a total of eighteen towns in Iowa and one town in
      Nebraska. The Internet service provider services segment provides Internet
      access to customers in the local exchanges and the surrounding areas and
      in the Carroll, Iowa market area through BTC, Inc.

      The segments in which Breda and its subsidiaries operate are as follows:

            Local Exchange Carrier
                  Breda
                  Prairie Telephone Co., Inc.
                  Westside Independent Telephone Company
                  BTC, Inc.

            Broadcast Services
                  Tele-Services, Ltd.

            Internet Service Provider
                  BTC, Inc.

      BTC, Inc. is a subsidiary of Prairie Telephone. BTC, Inc. provides
      Internet services to its customers and to the customers of Breda, Prairie
      Telephone and Westside Independent.

      Breda and its subsidiaries all conduct business under the names "W.I.N."
      or "Western Iowa Networks".

      The following table reflects, on a consolidated basis for Breda and its
      subsidiaries, the approximate percentage of Breda's and its subsidiaries'
      aggregate revenue which was derived from the three segments described
      above and from investments as of the close of, respectively, the first
      quarter of 2003 and the first quarter of 2004:


                                       9
<PAGE>

                                                           January-     January-
                                                           March        March
                                                           2003         2004

               Local Exchange Carrier(1)                    76.4%        76.3%
               Broadcast(2)                                 14.1%        13.6%
               Internet Service Provider(3)                  9.5%        10.1%
                                                           -----        -----
                        Total                              100.0%       100.0%

(1)   This segment includes (i) flat monthly fees charged to subscribers by
      Breda, Prairie Telephone, Westside Independent and BTC, Inc. for basic
      local telephone services, (ii) universal services funding amounts and
      access charges payable by long distance carriers for intrastate and
      interstate exchange services provided to those long distance carriers,
      (iii) fees from long distance providers for billing and collection
      services for long distance calls made by subscribers, (iv) per minute
      rates and calling plans rates for long distance services, and (v) monthly
      cellular commissions, advertising fees, and miscellaneous revenues. BTC,
      Inc. began providing local telephone services in October, 2003. Prior to
      that time, BTC, Inc. only provided long distance services and Internet
      services.

(2)   This segment includes monthly fees charged for basic and premium cable
      services.

(3)   This segment includes monthly fees charged for Internet services.

Three-months ended March 31, 2004 Compared to Three-months ended March 31, 2003

NET INCOME

Consolidated net income for the three-month period ended March 31, 2004 was
$328,589, which was a $28,838, or 8.1%, decrease when compared to the $357,427
of consolidated net income for the three-month period ended March 31, 2003.

The $28,838 decrease in net income resulted from the following three factors:

      1)    Consolidated operating income, which is Operating Revenues less
            Operating Expenses, generated from the local exchange carrier
            services segment, the broadcast services segment, and the Internet
            service provider segment decreased $119,481, or 43.7%, for the
            three-month period ended March 31, 2004, when compared to the
            three-month period ended March 31, 2003.

      2)    Other income (expense), which includes such items as interest and
            dividend income, income from equity investments, interest expense,
            and gains (losses) on the sale of investments and property,
            increased $30,809, or 10.1%, for the


                                       10
<PAGE>

            three-month period ended March 31, 2004, when compared to the
            three-month period ended March 31, 2003.

      3)    Income taxes decreased $59,834, or 26.9%, for the three-month period
            ended March 31, 2004, when compared to the three-month period ended
            March 31, 2003.

      OPERATING REVENUES

      There was a decrease in total operating revenues of $168,672, or 10.0%,
      for the three-month period ended March 31, 2004, when compared to the
      three-month period ended March 31, 2003. The segments making up total
      operating revenues and their contributions to the $168,672 decrease
      between the two periods are as follows: local exchange carrier services -
      ($130,040); broadcast services - ($31,171); and Internet service provider
      services - ($7,461).

      Local Exchange Carrier Services - ($130,040)

      Local exchange carrier services revenue accounted for 76.3% of the
      operating revenue in the three-month period ended March 31, 2004. The
      components of, and their contributions to, the $130,040 decrease in local
      exchange carrier services revenue for the three-months ended March 31,
      2004, when compared to the three-months ended March 31, 2003, are as
      follows: local network services - $27,370; network access services -
      $35,306; long distance services - $6,624; billing and collection services
      - ($659); cellular services - ($142,794); and miscellaneous - ($55,887).

      Local network services revenues increased 19.2% and network access
      services revenues increased 5.8% for the three-month period ended March
      31, 2004, when compared to the three-month period ended March 31, 2003.
      Both of those revenue increases were the result of new customers in the
      Carroll, Iowa market area which were generated by BTC, Inc. after BTC,
      Inc. began offering local exchange carrier services in the Carroll, Iowa
      market area in October 2003. There was no corresponding customer base in
      the three-month period ended March 31, 2003.

      Breda has not experienced an adverse effect from the implementation in
      2003 of different methodologies for the support payment funding regulated
      by the FCC.

      Breda has lost access revenues in both 2003 and 2004 because Qwest no
      longer pays access revenue for traffic originating with a wireless carrier
      that uses Qwest to deliver the traffic back to a number served by local
      exchange carriers, such as Breda, Prairie Telephone, and Westside
      Independent, who participate in the use of the switching and network
      facilities offered by Iowa Network Services.

      Access charges constitute a substantial part of Breda's, Prairie
      Telephone's and Westside Independent's revenues, and a material risk to
      them arises from the regulation of access charge rates by the FCC. Breda
      anticipates continuing pressure for the


                                       11
<PAGE>

      lowering of state and federal access charge rates, so future reductions in
      access charge rates are likely.

      Breda's long distance services revenue continues to grow because of the
      increase in its customer base for those services. Breda believes that long
      distance services should continue to be a growth area for Breda in 2004 as
      Breda continues to market this service as both a stand-alone service and
      as part of a package with other services, such as Internet services. There
      was a 22.3% increase in long distance services revenue for the three-month
      period ended March 31, 2004 when compared to the three-month period ended
      March 31, 2003. The increase is a direct reflection of the 50.1% increase
      in Breda's long distance customer base, which has mainly resulted from new
      customers taking this service as part of a bundled service package which
      includes local exchange carrier services and Internet service provider
      services.

