<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                   FORM 10-K

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

  For the fiscal year ended December 31, 2001  Commission File Number 0-24064

                          CONESTOGA ENTERPRISES, INC.

            a Pennsylvania Corporation          Employer IRS No.23-2565087

             202 East First Street, Birdsboro, Pennsylvania 19508

       Registrant's telephone number, including area code (610) 582-8711

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

     Common Stock (par value $1.00 per share)

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [_]

Indicate the number of shares outstanding of each of the issuers' classes of
Common Stock, as of the close of the period covered by this report.

  Class                Outstanding at December 31, 2001

  Common Stock, $1.00 par value      8,080,868 shares

The aggregate market value of the voting stock held by non-affiliates on
February 28, 2002, was $244,063,543. The stock of the Company is traded on
NASDAQ National Market (ticker symbol "CENI").

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                                     PART I

ITEM 1.  BUSINESS

    Conestoga Enterprises, Inc. (the Company) is a Pennsylvania corporation that
is doing business as a holding company owning all of the outstanding shares of
the following operating companies:  Conestoga Telephone and Telegraph Company
(Conestoga); Buffalo Valley Telephone Company (Buffalo Valley); CEI Networks,
Inc. (CEI Networks); Conestoga Mobile Systems, Inc. (Conestoga Mobile);
Conestoga Wireless Company (Conestoga Wireless); and Infocore Inc. (Infocore).
The Company's subsidiary, Conestoga, owns a 10.95% interest in the PenTeleData
Limited Partnership I.

    Conestoga and Buffalo Valley are incumbent local exchange carriers (ILEC),
which furnish communication services, mainly local and toll telephone service in
their respective service areas.  Conestoga serves an area of approximately 300
square miles, which includes parts of the counties of Berks, Chester, Lancaster,
and Montgomery, in the Commonwealth of Pennsylvania. Buffalo Valley serves an
area of approximately 275 square miles in Union and Northumberland Counties in
the Commonwealth of Pennsylvania.  Both Companies' services are distributed
through their telephone exchanges and systems of overhead and underground wire
and cables.  Conestoga's and Buffalo Valley's entire telephone systems are
digitally equipped.  The population of Conestoga's service area is estimated to
be 124,600, with an average annual growth rate of .7%.  The population of
Buffalo Valley's service area is estimated to be 39,500, with an average annual
growth rate of .4%.

    Conestoga was incorporated on August 20, 1902 and the original Buffalo
Valley on September 13, 1904.  The Company acquired Buffalo Valley on May 31,
1996.  Both are incorporated under the laws of the Commonwealth of Pennsylvania.
They are subject to the jurisdiction of the Pennsylvania Public Utility
Commission (PUC), which franchised and established their geographical service
areas.  Within their areas, at the present time, they are not in competition
with any other company in providing local exchange telephone service.  They are
subject to the jurisdiction of the Federal Communications Commission (FCC) with
respect to interstate services.

   The Company acquired Infocore on April 30, 1997.  Infocore is a diversified
telecommunications service company founded in 1981, which designs, installs and
maintains telephone and computer systems and resells local exchange and toll
services.

   Conestoga Wireless was formed on March 17, 1995 as a Limited Liability
Company owned 60% by the Company and 40% by Infocore.  The limited liability
company was merged into a corporation by the same name on January 1, 1998, with
the result that the Company now owns 100% of the outstanding shares of Conestoga
Wireless, the corporation.  Conestoga Wireless began providing digital wireless
telecommunication, called PCS services, in Eastern and Central Pennsylvania in
May 1998, pursuant to Federal Communications Commission PCS licenses.  During
the third quarter of 2001 the Company closed on a transaction for various
subsidiaries to sell their telecommunication towers to Mountain Union Telecom
LLC, headquartered in Alexandria, Virginia, for approximately $21 million.  By
the end of 2001 the sale of seventy-two towers had been completed with three
remaining as holdout sites in accordance with the agreement with Mountain Union
Telecom, LLC.

   Northern Communications, Inc. (Northern Communications) was organized in
March 1981 as a non-regulated commercial enterprise operated for the resale of
long distance service.   During 1997, Northern Communication's name was changed
to Conestoga Communications, Inc. (Conestoga Communications) and began
operations as a full-service interexchange carrier.  During 1998, Conestoga
Communications began operations as a Competitive Local Exchange Carrier (CLEC),
operating in adjacent Verizon territories.  Effective on December 31, 2000,
Conestoga Communications was merged into TeleBeam, Inc. (TeleBeam) and the name
of the surviving company was changed to CEI Networks, Inc.

   The Company acquired TeleBeam, Inc. on January 31, 2000.  TeleBeam was
founded in 1992, as a Delaware Corporation with headquarters in State College
Pennsylvania, to develop a broadband fiber network to provide multiple
communication services to customers in central Pennsylvania as a bundled package
through one service delivery venue.  TeleBeam is a diversified
telecommunications service company, which provides its services primarily to
business and multi-dwelling unit residential customers.  TeleBeam provides a
variety of individual and bundled services to its customers, including long
distance voice services, Internet access and high-speed data transport, video
and other enhanced communication services.  Effective on December 31, 2000,
TeleBeam's name was changed to CEI Networks, Inc.

   PenTeleData Limited Partnership I provides data transmission and
interconnection services, including Internet services.

   Conestoga Mobile is engaged in the business of providing radio paging
services in the Eastern and Central Pennsylvania regions.

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ITEM 1.  BUSINESS (Continued)

  The Company's earnings for 2001 were impacted by the following:

      1.  The strong operating results of the Company's telephone wireline
          segment of $23.3 million.
      2.  The operating loss of the Company's telephone wireless segment of $8.1
          million.
      3.  The operating loss of the Company's CLEC and long distance segment of
          $3.8 million.
      4.  The operating loss of the Company's other segment of $239 thousand.
      5.  The Sale of investment securities provided a before tax gain totaling
          $360 thousand.
      6.  Transaction costs of $1.4 million associated the review of the
          Company's strategic options, the agreement and plan of merger with D&E
          Communications, Inc. and the terminated transaction with NTELOS.
      7.  The $10.0 million termination fee to NTELOS to terminate that
          transaction.

    Percentages of the Company's consolidated operating revenue in telephone
wireline services, wireless communications, competitive local exchange and long
distance services and other telecommunications revenues are shown on the
following table:

                              2001      2000      1999      1998      1997
                              --------------------------------------------

Telephone Wireline Services    57%       59%       59%       65%       82%
Wireless Communications
   Services                     8%        5%        4%        2%        1%

Competitive Local Exchange
 and Long Distance Services     25%       26%       26%      23%        9%
Other Telecommunications
 Revenues                       10%       10%       11%      10%        8%

                               100%      100%      100%     100%      100%

       The telephone wireline services, which are regulated by the Pennsylvania
Public Utility Commission and the Federal Communications Commission, contribute
a greater percentage to net income than the more competitive wireless,
competitive local exchange and long distance services and other
telecommunications revenues.

       On December 31, 2001, the Company had 84,899 telephone wireline access
lines in service, of which 24% served business customers.  The Company also had
18,807 competitive local exchange (CLEC) lines in service, 19,271 PCS wireless
communications subscribers, and 3,184 video subscribers.

       On December 31, 2001 Conestoga had a total of 161 employees, of which 98
were covered by one collective bargaining agreement.  Buffalo Valley had a total
of 54 employees, Infocore had a total of 54 employees, Conestoga Wireless had a
total of 47, and CEI Networks had a total of 72, none of which are covered by a
bargaining agreement.

Financial Information about Industry Segments

       Financial information about the Company and its subsidiaries is contained
in the consolidated financial statements included herein.  The Company has
adopted Statement of Financial Accounting Standards No. 131 "Disclosures about
Segments of an Enterprise and Related Information" (SFAS 131).  The Company's
reportable segments are strategic business units that offer different services,
require different technology and marketing strategies and are managed
separately.  The Company has three reportable segments: (i) telephone,
traditional telephone services, (ii) wireless, paging and personal
communications services (PCS), and (iii) CLEC and long distance, competitive
local exchange and long distance services.

                                       3
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ITEM 2.  PROPERTIES

       Conestoga, Buffalo Valley, Conestoga Wireless, CEI Networks and Conestoga
Mobile are engaged in the business of furnishing communication service.  Their
properties do not lend themselves to description by character and location of
principal unit because their plant is widely distributed in their service
territories.

       As of December 31, 2001, investment in telephone plant in service by
Conestoga and Buffalo Valley consisted of the following categories and
approximate percentages:

       A.   Digital Switching equipment: 34%;

       B.   Land and buildings (occupied principally by digital switching
           equipment): 4%;

       C.   Connecting lines not on subscribers' premises (a majority of which
           are on or under public highways, streets, and alleys, and the
           remainder on or under private property): 56%;

       D.   General purpose computers: 2%;

       E.   Motor vehicles, other work equipment and furniture and office
           equipment: 4%.

       As of December 31, 2001, investment in plant in service by Conestoga
Wireless, CEI Networks, Infocore and Conestoga Mobile consisted of the following
categories and approximate percentages:

       A.    Land, Buildings and Towers: 7%;

       B.    Transmitters and terminal equipment: 44%;

       C.    Plant: 14%;

       D.    Computers and other plant: 6%;

       E.    Digital Switching equipment: 29%;

     Conestoga and Buffalo Valley own most of their occupied buildings as well
as most of the land on which the buildings are located.  Several of the remote
switching center buildings of Conestoga and Buffalo Valley are located on leased
properties.  Conestoga Wireless primarily leases space for its antennae on
towers of facilities owned by others.  Conestoga, Buffalo Valley, CEI Networks
and Conestoga Wireless are leasing some office space for corporate purposes.

     Infocore has fixed assets consisting of vehicles and furniture and
fixtures.  Infocore leases office space for its operations.

     Standard practices prevailing in the telephone industry are followed by
both Conestoga and Buffalo Valley in the construction and maintenance of their
plant and facilities. Both consider their plant and facilities, as a whole, to
be in sound physical and operating condition. Modernization of plant and
facilities is very important in the telecommunications industry. Conestoga and
Buffalo Valley together added 32.9 miles of fiber optic cable during 2001 and at
the end of 2001 had 505 miles of fiber optic cable in service. CEI Networks
installed 49.5 miles of fiber optic cable in 2001. Software additions to the
companies' digital switches are added each year in order to fulfill the demand
for enhanced service through the digital network.

ITEM 3.  LEGAL PROCEEDINGS

     As of December 31, 2001, there was no litigation that was material, as
defined in Regulation S-K Item 103, pending against the Company and its
subsidiaries.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         There was nothing submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.

                                       4
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                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

   (a)  the Company's Common Stock is trading on the NASDAQ National Market
under the Ticker Symbol "CENI".  The high and low sales prices for each quarter
of 2001 and 2000 are listed below.

                   2001           High     Low
                   ----           ----     ---
                1st Quarter     $17.625  $13.375
                2nd Quarter     $30.190  $14.500
                3rd Quarter     $38.750  $18.850
                4th Quarter     $32.300  $22.070

                   2000           High     Low
                   ----           ----     ---
                1st Quarter     $25.000  $16.500
                2nd Quarter     $22.000  $16.000
                3rd Quarter     $21.000  $17.625
                4th Quarter     $19.625  $15.500

        (b)  Approximate Number of Equity Security Holders.

                                 Approximate Number of
                                 Record Holders (as of
        Title of Class             December 31, 2001)
        --------------             ------------------

        Common Stock                    1,523 (1)

        Preferred Stock                    40 (1)

   (1)  Included in the number of stockholders of record are shares held in
"nominee" or "street" name.

    (c)  Dividends

         Payments of common stock dividends will be within the discretion of the
Company's Board of Directors and will depend on, among other factors, earnings,
capital requirements, restrictive debt covenants, and the operating and
financial condition of the Company.  During the years 2000 and 2001, the total
cash dividend paid each year by the Company was $.84.  Dividends were paid
quarterly throughout the years.

         Under the most restrictive covenants of the Company's debt agreements,
the Company, as of December 31, 2001, is not permitted to make any further
dividend distributions until the Company generates approximately $14.0 million
of consolidated net income as defined in the debt agreements. The Company has
received a temporary waiver of this covenant permitting the Company to pay a
dividend in the first quarter of 2002. The temporary waiver expires June 30,
2002, or earlier under certain conditions. The temporary waiver does not
authorize dividends in the second quarter of 2002 and thereafter.

         During the second quarter of 1996 the Company issued Series A
Convertible Preferred Stock. Cumulative dividends of $3.42 per share per annum
are paid semi-annually. During 2000 and 2001, the Company paid annual cash
dividends of $3.42 per share on the Series A Convertible Preferred Stock.

         The Company mailed notice of redemption of its convertible preferred
stock to its preferred shareholders on January 7, 2002. The redemption date was
February 6, 2002. The preferred shareholders had the option of receiving a cash
redemption price per share of $66.94, including accumulated dividends, or
converting each preferred share into 2.83 shares of the Company's common stock.

                                       5
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ITEM 6.  SELECTED FINANCIAL DATA


                                (in thousands, except shares and per share data)
                                    2001      2000     1999     1998      1997
                                  --------  -------- -------- --------  --------

Selected Income Statement Data:

Operating Revenue                 $ 92,822  $ 86,432 $ 86,131 $ 76,481  $ 59,306
Net Income (Loss)                   (8,473)    3,114    2,440   10,682     9,476
Basic Earnings (Loss)
 Per Common Share                   ($1.12) $   0.33 $   0.24 $   1.32  $   1.18
Diluted Earnings (Loss)
 Per Common Share                   ($1.12) $   0.33 $   0.24 $   1.31  $   1.18
Cash Dividends declared
per Common Share                  $   0.84  $   0.84 $  0.833 $  0.814  $  0.806

Selected Balance Sheet Data:

Net Plant                         $111,014  $103,192 $ 96,674 $ 92,410  $ 72,699
Total Assets                       178,368   182,370  168,133  169,897   133,062
Long-term Debt                      37,724    71,339   50,616   53,637    23,255
Current Maturities
 Of Long-term Debt                  33,615     4,770    4,982    3,633     3,040

Redeemable Preferred
      Stock                          4,707     9,184   10,191   11,719    12,780
Stockholders' Equity                62,429    72,462   77,016   77,938    73,801

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Overview

  In early 2001 the Company determined to explore its strategic alternatives,
including remaining independent, selling one or more of its operations or
selling the entire company.  As a result of that process, in November 2001 the
Company entered into an agreement and plan of merger with D & E Communications,
Inc. (D&E) of Ephrata, Pennsylvania, pursuant to which the Company will merge
with a subsidiary of D&E and all of the outstanding common shares of the Company
will be exchanged for cash and/or stock of D&E.  In order to enter into the
agreement with D&E, the Company terminated an agreement and plan of merger with
NTELOS, Inc. (NTELOS) dated July 24, 2001, on the grounds that, under the terms
of the NTELOS agreement, the D&E transaction constituted a "Superior Competing
Transaction" to the NTELOS transaction.  The Company paid NTELOS a termination
fee of $10.0 million in December 2001 to terminate the NTELOS transaction.  The
merger with D&E is contingent upon regulatory and shareholder approval and is
anticipated to close in the second quarter 2002.

     During the second quarter of 2001 the Company also announced that it had
entered into an asset sale and lease-back agreement with Mountain Union Telecom,
LLC, to sell the communications towers, located throughout Eastern and Central
Pennsylvania, to Mountain Union Telecom LLC and lease-back space on the towers
for its antennae.

     The Company continued on its plan of becoming a full service integrated
communications provider in 2001 by growing its competitive local exchange (CLEC)
business and its wireless personal communications services (PCS), and focusing
on offering high speed data DSL service throughout its local exchange telephone
companies (LEC) service territories.

      Operating Revenue increased from $86.432 million in 2000 to $92.822
million in 2001, an increase of 7.4%. The telephone wireline service revenues
increased 4% in 2001 when compared with 2000, mostly in local service revenues,
due to more access lines in service and to increased DSL service revenue, and in
network access from greater inter-lata pooling settlements.  Wireless revenue
increased 64% in 2001 when compared with 2000, due to continued expansion of the
wireless

                                       6
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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)

customer base.  CLEC and long distance revenue was 4% greater in 2001 than in
2000 due to substantial increase in the CLEC customer base.  Long distance
revenues were 6% greater in 2000 mostly due to price competition.  Other
telecommunications revenues increased 11% due to strong equipment sales in 2001.

     The operating loss for 2001 of $834 thousand compared with operating income
in 2000 of $8.981 million which decline was a direct result of the merger and
acquisition costs incurred in 2001.  Excluding those acquisition costs,
operating income for 2001 would have been $10.567 million, an increase of 8%
over the previous year, provided mostly by improved operating results from the
telephone wireline businesses, the wireless business and the equipment sales
business.  In 2001, an increase in the operating loss of the CLEC and long
distance business was experienced due to the expansion of the CLEC business and
the very price competitive nature of the long distance business.

     The net loss in 2001 of $8.473 million resulted from the above-mentioned
merger costs, but did include a pre tax gain from the sale of marketable
securities of $360 thousand.  The net income for 2000 of $3.114 million included
acquisition costs from the TeleBeam merger of $845 thousand and included a
before tax gain from the sale of marketable securities of $2.1 million.  Net
income not including the merger costs in 2001 would have been $2.928 million.

     The continued strong operating performance of the Company's local networks
and related markets provides the Company with the financial resources to pursue
its strategic plan to become a fully integrated communications provider.

     The Company's subscriber and access line data as of December 31, 2001 and
December 31, 2000 is as follows:


                                       December 31    December 31
                                          2001           2000         Change
                                         ------         ------        ------

     Local Exchange Lines (LEC)          84,899         82,844          +  3%
     Competitive Local
           Exchange Lines (CLEC)         18,807         10,928          + 72%

     Wireless PCS Subscribers            19,271         15,405          + 25%

     Long Distance Subscribers           40,665         36,754          + 11%

     Paging Lines                         5,416          5,904          -  8%

     DSL Subscribers                      1,536            567          +171%

     Cable Modem Subscribers                936            350          +167%

     Video Subscribers                    3,184          2,561          + 24%

Business Segments:

      The Company's reportable segments are strategic business units that offer
different services.  They are managed separately because each business unit
requires different technology and market strategies.  The reportable segments
are: Telephone Wireline, which is traditional telephone services provided by
Conestoga and Buffalo Valley; Telephone Wireless, which is paging and Personal
Communications Services (PCS) provided by Conestoga Wireless and Conestoga
Mobile; and CLEC and Long Distance, which is competitive local and long distance
services provided by CEI Networks.  The "Other" column is primarily the sale of
communication and security monitoring equipment and communications consulting
services provided by Infocore.

