<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549
                                   FORM 10-Q/A


              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                For the quarterly period ended September 30, 2002

                                       or

             [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
            For the transition period from ___________ to ___________

                        Commission File Number: 000-20709

                            D&E Communications, Inc.
             (Exact name of registrant as specified in its charter)

                                  PENNSYLVANIA
                         (State or other jurisdiction of
                         incorporation or organization)


                I.R.S. Employer Identification Number: 23-2837108

                            Brossman Business Complex
                              124 East Main Street
                                  P. O. Box 458
                           Ephrata, Pennsylvania 17522
                    (Address of principal executive offices)


                  Registrant's Telephone Number: (717) 733-4101

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

              Class                           Outstanding at November 8, 2002
              -----                           -------------------------------

Common Stock, par value $0.16 per share              15,424,016  Shares
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                                   Form 10Q/A

                                EXPLANATORY NOTE


This Quarterly Report on Form 10-Q/A is being filed to restate and reclassify
financial statement and footnote information included in the Consolidated
Financial Statements included in Item 1 of Part I, and related disclosures in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 2 of Part I of the Registrant's original Quarterly Report on
Form 10-Q for the period ended September 30, 2002 filed on November 14, 2002.
Such changes were made to: (1) restate certain financial information relating to
the purchase price allocation of the Company's acquisition of Conestoga
Enterprises, Inc.; (2) reclassify Conestoga's wireless operations held for sale
from discontinued operations to continuing operations; and (3) correct the
maturities of long-term debt table included in the footnotes for incorrect
amounts for years 2004, 2005, and 2006. Note 1 to the Consolidated Financial
Statements in this Quarterly Report on Form 10-Q/A discloses the impact on the
Company's financial statements for the changes related to (1) and (2) above. The
change in disclosure for (3) above had no effect on the Registrant's balance
sheets, statements of operations, statements of cash flows and statements of
shareholders' equity included in the original Form 10-Q.




                                       i
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                                   Form 10-Q/A

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
Item No.                                                                    Page
--------                                                                    ----
<S>                                                                        <C>

                          PART I. FINANCIAL INFORMATION

     1.  Financial Statements

          Consolidated Statements of Operations --
               For the three months and nine months ended
               September 30, 2002 and 2001 .................................   1

          Consolidated Balance Sheets --
               September 30, 2002 and December 31, 2001 ....................   2

          Consolidated Statements of Cash Flows --
               For the nine months ended
               September 30, 2002 and 2001 .................................   3

          Consolidated Statements of Shareholders' Equity --
               For the nine months ended
               September 30, 2002 and 2001 .................................   4

          Notes to Consolidated Financial Statements ....................   5-21

     2.  Management's Discussion and Analysis of Financial

          Condition and Results of Operations............................  22-47

     3.  Quantitative and Qualitative Disclosures

          About Market Risk .............................................     48

     4.   Controls and Procedures .......................................     48

                           PART II. OTHER INFORMATION

     1.   Legal Proceedings ..............................................    49

     6.   Exhibits and Reports on Form 8-K ...............................    49

SIGNATURES................................................................    50

CERTIFICATIONS............................................................    51
</TABLE>



                                       ii
<PAGE>
Form 10-Q/A Part I - Financial Information
Item 1. Financial Statements


                   D & E Communications, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                    (in thousands, except per-share amounts)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                                  Three Months Ended      Nine Months Ended
                                                                                     September 30,           September 30,
                                                                                 --------------------    --------------------
                                                                                   (As                     (As
                                                                                 restated                restated
                                                                                   see                     see
                                                                                  Note 1)                 Note 1)
OPERATING REVENUES                                                                 2002        2001        2002        2001
                                                                                 --------    --------    --------    --------
<S>                                                                              <C>         <C>         <C>         <C>
 Communication service revenues ..............................................   $ 41,111    $ 15,925    $ 79,692    $ 45,938
 Communication products sold .................................................      3,556       3,192      10,524       9,414
 Other .......................................................................        570         375       1,428       1,152
                                                                                 --------    --------    --------    --------
    Total operating revenues .................................................     45,237      19,492      91,644      56,504
                                                                                 --------    --------    --------    --------

OPERATING EXPENSES

 Communication service expenses (exclusive of
    depreciation and amortization below) .....................................     16,609       7,921      32,234      20,707
 Cost of communication products sold .........................................      3,104       2,431       9,136       7,474
 Depreciation and amortization ...............................................      9,402       3,983      19,130      11,200
 Marketing and customer services .............................................      5,111       2,207      10,118       6,785
 Merger-related costs ........................................................          0           0         973           0
 General and administrative services .........................................      6,952       4,410      16,449      11,630
                                                                                 --------    --------    --------    --------
    Total operating expenses .................................................     41,178      20,952      88,040      57,796
                                                                                 --------    --------    --------    --------
         Operating income (loss) .............................................      4,059      (1,460)      3,604      (1,292)
                                                                                 --------    --------    --------    --------

OTHER INCOME (EXPENSE)

 Equity in net income (losses) of affiliates .................................       (914)      5,137      (2,091)      5,579
 Interest expense ............................................................     (4,383)       (682)     (7,139)     (1,600)
 Other-than-temporary loss on investments ....................................          0          --      (2,999)         --
 Other, net ..................................................................         91         346         292       1,090
                                                                                 --------    --------    --------    --------
    Total other income (expense) .............................................     (5,206)      4,801     (11,937)      5,069
                                                                                 --------    --------    --------    --------
         Income (loss) from continuing operations
            before income taxes and dividends on
            utility preferred stock ..........................................     (1,147)      3,341      (8,333)      3,777

INCOME TAXES AND DIVIDENDS ON
    UTILITY PREFERRED STOCK

 Income taxes ................................................................        (99)       (898)     (2,536)       (643)
 Dividends on utility preferred stock ........................................         16          16          49          49
                                                                                 --------    --------    --------    --------
    Total income taxes and dividends
       on utility preferred stock ............................................        (83)       (882)     (2,487)       (594)
                                                                                 --------    --------    --------    --------
         Income (loss) from continuing operations ............................     (1,064)      4,223      (5,846)      4,371

 Discontinued operations:
   Loss from operations of discontinued D&E Wireless segment prior to December
     31, 2001, net of income tax benefit of $390 and $1,942 ..................          0      (1,553)          0      (4,552)
   Gain on disposal of discontinued D&E Wireless
     segment, net of operating losses during phase-out
     period and net of income taxes of ($138) and  $29,337 ...................       (280)          0      55,506           0
   Loss from operations of Paging business, net of
     income tax or (benefit) of $7, $3, $2, and ($8) .........................         11           4           2         (13)
                                                                                 --------    --------    --------    --------
         Income (loss) before extraordinary item .............................     (1,333)      2,674      49,662        (194)

 Extraordinary item, income tax benefit of $107 ..............................          0           0           0         107
                                                                                 --------    --------    --------    --------
NET INCOME (LOSS) ............................................................   $ (1,333)   $  2,674    $ 49,662    $    (87)
                                                                                 ========    ========    ========    ========
 Weighted average common shares outstanding ..................................     15,401       7,379      11,188       7,384

BASIC AND DILUTED EARNINGS (LOSS)
 PER COMMON SHARE
 Income (loss) from continuing operations ....................................   $  (0.07)   $   0.57    $  (0.52)   $   0.59
 Income (loss) from discontinued operations ..................................      (0.02)      (0.21)       4.96       (0.62)
 Extraordinary item ..........................................................       0.00        0.00        0.00        0.02
                                                                                 --------    --------    --------    --------
     Net income (loss) per common share ......................................   $  (0.09)   $   0.36    $   4.44    $  (0.01)
                                                                                 ========    ========    ========    ========
 Dividends per common share ..................................................   $   0.13    $   0.13    $   0.38    $   0.38
                                                                                 ========    ========    ========    ========
</TABLE>



                 See notes to consolidated financial statements.


                                        1
<PAGE>
                   D & E Communications, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                      (in thousands, except share amounts)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                          (As restated
                                                                           see note 1)

                                                                          September 30,    December 31,
                                ASSETS                                        2002             2001
                                                                          -------------    ------------
CURRENT ASSETS
<S>                                                                       <C>              <C>
     Cash and cash equivalents ........................................       $   7,246       $     615
     Accounts receivable ..............................................          19,415          10,105
     Accounts receivable - PCS ONE ....................................           2,804           5,938
     Inventories, lower of cost or market, at average cost ............           3,451           1,781
     Prepaid expenses .................................................           4,626           3,817
     Other ............................................................             932             494
                                                                          -------------    ------------
          TOTAL CURRENT ASSETS ........................................          38,474          22,750
                                                                          -------------    ------------

INVESTMENTS

     Investments in and advances to affiliated companies ..............           5,356           6,431
     Investments available-for-sale ...................................           1,077           4,425
                                                                          -------------    ------------
                                                                                  6,433          10,856
                                                                          -------------    ------------
PROPERTY, PLANT AND EQUIPMENT

     In service .......................................................         300,833         178,274
     Under construction ...............................................           7,085           5,034
                                                                          -------------    ------------
                                                                                307,918         183,308
     Less accumulated depreciation ....................................         102,227          88,163
                                                                          -------------    ------------
                                                                                205,691          95,145
                                                                          -------------    ------------
OTHER ASSETS

     Conestoga wireless and paging assets held for sale ...............           6,665              --
     Goodwill .........................................................         147,488           5,126
     Intangible assets, net of amortization ...........................         180,513           1,017
     Deferred income taxes ............................................              --             905
     Other ............................................................          15,781           7,079
                                                                          -------------    ------------
                                                                                350,447          14,127
                                                                          -------------    ------------

     TOTAL ASSETS .....................................................       $ 601,045       $ 142,878
                                                                          =============    ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

     Borrowings under line of credit ..................................       $      --       $   1,757
     Long-term debt maturing within one year ..........................             129              52
     Accounts payable and accrued liabilities .........................          20,001          16,319
     Accrued taxes ....................................................          20,096             352
     Accrued interest and dividends ...................................           1,620             333
     Advance billings, customer deposits and other ....................           4,867           3,668
                                                                          -------------    ------------
          TOTAL CURRENT LIABILITIES ...................................          46,713          22,481
                                                                          -------------    ------------
LONG-TERM DEBT ........................................................         245,000          58,124
                                                                          -------------    ------------

OTHER LIABILITIES

     Equity in net losses of discontinued D&E Wireless
         operations in excess of investments and advances .............              --          10,388
     Deferred income taxes ............................................          89,261              --
     Other ............................................................          10,842           6,564
                                                                          -------------    ------------
                                                                                100,103          16,952
                                                                          -------------    ------------

PREFERRED STOCK OF UTILITY SUBSIDIARY, Series A 4 1/2%, par value $100,
     cumulative, callable at par at the option of the Company,
     authorized 20,000 shares, outstanding  14,456 shares .............           1,446           1,446
                                                                          -------------    ------------
COMMITMENTS

SHAREHOLDERS' EQUITY

     Common stock, par value $0.16, authorized shares 30,000,000 ......           2,508           1,219
     Outstanding shares:   15,418,317 at September 30, 2002
                            7,362,226 at December 31, 2001
     Additional paid-in capital .......................................         157,897          39,956
     Accumulated other comprehensive income (loss) ....................          (3,050)         (2,833)
     Retained earnings ................................................          55,532          10,637
     Treasury stock at cost, 276,908 shares at September 30, 2002
          276,900 shares at December 31, 2001 .........................          (5,104)         (5,104)
                                                                          -------------    ------------
                                                                                207,783          43,875
                                                                          -------------    ------------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .......................       $ 601,045       $ 142,878
                                                                          =============    ============
</TABLE>



                 See notes to consolidated financial statements.


                                        2
<PAGE>
                   D & E Communications, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  September 30
                                                                             ----------------------
                                                                               2002         2001
                                                                             ---------    ---------
                                                                               (As
                                                                             restated
                                                                               see
                                                                              Note 1)

<S>                                                                          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES OF
     CONTINUING OPERATIONS ...............................................   $  13,380    $   7,531
                                                                             ---------    ---------

CASH FLOWS FROM INVESTING ACTIVITIES

     Capital expenditures, net of proceeds from sales and removal costs ..     (16,227)     (28,217)
     Business acquisition costs, net of cash acquired of $989 ............    (156,439)          --
     Proceeds from sale of temporary investments .........................          --       34,671
     Purchase of temporary investments ...................................          --      (26,002)
     Investments in and advances to affiliates ...........................      (1,567)      (9,259)
     Returns of investments and repayments from affiliates ...............         550          453
                                                                             ---------    ---------

          Net Cash Used In Investing Activities from Continuing Operations    (173,683)     (28,354)
                                                                             ---------    ---------

CASH FLOWS FROM FINANCING ACTIVITIES

     Dividends on common stock ...........................................      (4,574)      (2,579)
     Payments on long-term debt ..........................................     (44,991)         (51)
     Proceeds from long-term debt financing ..............................     160,000           --
     Payment of debt issuance costs ......................................      (7,999)          --
     Net proceeds from (payments on) revolving lines of credit ...........     (11,757)      25,233
     Proceeds from issuance of common stock ..............................         739          263
     Purchase of treasury stock ..........................................          --         (931)
                                                                             ---------    ---------

          Net Cash Provided By Financing Activities from
               Continuing Operations .....................................      91,418       21,935
                                                                             ---------    ---------

CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS .........................     (68,885)       1,112

CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS
     Cash Provided by (Used in) Operating Activities of
          Discontinued Operations ........................................          70          865
     Cash Provided by (Used in) Investing Activities of
          Discontinued Operations ........................................      75,446       (4,944)
                                                                             ---------    ---------

          Net Cash Provided By (Used In) Discontinued Operations .........      75,516       (4,079)
                                                                             ---------    ---------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .........................       6,631       (2,967)

CASH AND CASH EQUIVALENTS
     BEGINNING OF PERIOD .................................................         615        3,527
                                                                             ---------    ---------

     END OF PERIOD .......................................................   $   7,246    $     560
                                                                             =========    =========
</TABLE>


                 See notes to consolidated financial statements.


                                        3
<PAGE>
                    D&E Communications, Inc. and Subsidiaries

                 Consolidated Statements of Shareholders' Equity


             For the nine months ended September 30, 2002 and 2001


                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                            2002                      2001
                                                                    ---------------------     ---------------------
                                                                        (As restated
                                                                         see Note 1)
                                                                     Shares       Amount       Shares      Amount
                                                                    --------    ---------     --------    ---------
COMMON STOCK
<S>                                                                 <C>         <C>           <C>         <C>
       Balance at beginning of year ............................       7,639    $   1,219        7,608    $   1,214

       Common stock issued for acquisition .....................       7,877        1,260           --           --
       Common stock issued for Employee Stock Purchase, Long-
          Term Incentive and Dividend Reinvestment Plans .......         137           22           24            3
       Common stock issued for stock options exercised .........          42            7           --           --
                                                                    --------    ---------     --------    ---------
       Balance at September 30 .................................      15,695        2,508        7,632        1,217
                                                                    --------    ---------     --------    ---------

ADDITIONAL PAID-IN CAPITAL
       Balance at beginning of year ............................                   39,956                    39,374

       Common stock issued for acquisition .....................                  115,668                        --
       Common stock issued for Employee Stock Purchase, Long-
          Term Incentive and Dividend Reinvestment Plans .......                    1,890                       442
       Common stock issued for stock options exercised .........                      383                        --
                                                                                ---------                 ---------
       Balance at September 30 .................................                  157,897                    39,816
                                                                                ---------                 ---------

ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
       Balance at beginning of year ............................                   (2,833)                      467

       Unrealized gain (loss) on investments ...................                   (2,042)                    1,584
       Loss realized on other-than-temporary decline, net of tax                    1,825                        --
                                                                                ---------                 ---------
       Balance at September 30 .................................                   (3,050)                    2,051
                                                                                ---------                 ---------

RETAINED EARNINGS
       Balance at beginning of year ............................                   10,637                    18,366

       Net income (loss) .......................................                   49,662                       (87)
       Dividends on common stock: $.38, $.38 per share .........                   (4,767)                   (2,761)
                                                                                ---------                 ---------
       Balance at September 30 .................................                   55,532                    15,518
                                                                                ---------                 ---------
TREASURY STOCK
       Balance at beginning of year ............................        (277)      (5,104)        (226)      (4,059)

       Treasury stock acquired .................................          --           --          (52)        (995)
                                                                    --------    ---------     --------    ---------
       Balance at September 30 .................................        (277)      (5,104)        (278)      (5,054)
                                                                    --------    ---------     --------    ---------
TOTAL SHAREHOLDERS' EQUITY .....................................      15,418    $ 207,783        7,354    $  53,548
                                                                    ========    =========     ========    =========
</TABLE>



<TABLE>
<CAPTION>
                                                                     Three Months Ended         Nine Months Ended
                                                                        September 30              September 30
                                                                      2002        2001          2002        2001
                                                                    --------    ---------     --------    ---------
COMPREHENSIVE INCOME (LOSS)
<S>                                                                 <C>         <C>           <C>          <C>
       Net income (loss) .......................................    ($ 1,333)    $  2,674     $ 49,662     ($    87)
       Unrealized gain (loss) on investments, net of income
            taxes of ($105), $277, ($1,303) and $941 ...........        (174)         429       (2,042)       1,584
       Loss realized on other-than-temporary decline,
            net of tax of $1,387 ...............................          --           --        1,825           --
                                                                    --------    ---------     --------    ---------
       Total comprehensive income (loss) .......................    ($ 1,507)    $  3,103     $ 49,445     $  1,497
                                                                    ========    =========     ========    =========
</TABLE>



                 See notes to consolidated financial statements.