      There was a $142,794, or 36.2%, decrease in cellular services revenue for
      the three-month period ended March 31, 2004, when compared to the
      three-month period March 31, 2003. The decrease reflects the decreased
      sales from all of Breda's cellular service locations during the first
      three months of 2004. Breda began offering two-year contracts, instead of
      one-year contracts, in August 2002, when U.S. Cellular revamped its
      commission structure to encourage two-year contracts. Breda generates
      retention commissions when a customer extends the term of the customer's
      existing cellular services contract or enters into a new contract to
      continue the customer's cellular services. The customers with one-year
      contracts expiring in 2003 continued to generate retention contracts, but
      those contracts and other new contracts are now on a two year term. Breda
      will accordingly experience a time gap between when customers would
      normally be entering new contracts if they had one year contracts versus
      when they would enter into new contracts if they had two year contracts.
      The change in contract length has therefore caused a delay in new contract
      sign-up for retentionable contracts. Customers may migrate to new
      contracts without penalty once they have fulfilled eighty percent of the
      original contract term, so Breda anticipates that the first customers
      obtaining two year contracts in 2002 will be eligible for new contracts
      beginning in May and June of 2004. Breda expects its retention commissions
      to go back to their customary levels at that time. Other factors
      contributing to the decrease in cellular services revenue during the
      three-month period ended March 31, 2004, when compared to the three-month
      period ended March 31, 2003, were the down time caused by the hiring and
      training of a new outside cellular sales person, and the change in focus
      to the new services offered by Breda's local exchange services entry into
      the Carroll, Iowa market by two outside sales people, who had originally
      spent sales efforts on cellular services.

      Miscellaneous revenue decreased $55,887, or 52.0%, for the three-month
      period ended March 31, 2004, when compared to the three-month period ended
      March 31, 2003. Breda performed fiber installation contractual work for an
      outside corporation in the first quarter of 2003, which generated
      approximately $50,000 in miscellaneous revenue, before materials,
      equipment and labor costs. There was no corresponding work or revenue
      during the three-month period ended March 31, 2004.


                                       12
<PAGE>

      Broadcast Services ($31,171)

      Broadcast services revenue decreased $31,171, or 13.1%, for the
      three-month period ended March 31, 2004, when compared to the three-month
      period ended March 31, 2003. Breda's subsidiary, Tele-Services, Ltd.,
      continues to face competition from satellite dish providers that include
      local channels in their package offerings. Tele-Services experienced an
      11.5% decrease in its customer base when comparing the three-month period
      ended March 31, 2004, to the three-month period ended March 31, 2003.
      Another factor faced by Tele-Services is the declining population base in
      the small rural communities served by Tele-Services, which adversely
      affects Tele-Services' current and prospective customer base.
      Tele-Services has combined head-ends in Breda, Arcadia, and Westside in
      order to reduce its operating costs through consolidation of equipment and
      maintenance costs. Breda is continuing to explore other consolidation
      opportunities in the remaining sixteen communities which are served by
      Tele-Services. Tele-Services added channels during the latter part of the
      first quarter of 2004 in many of the nineteen communities served by
      Tele-Services. Breda anticipates finalizing and implementing most of those
      channel additions, and corresponding rate increases, by May 1, 2004. Local
      channels have been added to six additional communities and Breda hopes to
      generate customer loyalty through this avenue of information on local
      community events, as well as the weather and local news. Breda is also
      implementing paid advertising opportunities for businesses and individuals
      on the local channels in the communities that have local channels.

      Internet Services ($7,461)

      Internet services revenue decreased $7,461, or 4.6%, for the three-month
      period ended March 31, 2004, when compared to the three-month period ended
      March 31, 2003. The decrease is directly attributable to the decrease in
      BTC, Inc.'s Internet service customer base, which decrease is the result
      of the intense competition among the multiple suppliers in the Carroll,
      Iowa, market area. Breda began bundling Internet services with long
      distance services and lowered its pricing for Internet services in 2001 in
      response to competitive pressures. Breda has continued with these programs
      in 2003 and 2004. The programs have, however, resulted in reduced Internet
      revenues in both 2003 and 2004 given the lower pricing by Breda for
      Internet services under those programs. Breda is gaining high-speed
      Internet customers due to the October, 2003 start-up of BTC, Inc.'s local
      exchange carrier services in the Carroll, Iowa area because BTC, Inc. is
      offering bundled services packages that include Internet services, as well
      as local telephone and other communication services. The new customers
      subscribing for those bundled services have helped stem the decrease in
      Internet services revenue that Breda had experienced in 2003.

      OPERATING EXPENSES

      There was a decrease in total operating expenses of $49,191, or 3.5%, for
      the three-month period ended March 31, 2004, when compared to the
      three-month period ended


                                       13
<PAGE>

      March 31, 2003. The components making up operating expenses are as
      follows: cost of services, depreciation and amortization, and selling,
      general and administration expenditures.

      Cost of services decreased $27,627, or 4.2%, for the three-month period
      ended March 31, 2004, when compared to the three-month period ended March
      31, 2003. Most of the decrease in cost of services resulted from decreased
      Internet provision costs of $71,915 and decreased cellular services costs
      of $46,028. As noted previously, cellular services revenue decreased
      $142,794, or 36.2%, for the three-month period ended March 31, 2004, when
      compared to the three-month period ended March 31, 2003. Cellular service
      costs decreased 19.4%, however, due to the decrease in the amount of
      cellular services and the corresponding decrease in cellular equipment
      sales during the three-month period ended March 31, 2004. Internet costs
      decreased because Breda is no longer dependent on purchasing specialized
      circuits from Qwest in order to provide Internet provider services in the
      Carroll, Iowa market. As noted previously, Breda began offering local
      exchange carrier services in the Carroll, Iowa area through its subsidiary
      BTC, Inc. in October 2003. In order to provide local exchange carrier
      services in the Carroll, Iowa market, Breda had to install circuits and
      trunks between the present independent local exchange carrier (Qwest) and
      Breda's switch. Breda is able to provide Internet provider services to the
      Carroll, Iowa market over the same trunks, which has significantly reduced
      Breda's underlying circuit cost to provide Internet provider services.

      Depreciation and amortization expense decreased $18,695, or 7.2%, for the
      three-month period ended March 31, 2004, when compared to the three-month
      period ended March 31, 2003. The decrease is attributable to the fact that
      some of Breda's assets have reached their maximum depreciable life, so
      even though the assets are still in use, there is no further depreciation
      expense that can be taken on the assets.

      Selling, general and administration expenses decreased $2,869, or 0.6%,
      for the three-month period ended March 31, 2004, when compared to the same
      three-month period in 2003. The referenced expenses were almost identical
      when comparing the two three-month periods.

      OPERATING INCOME

      The net result of the operating revenue and operating expenses was a
      decrease of $119,481, or 43.7%, in operating income for the three-month
      period ended March 31, 2004, when compared to the same three-month period
      in 2003.