      The accounting policies of the segments are the same as those described in
the summary of accounting policies.  The Company evaluates performance based on
profit or loss from operations before corporate allocations, interest, income
taxes and non-recurring gains and losses. Transactions occurring between
segments are recorded on the same basis as transactions with third parties.

                                       7
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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)

REVENUES
Operating Revenues:
                              Increase/(Decrease)
                              (in thousands)

December 31, 2001 compared to December 31, 2000

Telephone Wireline Revenues               $1,528    3.0%
Wireless Revenues                          2,985   63.7
CLEC and Long Distance                       931    4.2
Other Revenues                               946   11.0

         Total                             6,390    7.4

December 31, 2000 compared to December 31, 1999

Telephone Wireline Revenues               $  (66)  (0.1%)
Wireless Revenues                          1,752   59.7
CLEC and Long Distance                      (836)  (3.7)
Other Revenues                              (549)  (6.0)

         Total                               301    0.3

Telephone Wireline Revenues

     Conestoga and Buffalo Valley, the local telephone companies, generate
revenues by providing local service, network access, intra-lata long distance,
equipment sales and other miscellaneous revenues, which include billing and
collection, directory advertising and rent revenues.  Conestoga and Buffalo
Valley together had a total of 84,899 access lines in service as of December 31,
2001, an increase of 2,055 during 2001.  The rate increases granted to both
local telephone companies was the result of an amendment to the Pennsylvania
Public Utility Act, which provided for streamlined rate regulation referred to
as "Chapter 30".  It had the effect of increasing local service rates and
decreasing intrastate network access rates, creating revenue neutral rate
adjustments for the telephone companies.  Local service revenues for the
telephone companies together increased 10.3% during 2001 when compared with
2000.  It is estimated that during 2001 this rate change increased local service
revenues in excess of $1.0 million.  Local Service Revenues are generated from
the provision of local exchange services, including enhanced services, by the
Company's operating telephone subsidiaries, Conestoga and Buffalo Valley.
Enhanced services include Caller ID, Call Waiting and Return Call.  Local
service revenues are regulated by the Pennsylvania Public Utility Commission
(PUC).

     The Company began offering high-speed digital subscriber line service (DSL)
in 2001 in its franchised territories and its CLEC territories.  DSL could
negatively impact the installation of residential second lines over the next few
years, which was a major source of the growth in access lines over the last few
years.   The Company had 1,536 DSL subscribers as of December 31, 2001.  The
Company anticipates that DSL service will grow rapidly in the next few years.

     The telephone companies' long distance and access revenues for 2001
increased 1.8% mostly due to more favorable settlements on both the inter-lata
and intra-lata jurisdictions.  Access Service Revenues consist of payments from
end-user subscribers and long distance carriers to access the Company's local
exchange facilities to provide long distance services.  Total switched access
minutes of use on the Company's networks increased 4% during 2001.  Intrastate
access rates were reduced in 2001 again as a result of the Pennsylvania PUC
rate-rebalancing order. It is anticipated that access rates will continue to
decline as local competition in the telecommunications industry becomes more
widespread.  This could negatively impact future Access Service Revenues of
Conestoga and Buffalo Valley.  Intralata competition within Pennsylvania has
caused long distance revenue of Conestoga and Buffalo Valley to decrease.

                                       8
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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)

     The telephone companies' equipment revenues, which include customer premise
equipment such as telephones, small business systems and related supplies,
declined 3.2% in 2001 when compared with 2000.  The telephone companies' other
revenues which include directory advertising, billing and collection and rents,
declined 6.6% partially due to less miscellaneous and billing and collection
revenues from the interexchange carriers.  Uncollectibles for the telephone
wireline business for 2001 were 0.3% of the gross telephone wireline revenue.

     The telephone companies realized a combined operating margin of 44% in 2001
on operating revenues of $53 million and operating income of $23 million,
compared with a 40% margin in 2000.

Wireless Revenues

  Wireless communication service revenues are generated by Conestoga Wireless
Company providing wireless Personal Communication Service (PCS), and Conestoga
Mobile System providing paging service.  Conestoga Wireless Company commenced
the commercial operation of its PCS system in May 1998.  As of December 31,
2001, Conestoga Wireless had a total of 19,271 PCS subscribers, an increase of
3,866 when compared with December 31, 2000.  Conestoga Mobile Systems had 5,416
paging lines as of December 31, 2001, a decrease of 488 when compared with
December 31, 2000.  Conestoga Wireless Company generated $7.1 million in
operating revenue during 2001, an increase of 77% over 2000.  Conestoga Mobile
Systems paging service generated $712 thousand in operating revenue during 2001,
which was 9% less than 2000.  The wireless communication services' operating
loss of $8.956 million for 2001 improved 10% over 2000 or $887 thousand.

     The wireless communications service equipment revenues include PCS wireless
phones and wireless pagers and related supplies, and the other revenues are
mostly rent revenues. The Uncollectibles for the wireless business for 2001 were
1.1% of the gross wireless revenue.

CLEC and Long Distance Revenues

     Competitive local exchange (CLEC) revenues and full inter-exchange long
distance service is provided by CEI Networks.  The CLEC revenues are generated
by providing local service, enhanced features and DSL service to customers
located in certain Verizon areas, giving the customer a choice of service
providers.  CEI Networks had a total of 18,807 access lines as of December 31,
2001, adding 7,879 during 2001.  CLEC local service revenue for 2001 was $4.6
million compared with $1.7 million for 2000.

     Long distance is very price competitive, and competitive pricing has caused
long distance revenue to decline.  A large portion of the telephone companies'
long distance subscribers were picked up by CEI Networks, and CEI Networks did
benefit from the rate rebalancing order mentioned above, which reduced
intrastate carrier access rates.  During 2001, the long distance revenues of CEI
Networks decreased 6%, or $1.0 million when compared to 2000.

     Other revenues generated by CEI Networks include pay telephone, video and
prepaid calling cards.  The Uncollectibles for the CLEC and Long Distance
business for 2001 were 1.7% of the gross revenue.

     The Competitive local exchange and long distance services operating loss
for 2001 was $3.8 million.

Other Revenues
The Company's other telecommunications revenues are generated from its equipment
and consulting service company, Infocore.  It includes the sale of
communications equipment and facility management consulting services. The sale
of communication equipment includes telephones, switchboard equipment (PBX),
security monitoring equipment and some other related equipment. Infocore's
equipment sales for 2001 were up 17%, or $1.0 million, when compared with 2000
due to substantially greater activity for customer premise equipment and from
large PBX and security system accounts. Other revenue from Infocore for facility
management, which offers small and mid-size long distance customers bulk
discounted rates otherwise not available to those customers was down 2% from
2000.

                                       9
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ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)

EXPENSES
0perating Expenses:
                              Increase/(Decrease)
                              (in thousands)

December 31, 2001 compared to December 31, 2000

Cost of Services                                $ 3,847      10.5%
Cost of Sales                                      (188)     (3.0)
Depreciation and Amortization                       794       4.7
Merger Costs                                     10,556   1,249.2
Selling, General and Administrative               1,196       7.0

         Total                                   16,205      20.9

December 31, 2000 compared to December 31, 1999

Cost of Services                                $ 1,490       4.2%
Cost of Sales                                      (987)    (13.8)
Depreciation and Amortization                     1,242       8.0
Merger Costs                                        741     712.5
Selling, General and Administrative                (156)     (0.9)

         Total                                    2,330       3.1

  The 20.9% increase in operating expenses in 2001 reflects the termination fee
paid to NTELOS, Inc. for the termination of the merger agreement between NTELOS
and the Company and other merger costs totaling $11.4 million, and increased
cost of operations mostly from the continued expansion of the Company's CLEC and
long distance and wireless PCS businesses. The telephone wireline operating
expenses were 4.0% less in 2001 when compared with 2000.  The wireless
communications operating expenses increased 15.3% in 2001 when compared with
2000, and the CLEC and long distance services' operating expenses were 13.2%
greater.  The other telecommunications operating expenses increased 5.7% in 2001
when compared with 2000.

Cost of Services

  Cost of Services Expense includes outside plant expenses, digital switching
and other network expenses, engineering expenses, and other related
administrative expenses.  The increase in cost of services during 2001 was
caused in large part by the increase in demand for the Company's PCS wireless
business and the CLEC business.  The telephone wireline cost of service expenses
of Conestoga and Buffalo Valley are primarily regulated expenses for network and
outside plant maintenance and increased 2.6%, or $342 thousand, in 2001 when
compared with 2000.  The Company's CLEC cost of services increased 7.9%, or $1.4
million, in 2001 when compared with 2000, while the long distance cost of
operations declined 6.2%, or $181 thousand, mostly due to more favorable rates
charged by the long distance carriers that provide its long distance access.
The Company's wireless communications business expenses increased 32.7%, or $1.6
million, due mostly to increased transport and network operations costs, and the
other telecommunications service costs increased 7.6%, or $367 thousand, in 2001
when compared with 2000.

Cost of Sales

      The Company's cost of sales during 2001 was slightly lower when compared
with 2000.  Infocore's, the Company's sales and equipment provider, cost of
sales increased $137 thousand, or 5%, in 2001 when compared with 2000, while the
telephone company's wireline cost of sales declined $242 thousand, or 12%, and
the wireless communications cost of sales decline $82 thousand, or 5%.

                                       10
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)

Depreciation and Amortization

      Depreciation and amortization expenses include charges from all of the
business segments.  The increase of 4.7% in 2001 when compared with an 8%
increase in 2000 is due to the sale and lease back of the wireless towers in the
second quarter of 2001, thereby reducing depreciation costs.  Depreciation
expense for 2001, computed by the straight-line method, totaled $16.0 million
and equated to a 7.88% effective composite rate, compared with 7.72% for 2000,
and 7.58% for 1999.  As discussed in Note 1 of the consolidated financial
statements, Statement of Financial Accounting Standards No. 142 became effective
January 1, 2002.  As a result, the Company will no longer be amortizing
goodwill: however, subsequent impairment reviews may result in periodic write-
downs of recorded goodwill.  Goodwill amortization expense was $1.295 million,
$1.706 million and $2.287 million for the years 2001, 2000 and 1999,
respectively.

Merger Costs

     When comparing 2001 with 2000, the increase in merger costs is due to the
merger and merger termination costs of $11.4 million related to the proposed
merger of the Company with D&E Communications, Inc., and the required merger
termination fee paid to NTELOS, as mentioned above.  The merger costs in 2000
and 1999 were as a result of the Company's acquisition of TeleBeam.

Selling, General and Administrative

  The Company and all of its subsidiaries incur selling, general and
administrative expenses.  Selling expenses include advertising and marketing.
General and administrative expenses include executive, accounting and finance,
information technology expenses, and taxes other than income taxes.  When
comparing 2001 with 2000, the increase of $1.2 million is mostly from increased
selling, general and administrative costs incurred from the CLEC/LD business,
which increased 29%, mostly in customer acquisition costs and other shared
corporate charges. The telephone wireline business' selling, general and
administrative costs decreased 10%, or $836 thousand, mostly as the result of
allocations of shared corporate charges.

Operating Income (Loss)

     Operating loss for 2001 of $834 thousand, compared to operating income of
$8.981 million in 2000, reflects merger/acquisition costs of $11.4 million in
2001 and $845 thousand in 2000, and improved operating results from the
telephone wireline business operations and the wireless business but declining
results from the CLEC and long distance operations.  Not including the
acquisition costs of both years, operating income would have been $10.6 million
in 2001 and $9.9 million in 2000.  The Company's telephone wireline business
provided operating income of $23.3 million in 2001 compared with operating
income of $20.5 million in 2000.  The continued expansion of the Company's CLEC
and PCS business produced negative operating results in both periods. The CLEC
and long distance business recorded an operating loss of $3.759 million during
2001 compared with an operating loss of $1.578 million in 2000.  The wireless
PCS business incurred an operating loss of $8.069 million during 2001 compared
with an operating loss of $8.956 million for 2000.  The other communication
business incurred an operating loss of $239 thousand during 2001 compared with
an operating loss of $658 thousand in 2000.

Other Income (Expenses), Net

  Other income (expenses), net consist primarily of interest and dividend
income, interest expense, income or losses from limited partnership interests,
and gains from sale of investment securities.  When comparing 2001 with 2000,
there were more securities liquidated in 2000, resulting in a pre tax gain of
$2.118 million compared with $360 thousand pre tax gain in 2001.  Interest
expense during 2001 was $455 thousand greater than interest expense in 2000.

  The Company drew on its two bank lines of credit for interim financing in
2001, and 2000, with balances of $10.0 million and $0.0 million respectively
remaining as of December 31 of each year on its bank lines of credit.

  The Company, through its subsidiary Conestoga, owns a 10.95% limited
partnership interest in PenTeleData, L.P., which provides Internet access, and
for 2001 and 2000 recorded losses of $39 thousand and $339 thousand,
respectively.  There were no capital requirements in 2001 and none are
anticipated.

                                       11
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)

Income Taxes

  Income taxes decreased in 2001 as a result of the decline in the Company's
income (loss) before income taxes.  The federal and state income tax rates over
the period remained unchanged.  The Company's effective tax rate (income tax
expense as a percentage of income (loss) before income taxes) was 49.9%, 51.3%
and 63.9% in 2001, 2000 and 1999, respectively.  The change in the effective tax
rates is due primarily to a valuation allowance on state net operating losses
and the relationship of nondeductible goodwill amortization and acquisition
costs to pretax income (loss).

Net Income (Loss)

      The 2001 net loss of $8.473 million included $11.4 million of merger-
related costs and a $247 thousand after tax gain on the sale of investment
securities.  2000 net income of $3.114 million included merger-related costs of
$845 thousand and a $1.358 million after tax gain on the sale of investment
securities.

     The 2001 net loss and 2000 net income were negatively impacted by the
operating losses of Conestoga Wireless and CEI Networks, and the goodwill
amortization associated with the acquisitions of Buffalo Valley, Infocore, and
TeleBeam's acquisition of NAC.  The goodwill of Infocore was fully amortized in
April 2000.  The Statement of Financial Accounting Standard No. 142 became
effective January 1, 2002 and as a result, the Company will no longer be
amortizing goodwill.  Goodwill amortization expense was $1.295 million and
$1.706 million for years 2001 and 2000 respectively.  The Company anticipates
that net income will be negatively impacted in the near future as a result of
the expenses associated with the continued build-out and development of the
Company's wireless PCS business and CLEC and long distance businesses.

FINANCIAL CONDITION

Liquidity and Capital Commitments

 Years Ended December 31,                2001           2000           1999
                                         ----           ----           ----
 Cash Flows From (Used In):

    Operating activities               $    771      $  18,234      $  20,488

    Investing activities                 (3,578)       (25,577)       (20,076)

    Financing activities                   (569)        10,365         (6,706)

  The Company uses the net cash generated from its operations and from external
financing to fund capital expenditures for network expansion and modernization
and to invest in new businesses.  The Company's sources of funds, primarily from
operations and, to the extent necessary, from readily available external
financing arrangements, are sufficient to meet ongoing operating and investing
requirements.  We expect that presently foreseeable capital requirements,
including CEI Networks' build-out of its CLEC business, along with the expansion
of the PCS business could require additional debt financing in order to maintain
our capital structure and ensure our financial flexibility.

  On December 31, 2001, the Company had commitments totaling $2.2 million,
including commitments to purchase equipment and materials to continue the
upgrade of its telecommunications plant base and to build the PCS and CLEC
networks.  The Company plans to finance its projected capital budget
requirements for 2002, totaling $17.8 million, from internally generated funds.

                                       12
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)

      On December 31, 2001 the Company had the following contractual and
commercial commitments:

<TABLE>
<CAPTION>
                                      Due less than   Due In      Due In      After
                              Total   1 Year          1-3 Years   4-5 Years   5-Years
                              (,000)  (,000)          (,000)      (,000)      (,000)
                              ------  ------          ------     -------      ------
<S>                          <C>      <C>             <C>       <C>          <C>
Operating Lease              $19,349      $ 2,855     $4,254     $ 3,622     $ 8,618

Capital Lease                  5,317          290        580         580       3,867

Long-Term Debt                68,546       33,546          0       7,000      28,000

Purchase Commitments           2,200        2,200          0           0           0

Total Cash Obligations        95,412       38,891      4,834      11,202      40,485

Notes Payable                 10,000       10,000          0           0           0
(Line of Credit)
</TABLE>

Cash Flows From Operating Activities

  Our primary source of funds continues to be cash generated from operations.
Taking into account net income plus the various adjustments for depreciation and
amortization, the cash flows from operating activities in 2001 were $771
thousand.  Cash flow in 2001 was negatively impacted by the $11.4 million merger
related costs.  Although net income for accounting purposes is decreased by the
amortization of the goodwill arising from the acquisitions of Buffalo Valley and
Infocore and the higher depreciation expenses arising from the capital
investment in PCS and CLEC, amortization and depreciation are non-cash expenses
and, consequently, a source of cash that the Company can use for the capital
investments necessary to maintain and upgrade its network and build and develop
PCS and CLEC.

Cash Flows Used in Investing Activities

      Capital expenditures are the Company's primary use of cash resources. The
Company's capital expenditures in 2001 included $11.6 million for the Company's
wireline operations, $4.9 million for the build-out and further development of
its wireless operation and $6.4 million for the build-out of the CLEC
operations.  The investment in the wireline operations was consistent with the
investments made in 2000 and 1999.  The investment in the wireless operation was
$ 8.2 million in 2000 and $6.9 million in 1999.  The investments are made to
support the Company's businesses in order to facilitate the introduction of new
products and services, enhance responsiveness to competitive challenges and
increase the operating efficiency and productivity of its networks.  The
investments in the PCS and CLEC systems by the Company are treated as
investments in new businesses.

