##### 



SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q



| |           
| | ----------
| | (MARK ONE)

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


For the quarterly period ended March 31, 2003

OR
(  ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____ to ____

Commission file number 0-19179

CT COMMUNICATIONS, INC.(Exact name of registrant as specified in its charter)

|                                         |  |                    
|---------------------------------------- |  | -------------------
|NORTH CAROLINA                           |  | 56-1837282         
|(State or other jurisdiction of          |  | (I.R.S. Employer   
|incorporation or organization)           |  | Identification No.)
|                                         |  |                    
|1000 Progress Place NE                   |  |                    
|P.O. Box 227, Concord, NC                |  | 28026-0227         
|(Address of principal executive offices) |  | (Zip Code)         

(704)722-2500
(Registrants telephone number, including area code)

(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 [  ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes
[X] No [  ]

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuers classes
of common stock, as of the latest practicable date.

18,739,485 shares of Common Stock outstanding as of May 1, 2003.





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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

INDEX

|                                                                                                            |  |          |    | 
|----------------------------------------------------------------------------------------------------------- |  | -------- | -- | 
|                                                                                                            |  | Page No.
|                                                                                                            |  |         
|PART I. Financial Information                                                                               |  |          |    | 
|                                                                                                            |  |          |    | 
|Item 1. Financial Statements                                                                                |  |          |    | 
|                                                                                                            |  |          |    | 
|Condensed Consolidated Balance SheetsMarch 31, 2003 and December 31, 2002                                  |  |          | 2  | 
|                                                                                                            |  |          |    | 
|Condensed Consolidated Statements of IncomeThree Months Ended March 31, 2003 and 2002                      |  |          | 4  | 
|                                                                                                            |  |          |    | 
|Condensed Consolidated Statements of Comprehensive Income (Loss)Three Months Ended March 31, 2003 and 2002 |  |          | 5  | 
|                                                                                                            |  |          |    | 
|Condensed Consolidated Statements of Cash FlowsThree Months Ended March 31, 2003 and 2002                  |  |          | 6  | 
|                                                                                                            |  |          |    | 
|Notes to Condensed Consolidated Financial Statements                                                        |  |          | 7  | 
|                                                                                                            |  |          |    | 
|Item 2. Managements Discussion and Analysis of
Financial Condition and Results of Operations               |  |          | 15 | 
|                                                                                                            |  |          |    | 
|Item 3. Quantitative and Qualitative Disclosures
About Market Risk                                          |  |          | 22 | 
|                                                                                                            |  |          |    | 
|Item 4. Controls and Procedures                                                                             |  |          | 22 | 
|                                                                                                            |  |          |    | 
|PART II. Other Information                                                                                  |  |          |    | 
|                                                                                                            |  |          |    | 
|Item 6. Exhibits and Reports on Form 8-K                                                                    |  |          | 24 | 
|                                                                                                            |  |          |    | 
|Signatures                                                                                                  |  |          | 25 | 
|                                                                                                            |  |          |    | 
|Certifications                                                                                              |  |          | 26 | 

1



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(in thousands)

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

|                                        |                                        |                            |         |             |         |              |         |          |         | 
|--------------------------------------- | -------------------------------------- | -------------------------- | ------- | ----------- | ------- | ------------ | ------- | -------- | ------- | 
|                                        |                                        |                            |         | (Unaudited) |         |              |         |         
|                                        |                                        |                            |         | March 31,   |         | December 31,
|                                        |                                        |                            |         | 2003        |         | 2002        
|                                        |                                        |                            |         |             |         |             
|Current assets:                         |                                        |                            |         |             |         |              |         |         
|                                        | Cash and cash equivalents              |                            | $       | 10,961      |         |              | $       | 7,652    |        
|                                        | Accounts receivable, net               |                            |         | 22,305      |         |              |         | 24,314   |        
|                                        | Income tax receivable                  |                            |         | 1,603       |         |              |         | 3,007    |        
|                                        | Assets of discontinued operations      |                            |         | 17          |         |              |         | 13       |        
|                                        | Other                                  |                            |         | 6,324       |         |              |         | 6,182    |        
|                                        |                                        |                            |         |             |         |              |         |         
|                                        |                                        | Total current assets       |         |             | 41,210  |              |         |          | 41,168  | 
|                                        |                                        |                            |         |             |         |              |         |         
|                                        |                                        |                            |         |             |         |              |         |         
|Investment securities                   |                                        |                            | 6,407   |             |         |              | 6,379   |         
|Other investments                       |                                        |                            | 1,036   |             |         |              | 797     |         
|Investments in unconsolidated companies |                                        |                            | 12,581  |             |         |              | 12,729  |         
|                                        |                                        |                            |         |             |         |              |         |         
|Property and equipment:                 |                                        |                            |         |             |         |              |         |         
|                                        | Land, buildings, and general equipment |                            |         | 86,273      |         |              |         | 85,716   |        
|                                        | Central office equipment               |                            |         | 154,391     |         |              |         | 148,484  |        
|                                        | Poles, wires, cables and conduit       |                            |         | 136,700     |         |              |         | 133,645  |        
|                                        | Construction in progress               |                            |         | 3,259       |         |              |         | 8,322    |        
|                                        |                                        |                            |         |             |         |              |         |         
|                                        |                                        |                            | 380,623 |             |         |              | 376,167 |         
|                                        |                                        |                            |         |             |         |              |         |         
|                                        | Less accumulated depreciation          |                            |         | (170,321    | )       |              |         | (164,270 | )      
|                                        |                                        |                            |         |             |         |              |         |         
|                                        |                                        |                            |         |             |         |              |         |         
|                                        |                                        | Net property and equipment |         |             | 210,302 |              |         |          | 211,897 | 
|                                        |                                        |                            |         |             |         |              |         |         
|Goodwill                                |                                        |                            | 9,906   |             |         |              | 9,906   |         
|Other intangibles, net                  |                                        |                            | 53,464  |             |         |              | 53,070  |         
|Other assets                            |                                        |                            | 1,660   |             |         |              | 1,612   |         
|Assets of discontinued operations       |                                        |                            | 1,125   |             |         |              | 1,206   |         
|                                        |                                        |                            |         |             |         |              |         |         
|Total assets                            |                                        | $                          | 337,691 |             |         | $            | 338,764 |         
|                                        |                                        |                            |         |             |         |              |         |         

See accompanying notes to condensed consolidated financial statements (unaudited).

2



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Continued)
(in thousands, except share data)

|                                           |                                                                                                                  |                                              |         |             |         |              |         |         |         | 
|------------------------------------------ | ---------------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ------- | ----------- | ------- | ------------ | ------- | ------- | ------- | 
|                                           |                                                                                                                  |                                              |         | (Unaudited) |         |              |         |        
|                                           |                                                                                                                  |                                              |         | March 31,   |         | December 31,
|                                           |                                                                                                                  |                                              |         | 2003        |         | 2002        
|                                           |                                                                                                                  |                                              |         |             |         |             
|Current liabilities:                       |                                                                                                                  |                                              |         |             |         |              |         |        
|                                           | Accounts payable                                                                                                 |                                              | $       | 5,401       |         |              | $       | 8,632   |        
|                                           | Customer deposits and advance billings                                                                           |                                              |         | 2,377       |         |              |         | 2,593   |        
|                                           | Accrued payroll                                                                                                  |                                              |         | 2,889       |         |              |         | 3,012   |        
|                                           | Accrued pension cost                                                                                             |                                              |         | 3,221       |         |              |         | 2,856   |        
|                                           | Other accrued liabilities                                                                                        |                                              |         | 6,961       |         |              |         | 6,495   |        
|                                           | Liabilities of discontinued operations                                                                           |                                              |         | 1,060       |         |              |         | 1,645   |        
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        
|                                           |                                                                                                                  | Total current liabilities                    |         |             | 21,909  |              |         |         | 25,233  | 
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        
|Long-term debt                             |                                                                                                                  |                                              | 127,697 |             |         |              | 127,697 |        
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        
|Deferred credits and other liabilities:    |                                                                                                                  |                                              |         |             |         |              |         |        
|                                           | Deferred income taxes                                                                                            |                                              |         | 13,180      |         |              |         | 12,433  |        
|                                           | Investment tax credits                                                                                           |                                              |         | 316         |         |              |         | 345     |        
|                                           | Post-retirement benefits other than pension                                                                      |                                              |         | 11,251      |         |              |         | 11,099  |        
|                                           | Other                                                                                                            |                                              |         | 1,686       |         |              |         | 1,756   |        
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        
|                                           |                                                                                                                  | Total deferred credits and other liabilities |         |             | 26,433  |              |         |         | 25,633  | 
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        
|Total liabilities                          |                                                                                                                  |                                              | 176,039 |             |         |              | 178,563 |        
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        
|Stockholders equity:                      |                                                                                                                  |                                              |         |             |         |              |         |        
|                                           | Preferred stock not subject to mandatory redemption:                                                             |                                              |         |             |         |              |         |         |        
|                                           | 5% series, $100 par value; 3,356 shares outstanding at March 31,
2003 and December 31, 2002                      |                                              |         | 336         |         |              |         | 336     |        
|                                           | 4.5% series, $100 par value; 614 shares outstanding at March 31,
2003 and December 31, 2002                      |                                              |         | 61          |         |              |         | 61      |        
|                                           | Common stock, 18,736,288 and 18,686,740 shares outstanding at
March 31, 2003 and December 31, 2002, respectively |                                              |         | 40,499      |         |              |         | 39,962  |        
|                                           | Other capital                                                                                                    |                                              |         | 298         |         |              |         | 298     |        
|                                           | Unearned compensation                                                                                            |                                              |         | (863        | )       |              |         | (470    | )      
|                                           | Other accumulated comprehensive loss                                                                             |                                              |         | (771        | )       |              |         | (817    | )      
|                                           | Retained earnings                                                                                                |                                              |         | 122,092     |         |              |         | 120,831 |        
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        
|                                           |                                                                                                                  | Total stockholders equity                   |         |             | 161,652 |              |         |         | 160,201 | 
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        
|Total liabilities and stockholders equity |                                                                                                                  | $                                            | 337,691 |             |         | $            | 338,764 |        
|                                           |                                                                                                                  |                                              |         |             |         |              |         |        

See accompanying notes to condensed consolidated financial statements (unaudited).