      OTHER INCOME (EXPENSE)

      Other income (expense) increased $30,809, or 10.1%, during the three-month
      period ended March 31, 2004, when compared to the same three-month period
      in 2003. The increase was mainly attributable to two items. The first item
      is interest expense, which decreased $2,480, or 7.1%, when comparing the
      three-month period ended March 31, 2004, to the three-month period ended
      March 31, 2003. The decrease in interest


                                       14
<PAGE>

      expense was due to a decrease in Breda's long-term debt during the
      three-month period ended March 31, 2004, when compared to the three-month
      period ended March 31, 2003. The second item is income from equity
      investments, which increased $27,251, or 9.5%, during the three-month
      period ended March 31, 2004, when compared to the same three-month period
      in 2003. The income from equity investments reported on Breda's financial
      statements is Breda's pro-rata share of the net income or net loss of each
      equity investment, based on Breda's percentage of ownership in each equity
      investment. The increase in equity investments reported on Breda's income
      statement for the three-month period ended March 31, 2004 is a reflection
      of the net increases and decreases in the net operating income of Breda's
      equity investments. Most of Breda's equity investments are in cellular
      partnerships. The cellular partnerships have, due to market pressure from
      carriers such as AT&T, Sprint and Verizon, had to renegotiate their
      roaming contracts at lower rates. As a result, the cellular partnerships
      making up Breda's equity investments are receiving less roaming revenue,
      but which has been more than offset by the increase in the number of
      customers and the minutes of use. Breda anticipates that these downward
      marketing pressures on roaming rates will continue for the foreseeable
      future.

      INCOME BEFORE INCOME TAXES

      Income before income taxes decreased $88,672, or 15.3%, for the
      three-month period ended March 31, 2004, when compared to the three-month
      period ended March 31, 2003. The $88,672 decrease was the result of the
      $119,481 decrease in operating income and the $30,809 increase in other
      income (expense).

      NET INCOME

      Income taxes decreased $59,834, or 26.9%, for the three-month period ended
      March 31, 2004, when compared to the same period in 2003. The decrease is
      a direct reflection of the decreased income generated in the three-month
      period ended March 31, 2004. The effective tax rate in 2004 was 33.1%,
      versus 38.3% in 2003. The effective tax rate differs from the U.S.
      statutory rate due to state income taxes, and the proportion of
      investments with state tax exemptions.

      Net income decreased $28,838, or 8.1%, for the three-month period ended
      March 31, 2004, when compared to the same period in 2003.

      Liquidity and Capital Resources at Twelve-months ended December 31, 2003

      Cash Flows

      Cash flows from operations were a steady source of funds for Breda in
      2003. Cash provided from operations was $2,414,760 in 2003. The cash flows
      from operations in 2003 were primarily attributable to a positive net
      income of $1,189,506, plus the addition of non-cash expenses of $1,382,873
      from depreciation, amortization, deferred income taxes, note receivable
      discount, and amortization of investment tax credits,


                                       15
<PAGE>

      which were then offset by $362,616 (net of cash distributions received of
      $676,786) of non-cash, equity income in unconsolidated affiliates. The net
      decrease in assets and liabilities of $204,997 was also added to net
      income to generate the net cash provided by operating activities of
      $2,414,760.

      Cash used in investing activities was $1,617,133 in 2003, and capital
      expenditures relating to ongoing business were $1,008,124 in 2003. A
      building was purchased for the relocation of Breda's and BTC, Inc.'s
      Carroll, Iowa services and operations for $246,000 in January 2003. Breda
      received $160,000 in February 2003 as an early payoff of a building
      contract note receivable. Breda's capital expenditures in 2003 were at a
      similar level to those made in 2002, after exclusion of the building
      purchase of $246,000. Capital used in investing activities in 2003
      included an additional $125,500 investment in RSA #1, Ltd. by Prairie
      Telephone in November 2003.

      Cash used in financing activities was $624,811 in 2003. Breda used cash in
      2003 to repay $134,981 of borrowings from the RTFC, to redeem common stock
      for $391,394, and to pay dividends of $98,436. Breda funds the redemption
      of its stock from cash flows from operations. Breda redeemed 1,306 shares
      during 2003.

      Working Capital

      Working capital was $1,839,171 as of December 31, 2003, compared to
      working capital of $1,950,070 as of December 31, 2002. The ratio of
      current assets to current liabilities was 4.0 to 1.0 as of December 31,
      2003, as compared to 3.6 to 1.0 as of December 31, 2002.

      Breda had a $228,418 decrease in current assets during the twelve-month
      period ended December 31, 2003, when compared to the twelve months ended
      December 31, 2002. The decrease in current assets was mainly attributable
      to a $75,300 increase in cash and temporary investments, which was offset
      by a $272,126 decrease in accounts receivable. Customer accounts
      receivable as of December 31, 2003 were comparable to customer accounts
      receivable as of December 31, 2002. The $272,126 decrease in accounts
      receivable was mainly attributable to a $201,897 reduction in the amount
      of outstanding payments due to Breda from interexchange carriers, and a
      decrease of $65,357 in the commissions due to Breda under its agency
      contract with U.S. Cellular.

      Noncurrent assets, which mainly consist of longer-term investments,
      increased $1,107,819 during the twelve-month period ended December 31,
      2003, when compared to the year ended December 31, 2002. Long term
      investments increased $791,778 during the twelve-month period ended
      December 31, 2003, when compared to the twelve months ended December 31,
      2002. Prairie Telephone loaned $500,000 to Desktop Media, L.L.C. on May 2,
      2001. The note is shown net of unamortized discounts of $16,866 and
      $31,208 at, respectively, December 31, 2003 and December 31, 2002.
      $291,134 is included in long-term note receivables, and $144,000 of the
      note is included in short-term note receivables as of December 31, 2003.
      Investments in unconsolidated affiliates at equity increased $488,116 for
      the twelve-month period


                                       16
<PAGE>

      ended December 31, 2003, when compared to the twelve months ended December
      31, 2002. The increase represents Breda's pro rata share of the net income
      or net loss of each equity investment, based on Breda's percentage of
      ownership in each equity investment during the twelve-month period ended
      December 31, 2003.

      Tele-Services entered into a five-year contract with Toyne, Inc. in
      September 2001, pursuant to which for Tele-Services sold its corporate
      building to Toyne, Inc. for $200,000. Tele-Services received a cash
      payment on October 1, 2002, and the remaining $160,000 balance was shown
      as $140,000 in long-term note receivables and $20,000 in short-term note
      receivables on Breda's balance sheet as of December 31, 2002. The $160,000
      balance was paid in full on February 14, 2003.

      Current liabilities decreased $117,519 for the twelve-month period ended
      December 31, 2003, when compared to the twelve months ended December 31,
      2002. Accounts payable decreased $29,077. A $3.00 per share dividend, for
      an aggregate amount of $98,436, was declared by Breda's Board of Directors
      to shareholders of record on March 10, 2003, and the dividend was paid on
      April 1, 2003. Accrued taxes decreased $60,487 for the twelve-month period
      ended December 31, 2003, when compared to the twelve months ended December
      31, 2002.

      Common stock had a net increase of $363,282 during the twelve-month period
      ended December 31, 2003, when compared to the twelve months ended December
      31, 2002. This increase resulted primarily from two items. One was the $23
      per share increase in outstanding shares value on May 20, 2003, and the
      other was a decrease in the number of outstanding shares through the
      redemption of 1,306 shares of common stock by Breda during the twelve
      month period ended December 31, 2003. The increase in retained earnings of
      $336,394 during the twelve month period ended December 31, 2003, when
      compared to the twelve months ended December 31, 2002, is the net effect
      of the stated value stock adjustment of $754,676, the dividends paid in
      2003 of $98,436, and the year-to-date net income as of December 31, 2003
      of $1,189,506.

