<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q


              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2001

                                       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.

<TABLE>
<CAPTION>
                     Class                     Outstanding at August 3, 2001
                     -----                     -----------------------------
<S>                                            <C>
Common Stock, par value $.16 per share          7,386,015  Shares
</TABLE>
<PAGE>   2
Form 10-Q

                    D&E Communications, Inc. and Subsidiaries

                                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 six months ended
                           June 30, 2001 and 2000 ........................................................        1

                  Consolidated Balance Sheets --
                           June 30, 2001 and December 31, 2000 ...........................................        2

                  Consolidated Statements of Cash Flows --
                           For the six months ended
                           June 30, 2001 and 2000 ........................................................        3

                  Consolidated Statement of Comprehensive Income --
                           For the three months and six months ended
                           June 30, 2001 and 2000 ........................................................        4

                  Notes to Consolidated Financial Statements .............................................        5

     2.   Management's Discussion and Analysis of Financial
                  Condition and Results of Operations.....................................................       10

     3.   Quantitative and Qualitative Disclosure
                  about Market Risks .....................................................................       19

                                            PART II.   OTHER INFORMATION

     1.   Legal Proceedings ..............................................................................       20

     4.   Submission of Matters to a Vote of Security Holders ............................................       21

     6.   Exhibits and Reports on Form 8-K ...............................................................       22

          SIGNATURES......................................................................................       23
</TABLE>


                                       i
<PAGE>   3
Form 10-Q 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         Six Months Ended
                                                                   June 30                   June 30
                                                           ----------------------    ----------------------
                                                                          2000                      2000
OPERATING REVENUE                                            2001      (Restated)      2001      (Restated)
                                                             ----      ----------      ----      ----------
<S>                                                        <C>         <C>           <C>         <C>
 Communication service revenues                            $ 18,202     $ 13,695     $ 35,637     $ 27,508
 Communication products sold                                  3,218        2,777        6,223        5,649
 Other                                                          375          338          777          671
                                                           --------     --------     --------     --------

    Total Operating Revenues                                 21,795       16,810       42,637       33,828
                                                           --------     --------     --------     --------

OPERATING EXPENSE

 Communication service expenses (exclusive of
    depreciation and amortization below)                      9,102        5,836       17,783       12,335
 Cost of communication products sold                          2,602        2,020        5,051        4,176
 Depreciation and amortization                                3,693        2,746        7,222        5,384
 Marketing and customer services                              2,547        1,700        4,641        3,084
 General and administrative services                          3,574        2,739        7,340        5,593
                                                           --------     --------     --------     --------

    Total Operating Expenses                                 21,518       15,041       42,037       30,572
                                                           --------     --------     --------     --------

         Operating Income                                       277        1,769          600        3,256
                                                           --------     --------     --------     --------

OTHER INCOME (EXPENSE)

 Allowance for funds used during construction                    --           13           21           24
 Equity in net losses of affiliates                          (1,038)      (3,661)      (4,593)      (6,479)
 Interest expense                                              (464)        (435)        (918)        (824)
 Gain (loss) on investments                                      --       (2,965)          --       (2,965)
 Other, net                                                     430          480          746          961
                                                           --------     --------     --------     --------

    Total Other Income (Expense)                             (1,072)      (6,568)      (4,744)      (9,283)
                                                           --------     --------     --------     --------

         Loss before income taxes, dividends on utility
            preferred stock, extraordinary item and
            cumulative effect of accounting change             (795)      (4,799)      (4,144)      (6,027)

INCOME TAXES AND DIVIDENDS ON
    UTILITY PREFERRED STOCK

 Income taxes                                                  (744)      (1,045)      (1,309)        (967)
 Dividends on utility preferred stock                            16           16           33           33
                                                           --------     --------     --------     --------

    Total income taxes and dividends
       on utility preferred stock                              (728)      (1,029)      (1,276)        (934)
                                                           --------     --------     --------     --------

         Loss before extraordinary item and
            cumulative effect of accounting change              (67)      (3,770)      (2,868)      (5,093)

 Extraordinary item, tax benefit of $107                         --           --          107           --
 Cumulative effect of change in accounting
    principle, net of tax benefit of $267                        --           --           --         (912)
                                                           --------     --------     --------     --------