                                        4
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


(1)   RESTATEMENT AND DISCONTINUED OPERATIONS

      RESTATEMENT

The financial statements for the three and nine months ended September 30, 2002
have been restated in order to properly state the purchase price allocation for
the Company's acquisition of Conestoga Enterprises, Inc. on May 24, 2002,
including depreciation and amortization changes necessary to reflect proper
asset lives for tangible and intangible assets.


The financial statements for the three and nine months ended September 30, 2002
included a preliminary purchase price allocation for D&E's acquisition of
Conestoga Enterprises, Inc. As part of the preliminary purchase price
allocation, the Company estimated the fair value of assets acquired and
liabilities assumed including one intangible asset of $30,000 for customer base
and a resultant goodwill of $230,647. The Company also estimated depreciable
asset lives on property, plant and equipment similar to D&E's existing lives.


Prior to the issuance of our financial statements for the year ended December
31, 2002, the Company finalized its valuation with the independent appraisers.
The final valuation resulted in recognition of additional intangible assets,
changes in estimated fair values and changes in estimated useful lives of the
tangible and intangible assets. The most significant impact resulted from
changes to shorten the estimated useful life of property, plant and equipment
from the lives used in the Company's preliminary evaluation. See note 2 for an
updated footnote regarding the acquisition and purchase price allocation.

      DISCONTINUED OPERATIONS

In order to present appropriate comparative information to our investors, the
financial statements for the three and nine months ended September 30, 2002 have
been reclassified in order to classify the operations of the Conestoga Wireless
Company within continuing operations versus discontinued operations. Prior to
the issuance of our financial statement for the year ended December 31, 2002,
the Company became aware of certain factors related to the Company's November
12, 2002 Conestoga Wireless Company sale agreement, which sale was consummated
on January 12, 2003, that were deemed to constitute continuing involvement thus
precluding recognition of the operations as discontinued operations under
Statement of Financial Accounting Standard No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". Subsequent to sale, D&E will
continue to guarantee payment on cell site leases and D&E will have certain
financial and construction responsibilities under a cell site build-to-suit
agreement.


                                        5
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                             PURCHASE      CONESTOGA
THREE MONTHS ENDED SEPTEMBER 30, 2002       AS PREVIOUSLY      PRICE       WIRELESS
                                              REPORTED      RESTATEMENT     RECLASS     AS RESTATED
                                             -----------    -----------    ---------    -----------
<S>                                          <C>            <C>            <C>          <C>
Operating Revenues:
     Communication service revenue           $    37,931    $        --    $   3,180    $    41,111
     Communication products sold                   3,467             --           89          3,556
     Other revenue                                   568             --            2            570
          Total revenues                          41,966             --        3,271         45,237
Operating Expenses:                                                  --
     Communication service expenses               14,780             --        1,829         16,609
     Cost of communication products sold           2,625             --          479          3,104
     Depreciation and amortization                 7,064          2,338           --          9,402
     Marketing and customer services               4,744             --          367          5,111
     Merger-related costs                             --             --           --             --
     General and administrative services           5,940             --        1,012          6,952
          Total operating expense                 35,153          2,338        3,687         41,178
Operating income (loss)                            6,813         (2,338)        (416)         4,059
Income taxes (benefit)                             1,037         (1,013)        (123)           (99)
Income (loss) from continuing operations             554         (1,324)        (294)        (1,064)
Income (loss) from discontinued operations          (563)            --          294           (269)
Net income (loss)                            $        (9)   $    (1,324)   $      --    $    (1,333)
     Basic and diluted earnings per share
     From continuing operations              $      0.04    $     (0.09)   $   (0.02)   $     (0.07)
     From discontinued operations            $     (0.04)   $        --    $    0.02    $     (0.02)
     Net income (loss) per common share      $        --    $     (0.09)   $      --    $     (0.09)
</TABLE>



                                        6
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                              PURCHASE      CONESTOGA
NINE MONTHS ENDED SEPTEMBER 30, 2002         AS PREVIOUSLY      PRICE        WIRELESS
                                                REPORTED     RESTATEMENT     RECLASS     AS RESTATED
                                              -----------    -----------    ---------    -----------
<S>                                           <C>            <C>            <C>          <C>
Operating Revenues:
     Communication service revenue            $    75,777    $        --    $   3,915    $    79,692
     Communication products sold                   10,406             --          118         10,524
     Other revenue                                  1,425             --            3          1,428
          Total revenues                           87,608             --        4,036         91,644
Operating Expenses:                                    --
     Communication service expenses                29,995             --        2,239         32,234
     Cost of communication products sold            8,493             --          643          9,136
     Depreciation and amortization                 16,519          2,596           15         19,130
     Marketing and customer services                9,606             --          512         10,118
     Merger-related costs                             973             --           --            973
     General and administrative services           15,126             --        1,323         16,449
          Total operating expense                  80,712          2,596        4,732         88,040
Operating income (loss)                             6,896         (2,596)        (696)         3,604
Income taxes (benefit)                             (1,170)        (1,122)        (244)        (2,536)
Income (loss) from continuing operations           (3,920)        (1,474)        (452)        (5,846)
Income (loss) from discontinued operations         55,056             --          452         55,508
Net income (loss)                             $    51,136    $    (1,474)   $      --    $    49,662

Basic and diluted earnings per share
     From continuing operations               $     (0.35)   $     (0.13)   $   (0.04)   $     (0.52)
     From discontinued operations             $      4.92    $        --    $    0.04    $      4.96
     Net income (loss) per common share       $      4.57    $     (0.13)   $      --    $      4.44

Cash flows provided by operating activities   $    16,070    $    (2,238)   $    (452)   $    13,380
Cash flows from investing activities          $  (175,921)   $     2,238    $      --    $  (173,683)
Cash flows from discontinued operations       $    75,064    $        --    $     452    $    75,516
</TABLE>



                                        7
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                    PURCHASE      CONESTOGA
                                   AS PREVIOUSLY      PRICE        WIRELESS
AT SEPTEMBER 30, 2002                 REPORTED     RESTATEMENT     RECLASS    AS RESTATED
                                    -----------    -----------    ---------   -----------
<S>                                 <C>            <C>            <C>         <C>
Current assets                      $    39,188    $      (714)   $      --   $    38,474
Property, plant and equipment           308,904           (986)          --       307,918
Accumulated depreciation                (99,716)        (2,511)          --      (102,227)
Assets held for sale                     18,715        (12,050)          --         6,665
Goodwill                                222,289        (74,801)          --       147,488
Intangible assets, net                   36,898        143,615           --       180,513
Other                                    19,178         (3,397)          --        15,781
     Total assets                   $   551,889    $    49,156    $      --   $   601,045

Current liabilities                 $    46,843    $      (130)   $      --   $    46,713
Deferred income taxes                    38,903         50,358           --        89,261
Other                                    10,440            402           --        10,842
Retained earnings                        57,006         (1,474)          --        55,532
Shareholders' equity                    209,257         (1,474)          --       207,783
     Total liabilities and equity   $   551,889    $    49,156    $      --   $   601,045
</TABLE>



(2)   BASIS OF PRESENTATION

      The accompanying consolidated financial statements include the accounts of
D&E Communications, Inc. and its wholly owned subsidiaries. D&E Communications,
Inc., including its subsidiary companies, is defined and referred to herein as
D&E. On May 24, 2002, D&E completed its acquisition of Conestoga Enterprises,
Inc. (Conestoga). The following subsidiaries of Conestoga are included in D&E's
September 30, 2002 results since the date of the completion of the acquisition:

      -     The Conestoga Telephone and Telegraph Company and Buffalo Valley
            Telephone Company, which are incumbent rural local exchange carriers
            providing both regulated and nonregulated communication services;

      -     CEI Networks, Inc., which provides long distance and competitive
            local telephone services;

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

      -     Conestoga Investment Corporation, an investment holding company;

      -     Conestoga Mobile Systems, which provides paging communication
            services and has been reported as a discontinued operation; and


                                        8
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)



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


      The accompanying financial statements are unaudited and we have prepared
them pursuant to generally accepted accounting principles and the rules and
regulations of the Securities and Exchange Commission (SEC). In the opinion of
management, the financial statements include all adjustments (consisting of
normal recurring adjustments) necessary to present fairly our results of
operations, financial position and cash flows for the periods presented. Certain
items in the financial statements for the three months and nine months ended
September 30, 2001 have been reclassified for comparative purposes to conform to
the current period's presentation. In addition, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to SEC rules and regulations. The use of
generally accepted accounting principles 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 amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates. We believe that the
disclosures made are adequate to make the information presented not misleading.
These financial statements should be read in conjunction with D&E's financial
statements and notes thereto included in our Annual Report on Form 10-K/A for
the fiscal year ended December 31, 2001 and with D&E's Current Report on Form
8-K related to the completion of its acquisition of Conestoga filed with the
Securities and Exchange Commission on June 10, 2002.

(3)   ACQUISITION OF BUSINESS


On May 24, 2002, D&E completed the acquisition of Conestoga Enterprises, Inc.
(Conestoga), a neighboring rural local telephone company providing integrated
communications services throughout the eastern half of Pennsylvania. The
acquisition was completed through the merger of Conestoga with and into D&E
Acquisition Corp., a wholly-owned subsidiary of D&E, pursuant to the Amended and
Restated Agreement and Plan of Merger, dated as of January 9, 2002.



As of September 30, 2002, the purchase price allocation was preliminary and had
been determined by D&E based on the report of independent appraisers. As
disclosed in Note 1, the final appraisal was completed subsequently. The final
purchase-price allocation reflecting the results from the final appraisal is as
follows:


<TABLE>
<S>                                                                                   <C>
Consideration paid:

     Cash consideration to Conestoga stockholders .................................   $149,422
     Transaction costs ($937 paid in 2001 and $5,401 paid as of September 30, 2002)      6,718
     D&E stock to Conestoga stockholders (7,876,655 shares) at $14.57 per share
          based on 3-day average market price per share prior to close of the
          merger on May 24, 2002 ..................................................    114,763
     Fair value of Conestoga stock options ........................................      2,165
                                                                                      --------
     Purchase price ...............................................................   $273,068
                                                                                      ========
</TABLE>


                                        9
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


<TABLE>
<S>                                                                                   <C>
Assets acquired:

     Cash .........................................................................   $    989
     Accounts receivable ..........................................................      9,542
     Inventories ..................................................................      1,918
     Prepaid expenses .............................................................     14,596
     Other current assets .........................................................        103
     Property, plant and equipment ................................................    111,788
     Other non-current assets .....................................................      1,601
     Net assets of wireless and paging operations, held for sale ..................      6,665
     Customer base (10-15 year life) ..............................................     75,700
     Franchise (indefinite life) ..................................................    104,800
     Trademark (3 year life) ......................................................      1,200
     Goodwill .....................................................................    142,362
                                                                                      --------
     Total assets acquired ........................................................   $471,264
                                                                                      --------
</TABLE>


<TABLE>
<S>                                                                                   <C>
Liabilities assumed:

     Long-term debt and lines of credit ...........................................   $ 79,178
     Accounts payable and accrued liabilities .....................................      8,542
     Accrued transaction costs ($2,605 paid through September 30, 2002) ...........      2,605
     Accrued taxes ................................................................     10,298
     Advance billings, customer deposits and other ................................      1,208
     Deferred income taxes ........................................................     86,172
     Other ........................................................................      7,427
     Capital lease obligations ....................................................      2,766
                                                                                      --------
     Total liabilities assumed ....................................................   $198,196
                                                                                      --------

Net assets acquired ...............................................................   $273,068
                                                                                      ========
</TABLE>


The Statement of Operations includes $973 of costs related to the merger
including $839 of costs related to an abandoned debt offering contemplated to
finance the acquisition, as well as $134 of severance costs for terminating
certain D&E employees as a result of the merger.



The following unaudited pro forma combined results of operations is provided for
illustrative purposes only and assumes that this acquisition had occurred as of
the beginning of each of the periods presented. The following unaudited pro
forma information should not be relied upon as necessarily being indicative of
the historical results that would have been obtained if this acquisition had
actually occurred during those periods, nor the results that may be obtained in
the future.


<TABLE>
<CAPTION>
                                     Three months ended     Nine months ended
                                        September 30,         September 30,
                                     ------------------   ----------------------
                                            2001            2002         2001
                                          --------        --------     --------
<S>                                       <C>             <C>          <C>
Pro forma operating revenues              $ 43,441        $129,427     $125,442
Pro forma income (loss) before
     extraordinary items                  $  3,479        $ 49,951     $  2,148
Pro forma net income                      $  3,479        $ 49,951     $  2,225
Pro forma income (loss) per share         $   0.23        $   3.32     $   0.15
</TABLE>


                                       10
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


(4)   INTANGIBLE ASSETS

      On January 1, 2002, we adopted Statement of Financial Accounting Standards
No. 142, "Goodwill and Other Intangible Assets" (SFAS 142), which addresses the
accounting for goodwill and intangible assets subsequent to their acquisition.
With the adoption of SFAS 142, goodwill is no longer subject to amortization. As
an indefinite lived asset, goodwill is still subject to at least an annual
assessment for impairment. We have completed our transitional intangible
impairment test, and based upon a discounted future cash flows model, the
goodwill has been deemed to not be impaired.


      SFAS 142 also requires that goodwill and indefinite-lived intangible
assets be tested annually for impairment using a two-step process. The first
step is to identify a potential impairment by comparing the fair value of
reporting units to their carrying value and, upon adoption, must be measured as
of the beginning of the fiscal year. As of January 1, 2002, the results of the
first step indicated no potential impairment of the D&E's goodwill. We will
perform this assessment annually. Should the results of the first step of the
impairment testing indicate a potential impairment, the second step would be
completed to measure the amount of any impairment loss.


      The annual assessment will be performed by an independent appraisal firm.
In performing the evaluation to determine if an impairment exists, the appraisal
firm is expected to use information from various sources including, but not
limited to, current stock price, transactions involving similar companies, the
business plan prepared by management and current and past operating results of
the Company among other information. The estimates used by the appraisal firm
may be different from those used by management in the preparation of its
business plan or from the current operating results of the Company and those
differences may be material. The assessment could be impacted by future events
such as, the stock price of the Company, being either higher or remaining at
current or lower prices for a significant period of time, transactions announced
or completed prior to the completion of the evaluation, regulatory or other
developments as well as the actual operating results of the Company.