      Liquidity and Capital Resources at Three-months ended March 31, 2004

      Cash Flows

      Cash provided from operations for the three-month periods ended March 31,
      2004 and March 31, 2003, was, respectively, $565,909 and $556,478. The
      cash flows from operations for the three-month period ended March 31, 2004
      were primarily attributable to a positive net income of $328,589, plus the
      addition of non-cash expenses such as depreciation, amortization, deferred
      income taxes, note receivable discount, and amortization of investment tax
      credits totaling $280,448, which were then offset by $168,281 of non-cash,
      equity income in unconsolidated affiliates. The net positive changes in
      assets and liabilities of $125,153 were also added to net income. The cash
      flows from operations for the three-month period ended March 31, 2003 were
      primarily attributable to a positive net income of $357,427, plus the
      addition of non-cash expenses such as depreciation, amortization, deferred
      income taxes, note receivable


                                       17
<PAGE>

      discount, and amortization of investment tax credits totaling $259,236,
      which were then offset by $287,997 of non-cash, equity income in
      unconsolidated affiliates. The net positive changes in assets and
      liabilities of $227,812 were also added to net income.

      Cash used in investing activities was $485,584 for the three-month period
      ended March 31, 2004, and $202,909 for the three-month period ended March
      31, 2003. Capital expenditures relating to ongoing business were $90,091
      for the three-month period ended March 31, 2004, and $409,792 for the
      three-month period ended March 31, 2003. A building was purchased for the
      relocation of Breda's and BTC, Inc.'s Carroll, Iowa services and
      operations for $246,000 in January 2003. As noted previously, Breda
      received $160,000 in February 2003, as an early payoff of a building
      contract note receivable. Breda expects capital expenditures for the
      remainder of 2004 to be at similar levels to those made in 2003.

      Cash used in financing activities was $96,062 for the three-month period
      ended March 31, 2004, and $85,555 for the three-month period ended March
      31, 2003. During the three-month period ended March 31, 2004, cash was
      used to repay $35,159 of long-term debt, and to redeem common stock for
      $60,903. During the three-month period ended March 31, 2003, cash was used
      to repay $32,915 of long-term debt, and to redeem common stock for
      $52,640. Breda funds the redemption of its stock from cash flows from
      operations.

      Working Capital

      Working capital was $1,559,170 as of March 31, 2004, compared to working
      capital of $1,839,172 as of December 31, 2003. The ratio of current assets
      to current liabilities was 2.8 to 1.0 as of March 31, 2004, and 4.0 to 1.0
      as of December 31, 2003.

      Breda had a $57,067 decrease in current assets during the three-month
      period ended March 31, 2004, when compared to the year ended December 31,
      2003. The decrease in current assets was mainly attributable to a $57,973
      decrease in cash and temporary investments and a $33,232 decrease in
      accounts receivable. There was a corresponding $468,478 increase in
      long-term investments. Customer accounts receivable as of March 31, 2004
      were comparable to customer accounts receivable as of December 31, 2003.
      The $33,232 decrease in accounts receivable was mainly attributable to the
      decreased cellular commissions receivable as of March 31, 2004 because of
      the corresponding decrease in retention contract sales during the
      three-month period ended March 31, 2004, as noted previously in this
      filing, when compared to the year ended December 31, 2003.

      Noncurrent assets, which mainly consist of longer-term investments,
      increased $609,020 during the three-month period ended March 31, 2004,
      when compared to the year ended December 31, 2003. Prairie Telephone
      loaned $500,000 to Desktop Media, L.L.C. on May 2, 2001. This note is
      shown net of unamortized discounts of $13,856 and $16,866, respectively,
      on March 31, 2004 and December 31, 2003. $270,144 is included in long-term
      note receivables, and $144,000 is included in short-term note


                                       18
<PAGE>

      receivables as of March 31, 2004. Desktop Media, L.L.C., Prairie Telephone
      and the other two investors in Desktop Media, L.L.C. signed a Principal
      Deferral Agreement on September 17, 2003, which allowed Desktop Media,
      L.L.C. to defer principal payments of $12,000 per month on its note with
      Prairie Telephone for a four-month period, starting with the September
      2003 payment and ending with the December 2003 payment, for a total
      deferral of $48,000 of principal payments on the note. Under this
      agreement, Desktop Media, L.L.C. was to obtain a sustainable monthly
      profit of $36,000 beginning no later than December 2003, and was to resume
      monthly principal payments beginning in January 2004. Prairie Telephone
      did receive principal payments for January and February 2004. However,
      preliminary 2003 audit results indicated that Desktop Media, L.L.C. had
      not obtained a sustainable monthly profit of $36,000, so documentation is
      being prepared pursuant to the agreement for Desktop Media, L.L.C. to
      issue an additional 7% of Desktop Media, L.L.C. units to each of Prairie
      Telephone and the other two investors in Desktop Media, L.L.C. Prairie
      Telephone will then have a 17% ownership interest in Desktop Media,
      L.L.C., instead of its current 10% ownership interest. Breda continues to
      believe that the cash flow shortfall experienced by Desktop Media, L.L.C.
      is a temporary situation. Investments in unconsolidated affiliates at
      equity increased $168,281 for the three-month period ended March 31, 2004,
      when compared to the year ended December 31, 2003. This increase
      represents Breda's pro rata share of the net income or net loss of each
      equity investment, based on Breda's percentage of ownership in each equity
      investment during the three-month period ended March 31, 2004.

      Current liabilities increased $222,935 for the three-month period ended
      March 31, 2004, when compared to the year ended December 31, 2003.
      Accounts payable increased $56,406. A $3.00 per share dividend was
      declared by Breda's Board of Directors on March 16, 2004 to shareholders
      of record on March 17, 2004, and payable on April 1, 2004. The dividend is
      recorded as a $94,479 dividend payable for the three-month period ended
      March 31, 2004. Accrued taxes increased $91,013 for the three-month period
      ended March 31, 2004, when compared to the year ended December 31, 2003.

      Common stock had a net decrease of $60,903 during the three-month period
      ended March 31, 2004, when compared to the year ended December 31, 2003.
      The decrease resulted from the redemption of 201 shares of common stock at
      a redemption price of $303 per share during the three-month period ended
      March 31, 2004. The increase in retained earnings during the three-month
      period ended March 31, 2004, when compared to the year ended December 31,
      2003, is the net effect of the $94,479 in dividends declared on March 17,
      2004, and paid on April 1, 2004, and the year-to-date net income as of
      March 31, 2004 of $328,589.

      Breda anticipates that Breda's operational, investing and financing
      activities during the remainder of 2004 will be similar to 2003, and will
      be funded internally through operations and temporary investments.