3



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Income (Unaudited)
(in thousands, except share and per share data)

|                                            |                                                                                           |                                                       |            |                              |       |      |            |            |       | 
|------------------------------------------- | ----------------------------------------------------------------------------------------- | ----------------------------------------------------- | ---------- | ---------------------------- | ----- | ---- | ---------- | ---------- | ----- | 
|                                            |                                                                                           |                                                       |            | Three Months Ended March 31,
|                                            |                                                                                           |                                                       |            |                             
|                                            |                                                                                           |                                                       |            |                              |       |      |            | (Restated)
|                                            |                                                                                           |                                                       |            | 2003                         |       | 2002
|                                            |                                                                                           |                                                       |            |                              |       |     
|Operating revenue                           |                                                                                           | $                                                     | 38,696     |                              |       | $    | 35,655     |           
|Operating expense                           |                                                                                           |                                                       | 34,364     |                              |       |      | 31,398     |           
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            |                                                                                           | Operating income                                      |            |                              | 4,332 |      |            |            | 4,257 | 
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|Other income (expense):                     |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            | Equity in income of unconsolidated companies, net                                         |                                                       |            | 1,049                        |       |      |            | 680        |      
|                                            | Interest, dividend income and gain on sale of investments                                 |                                                       |            | 517                          |       |      |            | 2,942      |      
|                                            | Impairment on investments                                                                 |                                                       |            | (11                          | )     |      |            | (534       | )    
|                                            | Other expenses, principally interest                                                      |                                                       |            | (1,640                       | )     |      |            | (1,292     | )    
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|Total
other income (expense)                |                                                                                           |                                                       | (85        | )                            |       |      | 1,796      |           
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            |                                                                                           | Income from continuing operations before income
taxes |            |                              | 4,247 |      |            |            | 6,053 | 
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|Income taxes                                |                                                                                           |                                                       | 1,766      |                              |       |      | 2,383      |           
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            |                                                                                           | Income from continuing operations                     |            |                              | 2,481 |      |            |            | 3,670 | 
|                                           
|Discontinued operations:                    |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            | Loss from operations of discontinued business, net of income
tax benefits of $480 in 2002 |                                                       |            |                             |       |      |            | (932       | )    
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            |                                                                                           | Net income                                            |            |                              | 2,481 |      |            |            | 2,738 | 
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|Dividends on preferred stock                |                                                                                           |                                                       | 5          |                              |       |      | 6          |           
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            |                                                                                           | Earnings for common stock                             |            | $                            | 2,476 |      |            | $          | 2,732 | 
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|Basic earnings per share:                   |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            | Continuing operations                                                                     |                                                       | $          | 0.13                         |       |      | $          | 0.20       |      
|                                            | Discontinued operations                                                                   |                                                       |            |                             |       |      |            | (0.05      | )    
|                                            | Net income                                                                                |                                                       |            | 0.13                         |       |      |            | 0.15       |      
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|Diluted earnings per share:                 |                                                                                           |                                                       |            |                              |       |      |            |           
|                                            | Continuing operations                                                                     |                                                       |            | 0.13                         |       |      |            | 0.20       |      
|                                            | Discontinued operations                                                                   |                                                       |            |                             |       |      |            | (0.05      | )    
|                                            | Net income                                                                                |                                                       |            | 0.13                         |       |      |            | 0.15       |      
|                                            |                                                                                           |                                                       |            |                              |       |      |            |           
|Basic weighted average shares outstanding   |                                                                                           |                                                       | 18,716,176 |                              |       |      | 18,759,318 |           
|Diluted weighted average shares outstanding |                                                                                           |                                                       | 18,726,395 |                              |       |      | 18,812,542 |           

See accompanying notes to condensed consolidated financial statements (unaudited).

4



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited)
(in thousands)

|                                               |                                                                    |   |                              |    |      |   |            |        |  
|---------------------------------------------- | ------------------------------------------------------------------ | - | ---------------------------- | -- | ---- | - | ---------- | ------ | -
|                                               |                                                                    |   | Three Months Ended March 31,
|                                               |                                                                    |   |                             
|                                               |                                                                    |   |                              |    |      |   | (Restated)
|                                               |                                                                    |   | 2003                         |    | 2002
|                                               |                                                                    |   |                              |    |     
|Net income                                     |                                                                    | $ | 2,481                        |    |      | $ | 2,738      |       
|Other comprehensive income (loss), net of tax: |                                                                    |   |                              |    |      |   |            |       
|                                               | Unrealized holding gains (losses) on available-for-sale
securities |   |                              | 7  |      |   |            | (1,579 | )
|                                               | Unrealized holding gains on interest rate swaps                    |   |                              | 43 |      |   |            | 158    |  
|                                               | Less reclassification adjustment for gains realized
in net income  |   |                              | (4 | )    |   |            | (1,828 | )
|                                               |                                                                    |   |                              |    |      |   |            |       
|Comprehensive income (loss)                    |                                                                    | $ | 2,527                        |    |      | $ | (511       | )     
|                                               |                                                                    |   |                              |    |      |   |            |       

See accompanying notes to condensed consolidated financial statements (unaudited).

5



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |        |         |            |        |  
|---------------------------------------------------- | --------------------------------------------------------------------------------- | --------------------------------------------------------------------------- | --------------------------------------------------- | ------ | ---------------------------- | ------ | ------ | ------- | ---------- | ------ | -
|                                                     |                                                                                   |                                                                             |                                                     |        | Three Months Ended March 31,
|                                                     |                                                                                   |                                                                             |                                                     |        |                             
|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |        |         | (Restated)
|                                                     |                                                                                   |                                                                             |                                                     |        | 2003                         |        | 2002  
|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |       
|Cash flows from operating activities:                |                                                                                   |                                                                             |                                                     |        |                              |        |        |        
|                                                     | Net income                                                                        |                                                                             | $                                                   | 2,481  |                              |        | $      | 2,738   |           
|                                                     | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                                             |                                                     |        |                              |        |        |         |           
|                                                     |                                                                                   | Loss from discontinued operations                                           |                                                     |        |                             |        |        |         | 932        |       
|                                                     |                                                                                   | Depreciation and amortization                                               |                                                     |        | 7,788                        |        |        |         | 6,502      |       
|                                                     |                                                                                   | Post-retirement benefits                                                    |                                                     |        | 152                          |        |        |         | 134        |       
|                                                     |                                                                                   | Loss (gain) on sale of investment securities                                |                                                     |        | 6                            |        |        |         | (2,850     | )     
|                                                     |                                                                                   | Impairment of investments                                                   |                                                     |        | 11                           |        |        |         | 534        |       
|                                                     |                                                                                   | Undistributed income of unconsolidated companies                            |                                                     |        | (1,049                       | )      |        |         | (680       | )     
|                                                     |                                                                                   | Undistributed patronage dividends                                           |                                                     |        | (238                         | )      |        |         |           |       
|                                                     |                                                                                   | Deferred income taxes and tax credits                                       |                                                     |        | 710                          |        |        |         | 709        |       
|                                                     |                                                                                   | Changes in operating assets and liabilities, net of effects of
acquisitions |                                                     |        | 128                          |        |        |         | (4,038     | )     
|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |        |        
|                                                     |                                                                                   |                                                                             | Net cash provided by operating activities           |        |                              | 9,989  |        |         |            | 3,981  |  
|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |        |        
|Cash flows from investing activities:                |                                                                                   |                                                                             |                                                     |        |                              |        |        |        
|                                                     | Capital expenditures                                                              |                                                                             |                                                     | (6,158 | )                            |        |        | (11,838 | )         
|                                                     | Purchases of investments in unconsolidated companies                              |                                                                             |                                                     |       |                              |        |        | (500    | )         
|                                                     | Purchases of investment securities                                                |                                                                             |                                                     | (50    | )                            |        |        | (716    | )         
|                                                     | Proceeds from sale of investment securities                                       |                                                                             |                                                     | 10     |                              |        |        | 3,563   |           
|                                                     | Partnership capital distribution                                                  |                                                                             |                                                     | 1,197  |                              |        |        | 993     |           
|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |        |        
|                                                     |                                                                                   |                                                                             | Net cash used in investing activities               |        |                              | (5,001 | )      |         |            | (8,498 | )
|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |        |        
|Cash flows from financing activities:                |                                                                                   |                                                                             |                                                     |        |                              |        |        |        
|                                                     | Proceeds from credit facility                                                     |                                                                             |                                                     |       |                              |        |        | 4,500   |           
|                                                     | Dividends paid                                                                    |                                                                             |                                                     | (1,220 | )                            |        |        | (1,228  | )         
|                                                     | Repurchases of common stock                                                       |                                                                             |                                                     |       |                              |        |        | (618    | )         
|                                                     | Proceeds from common stock issuances                                              |                                                                             |                                                     | 49     |                              |        |        | 102     |           
|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |        |        
|                                                     |                                                                                   |                                                                             | Net cash (used in) provided by financing activities |        |                              | (1,171 | )      |         |            | 2,756  |  
|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |        |        
|Net cash used in discontinued operations             |                                                                                   |                                                                             | (508                                                | )      |                              |        | (966   | )      
|Net increase (decrease) in cash and cash equivalents |                                                                                   |                                                                             | 3,309                                               |        |                              |        | (2,727 | )      
|Cash and cash equivalents at beginning of quarter    |                                                                                   |                                                                             | 7,652                                               |        |                              |        | 8,397  |        
|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |        |        
|Cash and cash equivalents at end of quarter          |                                                                                   | $                                                                           | 10,961                                              |        |                              | $      | 5,670  |        
|                                                     |                                                                                   |                                                                             |                                                     |        |                              |        |        |        

See accompanying notes to condensed consolidated financial statements (unaudited).