      During 2001, the Company received $19.1 million from the sale of some of
its wireless communications towers.   During 2001, the Company received proceeds
totaling $503 thousand from the sale of equity securities.  During 2000, the
Company received proceeds totaling $3.0 million from the sale of equity
securities.

      Additional capital will be needed for the remaining build-out of the PCS
network and the build-out of the CEI Networks' CLEC network.   The continued
build-out of these two networks for 2002 are budgeted to be $6.1 million.
Additional financing could come from internal sources, or issuance of additional
debt, or common stock.

Cash Flows Used in Financing Activities

      As in prior years, dividend payments were a significant use of cash.  In
2001, the Company paid dividends totaling $7.1 million and paid $198 thousand to
redeem preferred stock.

                                       13
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)

      During 2001 the Company used one of its lines of credit to finance the
$10.0 million merger termination fee it paid to NTELOS.  At the end of 2001, the
Company also had unadvanced amounts from two lines of credit totaling $60
million.

      The credit agreements and Senior Notes contain provisions which, among
other things, require maintenance of certain financial ratios and limit the
amount of additional indebtedness the Company may incur.  As of December 31,
2001, the Company was in default of certain of these provisions.  The Company
obtained a temporary waiver on February 25, 2002, whereby the lender waived
compliance by the Company with these provisions with respect to failure to
comply resulting from the payment of the $10.0 million termination fee to Ntelos
and the $1.4 million in transaction costs incurred by the Company with respect
to its review of its strategic alternatives.  The temporary waiver expires June
30, 2002, or earlier under certain conditions, at which time the debt balances
become callable by the lender.  As of December 31, 2001, the balances under this
agreement are classified as current liabilities in the financial statements.  In
the event that the lender does in fact call the loan on June 30, 2002, the
Company has unused lines of credit with another bank to cover this liability.

Equity Investments

      The Company had continued to invest in the future of the
telecommunications industry through the ownership of the publicly traded stock
of other telecommunication companies.  Management viewed this investment as a
source of future liquidity.  During 2000, the Company sold a portion of its
portfolio for $3.0 million, and during 2001 it sold the remaining portion for
$503 thousand.  As of December 31, 2001 there were no equity investments of this
type remaining.

OTHER FACTORS

Proposed Merger

      The Company has entered into an Agreement and Plan of Merger dated
November 21, 2001 with D&E Communications, Inc., which states that the Company
shall be merged into a subsidiary of D&E Communications, Inc., and that the
Company's common stock holders will receive cash and/or common stock of D&E
Communications, Inc. in exchange for the Company's common shares. If the merger
is completed it will result in a change in control of the Company. The Company
anticipates that the merger will close in the second quarter of 2002.

Personal Communication Services (PCS)

      Conestoga Wireless began commercial operations as a provider of wireless
telecommunications services in May, 1998.  By the end of 2001 it had 140 base
stations in service throughout the Reading, Sunbury, Williamsport and State
College areas.  Conestoga Wireless plans to put an additional 10 base stations
into service during 2002, to augment coverage in those markets.

      Conestoga Wireless holds licenses to provide wireless services known as
Personal Communication Services ("PCS") in radio spectrum.  PCS is a wireless
communications service based on lower power and a higher frequency bandwidth
than cellular service.  The Basic Trading Areas in which Conestoga Wireless
holds licenses are Reading, Pottsville, Sunbury, Williamsport, and State
College, Pennsylvania, covering ten counties in Pennsylvania.

      The development of the PCS network and business is subject to the risks
and delays associated with the design and construction of the wireless system
and the commencement of a new business.  After the sale of its communication
towers, the Company has a remaining investment of $38 million as of December 31,
2001. The Company's customer base grew 25% in 2001 with 19,271 subscribers as of
December 31, 2001.  The wireless business generated an operating loss of $8.1
million, and the Company has projected PCS operating losses for the near future.

Competitive Local Exchange Service (CLEC)

      The Company began offering competitive local exchange services, know as
CLEC service, in 1999.  It expanded its CLEC operations significantly when it
purchased TeleBeam, Inc. in January 2000.  During 2001 it invested $6.4 million
in its CLEC operations and as of December 31, 2001 has a total of $25.1 million
invested in CLEC operations.  The CLEC customer base grew 72% in 2001 to 18,807
subscribers as of December 31, 2001, and the long distance subscriber customer
base grew 11%, ending the year at 40,665.  The Company anticipates CLEC related
capital expenditures of $5.0 million in 2002.

                                       14
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)

      The Company had an operating loss of $3.8 million from its CLEC and long
distance operations in 2001.  It anticipates that its operating losses will
continue in the near future

Effects of Substantial Indebtedness and Preferred Stock on Future Operations

      At December 31, 2001, the Company had approximately $68.5 million of long
term debt outstanding, approximately $2.8 million of long term capital leases,
approximately $4.7 million of redeemable preferred stock, and $10.0 million in
short term debt, compared to approximately $62.4 million of common equity.  This
resulted in a ratio of 55% debt and preferred stock to 45% equity.  At December
31, 2000, the ratio was 57% debt and preferred stock to 43% equity.

      Although a higher level of debt and preferred stock is not unusual in the
telecommunications industry, the additional debt and preferred stock may have
important consequences on the Company's future operations, including: (i) the
Company will incur additional interest expense and significant principal
repayment obligations; (ii) the Company's increased leverage may make it more
vulnerable to economic downturns and reduce its flexibility in responding to
changing business and economic conditions; and (iii) payment of dividends on the
Company's common shares is restricted and may continue to be restricted by the
level of financial resources needed to service the Company's additional debt and
preferred stock.

      The Company mailed a notice of redemption of its convertible preferred
stock to all of its preferred shareholders on January 7, 2002.  The effective
date of the redemption was February 6, 2002.  The preferred shareholders had the
option of receiving $66.94 in cash to redeem each share of preferred stock or
converting each preferred share into 2.83 shares of the Company's common stock.

      In the redemption, 15,480 shares of preferred shares were redeemed for a
total of $1.036 million in cash, and 56,934 shares of preferred stock were
converted into 161,227 shares of the Company's common stock.

Regulated Industry:

      Conestoga and Buffalo Valley are both regulated by the Pennsylvania Public
Utility Commission (PUC) and the Federal Communications Commission (FCC).  An
amendment to the Pennsylvania Public Utility Act, passed in 1993, provides for
streamlined rate regulation and a method for determining rates other than the
historic method of rate of return regulation for the state jurisdiction.  This
new regulation, referred to as "Chapter 30", provides a price stability
mechanism in which a telephone company's annual revenues from non-competitive
services may be permitted to change in line with the Gross Domestic Product
Price Index, minus a productivity offset, with no limitation on earnings by the
regulated company.  In order for the Company to avail itself of the procedures
permitted by Chapter 30, Conestoga and Buffalo Valley must commit to providing
universal broadband services by 2015.

      Both companies filed Chapter 30 Plans in July 1998, and approval was
received in January 2001.  The interstate jurisdiction remains subject to rate
of return regulation.

      The telecommunication industry continues to undergo fundamental changes,
which may have a significant impact on financial performance.  The Federal
Telecommunications Act of 1996 creates a regulatory environment that encourages
competition.  As rural companies, Conestoga and Buffalo Valley are exempt from
many of the most onerous aspects of competition unless prospective competitors
can pass a public interest standard and agree to offer service throughout the
telephone companies' territories.  In addition, in March 1998, Conestoga and
Buffalo Valley received approval from the Pennsylvania PUC of a petition that
has significantly strengthened the companies' competitive position relative to
non-facilities based competition.  However, facilities based competition is not
precluded.

Accounting for the Effects of Certain Types of Regulation ("SFAS 71")

      The Company follows the accounting statement "SFAS 71" which recognizes
the economic effect of rate regulation by recording costs and return on
investment as such amounts are recovered through regulatory authorized rates. As
of December 31, 2001, the Company had no regulated assets but had regulated
liabilities totaling $357 thousand.  The Company currently expects to follow the
accounting practices prescribed by SFAS 71 in the foreseeable future, but, if
the Company discontinued this practice, the effect of writing off any regulatory
assets and liabilities would not be material to the Company's operations.

                                       15
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (continued)

Effects of Inflation

      It is the opinion of management that the effects of inflation on
operating revenues and expenses over the past three years have been immaterial.
Management anticipates that this trend will continue in the near future.

Forward-Looking Statements

      Information contained above in this Management's Discussion and Analysis
and elsewhere in this Annual Report with respect to expected financial results
and future events and trends is forward-looking, based on our estimates and
assumptions and is subject to risks and uncertainties.  For those statements, we
claim the protection of the safe harbor for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995.

      The following important factors could affect the future results of our
company and could cause those results to differ materially from those expressed
in the forward-looking statements: (i) changes in economic and market
conditions; (ii) effects of state and federal regulation; and (iii) the impact
of new technologies.  You should not place undue reliance on these forward-
looking statements, which are applicable only as of the date hereof.  We have no
obligation to revise or update these forward-looking statements to reflect
events or circumstances that arise after the date hereof or to reflect the
occurrence of unanticipated events.

ITEM 7A. QUANTITATIVE and QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

      The Company does not invest funds in derivative financial instruments or
other market risk sensitive instruments for any purpose.  Furthermore,
management believes that the market risk of its fixed-rate debt is immaterial to
the Company's financial statement as a whole.

      In December 2001, the Company borrowed $10 million on a line of credit
which carries a floating interest rate.  The Company is subject to interest rate
risk on this short-term debt.  A one percent increase in the interest rate would
result in additional interest expense of $100 thousand per year during the
period the loan is outstanding.

                                       16
<PAGE>

                                    PART II

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA


                         INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
Conestoga Enterprises, Inc.
Birdsboro, Pennsylvania


       We have audited the accompanying consolidated balance sheets of Conestoga
Enterprises, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations, common stockholders' equity and
cash flows for each of the three years in the period ended December 31, 2001.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.


       We conducted our audits in accordance with auditing standards generally
accepted in the United States of America.  Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.


       In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Conestoga
Enterprises, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2001 in conformity with accounting principles
generally accepted in the United States of America.


       Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole.  The financial statement schedule
included in Item 14(a) (2) of Conestoga Enterprises, Inc.'s Form 10-K for each
of the three years in the period ended December 31, 2001 is the responsibility
of Conestoga Enterprises, Inc.'s management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements.  This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.


                                         /s/ BEARD MILLER COMPANY LLP



Reading, Pennsylvania
January 30, 2002, except for Note 7 as to which the date is
      February 25, 2002

                                       17
<PAGE>

CONESTOGA ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
December 31,                                                                                       2001               2000
----------------------------------------------------------------------------------------------------------------------------------
                                        (In Thousands, Except Shares And Per Share Data)
<S>                                                                                            <C>                <C>
       ASSETS

CURRENT ASSETS
  Cash and cash equivalents                                                                    $    2,153         $     5,529
  Accounts receivable, including unbilled revenue, less allowance
     for doubtful accounts 2001 $346; 2000 $747                                                    11,635              10,212
  Inventories, at average cost                                                                      2,426               2,391
  Prepaid taxes                                                                                       729                   -
  Prepaid expenses and other current assets                                                         2,241               2,242
                                                                                               ------------------------------

       Total current assets                                                                        19,184              20,374
                                                                                               ------------------------------

INVESTMENTS AND OTHER ASSETS
  Assets held for sale                                                                                573               9,849
  Cost in excess of net assets of businesses acquired,
     less accumulated amortization 2001 $9,604; 2000 $8,309                                        41,623              43,477
  Prepaid pension costs                                                                             3,029               3,053
  Other                                                                                             2,945               2,425
                                                                                               ------------------------------

                                                                                                   48,170              58,804
                                                                                               ------------------------------

PLANT
  In service                                                                                      213,770             191,463
  Under construction                                                                                6,856              10,148
                                                                                               ------------------------------
                                                                                                  220,626             201,611
  Less accumulated depreciation                                                                   109,612              98,419
                                                                                               ------------------------------

                                                                                                  111,014             103,192





                                                                                               ------------------------------

                                                                                               $  178,368         $   182,370
                                                                                               ==============================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       18
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
December 31,                                                                                      2001                2000
----------------------------------------------------------------------------------------------------------------------------------
                                        (In Thousands, Except Shares And Per Share Data)
<S>                                                                                            <C>               <C>


  LIABILITIES AND COMMON STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current maturities of long-term debt                                                        $    33,546        $       4,705
  Current liability under capital lease                                                                69                   65
  Note payable                                                                                     10,000                    -
  Accounts payable                                                                                  5,513                6,132
  Accrued expenses:
     Payroll and vacation pay                                                                       1,265                1,007
     Taxes                                                                                              -                  895
     Other                                                                                          2,815                4,394
                                                                                              --------------------------------

       Total current liabilities                                                                   53,208               17,198
                                                                                              --------------------------------

DEFERRED REVENUE, from sale of towers                                                               9,936                    -
                                                                                              --------------------------------

LONG-TERM LIABILITIES
  Long-term debt, less current maturities                                                          35,000               68,545
  Liability under capital lease, less current portion                                               2,724                2,794
  Accrued postretirement benefit cost                                                               1,445                1,123
  Other                                                                                             1,999                1,270
                                                                                              --------------------------------

                                                                                                   41,168               73,732
                                                                                              --------------------------------

DEFERRED INCOME TAXES                                                                               6,920                9,794
                                                                                              --------------------------------

COMMITMENTS

REDEEMABLE PREFERRED STOCK, par value $65 per share;
  authorized 900,000 shares; issued and outstanding 2001
  72,414 shares; 2000 141,288 shares                                                                4,707                9,184
                                                                                              --------------------------------

COMMON STOCKHOLDERS' EQUITY
  Common stock, par value $1 per share; authorized
     200,000,000 shares; issued 2001 8,080,868 shares;
     2000 7,897,914 shares                                                                          8,081                7,898
  Additional paid-in capital                                                                       49,123               44,123
  Retained earnings                                                                                 5,225               20,820
  Accumulated other comprehensive income                                                                -                  238
  Less cost of treasury stock 2001 -0- shares; 2000 33,427 shares                                       -                 (617)
                                                                                              --------------------------------

                                                                                                   62,429               72,462
                                                                                              --------------------------------

                                                                                              $   178,368        $     182,370
                                                                                              ================================
</TABLE>

                                       19
<PAGE>

CONESTOGA ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Three Years Ended December 31,                                                      2001          2000          1999
-----------------------------------------------------------------------------------------------------------------------
                                                                                 (In Thousands, Except Per Share Data)
<S>                                                                             <C>           <C>           <C>
Operating revenues:
  Communication services                                                        $    78,646   $    72,948   $    71,413
  Equipment sales                                                                    11,994        11,192        12,552
  Other revenues                                                                      2,182         2,292         2,166
                                                                                ---------------------------------------

                                                                                     92,822        86,432        86,131
                                                                                ---------------------------------------

Operating expenses:
  Cost of services (exclusive of depreciation and amortization below)                40,443        36,596        35,106
  Cost of sales                                                                       5,992         6,180         7,167
  Depreciation and amortization                                                      17,528        16,734        15,492
  Merger costs                                                                       11,401           845           104
  Selling, general and administrative                                                18,292        17,096        17,252
                                                                                ---------------------------------------

                                                                                     93,656        77,451        75,121
                                                                                ---------------------------------------

       Operating income (loss)                                                         (834)        8,981        11,010
                                                                                ---------------------------------------

Other income (expense), net:
  Interest expense                                                                   (5,431)       (4,976)       (4,101)
  Loss from unconsolidated partnership interests                                        (39)         (339)         (350)
  Gain on sale of investments in equity securities                                      360         2,118             -
  Interest and dividend income                                                          271           706           409
  Other, net                                                                             21           (93)         (207)
                                                                                ---------------------------------------

                                                                                     (4,818)       (2,584)       (4,249)
                                                                                ---------------------------------------

       Income (loss) before income taxes                                             (5,652)        6,397         6,761

Income taxes                                                                          2,821         3,283         4,321
                                                                                ---------------------------------------

       Net income (loss)                                                        $    (8,473)  $     3,114   $     2,440
                                                                                =======================================

Basic earnings (loss) per share                                                 $     (1.12)  $      0.33   $      0.24
                                                                                =======================================

Diluted earnings (loss) per share                                               $     (1.12)  $      0.33   $      0.24
                                                                                =======================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       20
<PAGE>

CONESTOGA ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Three Years Ended December 31, 2001, 2000 and 1999
-----------------------------------------------------------------------------------------------------------------------------------


                                                                                                                        Additional
                                                                                             Common Stock                 Paid-In
                                                                                -------------------------------------
                                                                                        Shares            Amount          Capital
                                                                                ---------------------------------------------------
                                                                                  (In Thousands, Except Shares And Per Share Data)
<S>                                                                             <C>              <C>              <C>
Balance, December 31, 1998                                                           7,863,210   $       39,194    $         11,869
 Comprehensive income:
   Net income                                                                                -                -                   -
   Change in net unrealized gains (losses) on securities                                     -                -                   -

     Total comprehensive income

 Reduction in par value from $5 per share to $1 per share                                    -          (31,330)             31,330
 Common stock dividends ($0.83 per share)                                                    -                -                   -
 Preferred stock dividends ($3.42 per share)                                                 -                -                   -
 Common stock issued under stock-based plans and other equity changes                   34,704               34                 688
 Conversion of preferred shares                                                              -                -                 260
                                                                                ---------------------------------------------------

Balance, December 31, 1999                                                           7,897,914            7,898              44,147
 Comprehensive income:
   Net income                                                                                -                -                   -
   Change in net unrealized gains (losses) on securities                                     -                -                   -

     Total comprehensive income

 Common stock dividends ($0.84 per share)                                                    -                -                   -
 Preferred stock dividends ($3.42 per share)                                                 -                -                   -
 Common stock issued under stock-based plans and other equity changes                        -                -                 (24)
                                                                                ---------------------------------------------------

Balance, December 31, 2000                                                           7,897,914            7,898              44,123
 Comprehensive loss:
   Net loss                                                                                  -                -                   -
   Change in net unrealized gains (losses) on securities                                     -                -                   -