                                       19
<PAGE>

      Other Activities

      Breda received notification from the FBI on April 15, 2003, that the FBI
      would grant Breda, Prairie Telephone and Westside Independent an extension
      until June 30, 2004 for certain of their remaining deployment schedules
      under the Communications Assistance For Law Enforcement Act. The FCC
      decides whether or not to grant any such extension. At the time of this
      filing, no further correspondence had been received from the FCC, but
      Breda contemplates that the FCC will approve the FBI's determination or
      that additional time will otherwise be granted by the FCC, if necessary.
      BTC, Inc. receives its switching services from Breda, and is covered under
      the deployment schedule extension for Breda's switch. The Communications
      Assistance For Law Enforcement Act was passed by Congress in 1994 and sets
      forth the assistance capabilities that telecommunications carriers need to
      maintain so that they can support law enforcement in the conduct of
      lawfully authorized electronic surveillance. Breda, Prairie Telephone,
      Westside Independent and BTC, Inc. have been granted various extensions
      for compliance with the various requirements of that Act. Breda has
      licensed software that will allow it to become compliant with the Act
      within a short period of time should the FBI make a request for support.
      Breda also believes that it will be able to obtain an extension beyond the
      current June 30, 2004 compliance date, should that become necessary.

      Another industry issue that could have future, significant ramifications
      for Breda and its subsidiaries is number portability requirements. Number
      portability provides residential and business telephone customers with the
      ability to retain their existing telephone numbers when switching from one
      telephone service provider to another. Congress enacted the
      Telecommunications Act of 1996 to establish a national framework that
      promotes competition and reduces regulation in the telecommunications
      markets. The Act requires that local exchange carriers, such as Breda and
      Breda's telephone-related subsidiaries, open up their networks to local
      competition. The Act imposed new obligations and responsibilities on
      telecommunications carriers, particularly incumbent local exchange
      carriers. Number portability was one of the obligations that the Act
      imposed on all local exchange carriers, and the Act required the FCC to
      promulgate rules to implement the number portability requirements. The
      number portability requirements are viewed as consistent with the purposes
      of the Act because consumers might be reluctant to switch local exchange
      carriers if they have to change their telephone number, so number
      portability is viewed as facilitating competition.

      The FCC's rules obligate incumbent local exchange carriers, such as Breda,
      Prairie Telephone and Westside Independent, to port numbers when the
      carrier receives a specific request from another telecommunications
      carrier (wireline or wireless) for number portability capability. The
      rules give incumbent local exchange carriers a maximum period of 180 days
      to implement number portability capability following receipt of a request,
      with the actual permissible time period dependent on the extent of the
      upgrades required to their switch in order to be able to provide number
      portability.


                                       20
<PAGE>

      An incumbent local exchange carrier's number portability obligations were
      initially centered on responding to porting requests from other wireline
      carriers. In late 2003, however, the FCC released a Memorandum Opinion and
      Order and Further Notice of Rulemaking which clarified the circumstances
      under which its number portability rules apply to requests from wireless
      carriers. The determination of when an incumbent local exchange carrier
      must comply with a request for number portability from a wireless carrier
      depends upon the timing of the request, the type of carrier involved and
      whether the carrier is located within one of the 100 largest metropolitan
      statistical areas. The FCC's Memorandum Opinion and Order required or
      clarified that: a) as of November 24, 2003, wireline carriers that have
      received a request to port numbers in one of the 100 largest metropolitan
      statistical areas must port numbers to wireless carriers where the
      requesting wireless carrier's "coverage area" overlaps the geographic
      location of the rate center in which the customer's wireline number is
      provisioned, thus clarifying that the requesting wireless carrier does not
      need to have a point of interconnection in the wireline local exchange
      carrier rate center; b) the porting-in (wireless) carrier must maintain
      the number's original rate center designation following the port so that
      the calls to the ported number will continue to be rated as they were
      prior to porting; c) defined the wireless "coverage area" as the area in
      which wireless service can be received from the wireless carrier; d)
      wireline carriers may not require wireless carriers to enter into
      interconnection agreements as a precondition to porting between carriers;
      e) wireline carriers operating outside the 100 largest metropolitan
      statistical areas are not required to port numbers to wireless carriers
      until May 24, 2004 or six months after receipt of a porting request from
      another carrier, whichever is later, which is the earliest date that
      wireless carriers serving these areas are required to implement number
      portability; f) wireline carriers (both inside and outside of the 100
      largest metropolitan statistical areas) may file petitions with the FCC or
      the state public utility board for a waiver of their obligation to port
      numbers to wireless carriers if they can provide credible evidence
      demonstrating that porting is not technically feasible.

      The Iowa Utilities Board filed comments with the FCC in the matter of
      "Telephone Number Portability, CTIA's Petitions for Declaratory Ruling" on
      February 4, 2004. In their comments, the IUB expressed concern regarding
      the recovery of nonrecurring and recurring costs associated with providing
      wireless porting, especially for Iowa's rural exchanges where the access
      line counts are small. Prior to that time, various industry organizations
      cooperated in the filing of an "Emergency Joint Petition for Partial Stay
      and Clarification" with the FCC. The Petition asked the FCC not to enforce
      its wireless-wireline number portability order for companies that serve
      less than 2% of the nation's subscriber lines.

      On March 4, 2004, two Iowa industry associations, the Iowa Telecom
      Association and the Rural Iowa Independent Telephone Association, filed a
      petition with the IUB that requested a waiver of modification of the
      intermodal local number portability rules on behalf of all 2% carriers in
      Iowa. Breda, Prairie Telephone and Westside Independent


                                       21
<PAGE>

      had requested these associations to include Breda, Prairie Telephone and
      Westside Independent in these joint filings. On April 23, 2004, the IUB
      issued a temporary suspension of local number portability compliance for
      participants in the joint petition filed by the Iowa Telecom Association
      and the Rural Iowa Independent Telephone Association until a final
      decision is reached by the IUB in early October 2004. While Breda, Prairie
      Telephone, Westside Independent and the other independent telephone
      companies that opted to participate in the Iowa Telecom Association and
      the Rural Iowa Independent Telephone Association petition have received a
      180-day temporary suspension from the number portability requirements
      originally mandated by May 24, 2004, Breda and the other participating
      companies will need to provide company-specific information on number
      portability costs regarding the number of customers, the cost of number
      portability implementation, and expected cost per customer. Also, the IUB
      will consider lifting the stay on a company-by-company basis, so if one of
      the wireless carriers who has intervened and participated in the petition
      can demonstrate circumstances that support lifting of the temporary stay
      of the number portability requirements for Breda, Prairie Telephone or
      Westside Independent, the IUB would remove the stay with respect to Breda,
      Prairie Telephone and/or Westside Independent.

      Breda has already received requests for number portability from wireless
      carriers in Breda's wireless service areas. The most recent requests from
      wireless carriers do appear to meet the FCC's rules for a bona fide
      request. Breda is continuing to work with consultants and others within
      the industry to determine the needed facility upgrades and to finalize the
      costs associated with implementing number portability so that it will be
      able to comply with the regulatory directives regarding number portability
      as they continue to be established and clarified.