6



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



|1. |  | In the opinion of management of CT Communications, Inc. (the
Company), the accompanying unaudited financial statements contain
all adjustments consisting of only normal recurring accruals
necessary to present fairly the Companys financial position as of
March 31, 2003 and 2002, and the results of its operations and cash
flows for the three months then ended. These unaudited financial
statements should be read along with the Companys Annual Report on
Form 10-K for the year ended December 31, 2002 and do not include
all disclosures associated with the Companys annual financial
statements.                                                                    
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | In certain instances, amounts previously reported in the 2002
consolidated financial statements have been reclassified to conform
with the 2003 consolidated financial statements presentation. Such
reclassifications have no effect on net income or retained earnings
as previously reported.                                                                                                                                                                                                                                                                                                                                                                                          
|  
|3. |  | The results of operations for the three months ended March 31, 2003
and 2002 are not necessarily indicative of the results to be
expected for the full year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|  
|4. |  | RESTATEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |  | In the course of the preparation of its financial statements for the
year 2002, the Company identified accounting errors in estimating
certain revenues and expenses in prior periods. Specifically, the
Company determined that estimates for certain access revenues and
network expenses, as well as several settlement processes with other
telephone companies, were incorrect. The cumulative after-tax
effect of these errors for the three months ended March 31, 2002,
resulted in the Company recording additional net loss of $(57,542).
The accompanying financial statements for three months ended March
31, 2002, have been restated to reflect the corrected calculations.
|  
|   |  | The correction of the above items resulted in the restatement of
certain amounts on the statements of income for the three months
ended March 31, 2002. These items are as follows (in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

|                                                      |  |                                   |        |            |  |              |        |             |  |   |     |   |  |   |        |  
|----------------------------------------------------- |  | --------------------------------- | ------ | ---------- |  | ------------ | ------ | ----------- |  | - | --- | - |  | - | ------ | -
|                                                      |  | Three months ended March 31, 2002
|                                                      |  |                                  
|                                                      |  |                                   |        |            |  | (Note 5)     |        |             |  |   |     |   |  |  
|                                                      |  |                                   |        |            |  | Discontinued |        |             |  |   |     |   |  |  
|Income Statement                                      |  | As Reported                       |        | Operations |  | Restatement  |        | As Restated
|                                                      |  |                                   |        |            |  |              |        |            
|Operating revenue                                     |  | $                                 | 35,575 |            |  | $            | (35    | )           |  | $ | 115 |   |  | $ | 35,655 |  
|Operating expense                                     |  |                                   | 32,513 |            |  |              | (1,328 | )           |  |   | 213 |   |  |   | 31,398 |  
|Operating income                                      |  |                                   | 3,062  |            |  |              | 1,293  |             |  |   | (98 | ) |  |   | 4,257  |  
|Other income                                          |  |                                   | 1,677  |            |  |              | 119    |             |  |   |    |   |  |   | 1,796  |  
|Income from continuing
operations before income taxes |  |                                   | 4,739  |            |  |              | 1,412  |             |  |   | (98 | ) |  |   | 6,053  |  
|Income taxes                                          |  |                                   | 1,943  |            |  |              | 480    |             |  |   | (40 | ) |  |   | 2,383  |  
|Income from continuing operations                     |  |                                   | 2,796  |            |  |              | 932    |             |  |   | (58 | ) |  |   | 3,670  |  
|Loss from discontinued operations                     |  |                                   |       |            |  |              | (932   | )           |  |   |    |   |  |   | (932   | )
|Net income (loss)                                     |  |                                   | 2,796  |            |  |              |       |             |  |   | (58 | ) |  |   | 2,738  |  

7



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

|                                          |  |                                   |        |          |  |              |      |             |  |   |   |  |  |   |        |  
|----------------------------------------- |  | --------------------------------- | ------ | -------- |  | ------------ | ---- | ----------- |  | - | - |  |  | - | ------ | -
|                                          |  | Three months ended March 31, 2002
|                                          |  |                                  
|                                          |  |                                   |        |          |  | Discontinued |      |             |  |   |   |  |  |  
|                                          |  |                                   |        |          |  | Operations   |      |             |  |   |   |  |  |  
|Cash Flow Statement                       |  | As Reported                       |        | (Note 5) |  | Restatement  |      | As Restated
|                                          |  |                                   |        |          |  |              |      |            
|Net cash provided
by operating
activities |  | $                                 | 3,463  |          |  | $            | 518  |             |  | $ |  |  |  | $ | 3,981  |  
|Net cash used in
investing
activities     |  |                                   | (8,946 | )        |  |              | 448  |             |  |   |  |  |  |   | (8,498 | )
|Net cash used in
discontinued
operations  |  |                                   |       |          |  |              | (966 | )           |  |   |  |  |  |   | (966   | )



|5. |  | DISCONTINUED OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On December 9, 2002 the Company discontinued its wireless broadband
commercial trial operations in Fayetteville, North Carolina. These
operations were provided by Wavetel. The Company ceased operations
due to significant operating losses, limited coverage area provided
by the technology available at the time and inability to obtain
outside investment. Complete disposal of the business through sale
and disposal of assets is expected by June 30, 2003. As a result,
Wavetels operations have been reflected as discontinued operations
and as assets and liabilities held for sale in accordance with SFAS
No. 144. Wavetels revenue, reported in discontinued operations was
$35,203 for the three months ended March 31, 2002. Wavetels loss
before income taxes, reported in discontinued operations, for the
three months ended March 31, 2002 was $1.4 million. The Company had
no outstanding indebtedness directly related to the Wavetel
operations; therefore, no interest expense was allocated to
discontinued operations.
|  
|   |  | In connection with the discontinuance of operations, the Company
recognized a loss of $4.4 million in 2002 to write-down the related
carrying amounts of assets to their fair values less cost to sell in
accordance with SFAS No. 144 and recorded related liabilities for
estimated severance costs, lease termination costs, and other exit
costs in accordance with Emerging Issues Task Force (EITF) Issue
No. 94-3, Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs
Incurred in Restructuring). The assets and liabilities of the
discontinued operations are presented separately under the captions
Assets of discontinued operations and Liabilities of discontinued
operations, respectively, in the accompanying balance sheets at
March 31, 2003 and December 31, 2002, and consist of the following
(in thousands):                                                                                                                                  

|                                       |                                                |  |           |       |              |  |   |       | 
|-------------------------------------- | ---------------------------------------------- |  | --------- | ----- | ------------ |  | - | ----- | 
|                                       |                                                |  | March 31, |       | December 31,
|                                       |                                                |  | 2003      |       | 2002        
|                                       |                                                |  |           |       |             
|Assets of discontinued operations      |                                                |  |           |       |              |  |   |      
|                                       | Other current assets                           |  | $         | 17    |              |  | $ | 13    | 
|                                       | Property and equipment, net                    |  |           | 1,125 |              |  |   | 1,206 | 
|                                       | Other assets                                   |  |           |      |              |  |   |      | 
|                                       |                                                |  |           |       |              |  |   |      
|                                       | Total assets                                   |  | $         | 1,142 |              |  | $ | 1,219 | 
|                                       |                                                |  |           |       |              |  |   |      
|Liabilities of discontinued operations |                                                |  |           |       |              |  |   |      
|                                       | Accounts payable                               |  | $         | 249   |              |  | $ | 276   | 
|                                       | Accrued liabilities                            |  |           | 101   |              |  |   | 124   | 
|                                       | Other liabilities, primarily lease obligations |  |           | 710   |              |  |   | 1,245 | 
|                                       |                                                |  |           |       |              |  |   |      
|                                       | Total liabilities                              |  | $         | 1,060 |              |  | $ | 1,645 | 
|                                       |                                                |  |           |       |              |  |   |      

8



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



| |  | A summary of restructuring liability activity related to the
discontinued operations for the three months ended March 31, 2003 is
as follows (in thousands):
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             |                         |   |       |      |  
|---------------------------- | ----------------------- | - | ----- | ---- | -
|Balance at December 31, 2002 |                         | $ | 1,243 |     
|                             | Lease termination costs |   |       | (246 | )
|                             | Severance costs         |   |       | (130 | )
|                             | Network removal costs   |   |       | (92  | )
|                             | Other costs             |   |       | (66  | )
|                             |                         |   |       |     
|Balance at March 31, 2003    |                         | $ | 709   |     
|                             |                         |   |       |     



|6. |  | COMMON STOCK                                                                                         
|-- |  | -----------------------------------------------------------------------------------------------------
|  
|   |  | The following is a summary of Common Stock transactions during the
three months ended March 31, 2003:

|                                                                              |  |        |            |         |  |   |            |  
|----------------------------------------------------------------------------- |  | ------ | ---------- | ------- |  | - | ---------- | -
|                                                                              |  | Shares |            | Amount 
|                                                                              |  |        |            |        
|Outstanding at December 31, 2002                                              |  |        | 18,686,740 |         |  | $ | 39,962,278 |  
|Purchase of Common Stock                                                      |  |        | (35,089    | )       |  |   | (364,117   | )
|Issuance of Common Stock                                                      |  |        | 84,637     |         |  |   | 901,095    |  
|                                                                              |  |        |            |         |  |   |            |  
|Outstanding at March 31, 2003                                                 |  |        | 18,736,288 |         |  | $ | 40,499,256 |  
|                                                                              |  |        |            |         |  |   |            |  
|                                                                             
|                                                                              |  | Basic  |            | Diluted
|                                                                              |  |        |            |        
|Weighted average shares outstanding for the
three months ended March 31, 2003 |  |        | 18,716,176 |         |  |   | 18,726,395 |  
|Weighted average shares outstanding for the
three months ended March 31, 2002 |  |        | 18,759,318 |         |  |   | 18,812,542 |  



| |  | The Company began a stock repurchase program in March 2001, which
was extended in March 2002, that authorized the repurchase of up to
1,000,000 shares of its outstanding Common Stock. In April 2003,
the Board of Directors approved the continuation of the stock
repurchase program through April 27, 2004 and authorized the
repurchase of up to 1,000,000 shares of its outstanding Common
Stock. As of March 31, 2003, 322,950 shares had been repurchased
since March 2001, at a cost of approximately $4.7 million.
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Outstanding options to purchase approximately 654,000 shares of
Common Stock for the three months ended March 31, 2003 and
approximately 430,000 shares of Common Stock for the three months
ended March 31, 2002 were not included in the computation of diluted
earnings per share and diluted weighted shares outstanding because
the exercise price of these options was greater than the average
market price of the Common Stock during the respective periods.                                                       

9



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



|7. |  | SECURITIES AVAILABLE-FOR-SALE                                                                                                                                                                                                                        
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | The amortized cost, gross unrealized holding gains, gross unrealized
holding losses and fair value for the Companys investments by major
security type and class of security at March 31, 2003 and December
31, 2002 were as follows (in thousands):

|                   |  |           |       |                  |  |                  |    |            |  |   |      |   |  |   |       | 
|------------------ |  | --------- | ----- | ---------------- |  | ---------------- | -- | ---------- |  | - | ---- | - |  | - | ----- | 
|Equity Securities  |  | Amortized |       | Gross Unrealized |  | Gross Unrealized |    |            |  |  
|Available-for-Sale |  | Cost      |       | Holding Gains    |  | Holding Losses   |    | Fair Value
|                   |  |           |       |                  |  |                  |    |           
|March 31, 2003     |  | $         | 6,621 |                  |  | $                | 27 |            |  | $ | (241 | ) |  | $ | 6,407 | 
|                   |  |           |       |                  |  |                  |    |            |  |   |      |   |  |   |       | 
|December 31, 2002  |  | $         | 6,597 |                  |  | $                | 98 |            |  | $ | (316 | ) |  | $ | 6,379 | 



|8. |  | INVESTMENTS IN UNCONSOLIDATED COMPANIES                                         
|-- |  | --------------------------------------------------------------------------------
|  
|   |  | Investments in unconsolidated companies consist of the following (in
thousands):