      The elimination of goodwill amortization net of tax would have reduced net
loss by approximately $384 for the three months and $1,099 for the nine months
ended September 30, 2001, or $0.06 and $0.15 respectively per basic and diluted
share. Pro forma net loss and loss per share information are shown as if the
provisions of SFAS No. 142 were in effect for fiscal 2001.



                                       11
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                              Three months               Nine months
                                           ended September 30        ended September 30,
                                        ------------------------   -----------------------
(Dollars in thousands, except
      per share amounts)
------------------------
                                           2002          2001         2002         2001
                                        ----------    ----------   ----------   ----------
<S>                                     <C>           <C>          <C>          <C>
Income (loss) before
   extraordinary item                   ($   1,333)   $    2,674   $   49,662   ($     194)
Extraordinary item                              --            --           --          107
                                        ----------    ----------   ----------   ----------
Reported net income (loss)              ($   1,333)   $    2,674   $   49,662   ($      87)
Add: Goodwill amortization                      --           384           --        1,099
                                        ----------    ----------   ----------   ----------
Adjusted net income (loss)              ($   1,333)   $    3,058   $   49,662        1,012
                                        ----------    ----------   ----------   ----------
Basic and diluted earnings per share:
   Income (loss) before
   extraordinary item                   ($    0.09)   $     0.36   $     4.44   ($    0.03)
Extraordinary item                              --            --           --         0.02
                                        ----------    ----------   ----------   ----------
Reported net income (loss)              ($    0.09)   $     0.36   $     4.44   ($    0.01)
Add: Goodwill amortization                      --          0.06           --         0.15
                                        ----------    ----------   ----------   ----------
Adjusted net income (loss)              ($    0.09)   $     0.42   $     4.44   $     0.14
                                        ----------    ----------   ----------   ----------
</TABLE>


      As a result of the Conestoga acquisition described in Note 3 as well as
previous acquisitions, the intangible assets and related accumulated
amortization recorded on our balance sheets are as follows:



<TABLE>
<CAPTION>
                             As of September 30, 2002    As of December 31, 2001
                             ------------------------    ------------------------
                               Gross                      Gross
                             carrying    Accumulated     carrying    Accumulated
                              amount     amortization     amount     amortization
                             --------    ------------    --------    ------------
<S>                          <C>         <C>             <C>         <C>
Customer base                $ 75,700       $ (1,838)         $--             $--
Franchise                     104,800              --          --              --
Trademarks and
     Trade names                1,200            (133)         --              --
Non-compete agreements          1,424            (640)      1,450            (433)
                             --------    ------------    --------    ------------
Total intangible assets      $183,124    $     (2,611)   $  1,450    $       (433)
                             ========    ============    ========    ============
</TABLE>



      Aggregate amortization expense related to these intangible assets recorded
for the nine-months ended September 30, 2002 was $2,211. Estimated amortization
expense for succeeding years is as follows:


<TABLE>
For the year ended:
<S>                        <C>
     December 31, 2002     $3,851
     December 31, 2003      6,198
     December 31, 2004      6,198
     December 31, 2005      5,824
     December 31, 2006      5,513
</TABLE>


                                       12
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


(5)   DISCONTINUED OPERATIONS

      D&E WIRELESS

      D&E's fifty percent partnership interest in D&E/Omnipoint Wireless Joint
Venture, L.P. (PCS ONE) and the related contract services D&E provides to PCS
ONE constitute a separate segment of our business. On October 17, 2001, D&E
entered into a definitive agreement to sell its interest in PCS ONE to
VoiceStream Wireless Corporation for $117,000 less working capital and long-term
debt adjustments.

      The assets and liabilities and results of operations of D&E Wireless are
reported as discontinued operations in accordance with APB Opinion No. 30 with a
measurement date of December 31, 2001. The only assets or liabilities held for
sale were the equity in net losses of PCS ONE, which were classified as equity
in net losses of discontinued D&E Wireless operations in excess of investments
and advances in the balance sheet.

      In accordance with EITF 85-36, beginning January 1, 2002, through disposal
date (the phase-out period), losses from D&E Wireless were deferred because it
was reasonably assured that the ultimate disposition of this business would
result in the recognition of a gain. Losses were deferred until a gain on sale
was recognized.

      On April 1, 2002, D&E consummated its sale of PCS ONE. The related
contract services D&E provided to PCS ONE were terminated subsequent to the
sale, after a six-month post closing period.


      Upon completion of the sale, D&E received $74,168 in cash, subject to post
closing adjustments as set forth in the sale agreement. These adjustments were
finalized in the third quarter of 2002 and resulted in additional cash proceeds
of $2,287, which were collected in October, 2002. In addition, D&E received
equipment with a fair value of approximately $2,014. Selling and other estimated
costs, offset by post-closing adjustments, are approximately $1,542 and
associated income taxes are estimated at $29,325. The gain on sale recognized
was $55,413 after eliminating the $10,098 liability for the equity in net losses
of discontinued D&E Wireless operations in excess of investments and advances.
The proceeds from the sale of PCS ONE were used to help finance the acquisition
of Conestoga Enterprises, Inc. (see Note 3).



                                       13
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


      Summarized financial information for the discontinued operations of D&E
Wireless Services is as follows:

<TABLE>
<CAPTION>
                                           Three months            Nine months
                                        Ended September 30,     Ended September 30,
                                       --------------------    --------------------
                                         2002        2001        2002        2001
                                       --------    --------    --------    --------
<S>                                    <C>         <C>         <C>         <C>
Revenue                                $    729    $  3,133    $  4,741    $  8,704
Expenses                                    709       2,822       4,299       7,932
                                       --------    --------    --------    --------
     Operating income                        20         311         442         772
Equity in net loss of PCS ONE                --      (2,315)     (1,605)     (7,359)
Phase-out losses deferred until sale         --          --       1,268          --
Gain on sale of PCS ONE                    (162)         --      84,738          --
Other income                                 --          61          --          93
                                       --------    --------    --------    --------
     Income (loss) from D&E wireless
          Operations before taxes          (142)     (1,943)     84,843      (6,494)
Income taxes                                138        (390)     29,337      (1,942)
                                       --------    --------    --------    --------
     Income (loss) from D&E wireless
          Operations, net of taxes     $   (280)   $ (1,553)   $ 55,506    $ (4,552)
                                       --------    ========    ========    ========
</TABLE>


      The summarized results of operations of PCS ONE were as follows:


<TABLE>
<CAPTION>
                         Three months               Nine months
                      Ended September 30,       Ended September 30,
                      -------------------      ----------------------
                       2002        2001          2002          2001
                      ------     --------      --------      --------
<S>                   <C>        <C>           <C>           <C>
Net sales             $   --     $ 13,485      $ 12,312      $ 33,751
Net loss              $   --     $ (4,630)       (3,211)      (14,718)
Our share of loss     $   --     $  2,315        (1,605)       (7,359)
</TABLE>


PAGING SERVICES

      During the third quarter, we committed to a plan to sell the assets of
Conestoga Mobile Systems' and D&E's paging operations. We expect to sell the
business within a year. No liabilities are expected to be included as part of
the sale. The carrying amount of the major classes of assets included as part of
the business to be sold are as follows:

<TABLE>
<CAPTION>
                         September 30, 2002
                         ------------------
<S>                      <C>
Inventories                     $ 47
Property & equipment             168
                                ----
     Total                      $215
                                ----
</TABLE>


                                       14
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


     Summarized income statement information for the discontinued operations of
the paging services were as follows:


<TABLE>
<CAPTION>
                                      Three months           Nine months
                                  ended September 30,    ended September 30,
                                  -------------------    -------------------
                                   2002        2001       2002        2001
                                  -------     -------    -------     -------
<S>                               <C>         <C>        <C>         <C>
Revenue                              $183        $ 24       $294        $ 78
Expenses                              166          17        290          99
                                  -------     -------    -------     -------
Operating income (loss)                17           7          4        (21)
Income taxes (benefit)                  7           3          2         (8)
                                  -------     -------    -------     -------
Income (loss) from Paging
     operations, net of taxes        $ 10        $  4       $  2       ($13)
</TABLE>


(6)   SALE OF CONESTOGA WIRELESS ASSETS


On May 24, 2002, we acquired Conestoga Enterprises, Inc. (see Note 3). From the
date of acquisition, D&E had committed to a plan to sell the assets of
Conestoga's wireless segment. As such, certain assets are held for sale in
accordance with Statement of Financial Accounting Standards No. 144 "Accounting
for the Impairment or Disposal of Long-Lived Assets." The assets are not
depreciated while they are held for sale. D&E expects to sell the business
within a year from acquisition. No liabilities are expected to be included as
part of the sale.



     On November 12, 2002, we entered into a definitive agreement to sell
substantially all of the assets of the Conestoga wireless segment to Keystone
Wireless, LLC ("Keystone"), a Delaware limited liability company. Keystone is an
affiliate of PC Management, Inc., a Ft. Myers, Florida-based company that owns
and manages wireless communications systems throughout the United States of
America. Upon completion of the sale, CWC will receive $10.0 million in cash and
D&E will receive $10.0 million in a secured promissory note issued by Keystone,
each subject to certain purchase price adjustments to be determined after
closing. Proceeds from the sales price, including adjustments, less costs to
sell are estimated at the $9,650 value recorded in the balance sheet and there
will be no gain or loss recorded as a result of a sale. The sale is subject to
final regulatory approval by the Federal Communications Commission and other
customary closing conditions.


     The carrying amount of the major classes of assets included as part of the
Conestoga wireless business to be sold are as follows:



<TABLE>
<S>                                                        <C>
Inventories                                                $   166
Property & equipment                                         9,084
PCS licenses                                                   400
                                                           -------
     Total assets held for sale                              9,650
Less: Fair value of lease guarantee remaining with D&E      (3,200)
                                                           -------
     Net assets held for sale                              $ 6,450
</TABLE>




(7)   INVESTMENTS IN AFFILIATED COMPANIES

      As of December 31, 2001, we owned a one-third investment in EuroTel L.L.C.
(EuroTel), a domestic corporate joint venture. EuroTel held a 100% investment in
PenneCom, B.V. (PenneCom), an international telecommunications holding company
that held a 100% investment in Pilicka Telefonia, Sp.zo.o (Pilicka), a
telecommunications company located in Poland.

      As of December 31, 2001, PenneCom was indebted to EuroTel for $10,656 and
to the investors in EuroTel for $36,751 (including $14,623 to D&E). PenneCom
agreed with EuroTel and the EuroTel investors to satisfy a portion of its
indebtedness to EuroTel and the founders by transferring PenneCom's entire
equity


                                       15
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


interests in Pilicka to EuroTel and the founders. PenneCom satisfied $3,384 of
its indebtedness to EuroTel by transferring 22.56% of the capital stock of
Pilicka to EuroTel, satisfied $4,650 of its indebtedness to D&E by transferring
31.00% of the capital stock of Pilicka to D&E, and satisfied $6,966 of
indebtedness to the other EuroTel investors by transferring 46.44% of the
capital stock of Pilicka to the other EuroTel investors. The total amount of
indebtedness satisfied by PenneCom was equal to the total estimated fair value
of Pilicka at December 31, 2001. These transactions were effective as of January
1, 2002.

      As a result of the transactions described above, D&E now has a 31.00%
direct ownership in Pilicka and an indirect 7.52% ownership in Pilicka, through
its continuing one-third interest in EuroTel. D&E accounts for both its
investment in EuroTel and its investment in Pilicka using the equity method of
accounting.

      The summarized results of operations of EuroTel were as follows:


<TABLE>
<CAPTION>
                                  Three months             Nine months
                               ended September 30,     ended September 30,
                              --------------------    --------------------
                                2002        2001        2002        2001
                              --------    --------    --------    --------
<S>                           <C>         <C>         <C>         <C>
Net sales                     $     --    $  1,868    $     --    $  5,542
Net income (loss)               (1,683)     15,411      (2,730)     16,737
Our share of income (loss)        (561)      5,137        (910)      5,579
</TABLE>


      The summarized results of operations of Pilicka were as follows:

<TABLE>
<CAPTION>
                                Three months            Nine months
                            ended September 30,     ended September 30,
                            -------------------     -------------------
                                    2002                   2002
                                  -------                 -------
<S>                               <C>                     <C>
Net sales                         $ 2,235                 $ 6,958
Net loss                          $  (753)                $(2,677)
Our share of loss                 $  (234)                  $(830)
Investment Amortization           $  (119)                  $(351)
Total loss                        $  (353)                $(1,181)
</TABLE>


(8)   ACCOUNTING CHANGES AND RECENT ACCOUNTING PRONOUNCEMENTS

      In June 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities," which requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
The provisions of this Statement are effective for exit or disposal activities
initiated after December 31, 2002 and are not expected to have a material effect
on the Company's results of operations, financial position or cash flows.

      In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections as of April 2002" ("SFAS No. 145"), which rescinded or amended
various existing standards. One change addressed by this Statement pertains to
treatment of extinguishments of debt as an extraordinary item. SFAS No. 145
rescinds SFAS No. 4,


                                       16
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


"Reporting Gains and Losses from Extinguishment of Debt," and states that an
extinguishment of debt cannot be classified as an extraordinary item unless it
meets the unusual or infrequent criteria outlined in Accounting Principles Board
("APB") Opinion No. 30, "Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" ("APB No. 30"). The provisions of SFAS 145 are effective for
fiscal years beginning after May 15, 2002 and provide that extinguishments of
debt that were previously classified as an extraordinary item in prior periods
that do not meet the criteria in APB No. 30 for classification as an
extraordinary item shall be reclassified. The adoption of SFAS No. 145 is not
expected to have a material effect on the Company's results of operations,
financial position or cash flows.


      In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). This Statement
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
For Long-Lived Assets to be Disposed Of" ("SFAS No. 121"), and the accounting
and reporting provisions of APB No. 30. However, certain provisions of SFAS No.
121 and APB No. 30 have been maintained. The Company adopted SFAS No. 144
effective January 1, 2002. We have determined that there is no impairment to any
long-lived assets. We have also accounted for the planned sale of the Conestoga
wireless operations and the combined Conestoga and D&E paging operations in
accordance with SFAS 144 (Notes 5 and 6).


      In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations" ("SFAS No. 143"). This Statement establishes common
accounting practices relating to legal obligations associated with the
retirement of tangible long-lived assets that result from the acquisition,
construction, development or normal operation of a long-lived asset. The Company
will adopt SFAS No. 143 on January 1, 2003. The adoption is not expected to have
a material effect on the Company's results of operations, financial position or
cash flows.

(9)   LONG-TERM DEBT

      During the second quarter of 2002 in connection with the Conestoga
acquisition (Note 3), we incurred additional indebtedness to finance a portion
of the acquisition and to repay certain existing indebtedness and related fees
and we also assumed certain existing indebtedness of Conestoga. The following
table sets forth total long-term debt outstanding:

<TABLE>
<CAPTION>
                                Interest rate
                               at September 30,                September 30,    December 31,
Description                          2002          Maturity        2002             2001
--------------------------     ----------------    --------    -------------    ------------
<S>                            <C>                 <C>         <C>              <C>
Senior Secured Revolving
    Credit Facility                  5.81%           2009           $ 32,250        $  8,000
Senior Secured Term Loan B           5.95%           2010            125,000              --
Senior Secured Term Loan A           6.07%           2011             50,000          50,000
Secured Term Loan                    9.34%           2014             20,000              --
Secured Term Loan                    9.36%           2014             15,000              --
Capital lease obligations                                              2,879             176
                                                               -------------    ------------
                                                                     245,129          58,176
Less current maturities                                                  129              52
                                                               -------------    ------------
Total long-term debt                                                $245,000        $ 58,124
                                                               =============    ============
</TABLE>


                                       17
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


      Senior Secured Revolving Credit Facility:

      The Senior Secured Revolving Credit Facility ("Credit Facility") is a
$75,000 8 -1/2-year senior secured reducing revolving credit facility. The
Credit Facility requires interest only payments for two years initially with
increasing quarterly principal reductions of the amount available to borrow
beginning in the third quarter of 2004 and continuing through the fourth quarter
of 2009. Interest is payable at a base rate or at one, two, three or six month
LIBOR rates plus an applicable margin based on our leverage ratio. At September
30, 2002 the interest rate was 5.81%. The Credit Facility also requires a
quarterly commitment fee on the unused portion.