      In 2003, Qwest began minute-of-use studies with the twenty companies in
      Iowa which had the highest number of intrastate minutes being billed to
      Qwest. Breda was one of those twenty companies. Based on discussions and
      research with Qwest and INS (which submits minutes of use information to
      Breda for billing purposes), it was determined in October 2003 that Qwest
      had not routed some of its traffic according to the Local Exchange Routing
      Guide because Qwest had routed some of its traffic to Breda's switch that
      should, instead, have been routed to a cellular switch. Qwest is now
      routing that traffic to the appropriate cellular switches. Breda estimates
      that it will lose approximately $200,000 per year of intrastate access
      revenue from Qwest in future years because of this routing change. Breda
      is not currently aware of any plans to make any retroactive adjustments to
      Breda's intrastate access revenues from Qwest based upon the results of
      the Qwest study.

      The regulation of access charge rates is an area of particular concern to
      Breda because a substantial amount of Breda's total consolidated revenues
      are derived from access charge revenues. Breda, Prairie Telephone,
      Westside Independent and BTC, Inc. receive access charge revenues from
      long distance carriers (sometimes referred to in the telephone industry as
      "inter-exchange carriers" or "IXCs") for providing intrastate and
      interstate exchange services to those long distance carriers. In more
      basic terms, they receive access charge revenues for originating and
      terminating long distance calls made


                                       22
<PAGE>

      by their subscribers. The access charge rate that can be charged for
      interstate long distance calls is determined by the FCC. The FCC can
      change those rates at any time, and the more recent changes have lowered
      access charge rates.

      Concerns had also been raised at the state level by the Iowa Legislature
      and the Iowa Utility Board regarding intra-state rates and whether
      alternative intrastate inter-carrier compensation mechanisms should be
      investigated. A joint task force comprised of representatives from the
      Iowa Telecom Association and the Rural Iowa Independent Telephone
      Association was formed in the spring of 2003 to compile data from the
      local telephone companies, such as Breda, in order to document and study
      the cost of access and make recommendations regarding Iowa access rates.
      Two industry consulting firms joined this task force and the committee
      looked at not only the justification of the present intra-state access
      rates received by local telephone companies, but also at other revenue
      recovery alternatives.

      The joint task force had completed its initial study in May 2004 and found
      that the overall results showed costs both higher and lower than the
      current intra-state access rates, and that the cost/minute for the
      intrastate access fell within a range of 2 cents to 16 cents. The task
      force is continuing to study specific results and impacts from not having
      data from 38 Iowa companies, and the fact that declining minutes of use
      will increase the average cost. The joint task force is now arranging for
      regional meetings and conferences to educate and present its information
      to the Iowa Telecom Association and the Rural Iowa Independent Telephone
      Association members on the issues and elements of their recommendation,
      and then plans to develop a final recommendation. Access charge revenues
      constitute a substantial portion of Breda's total consolidated revenues,
      so this is an area of material risk to Breda and its subsidiaries.

      Breda does not believe that any increase in intra-state access rates will
      be recommended by this task force and that, at best, intra-state access
      rates will stay the same. It is also possible, however, that intra-state
      access rates will be lowered, and if that occurs, it will have a negative
      impact on Breda's operating income. Breda does not believe that it is
      possible to predict at this time whether intra-state access rates will be
      lowered, or if intrastate access rates are lowered, the amount of the
      decrease in those rates. It is therefore uncertain at this time whether
      this issue will result in an adverse effect on Breda's operating income.
      Breda does, however, expect continuing pressure in any event for the
      lowering of both state and federal access charge rates.

      Another revenue recovery issue present in the industry since April 1999
      has been the nonpayment of access revenue by wireless carriers on traffic
      originating and terminating within the same major trading area (intraMTA).
      Breda and other local exchange carriers have not received payment for the
      termination of this wireless traffic over their networks to the end user.
      A joint task force of industry representatives and the Iowa Telecom
      Association had been working since the spring of 2003 to negotiate with
      wireless carriers on this issue. In late April 2004, the ITA Wireless
      Termination negotiating committee was successful in reaching an agreement
      with four wireless


                                       23
<PAGE>

      carriers - U.S. Cellular, Verizon Wireless, Sprint and Midwest Wireless.
      Breda is presently reviewing this model agreement to determine if it is
      beneficial to use part of or all of the agreement in Breda's negotiations
      with these carriers. The model agreement would provide compensation only
      on a going forward basis, but past compensation is still under
      negotiation.

      A primary source of consolidated revenue is generated from Tele-Services'
      cable business. Tele-Services' operating revenues arise primarily from
      monthly fees for basic and premium cable services provided to its cable
      subscribers. Tele-Services' main competition is from satellite dish
      providers. The FCC has allowed satellite dish providers to provide local
      channels since 1999, which has had an adverse effect on Tele-Services,
      given that its ability to provide local channels was, in the past, one
      reason subscribers might choose Tele-Services' cable services over a
      satellite dish. Other rulings and decisions by the FCC are possible, and
      may provide satellite dish providers, or other providers as changes in the
      telecommunications and cable industry occur, with equal or greater
      advantages than Tele-Services can offer to its subscribers, which could
      obviously have an adverse effect on Tele-Services' business. Changes in
      the telecommunications and cable industry are continually occurring, and
      technological advances may provide Tele-Services subscribers with other
      options. For example, Iowa Network Services is offering cable services in
      Iowa over existing telephone lines, and it is estimated that up to 70
      independent telephone companies in mostly rural Iowa will be able to offer
      cable television programming over their telephone lines by 2005. This
      option, and others which might arise through other changes or advancements
      in technology, could have material adverse effects on Tele-Services in the
      future. Tele-Services is also faced with a declining population base in
      its service areas, which results in a lower potential customer base for
      Tele-Services, and with the need to upgrade its plant, equipment and
      cables in order to add more channel lineups so that it can stay
      competitive and continue to be able to obtain programming licenses.

      Tele-Services has worked with an engineering firm to look at and work on
      consolidating its head-end equipment with the goal being that the
      equipment will then be able to serve two or more communities, instead of
      just one community, resulting in lower maintenance costs for that
      equipment. Tele-Services did combine the head-ends on two systems into one
      head-end during first quarter 2004, which has allowed three communities to
      be served by one head-end and for these three communities to receive local
      channel services. Tele-Services is also upgrading some of its cable TV
      systems and installing additional equipment and electronics to be able to
      provide more channel line-up options. Channel additions were completed in
      ten of the communities served by Tele-Services by May 1, 2004, and
      Tele-Services will be adding channels in May 2004 in two other communities
      served by Tele-Services. Rate increases were implemented in the
      communities receiving the additional channels as of May 1, 2004. The cost
      of upgrades in 2004, and of any continuing or further head-end equipment
      consolidation, is estimated to be less than $300,000.