|               |                                    |  |                |        |                   |  |   |        | 
|-------------- | ---------------------------------- |  | -------------- | ------ | ----------------- |  | - | ------ | 
|               |                                    |  | March 31, 2003 |        | December 31, 2002
|               |                                    |  |                |        |                  
|Equity Method: |                                    |  |                |        |                   |  |   |       
|               | Palmetto MobileNet, L.P.           |  | $              | 8,593  |                   |  | $ | 8,740  | 
|               | Other                              |  |                | 120    |                   |  |   | 120    | 
|               |                                    |  |                |        |                   |  |   |       
|Cost Method:   |                                    |  |                |        |                   |  |   |       
|               | ITC Holding Company                |  |                | 1,979  |                   |  |   | 1,980  | 
|               | Maxcom Telecomunicaciones, S.A. de |  |                | 1,239  |                   |  |   | 1,239  | 
|               | C.V.
Other                         |  |                | 650    |                   |  |   | 650    | 
|               |                                    |  |                |        |                   |  |   |       
|               | Total                              |  | $              | 12,581 |                   |  | $ | 12,729 | 
|               |                                    |  |                |        |                   |  |   |       



| |  | On September 14, 2001, the Companys wholly-owned subsidiary, CT
Wireless Cable, Inc. (CTWC), and Wireless One of North Carolina,
L.L.C. (WONC), entered into a Limited Liability Company Interest
Purchase Agreement (the Purchase Agreement) with Wireless One,
Inc., a subsidiary of WorldCom, Inc. (Wireless One), and Worldcom
Broadband Solutions, Inc. pursuant to which WONC would purchase from
Wireless One its entire 50% interest in WONC. The FCC approved this
transaction on March 28, 2002 and the transaction was closed on
April 5, 2002. At December 31, 2002, CTWC held 100% of the equity
interest in WONC. This transaction has been accounted for using the
purchase method of accounting. As a result, the results of WONC
have been consolidated with the Companys results from the beginning
of the second quarter 2002. Pro forma results for WONC are not
material to the Companys consolidated financial statements.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The total purchase price for Wireless Ones interest in WONC was
$20.7 million, $3.0 million of which was paid in cash at the closing
and the remainder of which was paid in the form of an interest
bearing promissory note of WONC. The promissory note is payable over
the 10 year period following the closing, with a $7.0 million
payment due by 12 months from the closing date (which payment may be
deferred for up to an additional two years) and the remainder
payable in equal annual installments beginning after six years. In
the event the $7.0 million payment is not made when due, either CTWC
or Wireless One may cause WONC to transfer certain of its licensed
frequencies to Wireless One in payment of the outstanding principal
amount of the promissory note. The promissory note is secured by a
pledge of WONCs channel rights.                                                                                              

10



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



| |  | The total purchase price of $20.7 million was allocated as follows
(in thousands):
| |  | ----------------------------------------------------------------------------------

|                         |  |   |        |  
|------------------------ |  | - | ------ | -
|Current assets           |  | $ | 278    |  
|Intangibles and licenses |  |   | 20,726 |  
|Equipment                |  |   | 412    |  
|Accounts payable         |  |   | (720   | )
|                         |  |   |        |  
|Total purchase price     |  | $ | 20,696 |  
|                         |  |   |        |  



|   |  | On July 19, 2002, WONC delivered a Split-Up Notice to Wireless One
pursuant to the Purchase Agreement. This notice sets into motion a
process under the Purchase Agreement pursuant to which WONC will
transfer to Wireless One certain of WONCs licensed frequencies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | On April 22, 2003, WONC executed an agreement that results in the
cancellation of a $17.7 million promissory note payable to Wireless
One. The agreement unwinds WONCs purchase of Wireless Ones
interest in WONC in exchange for the payment of accrued interest due
under the promissory note and transfer of certain licensed
frequencies to Wireless One and the cancellation of the $17.7
million promissory note payable to Wireless One. The cancellation
of the promissory note will occur in the second quarter of 2003.                                                                                                                                                                                                                 
|  
|   |  | On May 9, 2003, West Corporation purchased the stock of ITC Holding
Company, Inc. (ITC). The Company had a 4.4% equity interest in
ITC. This transaction resulted in a distribution to the Company
of $13.4 million in cash plus stock in a newly formed
company that will hold certain assets not acquired by West
Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|9. |  | LONG-TERM DEBT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | Long-term debt consists of the following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|  
|   |  | The Company has a $90.0 million revolving five year line of credit
with interest at three month LIBOR plus a spread based on various
financial ratios. The interest rate on March 31, 2003 was 2.79%.
The credit facility provides for quarterly payments of interest
until maturity on March 31, 2006. As of March 31, 2003, $60.0
million was outstanding under the revolving credit agreement. The
Company also has a 7.32% fixed rate $50.0 million term loan that
matures on December 31, 2014. All $50.0 million was outstanding as
of March 31, 2003. The Company also has an additional line of credit
for $10.0 million at one month LIBOR plus 1.25%. As of March 31,
2003, the Company had no amounts outstanding under this credit line.
|  
|   |  | At March 31, 2003, the Company has a $17.7 million note payable to
Wireless One that bears interest at 9% annually with principal
payments due over the 10 year period ending March 2012. A $7.0
million principal payment was due by March 2003 (which payment may
be deferred until March 2005 with the payment of accrued interest)
and the remainder payable in equal annual installments beginning in
March 2008. As discussed in Note 8, on April 22, 2003, WONC
executed an agreement that results in the cancellation of a $17.7
million promissory note payable to Wireless One.                                                                                                                                                           
|  
|   |  | The Company has three interest rate swap transactions to fix $10.0
million, $5.0 million, and $5.0 million of the amounts outstanding
under the $90.0 million revolving line of credit at rates of 5.9%,
4.53%, and 3.81%, respectively, plus a current spread of 1.25%. The
fair value of each of the swaps as of March 31, 2003 was ($469,790),
($372,917), and ($204,540), respectively.                                                                                                                                                                                                                                                                                                                                                         

11



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



|10. |  | GOODWILL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On January 1, 2002, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other
Intangible Assets. In accordance with SFAS No. 142, the Company
discontinued goodwill amortization and tested goodwill for
impairment as of January 1, 2002, determining that the recognition
of an impairment loss was not necessary. The Company will continue
to test goodwill for impairment at least annually. Goodwill was
$9.9 million as of March 31, 2003, and was unchanged for the quarter
then ended. No impairment was required based on the test performed
in accordance with SFAS No. 142.                                                                                                                                                                                                                                                                                                                                                                                        
|   
|11. |  | RECENT ACCOUNTING PRONOUNCEMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | In April 2002, the Financial Accounting Standards Board (FASB)
issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and
64, Amendment of FASB Statement No. 13, and Technical Corrections.
This statement eliminates extraordinary accounting treatment for a
gain or loss reported on the extinguishment of debt and amends other
existing authoritative pronouncements to make technical corrections,
clarify meanings, or describe their applicability under changed
conditions. The provisions of this statement are effective for the
Company with the beginning of fiscal year 2003. The adoption of
this statement did not have a material impact on the Companys
overall financial position or results of operations.                                                                                                                                                                                                                                                                                  
|   
|    |  | In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 requires
that the fair value of a liability associated with an exit or
disposal activity be recognized when the liability is incurred.
Prior to the adoption of SFAS No. 146, certain exit costs were
recognized when the Company committed to a restructuring plan, which
may have been before the liability was incurred. The Company will
apply the provisions of SFAS No. 146 for all exit or disposal
activities initiated after December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | In December 2002, the FASB issued Statement No. 148, Accounting for
Stock-Based CompensationTransition and Disclosure. SFAS No. 148
presents additional alternatives for transitioning to the fair value
method of accounting for stock-based compensation, prescribes the
format to be used for pro forma disclosures and requires the
inclusion of similar pro forma disclosures in interim financial
statements. SFAS No. 148 is effective for fiscal years ending after
December 15, 2002. The interim disclosure provisions are effective
for financial reports containing financial statements for interim
periods beginning after December 15, 2002. The adoption of this
statement did not have a significant effect on the Companys
financial position or results of operations.                                                                                                                                                                                                                               
|   
|    |  | In January 2003, the FASB issued Interpretation No. 46,
Consolidation of Variable Interest Entities, (Interpretation 46)
to clarify the conditions under which assets, liabilities and
activities of another entity should be consolidated into the
financial statements of a company. Interpretation 46 requires the
consolidation of a variable interest entity (including a special
purpose entity such as that utilized in an accounts receivable
securitization transaction) by a company that bears the majority of
the risk of loss from the variable interest entitys activities, is
entitled to receive a majority of the variable interest entitys
residual returns or both. The provisions of Interpretation 46 are
required to be adopted by the Company in 2003. The Company does not
believe the adoption of Interpretation 46 will have a material
impact on its overall financial position or results of operations.                                                                                  
|   
|12. |  | STOCK OPTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | The Company applies the intrinsic value-based method of accounting
prescribed by Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related
interpretations including FASB Interpretation No. 44, Accounting
for Certain Transactions Involving Stock Compensation an
Interpretation of APB Opinion No. 25 issued in March 2000 to
account for its fixed plan stock options. Under this method,
compensation expense is recorded on the date of grant only if the
current market price of the underlying stock exceeded the exercise
price. SFAS No. 123, Accounting for Stock-Based Compensation,
established accounting and disclosure requirements using a fair
value-based method of accounting for stock-based employee
compensation plans. As allowed by SFAS No. 123, the Company has
elected to continue to apply the intrinsic value-based method of
accounting described above, and has adopted the disclosure
requirements of SFAS No. 123 and SFAS No. 148.