      Senior Secured Term Loan B:

      We have outstanding a new 8 -1/2-year variable rate Senior Secured Term
Loan B ("Term Loan B") for $125,000. Term Loan B bears interest at our option at
either the U.S. prime rate plus 1.75% to 3.00% or at LIBOR plus 2.50% to 4.00%,
depending on our total leverage ratio. At September 30, 2002 the average
interest rate was 5.95%. Term Loan B requires interest only payments for two
years initially with increasing quarterly principal payments beginning in the
third quarter of 2004 and continuing through the fourth quarter of 2010.

      Senior Secured Term Loan A:

      The Secured Senior Term Loan A ("Term Loan A") bears interest at a base
rate or at either the U.S. prime rate plus 2.00% to 3.125% or at LIBOR plus
2.625% to 4.125%, depending on our leverage ratio. At September 30, 2002 the
average interest rate was 6.07%. The Term Loan A requires interest only payments
for three years initially with increasing quarterly principal payments beginning
in the third quarter of 2004 and continuing through the second quarter of 2011.

      9.34% Secured Term Loan:


      The 9.34% Secured Term Loan was assumed as a result of the Conestoga
acquisition (Note 3) and has been recorded at its book value, which approximates
fair value. The 9.34% Secured Term Loan requires interest to be paid quarterly
at the stated rate and also requires principal to be paid in quarterly
installments of $500 beginning in 2005 and continuing through 2014.


      9.36% Secured Term Loan:


      The 9.36% Secured Term Loan was assumed as a result of the Conestoga
acquisition (Note 3) and has been recorded at its book value, which approximates
fair value. The 9.36% Secured Term Loan requires interest to be paid quarterly
at the stated rate and also requires principal to be paid in quarterly
installments of $375 beginning in 2005 and continuing through 2014.



      D&E's indebtedness requires that the Company maintain certain financial
and operational covenants. The most restrictive covenant is the total leverage
ratio. At September 30, 2002, D&E was in compliance with all covenants. We are
also required to maintain interest rate protection on one-half of the total
amount of senior indebtedness outstanding, with a weighted average life of at
least 2 years, beginning on November 24, 2002.


      Based on the borrowing rate currently available to us for bank loans, the
book value of long-term debt approximates the fair market value.


                                       18
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


      Maturities of long-term debt, for each year ending December 31, 2002
through 2006, excluding capital lease obligations are as follows:




<TABLE>
<CAPTION>
                              Year         Aggregate Amount
                              ----         ----------------
<S>                                        <C>
                              2002                $   --
                              2003                    --
                              2004                 8,750
                              2005                21,000
                              2006                27,250
</TABLE>




      At December 31, 2001, we had $1,757 outstanding under our lines of credit
with domestic banks. As of May 24, 2002 in connection with the obtaining of our
new revolving credit facility, the Company terminated its lines of credit and
repaid all amounts outstanding.

      Capital lease obligations:

      As a result of the Conestoga acquisition, we assumed a long-term lease
agreement for a building that requires monthly rent payments of approximately
$24, including interest at 7.95% through April 2020. In addition, D&E has
equipment leases that require monthly payments of $5 through October 2004.

(10)  INVESTMENTS, AVAILABLE-FOR-SALE

      During the second quarter of 2002, the company determined that the decline
in value of two of its available-for-sale securities was other than temporary.
As such, D&E recorded a $2,999 realized loss with a corresponding tax benefit of
$1,174.

(11)  BUSINESS SEGMENT DATA


      Our segments, excluding the Paging segment, which is now reported as a
discontinued segment, are RLEC, CLEC, Internet Services, Systems Integration and
Conestoga Wireless. In the first quarter of 2002 we renamed our ILEC segment our
"RLEC" segment and our Networking Services segment our "Systems Integration"
segment to better define these businesses. The measure of profitability for our
segments is operating income.



                                     19
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)



<TABLE>
<CAPTION>
                                  External Revenues    Intersegment Revenues   Operating Income (Loss)
                                 Three months ended     Three months ended      Three months ended
                                    September 30,          September 30,          September 30,
                                 -------------------   ---------------------   -----------------------
            Segment                2002       2001       2002        2001        2002         2001
------------------------------   --------   --------   --------    ---------   ---------    ----------
<S>                              <C>        <C>        <C>         <C>         <C>          <C>
RLEC .........................   $ 25,518   $ 10,754   $  2,384    $   1,372   $  6,951       $  1,230
CLEC .........................      7,716      1,560        146          108     (1,050)        (1,186)
Internet Services ............      1,226        583        107            7        (69)          (593)
Systems Integration ..........      6,201      6,035          7           44       (674)          (855)
Conestoga Wireless ...........      3,245         --         36           --       (447)            --
Corporate, Other
and Eliminations .............      1,331        560     (2,680)      (1,531)      (652)           (56)
                                 --------   --------   --------    ---------   ---------    ----------
Total ........................   $ 45,237   $ 19,492   $     --    $      --   $  4,059       $ (1,460)
                                 ========   ========   ========    =========   =========    ==========
</TABLE>




<TABLE>
<CAPTION>

                                  External Revenues    Intersegment Revenues   Operating Income (Loss)
                                  Nine months ended      Nine months ended       Nine months ended
                                    September 30,          September 30,          September 30,
                                 -------------------   ---------------------   -----------------------
            Segment                2002       2001       2002        2001        2002         2001
------------------------------   --------   --------   --------    ---------   ---------    ----------
<S>                              <C>        <C>        <C>         <C>         <C>          <C>
RLEC .........................   $ 50,985   $ 30,787   $  4,185    $   3,557    $ 10,372    $    6,134
CLEC .........................     13,308      4,970        373          219      (2,991)       (2,776)
Internet Services ............      3,086      1,201        150           18        (539)       (1,733)
Systems Integration ..........     17,687     17,384         32           82      (2,029)       (2,768)
Conestoga Wireless ...........      4,010         --         42           --        (851)           --
Corporate, Other .............
and Eliminations .............      2,568      2,162     (4,782)      (3,876)       (358)         (149)
                                 --------   --------   --------    ---------   ---------    ----------
Total ........................   $ 91,644   $ 56,504   $     --    $      --    $  3,604    $   (1,292)
                                 ========   ========   ========    =========   =========    ==========
</TABLE>



                                       20
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

               Item 1. Notes to Consolidated Financial Statements
               ---------------------------------------------------
                        (Dollar amounts are in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                 Segment Assets
                                            -----------------------
                                            September     December
              Segment                        30, 2002     31, 2001
---------------------------------------     ---------     ---------

<S>                                         <C>           <C>
RLEC ..................................     $ 491,732     $ 151,303
CLEC ..................................        64,371        12,232
Internet Services .....................         4,776         1,775
Systems Integration ...................        20,206        14,787
Conestoga Wireless ....................         6,665
Corporate, Other
and Eliminations ......................        13,295       (37,219)
                                            ---------     ---------
Total .................................     $ 601,045     $ 142,878
                                            =========     =========
</TABLE>


      The following table shows a reconciliation of the results for the business
segments to the applicable line items in the consolidated financial statements
as follows:



<TABLE>
<CAPTION>
                                                    Three months ended      Nine months ended
                                                       September 30,          September 30,
                                                     2002        2001        2002        2001
                                                   --------    --------    --------    --------
<S>                                                <C>         <C>         <C>         <C>
Operating income (loss) from reportable segments   $  4,711    $ (1,404)   $  3,962    $ (1,143)
Corporate, other and eliminations ..............       (652)        (56)       (358)       (149)
Equity in net income (losses) of affiliates ....       (914)      5,137      (2,091)      5,579
Interest expense ...............................     (4,383)       (682)     (7,139)     (1,600)
Loss on investments ............................          --         --      (2,999)         --
Other, net .....................................         91         346         292       1,090
                                                   --------    --------    --------    --------
Income (loss) from continuing operations
before income taxes and dividends
on utility preferred stock .....................   $ (1,147)   $  3,341    $ (8,333)   $  3,777
                                                   ========    ========    ========    ========
</TABLE>



                                       21

<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


      The following discussion should be read in conjunction with our
consolidated financial statements, including the notes thereto, included in this
quarterly report on Form 10-Q. Monetary amounts presented in the following
discussion are rounded to the nearest thousand dollars. Certain items in the
financial statements for the three months and nine months ended September 30,
2001 have been reclassified for comparative purposes.

      OVERVIEW

      We are a leading rural local telephone company providing integrated
communications services to residential and business customers in markets
throughout the eastern half of Pennsylvania. We operate an incumbent rural local
telephone company, or RLEC, in parts of Berks, Lancaster, Union and smaller
portions of three other adjacent counties in Pennsylvania, and a competitive
local telephone company, or CLEC, in the Lancaster, Harrisburg, Reading,
Altoona, Pottstown, State College and Williamsport, Pennsylvania metropolitan
areas, which we refer to as our edge-out markets. We offer our customers a
comprehensive package of communications services including local and long
distance telephone, high speed data, and Internet access services. We also
provide business customers with integrated voice and data network solutions.


     Our segments, excluding our D&E Wireless and paging services, which, as
discussed below, are reported as discontinued segments, are RLEC, CLEC, Internet
Services, Systems Integration and Conestoga Wireless. The measure of
profitability for our segments is operating income.


     Our RLEC revenue is derived primarily from network access charges, local
telephone service, enhanced telephone services and regional toll service.
Network access revenue consists of charges paid by long distance and wireless
companies for access to our network in connection with the completion of long
distance telephone calls. Local telephone service revenue consists of charges
for local telephone services, including monthly charges for basic local service.
Enhanced telephone services revenue is derived from providing special calling
features, such as caller ID, call waiting and a telemarketer call-blocking
service. Regional long distance revenue is derived from providing regional long
distance services to our RLEC customers.

     Our CLEC revenue is derived primarily from network access charges, local
telephone service, enhanced telephone services and long distance service
revenue. Network access revenue consists of charges paid by long distance
companies and other non-CLEC customers for access to our network in connection
with the completion of long distance telephone calls. Local telephone service
revenue consists of charges for local telephone services, including monthly
charges for basic local service. Enhanced telephone services revenue is derived
from providing special calling features, such as caller ID, call waiting and a
telemarketer call-blocking service. Long distance revenue consists of charges
for both national and regional long-distance services, a portion of which is
provided on a resale basis.

                                       22
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


     Our Internet Services revenue is derived from dial-up and high speed
Internet access services, in addition to web hosting services. We market these
services primarily in our RLEC and CLEC service areas.

     Our Systems Integration revenue is derived from sales of services that
support the design, implementation and maintenance of local and wide area
networks and telecommunications systems. In addition, we sell data and voice
communications equipment and provide custom computer programming service. We
market these products and services primarily in our RLEC and CLEC service areas.


     Conestoga Wireless revenue is derived from providing wireless Personal
Communication Service, including local and long distance telephone services, and
from the sale of wireless communications equipment. We market these products and
services in certain of our RLEC and CLEC markets.



     Our operating costs and expenses primarily include wages and related
employee benefit costs, depreciation and amortization, selling and advertising,
software and information system services and general and administrative
expenses. Our RLEC segment incurs costs related to network access charges,
directory expense, and other operations expenses such as digital electronic
switch expense, engineering and testing costs. Our CLEC incurs costs related to
leased network facilities associated with providing local telephone service to
customers, engineering costs, and network access costs for local calls and long
distance expense. Our Internet Services segment incurs leased network facilities
costs for our dial-up Internet service and for our DSL
Internet service. Our Systems Integration business incurs expenses primarily
related to wages and employee benefit costs, and equipment and materials used in
the course of the installation and provision of our products and services. Our
Conestoga Wireless Segment incurs costs related to network facilities to provide
wireless Personal Communications Service, engineering costs, network access
costs and costs of wireless communications equipment sold.


      We incur access line-related capital expenditures associated with access
line additions, expenditures for upgrading existing facilities and costs related
to the provision of DSL and dial-up Internet services in our RLEC and CLEC
territories. We believe that our capital expenditures related to CLEC access
line growth are generally associated with additional customers and therefore
tend to result in incremental revenue. We believe that our additional capital
expenditures relating to our investment in software and systems will provide us
with a competitive advantage in the marketplace and generally allow for
corresponding reductions in operating expenses through increased operating
efficiencies.

      As of December 31, 2001, we owned a one-third investment in EuroTel L.L.C.
(EuroTel), a domestic corporate joint venture. EuroTel held a 100% investment in
PenneCom, B.V. (PenneCom), an international telecommunications holding company
that held a 100% investment in Pilicka Telefonia, Sp.zo.o (Pilicka), a
telecommunications company located in Poland.

      As of December 31, 2001, PenneCom was indebted to EuroTel and the
investors in EuroTel, including D&E. PenneCom agreed with EuroTel and the
EuroTel investors to satisfy a portion of its indebtedness to EuroTel and the
founders by transferring PenneCom's entire equity interests in Pilicka to
EuroTel and the founders. The total amount of indebtedness satisfied by PenneCom
was equal to the total estimated fair value of Pilicka at December 31, 2001. As
a result of these transactions, we now have a 31.00% direct ownership in Pilicka
and a 7.52% indirect ownership in Pilicka, through our continuing one-third
interest in EuroTel.


                                       23
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


We account for both our investment in EuroTel and Pilicka using the equity
method of accounting. We currently are exploring strategic alternatives with
regard to these investments.

      On April 1, 2002, we completed the sale of our investment in PCS ONE,
whose results, along with related contract services provided to PCS ONE, have
been reported as a discontinued segment.

      On May 24, 2002, we completed our acquisition of Conestoga Enterprises,
Inc. ("Conestoga"), a neighboring rural local exchange carrier providing
integrated communications services throughout the eastern half of Pennsylvania.
The acquisition was completed through the merger of Conestoga with and into D&E
Acquisition Corp. (the "Merger Sub"), a wholly-owned subsidiary of D&E, pursuant
to the Amended and Restated Agreement and Plan of Merger, dated as of January 9,
2002 (the "Merger Agreement"), by and among D&E, Conestoga and the Merger Sub
(the "Merger"). We paid cash consideration of $149,422 and issued 7,876,655
shares of D&E common stock to Conestoga shareholders pursuant to the Merger
Agreement. We also assumed existing indebtedness of Conestoga and outstanding
options issued pursuant to Conestoga equity compensation plans.

      In connection with the Merger, we entered into an Amended and Restated
Credit Agreement dated May 24, 2002 (the "Credit Agreement") with CoBank, ACB
("CoBank"), as a lender and administrative agent and certain other lenders. The
Credit Agreement provides for a new $125 million 8-1/2 year variable rate senior
secured term loan and a $25 million increase to our existing $50 million
revolving credit facility provided by CoBank. The Credit Agreement is also the
governing document for our existing $50 million term loan from CoBank. On May
24, 2002, we borrowed the $125 million term loan and $35 million under the
revolving credit facility. These borrowings, along with proceeds from the sale
of our interest in PCS ONE, were used to pay the cash portion of the Merger as
well as to repay certain existing indebtedness and related fees and expenses.
The $125 million term loan and borrowings under the $75 million revolving credit
facility bear interest at our option at either the U.S. prime rate plus 1.75% to
3.00% or at LIBOR plus 2.50% to 4.00%, depending on our total leverage ratio.
The $50 million term loan bears interest at our option at either the U.S. prime
rate plus 2.00% to 3.125% or at LIBOR plus 2.625% to 4.125%, depending on our
total leverage ratio. We are also required to maintain interest rate protection
on one-half of the total amount of senior indebtedness outstanding, with a
weighted average life of at least 2 years, beginning on November 24, 2002.

      During the third quarter of 2002, we committed to a plan to sell the
paging assets of Conestoga Mobile Systems' and D&E's operations. Accordingly, we
have reflected our wireless assets as available-for-sale while including the
results of Conestoga Wireless as part of operating activity because there is a
continuing involvement in building out tower sites and a lease guarantee related
to certain tower sites. Our paging businesses were reported as discontinued
operations in our financial statements.