                                       24
<PAGE>

      Breda expanded its core business of providing local telephone services by
      beginning to offer those services in the Carroll, Iowa market area in
      October of 2003 through BTC, Inc. Prior to that time, BTC, Inc. only
      offered long distance services and Internet services in the Carroll, Iowa
      market area.

      Breda, Prairie Telephone, Westside Independent and BTC, Inc. continue to
      face competition in providing dial-up and high-speed Internet access. For
      example, Breda has been experiencing price-point competition for Internet
      services from Iowa Telecom in three communities since the late fourth
      quarter 2000. Breda had been the sole provider of Internet services in
      those communities until that time. Iowa Telecom purchased the telephone
      exchanges for those communities in 1999 and began operating them on June
      1, 2000. In late 2000, Iowa Telecom expanded the services offered in those
      communities to include Internet services and at a lower price than is
      offered by Breda. As a result, Breda has lost Internet customers in the
      three communities. BTC, Inc. is experiencing intense pricing and free
      services competition in providing Internet access in its Carroll, Iowa
      market. There are at least five competitors in this relatively small
      market area, and BTC, Inc. has experienced a 17.0% decline in its dial-up
      customer base in this market since March 31, 2002.

      Breda continues to investigate new technology and product offerings in the
      Internet field that it can provide to its customers, or that could be
      considered value-added features to the already-existing product. Breda has
      determined to begin offering a dial-up accelerator product during the
      second quarter of 2004, which will allow Breda to deliver data services
      over its existing dial-up and wireless networks at up to six times the
      normal speed. This type of service would be considered an upgrade from
      dialup, but not a replacement for the high speed Internet service. Breda
      anticipates that there will be considerable demand for this product from
      its dial-up customers.

      Breda continues to anticipate that it may need to enter into a new agency
      agreement with U.S. Cellular some time in 2004. Breda continues to be
      hopeful, based on its past negotiations with U.S. Cellular, that any new
      agreement will, at worst, have a neutral impact on Breda's cellular
      commissions revenue.

      Breda, Prairie Telephone and Westside Independent continue to face
      competition in the sale and lease of telephone, cellular and related
      equipment because there are numerous competitors who sell and lease that
      equipment.

      The cellular ventures in which Breda, Prairie Telephone and Westside
      Independent have invested continue to face ever increasing and changing
      competition in providing cellular services and equipment from the various
      competitors offering cellular and personal communication services.

      Breda's primary ongoing capital investment activity will currently
      continue to be additions to property, plant and equipment. Capital
      expenditures for 2003 were $1,008,124, and are currently expected to be
      approximately $692,637 in 2004.


                                       25
<PAGE>

      Breda believes that its present cash position along with its anticipated
      normal operating revenues will generate sufficient working capital for
      Breda and its subsidiaries to meet their current operating needs and
      maintain historical fixed asset addition levels.

      Cautionary Statement on Forward Looking Statements

      Various discussions and statements in this quarterly report are or contain
      forward looking statements that involve and are subject to various risks,
      uncertainties and assumptions. Forward looking statements include, but are
      not limited to, statements with respect to financial results and
      condition; anticipated future trends in business, revenues or net income;
      projections concerning operations and cash flow; business, growth and
      acquisition opportunities and strategies; management's plans and
      intentions for the future; competitive position; and other forecasts,
      projections and statements of expectation. Words such as "expects,"
      "estimates," "plans," "will," "anticipates," "contemplates," "forecasts,"
      "predicts," "projects," "prospects," "possible," "hopeful," "intends,"
      "believes," "seeks," "should," "thinks," "objectives" and other similar
      expressions or variations of those words or those types of words help
      identify forward looking statements. Forward looking statements are made
      based on numerous and varied estimates, projections, views, beliefs,
      strategies and assumptions made or existing at the time of such statements
      and are not guarantees of future results or performance. Breda disclaims
      any obligation to update or revise any forward looking statements based on
      the occurrence of future events, the receipt of new information, or
      otherwise.

      Actual future performance, outcomes and results may differ materially from
      those expressed in forward looking statements as a result of numerous and
      varied factors, risks and uncertainties, some that are known and some that
      are not, and nearly all of which are beyond the control of Breda and its
      management. It is not possible to predict or identify all such factors,
      risks and uncertainties, but some of the factors, risks and uncertainties
      affecting forward looking statements include, but are not limited to, the
      following:

            o     adverse changes by the Federal Communications Commission or
                  other regulatory authorities to the access charge rates that
                  can be charged by Breda and its subsidiaries to long distance
                  carriers or to the rules and other requirements regarding
                  access charge rates or access charges, whether instituted by
                  the regulatory authorities or at the request or by reason of
                  court or other actions taken by long distance carriers or
                  other interested persons;

            o     technological advances in the telecommunications, cable and
                  related industries, which are always occurring and at an ever
                  increasing rate, and any one or more of which may replace or
                  otherwise adversely affect in a material way the existing
                  technologies utilized by Breda and its subsidiaries;


                                       26
<PAGE>

            o     changes in employee relations, including the loss of a key
                  employee or employees;

            o     industry conditions and occurrences, including bankruptcies
                  and insolvencies of long distance carriers (such as Global
                  Crossing and WorldCom), and consolidations in the
                  telecommunications and cable industries, which may result in
                  competitors which are larger and better financed and with
                  greater geographic reach, allowing them to compete over
                  broader areas and more effectively;

            o     economic conditions at the national, regional and local
                  levels, which are always somewhat uncertain given that many
                  different tangible and intangible factors and occurrences can
                  affect the economy;

            o     political conditions and occurrences at the international,
                  national, regional and local levels, including rumors about,
                  or threats and/or acts of, terrorism or war;

            o     the general emotions and psychology of the economy, the
                  markets and consumers, which can at times seem to be totally
                  unrelated to actual economic or market conditions or other
                  more tangible factors;

            o     litigation;

            o     inaccurate assumptions or predictions by management;

            o     the ability to enter into and maintain agreements which are
                  necessary to provide services, and on favorable terms;

            o     ever increasing costs and expenses which are necessary to
                  Breda's and its subsidiaries' businesses but which are outside
                  of Breda's control, such as health and other insurance costs;

            o     acts or omissions of existing and/or new competitors and other
                  third parties, including offering lower prices or new or
                  substitute products or services and their use of new marketing
                  strategies and approaches or new third parties entering into
                  Breda's or any of its subsidiaries' marketing or service
                  areas;

            o     the risks associated with technological requirements,
                  technology substitution and changes and other technological
                  developments;

            o     changes in or more governmental laws, rules, regulations or
                  policies;

            o     reductions in or other changes to governmental programs
                  assisting or affecting the telecommunications, cable and
                  related industries, and in particular programs which aid
                  providers of those services to rural areas;


                                       27
<PAGE>

            o     the continued availability of financing, and on favorable
                  terms, and the cost of financing and consequences of leverage;
                  and

            o     the effects of ever increasing and changing competition and
                  relationships with other carriers and other parties, including
                  competition or relationships which result in Breda or its
                  subsidiaries having to develop new pricing for services, such
                  as interexchange access charges and wireless access charges,
                  or new marketing strategies or new product offerings, and the
                  related risk that Breda or its subsidiaries will not be able
                  to respond on a timely or profitable basis to competitive
                  changes or pressures.