12



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



| |  | The Company applies APB Opinion No. 25 and related Interpretations
in accounting for its plans. Accordingly, no compensation cost has
been recognized for its fixed stock option plans and its stock
purchase plan. Had compensation cost for the Companys stock-based
compensation plans been determined consistent with SFAS No. 123, the
Companys net income and earnings per share would have been reduced
to the pro forma amounts indicated below (in thousands except per
share data):
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                                                                                  |             |   |                              |      |      |   |            |      | 
|----------------------------------------------------------------------------------------------------------------- | ----------- | - | ---------------------------- | ---- | ---- | - | ---------- | ---- | 
|                                                                                                                  |             |   | Three months ended March 31,
|                                                                                                                  |             |   |                             
|                                                                                                                  |             |   |                              |      |      |   | (Restated)
|                                                                                                                  |             |   | 2003                         |      | 2002
|                                                                                                                  |             |   |                              |      |     
|Net income, as reported                                                                                           |             | $ | 2,481                        |      |      | $ | 2,738      |     
|Total stock-based compensation expense
determined under fair value based method
for all awards, net of income tax |             |   | 205                          |      |      |   | 181        |     
|                                                                                                                  |             |   |                              |      |      |   |            |     
|Pro forma net income                                                                                              |             | $ | 2,276                        |      |      | $ | 2,557      |     
|                                                                                                                  |             |   |                              |      |      |   |            |     
|                                                                                                                  |             |   |                              |      |      |   |            |     
|Basic earnings per common share                                                                                   |             |   |                              |      |      |   |            |     
|                                                                                                                  | As reported |   | $                            | 0.13 |      |   | $          | 0.15 | 
|                                                                                                                  | Pro forma   |   |                              | 0.12 |      |   |            | 0.14 | 
|                                                                                                                  |             |   |                              |      |      |   |            |     
|Diluted earnings per common share                                                                                 |             |   |                              |      |      |   |            |     
|                                                                                                                  | As reported |   |                              | 0.13 |      |   |            | 0.15 | 
|                                                                                                                  | Pro forma   |   |                              | 0.12 |      |   |            | 0.14 | 



|13. |  | SEGMENT INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company has six reportable segments, each of which are strategic
businesses that are managed separately due to certain fundamental
differences such as regulatory environment or services offered. The
segments and a description of their businesses are as follows: the
incumbent local exchange carrier (ILEC), which provides local
telephone services, the digital wireless group (Digital Wireless),
which provides wireless phone services, the competitive local
exchange carrier (CLEC), which provides competitive local
telephone services to customers outside the ILECs operating area,
the Greenfield business (Greenfield), which provides full
telecommunications services to mixed-use developments outside the
ILECs operating area, internet and data services (IDS), which
provides dial-up and high-speed internet access and other data
related services, Palmetto MobileNet, L.P. (Palmetto), which is a
limited partnership with interests in wireless phone service in
North and South Carolina of which the Company has an equity interest
through CT Cellular, and all other business units, investments and
operations of the Company (Other). Quarterly information for the
Palmetto reporting segment is not shown separately below due to the
lack of availability of timely financial information. Palmetto is
not a public company and therefore, is not subject to the same
reporting deadlines as the Company. The Company will continue to
include the financial information for Palmetto on an annual basis as
presented in the Form 10-K for the year ended December 31, 2002.

13



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



| |  | Accounting policies of the segments are the same as those described
in the summary of significant accounting policies included in the
Companys Annual Report on Form 10-K for the year ended December 31,
2002. The Company evaluates performance based on operating income.
Intersegment transactions have been eliminated for purposes of
calculating operating income. All segments provide services
primarily within North Carolina. Greenfield also provides service
in Georgia. Selected data by business segment for the three months
ended March 31, 2003 and 2002, is as follows (in thousands):
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             |  |      |         |          |  |         |        |            |  |     |        |       |  |       |        |   |  |   |        |   |  |   |        |   |  |   |         | 
|-------------------------------------------- |  | ---- | ------- | -------- |  | ------- | ------ | ---------- |  | --- | ------ | ----- |  | ----- | ------ | - |  | - | ------ | - |  | - | ------ | - |  | - | ------- | 
|Three
months ended March 31, 2003            |  |      |         |          |  |         |        |            |  |     |        |       |  |       |        |   |  |   |        |   |  |   |        |  
|                                            
|                                             |  |      |         |          |  | Digital |        |            |  |     |        |       |  |       |        |   |  |   |        |   |  |   |        |   |  |  
|                                             |  | ILEC |         | Wireless |  | CLEC    |        | Greenfield |  | IDS |        | Other |  | Total
|                                             |  |      |         |          |  |         |        |            |  |     |        |       |  |      
|External revenue                             |  | $    | 23,532  |          |  | $       | 6,873  |            |  | $   | 4,471  |       |  | $     | 1,312  |   |  | $ | 2,508  |   |  | $ |       |   |  | $ | 38,696  | 
|External expense                             |  |      | 10,970  |          |  |         | 5,675  |            |  |     | 4,768  |       |  |       | 1,928  |   |  |   | 2,396  |   |  |   | 839    |   |  |   | 26,576  | 
|Depreciation and
amortization                |  |      | 5,407   |          |  |         | 363    |            |  |     | 662    |       |  |       | 554    |   |  |   | 471    |   |  |   | 331    |   |  |   | 7,788   | 
|                                             |  |      |         |          |  |         |        |            |  |     |        |       |  |       |        |   |  |   |        |   |  |   |        |   |  |   |         | 
|Operating income                             |  |      | 7,155   |          |  |         | 835    |            |  |     | (959   | )     |  |       | (1,170 | ) |  |   | (359   | ) |  |   | (1,170 | ) |  |   | 4,332   | 
|                                             |  |      |         |          |  |         |        |            |  |     |        |       |  |       |        |   |  |   |        |   |  |   |        |   |  |   |         | 
|Segment Assets                               |  |      | 171,305 |          |  |         | 30,722 |            |  |     | 12,809 |       |  |       | 23,011 |   |  |   | 15,043 |   |  |   | 84,801 |   |  |   | 337,691 | 
|                                             |  |      |         |          |  |         |        |            |  |     |        |       |  |       |        |   |  |   |        |   |  |   |        |   |  |   |         | 
|Three months ended
March 31, 2002
(Restated) |  |      |         |          |  |         |        |            |  |     |        |       |  |       |        |   |  |   |        |   |  |   |        |  
|                                            
|                                             |  |      |         |          |  | Digital |        |            |  |     |        |       |  |       |        |   |  |   |        |   |  |   |        |   |  |  
|                                             |  | ILEC |         | Wireless |  | CLEC    |        | Greenfield |  | IDS |        | Other |  | Total
|                                             |  |      |         |          |  |         |        |            |  |     |        |       |  |      
|External revenue                             |  | $    | 23,221  |          |  | $       | 5,845  |            |  | $   | 3,447  |       |  | $     | 800    |   |  | $ | 2,342  |   |  | $ |       |   |  | $ | 35,655  | 
|External expense                             |  |      | 10,722  |          |  |         | 4,752  |            |  |     | 4,763  |       |  |       | 1,641  |   |  |   | 2,777  |   |  |   | 241    |   |  |   | 24,896  | 
|Depreciation and
amortization                |  |      | 4,918   |          |  |         | 200    |            |  |     | 515    |       |  |       | 420    |   |  |   | 443    |   |  |   | 6      |   |  |   | 6,502   | 
|                                             |  |      |         |          |  |         |        |            |  |     |        |       |  |       |        |   |  |   |        |   |  |   |        |   |  |   |         | 
|Operating income                             |  |      | 7,581   |          |  |         | 893    |            |  |     | (1,831 | )     |  |       | (1,261 | ) |  |   | (878   | ) |  |   | (247   | ) |  |   | 4,257   | 
|                                             |  |      |         |          |  |         |        |            |  |     |        |       |  |       |        |   |  |   |        |   |  |   |        |   |  |   |         | 
|Segment Assets                               |  |      | 180,777 |          |  |         | 28,888 |            |  |     | 16,389 |       |  |       | 16,005 |   |  |   | 15,395 |   |  |   | 49,962 |   |  |   | 307,416 | 



| |  | Reconciliation to income from continuing operations before income
taxes (in thousands):
| |  | ---------------------------------------------------------------------------------------

|                                                      |  |                              |       |      |  |            |       | 
|----------------------------------------------------- |  | ---------------------------- | ----- | ---- |  | ---------- | ----- | 
|                                                      |  | Three months ended March 31,
|                                                      |  |                             
|                                                      |  |                              |       |      |  | (Restated)
|                                                      |  | 2003                         |       | 2002
|                                                      |  |                              |       |     
|Segment operating income                              |  | $                            | 4,332 |      |  | $          | 4,257 | 
|Total other income (expense)                          |  |                              | (85   | )    |  |            | 1,796 | 
|                                                      |  |                              |       |      |  |            |       | 
|Income from continuing operations before income taxes |  | $                            | 4,247 |      |  | $          | 6,053 | 
|                                                      |  |                              |       |      |  |            |       | 

14



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

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

Overview and Segments



| |  | We are a growing provider of telecommunications services to
residential and business customers located primarily in North
Carolina. We offer an integrated package of telecommunications
services consisting of local and long distance telephone services,
Internet and data services, and digital wireless products and
services.                                                                                             
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | We have worked to expand our core businesses through the development
of integrated product and service offerings, investment in growth
initiatives that exceed our return thresholds and targeted marketing
efforts to efficiently identify and obtain customers.                                                                                                                                                               
|
| |  | In addition, we have made certain strategic investments that
complement our business units. During 2001, we expanded our
wireless business through the partitioning of our area of the
Cingular digital networks. In March 2002, the FCC approved the
transfer of certain MMDS and ITFS spectrum from WorldCom to WONC.                                                                                                         
|
| |  | We devoted substantial effort in the past three years to developing
business plans, enhancing our management team and board of
directors, and designing and developing our business support and
operating systems. Development of these areas has required
significant investment of capital and start-up expenses. We believe
that through these investments, we are positioning ourselves to
achieve our strategic objectives.
|
| |  | Our primary focus is to maximize our ILEC business in our current
markets by cross-selling integrated products and packages and
growing our customer base through our CLEC, Greenfield, Internet and
data services, and digital wireless businesses. We will also
consider strategic acquisitions and investments as opportunities
arise.                                                                                       
|
| |  | We have identified reportable segments based on the common
characteristics of products and services and/or the customers
served. The identified reportable segments are: ILEC, CLEC,
Greenfield, Digital Wireless, and Internet and Data Services. All
other businesses that do not meet reporting guidelines and
thresholds are reported under Other Business Units.                                                         
|
| |  | The following discussion reviews the results of our consolidated
operations and specific results within each reportable segment.                                                                                                                                                                                                                                                                                                

Results of Operations



| |  | Consolidated Operating Results(in thousands except lines)
| |  | ---------------------------------------------------------

|                              |  |                              |         |      |  |            |         | 
|----------------------------- |  | ---------------------------- | ------- | ---- |  | ---------- | ------- | 
|                              |  | Three months ended March 31,
|                              |  |                             
|                              |  |                              |         |      |  | (Restated)
|                              |  | 2003                         |         | 2002
|                              |  |                              |         |     
|Total operating revenue       |  | $                            | 38,696  |      |  | $          | 35,655  | 
|Total operating expense       |  |                              | 34,364  |      |  |            | 31,398  | 
|                              |  |                              |         |      |  |            |         | 
|Operating income              |  | $                            | 4,332   |      |  | $          | 4,257   | 
|                              |  |                              |         |      |  |            |         | 
|                              |  |                              |         |      |  |            |         | 
|Depreciation and amortization |  | $                            | 7,788   |      |  | $          | 6,502   | 
|Capital expenditures          |  |                              | 5,776   |      |  |            | 12,434  | 
|Total assets                  |  |                              | 337,691 |      |  |            | 307,416 | 
|                              |  |                              |         |      |  |            |         | 
|Ending wired access lines     |  |                              | 152,398 |      |  |            | 147,647 | 
|Ending wireless subscribers   |  |                              | 33,984  |      |  |            | 31,425  | 



| |  | Operating revenue increased $3.0 million or 8.5% for the three
months ended March 31, 2003 when compared to the three months ended
March 31, 2002. This $3.0 million increase is primarily
attributable to a $1.0 million increase in CLEC revenue driven by a
23.1% increase in CLEC access lines, a $1.0 million increase in
Wireless revenue driven by an 8.1% increase in wireless subscribers
and increased roaming revenue related to network growth and a $0.5
million increase in Greenfield revenue as Greenfield access lines
nearly doubled.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