NET LOSS                                                   $    (67)    $ (3,770)    $ (2,761)    $ (6,005)
                                                           ========     ========     ========     ========

 Weighted average common shares outstanding                   7,387        7,358        7,386        7,348

BASIC AND DILUTED EARNINGS (LOSS)
 PER COMMON SHARE
 Net loss before extraordinary item
    and accounting change                                  $  (0.01)    $  (0.51)    $  (0.39)    $  (0.69)
 Extraordinary item                                            0.00         0.00         0.02         0.00
 Cumulative effect of accounting change                        0.00         0.00         0.00        (0.13)
                                                           --------     --------     --------     --------
    Net loss per common share                              $  (0.01)    $  (0.51)    $  (0.37)    $  (0.82)
                                                           ========     ========     ========     ========

 Dividends per common share                                $   0.13     $   0.10     $   0.25     $   0.20
                                                           ========     ========     ========     ========
</TABLE>


                See notes to consolidated financial statements.



                                       1
<PAGE>   4
                   D & E Communications, Inc. and Subsidiaries

                           Consolidated Balance Sheets

                      (in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                 June 30,
                                                                                   2001         December 31,
                                    ASSETS                                     (Unaudited)          2000
                                                                               -----------          ----
<S>                                                                            <C>              <C>
CURRENT ASSETS
            Cash and cash equivalents                                           $   1,368        $   3,527
            Temporary investments, including $8,667 and $8,667 restricted           8,667            8,670
            Accounts receivable                                                    10,988           12,290
            Accounts receivable - affiliated companies                             10,189            5,714
            Inventories, lower of cost or market, at average cost                   2,017            2,080
            Prepaid expenses                                                        5,581            2,661
            Other                                                                     771              575
                                                                                ---------        ---------
               TOTAL CURRENT ASSETS                                                39,581           35,517
                                                                                ---------        ---------
INVESTMENTS
            Investments and advances in affiliated companies                          980               --
            Investments available-for-sale                                          4,337            2,518
                                                                                ---------        ---------
                                                                                    5,317            2,518
                                                                                ---------        ---------
PROPERTY, PLANT AND EQUIPMENT
            In service                                                            158,375          147,263
            Under construction                                                     13,400            7,913
                                                                                ---------        ---------
                                                                                  171,775          155,176
            Less accumulated depreciation                                          84,918           79,321
                                                                                ---------        ---------
                                                                                   86,857           75,855

OTHER ASSETS                                                                        9,409           10,331
                                                                                ---------        ---------

            TOTAL ASSETS                                                        $ 141,164        $ 124,221
                                                                                =========        =========
                   LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
            Long-term debt maturing within one year                             $     908        $     917
            Accounts payable and accrued liabilities                               18,639           18,975
            Accrued taxes                                                             334              387
            Accrued interest and dividends                                            432              431
            Advance billings, customer deposits and other                           5,316            3,672
                                                                                ---------        ---------
               TOTAL CURRENT LIABILITIES                                           25,629           24,382
                                                                                ---------        ---------
LONG-TERM DEBT                                                                     42,263           20,907
                                                                                ---------        ---------
OTHER LIABILITIES
            Equity in net losses of affiliates in excess of
               investments and advances                                             9,364           11,435
            Deferred income taxes                                                   7,180            6,696
            Other                                                                   3,283            3,993
                                                                                ---------        ---------
                                                                                   19,827           22,124
                                                                                ---------        ---------
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 $.16, authorized shares 30,000,000               1,216            1,214
               Outstanding shares: 7,388,268 at June 30, 2001
                                   7,382,054 at December 31, 2000
            Additional paid-in capital                                             39,663           39,374
            Unrealized gain on investments                                          1,623              467
            Retained earnings                                                      13,765           18,366
            Treasury stock at cost, 237,134 shares at June 30, 2001
               226,194 shares at December 31, 2000                                 (4,268)          (4,059)
                                                                                ---------        ---------
                                                                                   51,999           55,362
                                                                                ---------        ---------
            TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                          $ 141,164        $ 124,221
                                                                                =========        =========
</TABLE>


                See notes to consolidated financial statements.