     Total comprehensive loss

 Common stock dividends ($0.84 per share)                                                    -                -                   -
 Preferred stock dividends ($3.42 per share)                                                 -                -                   -
 Common stock issued under stock-based plans and other equity changes                    6,763                7               1,086
 Conversion of preferred shares                                                        176,191              176               3,914
                                                                                ---------------------------------------------------

Balance, December 31, 2001                                                           8,080,868   $        8,081    $         49,123
                                                                                ===================================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       21
<PAGE>

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
                   Accumulated
                      Other
    Retained      Comprehensive              Treasury Stock
                                   ----------------------------------
    Earnings         Income            Shares             Amount            Total
-------------------------------------------------------------------------------------
<S>               <C>              <C>                <C>             <C>
$     28,819      $      1,523         187,675        $    (3,467)       $     77,938
                                                                      ---------------

       2,440                 -               -                  -               2,440
           -               144               -                  -                 144
                                                                      ---------------

                                                                                2,584
                                                                      ---------------

           -                 -               -                  -                   -
      (5,876)                -               -                  -              (5,876)
        (560)                -               -                  -                (560)
           -                 -         (47,230)               872               1,594
           -                 -         (58,220)             1,076               1,336
-------------------------------------------------------------------------------------

      24,823             1,667          82,225             (1,519)             77,016
                                                                      ---------------

       3,114                 -               -                  -               3,114
           -            (1,429)              -                  -              (1,429)
                                                                      ---------------

                                                                                1,685
                                                                      ---------------

      (6,581)                -               -                  -              (6,581)
        (536)                -               -                  -                (536)
           -                 -         (48,798)               902                 878
-------------------------------------------------------------------------------------

      20,820               238          33,427               (617)             72,462
                                                                      ---------------

      (8,473)                -               -                  -              (8,473)
           -              (238)              -                  -                (238)
                                                                      ---------------

                                                                               (8,711)
                                                                      ---------------

      (6,698)                -               -                  -              (6,698)
        (424)                -               -                  -                (424)
           -                 -         (23,176)               428               1,521
           -                 -         (10,251)               189               4,279
-------------------------------------------------------------------------------------

$      5,225      $          -               -        $         -        $     62,429
=====================================================================================
</TABLE>

                                       22
<PAGE>

CONESTOGA ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
Three Years Ended December 31,                                               2001         2000         1999
-------------------------------------------------------------------------------------------------------------
                                                                                    (In Thousands)
<S>                                                                      <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                                      $   (8,473)  $    3,114   $    2,440
  Adjustments to reconcile net income (loss) to net cash
     provided by operating activities:
     Depreciation and amortization                                           17,528       16,734       15,492
     Loss from unconsolidated partnership interests                              39          339          350
     (Gain) loss on sale of nonregulated property                              (501)           1          206
     Gain on sale of equity securities                                         (360)      (2,118)           -
     Change in assets and liabilities:
       (Increase) decrease in:
          Accounts receivable                                                (1,423)         926       (1,550)
          Materials and supplies                                                (35)        (329)        (292)
          Prepaid expenses                                                     (728)        (401)        (195)
          Prepaid pension costs                                                  24         (182)        (141)
          Other assets                                                       (1,883)         127          210
       Increase (decrease) in:
          Accounts payable                                                     (620)        (782)       1,603
          Accrued expenses and other current liabilities                     (1,084)         907        1,516
          Other liabilities                                                   1,051          246          253
          Deferred income taxes                                              (2,764)        (348)         596
                                                                       --------------------------------------

       Net cash provided by operating activities                                771       18,234       20,488
                                                                       --------------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchase of plant, net of removal costs and
     salvage from retirements                                               (23,246)     (28,252)     (18,749)
  Purchase of FCC licenses                                                        -            -       (1,162)
  Proceeds from sale of nonregulated property                                19,165           14           35
  Capital investments in unconsolidated
     partnership interests                                                        -         (325)           -
  Purchase of equity securities                                                   -            -         (200)
  Proceeds from sale of equity securities                                       503        2,986            -
                                                                       --------------------------------------

       Net cash used in investing activities                                 (3,578)     (25,577)     (20,076)
                                                                       --------------------------------------
</TABLE>

                                       23
<PAGE>

CONESTOGA ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Three Years Ended December 31,                                               2001         2000        1999
------------------------------------------------------------------------------------------------------------
                                                                                    (In Thousands)
<S>                                                                       <C>         <C>          <C>
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from long-term borrowings                                      $       -   $   35,000   $   1,500
  Principal payments on long-term debt                                       (4,704)     (16,348)     (4,172)
  Principal payments on capital lease obligation                                (66)         (41)          -
  Borrowings on line of credit                                               10,000       17,245       1,500
  Principal payments on line of credit                                            -      (18,245)       (500)
  Issuance of common stock under the employee stock                           1,521          878       1,594
     purchase and dividend reinvestment plans and
     other equity changes                                                     1,521          878       1,594
  Common and preferred dividends paid                                        (7,122)      (7,117)     (6,436)
  Redemption of preferred stock                                                (198)      (1,007)       (192)
                                                                        ------------------------------------

       Net cash provided by (used in)
          financing activities                                                 (569)      10,365      (6,706)
                                                                        ------------------------------------

       Increase (decrease) in cash and cash equivalents                      (3,376)       3,022      (6,294)

Cash and cash equivalents:
  Beginning                                                                   5,529        2,507       8,801
                                                                        ------------------------------------

  Ending                                                                  $   2,153   $    5,529   $   2,507
                                                                        ====================================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash payments for:
     Interest                                                             $   5,375   $    4,329   $   4,104
                                                                        ====================================

     Income taxes                                                         $   8,197   $    4,490   $   3,392
                                                                        ====================================

SUPPLEMENTAL SCHEDULE OF NONCASH
  INVESTING AND FINANCING ACTIVITIES
  Capital lease obligation incurred for use of building                   $       -   $    2,900   $       -
                                                                        ====================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       24
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES

     Principles of consolidation and nature of operations:

       The consolidated financial statements include the accounts of Conestoga
       Enterprises, Inc. and its subsidiaries.  Conestoga Enterprises, Inc.'s
       wholly-owned operating subsidiaries include:

          The Conestoga Telephone and Telegraph Company and Buffalo Valley
          Telephone Company, which are independent local exchange carriers
          providing both regulated and nonregulated communication services.

          CEI Networks, Inc., which provides long distance and competitive local
          telephone services.  CEI Networks was formed by a merger of two of
          Conestoga Enterprises, Inc.'s wholly-owned subsidiaries, Conestoga
          Communications, Inc. and TeleBeam, Incorporated.

          Conestoga Mobile Systems, Inc., which provides paging communication
          services.

          Conestoga Wireless Company, which provides wireless personal
          communication services (PCS).

          Infocore, Inc., which provides communication consulting services
          including the design and installation of communication systems.

       The Companies are collectively referred to herein as the Company.  All
       significant intercompany transactions have been eliminated in
       consolidation.

       The Company operates predominately in the communications and related
       services industry providing services to customers in eastern and central
       Pennsylvania.

       The Company's local exchange carriers are subject to rate regulations by
       the Federal Communications Commission (FCC) and the Pennsylvania Public
       Utility Commission (PUC) and, accordingly, follow the accounting
       prescribed by Statement of Financial Accounting Standards No. 71,
       "Accounting for Certain Types of Regulation."

     Use of estimates:

       The preparation of financial statements in conformity with accounting
       principles generally accepted in the United States of America requires
       management to make estimates and assumptions that affect the reported
       amounts of assets and liabilities and disclosure of contingent assets and
       liabilities at the date of the financial statements and the reported
       amounts of revenues and expenses during the reporting period.  Actual
       results could differ from those estimates.

                                       25
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Revenue recognition:

       The Company's revenues are recognized when earned.  Local service
       revenues are recognized as service is provided.  Long distance and access
       revenues are derived from toll rates, access charges and settlement
       arrangements and are recorded as service is utilized.  Wireless revenues
       are recorded as service is provided and air-time is utilized.  Equipment
       revenues are recorded at the time of sale.

     Cash and cash equivalents:

       For purposes of reporting the statements of cash flows, the Company
       considers all highly liquid debt instruments purchased with a maturity of
       three months or less to be cash equivalents.  At times, cash balances
       exceed F.D.I.C. limits.

     Cost in excess of net assets of business acquired:

       The excess of the acquisition cost over the net assets of the businesses
       acquired is being amortized by the straight-line method over 25 to 40
       years.  Management continually reviews the appropriateness of the
       carrying value of the excess acquisition cost and the related
       amortization period.  Amortization expense for the years 2001, 2000 and
       1999 was approximately $1,295,000, $1,706,000 and $2,287,000,
       respectively.

     Investments:

       All marketable equity securities are classified as available for sale.
       These securities are recorded at fair value based on quoted market
       prices, and unrealized gains, net of taxes, are reported in other
       comprehensive income.  Gains and losses are determined using the
       specific-identification method.  The Company is accounting for its
       partnership investment by the equity method.  These investments are
       included with other assets in the accompanying balance sheets.

     Plant and depreciation:

       Plant is recorded at cost.  Depreciation is computed by the straight-line
       method over the estimated useful lives of the assets.  Depreciation
       expense on assets acquired under a capital lease is included with
       depreciation expense on owned assets.

       Telephone plant:

          Normal renewals and betterments of units of property are charged to
          plant accounts, while ordinary repairs and replacements of items
          considered to be less than units of property are charged to plant
          specific expenses.  When telephone plant is replaced or retired, the
          cost of the plant retired, plus removal costs, less salvage is charged
          to accumulated depreciation. Accordingly, no gain or loss is
          recognized in connection with ordinary retirements.

                                       26
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Plant and depreciation (continued):
       Other property:

          When other property is retired or otherwise disposed of, the
          property's cost and accumulated depreciation are removed from the
          plant accounts and any gain or loss on disposition is recognized in
          income.

     Long-lived assets:

       The Company reviews long-lived assets for impairment whenever events or
       changes in circumstances indicate that the carrying amount of an asset
       may not be recoverable. Recoverability of assets to be held and used is
       measured by a comparison of the carrying amount of an asset to future
       undiscounted cash flows expected to be generated by the asset. If such
       assets are considered to be impaired, the impairment recognized is
       measured by the amount by which the carrying amount of the assets exceeds
       the fair value of the assets.

     Advertising:

       Advertising costs are expensed when incurred.  Advertising expense for
       the years ended December 31, 2001, 2000 and 1999 was approximately
       $1,823,000, $2,235,000 and $1,513,000, respectively.

     Income taxes:

       Deferred taxes are provided on the liability method whereby deferred tax
       assets are recognized for deductible temporary differences and deferred
       tax liabilities are recognized for taxable temporary differences.
       Temporary differences are the differences between the reported amounts of
       assets and liabilities and their tax basis and net operating loss
       carryforwards.  Deferred tax assets are reduced by a valuation allowance
       when, in the opinion of management, it is more likely than not that some
       portion or all of the deferred tax assets will not be realized.  Deferred
       tax assets and liabilities are adjusted for the effects of changes in tax
       laws and rates on the date of enactment.

     Employee benefits:
       Pension plans:

          All eligible employees of Conestoga Telephone and Telegraph Company
          and Buffalo Valley Telephone Company are covered under noncontributory
          defined benefit pension plans.  The plans provide benefits based on
          years of service and employee compensation. The Company's funding
          policy is to make contributions in compliance with applicable
          regulations.

                                       27
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Employee benefits (continued):
       Postretirement benefit plan:

          A subsidiary of the Company sponsors a postretirement health care plan
          for substantially all of its salaried employees and their spouses.
          The plan is contributory, with retirees contributing 50% of the
          premiums.  The plan is unfunded.  The Company's share of the estimated
          costs that will be paid after retirement is generally being accrued by
          charges to expense over the employees' active service periods to the
          dates they are fully eligible for benefits, except that the Company's
          unfunded cost that existed at January 1, 1993 is being accrued
          primarily under the straight-line method that will result in full
          accrual by December 31, 2012.

       401(k) savings plans:

          The Company has contributory 401(k) savings plans for substantially
          all employees.  The Company contributes matching amounts for
          participating employees in accordance with the provisions of the
          plans.  The Company contributed approximately $558,000, $530,000 and
          $478,000 to the plans for 2001, 2000 and 1999, respectively.

       Deferred compensation agreement:

          The Company has a deferred compensation agreement with an officer
          which provides benefits payable to him upon retirement.  The estimated
          liability under the agreement is being accrued over the expected
          remaining years of employment.

     Reclassifications:

       During 2001, the Company revised the presentation of certain operating
       revenue and expenses in the accompanying statement of operations.  The
       Company also has included in cost of service expense, customer service
       costs previously included with selling, general and administrative
       expense.  In addition, certain subsidiary revenues were reclassified for
       consistent presentation throughout the Company.  Revenue and expense
       items previously reported in 2000 and 1999 have been reclassified to
       conform to this new presentation.  These reclassifications had no impact
       on net income.

     New accounting standards:

       In June of 2001, the Financial Accounting Standards Board issued
       Statement No. 141, "Business Combinations", and Statement No. 142,
       "Goodwill and Other Intangible Assets". Statement No. 141 requires all
       business combinations to be accounted for using the purchase method of
       accounting as use of the pooling-of-interests method is prohibited.  The
       provisions of this Statement apply to all business combinations initiated
       after June 30, 2001. The adoption of this Statement did not have an
       impact on the Company's financial condition or results of operations.

                                       28
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1
--------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     New accounting standards (continued):

       Statement No. 142 prescribes that goodwill associated with a business
       combination and intangible assets with an indefinite useful life should
       not be amortized but should be tested for impairment at least annually.
       The Statement requires intangibles that are separable from goodwill and
       that have a determinable useful life to be amortized over the
       determinable useful life.  The provisions of this Statement became
       effective for the Company in January of 2002.  Upon adoption of this
       Statement, goodwill and other intangible assets arising from acquisitions
       completed before July 1, 2001 should be accounted for in accordance with
       the provisions of this Statement.  At December 31, 2001, the Company has
       goodwill of approximately $41,623,000.  Effective January 1, 2002, the
       Company is no longer amortizing goodwill; however, subsequent impairment
       reviews may result in periodic write-downs of goodwill.  The Company is
       also required to complete a goodwill impairment test within six months of
       the adoption of the Statement.  Except for discontinuing the amortization
       of goodwill, the Company has not determined the impact of adoption with
       respect to goodwill on the Company's financial condition or results of
       operations.

       In July of 2001, the Financial Accounting Standards Board issued
       Statement No. 143, "Accounting for Asset Retirement Obligations," which
       addresses the financial accounting and reporting for obligations
       associated with the retirement of tangible long-lived assets and the
       associated asset retirement costs.  This Statement requires that the fair
       value of a liability for an asset retirement obligation be recognized in
       the period in which it is incurred if a reasonable estimate of fair value
       can be made.  The associated asset retirement costs are capitalized as
       part of the carrying amount of the long-lived asset.  This Statement will
       become effective for the Company on January 1, 2003, but is not expected
       to have a material impact on the Company's financial condition or results
       of operations.

       In August of 2001, the Financial Accounting Standards Board issued
       Statement 144, "Accounting for the Impairment of or Disposal of Long-
       Lived Assets."  This Statement supersedes FASB Statement No. 121,
       "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
       Assets to be Disposed of," and the accounting and reporting provisions of
       APB Opinion No. 30, "Reporting the Results of Operations - Reporting the
       Effects of Disposal of a Segment of a Business, and Extraordinary,
       Unusual and Infrequent Occurring Events and Transactions for the Disposal
       of a Segment of a Business."  This Statement also amends ARB No. 51,
       "Consolidated Financial Statements."  The provisions of this Statement
       became effective for the Company on January 1, 2002, and did not have a
       material impact on the Company's financial condition or results of
       operations.

                                       29
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2
--------------------------------------------------------------------------------
PENDING MERGER

     The Company entered into an Agreement and Plan of Merger with D&E
     Communications, Inc. (the "D&E Merger Agreement") dated November 21, 2001,
     which provided for the exchange of all of the Company's issued and
     outstanding common stock for cash and/or common stock of D&E
     Communications, Inc.  The D&E Merger Agreement was contingent upon the
     Company terminating an Agreement and Plan of Merger with Ntelos, Inc. and
     Ntelos Acquisition Corp. (the "Ntelos Merger Agreement"), dated July 21,
     2001, that it had previously entered into with Ntelos, Inc. on the grounds
     that the transaction provided for in the D&E Merger Agreement constituted a
     "superior competing transaction" to the transaction provided for in the
     Ntelos Merger Agreement.  On December 4, 2001, the Company gave notice to
     D&E Communications, Inc. that it had terminated the Ntelos Merger Agreement
     and paid Ntelos the termination fee of $10,000,000 provided for therein and
     that consequently the D&E Merger Agreement was effective as of that date.
     The Company also incurred approximately $1,401,000 in transaction expenses
     with respect to its exploration of its strategic options, including matters
     relating to the Ntelos Merger Agreement, the termination thereof, and the
     D&E Merger Agreement.  The Company expensed the $10,000,000 termination fee
     and the $1,401,000 transaction expenses.  The completion of the merger with
     D&E Communications, Inc. is contingent upon, among other things,
     shareholder and regulatory approvals.  Completion of the merger will
     trigger change of control payments to certain of the Company's officers in
     accordance with the terms of their respective employment contracts.

3
--------------------------------------------------------------------------------
ACQUISITION

     On January 31, 2000, the Company acquired all the outstanding shares of
     TeleBeam, Incorporated.  The Company issued 734,962 shares to TeleBeam
     shareholders.  The transaction has been accounted for as a pooling of
     interests.

                                       30
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


4
--------------------------------------------------------------------------------
INVESTMENTS IN EQUITY SECURITIES

     The following is a summary of the Company's investments in equity
     securities:

<TABLE>
<CAPTION>
                                                                                                         December 31,
                                                                                                     2001            2000
                                                                                               -------------------------------
                                                                                                       (In Thousands)
         <S>                                                                                   <C>              <C>
         Marketable equity securities:
           Aggregate cost                                                                      $            -   $          143
           Gross unrealized gains                                                                           -              348
                                                                                               -------------------------------

                 Fair value                                                                    $            -   $          491
                                                                                               ===============================
</TABLE>

     The Company's investments in equity securities were concentrated in the
     telecommunications industry.