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



| |  | As a result of this growth in our competitive businesses we have
diversified operating revenue in our Company significantly over the
past two years. In the first quarter of 2003, the ILEC represented
60.8% of revenue compared to 65.1% in 2002, while Digital Wireless
has grown to 17.8% of revenue and the combined CLEC and Greenfield
businesses has grown to 14.9% of revenue.                                                                                                                        
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | For the three months ended March 31, 2003, operating expense
increased $3.0 million or 9.4% as compared to the three months ended
March 31, 2002. Of this increase in operating expense, $1.3
million is related to depreciation and amortization expenses as
several large capital projects were completed during 2002. The
remaining increase is related to the greater customer numbers in our
Wireless, CLEC and Greenfield businesses, partially offset by
internal efficiencies and cost control efforts.
|
| |  | For the three months ended March 31, 2003, revenues grew 8.5% and
expenses grew 9.4%. Operating margins were 11.2% for the three
months ended March 31, 2003 as compared to 11.9% for the three
months ended March 31, 2002.                                                                                                                                                                                                                                                                                   
|
| |  | ILEC(in thousands except lines)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

|                                |  |                              |         |      |  |            |         | 
|------------------------------- |  | ---------------------------- | ------- | ---- |  | ---------- | ------- | 
|                                |  | Three months ended March 31,
|                                |  |                             
|                                |  |                              |         |      |  | (Restated)
|                                |  | 2003                         |         | 2002
|                                |  |                              |         |     
|Total operating revenue         |  | $                            | 23,532  |      |  | $          | 23,221  | 
|Total operating expense         |  |                              | 16,377  |      |  |            | 15,640  | 
|                                |  |                              |         |      |  |            |         | 
|Operating income                |  | $                            | 7,155   |      |  | $          | 7,581   | 
|                                |  |                              |         |      |  |            |         | 
|                                |  |                              |         |      |  |            |         | 
|Depreciation and amortization   |  | $                            | 5,407   |      |  | $          | 4,918   | 
|Capital expenditures            |  |                              | 3,308   |      |  |            | 3,300   | 
|Total assets                    |  |                              | 171,305 |      |  |            | 180,777 | 
|                                |  |                              |         |      |  |            |         | 
|Ending business access lines    |  |                              | 29,750  |      |  |            | 31,475  | 
|Ending residential access lines |  |                              | 88,259  |      |  |            | 90,355  | 
|Ending total access lines       |  |                              | 118,009 |      |  |            | 121,830 | 
|Ending long distance lines      |  |                              | 84,233  |      |  |            | 84,112  | 



| |  | Operating revenue for the ILEC increased $0.3 million for the three
months ended March 31, 2003. This 1.3% increase in revenue was
despite a 3.1% decrease in access lines. During the first three
months of 2003, a large Internet Service Provider (ISP) restructured
its operations and transferred 1,296 lines to a competitor.
Excluding the adjustment for ISP lines, ending access lines for the
three months ended March 31, 2003 decreased 2.1%.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Operating expense in the ILEC increased $0.7 million for the three
months ended March 31, 2003 compared to the three months ended March
31, 2002. Operating margins decreased to 30.4% in 2003 from 32.6%
in 2002. Increases in depreciation and amortization expenses
accounted for $0.5 million of the $0.7 million increase in operating
expense.                                                                                                     
|
| |  | Capital expenditures for the three months ended March 31, 2003 were
14.1% of ILEC operating revenue as compared to 14.2% for the three
months ended March 31, 2002.                                                                                                                                                                                                                                                                                      
|
| |  | ILEC access lines subscribing to our long distance service increased
slightly for the three months ended March 31, 2003 despite the 3.1%
access line loss. At the end of the three months ended March 31,
2003, 71.4% of ILEC access lines subscribed to our long distance
service, up from 69.0% at the end of the three months ended March
31, 2002.                                                                                                   
|
| |  | The Companys ILEC currently receives compensation from BellSouth
for termination of wireless traffic to our end users. Our ILEC also
directly receives terminating minutes of use from wireless carriers.
Bellsouth has                                                                                                                                                                                                                                 

16



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

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



| |  | communicated with ILECs in North Carolina that they no longer
plan to provide compensation for wireless minutes of use that they terminate to
ILECs as they convert wireless carriers to meet point billing. At that
point each ILEC would be responsible for billing each wireless
carrier at negotiated interconnection rates. The timing of this conversion is uncertain, but we
anticipate that it will be completed by the end of 2003. We
estimate the impact to the Companys ILEC may be
a reduction in revenue of approximately $0.2 to $0.3 million per
month, if BellSouth is successful in effecting this change that is
currently under review by the North Carolina Utilities Commission
(NCUC).
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Legislation has been proposed in the North Carolina General
Assembly, which if enacted will effectively deregulate the provision
of (i) intraLATA long distance service; (ii) interLATA long distance
service; and (iii) long distance operator services. This will not
affect our long distance operation since it is not
required to file tariffs for services regulated by the NCUC. However, this legislation would
allow our ILEC more flexibility in offering service bundles and
promotions.                                                                                                                                                                                                             
|
| |  | CLEC(in thousands except lines)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

|                              |  |                              |        |      |  |            |        |  
|----------------------------- |  | ---------------------------- | ------ | ---- |  | ---------- | ------ | -
|                              |  | Three months ended March 31,
|                              |  |                             
|                              |  |                              |        |      |  | (Restated)
|                              |  | 2003                         |        | 2002
|                              |  |                              |        |     
|Total operating revenue       |  | $                            | 4,471  |      |  | $          | 3,447  |  
|Total operating expense       |  |                              | 5,430  |      |  |            | 5,278  |  
|                              |  |                              |        |      |  |            |        |  
|Operating income (loss)       |  | $                            | (959   | )    |  | $          | (1,831 | )
|                              |  |                              |        |      |  |            |        |  
|                              |  |                              |        |      |  |            |        |  
|Depreciation and amortization |  | $                            | 662    |      |  | $          | 515    |  
|Capital expenditures          |  |                              | 256    |      |  |            | 500    |  
|Total assets                  |  |                              | 12,809 |      |  |            | 16,389 |  
|                              |  |                              |        |      |  |            |        |  
|Ending access lines           |  |                              | 27,300 |      |  |            | 22,184 |  
|Ending long distance lines    |  |                              | 14,485 |      |  |            | 11,927 |  



| |  | For the three months ended March 31, 2003, CLEC operating revenue
increased $1.0 million as compared to the three months ended March
31, 2002. This increase is due to a 23.1% increase in access lines,
as well as a 21.4% increase in CLEC customers subscribing to our
long distance service. Revenue growth slowed during the first
quarter 2003 due to several factors including the continuing impact
of sluggish economic growth and the uncertainty brought on by the
war with Iraq.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | CLEC operating expense was $5.4 million and $5.3 million for the
three months ended March 31, 2003 and March 31, 2002, respectively.
We expect margins to continue to be positively impacted as we
leverage existing transport infrastructure with new customers and
continue internal initiatives to control costs and improve
profitability.                                                                                                                                              
|
| |  | Greenfield(in thousands except lines)                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                              |  |                              |        |      |  |            |        |  
|----------------------------- |  | ---------------------------- | ------ | ---- |  | ---------- | ------ | -
|                              |  | Three months ended March 31,
|                              |  |                             
|                              |  |                              |        |      |  | (Restated)
|                              |  | 2003                         |        | 2002
|                              |  |                              |        |     
|Total operating revenue       |  | $                            | 1,312  |      |  | $          | 800    |  
|Total operating expense       |  |                              | 2,482  |      |  |            | 2,061  |  
|                              |  |                              |        |      |  |            |        |  
|Operating income (loss)       |  | $                            | (1,170 | )    |  | $          | (1,261 | )
|                              |  |                              |        |      |  |            |        |  
|                              |  |                              |        |      |  |            |        |  
|Depreciation and amortization |  | $                            | 554    |      |  | $          | 420    |  
|Capital expenditures          |  |                              | 1,146  |      |  |            | 2,106  |  
|Total assets                  |  |                              | 23,011 |      |  |            | 16,005 |  
|                              |  |                              |        |      |  |            |        |  
|Ending access lines           |  |                              | 7,089  |      |  |            | 3,633  |  
|Ending long distance lines    |  |                              | 2,878  |      |  |            | 1,224  |  
|Total signed agreements       |  |                              | 77     |      |  |            | 60     |  

17



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

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



| |  | Greenfield revenue for the three months ended March 31, 2003
increased 64.0% as compared to the three months ended March 31,
2002. This revenue increase is primarily attributable to a 95.1%
increase in access lines compared to 2002. Four new agreements were
signed during the first quarter of 2003 bringing the total
agreements signed to 77. These agreements represent an estimated
43,000 access lines at completion. The expected
residential/business line mix of these 77 projects is expected to be
91.6% residential and 8.4% business.                                                   
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Operating expense increased $0.4 million or 20.4% in for the three
months ended March 31, 2003. This increase is related primarily to
the 95.1% increase in access lines and a $0.1 million increase in
depreciation expense. Capital expenditures in 2002 were $1.0
million less than 2002 levels. This decrease is primarily due to
the slower pace in which new agreements are being signed as the
Company targets developments with the most efficient capital
deployments                                                                                                                            
|
| |  | For the three months ended March 31, 2003, 40.6% of Greenfield
access lines also subscribed to our long distance service, up from
33.7% in 2002. This increase is mainly due to the fact that many of
the early Greenfield access lines were business lines located in
mall projects. Business customers historically have not selected
our long distance service as frequently as residential customers
since many retail businesses have national long distance contracts.
As the residential percentage of Greenfield access lines increases
we have seen our long distance penetration rates increase.
|
| |  | Digital Wireless(in thousands except subscribers)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

|                              |  |                              |        |      |  |            |        | 
|----------------------------- |  | ---------------------------- | ------ | ---- |  | ---------- | ------ | 
|                              |  | Three months ended March 31,
|                              |  |                             
|                              |  |                              |        |      |  | (Restated)
|                              |  | 2003                         |        | 2002
|                              |  |                              |        |     
|Total operating revenue       |  | $                            | 6,873  |      |  | $          | 5,845  | 
|Total operating expense       |  |                              | 6,038  |      |  |            | 4,952  | 
|                              |  |                              |        |      |  |            |        | 
|Operating income (loss)       |  | $                            | 835    |      |  | $          | 893    | 
|                              |  |                              |        |      |  |            |        | 
|                              |  |                              |        |      |  |            |        | 
|Depreciation and amortization |  | $                            | 363    |      |  | $          | 200    | 
|Capital expenditures          |  |                              | 59     |      |  |            | 902    | 
|Total assets                  |  |                              | 30,722 |      |  |            | 28,888 | 
|                              |  |                              |        |      |  |            |        | 
|Ending post-pay subscribers   |  |                              | 33,984 |      |  |            | 31,425 | 



| |  | Digital Wireless operating revenue for the three months ended March
31, 2003 grew $1.0 million or 17.6% as compared to the three months
ended March 31, 2002. Of this increase, $0.6 million related to
recurring monthly billing revenue as the Company continued its
post-pay wireless subscriber growth in 2003 by adding over 2,500 net
subscribers, an increase of 8.1%. Also contributing to our
increase in revenue during 2003 was higher settlement revenue of
$0.4 million related to a 24% increase in the minutes of use on our
wireless network for the three months ended March 31, 2003 compared
to three months ended March 31, 2002.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Operating expense increased 21.9% in 2003 to $6.0 million. The
increase in operating expense was due to the addition of customers,
the increase in minutes on our network, the opening of two new
retail outlets and increased marketing expenditures.                                                                                                                                                                                                                                                                                                                                                                                               