      This section should also be read in conjunction with the financial
      statements and related notes included in Item 1 of Part I of this
      quarterly report.

Item 3. Controls and Procedures.

      The principal executive officer and the principal financial officer of
      Breda have evaluated the effectiveness of Breda's disclosure controls and
      procedures as of the end of the period covered by this quarterly report,
      and they have concluded that the disclosure controls and procedures have
      been effective for the purposes for which they are intended.

      No change in Breda's internal control over financial reporting occurred
      during the period covered by this quarterly report that has materially
      affected, or is reasonably likely to materially affect, Breda's internal
      control over financial reporting.

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

      As of the date of this quarterly report, Breda was not aware of any
      pending legal proceeding to which Breda was a party or to which any of
      Breda's property was subject, other than for any routine litigation, if
      any, that was incidental to its business. As of the date of this quarterly
      report, Breda was not aware that any governmental authority was
      contemplating any proceeding against Breda or any of its property.

Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
Securities.

      No material modifications, limitations or qualifications of the type
      required to be reported under this Item occurred with respect to Breda's
      shares of common stock during the period of January 1, 2004 through March
      31, 2004.

      Breda did not issue any shares of its common stock during the period of
      January 1, 2004 through March 31, 2004.


                                       28
<PAGE>

      The following table provides information regarding Breda's purchases of
      its common stock from shareholders during the period of January 1, 2004
      through March 31, 2004.

              SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------

                                                                      Total Number of      Maximum Number (or
                                                                      Shares Purchased     Approximate Dollar
                                                                         as Part of         Value) of Shares
                                                                          Publicly          that May Yet Be
                            Total Number of       Average Price       Announced Plans     Purchased Under the
        Period            Shares Purchased(1)   Paid per Share(2)      or Programs(1)     Plans or Programs(1)
---------------------------------------------------------------------------------------------------------------
<S>                          <C>                <C>                         <C>                   <C>
Month #1 (January 1,         95 Shares of
2004-January 31, 2004        Common Stock       $303.00 per Share            -0-                   -0-
---------------------------------------------------------------------------------------------------------------
Month #2 (February 1,        -0- Shares of
2004-February 29, 2004)      Common Stock              N/A                  N/A                   N/A
---------------------------------------------------------------------------------------------------------------
Month #3 (March 1,           106 Shares of
2004-March 31, 2004)         Common Stock       $303.00 per Share            -0-                   -0-
---------------------------------------------------------------------------------------------------------------
Total                               201                 --                   -0-                   -0-
---------------------------------------------------------------------------------------------------------------
</TABLE>

(1)   All of the shares of common stock were purchased by Breda pursuant to the
      redemption right or the right of first refusal granted to Breda in its
      Amended and Restated Articles of Incorporation, or pursuant to the
      unsolicited request of the shareholder in question. Breda does not have
      any publicly announced plans or programs with respect to purchases of its
      common stock.

(2)   All of the shares of common stock were purchased by Breda at the $303 per
      share redemption price that was announced by the board of directors at,
      and which became effective at, the May 20, 2003 annual meeting of Breda's
      shareholders.

Item 3. Defaults Upon Senior Securities.

      There was no material default or any material arrearage or delinquency by
      Breda of the type required to be reported under this Item during the
      period of January 1, 2004 through March 31, 2004.


                                       29
<PAGE>

Item 4. Submission of Matters to a Vote of Security Holders.

      No matters were submitted to a vote of the shareholders of Breda during
      the period of January 1, 2004 through March 31, 2004.

Item 5. Other Information.

      The board of directors declared a dividend of $3.00 per share on March 16,
      2004, payable to shareholders of record on March 17, 2004. The aggregate
      amount of the dividend was $94,479. The dividend was paid to the
      shareholders on April 1, 2004.

Item 6. Exhibits and Reports on Form 8-K.

      (a)   A list of the exhibits included as part of this quarterly report is
            set forth in the Exhibit Index which immediately precedes such
            exhibits and is incorporated herein by this reference.

      (b)   Breda did not file any reports on Form 8-K during the period of
            January 1, 2004 through March 31, 2004.

               [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]


                                       30
<PAGE>

                                   SIGNATURES

      In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                      BREDA TELEPHONE CORP.


Date:  May 13, 2004.                  By: /s/ Robert Boeckman
                                          --------------------------------------
                                          Robert Boeckman, Chief Operations
                                          Officer and Co-Chief Executive Officer


Date:  May 13, 2004.                  By: /s/ Jane Morlok
                                          --------------------------------------
                                          Jane Morlok, Chief Financial Officer
                                          and Co-Chief Executive officer


                                       31
<PAGE>

                                  EXHIBIT INDEX
                             Exhibits to Form 10-QSB
                        Three Months Ended March 31, 2004
                              BREDA TELEPHONE CORP.

Description of Exhibit                                                      Page
----------------------                                                      ----

3.    Articles of Incorporation and Bylaws

      3.1   Amended and Restated Articles of Incorporation of Breda
            Telephone Corp. (Filed as Exhibit 3.1 to Breda's
            Registration Statement on Form 10-SB, and incorporated
            herein by this reference.)

      3.2   Amended and Restated Bylaws of Breda Telephone Corp.
            (Filed as Exhibit 3.2 to Amendment No. 1 to Breda's
            Registration Statement on Form 10-SB, and incorporated
            herein by this reference.)

10.   Material Contracts

      10.1  Employment Agreement dated July 1, 2003 between Breda and
            Robert Boeckman. (Filed as Exhibit 10.1 to Breda's Form
            10-QSB for the quarterly period ended June 30, 2003 and
            filed August 12, 2003, and incorporated herein by this
            reference.)

      10.2  Employment Agreement dated July 1, 2003 between Breda and
            Jane Morlok. (Filed as Exhibit 10.2 to Breda's Form 10-QSB
            for the quarterly period ended June 30, 2003 and filed
            August 12, 2003, and incorporated herein by this
            reference.)

*31.  Rule 13a-14(a)/15d-14(a) Certifications

      31.1  Rule 13a-14(a) Certification of Chief Operations Officer        E-1
            and Co-Chief Executive Officer

      31.2  Rule 13a-14(a) Certification of Chief Financial Officer
            and Co-Chief Executive Officer                                  E-2


<PAGE>



*32.  Section 1350 Certifications

      32.1  Section 1350 Certification of Chief Operations Officer and      E-3
            Co-Chief Executive Officer

      32.2  Section 1350 Certification of Chief Financial Officer and       E-4
            Co-Chief Executive Officer

*Included with this filing.