     Proceeds and gross gains from the sale of equity securities were $503,000
     and $360,000, respectively, for the year ended December 31, 2001.

     Proceeds and gross gains from the sale of equity securities were $2,986,000
     and $2,118,000, respectively, for the year ended December 31, 2000.

     There were no sales of equity securities in 1999.

5
--------------------------------------------------------------------------------
INVESTMENT IN PARTNERSHIP

     PenTeleData is a limited partnership which provides Internet access
     services in central and eastern Pennsylvania.  The Company has a 10.95%
     partnership interest in PenTeleData.  The carrying value of this investment
     was approximately $12,000 and $51,000 at December 31, 2001 and 2000,
     respectively.

     During the years ended December 31, 2001, 2000 and 1999, the Company's
     equity share of the partnership's net loss was approximately $39,000,
     $339,000 and $350,000, respectively.

                                       31
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6
--------------------------------------------------------------------------------
PLANT

     Plant is carried at cost less accumulated depreciation and consists of the
     following:

<TABLE>
<CAPTION>
                                                                            Estimated Life     December 31,
                                                                              (In Years)     2001        2000
                                                                       -----------------------------------------
                                                                                              (In Thousands)
          <S>                                                          <C>                <C>         <C>
          Telephone plant:
            In service:
               Land and buildings                                              33-40      $    5,739  $    5,654
               Digital switching equipment                                      5-18          51,866      50,736
               Other equipment                                                  3-20           7,112       7,552
               Outside plant facilities                                        11-45          84,112      79,879
                                                                                       -------------------------
                                                                                             148,829     143,821
            Under construction                                                                 2,954       1,174
                                                                                       -------------------------
                                                                                             151,783     144,995
            Less accumulated depreciation                                                     90,644      85,600
                                                                                       -------------------------

                                                                                              61,139      59,395
                                                                                       -------------------------
            Nonregulated property and equipment:
              Land and buildings                                               33-40           3,548       3,577
              Equipment                                                         3-20          61,393      44,065
                                                                                       -------------------------
                                                                                              64,941      47,642
              Under construction                                                               3,902       8,974
                                                                                       -------------------------
                                                                                              68,843      56,616
              Less accumulated depreciation                                                   18,968      12,819
                                                                                       -------------------------

                                                                                              49,875      43,797
                                                                                       -------------------------

                                                                                          $  111,014  $  103,192
                                                                                       =========================
</TABLE>

     During 2001, the Company sold and transferred 72 of its subsidiaries'
     wireless transmission towers and certain real estate to Mountain Union
     Telecom, LLC ("Mountain Union") pursuant to an agreement, dated March 15,
     2001, which provided that 75 transmission towers were to be sold to
     Mountain Union and Conestoga Wireless Company was to lease back antennae
     space on the towers under a master license agreement for a term of 10 years
     (see Note 18).  Closing was held on June 29, 2001, at which time 64 tower
     sites were transferred and 11 sites remained as "hold out" sites with
     issues to be resolved, the purchase price for which was deposited into
     escrow by the buyer.  By year end, the issues were resolved and closing
     held with respect to 8 of the hold out sites.  The Company received
     approximately $19,100,000 from the sale of the transmission towers in 2001
     and recorded a deferred gain from the sale of approximately $10,458,000.
     This gain has been deferred and is being amortized to income over the ten-
     year term of the license agreement.  At December 31, 2001, the deferred
     gain totaled approximately $9,936,000.

     As of January 30, 2002, the issues with respect to all but one of the hold
     out sites have been resolved and closing on those sites have or will occur
     in 2002.  These towers are presented in the financial statements as assets
     held for sale at December 31, 2001.

                                       32
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


6
--------------------------------------------------------------------------------
PLANT (CONTINUED)

     As part of the sales transaction, the Company also entered into a Build-to-
     Suit Agreement with Mountain Union pursuant to which the Company is
     obligated to find 20 suitable tower sites through June 2003 ("Development
     Sites"), Mountain Union is to lease the sites and build towers thereon, and
     the Company is to lease space on the towers.  The Company is exposed to
     liquidated damages, if it does not find and lease back space on 20
     development sites by June 29, 2003, as follows:

       (a) If the parties develop less than 15 development sites, the damages
           payable by the Company are $100,000 for each site less than 20; and

       (b) If the parties develop at least 15 development sites, but less than
           20, the damages payable by the Company are $50,000 for each site less
           than 20.


7
--------------------------------------------------------------------------------
LONG-TERM DEBT AND CREDIT ARRANGEMENTS

     Long-term debt is summarized as follows:

<TABLE>
<CAPTION>
                                                                                                    December 31,
                                                                                               2001              2000
                                                                                       --------------------------------------
                                                                                                    (In Thousands)
                      <S>                                                              <C>                   <C>
                      7.59% Series B Senior Notes, interest payable quarterly,            $         14,546   $         16,000
                        principal due in annual installments of $1,454,000
                        through 2011. (See below.)
                      6.22% Senior Notes, interest payable quarterly, principal                     18,750             21,000
                        due in quarterly installments of $750,000 through 2008.
                        (See below.)
                      6.89% term loan, interest payable quarterly, principal due in                    250              1,250
                        quarterly installments of $250,000 through 2002.
                      7.84% term loan, interest payable quarterly, principal due in                 20,000             20,000
                        quarterly installments of $500,000 from 2005 through 2014.
                      7.86% term loan, interest payable quarterly, principal due in                 15,000             15,000
                        quarterly installments of $375,000 from 2005 through 2014.
                                                                                       --------------------------------------
                                                                                                    68,546             73,250
                      Less current maturities                                                       33,546              4,705
                                                                                       --------------------------------------

                                                                                          $         35,000   $         68,545
                                                                                       ======================================
</TABLE>

                                       33
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7
--------------------------------------------------------------------------------
LONG-TERM DEBT AND CREDIT ARRANGEMENTS (CONTINUED)

     The aggregate amounts of maturities of long-term debt for each of the five
     years subsequent to December 31, 2001 are as follows (in thousands):

          2002                                                        $  33,546
          2003                                                                -
          2004                                                                -
          2005                                                            3,500
          2006                                                            3,500

     The Company has an unsecured credit agreement through June 30, 2002 with a
     bank under which it may borrow up to $10,000,000 for working capital or
     general business purposes in the form of line of credit loans or letters of
     credit. Interest is payable monthly on advances at the Company's option of
     either one percent below the bank's prime rate or .35 percent above the one
     month London Interbank Offered Rate (LIBOR) rate. There were no borrowings
     outstanding at December 31, 2001 and 2000. The prime and one month LIBOR
     interest rates were 4.75% and 2.22% at December 31, 2001 and 8.50% and
     6.56% at December 31, 2000. Issuance fees on letters of credit shall be
     mutually agreed between the bank and the Company on a case-by-case basis.

     The Company also has an unsecured $10,000,000 line of credit from a bank
     available until June 30, 2002 with interest at the London Interbank Offered
     Rate plus .75% or at a rate to be negotiated. The interest rate applicable
     to the line of credit was 2.97% and 7.31% at December 31, 2001 and 2000,
     respectively. At December 31, 2001 and 2000, outstanding borrowings under
     this line of credit were $10,000,000 and $-0-, respectively.

     The Company has an unsecured $50,000,000 line of credit from a bank
     available until April 28, 2002 with interest at a rate selected at the
     option of the Company. The line of credit is automatically renewed on each
     anniversary date through April 28, 2005, unless either party gives written
     notice no less than 30 days prior to the anniversary date. The bank charges
     a commitment fee at an annual rate of 0.125% on the average daily unused
     portion of the line, payable quarterly. There were no borrowings
     outstanding on the line of credit at December 31, 2001 and 2000.

     The credit agreements contain provisions which, among other things, require
     maintenance of certain financial ratios and limit the amount of additional
     indebtedness. The Senior Notes also contain provisions which, among other
     things, restrict mergers and consolidations, encumbrances and sales of
     certain assets, redemptions of preferred stock and purchases of restricted
     investments. As of December 31, 2001, the Company was in default of certain
     covenants of its Senior Notes loan agreement. The Company obtained a
     temporary waiver on February 25, 2002, whereby the lender waived compliance
     by the Company of these covenants. The temporary waiver expires June 30,
     2002, or earlier under certain conditions, at which time the debt balances
     become callable by the lender. Accordingly, the balances under the
     agreements are classified as current liabilities in the accompanying
     financial statements.

                                       34
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


7
--------------------------------------------------------------------------------
LONG-TERM DEBT AND CREDIT ARRANGEMENTS (CONTINUED)

     Under the most restrictive covenants of the debt agreements, the Company,
     as of December 31, 2001, in not permitted to make any further dividend
     distributions until the Company generates approximately $14,000,000 of
     consolidated net income as defined in the agreement. The Company has
     received a temporary waiver of this covenant permitting the Company to pay
     a dividend in the first quarter of 2002. The temporary waiver expires June
     30, 2002, or earlier, under certain conditions. The temporary waiver does
     not authorize dividends in the second quarter of 2002 and thereafter.


8
--------------------------------------------------------------------------------
CAPITAL LEASE

     In 2000, the Company entered into a long-term lease agreement for a
     building, that provides for monthly rentals of approximately $24,000 per
     month, including interest at 7.95% through April 2020.

     The following is a schedule, by year, of the future minimum lease payments
     under the capital lease together with the present value of the net minimum
     lease payments (in thousands):

          2002                                                   $    290
          2003                                                        290
          2004                                                        290
          2005                                                        290
          2006                                                        290
          Thereafter                                                3,867
                                                                 --------
            Total minimum lease payments                            5,317
          Less amount representing interest                         2,524
                                                                 --------
            Present value of net minimum lease payments             2,793
          Less portion reflected as current liabilities                69
                                                                 --------

                                                                 $  2,724
                                                                 ========

     The building under capital lease was recorded as follows at December 31:

                                                          2001         2000
                                                       ----------------------

          Cost                                          $   2,900    $  2,900
          Accumulated depreciation                           (236)        (91)
                                                       ----------------------

                                                        $   2,664    $  2,809
                                                       ======================

                                       35
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9
--------------------------------------------------------------------------------
INCOME TAX MATTERS

     The provision for income taxes for the years ended December 31, 2001, 2000
     and 1999 was as follows:

                                              2001       2000       1999
                                           -------------------------------
                                                    (In Thousands)

          Current:
            Federal                         $  3,382   $  1,591   $  1,914
            State                              2,203      1,952      1,909
                                           -------------------------------

                                               5,585      3,543      3,823
                                           -------------------------------
          Deferred:
            Federal                           (2,535)       190        676
            State                               (229)      (450)      (178)
                                           -------------------------------

                                              (2,764)      (260)       498
                                           -------------------------------

                                            $  2,821   $  3,283   $  4,321
                                           ===============================

     The income tax provision differs from the amount of income tax determined
     by applying the federal income tax rate to pretax income for the years
     ended December 31, 2001, 2000 and 1999 due to the following:

<TABLE>
<CAPTION>
                                                                               2001          2000      1999
                                                                             --------------------------------
          <S>                                                                <C>            <C>          <C>
          Normal statutory federal income tax rate                           (34.0) %       34.0  %      34.0  %
          Increase (decrease) resulting from:
             State income tax, net of federal tax benefit                      1.2           2.4          5.7
             Valuation allowance                                              15.5           7.9         16.1
             Goodwill amortization                                             5.9           6.9          9.5
             Merger costs                                                     66.4           3.5            -
             Other                                                            (5.1)         (3.4)        (1.4)
                                                                             --------------------------------

                                                                              49.9  %       51.3  %      63.9  %
                                                                             ================================
</TABLE>

                                       36
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9
--------------------------------------------------------------------------------
INCOME TAX MATTERS (CONTINUED)

     Net deferred tax liabilities consist of the following components as of
     December 31, 2001 and 2000:

                                                           2001        2000
                                                       -----------------------
                                                            (In Thousands)

          Deferred tax liabilities:
            Plant, in service                            $  11,764   $  11,794
            Prepaid pension costs                            1,230       1,239
            Investments                                          -         123
                                                       -----------------------

                                                            12,994      13,156
                                                       -----------------------
          Deferred tax assets:
            Employee benefits                                 (952)       (720)
            Net operating loss carryforwards                (4,567)     (4,438)
            Deferred revenue                                (4,033)          -
            Other                                             (260)       (479)
                                                       -----------------------

                                                            (9,812)     (5,637)
                                                       -----------------------

          Valuation allowance                                3,738       2,275
                                                       -----------------------

                                                         $   6,920   $   9,794
                                                       =======================

     The Company has approximately $1,700,000 of net operating loss
     carryforwards for federal income tax purposes, which expire between the
     years 2006 and 2019.

     The Company and certain subsidiaries have approximately $60,000,000 of net
     operating loss carryforwards for state income tax purposes which expire
     between the years 2005 and 2011. A valuation allowance of $3,738,000 and
     $2,275,000 was recorded at December 31, 2001 and 2000 for these state loss
     carryforwards which may expire unutilized. The valuation allowance was
     increased by approximately $1,463,000, $508,000 and $1,090,000 in 2001,
     2000 and 1999, respectively.

     Utilization of the net operating loss carryforwards is dependent upon
     future taxable income and is subject to statutory limitations.

                                       37
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10
--------------------------------------------------------------------------------
DEFINED BENEFIT PENSION PLANS

     Information pertaining to the activity in the Company's defined benefit
     pension plans is as follows:

<TABLE>
<CAPTION>
                                                                                              Years Ended December 31,
                                                                                             2001                2000
                                                                                      ----------------------------------------
                                                                                                    (In Thousands)
          <S>                                                                            <C>                  <C>
          Change in benefit obligation:
            Benefit obligation at beginning of year                                      $          18,386    $         16,970
            Service cost                                                                               748                 665
            Interest cost                                                                            1,266               1,183
            Actuarial loss                                                                               3                 215
            Benefits paid                                                                             (725)               (647)
                                                                                      ----------------------------------------

                 Benefit obligation at end of year                                                  19,678              18,386
                                                                                      ----------------------------------------

          Change in plan assets:
            Fair value of plan assets at beginning of year                                          22,860              22,894
            Actual return on plan assets                                                            (1,112)                613
            Benefits paid                                                                             (725)               (647)
                                                                                      ----------------------------------------

                 Fair value of plan assets at end of year                                           21,023              22,860
                                                                                      ----------------------------------------

          Funded status                                                                              1,345               4,474

          Unrecognized net actuarial loss (gain)                                                     1,354              (1,717)
          Unrecognized prior service cost                                                              882                 963
          Unrecognized net transition asset                                                           (552)               (667)
                                                                                      ----------------------------------------

                 Prepaid pension costs                                                   $           3,029    $          3,053
                                                                                      ========================================
</TABLE>

     Two of the Company's three defined benefit plans had projected benefit
     obligations in excess of the fair value of the plans' assets at December
     31, 2001.  These plans had an aggregate projected benefit obligation and
     fair value of plan assets of approximately $11,606,000 and $11,257,000,
     respectively, at December 31, 2001.

                                       38
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10
--------------------------------------------------------------------------------
DEFINED BENEFIT PENSION PLANS (CONTINUED)

     Net pension cost (benefit) for these Plans consisted of the following
     components:

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                                           2001        2000        1999
                                                                       -----------------------------------
                                                                                  (In Thousands)
          <S>                                                            <C>         <C>         <C>
          Service cost                                                   $     748   $     665   $     605
          Interest cost on projected benefit obligation                      1,266       1,183       1,083
          Expected return on plan assets                                    (1,917)     (1,926)     (1,750)
          Net amortization and deferral                                        (73)       (104)        (79)
                                                                       -----------------------------------

                                                                         $      24   $    (182)  $    (141)
                                                                       ===================================
</TABLE>

     Assumptions used by the Company in the determination of pension plan
     information for 2001, 2000 and 1999 consisted of the following:

<TABLE>
                                                                                          2001            2000         1999
                                                                                    ------------------------------------------
          <S>                                                                         <C>             <C>            <C>
          Discount rate                                                                7.00%           7.00%          7.00%
          Rate of increase in compensation levels                                      5.00            5.00           5.00
          Expected long-term rate of return on plan assets                             8.50            8.50           8.50
</TABLE>

     Plan assets consist primarily of U.S. Government securities, corporate
     bonds and common stocks, including CEI's common stock of $399,000, $215,000
     and $215,000 at December 31, 2001, 2000 and 1999, respectively.

                                       39
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11
--------------------------------------------------------------------------------
POSTRETIREMENT BENEFIT PLAN

     Information pertaining to the activity in the postretirement benefit
     plan is as follows:

<TABLE>
<CAPTION>
                                                                                           Years Ended December 31,
                                                                                            2001               2000
                                                                                    --------------------------------------
                                                                                                 (In Thousands)
          <S>                                                                         <C>                <C>
          Change in benefit obligation:
            Benefit obligation at beginning of year                                    $         1,410    $          1,453
            Service cost                                                                           116                  67
            Interest cost                                                                          113                  89
            Actuarial (gain) loss                                                                  234                (159)
            Benefits paid                                                                          (47)                (40)
                                                                                    --------------------------------------

                 Benefit obligation at end of year                                               1,826               1,410
                                                                                    --------------------------------------

                 Fair value of plan assets at end of year                                            -                   -
                                                                                    --------------------------------------

          Funded status                                                                         (1,826)             (1,410)

          Unrecognized net actuarial (gain)                                                       (237)               (388)
          Unrecognized net transition obligation                                                   618                 675
                                                                                    --------------------------------------

                 Accrued postretirement benefit cost                                   $        (1,445)   $         (1,123)
                                                                                    ======================================
</TABLE>

     Net postretirement benefit cost for this Plan consisted of the following
     components:

<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                                  2001            2000           1999
                                                                            -------------------------------------------------
                                                                                              (In Thousands)
          <S>                                                                 <C>              <C>             <C>
          Service cost                                                         $        116     $        67     $          74
          Interest cost on projected benefit obligation                                 113              89                91
          Net amortization and deferral                                                 140              21                43
                                                                            -------------------------------------------------

                                                                               $        369     $       177     $         208
                                                                            =================================================
</TABLE>

     Assumptions used by the Company in the determination of postretirement
     benefit plan information consisted of the following:

<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                                   2001           2000          1999
                                                                            ---------------------------------------------
          <S>                                                                 <C>              <C>            <C>
          Discount rate                                                             7.00%          7.00%          7.00%
                                                                            =============================================
</TABLE>

                                       40
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




11
--------------------------------------------------------------------------------
POSTRETIREMENT BENEFIT PLAN (CONTINUED)

     For measurement purposes, a 5.5 percent annual rate of increase in the per
     capita cost of covered health care benefits was assumed for 2001 and
     thereafter.