18



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##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

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



| |  | Internet and Data Services(in thousands except lines)
| |  | -----------------------------------------------------

|                              |  |                              |        |      |  |            |        |  
|----------------------------- |  | ---------------------------- | ------ | ---- |  | ---------- | ------ | -
|                              |  | Three months ended March 31,
|                              |  |                             
|                              |  |                              |        |      |  | (Restated)
|                              |  | 2003                         |        | 2002
|                              |  |                              |        |     
|Total operating revenue       |  | $                            | 2,508  |      |  | $          | 2,342  |  
|Total operating expense       |  |                              | 2,867  |      |  |            | 3,221  |  
|                              |  |                              |        |      |  |            |        |  
|Operating income (loss)       |  | $                            | (359   | )    |  | $          | (878   | )
|                              |  |                              |        |      |  |            |        |  
|                              |  |                              |        |      |  |            |        |  
|Depreciation and amortization |  | $                            | 471    |      |  | $          | 443    |  
|Capital expenditures          |  |                              | 838    |      |  |            | 371    |  
|Total assets                  |  |                              | 15,043 |      |  |            | 15,395 |  
|                              |  |                              |        |      |  |            |        |  
|Ending DSL lines              |  |                              | 7,755  |      |  |            | 3,897  |  
|Ending dial-up accounts       |  |                              | 12,263 |      |  |            | 13,970 |  
|Ending high-speed accounts    |  |                              | 580    |      |  |            | 607    |  



| |  | IDS operating revenue for the three months ended March 31, 2003,
grew 7.1% to $2.5 million. This $0.2 million increase in revenue
was attributable to a near doubling of digital subscriber line (DSL)
revenue to $0.9 million partially offset by a decrease in dial-up,
web development and web hosting revenue as CTC Internet Services
converted many dial-up customers to DSL and downsized its web
development department.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | IDS operating expense was $2.9 million for the three months ended
March 31, 2003, an 11.0% decrease compared to the three months ended
March 31, 2002. This decrease relates to the reduction in our web
development services, the increased focus on product margins,
somewhat offset by costs associated with an increasing DSL customer
base.                                                                                
|
| |  | DSL customers nearly doubled for the three months ended March 31,
2003 as compared to three months ended March 31, 2002 bringing total
DSL lines in service to 7,755 at Mach 31, 2003. This represents a
penetration rate of 6.1% of ILEC access lines and 8.3% of Greenfield
access lines.                                                                                                                                     
|
| |  | Other Business Units(in thousands)                                                                                                                                                                                                                                                                                                                                                                                              

|                              |  |                              |        |      |  |            |        |  
|----------------------------- |  | ---------------------------- | ------ | ---- |  | ---------- | ------ | -
|                              |  | Three months ended March 31,
|                              |  |                             
|                              |  |                              |        |      |  | (Restated)
|                              |  | 2003                         |        | 2002
|                              |  |                              |        |     
|Total operating expense       |  | $                            | 1,170  |      |  | $          | 247    |  
|                              |  |                              |        |      |  |            |        |  
|Operating income (loss)       |  | $                            | (1,170 | )    |  | $          | (247   | )
|                              |  |                              |        |      |  |            |        |  
|                              |  |                              |        |      |  |            |        |  
|Depreciation and amortization |  | $                            | 331    |      |  | $          | 6      |  
|Capital expenditures          |  |                              | 169    |      |  |            | 5,255  |  
|Total assets                  |  |                              | 84,801 |      |  |            | 49,962 |  



| |  | Operating expense for the other units increased $0.9 million for the
three months ended March 31, 2003. This increase was primarily
related to a $0.3 million increase in depreciation and amortization
due to the completion of our corporate headquarters and several
other large projects and the inclusion of WONC in our consolidated
results ($0.2 million) after our purchase of majority ownership in
the spring of 2002.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Capital expenditures of $5.3 million in the first quarter of 2002
primarily include expenditures related to the completion of the
Companys new corporate center.                                                                                                                                                                                                                                                                

19



---



##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

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



| |  | Other Income                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Other income (expense) for the three months ended March 31, 2003
decreased $1.9 million when compared to the three months ended March
31, 2002. This decrease relates to a $2.4 million reduction in
gains on sales of investments and a $0.3 million increase in
interest expense partially offset by a $0.5 million decrease in
impairment charges on investments and an increase in equity in
income of affiliates of $0.4 million.

Liquidity and Capital
Resources



| |  | Net cash provided by operating
activities
Cash provided by operating activities increased $6.0 million to
$10.0 million for the three months ended March 31, 2003. The
increase primarily related to more income generated from higher
margins in operating activities rather than from gain on sales of
securities as well as positive working capital changes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Net cash used in investing
activities
Cash used in investing activities decreased to $5.0 million during
the three months ended March 31, 2003 compared with $8.5 million for
the three months ended March 31, 2002. Capital expenditures were
lower during the three months ended March 31, 2003 and proceeds from
securities sales were down significantly in the three months ended
March 31, 2003 compared with the three months ended March 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Net cash used in financing
activities
Net cash used in financing activities was $1.2 million during the
three months ended March 31, 2003 compared with cash provided by
financing activities of $2.8 million during the three months ended
March 31, 2002. Dividends were the primary use of cash for
financing activities in the first three months of 2003 while
proceeds from credit facilities of $4.5 million offset the dividends
and stock repurchases in the first three months of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | At March 31, 2003, the fair market value of the Companys marketable
investment securities was $6.4 million, all of which could be
pledged to secure additional borrowing, or sold, if needed for
liquidity purposes. The Company has a $90.0 million revolving five
year line of credit with interest at three month LIBOR plus a spread
based on various financial ratios, currently 1.50%. The interest
rate on March 31, 2003 was 2.79%. The credit facility provides for
quarterly payments of interest until maturity on March 31, 2006. As
of March 31, 2003, $60.0 million was outstanding under the revolving
credit agreement. The Company also has a 7.32% fixed rate $50.0
million term loan that matures on December 31, 2014. All $50.0
million was outstanding as of March 31, 2003. The Company also has
an additional line of credit for $10.0 million at one month LIBOR
plus 1.25%. As of March 31, 2003, the Company had no amounts
outstanding under this credit line.
|
| |  | As mentioned in Note 8, West Corporation purchased the stock of ITC
Holding Company, Inc. on May 9, 2003. The Company had a 4.4% equity
interest in ITC. The Company received a distribution of
$13.4 million in cash plus stock in a newly formed
company.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | The following table discloses aggregate information about our
contractual obligations and the periods in which payments are due
(in thousands):                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                         |                  |   |         |         |                   |   |                      |       |      |   |         |        |         |   |          |        |  |   |        |        | 
|------------------------ | ---------------- | - | ------- | ------- | ----------------- | - | -------------------- | ----- | ---- | - | ------- | ------ | ------- | - | -------- | ------ |  | - | ------ | ------ | 
|                         |                  |   |         |         |                   |   | Payments due by year
|                         |                  |   |         |         |                   |   |                     
|                         |                  |   |         |         |                   |   |                      |       |      |   | 2004 to |        | 2006 to |   | 2008 and
|                         |                  |   | Total   |         | Remainder of 2003 |   | 2005                 |       | 2007 |   | after  
|                         |                  |   |         |         |                   |   |                      |       |      |   |        
|Contractual obligations: |                  |   |         |         |                   |   |                      |       |      |   |         |        |         |   |          |        |  |   |        |       
|                         | Long-term debt   |   | $       | 127,697 |                   |   | $                    |      |      |   | $       | 17,697 |         |   | $        | 60,000 |  |   | $      | 50,000 | 
|                         | Operating leases |   |         | 5,935   |                   |   |                      | 1,653 |      |   |         | 3,458  |         |   |          | 777    |  |   |        | 47     | 
|                         | Capital leases   |   |         | 94      |                   |   |                      | 71    |      |   |         | 23     |         |   |          |       |  |   |        |       | 
|                         |                  |   |         |         |                   |   |                      |       |      |   |         |        |         |   |          |        |  |   |        |       
|                         |                  | $ | 133,726 |         |                   | $ | 1,724                |       |      | $ | 21,178  |        |         | $ | 60,777   |        |  | $ | 50,047 |       
|                         |                  |   |         |         |                   |   |                      |       |      |   |         |        |         |   |          |        |  |   |        |       

20



---



##### 



CT COMMUNICATIONS, INC. AND SUBSIDIARIES

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



| |  | As discussed in Note 8, WONC executed an agreement that results in
the cancellation of a $17.7 million promissory note payable to
Wireless One. The cancellation of the promissory note will occur in
the second quarter of 2003.                                                                                                            
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company anticipates that it has adequate resources to meet its
currently foreseeable obligations and capital requirements
associated with continued growth in the CLEC, Greenfield, Wireless
and Internet and Data Service units, as well as its operations,
payments associated with long-term debt and investments as
summarized above.