      In connection with the integration of the Conestoga acquisition, we
reviewed certain of our access line count methodologies. As a result of this
process, the total number of our RLEC access lines was adjusted upward by 526
lines from the number of RLEC lines reported at June 30, 2002. In addition, the
total


                                       24
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


number of our CLEC lines was adjusted downward by 2,879 lines from the number of
CLEC lines reported at June 30, 2002. The count correction and conforming the
methodology had no impact on revenues or expenses. We believe that at September
30, 2002 our count methodologies are applied consistently throughout our
organization.

RESULTS OF OPERATIONS

      The following table is a summary of our operating results by segment for
the three months ended September 30, 2002 and 2001:




<TABLE>
<CAPTION>
                                                                                               CORPORATE,
                                                       INTERNET      SYSTEMS     CONESTOGA     OTHER AND       TOTAL
                                  RLEC       CLEC      SERVICES    INTEGRATION    WIRELESS    ELIMINATIONS    COMPANY
                                --------   --------    --------    -----------    --------    ------------    -------
     THREE MONTHS ENDED
     SEPTEMBER 30, 2002
-----------------------------
<S>                             <C>        <C>         <C>         <C>            <C>         <C>             <C>
Revenues - External              $25,518    $ 7,716    $  1,226    $     6,201    $  3,245    $      1,331    $45,237
Revenues - Intercompany            2,384        146         107              7          36          (2,680)        --
                                --------   --------    --------    -----------    --------    ------------    -------
Total Revenues                    27,902      7,862       1,333          6,208       3,281          (1,349)    45,237
                                --------   --------    --------    -----------    --------    ------------    -------
Depreciation and Amortization      7,685      1,021         118            405          --             173      9,402
Other Operating Expenses          13,266      7,891       1,284          6,477       3,728            (870)    31,776
                                --------   --------    --------    -----------    --------    ------------    -------
Total Operating Expenses          20,951      8,912       1,402          6,882       3,728            (697)    41,178
                                --------   --------    --------    -----------    --------    ------------    -------
Operating Income (Loss)            6,951     (1,050)        (69)          (674)       (447)           (652)     4,059
                                --------   --------    --------    -----------    --------    ------------    -------
</TABLE>




<TABLE>
<CAPTION>
                                                                                               CORPORATE,
                                                       INTERNET      SYSTEMS      CONESTOGA    OTHER AND       TOTAL
                                  RLEC       CLEC      SERVICES    INTEGRATION    WIRELESS    ELIMINATIONS    COMPANY
                                --------   --------    --------    -----------    --------    ------------    -------
     THREE MONTHS ENDED
     SEPTEMBER 30, 2001
-----------------------------
<S>                             <C>        <C>         <C>         <C>            <C>         <C>             <C>
Revenues - External             $ 10,754    $ 1,560       $ 583        $ 6,035                        $560    $19,492
Revenues - Intercompany            1,372        108           7             44                      (1,531)        --
                                --------   --------    --------    -----------    --------    ------------    -------
Total Revenues                    12,126      1,668         590          6,079                        (971)    19,492
                                --------   --------    --------    -----------    --------    ------------    -------
Depreciation and Amortization      2,913        149          69            769                          83      3,983
Other Operating Expense            7,983      2,705       1,114          6,165                        (998)    16,969
                                --------   --------    --------    -----------    --------    ------------    -------
Total Operating Expenses          10,896      2,854       1,183          6,934                        (915)    20,952
                                --------   --------    --------    -----------    --------    ------------    -------
Operating Income (Loss)            1,230     (1,186)       (593)          (855)                        (56)    (1,460)
                                --------   --------    --------    -----------    --------    ------------    -------
</TABLE>



                                       25
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


      The following table is a summary of our operating results by segment for
the nine months ended September 30, 2002 and 2001:



<TABLE>
<CAPTION>
                                                                                               CORPORATE,
                                                       INTERNET      SYSTEMS     CONESTOGA     OTHER AND       TOTAL
                                  RLEC       CLEC      SERVICES    INTEGRATION    WIRELESS    ELIMINATIONS    COMPANY
                                --------   --------    --------    -----------    --------    ------------    -------
    NINE MONTHS ENDED
    SEPTEMBER 30, 2002
-----------------------------
<S>                             <C>        <C>         <C>         <C>            <C>         <C>             <C>
Revenues - External              $50,985    $13,308      $3,086       $ 17,687      $4,010          $2,568    $91,644
Revenues - Intercompany            4,185        373         150             32          42          (4,782)        --
                                --------   --------    --------    -----------    --------    ------------    -------
Total Revenues                    55,170     13,681       3,236         17,719       4,052          (2,214)    91,644
                                --------   --------    --------    -----------    --------    ------------    -------
Depreciation and Amortization     15,541      1,746         328          1,078          --             437     19,130
Other Operating Expenses          29,257     14,926       3,447         18,670       4,903          (2,293)    68,910
                                --------   --------    --------    -----------    --------    ------------    -------
Total Operating Expenses          44,798     16,672       3,775         19,748       4,903          (1,856)    88,040
                                --------   --------    --------    -----------    --------    ------------    -------

Operating Income (Loss)           10,372     (2,991)       (539)        (2,029)       (851)           (358)     3,604
                                --------   --------    --------    -----------    --------    ------------    -------
</TABLE>




<TABLE>
<CAPTION>
                                                                                               CORPORATE,
                                                       INTERNET      SYSTEMS     CONESTOGA     OTHER AND       TOTAL
                                  RLEC       CLEC      SERVICES    INTEGRATION    WIRELESS    ELIMINATIONS    COMPANY
                                --------   --------    --------    -----------    --------    ------------    -------
    NINE MONTHS ENDED
    SEPTEMBER 30, 2001
-----------------------------
<S>                             <C>        <C>         <C>         <C>            <C>         <C>             <C>
Revenues - External             $ 30,787    $ 4,970     $ 1,201       $ 17,384                     $ 2,162    $56,504
Revenues - Intercompany            3,557        219          18             82                      (3,876)        --
                                --------   --------    --------    -----------    --------    ------------    -------
Total Revenues                    34,344      5,189       1,219         17,466                      (1,714)    56,504
                                --------   --------    --------    -----------    --------    ------------    -------
Depreciation and Amortization      8,092        565         164          2,075                         304     11,200
Other Operating Expense           20,118      7,400       2,788         18,159                      (1,869)    46,596
                                --------   --------    --------    -----------    --------    ------------    -------
Total Operating Expenses          28,210      7,965       2,952         20,234                      (1,565)    57,796
                                --------   --------    --------    -----------    --------    ------------    -------
Operating Income (Loss)            6,134     (2,776)     (1,733)        (2,768)                       (149)    (1,292)
                                --------   --------    --------    -----------    --------    ------------    -------
</TABLE>



CONSOLIDATED OPERATIONS

Three months ended September 30, 2002 compared
to the three months ended September 30, 2001

      Consolidated operating revenues from continuing operations increased
$25,745, or 132.1%, to $45,237 for the three months ended September 30, 2002
from $19,492 in the same period of 2001. The revenue


                                       26
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


increase was primarily due to $26,226 in incremental revenue attributable to the
acquisition of Conestoga on May 24, 2002 offset by a $1,009 reduction in D&E's
RLEC network access revenues and a $1,465 decline in D&E's system integration
revenues.

      Consolidated operating income from continuing operations increased $5,519
to an income of $4,059 for the three months ended September 30, 2002 from a loss
of $1,460 in the same period of 2001. The increase was primarily related to
$3,283 in incremental income attributable to the acquisition of Conestoga. The
increase was also partially attributable to improved operating results in D&E's
RLEC and Internet Services segments and the discontinuance of goodwill
amortization in 2002 due to the adoption of SFAS 142. Goodwill amortization
resulted in $384 of expense in the period for 2001.

      Other income and expense was a net expense of $5,206 in the third quarter
of 2002 compared to a net income of $4,801 in the same period of the prior year.
This net decrease in other income of $10,007 is primarily attributable to (i) a
$6,051 decrease in European affiliate income recognized in the third quarter of
2002 as a result of a portion of an arbitration award being included in European
affiliate income in the third quarter 2001 and (ii) a $3,701 increase in
interest expense in the third quarter of 2002, as a result of increased
borrowings to finance the acquisition of Conestoga.


      Income taxes were a benefit of $99 in the third quarter of 2002 compared
to a benefit of $898 in the same period of 2001.


      Adjustments to the gain for discontinued operations from D&E Wireless
resulted in an after-tax loss of $280 in the third quarter of 2002 primarily
from the final post-closing adjustments and transition activity related to the
sale of our wireless partnership interest, compared with the loss from D&E's
Wireless operations of $1,553 in the third quarter of 2001. The discontinued
operations of our Paging Service business for the third quarter of 2002 was a
gain of $11 after taxes as compared to income of $4 from D&E's paging services
in 2001.

      Our net loss was $1,333, or $0.09 per share in the third quarter of 2002
compared to a net income of $2,674, or $0.36 per share in the third quarter of
2001.

Nine months ended September 30, 2002 compared
to the nine months ended September 30, 2001

      Consolidated operating revenues from continuing operations increased
$35,140 or 62.2% to $91,644 for the nine months ended September 30, 2002 from
$56,504 in the same period of 2001. The revenue increase was primarily due to
$34,274 in incremental revenue attributable to the acquisition of Conestoga on
May 24, 2002 as well as an increase of approximately 45% in the number of D&E's
customers in our Internet Services segment and 47% more access lines in our CLEC
segment before including Conestoga's lines. These revenue increases were offset
by decreases in D&E's system integration revenues.


                                       27

<PAGE>

                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


      Consolidated operating income from continuing operations increased $4,896
to an income of $3,604 for the nine months ended September 30, 2002 from a loss
of $1,292 in the same period of 2001. The increase was primarily related to
$3,982 incremental income attributable to the acquisition of Conestoga, improved
operating results in D&E's Internet Services and Systems Integration segments
and the discontinuance of goodwill amortization in 2002 due to the adoption of
SFAS 142, which resulted in $1,099 of amortization expense in the period for
2001. The increases were partially offset by $839 of financing costs expensed as
merger-related costs associated with an abandoned debt offering, $134 of
severance charges expensed as merger-related costs for D&E employees terminated
as a result of the merger, $285 of stay bonuses to D&E employees working during
transition and a charge to bad debt expense of $651 for WorldCom receivables as
a result of their bankruptcy filing.

      Other income and expense was a net expense of $11,937 in the first nine
months of 2002 compared to a net income of $5,069 in the same period of the
prior year. This net decrease in other income of $17,006 is primarily
attributable to (i) a $7,670 decrease in European affiliate income recognized in
the first nine months of 2002 as a result of a portion of an arbitration award
being included in European affiliate income in the first nine months of 2001;
(ii) a $5,539 increase in interest expense in the first nine months of 2002, as
a result of increased borrowings to finance the acquisition of Conestoga; and
(iii) the recognition of a loss of $2,999 in 2002 in the nine months ended
September 30, 2002 for the decline in market value of certain publicly traded
investments that were determined to be other than temporary declines.

      Income taxes were a benefit of $2,536 in the first nine months of 2002
compared to a benefit of $643 in the same period of 2001.

      Discontinued operations of D&E Wireless resulted in an income of $55,506
after tax in the first nine months of 2002 primarily from the completion of the
sale of our wireless partnership interest, compared with the loss from
operations of $4,552 in the first nine months of 2001. The discontinued
operations of our paging services business included in the first nine months of
2002 were a gain of $2 after taxes as compared to an after tax loss of $13 from
D&E's paging services in 2001.

      Our net income was $49,662, or $4.44 per share in the first nine months of
2002 compared to a net loss of $87, or $0.01 per share in the first nine months
of 2001.

RLEC SEGMENT RESULTS

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED                          NINE MONTHS ENDED
                                             SEPTEMBER 30                               SEPTEMBER 30,
                                             ------------                               -------------
                                   2002         2001          Change         2002          2001         Change
                                   ----         ----          ------         ----          ----         ------
<S>                              <C>           <C>           <C>           <C>           <C>           <C>
Revenues:
    Local Telephone Service      $  8,270      $  3,029      $  5,241      $ 16,695      $  9,060      $  7,635
    Network Access                 13,723         6,925         6,798        27,680        19,320         8,360
    Other                           5,909         2,172         3,737        10,795         5,964         4,831
                                 --------      --------      --------      --------      --------      --------
</TABLE>


                                       28
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


<TABLE>
<S>                              <C>           <C>           <C>           <C>           <C>           <C>
Total Revenues                     27,902        12,126        15,776        55,170        34,344        20,826
                                 --------      --------      --------      --------      --------      --------

Depreciation and
  Amortization                      7,685         2,913         4,772        15,541         8,092         7,449
Other Operating Expenses           13,266         7,983         5,283        29,257        20,118         9,139
                                 --------      --------      --------      --------      --------      --------
Total Operating Expenses           20,951        10,896        10,055        44,798        28,210        16,588
                                 --------      --------      --------      --------      --------      --------

Operating Income                    6,951         1,230         5,721        10,372         6,134         4,238
                                 --------      --------      --------      --------      --------      --------

Access Lines at Sept. 30,         146,619        61,962                     146,619        61,962
                                 --------      --------                    --------      --------
</TABLE>

      RLEC segment revenues increased $15,776 to $27,902 for the three months
ended September 30, 2002 from $12,126 in the same period of 2001. The Conestoga
acquisition added $16,172 while our D&E RLEC revenue decreased $396 from the
same period of 2001. Our D&E local telephone service revenues increased $804 or
26.6% to $3,833 in the third quarter of 2002, from $3,029 in the same period of
2001, driven by rate increases effective in December 2001 and July 2002. We
experienced a decrease of $1,010 or 14.6% to $5,915 in D&E's network access
revenues in the third quarter of 2002, from $6,925 in the same period of 2001,
as a result of lower call volumes and a decrease in certain network access rate
elements. The access line increase was the net result of 648 fewer D&E lines
compared to a year earlier, primarily relating to the loss of 488 lines from one
customer that relocated its customer service operations outside of our
territory, and 84,895 Conestoga lines acquired; plus 410 additions from net
adjusted line counts.

      RLEC operating expenses increased $10,055 to $20,951 in the third quarter
of 2002 from $10,896 in the same period of the prior year. The Conestoga
acquisition added $11,350 while our D&E RLEC expense decreased $1,295.
Depreciation expense increased $4,772 as a result of tangible and intangible
assets from the Conestoga acquisition and D&E's capital additions. In the third
quarter of 2002, we charged bad debt expense $162 for WorldCom receivables as a
result of their bankruptcy filing.

      RLEC segment revenues increased $20,826 to $55,170 in the first nine
months of 2002 from $34,344 in the same period of 2001. The Conestoga
acquisition added $20,921 while our D&E RLEC revenue decreased $95 from the same
period of 2001. Our D&E local telephone service revenues increased $1,824 or
20.1% to $10,884 in the first nine months of 2002, from $9,060 in the same
period of 2001, driven by rate increases effective in December 2001 and July
2002. We experienced a decrease of $2,088 or 10.8% to $17,232 in D&E's network
access revenues in the first nine months of 2002, from $19,320 in the same
period of 2001, as a result of lower call volumes and a decrease in certain
network access rate elements.

      RLEC operating expenses increased $16,588 to $44,798 in the first nine
months of 2002 from $28,210 in the same period of the prior year. The increase
was primarily attributable to increased operating expenses from incremental
costs associated with the Conestoga acquisition as well as financing costs
expensed during the second quarter of 2002 related to an abandoned debt
offering, severance related costs and a charge to bad debt expense of $590 for
WorldCom receivables as a result of their bankruptcy filing. Depreciation and


                                       29
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


amortization expense increased $7,449 as a result of tangible and intangible
assets from the Conestoga acquisition and D&E's capital additions, primarily a
new building placed into service in July 2001.