                                       2
<PAGE>   5
                   D & E Communications, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

                                 (in thousands)

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                      Six Months Ended
                                                                                           June 30
                                                                                    2001            2000
                                                                                  --------        --------
<S>                                                                               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES                                              $  8,233        $  8,491
                                                                                  --------        --------

CASH FLOWS FROM INVESTING ACTIVITIES
                     Capital expenditures, net of proceeds from sales
                         and removal costs                                         (17,201)         (7,379)
                     Acquisition of businesses, net of cash acquired of $18             --          (2,077)
                     Proceeds from sale of temporary investments                    17,336          36,626
                     Purchase of temporary investments                             (17,333)        (41,292)
                     Increase in investments and advances to affiliates            (38,337)        (17,548)
                     Decrease in investments and repayments from affiliates         25,555          30,110
                                                                                  --------        --------

                     Net Cash Used In Investing Activities                         (29,980)         (1,560)
                                                                                  --------        --------

CASH FLOWS FROM FINANCING ACTIVITIES
                     Dividends on common stock                                      (1,720)         (1,370)
                     Payments on long-term debt                                        (36)             (5)
                     Net proceeds from revolving lines of credit                    21,383              --
                     Proceeds from issuance of common stock                            170             146
                     Purchase of treasury stock                                       (209)           (349)
                                                                                  --------        --------

                     Net Cash Provided By (Used In) Financing Activities            19,588          (1,578)
                                                                                  --------        --------

INCREASE (DECREASE) IN CASH
           AND CASH EQUIVALENTS                                                     (2,159)          5,353

CASH AND CASH EQUIVALENTS
           BEGINNING OF PERIOD                                                       3,527           1,674
                                                                                  --------        --------

           END OF PERIOD                                                          $  1,368        $  7,027
                                                                                  ========        ========
</TABLE>


                See notes to consolidated financial statements.



                                       3
<PAGE>   6
                   D & E Communications, Inc. and Subsidiaries
                 Consolidated Statements of Comprehensive Income
                                 (in thousands)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                          Three months ended             Six months ended
                                                                June 30                       June 30
                                                          2001           2000           2001           2000
                                                          ----           ----           ----           ----
<S>                                                     <C>            <C>            <C>            <C>
Net loss                                                $   (67)       $(3,770)       $(2,761)       $(6,005)

Other comprehensive income:
  Unrealized gain on investments, net of
     taxes of $445, $50, $664 and $792                      691             71          1,155            953
  Reclassification adjustment for losses
     included in net loss, net of taxes of $1,008            --          1,957             --          1,957
                                                        -------        -------        -------        -------

Total comprehensive income (loss)                       $   624        $(1,742)       $(1,606)       $(3,095)
                                                        =======        =======        =======        =======
</TABLE>



                See notes to consolidated financial statements.




                                       4
<PAGE>   7
Form 10-Q

                    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) BASIS OF PRESENTATION

              D&E Communications, Inc. is a telecommunications holding company.
         The accompanying consolidated financial statements include the accounts
         of Denver and Ephrata Telephone and Telegraph Company (D&E Telephone);
         D&E Networks, Inc., (Networks) formerly D&E Telephone and Data Systems
         (TDS); D&E Wireless, Inc. (Wireless); D&E Investments, Inc.
         (Investments); and D&E Systems, Inc. (Systems). D&E Communications,
         Inc., including these subsidiary companies, is defined and referred to
         herein as (D&E).

              The accompanying financial statements are unaudited and have been
         prepared by D&E 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 the results of operations, financial position, and
         cash flows of D&E for the periods presented. Certain information and
         footnote disclosures normally included in financial statements prepared
         in accordance with generally accepted accounting principles have been
         condensed or omitted pursuant to such 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. D&E believes that the
         disclosures made are adequate to make the information presented not
         misleading. These financial statements should be read in conjunction
         with the financial statements and notes thereto included in the D&E
         Annual Report on Form 10-K for the fiscal year ended December 31, 2000.