     Assumed health care trend rates have a significant impact on the amounts
     reported.  A one-percentage-point change in assumed health care cost trend
     rates would have the following effects:

<TABLE>
<CAPTION>
                                                                                     One-Percentage-         One-
                                                                                          Point           Percentage-
                                                                                         Increase        Point Decrease
                                                                                  ---------------------------------------
                                                                                               (In Thousands)
         <S>                                                                        <C>                 <C>
         Effect on total of service and interest cost components                     $              47   $            (37)
         Effect on postretirement benefit obligation                                               307               (249)
</TABLE>




12
--------------------------------------------------------------------------------
CONTINGENCIES

     The Company and its subsidiaries in the ordinary course of business are
     involved in various claims and legal proceedings.  The Company is unable to
     predict the timing or outcome of these claims and proceedings.  Although it
     is possible that one or more of these claims or proceedings, if adversely
     determined could have a material effect on the Company in a future period,
     management does not believe that their outcome will have a material effect
     on the Company's consolidated financial condition or results of operations.


13
--------------------------------------------------------------------------------
REDEEMABLE PREFERRED STOCK

     The Company has 72,414 outstanding shares of Series A Convertible Preferred
     Stock. Cumulative dividends of $3.42 per share per annum are paid semi-
     annually.  Each share of preferred stock may be converted, at the option of
     the holder, into shares of Common Stock at a conversion price of $22.95,
     subject to adjustment under certain circumstances.  Each holder may require
     the Company to redeem all or a portion of such holder's preferred stock for
     $65 per share plus accrued dividends.

                                       41
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



13
--------------------------------------------------------------------------------
REDEEMABLE PREFERRED STOCK (CONTINUED)

     On January 7, 2002, the Company gave notice to the holders of its preferred
     stock of its intention to redeem all outstanding shares of preferred stock
     on February 6, 2002.  On this date, the Company will redeem all remaining
     outstanding shares for $66.94 per share.  The redemption price is comprised
     of the stock's par value of $65, a 2% redemption premium of $1.30 and an
     unpaid cumulative dividend of $.64.

     The number of preferred shares exchanged for shares of common stock and
     number of preferred shares redeemed for cash is as follows:

<TABLE>

                                                                        2001             2000            1999
                                                               ---------------------------------------------------
          <S>                                                      <C>               <C>              <C>
          Number of preferred shares exchanged                             65,840                -          20,558
          Number of common shares issued                                  186,442                -          58,220

          Number of preferred shares redeemed                               3,034           15,491           2,952
          Amount paid for redeemed shares                         $       198,000   $    1,007,000   $     192,000
</TABLE>


14
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY

     Stock Purchase Plan:
       Effective January 1, 1998, the Company established an employee stock
       purchase plan for eligible employees.  Shares of common stock were
       purchased monthly by participating employees at a price of 95% of the
       stock's fair market value, as defined in the Plan document. A maximum of
       150,000 shares were reserved for issuance under the Plan. This Plan was
       terminated in 2001.

                                       42
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



14
--------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (CONTINUED)

     Dividend Reinvestment Plan:
       The Company sponsored a Dividend Reinvestment Plan for all stockholders
       who wished to participate. Participants' dividends and optional cash
       considerations were used to purchase shares of common stock.  A
       participant's purchase price per share was the fair market value, as
       defined in the Plan document.  This Plan was terminated in 2001.

     Shareholder Rights Plan:
       The Company adopted a Shareholder Rights Plan (the Rights Plan) in 2000
       to protect stockholders from attempts to acquire control of the Company
       at an inadequate price.  Under the Rights Plan, the Company will issue
       one right to purchase one share of the Company's common stock for $180
       per share for each outstanding common share held.

       Upon acquisition of 15 percent or more of the Company's shares by an
       adverse party, or upon a tender offer by an adverse party to purchase 15
       percent or more of the Company's shares, the rights of the adverse party
       are void, while the rights of all other shareholders entitle them to
       purchase $360 worth of common stock, at its then current market price,
       for $180.

       The Rights Plan was not adopted in response to any specific effort to
       acquire control of the Company.  The adoption of the Rights Plan had no
       dilutive effect, did not affect the Company's reported earnings per
       share, and was not taxable to the Company or its shareholders.


15
--------------------------------------------------------------------------------
STOCK OPTION PLAN

     The Company has a Stock Option Plan for the officers and employees of the
     Company.  An aggregate of 450,000 shares of authorized but unissued common
     stock of the Company are reserved for future issuance under the Plan.  The
     stock options have an expiration term of 10 years.  The per share exercise
     price of a stock option shall be not less than the fair market value of the
     underlying common stock on the date the option is granted.  There were
     299,250 options available for grant at December 31, 2001.

                                       43
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15
--------------------------------------------------------------------------------
STOCK OPTION PLAN (CONTINUED)

     A summary of the Company's stock option activity and related information
     for the years ended December 31, 2001, 2000 and 1999 is as follows:

<TABLE>
<CAPTION>
                                                2001                 2000                     1999
                                        ----------------------------------------------------------------------
                                                    Weighted               Weighted                 Weighted
                                                    Average                 Average                 Average
                                                    Exercise            Exercise Price              Exercise
                                          Options    Price    Options                    Options     Price
                                        ----------------------------------------------------------------------
     <S>                                <C>         <C>       <C>       <C>              <C>       <C>
     Outstanding, beginning of
       year                               145,750   $  18.71   41,750    $        22.34        -   $         -
     Granted                                5,000      20.72  109,000             17.48   41,750         22.34
     Exercised                             (7,500)     17.48        -                 -        -             -
     Forfeited                                  -          -   (5,000)            22.34        -             -
                                        ----------------------------------------------------------------------

     Outstanding, end of year             143,250   $  18.84  145,750    $        18.71   41,750   $     22.34
                                        ======================================================================
</TABLE>

     There were no options exercisable at December 31, 2001.  Exercise prices
     for options outstanding ranged from $17.48 to $22.34 per share.  The
     weighted average remaining contractual life is approximately 8.0 years.

     The Company applies APB Opinion 25 and related interpretations in
     accounting for the stock option plan.  Accordingly, no compensation cost
     has been recognized.  Had compensation cost for the Company's Stock Option
     Plan been determined based on the fair value at the grant dates for awards
     under the Plan consistent with the method prescribed by FASB Statement No.
     123, the Company's net income (loss) and earnings (loss) per share for the
     year ended December 31, 2001, 2000 and 1999 would have been adjusted to the
     pro forma amounts indicated below (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                                   2001       2000      1999
                                                              --------------------------------
       <S>                                                     <C>          <C>        <C>
       Net income (loss):
         As reported                                            $  (8,473)  $  3,114  $  2,440
         Pro forma                                                 (8,696)     2,950     2,413

       Basic and diluted earnings (loss) per share:
         As reported                                            $   (1.12)  $   0.33  $   0.24
         Pro forma                                                  (1.15)      0.31      0.24
</TABLE>

                                       44
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15
--------------------------------------------------------------------------------
STOCK OPTION PLAN (CONTINUED)

     The fair value of each option grant of $6.22, $4.95 and $3.27 for the years
     ended December 31, 2001, 2000 and 1999, respectively, is estimated on the
     date of the grant using the Black-Scholes option pricing model with the
     following weighted average assumptions:

<TABLE>
<CAPTION>
                                                             2001           2000           1999
                                                      -----------------------------------------------
       <S>                                            <C>                  <C>            <C>
       Dividend yield                                        4.47%          4.25%          4.00%
       Expected life                                            9 years        9 years        9 years
       Expected volatility                                  38.25%         30.23%         14.80%
       Risk-free interest rate                               5.00%          6.10%          6.01%
</TABLE>

     During 2001, the Board of Directors authorized that, upon consummation of
     the merger with D&E Communications, Inc., the terms of all outstanding
     option agreements will become modified so that all outstanding options will
     become fully vested and immediately exercisable.

16
--------------------------------------------------------------------------------
COMPREHENSIVE INCOME

     Accounting principles generally require that recognized revenue, expenses,
     gains and losses be included in net income.  Although certain changes in
     assets and liabilities, such as unrealized gains and losses on available
     for sale securities, are reported as a separate component of the equity
     section of the balance sheet, such items, along with net income, are
     components at comprehensive income.

     The components of other comprehensive income and related tax effects for
     the years ended December 31, 2001, 2000 and 1999 are as follows:

<TABLE>
<CAPTION>
                                                                          2001       2000       1999
                                                                       ------------------------------
                                                                                (In Thousands)
       <S>                                                             <C>         <C>         <C>
       Unrealized holding gains (losses) on available for sale
         securities, less tax effect 2001 $-0-; 2000 $(16);
         1999 $74                                                        $     -   $     (31)  $  144
       Less reclassification adjustment for gains realized in net
         income, less tax effect 2001 $123; 2000 $720;
         1999 $-0-                                                           238       1,398        -
                                                                       ------------------------------

                                                                         $  (238)  $  (1,429)  $  144
                                                                       ==============================
</TABLE>

                                       45
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


17
--------------------------------------------------------------------------------
EARNINGS (LOSS) PER SHARE

     The following table sets forth the computation of basic and diluted
     earnings per share:

<TABLE>
<CAPTION>
                                                                                  2001          2000         199
                                                                           -----------------------------------------
                                                                              (In Thousands, Except Per Share Data)
<S>                                                                        <C>              <C>           <C>
Numerator:
  Net income (loss)                                                           $     (8,473)  $    3,114   $    2,440
  Preferred stock dividends                                                           (405)        (532)        (553)
                                                                           -----------------------------------------
  Numerator for basic and diluted earnings (loss) per share, income
   available to common stockholders                                           $     (8,878)  $    2,582   $    1,887
                                                                           =========================================

Denominator:
  Denominator for basic earnings per share,
     weighted average shares                                                  $      7,946   $    7,833   $    7,736
  Effect of dilutive securities, stock options                                           -            7            -
                                                                           -----------------------------------------

  Dilutive potential common shares, denominator for
     diluted earnings per share, adjusted weighted
     average shares and assumed conversions                                   $      7,946   $    7,840   $    7,736
                                                                           =========================================

Basic earnings (loss) per share                                               $      (1.12)  $     0.33   $     0.24
                                                                           =========================================

Diluted earnings (loss) per share                                             $      (1.12)  $     0.33   $     0.24
                                                                           =========================================
</TABLE>

     At December 31, 2001, 2000 and 1999, an aggregate of 363,606, 440,359 and
     457,822 potential common shares related to stock options and convertible
     preferred stock, respectively, have been excluded from the computation of
     dilutive earnings per share due to their anti-dilutive effect.

                                       46

<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


18
--------------------------------------------------------------------------------
COMMITMENTS

     At December 31, 2001, the Company had commitments for the purchase of
     equipment and materials approximating $2,198,000.

     During 2001, the Company entered into an agreement to lease space on
     approximately 75 wireless communication towers.  Annual lease payments for
     these towers in year one will be approximately $1,350,000 with an annual
     increase in the payment of 4% in each year thereafter. The initial term of
     this lease is ten years.

     In addition to the wireless communication towers, the Company leases remote
     sites and buildings under operating lease agreements which expire between
     August 2002 and June 2026.

     Future minimum payments under all leases are (in thousands):

       2002                                                      $   2,855
       2003                                                          2,230
       2004                                                          2,024
       2005                                                          1,856
       2006                                                          1,766
       Thereafter                                                    8,618
                                                                 -----------

                                                                 $  19,349
                                                                 ===========

     Rental expense included in the financial statements for the years ended
     December 31, 2001, 2000 and 1999 approximated $2,383,000; $1,557,000 and
     $1,205,000, respectively.

19
--------------------------------------------------------------------------------
OPERATING SEGMENTS

     The Company's reportable segments are strategic business units that offer
     different services. They are managed separately because each business unit
     requires different technology and marketing strategies.  The Company has
     three reportable segments: Telephone - traditional telephone service
     provided by Conestoga Telephone and Telegraph Company and Buffalo Valley
     Telephone Company; Wireless - paging and PCS communication services
     provided by Conestoga Wireless Company and Conestoga Mobile Systems, Inc.;
     and CLEC and Long- Distance - competitive local and long distance services
     provided by CEI Networks, Inc.  The "Other" column primarily includes the
     sale of communications and security monitoring systems equipment and
     communications consulting services provided by Infocore, Inc.

                                       47
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



19
--------------------------------------------------------------------------------
OPERATING SEGMENTS (CONTINUED)

     The accounting policies of the segments are the same as those described in
     the summary of accounting policies.  The Company evaluates performance
     based on profit or loss from operations before corporate allocations,
     interest, income taxes and non-recurring gains and losses. Transactions
     occurring between segments are recorded on the same basis as transactions
     with third parties.

     Segment information as of and for the years ended December 31, 2001, 2000
     and 1999 is as follows:

<TABLE>
<CAPTION>
                                                                                 CLEC And
                                                                                   Long
                                                        Telephone    Wireless    Distance     Other      Total
                                                      -----------------------------------------------------------
                                                                             (In Thousands)
           <S>                                           <C>         <C>         <C>         <C>        <C>
          2001:
            Operating revenues from
               external customers:
               Local service                            $   14,663  $       -   $   4,580   $      -   $   19,243
               Long distance and
                 access service                             30,525          -      16,408          -       46,933
               Wireless service                                  -      6,792           -          -        6,792
               Equipment sales                               3,946        687           -      7,361       11,994
               Other                                         3,568        192       1,918      2,182        7,860
                                                      -----------------------------------------------------------
                                                            52,702      7,671      22,906      9,543       92,822
            Intersegment operating revenues                  4,389        148         116          4        4,657
            Operating profit (loss)                         23,273     (8,069)     (3,759)      (239)      11,206
            Total assets                                   110,164     30,905      33,040      4,259      178,368
            Capital expenditures                            11,590      4,864       6,363        158       22,975
            Depreciation and amortization                   11,102      4,403       1,844        179       17,528

          2000:
            Operating revenues from
               external customers:
               Local service                            $   13,299  $       -   $   1,684   $      -   $   14,983
               Long distance and
                 access service                             29,978          -      17,452          -       47,430
               Wireless service                                  -      3,712           -          -        3,712
               Equipment sales                               4,077        810           -      6,305       11,192
               Other                                         3,820        164       2,839      2,292        9,115
                                                      -----------------------------------------------------------
                                                            51,174      4,686      21,975      8,597       86,432
            Intersegment operating revenues                  3,535        110          93         60        3,798
            Operating profit (loss)                         20,513     (8,956)     (1,578)      (658)       9,321
            Total assets                                   108,264     37,978      29,618      6,520      182,380
            Capital expenditures                            10,524      8,195      12,218        215       31,152
            Depreciation and amortization                   10,743      4,030       1,425        536       16,734
</TABLE>

                                       48
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19
--------------------------------------------------------------------------------
OPERATING SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                CLEC And
                                                                                  Long
                                                       Telephone    Wireless    Distance     Other      Total
                                                     -----------------------------------------------------------
                                                                            (In Thousands)
          <S>                                          <C>         <C>         <C>         <C>        <C>
          1999:
          Operating revenues from
               external customers:
               Local service                           $   11,640  $       -   $     805   $      -   $   12,445
               Long distance and
                 access service                            30,978          -      19,195          -       50,173
               Wireless service                                 -      2,063           -          -        2,063
               Equipment sales                              4,740        832           -      6,980       12,552
               Other                                        3,882         39       2,811      2,166        8,898
                                                     -----------------------------------------------------------
                                                           51,240      2,934      22,811      9,146       86,131
          Intersegment operating revenues                   2,835         15         119         24        2,993
          Operating profit (loss)                          20,839     (8,035)       (986)      (804)      11,014
          Total assets                                    110,718     33,704      19,996      6,798      171,216
          Capital expenditures                             10,373      6,987       1,264        125       18,749
          Depreciation and amortization                    10,110      3,153       1,129      1,100       15,492
</TABLE>

     Certain items in the schedule above need to be reconciled to the
     consolidated financial statements and are provided in the schedules below:

<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                             2001         2000         1999
                                                                       --------------------------------------
                                                                                    (In Thousands)
          <S>                                                            <C>          <C>          <C>
          Revenues:
            Total revenues for reportable segments                       $   87,932   $   81,573   $   79,954
            Other revenues                                                    9,547        8,657        9,170
            Elimination of intersegment revenues                             (4,657)      (3,798)      (2,993)
                                                                       --------------------------------------

                 Total consolidated revenues                             $   92,822   $   86,432   $   86,131
                                                                       ======================================

          Total assets:
            Total assets for reportable segments                         $  174,109   $  175,860   $  164,418
            Other assets                                                      4,259        6,520        6,798
            Elimination of intersegment (receivables) payables                    -          (10)      (3,083)
                                                                       --------------------------------------

                 Total consolidated assets                               $  178,368   $  182,370   $  168,133
                                                                       ======================================
</TABLE>

                                       49
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



19
--------------------------------------------------------------------------------
OPERATING SEGMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                              Years Ended December 31,
                                                                           2001       2000        1999
                                                                       -----------------------------------
                                                                                  (In Thousands)
          <S>                                                            <C>          <C>        <C>
          Operating income (loss):
            Operating profit (loss) for reportable segments              $   11,206   $  9,321   $  11,014
            Corporate expenses not allocated to reportable
               segments                                                     (12,040)      (340)         (4)
                                                                       -----------------------------------

                 Total consolidated operating income
                    (loss)                                               $     (834)  $  8,981   $  11,010
                                                                       ===================================
</TABLE>


20
--------------------------------------------------------------------------------
FAIR VALUE OF FINANCIAL INSTRUMENTS

     The following methods and assumptions were used to estimate the fair value
     of each class of financial instruments for which it is practicable to
     estimate that value.