CLEC SEGMENT RESULTS

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED                         NINE MONTHS ENDED
                                                 SEPTEMBER 30,                              SEPTEMBER 30,
                                                 -------------                              -------------
                                     2002           2001          Change         2002           2001          Change
                                     ----           ----          ------         ----           ----          ------
<S>                                <C>            <C>            <C>           <C>            <C>            <C>
Revenues:
    Local Telephone Service        $  1,963       $    442       $  1,521      $  3,564       $  1,073       $  2,491
    Network Access                    1,088            295            793         2,083          1,040          1,043
    Long Distance                     4,658            872          3,786         7,711          2,454          5,257
    Other                               153             59             94           323            622           (299)
                                   --------       --------       --------      --------       --------       --------
Total Revenues                        7,862          1,668          6,194        13,681          5,189          8,492
                                   --------       --------       --------      --------       --------       --------

Depreciation and Amortization         1,021            149            872         1,746            565          1,181
Other Operating Expenses              7,891          2,705          5,186        14,926          7,400          7,526
                                   --------       --------       --------      --------       --------       --------
Total Operating Expenses              8,912          2,854          6,058        16,672          7,965          8,707
                                   --------       --------       --------      --------       --------       --------

Operating Loss                       (1,050)        (1,186)           136        (2,991)        (2,776)          (215)
                                   --------       --------       --------      --------       --------       --------

Access Lines at Sept. 30             28,387          6,785                       28,387          6,785
                                   --------       --------                     --------       --------
</TABLE>

      CLEC segment revenues increased $6,194 to $7,862 in the third quarter of
2002 from $1,668 in same period of 2001. Of this increase, the Conestoga
acquisition added $5,592 while our D&E CLEC revenue increased $602 from the same
period of 2001. The D&E increase was primarily from the addition of access lines
for new customers that increased basic area service revenues. The access line
increase was the result of 3,187 additional D&E lines compared to a year earlier
and 20,420 Conestoga lines acquired plus growth of 874 lines in the quarter
offset by a 2,879 line count decrease from correcting a Conestoga line count
error and conforming the count methodology to D&E's methodology. The count
correction and conforming the methodology had no impact on revenue or expenses.

      CLEC operating expenses increased $6,058 to $8,912 in the third quarter of
2002 from $2,854 in the same period of the prior year. The increase was
primarily related to the Conestoga acquisition and additional network operating
costs consistent with the larger customer base, higher depreciation expense for
additional equipment added and increased sales and marketing expense related to
commencement of operations in our Harrisburg, Pennsylvania market.

      CLEC segment revenues increased $8,492 to $13,681 in the first nine months
of 2002 from $5,189 in same period of 2001.The Conestoga acquisition added
$7,638 while our D&E CLEC revenue increased


                                       30
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


$854 from the same period of 2001. The D&E increase was primarily from the
addition of access lines for new customers that increased basic area service
revenues.

      CLEC operating expenses increased $8,707 to $16,672 in the first nine
months of 2002 from $7,965 in the same period of the prior year. The increase
was primarily related to the Conestoga acquisition and additional network
operating costs consistent with the larger customer base, higher depreciation
expense for additional equipment added and increased sales and marketing expense
related to commencement of operations in our Harrisburg, Pennsylvania market.
The expenses included a charge to bad debt expense of $62 for WorldCom
receivables as a result of their bankruptcy filing.

INTERNET SERVICES SEGMENT RESULTS

<TABLE>
<CAPTION>
                                          THREE MONTHS ENDED                          NINE MONTHS ENDED
                                             SEPTEMBER 30,                              SEPTEMBER 30,
                                             -------------                              -------------
                                 2002           2001          Change         2002           2001          Change
                                 ----           ----          ------         ----           ----          ------
<S>                            <C>            <C>            <C>           <C>            <C>            <C>
Revenues                       $  1,333       $    590       $    743      $  3,236       $  1,219       $  2,017

Depreciation and
  Amortization                      118             69             49           328            164            164
Other Operating Expenses          1,284          1,114            170         3,447          2,788            659
                               --------       --------       --------      --------       --------       --------
Total Operating Expenses          1,402          1,183            219         3,775          2,952            823
                               --------       --------       --------      --------       --------       --------
Operating Loss                      (69)          (593)           524          (539)        (1,733)         1,194
                               --------       --------       --------      --------       --------       --------

Customers at September 30
     DSL                          5,138          1,791                        5,138          1,791
     Dial-up Access              12,417          8,431                       12,417          8,431
     Web-hosting Services           590            406                          590            406
</TABLE>

      Internet Services segment revenues increased 125.9% to $1,333 in the third
quarter of 2002 from $590 in the same period of 2001. This revenue increase is
primarily attributable to significant increases in subscribers for dial-up, DSL
and web-hosting services in the third quarter of 2002 from the third quarter
2001. The Conestoga acquisition accounted for $269 of the revenue increase.
Management anticipates an increase in fourth quarter revenue when the dial-up
access service is expected to be offered in the Conestoga territories.

      Internet Services segment operating expenses increased 18.5% to $1,402 in
the third quarter of 2002 from $1,183 in the same period of the prior year. The
direct cost of operations increased as a result of providing service to the
larger customer base; however, the spreading of fixed operating costs over a
larger revenue base improved operating margins. Management anticipates an
increase in fourth quarter expenses when the Internet access service is expected
to be offered in the Conestoga territories.


                                       31
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


      Internet Services segment revenues increased $2,017 or 165.5% to $3,236 in
the first nine months of 2002 from $1,219 in the same period of 2001. Dial-up
services for single user residential and business customers, as well as DSL
customers and web-hosting subscriber increases accounted for $1,670 of the
revenue increase, with $347 of the increase attributable to the Conestoga
acquisition.

      Internet Services segment operating expenses increased $823 or 27.9% to
$3,775 in the first nine months of 2002 from $2,952 in the same period of the
prior year. The direct cost of operations increased as a result of providing
service to the larger customer base; however, the spreading of fixed operating
costs over a larger revenue base improved operating margins.

SYSTEMS INTEGRATION SEGMENT RESULTS

<TABLE>
<CAPTION>
                                         THREE MONTHS ENDED                           NINE MONTHS ENDED
                                            SEPTEMBER 30,                               SEPTEMBER 30,
                                2002           2001          Change          2002           2001          Change
                                ----           ----          ------          ----           ----          ------
<S>                           <C>            <C>            <C>            <C>            <C>            <C>
Revenues                      $  6,208       $  6,079       $    129       $ 17,719       $ 17,466       $    253

Depreciation and
  Amortization                     405            769           (364)         1,078          2,075           (997)
Other Operating Expenses         6,477          6,165            312         18,670         18,159            511
                              --------       --------       --------       --------       --------       --------
Total Operating Expenses         6,882          6,934            (52)        19,748         20,234           (486)
                              --------       --------       --------       --------       --------       --------

Operating Loss                    (674)          (855)           181         (2,029)        (2,768)           739
                              --------       --------       --------       --------       --------       --------
</TABLE>

      Systems Integration segment revenues increased $129 or 2.1% to $6,208 in
the third quarter of 2002 from $6,079 in the same period of 2001. The Conestoga
acquisition added $1,594, while D&E's product sales decreased $648 and D&E's
service revenues decreased $806 from the third quarter of 2001. We believe these
decreases partially relate to the effects of a slowing economy and reductions in
customer spending for communications related infrastructure and consulting
services.

      Systems Integration segment operating expenses decreased $52 or 0.7% to
$6,882 in the third quarter 2002 from $6,934 in the same period of the prior
year. The decrease in depreciation and amortization primarily relates to the
discontinuance of amortizing goodwill from two acquisitions in 2000 due to the
adoption of a new accounting pronouncement, which amounted to $384 in the third
quarter of 2001. Other operating expense changes in the third quarter of 2002
primarily related to decreased cost of equipment sold and lower computer
services expense from temporarily reassigning staff.

      Systems Integration segment revenues increased $253 or 1.4% to $17,719 in
the first nine months of 2002 from $17,466 in the same period of 2001. The
Conestoga acquisition added $2,204, while D&E's product sales decreased $233 and
D&E's service revenues decreased $1,707 from the first nine months of


                                       32
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


2001. We believe the decrease partially relates to the effects of a slowing
economy and reductions in customer spending for communications related
infrastructure and consulting services.

      Systems Integration segment operating expenses decreased $486 or 2.4% to
$19,748 in the first nine months of 2002 from $20,234 in the same period of the
prior year. The decrease in depreciation and amortization primarily relates to
the discontinuance of amortizing goodwill from two acquisitions in 2000 due to
the adoption of a new accounting pronouncement, which amounted to $1,099 for the
nine months ended September 30, 2001. Other operating expense changes in the
first nine months of 2002 primarily related to increased cost of equipment sold
offset by lower computer services expense.

CONESTOGA WIRELESS SEGMENT RESULTS

Conestoga Wireless segment revenues were $3,281 for the three months ended
September 30, 2002 and $4,052 year to date. The operating loss of the third
quarter was $447 and the year to date loss was $851. The sale of this segment
was completed on January 14, 2003.

OTHER INCOME (EXPENSE)

      Other income (expense) for the three months ended September 30, 2002 was a
net expense of $5,206, compared to a net income of $4,801 in the same period of
2001. The equity in the operations of our European affiliates decreased to a
loss of $914 in the third quarter of 2002 from an income $5,137 in 2001 as a
result of a portion of an arbitration award included in 2001. Interest expense
increased to $4,383 from $682 in the third quarter of 2001, as a result of
increased borrowings for the Conestoga acquisition and capital expenditures.

      Other income (expense) for the first nine months of 2002 was a net expense
of $11,937, compared to a net income of $5,069 in the same period of 2001. The
equity in the operations of our European affiliates decreased to a loss of
$2,091 in the first nine months of 2002 from an income of $5,579 in 2001 as a
result of a portion of an arbitration award included in 2001. Interest expense
increased to $7,139 from $1,600 in the first nine months of 2001, as a result of
increased borrowings for the Conestoga acquisition and capital expenditures. A
loss of $2,999 was recognized in 2002 for the decline in market value of certain
publicly traded investments that were determined to be other than temporary
declines.

INCOME TAXES


      Income tax expense was a benefit of $99 in the third quarter of 2002
compared to a benefit of $898 in the same period of 2001. The change in tax
primarily resulted from the $5,137 of European income in 2001 having its tax
provision being offset by a benefit from the reversal of a related valuation
allowance on deferred tax assets from previous net operating losses on European
investments.



                                       33
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


      Income taxes were a benefit of $2,536 in the first nine months of 2002
compared to a benefit of $643 in the same period of 2001. The change in tax
primarily resulted from the taxable income in 2001 changing to a taxable loss in
2002 and the change in the valuation allowance for European results in 2001.

DISCONTINUED OPERATIONS

      On April 1, 2002, we completed the sale of our investment in PCS ONE,
which has been reported as a discontinued segment. For the three months ended
September 20, 2002, we reported a $280 loss from the discontinued D&E Wireless
segment resulting primarily from an adjustment to the gain on sale as well as
the closing out of contract services provided to PCS ONE. In the third quarter
in 2001, the wireless services segment incurred a loss of $1,553. For the
year-to-date period ended September 30,2002, the discontinued D&E wireless
services segment recognized a $55,506 gain primarily from the sale of our
interest in PCS ONE as well as related contract services provided to PCS ONE.
The comparable period in 2001 included a loss of $4,552 from the operations of
the D&E wireless services segment.

      During the third quarter 2002 the Paging Services business was reported as
discontinued. Paging Services recorded an income after taxes of $11 for the
third quarter of 2002 and $2 for the nine months ended September 30, 2002. In
2001, our D&E Paging Services business reported income of $4 in the third
quarter and a nine-month loss of $13.

EXTRAORDINARY ITEM

      As a result of moving to an alternative form of regulation during the
first quarter of 2001, in accordance with SFAS 101 "Regulated Enterprises -
Accounting for the Discontinuation of Application of FASB No. 71," $107 of
previously established regulatory tax liabilities were eliminated.

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

      We have historically generated cash from our operating activities. Our
overall capital resource strategy is to finance capital expenditures for new and
existing lines of businesses and acquisitions partly with operating cash and
through external sources, such as bank borrowings and offerings of debt or
equity securities.

      Net cash provided by continuing operations was $13,380 in the first nine
months of 2002 compared with $7,531 in the same period of the prior year. As a
result of the merger, the Company experienced improved operating efficiencies
offset by higher cash operating expenses relating to the continued growth in our
CLEC and Internet Services segments, payments for merger-related severance and
payments assumed on liabilities from Conestoga.


                                       34
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


      Net cash used in investing activities was $173,683 in the first nine
months of 2002 primarily due to $156,439 in net cash expenditures related to the
Conestoga acquisition. Other capital additions were $16,227 for the period.
Capital additions primarily included $8,279 for network and outside plant
infrastructure expansion plus $3,884 for CLEC switching equipment and line
extensions and $1,818 for computers. In the first nine months of 2001, $28,217
was invested in capital additions including $8,566 for construction of an office
building, $6,363 for computer equipment and software and $6,528 for network
infrastructure equipment.

      Net cash provided by financing activities was $91,418 in the first nine
months of 2002. Long-term debt was increased $160,000. The majority of the
additional debt was used to fund the Conestoga acquisition. Of the remainder,
$64,747 was used to repay other long-term loans and lines of credit and to pay
debt issuance costs. During the nine months ended September 30, 2002, we paid
quarterly dividends of $4,574, which included dividends paid on shares issued to
Conestoga shareholders in the merger. In the first nine months of 2001, $25,233
was provided from bank lines of credit and $2,579 was used to pay quarterly
dividends. During the fourth quarter 2002, management expects to repurchase
30,000 shares of D&E's common stock in a private transaction.

EXTERNAL SOURCES OF CAPITAL AT SEPTEMBER 30, 2002

      During the second quarter of 2002, we abandoned an offering of senior
notes due to market conditions. We completed an amendment to our existing credit
facility to provide a new 8 -1/2-year variable rate senior secured term loan for
$125,000 and a $25,000 increase to our existing 8 -1/2-year revolving credit
facility. In connection with the amended agreement, we incurred debt issuance
costs of approximately $7,999, which will be amortized over the 8 -1/2-year life
of the debt. We amended our existing credit facility to, among other things,
increase certain interest rate provisions, grant the lender a secured position
with respect to all credit facility borrowings and include additional financial
covenants.

      As of September 30, 2002, we had $285,000 in credit facilities consisting
of the following:

            -     $50,000 single draw 10-year term loan, of which $50,000 was
                  outstanding,

            -     $75,000 senior reducing revolving credit loan for 8 1/2-years,
                  of which $32,250 was drawn,

            -     $125,000 single draw 8 -1/2-year term loan, of which $125,000
                  was outstanding,

            -     $35,000 single draw 12-year term loan, of which $35,000 was
                  outstanding.

      The $50,000 term loan requires interest only payments for three years with
increasing quarterly principal payments from the third quarter of 2004 through
the second quarter of 2011. The revolving credit facility requires interest only
payments for two years with increasing quarterly principal reductions of the
amount available to borrow from the third quarter of 2003 through the fourth
quarter of 2009. The $125,000 term loan requires interest only payments for two
years with increasing quarterly principal payments from the third quarter of
2004 through the fourth quarter of 2010. The $35,000 term loan requires interest
only payments for three years with equal quarterly payments from the first
quarter of 2005 through the fourth


                                       35
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


quarter of 2014. Interest on both the $50,000 and $125,000 term loans and the
revolving credit facility is payable at a base rate or at LIBOR rates plus an
applicable margin based on our leverage ratio. Interest on the $35,000 term loan
was fixed at 9.34% for $20,000 and 9.36% for the remaining $15,000 supplement. A
commitment fee must be paid on the unused portion of the revolving credit
facility. We are required to maintain interest rate protection on one-half of
the total amount of senior indebtedness outstanding, with a weighted average
life of at least 2 years, beginning on November 24, 2002.

      The credit facilities include a number of significant covenants that
impose restrictions on our business. These covenants include, among others,
restrictions on additional indebtedness, mergers, expansion of CLEC services
into new markets, acquisitions and the disposition of assets, sale and leaseback
transactions and capital lease payments. In addition, we are required to comply
with financial covenants with respect to the maximum indebtedness to total
capitalization ratio, a maximum leverage ratio, a debt service ratio and a fixed
charge ratio.