Cautionary Note Regarding
Forward-Looking Statements



| |  | The foregoing discussion contains forward-looking statements, as
defined in Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934, that are based on the
beliefs of management, as well as assumptions made by, and
information currently available to, management. Management has based
these forward-looking statements on its current expectations and
projections about future events and trends affecting the financial
condition and operations of the Companys business. These
forward-looking statements are subject to certain risks,
uncertainties, and assumptions about us that could cause actual
results to differ materially from those reflected in the
forward-looking statements.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Factors that may cause actual results to differ materially from
these forward-looking statements include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        



| |  |  | our ability to respond effectively to the issues
surrounding the industry caused by state and federal
legislation and regulations,                                                              
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the impact of economic conditions related to financial
performance of customers, business partners, competitors and
peers within the telecommunications industry,                               
|
| |  |  | our ability to recover the substantial costs incurred
over the past few years in connection with our expansion into
new businesses,                                                             
|
| |  |  | our ability to attract and retain key personnel,                                                                                                                                                
|
| |  |  | our ability to retain our existing customer base against
wireless competition and cable telephony in all areas of the
business including local and long distance and internet and
data services,
|
| |  |  | our ability to control pricing and product offerings in a highly competitive industry,                                                                                                          
|
| |  |  | the performance of our investments,                                                                                                                                                             
|
| |  |  | our ability to effectively manage rapid changes in
technology and control capital expenditures related to those
technologies and                                                                
|
| |  |  | the impact of economic and political events on the
Companys business, operating regions and customers, including
terrorist attacks.                                                            



| |  | In some cases, these forward-looking statements can be identified by
the use of words such as may, will, should, expect,
intend, plan, anticipate, believe, estimate, predict,
project or potential or the negative of these words or other
comparable words.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In making forward-looking statements, the Company claims the
protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995.
The Company undertakes no obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Readers are also directed to consider
the risks, uncertainties and other factors discussed in documents
filed by us with the Securities and Exchange Commission, including
those matters summarized under the caption Risk Factors in the
Companys Annual Report on Form 10-K for the year ended December 31,
2002. All forward-looking statements should be viewed with caution.

21



---



##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk



| |  | The Company has a $90.0 million revolving five year line of credit
with interest at three month LIBOR plus a spread that is currently
1.50%, based on various financial ratios. The interest rate on
March 31, 2003 was 2.79%. The credit facility provides for
quarterly payments of interest until maturity on March 31, 2006. As
of March 31, 2003, $60.0 million was outstanding under the revolving
credit agreement. The Company also has a 7.32% fixed rate $50.0
million term loan that matures on December 31, 2014. All $50.0
million was outstanding as of March 31, 2003. In addition, the
Company has another line of credit for $10.0 million at one month
LIBOR plus 1.25%. As of March 31, 2003, the Company had no amounts
outstanding under this credit line.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company has a $17.7 million note payable to Wireless One that
bears interest at 9% annually with principal payments due over the
10 year period ending March 2012. A $7.0 million principal payment
was due by March 2003 (which payment may be deferred until March
2005 with the payment of accrued interest) and the remainder payable
in equal annual installments beginning in March 2008. As discussed
in Note 8, the Company delivered a Split-Up Notice to Wireless
One. In April 2003, the Company entered an agreement with Wireless
One that will result in the cancellation of a $17.7 million
promissory note to Wireless One. The cancellation of the promissory
note will occur in the second quarter of 2003.                                            
|
| |  | The Company has three interest rate swap transactions to fix $10.0
million, $5.0 million and $5.0 million of the amounts outstanding
under the $90.0 million revolving line of credit at rates of 5.9%,
4.53%, and 3.81%, respectively, plus a spread. The fair value of
each swap as of March 31, 2003 was ($469,790), ($372,917), and
($204,540), respectively. The interest rate swaps are intended to
protect the Company against an upward movement in interest rates,
but subject the Company to above market interest costs if interest
rates decline.                                                                                                                                                                                                                  
|
| |  | Management believes that reasonably foreseeable movements in
interest rates will not have a material adverse effect on the
Companys financial condition or operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Item 4. Controls and Procedures



| |  | The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed by the
Company in the reports it files under the Securities Exchange Act of
1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commissions rules
and forms. These disclosure controls and procedures are designed to
insure that appropriate information is accumulated and communicated
to the Companys management, including its chief executive officer
and chief financial officer, as appropriate to allow for timely
decisions regarding disclosure.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Within 90 days of the filing date of this report, the Company
carried out an evaluation, under the supervision and with the
participation of the Companys management, including the Companys
chief executive officer and chief financial officer, of the
effectiveness of the design and operation of the Companys
disclosure controls and procedures as required by SEC rules. The
Companys management, including the chief executive officer and
chief financial officer, does not expect that our disclosure
controls or our internal controls will prevent all error and all
fraud. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a
control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered
relative to their costs. Some inherent limitations in all control
systems include the realities that (i) judgments in decision-making
can be faulty; (ii) breakdowns can occur because of simple error or
mistake; (iii) controls can be circumvented by the individual acts
of some persons, by collusion of two or more people, or by
management override of the control; and (iv) the design of any
system of controls is based in part upon certain assumptions about
the likelihood of future events and there can be no assurance that
any design will succeed in achieving its stated goals under all
potential future conditions. Because of the inherent limitations in
a cost-effective control system, misstatements due to error or fraud
may occur and not be detected. Also, the Company has investments
in certain unconsolidated entities, including Palmetto MobileNet,
L.P. As the Company neither controls nor manages these entities,
its disclosure controls and procedures with respect to these
entities are necessarily substantially more limited than those it
maintains with respect to its consolidated subsidiaries.

22



---



##### 





| |  | We presented the results of our most recent evaluation to our
independent auditors, KPMG LLP, and the Audit Committee of the Board
of Directors. Based upon the evaluation, the Companys chief
executive officer and chief financial officer concluded that the
Companys disclosure controls and procedures are effective in all
material respects in timely alerting them to material information
relating to the Company, including its consolidated subsidiaries,
required to be included in the Companys Exchange Act reports.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | While performing a review of the Companys disclosure controls and
procedures during the fourth quarter of 2002, a number of areas were
identified in which the Companys internal controls could be
strengthened. In that regard, the Company has taken the following
steps with regard to its internal controls:                                                                                                                                                                                                                   



| |  |  | reviewed the experience and technical accounting
knowledge of certain key accounting personnel with regard to
their responsibilities and has made certain changes considered
appropriate by the Company considers appropriate; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | direct that steps be taken to ensure that certain
policies, objectives, procedures, roles and responsibilities
are well defined, understood and followed.                                                                         



| |  | The Company initiated these improvements during the fourth quarter
of 2002. The Company will continue to evaluate the effectiveness of
its actions as well as the Companys overall disclosure controls and
procedures and internal controls and may take further actions as
appropriate.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In the course of the preparation of its financial statement for
2002, the Company identified accounting errors in estimating certain
revenues and expenses in prior periods. Specifically, the Company
determined that estimates for certain access revenues and network
expenses, as well as several settlement processes with other
telephone companies, were incorrect. To specifically address these
errors, the Company has made appropriate modifications to refine its
process of estimating certain revenues and expenses for future
reporting periods. On February 25, 2003 we filed a current report
on Form 8-K, disclosing our intention to present restated financial
information for the fiscal years ended December 31, 2000 and
December 31, 2001 in the Annual Report on Form 10-K for the year
ended December 31, 2002. In addition, we have restated certain
previously reported quarterly results of operations, selected
financial data and segment data presented in the Form 10-K for the
year ended December 31, 2002.
|
| |  | Since the date the Company carried out its evaluation, there have
been no significant changes in the Companys internal controls or in
other factors which could significantly affect internal controls,
other than the Companys plans to make the changes discussed above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

PART II. OTHER INFORMATION

Item 1. Legal Proceedings



| |  | None
| |  | ----

Item 2. Changes in Securities and Use of Proceeds



| |  | None
| |  | ----

Item 3. Defaults Upon Senior Securities



| |  | None
| |  | ----

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



| |  | None
| |  | ----

Item 5. Other Information



| |  | None
| |  | ----

23



---



##### 



Item 6. Exhibits and Reports on Form 8-K



| | (a) |  | Exhibits
| | --- |  | --------

|            |  |                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                            
|            |  |                                                                                                                                   
|10.1        |  | Executive Nonqualified Excess Plan, as amended dated December 1, 2001                                                             
|           
|11          |  | Computation of Earnings per Share                                                                                                 
|           
|99.1        |  | Written statement of Chief Executive
Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002



| | (b) |  | Reports on Form 8-K                                                                                                                                                                                                                                                                                                                                                                  
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |     |  | On April 22, 2003, the Company filed a Current Report on Form
8-K announcing that the Company, through its wholly-owned
subsidiary CT Wireless Cable, Inc. (CTWC), executed an
agreement, dated April 22, 2003 to implement the Split-Up of
Wireless One of North Carolina, L.L.C. (WONC) between
Wireless One, Inc. (Wireless One), a subsidiary of Worldcom,
Inc. and CTWC.

24



---



##### 



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.

|                                       |  | 
|-------------------------------------- |  | 
|CT COMMUNICATIONS, INC.

(Registrant)  |  | 
|                                       |  | 
|/s/ Ronald A. Marino

Ronald A. Marino |  | 
|Vice President Finance and             |  | 
|Chief Accounting Officer               |  | 
|                                       |  | 
|May 14, 2003

Date                     |  | 

(The above signatory has dual responsibility as a duly authorized
officer and chief accounting officer of the Registrant.)

25



---



##### 



CERTIFICATIONS

I, Michael R. Coltrane, President and Chief Executive Officer of CT
Communications, Inc., certify that:

1.     I have reviewed this quarterly report on Form 10-Q of CT
Communications, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|      |  |                                       |  | 
|----- |  | ------------------------------------- |  | 
|Date: |  | May 14, 2003                          |  | 
|      |  |                                       |  | 
|By:   |  | /s/ Michael R. Coltrane               |  | 
|      |  |                                       |  | 
|      |  | Michael R. Coltrane                   |  | 
|      |  | President and Chief Executive Officer |  | 
|      |  | (Principal Executive Officer)         |  | 

26



---



##### 



CERTIFICATIONS

I, James E. Hausman, Senior Vice President and Chief Financial Officer of
CT Communications, Inc., certify that:

1.     I have reviewed this quarterly report on Form 10-Q of CT
Communications, Inc.;

2.     Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrants disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the Evaluation Date); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5.     The registrants other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record,
process, summarize and report financial data and have identified for the
registrants auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls;
and

6.     The registrants other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

|      |  |                                                   |  | 
|----- |  | ------------------------------------------------- |  | 
|Date: |  | May 14, 2003                                      |  | 
|      |  |                                                   |  | 
|By:   |  | /s/ James E. Hausman                              |  | 
|      |  |                                                   |  | 
|      |  | James E. Hausman                                  |  | 
|      |  | Senior Vice President and Chief Financial Officer |  | 
|      |  | (Principal Financial Officer)                     |  | 

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---



##### 



EXHIBIT INDEX

|            |  |                                                                                                                                   
|----------- |  | ----------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description of Exhibit                                                                                                            
|            |  |                                                                                                                                   
|10.1        |  | Executive Nonqualified Excess Plan, as amended dated December 1, 2001                                                             
|            |  |                                                                                                                                   
|11          |  | Computation of Earnings per Share                                                                                                 
|            |  |                                                                                                                                   
|99.1        |  | Written statement of Chief Executive Officer and Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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