     Cash and cash equivalents:
       The carrying amount approximates fair value because of the short maturity
       of those instruments.

     Investments in equity securities:
       The fair values of investments in equity securities are based on quoted
       market prices.

     Letters of credit:
       It was not practicable to estimate the fair value of the letters of
       credit due to the absence of definite issuance fee terms.

     Note payable and long-term debt:

       The fair values of the note payable and long-term debt are estimated
       based on interest rates for the same or similar debt offered to the
       Company having the same or similar remaining maturities.  The carrying
       amounts approximate fair value.

     Redeemable preferred stock:
       The carrying amount approximates fair value based on the fixed redemption
       price available to holders of preferred stock.

                                       50
<PAGE>

CONESTOGA ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



21
--------------------------------------------------------------------------------
QUARTERLY DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                            First     Second      Third      Fourth
                                                        ---------------------------------------------
                                                             (In Thousands, Except Per Share Data)
          <S>                                             <C>        <C>        <C>        <C>
          2001
          ----

          Operating revenues                              $  22,758  $  22,617  $  24,121  $   23,326
          Operating income (loss)                             3,272      2,608      2,447      (9,161)
          Net income (loss)                                     974        563        805     (10,815)
          Basic earnings (loss) per share                      0.11       0.05       0.09       (1.36)
          Diluted earnings (loss) per share                    0.11       0.05       0.09       (1.36)

          2000
          ----

          Operating revenues                              $  21,688  $  21,803  $  21,265  $   21,676
          Operating income                                    1,562      2,771      2,557       2,091
          Net income                                            381      1,360        771         602
          Basic earnings per share                             0.03       0.16       0.08        0.06
          Diluted earnings per share                           0.03       0.16       0.08        0.06
</TABLE>

     As described in Note 2, during the fourth quarter of 2001, the Company
     recorded and paid a $10,000,000 termination fee to Ntelos as a result of
     the merger termination.

                                     -51-
<PAGE>

                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                              EXECUTIVE OFFICERS

Albert H. Kramer; Age 47; President

  Mr. Kramer was appointed President of the Company in May, 1998. He has been
  employed bythe Company since September, 1995, serving as Vice President,
  Finance and Administration, from September, 1995, until August, 1997, and as
  Executive Vice President from August, 1997 until May, 1998. Prior to that he
  was employed by Denver and Ephrata Telephone Company for 11 years, serving as
  Chief Financial Officer during the last 5 years of his employment.

Joseph P. Laffey; Age 49; Senior Vice President, Administration

  Mr. Laffey has been employed by the Company as Vice President, Regulatory and
  External Affairs, since May 1996. Prior to that he was employed by
  Commonwealth Telephone Company for 17 years, serving as Vice President of
  Revenue Requirements during the last year of his employment, and Director of
  Revenue Requirements for four years prior thereto.  He was appointed Senior
  Vice President, Administration in 2000.

Donald R. Breitenstein; Age 61; Senior Vice President, Chief Financial Officer

  Mr. Breitenstein has been employed by Conestoga since 1962. He worked as
  Accountant until September 1979, when he was appointed Accounting Supervisor.
  He was appointed Conestoga's Accounting Manager in 1981, and Controller in
  1986. He was appointed to the board of directors of Conestoga in 1987. He was
  elected the Company's Controller and a member of its Board at its
  organizational meeting in June, 1989.  He was appointed Sr. Vice President,
  CFO in 2000.

Thomas C. Keim; Age 56; Senior Vice President Local Exchange services

  Mr. Keim was appointed Senior Vice President, Telecom Group, of the Company in
  August, 1997. He had previously served as Vice President, Operations, since
  October, 1994, and prior to that as Conestoga's Network Services Manager since
  February 1984. Mr. Keim has been employed by Conestoga since 1964.

Kenneth A. Benner; Age 54; Secretary/Treasurer

  Mr. Benner has been employed by Conestoga since 1974. He was elected to the
  board of directors of Conestoga in 1972, and has served as its
  Secretary/Treasurer since 1982. He was elected Secretary/Treasurer and a
  member of the Company's Board at its organizational meeting in June, 1989. In
  June, 1996, he was appointed Vice President and General Manager of Buffalo
  Valley.

Harrison H. Clement, Jr.; Age 58; Senior Vice President Wireless Group

  Mr. Clement has been employed by the Company or one of its subsidiaries since
  the Company acquired Infocore on April 30, 1997.  In 2000, Mr. Clement was
  appointed the Company's Senior Vice President, Wireless Group, in charge of
  Infocore and Conestoga wireless.  Mr. Clement began his career in the
  telecommunications industry in 1966 with the Bell system, holding a variety of
  management positions of increasing responsibility until 1981. In 1981 he co-
  founded Infocore, serving as President since that time.

Stuart L. Kirkwood; Age 48; Senior Vice President, Technology Planning

  Mr. Kirkwood is Senior Vice President of Technology Planning for the Company.
  Mr. Kirkwood joined the Company in June 2000. Prior to that he was employed by
  Commonwealth Telephone Enterprises for 16 years, serving in various
  engineering and operations roles, the most recent being Vice President of
  Technology and Strategic Planning.

                                     -52-
<PAGE>

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)

                                   DIRECTORS


Current Class I Directors
(Term Expires in 2002)

     John R. Bentz (Age 66; Chairman of the Board) -- Mr. Bentz has been a
member of the Board since 1989, and has been Chairman of the Board since May,
1998.  He retired as President in May, 1998, a position he had held since May,
1996. He was employed by Conestoga continuously from 1958 until his retirement
on June 1, 1998. He is now serving as a consultant to the Company.   He has been
a member of Conestoga's board of directors since October, 1986.

     James H. Murray (Age 73; Vice Chairman; "Of Counsel" to Barley, Snyder,
Senft & Cohen, LLC, Attorneys-at-Law, Reading, PA) -- Mr. Murray has been a
member of the Board and a Vice President of the Company since June, 1989.  He
has been a member of the board of directors of Conestoga since 1957 and has been
a Vice President of Conestoga since June, 1988.  He retired as a partner of the
law firm of Miller and Murray, LLP, Reading, Pennsylvania, on December 31, 1998,
and is now "Of Counsel" to the law firm of Barley, Snyder, Senft & Cohen, LLC,
legal counsel to the Company.

     Robert M. Myers (Age 54; Director of Personnel, Reading Hospital and
Medical Center, Reading, PA) -- Mr. Myers has been a member of the Board since
1996.  He is the director of Personnel of the Reading Hospital and Medical
Center where he has been employed since 1982.

Current Class III Directors
(Term Expires in 2003)

     Richard G. Weidner (Age 75; Retired) -- Mr. Weidner has been a member of
the Board since June, 1989. He was appointed to the board of directors of
Conestoga in June 1988. He retired as President of Beard and Company, Inc.,
Certified Public Accountants, in 1986.

     Jean M. Ruhl (Age 60; Retired) -- Ms. Ruhl has been a member of the Board
since November, 1996.  She served as a member of the board of directors of
Buffalo Valley from 1990 until its acquisition by the Company in 1996.  She is
retired, having served as Chief Financial Officer and Manager of Solar Master
Film Corporation from 1974 until 1990.

     John M. Sausen,(Age 68; Self Employed Accountant, Oley, PA) -- Mr. Sausen
has been a member of the Board since June, 1989. He has been a member of the
board of directors of Conestoga since 1974.  He is an accountant with an office
in Oley, PA.

Current Class II Directors
(Term Expires in 2004)

     Kenneth A Benner (Age 54; Secretary/Treasurer) -- see description for Mr.
Benner, above.

     Thomas E. Brown (Age 49; Manager of Feed Division of F. M. Brown's Sons,
Inc., Feed and Flour Manufacturers, Sinking Spring, PA) -- Mr. Brown has been a
member of the Board since June, 1999.  He is Manager of the Feed Division of
F.M. Brown's Sons, Inc., feed and flour manufacturers, Sinking Spring,
Pennsylvania.

     Donald R. Breitenstein (Age 61; Senior Vice President and CFO) -- see
description for Mr. Breitenstein, above.

                                     -53-
<PAGE>

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (continued)

Section 16(a) Beneficial Ownership Reporting Compliance

     Section 16(a) of the Securities Exchange Act of 1934 requires the directors
and executive offices of the Company to file with the Securities and Exchange
Commission initial reports of ownership and reports of change in ownership of
common stock and other equity securities of the Company.  To the knowledge of
the Company, all Section 16(a) filing requirements applicable to its directors
and executive officers have been complied with.

ITEM 11.  SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

Director Compensation

     During 2001, the Company paid each non-employee member of the Board an
annual director's salary of $6,000.  In addition, the Company paid each such
person a fee of $750 for each meeting of the Board he or she attended and a fee
of $400 for each committee meeting he or she attended.  The directors were not
paid additional compensation for attending board or committee meetings of the
Company's subsidiaries.

     Messrs. Benner and Breitenstein are employees of the Company or one of its
subsidiaries and, as such, do not receive additional compensation for serving on
the Board of the Company or the boards of its subsidiaries or for attending
directors and committee meetings

Executive Compensation:

     The following table sets forth information concerning annual and long term
compensation for services in all capacities to the Company during the years
ended December 31, 2001, 2000 and 1999 of those persons who were, at December
31, 2001, the chief executive officer, or had served as such at any time during
2001, and the four other most highly compensated executive officers of the
Company whose compensation in 2001 exceeded $100,000 (the "Named Executive
Officers"):

                                     -54-
<PAGE>

                          SUMMARY COMPENSATION TABLE
                          --------------------------

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Long Term Compensation
                                                                     ---------------------------------------------------------------
                                       Annual Compensation                           Awards               Payouts
------------------------------------------------------------------------------------------------------------------------------------
       (a)                 (b)      (c)        (d)            (e)               (f)            (g)           (h)            (i)
------------------------------------------------------------------------------------------------------------------------------------

                                                                            Restricted      Securities
                                                            Other Annual       Stock        Underlying       LTIP        All Other
Name and Principal                              Bonus       Compensation      Awards         Option/        Payouts     Compensation
    Position                Year   Salary ($)  ($)/1/           ($)             ($)          SARs (#)         ($)           ($)/2/
------------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>    <C>         <C>          <C>             <C>            <C>              <C>         <C>
Albert H. Kramer,           2001     179,135   19,125           None             0                  0          0            7,752
President                   2000     166,192        0           None             0             10,000          0            7,875
                            1999     146,702   28,100           None             0              7,500          0            7,208
------------------------------------------------------------------------------------------------------------------------------------
Stuart L. Kirkwood/3/       2001     146,346   16,313           None             0              5,000          0            4,639
Senior Vice President,      2000      80,865        0           None             0             45,000          0            1,631
Technology Planning
------------------------------------------------------------------------------------------------------------------------------------
Joseph J. Laffey,           2001     138,192   15,188           None             0                  0          0            6,218
Senior Vice President,      2000     133,615        0           None             0              5,000          0            7,025
Administration              1999     126,048   24,300           None             0              3,750          0            6,084
------------------------------------------------------------------------------------------------------------------------------------
Harrison H. Clement, Jr.,   2001     129,230   14,625           None             0                  0          0            3,254
Senior Vice President,      2000     127,308        0           None             0              5,000          0            3,564
Wireless Services           1999     114,846   22,000           None             0              3,750          0            4,020
------------------------------------------------------------------------------------------------------------------------------------
Donald R. Breitenstein,
Senior Vice President       2001     124,692   13,781           None             0                  0          0           18,411
and Chief Financial         2000     121,721        0           None             0              5,000          0           18,666
Officer                     1999     117,117   22,580           None             0              3,750          0           17,466
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

1. The bonus is an incentive bonus paid to each of the Named Executive Officers
under the Company's annual executive incentive plan instituted in 1996.
2. "All Other Compensation" includes amounts contributed by the Company under
the Company's 401K plan in 2001 for the accounts of Messrs. Kramer, Kirkwood,
Laffey, Clement, and Breitenstein as follows:  $7,752, $4,639, $6,218, $3,254
and $5,611 respectively. For Mr. Breitenstein, the amount also includes amounts
accrued during each of the years stated in the table under Mr. Breitenstein's
employment contract with CT&T, described under the heading "Employment
Contract".
3.  Mr. Kirkwood joined the Company in 2000.

     During 2001 5,000 stock options were granted to one employee of the Company
under the Company's 1999 Stock Option Plan.

                                      -55-
<PAGE>

ITEM 11.  SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION (continued)

                     OPTION/SAR GRANTS IN LAST FISCAL YEAR
                     -------------------------------------

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Potential realized value at
                                        Individual Grants                                           assumed annual rates of
                                                                                                    stock price appreciation
                                                                                                    for option term/1/
-------------------------------------------------------------------------------------------------------------------------------
<S>                        <C>                <C>                 <C>               <C>             <C>           <C>
                              Number of          % of total
                              securities        Options/SARs        Exercise or
      Name                    underlying         granted to         Base Price       Expiration          5% ($)     10% ($)
                             options/SARs       employees in          ($/Sh)            Date
                             granted (#)         fiscal year
-------------------------------------------------------------------------------------------------------------------------------
      (a)                        (b)                 (c)                (d)              (e)            (f)            (g)
-------------------------------------------------------------------------------------------------------------------------------
Stuart L Kirkwood               5,000               100.0%             27.20           6/20/11        85,500         216,700
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

1.  Based on the price of Conestoga common stock on the grant date of $17.48.

                        AGGREGATED OPTION/SAR EXERCISES
                   AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
                   ------------------------------------------

(a)                 (b)          (c)              (d)             (e)
                                                  Number of
                                                  Securities      Value of
                                                  Underlying      Unexercised
                                                  Unexercised     In-the-Money
                                                  Options/SARs    Options/SARs
                    Shares                        At FY-End (#)   At FY-End ($)
                    Acquired on  Value Realized   Exercisable/    Exercisable/
Name                Exercise (#)       ($)        Unexercisable   Unexercisable
-------------------------------------------------------------------------------
Albert H. Kramer              0               0        0/17,500       0/216,775
Stuart L. Kirkwood            0               0        0/50,000       0/674,900
Joseph J. Laffey              0               0        0/ 8,750       0/108,388
Harrison H.
 Clement, Jr.                 0               0        0/ 8,750       0/108,388
Donald R.
 Breitenstein                 0               0        0/ 8,750       0/108,388

Report of the Compensation Committee

     Executive Compensation Program.  The Company's executive compensation
     ------------------------------
program is administered by the Board's Compensation Committee, composed of
Messrs. Murray, Weidner and Sausen.

     The executive compensation administered by the Committee is primarily that
of Albert H. Kramer, President and Chief Executive Officer; Thomas C. Keim,
Senior Vice President, Local Exchange Services; Joseph J. Laffey, Senior Vice
President, Administration; Donald R. Breitenstein, Senior Vice President and
CFO; Harrison H. Clement,

                                      -56-
<PAGE>

ITEM 11.  SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION (continued)

Jr., Senior Vice President, Wireless Services, and President, Infocore, Inc.;
and Stuart L. Kirkwood, Senior Vice President of Technology Planning.

     The Company's executive compensation program consists of three elements:
(i) annual base salary, (ii) potential annual cash incentive award (the
"Executive Incentive Plan"), and (iii) longer term incentives under a stock
option plan (the "Stock Option Plan").  The Company's executive compensation
plan is designed to achieve the following objectives:

     (1)  attracting and retaining key executives with outstanding abilities and
          motivating them to perform to the full extent of those abilities;

     (2)  supporting the Company's business mission of providing superior
          telecommunications services to its customers, continually increasing
          shareholder value and treating its employees fairly in the process;

     (3)  linking executive compensation to corporate financial performance and
          individual job performance; and

     (4)  aligning the interests of executives with the interests of
          shareholders through ownership of Company stock.

Base Compensation.

     Base salaries of executive officers are determined by evaluating the
responsibilities of their positions and by comparing salaries paid in the
competitive marketplace to executives with similar experience and
responsibilities.  The Company employs an outside compensation consulting firm
to review annually these comparisons and update the salary ranges for all salary
grades.  The Compensation Committee considers both financial and non-financial
performance measures in making salary adjustments.  In January 2001, the
Committee reviewed Mr. Kramer's performance during 2000. During 2000, the
Company saw continued growth in its competitive local exchange carrier (CLEC)
and its wireless PCS lines of business.  Based upon these and other
accomplishments, the Committee increased Mr. Kramer's base salary 8.82% to
$185,000.

Incentive Compensation.

     The Compensation Committee believes that executives should have a greater
portion of their compensation at risk than other employees.  In 1996, the
Company instituted the Executive Incentive Plan.  This plan allows the
participants to earn an annual bonus of 10-30% of base salary, if certain
corporate financial goals are met.  The goals are set annually by the Board of
Directors.  If these goals are not met, there is no payment for that year.  In
2001, the goals focused on increasing overall corporate revenues and cash flows.
By achieving these two goals the plan participants (including Mr. Kramer)
received incentive bonuses equal to 11.125% of base pay.

     In 1999, the shareholders approved the Company's Stock Option Plan which
allows the Company to issue incentive or nonqualified stock options to certain
key management employees.  The stock options vest over a three year period and
must be exercised within ten years of their vesting date, provided that the
stock options may, at the election of the option holders, vest at the close of a
change of control transaction with D&E Communications, Inc.  Stock options are
designed to reward executives as the fair market value of the stock increases.
In 2001 no options were granted to employees for merit rewards, but 5,000 stock
options were granted to Mr. Kirkwood as per his employment contract.

SUBMITTED BY THE COMPENSATION COMMITTEE OF THE COMPANY'S BOARD OF DIRECTORS:
James H. Murray
John M. Sausen
Richard G. Weidner

                                      -57-
<PAGE>

ITEM 11.  SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION (continued)

Compensation Committee Interlocks and Insider Participation

     Messrs. Murray, Weidner and Sausen are the members of the Company's
Executive Committee.

     During 2001, Mr. Murray was "Of Counsel" to the law firm of Barley, Snyder,
Senft & Cohen, LLC, 501 Washington Street, Reading, Pennsylvania, which firm
performed legal services for the Company and its subsidiaries.  Mr. Murray is
not a full time employee of the Company and is not compensated as such.  Mr.
Murray participates in all discussions and decisions concerning executive
compensation.