      Upon completion of the sale of our interest in PCS ONE on April 1, 2002,
we received approximately $74,168 and subsequently repaid the outstanding
balances on our revolving credit facility and our bank lines of credit. As of
May 24, 2002 we discontinued the previous two lines of credit totaling $20,000.

      For further information regarding our lines of credit and long-term debt,
see Note 9 to our consolidated financial statements included in this Quarterly
Report on Form 10-Q.

COMMITMENTS, CONTINGENCIES AND PROJECTED USES OF CAPITAL

      Having completed the Conestoga acquisition, we believe that our most
significant commitments, contingencies and projected uses of funds in 2002,
other than for operations, include capital expenditures, the payment of annual
common stock dividends and other contractual obligations.

      We hold a 29% direct interest in Pilicka and a 33% interest in EuroTel,
both of which we account for under the equity method of accounting. Thus,
neither the assets nor the liabilities of Pilicka or EuroTel are presented on a
consolidated basis on our balance sheets. We have committed to loan EuroTel, on
an equal basis with the other investors in EuroTel, certain of its operating
cash needs. In 2001, we made advances of $9,920 pursuant to this commitment. We
advanced $912 in funds to EuroTel in the nine months ended September 30, 2002,
and we expect that our total 2002 funding requirements for EuroTel will be
approximately $1,500. We have provided a letter of commitment to advance funds
to EuroTel for 2002.

      In connection with the sale of our D&E Wireless joint venture, we
anticipate making a tax payment of approximately $22,500 in the first quarter of
2003. We expect that we will have to increase bank borrowing to meet this
obligation.


                                       36
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      Our discussion and analysis of our results of operations and financial
condition is based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of the financial statements requires us to make
estimates and judgments that affect the reported amounts. On an on-going basis,
we evaluate our estimates, including those related to intangible assets, income
taxes, revenues, contingencies and impairment of long-lived assets. We base our
estimates on historical experience and other assumptions that are believed to be
reasonable under the circumstances. Actual results may differ from these
estimates under different assumptions or conditions, as further described below.

      Note 2 to our consolidated financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2001 provides a summary of
all significant accounting policies that we follow in the preparation of our
financial statements. We have identified the following critical accounting
policies as those that are the most significant to our financial statement
presentation and that require difficult, subjective and complex judgments:

      Revenue Recognition

      Revenues for all of our business segments are generally recorded when
services are provided or products are delivered. Our RLEC and CLEC pricing is
subject to oversight by both state and federal regulatory commissions. Such
regulation also covers services, competition and other public policy issues.
Different interpretations by regulatory bodies may result in adjustments in
future periods to revenues derived from our RLEC and CLEC operations. We monitor
these proceedings closely and make adjustments to revenue accordingly.

      We receive a portion of our interstate access revenues in our RLEC and
CLEC segments from settlement pools in which we participate with other telephone
companies through the National Exchange Carrier Association, Inc. (NECA). These
pools were established at the direction of the FCC and are funded by interstate
access service revenues, which the FCC regulates. Revenues earned through this
pooling process are initially recognized based on estimates and are subject to
adjustments that may either increase or decrease the amount of interstate access
revenues. If the actual amounts that we receive from the settlement pools differ
from the amounts that we have recorded as accounts receivables on our balance
sheets, we would be required to record the amount of such a reduction or
increase as an adjustment to our earnings. Historically, we have not experienced
significant adjustments to our revenues as a result of our participation in
these pools.

      Regulated Asset Depreciation

      We use a composite group remaining life method and straight-line composite
rates to depreciate the regulated property assets of our RLEC and CLEC segments.
Under this method, when we replace or retire


                                       37
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


such assets, we deduct the net book value of these assets and charge it to
accumulated depreciation. The effect of this accounting is to amortize any gains
or losses on dispositions over the service lives of the remaining regulated
telephone property assets rather than recognizing such gain or loss in the
period of retirement.

      In addition, use of the composite group remaining life method requires
that we periodically revise our depreciation rates. Such revisions are based on
asset retirement activity, cost of removal and salvage values and often require
that we make related estimates and assumptions. If actual outcomes differ from
our estimates and assumptions, we may be required to adjust depreciation and
amortization expense, which could impact our earnings.

      Goodwill and Intangible Assets

      Purchase price accounting requires extensive use of accounting estimates
and judgments to allocate the purchase price to the fair market value of the
assets and liabilities purchased. In our recording of the purchase of Conestoga
Enterprises, we have engaged a valuation expert to assist us in determining the
fair value of these assets and liabilities. Included in the preliminary asset
valuation for this purchase was the valuation of intangible assets that will be
amortized over their estimated useful lives.

      Effective January 1, 2002, we adopted SFAS No. 142, "Goodwill and Other
Intangible Assets" which requires that goodwill and indefinite-lived intangible
assets resulting from business combinations no longer be amortized, but instead
be reviewed for recoverability which may result in periodic write-downs. We will
assess on an annual basis the fair values of the reporting units holding the
goodwill and any intangibles and, if necessary, assess on an interim basis for
any impairments. Any write-offs would result in a charge to earnings and a
reduction in equity in the period.


      SFAS 142 also requires that goodwill and indefinite-lived intangible
assets be tested annually for impairment using a two-step process. The first
step is to identify a potential impairment by comparing the fair value of
reporting units to their carrying value and, upon adoption, must be measured as
of the beginning of the fiscal year. As of January 1, 2002, the results of the
first step indicated no potential impairment of the D&E's goodwill. We will
perform this assessment annually. Should the results of the first step of the
impairment testing indicate a potential impairment, the second step would be
completed to measure the amount of any impairment loss.



      The annual assessment will be performed by an independent appraisal firm.
In performing the evaluation to determine if an impairment exists, the appraisal
firm is expected to use information from various sources including, but not
limited to, current stock price, transactions involving similar companies, the
business plan prepared by management and current and past operating results of
the Company among other information. The estimates used by the appraisal firm
may be different from those



                                       38
<PAGE>
                   D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                       (Dollar amounts are in thousands)


used by management in the preparation of its business plan or from the current
operating results of the Company and those differences may be material. The
assessment could be impacted by future events such as, the stock price of the
Company, being either higher or remaining at current or lower prices for a
significant period of time, transactions announced or completed prior to the
completion of the evaluation, regulatory or other developments as well as the
actual operating results of the Company.

      Impairment of Long-Lived Assets

      Based upon the provisions of SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," we review assets and finite-lived intangibles
for impairment whenever events or changes in circumstances indicate that the
carrying value of the asset may not be recoverable. Our assets subject to SFAS
No. 144 include our property, plant and equipment and certain intangibles. A
determination of impairment is made based on estimates of future cash flows.
While we have never recorded an impairment charge under SFAS 144, future events
or changes in circumstances could result in a charge to earnings.

      Investment in Unconsolidated Affiliates

      We have investments and advances to affiliated entities that are accounted
for under the equity method of accounting. We periodically evaluate whether
there have been declines in value in these investments, and if so, whether these
declines are considered temporary or other-than-temporary. Other-than-temporary
declines would be recognized as realized losses in earnings. Evidence of a loss
in value includes, but is not limited to, our inability to recover the carrying
amount of the investment or the inability of the investee to sustain an earnings
capacity, which would justify the carrying amount of the investment. The fair
value of an investment that is less than its book value may indicate a loss in
value of the investment. Our evaluations are based on many factors, including
the duration and extent to which the fair value is less than carrying amount;
the financial health of and business outlook for the investee, including
industry performance, changes in technology, and operational and financing cash
flow factors; and our intent and ability to hold the investment, including
strategic factors.

      Retirement Benefits

      Retirement benefits are a significant cost of doing business and yet
represent obligations that will be settled in the future. Retirement benefit
accounting is intended to reflect the recognition of future benefit costs over
the employee's approximate service period based on the terms of the plans and
the investment and funding decisions made by a company. We record the costs of
providing retirement benefits in accordance with SFAS No. 87 "Employers'
Accounting for Pensions". Our estimates include assumptions regarding the
discount rate to value the future obligation and the expected return on our plan
assets. We use discount rates in line with current market interest rates on high
quality fixed rate debt securities. Our return on assets is based on our current
expectation of the long-term returns on assets held by the plan. Changes in
these key


                                       39
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


assumptions can have a significant impact on the projected benefit obligations,
funding requirements and periodic benefit costs that we incur.

      Income Taxes

      We file a consolidated federal income tax return. We have two categories
of income taxes: current and deferred. Current taxes are those amounts we expect
to pay when we file our tax returns. Since we must report some of our revenues
and expenses differently for our financial statements than we do for income tax
purposes, we record the tax effects of those differences as deferred tax assets
and liabilities in our consolidated balance sheets. These deferred tax assets
and liabilities are measured using the enacted tax rates that are currently in
effect.

      Management judgment is required in determining the provision for current
income taxes, deferred tax assets and liabilities, and any valuation allowance
recorded against the net deferred tax assets. A valuation allowance is
established for any deferred tax asset that we may not be able to use in the
preparation and filing of our future tax returns. We have recorded a valuation
allowance due to uncertainties related to the ability to utilize some of the
deferred tax assets, consisting primarily of equity income losses carried
forward before they expire.

RECENT ACCOUNTING PRONOUNCEMENTS

      In June 2002, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for
Costs Associated with Exit or Disposal Activities," which requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
The provisions of this Statement are effective for exit or disposal activities
initiated after December 31, 2002 and are not expected to have a material
adverse effect on the Company's results of operations, financial position or
cash flows.

      In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections as of April 2002" ("SFAS No. 145"), which rescinded or amended
various existing standards. One change addressed by this Statement pertains to
treatment of extinguishments of debt as an extraordinary item. SFAS No. 145
rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt,"
and states that an extinguishment of debt cannot be classified as an
extraordinary item unless it meets the unusual or infrequent criteria outlined
in Accounting Principles Board ("APB") Opinion No. 30, "Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions" ("APB No. 30"). The provisions of SFAS 145
are effective for fiscal years beginning after May 15, 2002 and provide that
extinguishments of debt that were previously classified as an extraordinary item
in prior periods that do not meet the criteria n APB No. 30 for classification
as an extraordinary item shall be reclassified. The adoption of SFAS No. 145 is
not expected to have a material affect on the Company's results of operations,
financial position or cash flows.


                                       40
<PAGE>
                   D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                       (Dollar amounts are in thousands)



      In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). This Statement
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
For Long-Lived Assets to be Disposed Of" ("SFAS No. 121"), and the accounting
and reporting provisions of APB No. 30. However, certain provisions of SFAS No.
121 and APB No. 30 have been maintained. The Company adopted SFAS No. 144
effective January 1, 2002. We have determined that there is no impairment to any
long-lived assets. We have also accounted for the planned sale of the Conestoga
wireless operations and the combined Conestoga and D&E paging operations in
accordance with SFAS 144 (Notes 5 and 6).


      In June 2001, the FASB issued SFAS no. 143, "Accounting for Asset
Retirement Obligations" ("SFAS No. 143"). This Statement establishes common
accounting practices relating to legal obligations associated with the
retirement of tangible long-lived assets that result from the acquisition,
construction, development or normal operation of a long-lived asset. The Company
will adopt SFAS No. 143 on January 1, 2003. The adoption is not expected to have
a material effect on the Company's results of operations, financial position or
cash flows.


      During the first quarter 2002, we adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS 142),
which addresses the accounting for goodwill and intangible assets subsequent to
their acquisition. Annual goodwill amortization of approximately $1,440 ceased
as of January 1, 2002 as a result of adopting SFAS 142. During the first quarter
2002, we also adopted Statement of Financial accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144)
which addresses issues relating to the implementation of Financial Accounting
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of." We have determined that there is no
impairment to any long-lived assets. However, we have accounted for our planned
sale of Conestoga's wireless segment and our paging services business in
accordance with SFAS 144 as described in Notes 5 and 6 to our consolidated
financial statements included in this Form 10-Q.


FORWARD-LOOKING STATEMENTS

      This quarterly report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Forward looking statements provide our current
expectations or forecasts of future events. You can identify these statements by
the fact that they do not relate strictly to historical or current facts. These
statements may relate to our financial condition, results of operations, plans,
objectives, future performance and business. Often these statements include
words such as "believes," "expects," "anticipates," "estimates," "intends,"
"strategy," "plan," or similar words or expressions. In particular, statements,
express or implied, concerning future operating results, the ability to generate
income or cash flows, or our capital resources or financing plans are
forward-looking statements. These forward-looking statements involve certain
risks and uncertainties. Our actual


                                       41
<PAGE>
                   D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                       (Dollar amounts are in thousands)

performance or achievements may differ materially from those contemplated by
these forward-looking statements.

      You should understand that various factors, in addition to those discussed
in the section titled "Factors Affecting Our Prospects" and elsewhere in this
document, could affect our future results and could cause results to differ
materially from those expressed in these forward-looking statements. You are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this document. All subsequent written and oral
forward-looking statements attributable to us are expressly qualified in their
entirety by the cautionary statements contained or referred to in this report.
We do not undertake any obligation to release publicly any revisions to these
forward-looking statements to reflect events or circumstances after the date of
this document or to reflect the occurrence of unanticipated events.

FACTORS AFFECTING OUR PROSPECTS

            THE COMMUNICATIONS INDUSTRY IS BECOMING INCREASINGLY COMPETITIVE,
AND THIS COMPETITION HAS RESULTED IN PRICING PRESSURE ON OUR SERVICE OFFERINGS.

      As a provider of integrated communications services, we face competition
from:

      -     competitive local exchange carriers, including Verizon
            Communications, Adelphia Business Solutions (which has received
            regulatory approval to compete with us in our RLEC territory using
            its own facilities), Commonwealth Telephone Enterprises and XO
            Communications;

      -     Internet service providers, including AOL, EarthLink and MSN;

      -     cable television companies, including Adelphia Communications,
            Comcast, AT&T Broadband and Pencor Services;

      -     wireless services providers, including AT&T Wireless, Cingular
            Wireless, Sprint PCS and T-Mobile;

      -     providers of communications services such as long distance services,
            including, AT&T, MCI WorldCom and, as a consequence of its recently
            received regulatory approval to provide long distance services in
            Pennsylvania, Verizon Communications; and

      -     systems integration providers, including Morefield Communications,
            Inc., IntelliMark IT Business Solutions and Weidenhammer Systems
            Corporation.

      Many of our competitors have substantially greater financial, technical
and marketing resources, greater name recognition and more established
relationships with a larger base of current and potential customers than us.
Accordingly, it may be difficult to compete against these communications
providers.


                                       42
<PAGE>
                   D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                       (Dollar amounts are in thousands)

            WE ARE SUBJECT TO A COMPLEX AND UNCERTAIN REGULATORY ENVIRONMENT
THAT MAY REQUIRE US TO ALTER OUR BUSINESS PLANS AND FACE INCREASED COMPETITION.

      The United States communications industry is subject to federal, state and
other regulations that are continually evolving. As new communications laws and
regulations are issued, we may be required to modify our business plans or
operations and may not be able to do so in a cost-effective manner. Federal and
state regulatory trends toward a more competitive marketplace through reduced
competitive entry standards are likely to have negative effects on our business
and our ability to compete. The regulatory environment governing ILEC operations
has been and will likely continue to be very liberal in its approach to
promoting competition and network access, which may increase the likelihood of
new competitors offering similar services to our service areas. The introduction
of new competitors could have a negative effect on our ILEC operating results
yet at the same time present operating benefits to our CLEC business.

            WE HAVE RECEIVED A LIMITED SUSPENSION FROM CERTAIN INTERCONNECTION
REQUIREMENTS OF THE TELECOMMUNICATIONS ACT OF 1996. UPON EXPIRATION OF THE
SUSPENSION, WE MAY BE SUBJECT TO ADDITIONAL COMPETITION FOR TELECOMMUNICATIONS
SERVICES.

      Congress specifically recognized that the movement towards increased
competition under the Telecommunications Act of 1996 (TA-96) requires
accommodation for the different market characteristics of areas served by rural
and small incumbent carriers. In this regard, the Pennsylvania Public Utility
Commission (PA PUC) previously granted our RLECs a limited suspension until July
2002 from certain interconnection requirements of the TA-96. The suspension
reduces our interconnection obligations in the RLEC territory by excluding us
from requirements that would allow competitors access to our customers by
relying upon our services and facilities.

      In June 2002, our RLECs petitioned the PA PUC for an extension of certain
protections provided in the original suspension. Our RLECs anticipate PA PUC
action on the petition by December 31, 2002. While the request is under review,
the terms and conditions of the original suspension remain in effect. Although
narrower in scope, the June 2002 petition, if granted, would continue to
preclude the use of our RLEC services and facilities by a competitor. If our
RLECs do not receive additional extensions of this suspension, competitors will
be allowed to seek removal of our rural exemption for the purposes of using our
services and facilities through interconnection agreements to provide
competitive services. If this event were to occur, our RLECs would exercise
their right to oppose before the PA PUC the competitor's request. The
prospective competitor would have the burden of proof to show that the request
is not unduly economically burdensome, is technically feasible, and is
consistent with universal service principles.

      The introduction of new competitors could result in the loss of customers
and have a negative effect on our operating results. However, such loss would be
partially offset by charges paid to our RLECs by such competitors for
utilization of our services and networks.


                                       43
<PAGE>
                   D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                       (Dollar amounts are in thousands)

            WE MUST SECURE UNBUNDLED NETWORK ELEMENTS AT REASONABLE RATES OR
CLEC GROWTH MAY BE DELAYED AND THE QUALITY OF SERVICE MAY DECLINE.

      In providing our CLEC service, we interconnect with and use other
telephone companies' networks to access certain of their customers. Therefore,
we depend, in certain circumstances, upon the technology and capabilities of
these other telephone companies, the quality and availability of other telephone
companies' facilities and other telephone companies' maintenance of these
facilities. We must also maintain efficient procedures for ordering,
provisioning, maintaining and repairing facilities from these other telephone
companies. We may not be able to obtain the facilities and services of
satisfactory quality that we require from other telephone companies, or on other
satisfactory terms and conditions, in which case we may experience delays in the
growth of our competitive local exchange carrier networks and the degradation of
the quality of our service to customers.

      We also provide digital subscriber line services. To provide unbundled
DSL-capable lines that connect each end-user to our equipment, we rely on other
telephone companies. The Telecommunications Act of 1996 generally requires that
charges for these unbundled network elements be cost-based and
nondiscriminatory. Charges for DSL-capable lines and other unbundled network
elements may vary based on rates proposed by other telephone companies and
approved by state regulatory commissions. Increases in these rates or reductions
in ILEC unbundling obligations could harm our CLEC business.

      Many of the FCC's rules governing the rates, terms and conditions on which
unbundled network elements are offered by ILECs are under challenge in various
Courts of Appeal and the U.S. Supreme Court. Any decision which limits the FCC's
ability to regulate the rates, terms and conditions on which unbundled network
elements are offered to CLECs may adversely impact our ability to compete.
Additionally, the FCC's rules concerning the availability of unbundled network
elements and the regulatory status of the rates, terms and conditions on which
they are offered are subject to revision. If the FCC constricts the list of
elements it regulates as unbundled network elements, such an action may have an
adverse impact on our ability to compete.

            IF WE EXPAND OUR CLEC OPERATIONS, THE SUCCESS OF THIS EXPANSION WILL
BE DEPENDENT ON INTERCONNECTION AGREEMENTS, PERMITS AND RIGHTS-OF-WAY, AND THE
FAILURE TO OBTAIN THESE AGREEMENTS AND PERMITS COULD HAMPER ANY SUCH EXPANSION.

      If we expand our CLEC operations, our success will depend, in part, on our
ability to manage existing interconnection agreements and to enter into and
implement new interconnection agreements with other telephone companies. Our
failure to obtain these agreements and permits could hamper this expansion.
Interconnection agreements are subject to negotiation and interpretation by the
parties to the agreements and are subject to state regulatory commission, FCC
and judicial oversight. If the terms of these interconnection agreements need to
be renegotiated, we may not be able to renegotiate existing or enter into new
interconnection agreements in a timely manner or on favorable terms. We must
also maintain existing, and obtain new, local permits, including rights to
utilize underground conduit and pole space and other rights-of-


                                       44
<PAGE>
                   D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                       (Dollar amounts are in thousands)

way. We may not be able to maintain our existing permits and rights or obtain
and maintain other required permits and rights on acceptable terms. Cancellation
or nonrenewal of interconnection agreements, permits, rights-of-way or other
arrangements could significantly harm our business.

            DEMAND FOR OUR SYSTEMS INTEGRATION OFFERINGS IS SENSITIVE TO
DOWNTURNS IN THE UNITED STATES ECONOMY GENERALLY.

      Unlike our RLEC, CLEC and Internet services businesses which generate
revenues of a monthly recurring nature, demand for our systems integration
offerings is generally more sensitive to downturns in the United States economy.
In an economic downturn, consumers and businesses often curtail spending on
voice and data network infrastructure. As a result, we may experience lower than
expected revenues for our systems integration business during an economic
downturn. Reduced demand for our systems integration offerings could adversely
affect the operating profitability of our systems integration segment, which
could have an adverse effect on our operating results and financial condition.

            OUR CHAIRMAN AND FOUR OTHER MEMBERS OF OUR BOARD OF DIRECTORS CAN
SIGNIFICANTLY INFLUENCE THE ELECTION OF DIRECTORS AND OTHER MATTERS IN THEIR
CAPACITIES AS TRUSTEES OF A VOTING TRUST.

      Certain of our shareholders are parties to a Voting Trust Agreement, dated
as of November 19, 1992, pursuant to which the voting trustees have the right to
exercise sole voting power on all matters submitted to our shareholders for a
vote. The trustees of the voting trust are our chairman and four of our other
directors. The shares represented by the voting trust are voted in accordance
with resolutions adopted by a majority of the voting trustees. The Voting Trust
Agreement will expire on November 19, 2002. It is our understanding that the
parties to the voting trust intend to renew this agreement, although the terms,
including the number of shares covered by the agreement, of any such renewal may
differ from the terms of the current agreement.

      As of November 8, 2002, the voting trust beneficially owned 18.8% of our
outstanding shares of common stock. As a result, these directors are able to
significantly influence the election of directors and other matters submitted to
shareholders for a vote. There can be no assurance that the interests of the
trustees of the voting trust will not conflict with the interests of our other
security holders.

            WE MAY BE UNABLE TO INTEGRATE SUCCESSFULLY THE BUSINESS OPERATIONS
OF D&E AND CONESTOGA AND SUCH INABILITY COULD HAVE AN ADVERSE IMPACT ON OUR
PROFITABILITY.

      The integration of the systems and operations of D&E and Conestoga will
involve significant risks. D&E and Conestoga have different operating support
systems, including billing, accounting, order management, toll rating, trouble
reporting and customer service systems, which may be difficult to integrate. In
addition, some of Conestoga's employees are members of a labor union and are
subject to the terms of a collective bargaining agreement. Because D&E employees
are not unionized, management of the combined company may face difficulties in
integrating employees with different work rules. Even if integration of the


                                       45
<PAGE>
                   D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                       (Dollar amounts are in thousands)

operating systems and employees is ultimately successful, the amount of
management attention diverted to integration efforts may limit their ability to
work on other business matters.

            OUR INCREASED INDEBTEDNESS COULD RESTRICT OUR OPERATIONS.

      As of September 30, 2002, we had approximately $245,129 of total
indebtedness, including current maturities, which increased in connection with
the Conestoga acquisition. This increased indebtedness could restrict our
operations due to the following factors, among others:

      -     we will use a substantial portion of our cash flow from operations,
            if any, to pay principal and interest on our indebtedness, which
            would reduce the funds available for working capital, capital
            expenditures, acquisitions and other general corporate purposes;

      -     our indebtedness may limit our ability to obtain additional
            financing on satisfactory terms, if at all;

      -     insufficient cash flow from operations may cause us to attempt to
            sell assets, restructure or refinance our debt, or seek additional
            equity capital, which we may be unable to do at all or on
            satisfactory terms;

      -     our level of indebtedness may make us more vulnerable to economic or
            industry downturns;

      -     we may not have the ability to pay dividends to our shareholders;
            and

      -     our debt service obligations increase our vulnerabilities to
            competitive pressures, as we may be more leveraged than many of our
            competitors.

            OUR CREDIT FACILITIES CONTAIN COVENANTS THAT COULD SIGNIFICANTLY
RESTRICT OUR OPERATIONS.

      The agreements governing our indebtedness contain covenants imposing
financial and operating restrictions on our business. These restrictions may
limit our ability to take advantage of potential business opportunities as they
arise and adversely affect the conduct of our business. These covenants will
place restrictions on our ability and the ability of our subsidiaries to, among
other things:

      -     incur more indebtedness

      -     pay dividends, redeem or repurchase our stock or make other
            distributions;

      -     make acquisitions or investments;

      -     use assets as security in other transactions;

      -     enter into transactions with affiliates;

      -     merge or consolidate with others;

      -     dispose of assets or use asset sale proceeds;

      -     create liens on our assets;

      -     expand our CLEC marketing areas; and

      -     extend credit.


                                       46
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

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

                        (Dollar amounts are in thousands)


      In addition, our credit facilities require that we maintain specified
financial ratios. Our ability to maintain these financial ratios can be affected
by operating performance or other events beyond our control. Accordingly, we
cannot assure you that we will meet these ratios. Our ability to comply with the
provisions governing our indebtedness may be adversely affected by our
operations and by changes in economic or business conditions or other events
beyond our control. In addition, our failure to comply with our
indebtedness-related obligations could result in an event of default under our
credit facilities or future indebtedness.

            THE INABILITY TO SELL THE WIRELESS BUSINESS OF CONESTOGA WOULD
RESULT IN A REDUCTION OF OUR EXPECTED RESOURCES AVAILABLE FOR THE OPERATION OF
OUR BUSINESS, AND MAY ADVERSELY AFFECT THE CONTINUING OPERATIONS OF THE
BUSINESS.

      We intend to dispose of Conestoga's wireless assets and business. Until
the Conestoga wireless business is sold, we will continue to operate this
business, which incurred operating losses of $8.2 million for the year ended
December 31, 2001. The continued operation of the wireless business will
negatively impact our results from discontinued operations and may adversely
affect our business by requiring additional financing to fund operations. The
proceeds to be realized by us from a sale of Conestoga's wireless assets and
business are uncertain.

      In addition, pursuant to certain non-competition covenants in our
agreement with VoiceStream Wireless Corporation, for three years following the
sale of our interest in PCS ONE, we may be restricted from providing mobile
voice wireless communications services in the York-Hanover, Lancaster and
Reading, Pennsylvania markets. As a result of the restrictions imposed by these
non-competition covenants, we may be required within 240 days after the
Conestoga acquisition to dispose of that portion of Conestoga's wireless
business operated in the Reading, Pennsylvania market, which represents
approximately 37% of the population area serviced by such business. Due to the
significant amount of fixed costs associated with Conestoga's wireless business,
if we were unable to dispose of that portion of the Conestoga wireless business
and were restricted from providing services in the Reading, Pennsylvania market,
we may incur significantly greater losses from that business than those
previously incurred by Conestoga.

      On November 12, 2002, we entered into a definitive agreement to sell
substantially all of the assets of the Conestoga wireless business to Keystone
Wireless, LLC ("Keystone"), a Delaware limited liability company. Keystone is an
affiliate of PC Management, Inc., a Ft. Myers-based company that owns and
manages wireless communications systems throughout the United States. Upon
completion of the sale, we will receive $10.0 million in cash and $10.0 million
in a secured promissory note issued by Keystone, each subject to certain
purchase price adjustments to be determined after closing. The sale is subject
to final regulatory approval by the Federal Communications Commission and other
customary closing conditions.


                                       47
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                   Part I - Financial Information (continued)

Item 3. Quantitative and Qualitative Disclosure About Market Risks

            D&E does not invest in derivative financial instruments or other
market risk sensitive instruments for the purpose of managing its foreign
currency exchange rate risk or for any other purpose. We will enter into an
interest rate protection agreement on one-half of the total amount of senior
indebtedness outstanding, with a weighted average life of at least 2 years, by
November 24, 2002 as required by the loan agreement.

Item 4. Controls and Procedures

            The Chief Executive Officer and the Chief Financial Officer of D&E
Communications (its principal executive officer and principal financial officer
respectively) have concluded, based on their evaluation as of a date within 90
days prior to the date of the filing of this report, D&E Communications'
disclosure controls and procedures: are effective to ensure that information
required to be disclosed by D&E Communications in the reports filed or submitted
by it under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms; and include controls and procedures designed to ensure
that information required to be disclosed by D&E Communications in such reports
is accumulated and communicated to the company's management, including the Chief
Executive Officer and the Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.

            There were no significant changes in D&E Communications' internal
controls or in other factors that could significantly affect these controls
subsequent to the date of such evaluation.


                                       48
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                           Part II - Other Information

Item 1. Legal Proceedings

      We are involved in various legal proceedings arising in the ordinary
course of our business. In the opinion of management, the ultimate resolution of
these matters will not have a material adverse effect on our consolidated
financial condition or results of operations.

Item 6. Exhibits and Reports on Form 8-K

(a)   Exhibits:

<TABLE>
<CAPTION>
Exhibit                           Identification
  No.                               of Exhibit                               Reference
  ---                               ----------                               ---------
<S>         <C>                                                            <C>
  4.1       Amendment to Credit Agreement dated September 12, 2002
            by and among D&E Communications, Inc. and CoBank, ACB
            as administrative agent for the Lenders.                       Filed herewith.

 10.1       Employment agreement dated May 24, 2002 between Albert
            H. Kramer and D&E Communications, Inc.                         Filed herewith.

 99.1       Certification of Chief Executive Officer                       Filed herewith.

 99.2       Certification of Chief Financial Officer.                      Filed herewith.
</TABLE>

(b)   Reports on Form 8-K:

      A current report on Form 8-K dated July 23, 2002, was filed during the
quarter ended September 30, 2002. The report announced the execution of a
non-binding letter of intent regarding the potential sale of certain assets of
Conestoga Wireless Corporation.


                                       49
<PAGE>
                    D&E Communications, Inc. and Subsidiaries

                                   Signatures

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


<TABLE>
<S>                                        <C>
                                           D&E Communications, Inc.



Date: March 31, 2003
                                           By: /s/ G. William Ruhl
                                               --------------------------------
                                               G. William Ruhl
                                               Chief Executive Officer

Date: March 31, 2003
                                           By: /s/ Thomas E. Morell
                                               --------------------------------
                                               Thomas E. Morell
                                               Senior Vice President, Chief
                                               Financial Officer and Treasurer
</TABLE>



                                       50
<PAGE>
                    D&E Communications, Inc. and Subsidiaries

                             OFFICER CERTIFICATIONS
                 REQUIRED BY SECTION 13A-14 OF THE EXCHANGE ACT

CERTIFICATIONS

I, G. William Ruhl, certify that:

      1.    I have reviewed this quarterly report on Form 10-Q/A of D&E
            Communications, Inc.;

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

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

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

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

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

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

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

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

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

      6.    The registrant's other certifying officers and I have indicated in
            this quarterly report whether or not there were significant changes
            in internal controls or in other factors that could significantly
            affect
<PAGE>
                   D&E Communications, Inc. and Subsidiaries


            internal controls subsequent to the date of our most recent
            evaluation, including any corrective actions with regard to
            significant deficiencies and material weaknesses.


Date: March 31, 2003



                                            /s/ G. William Ruhl
                                            -----------------------------------
                                            G. William Ruhl
                                            Chief Executive Officer
<PAGE>
                    D&E Communications, Inc. and Subsidiaries

I, Thomas E. Morell, certify that:

      1.    I have reviewed this quarterly report on Form 10-Q/A of D&E
            Communications, Inc.;

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

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

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

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

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

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

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

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

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

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


Date: March 31, 2003



                                            /s/ Thomas E. Morell
                                            -----------------------------------
                                            Thomas E. Morell
                                            Chief Financial Officer