     Mr. Weidner provides consulting services to the Company.  He participates
in all discussions and decisions concerning executive compensation

Employment Contracts.

     Conestoga entered into a Restated Employment Agreement with Donald R.
Breitenstein, dated March 27, 2001, amending and restating an employment
agreement dated March 22, 1989, as amended on June 1, 1999, whereby Conestoga
agreed to pay to Mr. Breitenstein, or his estate, at such time as he (1) elects
to retire from the active and daily service of CT&T on or after December 31,
2002, (2) becomes disabled or (3) dies at any time during the period of
employment covered by the agreement, deferred compensation equal to ten percent
(10%) of his annual gross salary, before deductions, for each year he is
employed by Conestoga after January 1, 1989.  Such compensation is payable
commencing one (1) month after his retirement on or after his specified
retirement date, his disability or death, as applicable, in equal monthly
installments of 1/120 of the amount of additional compensation accumulated.  The
amount of $12,800 accrued in 2001 for Mr. Breitenstein under his contract and is
included in the Summary Compensation Table under the heading "all other
compensation".  The total amount accrued for Mr. Breitenstein under his contract
as of December 31, 2001 was $130,920 (the "Accumulated Deferred Compensation"),
which upon his retirement on or after December 31, 2002, disability or death
would provide him equal monthly payments of $1,091.00 for ten years.  The
obligation of Conestoga to make such payments is conditioned and contingent upon
Mr. Breitenstein remaining an employee of Conestoga until December 31, 2002,
unless prior to attaining such retirement age he dies, becomes disabled, or
terminates his employment with Conestoga for proper cause.  Conestoga is
obligated to employ Mr. Breitenstein until December 31, 2002, unless his
employment is terminated prior thereto as a result of his early retirement,
death, disability or proper cause.  Mr. Breitenstein's contract contains a
change of control provision, which provides that, if during the term of the
contract and after a change of control of the Company, his employment with
Conestoga is terminated, either by Mr. Breitenstein or Conestoga, Conestoga will
pay to him his annual salary, determined as of the date of the termination, for
a period of three years after the date of termination in such periodic
installments as were being paid at the time of the termination and also pay him
the Accumulated Deferred Compensation as though the date of the control
termination were December 31, 2002.

     The Company is a party to employment contracts with Messrs. Kramer,
Kirkwood and Laffey.  Infocore, Inc., a wholly-owned subsidiary of the Company,
is a party to an employment contract with Mr. Clement.  Each of these employment
contracts contains substantially similar provisions,  providing for a three-year
renewable term of employment.  Each prescribes the respective employee's
compensation, duties and the extent of his services.  If the employee's
employment is terminated by the Company or, in the case of Mr. Clement, by
Infocore, Inc., other than for cause, prior to the expiration of the term of the
contract, the Company or Infocore, as the case may be, will pay to the employee
an amount equal to the greater of: (i) fifty  percent (50%) of his annual salary
determined as of the date of termination of employment, or (ii) the aggregate
salary otherwise payable to him for the balance of the three (3) year term of
the contract.  The contracts include a change of control provision, which
provides that, if during the term of the contract and after a change of control
of the Company, the employee's employment with the Company is terminated, either
by the employee or the Company, the Company will pay to the employee his annual
salary, determined as of the date of the termination, for a period of three
years after the date of termination in such periodic installments as were being
paid at the time of the termination.  With respect to Mr. Clement, the change of
control provision applies to a change of control of Infocore as well as the
Company.

                                      -58-
<PAGE>

ITEM 11.  SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION (continued)

     The contract between the Company and Mr. Kramer is dated April 1, 2001, for
a three-year term commencing on March 1, 2001, and terminating on February 28,
2004.  The contract between the Company and Mr. Laffey is dated May 29, 1999,
for a three year term commencing on May 29, 1999, and terminating on May 28,
2002. The contract between Infocore, Inc. and Mr. Clement is dated June 30,
1999, for a three-year term commencing June 1, 1999, and terminating on May 31,
2002.  Infocore's obligations under the contract are guaranteed by the Company.
The contract between the Company and Mr. Kirkwood is dated June 5, 2000, for a
three year term terminating on June 4, 2003.

Pension Plan

     The following table shows the estimated annual pension benefits payable to
a covered participant at normal retirement age (65) under Conestoga's qualified
defined benefit pension plan for its employees with years of service ranging
from 15 through 40 years and earning compensation ranging from $100,000 to
$200,000:

                               PENSION PLAN TABLE
                               ------------------

                                Years of Service

Compensation      15      20      25      30      35      40
------------    ------  ------  ------  ------  ------  ------
100,000         15,000  20,000  25,500  31,000  37,500  44,000
110,000         16,500  22,000  28,050  34,100  41,250  48,400
120,000         18,000  24,000  30,600  37,200  45,000  52,800
130,000         19,500  26,000  33,150  40,300  48,750  57,200
140,000         21,000  28,000  35,700  43,400  52,500  61,600
150,000         22,500  30,000  38,250  46,500  56,250  66,000
160,000         24,000  32,000  40,800  49,600  60,000  70,400
170,000         25,500  34,000  43,350  52,700  63,750  74,800
180,000         27,000  36,000  45,900  55,800  67,500  79,200
190,000         28,500  38,000  48,450  58,900  71,250  83,600
200,000         30,000  40,000  51,000  62,000  75,000  88,000

     The normal retirement benefit at age 65 is 1.0% of the employee's "average
pay" multiplied by years of service to normal retirement date for the first
twenty (20) years of service; 1.1% for service in excess of twenty (20) years
but less than thirty (30) years; 1.3% for service in excess of thirty (30) years
but less than forty (40) years; and 1.0% for service in excess of forty (40)
years.  "Average pay" is defined as the average of the highest 5 consecutive
years of salary during an employee's last 10 years as a plan participant.  For
2001, the covered compensation for Messrs. Kramer, Kirkwood, Laffey and
Breitenstein were the amounts reported as "salary" for them in the Summary
Compensation Table.  Benefits are computed as straight-life annuity amounts.
The benefits listed in the Pension Plan Table are not subject to any deduction
for Social Security or other offset amounts.  Although the normal retirement age
is 65, an employee with ten years of service may retire at age 55 with
actuarially reduced benefits.  An employee who has attained the age of 55, but
not 65, may retire without any actuarial reduction of his benefits, if the sum
of his age and years of service with Conestoga is at least eighty (80) when he
retires.  The years and months of  service of an employee are equal to the total
length of time that he or she is employed by Conestoga.

                                      -59-
<PAGE>

ITEM 11.  SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION (continued)

SHAREHOLDER RETURN PERFORMANCE PRESENTATION

     Set forth below is a line graph comparing the yearly percentage change in
the cumulative total shareholder return on the Company's common stock against
the cumulative total return of the S & P 500 Stock Index and the S & P Telephone
Index for the period of five calendar years commencing on December 31, 1996 and
ending on December 31, 2001.

                Comparison of Five Year Cumulative Total Return

       -------------------------------------------------------------------------
   220  -----

   200  ------

   180  -----

   160  ------

   140  ------

   120  ---------

   100  ---------

    80  --------
       -------------------------------------------------------------------------
        Dec. 1996    Dec. 1997   Dec. 1998    Dec. 1999    Dec. 2000   Dec. 2001

              ---------------------------------------------
                   CEI        S&P 500            S&P TEL
              ---------------------------------------------

                1996      1997        1998        1999       2000       2001
CEI              100       127         153         133        124        235
S&P 500          100       133         171         208        189        166
S&P TEL.        1010       140         205         217        194        161
               DEC 96     DEC 97      DEC 98      DEC 99     DEC 00     DEC 01

                                      -60-
<PAGE>

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management
-------------------------------------------------------------------------

The following table reflects, as of February 28, 2002, the total common stock
ownership of the Company by each director and reporting officer, and by all
directors and executive officers as a group.  The Company's voting common stock
is its only class of voting equity securities.  Each named individual and all
members of the group exercise sole voting and investment power.


                                Amount and Nature of
  Name of Beneficial Owner    Beneficial Ownership/1,2/    Percent of Class/3/
-------------------------------------------------------------------------------
Kenneth A. Benner                      38,060                      *
-------------------------------------------------------------------------------
John R. Bentz                          14,431                      *
-------------------------------------------------------------------------------
Donald R. Breitenstein                 10,225                      *
-------------------------------------------------------------------------------
Thomas E. Brown                        27,155                      *
-------------------------------------------------------------------------------
James H. Murray                        52,815                      *
-------------------------------------------------------------------------------
Robert M. Myers                         6,038                      *
-------------------------------------------------------------------------------
Jean M. Ruhl                           75,000                      *
-------------------------------------------------------------------------------
John M. Sausen                        136,983                     1.66
-------------------------------------------------------------------------------
Richard G. Weidner                      4,410                      *
-------------------------------------------------------------------------------
Thomas C. Keim                         49,083                      *
-------------------------------------------------------------------------------
Stuart L. Kirkwood                          0                      *
-------------------------------------------------------------------------------
Albert H. Kramer                        5,027                      *
-------------------------------------------------------------------------------
Joseph J. Laffey                        3,931                      *
-------------------------------------------------------------------------------
Harrison H. Clement, Jr.               22,620                      *
-------------------------------------------------------------------------------
All Directors and Officers            449,517                     5.45%
as a Group (15 persons)
-------------------------------------------------------------------------------

1. Under the rules of the Securities and Exchange Commission, a person who
directly or indirectly has or shares voting power and/or investment power with
respect to a security is considered a beneficial owner of the security.  Shares
as to which voting power and/or investment power may be acquired within 60 days
are also considered as beneficially owned under these proxy rules.

2. These amounts include (a) shares beneficially owned by the director or
officer, his wife, minor children and relatives living in his house as required
by the rules of the Securities and Exchange Commission, and (b) shares deemed to
be beneficially owned because the director or officer has voting power or power
of disposition over the shares. Share amounts are reported as of February 28,
2002 and percentages of share ownership are calculated based upon 8,242,095
shares of Common Stock of the Company outstanding as of that date. The
information in the table is based upon data furnished to the Company by, or on
behalf of, the persons referred to in the table.

3. An asterisk (*) indicates percentage ownership is less than 1%.

     To the best of the Company's knowledge, no person or group beneficially
owns more than 5% of the company's outstanding common stock.

Change in Control

     The Company entered into an Agreement and Plan of Merger, dated November
21, 2001 (the "Agreement"), as subsequently amended and restated, with D&E
Communications, Inc.  The Agreement provides that all of the Company's
outstanding shares of common stock will be converted into cash, D&E
Communications common stock or a combination of the two as more particularly
described in the Agreement.  In addition, the Agreement provides that the

                                      -61-
<PAGE>

ITEM 12.  Security Ownership of Certain Beneficial Owners and Management
(continued)

Company will merge with and into D&E Communications, Inc.  This transaction is
subject to several conditions including, among others, approval of the
transaction by the Company's and D&E's shareholders and by the Company's federal
and state regulators.  If the transaction is completed, it will result in a
change in control of the Company.

ITEM 13

Certain Business Relationships

     Mr. Murray is "Of Counsel" to the law firm of Barley, Snyder, Senft &
Cohen, LLC., which firm provides legal services to the Company.

     Mr. Weidner and Mr. Bentz provide consulting services to the Company.

Certain Indebtedness
     None

                                      -62-
<PAGE>

                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

 (a)(1)  Financial Statements:

  The following consolidated financial statements of Conestoga Enterprises, Inc.
and subsidiaries are included in Part II, Item 8:

         Opinion of Independent Certified Public Accountants

         Consolidated balance sheets - December 31, 2001 and 2000

         Consolidated statements of operations - years ended December 31, 2001,
         2000 and 1999

         Consolidated statements of common stockholders' equity - years ended
         December 31, 2001, 2000, and 1999

         Consolidated statements of cash flows - years ended December 31, 2001,
         2000 and 1999

         Notes to consolidated financial statements

(a)(2)   Financial Statement Schedules

CONESTOGA ENTERPRISES, INC. AND SUBSIDIARIES

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
For the Years Ended December 31, 2001, 2000 and 1999
-----------------------------------------------------------------------------------------------------------------------------

                                                      Balance At                    Charged To                  Balance At
                                                      Beginning     Charged To        Other                       End Of
                  Description                         Of Period      Expenses        Accounts    Deductions       Period
-----------------------------------------------------------------------------------------------------------------------------
                                                                                  (In Thousands)
<S>                                                  <C>            <C>             <C>          <C>            <C>
Allowance for uncollectible accounts receivable:
  Year ended December 31, 2001                       $      747       $    221        $      -   $    (622)      $    346
  Year ended December 31, 2000                              609            986               -        (848)           747
  Year ended December 31, 1999                              265          1,177               -        (833)           609

Valuation allowance for deferred tax assets:
  Year ended December 31, 2001                            2,275          1,463               -           -          3,738
  Year ended December 31, 2000                            1,767            508               -           -          2,275
  Year ended December 31, 1999                              677          1,090               -           -          1,767
</TABLE>

  All other schedules are omitted because they are not applicable, not required,
or because the required information is included in the financial statements or
notes thereto.

 (a)(3) Exhibits -

        See Exhibit Index on following page.

                                      -63-
<PAGE>

  (b)  Reports on Form 8-K

         10/03/01re:  Ntelos, Inc. merger consideration examples

         11/27/01re:  Conditional agreement with D&E Commmunications, Inc.

         12/06/01re:  Termination of Ntelos Inc. agreement and effectiveness of
                      D&E Communications agreement

                               INDEX TO EXHIBITS

Exhibit Description                           Page in Manually Signed Original
-------------------                           --------------------------------

3.1   Articles of Incorporation, as amended   Incorporated by reference to
                                              Exhibit A of Company's Definitive
                                              Proxy Statement relating to its
                                              2000 Annual Meeting, filed with
                                              the Commission on April 14, 2000

3.2   By-laws                                 66

4     Relevant portions of the by-laws        Incorporated by reference to
                                              Exhibit 3 of Company's form 10-K,
                                              for the year ended December 31,
                                              1991, filed with the Commission on
                                              March __, 1992.

10.1  Amendment, dated March 27, 2001,        71
      to Agreement, dated March 22, 1989
      with Donald R. Breitenstein,

10.2  Agreement, dated April 1, 2001, with    75
      Albert H. Kramer

10.3  Agreement, dated May 29, 1999, with     Incorporated by reference to
      Joseph J. Laffey                        Exhibit "c" under the heading
                                              "Material Contracts" of the Index
                                              to Exhibits of Company's Form 10-
                                              K, for the year ended December 31,
                                              1998, filed with the Commission on
                                              March 30, 2000.

10.4  Agreement, dated June 30, 1999, with    Incorporated by reference to
      Harrison H. Clement, Jr.                Exhibit "d" under the heading
                                              "Material Contracts" of the Index
                                              to Exhibits of the Company's Form
                                              10-K, for the year ended December
                                              31, 1998, filed with the
                                              Commission on March 30, 2000.

10.5  Agreement, dated June 1, 1999, with     Incorporated by reference to
      Thomas C. Keim                          Exhibit "e" under the heading
                                              "Material Contracts" of the Index
                                              to Exhibits of Company's Form 10-
                                              K, for the year ended December 31,
                                              1998, filed with the Commission on
                                              March 30, 2000.

10.6  Agreement, dated June 5, 2000, with     Incorporated by reference to
      Stuart L. Kirkwood                      Exhibit "f" under the heading
                                              "Material Contracts" of the Index
                                              to Exhibits of Company's Form 10-K
                                              for the year ending December 31,
                                              1999, filed with the Commission on
                                              March 30, 2001.

                                      -64-
<PAGE>

12.    Statement re: Computation of Ratios            79

21.    Subsidiaries of the registrant                 80

23.    Consent of independent accountants             81

                                      -65-
<PAGE>

  Pursuant to the requirement of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.

                                        Conestoga ENTERPRISES, INC.

Date  March 25, 2002                    By  \s\ Albert H. Kramer
                                           ----------------------------
                                           Albert H. Kramer
                                           President

  Pursuant to the requirements of the Securities Exchange Act of 1934, this
report signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.

Date  3/25/02                             \s\ John R. Bentz
     ------------                       ----------------------------
                                        John R. Bentz
                                        Chairman of the Board

Date  3/25/02                             \s\ James H. Murray
     ------------                       ----------------------------
                                        James H. Murray
                                        Vice Chairman

Date  3/25/02                             \s\ Kenneth A Benner
     ------------                       ----------------------------
                                        Kenneth A. Benner
                                        Secretary/Treasurer

Date  3/25/02                             \s\ Donald R. Breitenstein
     ------------                       ----------------------------
                                        Donald R. Breitenstein
                                        Senior Vice President,
                                        Chief Financial Officer

Date  3/25/02                             \s\ Thomas E. Brown
     ------------                       ----------------------------
                                        Thomas E. Brown
                                        Director

Date  3/25/02                             \s\ John M. Sausen
     ------------                       ----------------------------
                                        John M. Sausen
                                        Director

Date  3/25/02                             \s\ Richard G. Weidner
     ------------                       ----------------------------
                                        Richard G. Weidner
                                        Director

Date  3/25/02                             \s\ Robert M. Myers
     ------------                       ----------------------------
                                        Robert M. Myers
                                        Director

Date  3/25/02                             \s\ Jean M. Ruhl
     ------------                       ----------------------------
                                        Jean M. Ruhl
                                        Director

Date  3/25/02                             \s\ Thomas C. Keim
     ------------                       ----------------------------
                                        Thomas C. Keim
                                        Sr. Vice President - Telecom Group

<PAGE>

Date  3/25/02                             \s\ Joseph J. Laffey
     ------------                       ----------------------------
                                        Joseph J. Laffey
                                        Sr. Vice President, Administrative

Date  3/25/02                             \s\ Harrison H. Clement, Jr.
     ------------                       ----------------------------
                                        Harrison H Clement, Jr.
                                        Sr. Vice President, Wireless Group

Date  3/25/02                             \s\ Stuart L. Kirkwood
     ------------                       ----------------------------
                                        Stuart L. Kirkwood
                                        Sr. Vice President, Technology