(2) EQUITY INVESTMENTS IN AFFILIATED COMPANIES

         (a) PCS ONE

              D&E owns a fifty percent partnership interest in D&E/Omnipoint
         Wireless Joint Venture, L.P. (PCS ONE) that was formed in November 1997
         to provide PCS wireless communications services and equipment to
         customers in the Lancaster, Harrisburg, York/Hanover and Reading,
         Pennsylvania Basic Trading Areas. The results of operations of PCS ONE
         were as follows:

<TABLE>
<CAPTION>
                               Three months ended               Six months ended
                                     June 30                        June 30
                              2001            2000            2001            2000
                              ----            ----            ----            ----
<S>                         <C>             <C>             <C>             <C>
Net sales                   $ 10,592        $  7,684        $ 20,266        $ 14,824
Net loss                    ($ 5,558)       ($ 4,130)       ($10,088)       ($ 7,584)
D&E's share of loss         ($ 2,779)       ($ 2,065)       ($ 5,044)       ($ 3,792)
</TABLE>

              Affiliated accounts receivable includes $3,877 due from PCS ONE
         for the acquisition of a billing system implemented during the quarter
         ended June 30, 2001.

                                       5
<PAGE>   8
Form 10-Q

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

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


         (b) EuroTel

              D&E owns a one-third interest in EuroTel L.L.C. (EuroTel), a
         domestic corporation which holds an indirect 100% investment in
         PenneCom B.V. (PenneCom), an international telecommunications company
         that holds a 100% investment in Pilicka Telefonia, Sp.zo.o. (Pilicka).
         In April 1999, PenneCom entered into an agreement to sell its entire
         investment in Pilicka to Elektrim S.A. (Elektrim) for $140,000 in cash
         and notes. In July 1999, Elektrim issued written notice to PenneCom
         that it was repudiating the purchase agreement. In August 1999,
         PenneCom filed an arbitration request with the International Court of
         Arbitration (the Arbitration Court) seeking specific performance of the
         agreement as well as compensatory and punitive damages.

              In May 2001 the Arbitration Court made its award (the Award) in
         favor of PenneCom on the question of liability and awarded payment by
         Elektrim to PenneCom of the following sums: (1) $22,987 together with
         interest at an annual rate of 10% effective from August 1, 1999 to the
         date of payment; (2) $367.5 in respect of costs paid by PenneCom to the
         Arbitration Court; and (3) $2,000 towards PenneCom's legal costs.

              On May 21, 2001, PenneCom submitted to the Arbitration Court a
         formal application for a correction of a computational error in the
         Award. The proposed correction would increase the $22,987 to $32,987.
         Income from affiliates for the quarter ended June 30, 2001 includes
         $3,333, D&E's one third share of the income recognized related to the
         Award. The remainder of the Award will be recorded when payment is
         received. Elektrim has notified PenneCom that Elektrim now wants to pay
         to PenneCom the full amount due under the Award and expressed its
         intention to pay the amount of any amended Award.

              On August 6, 2001, PenneCom was notified that the Arbitration
         Court issued an amended award, correcting the Award to reflect that the
         following sums are due to PenneCom from Elektrim: (1) $30,000 with
         interest at an annual rate of 10% effective from August 1, 1999 to the
         date of payment; (2) $367.5 in respect of costs paid by PenneCom to the
         Arbitration Court; and (3) $2,000 towards PenneCom's legal costs. See
         Item 1 of Part II of this Report.


(3) ACCOUNTING CHANGES AND RECENT ACCOUNTING PRONOUNCEMENTS

              D&E adopted Securities and Exchange Commission Staff Accounting
         Bulletin No. 101, "Revenue Recognition in Financial Statements"
         (SAB101) in the fourth quarter of 2000, retroactive to January 1, 2000.
         SAB 101 provides guidance on recognition of certain non-recurring fees,
         such as service activation and installation fees, and associated
         incremental direct expenses over the expected term of the customer
         relationship. The cumulative effect of a change in accounting principle
         was reported in our Form 10-K for the year ended December 31, 2000. The
         previously reported quarterly information for the three months and six
         months ended June 30, 2000 are restated in this Form 10-Q to reflect a
         decrease of $912 ($0.13 per share) cumulative effect of the change in
         accounting principle, net of tax benefit of $267 as of January 1, 2000.
         Also

                                       6
<PAGE>   9
Form 10-Q

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

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


         we have restated communication service revenues, other revenues,
         communication service expenses, marketing and customer services
         expenses and equity in net losses of affiliates for the impact of SAB
         101. The impact decreased the second quarter 2000 revenue by $2,
         expenses by $24 and increased operating income by $22. The year to date
         restatement in 2000 increased revenue by $4, expenses by $48 and
         decreased operating income by $44. Additionally, D&E's share of
         EuroTel's impact was a decrease of $521. The restatements resulted in a
         year to date June 30, 2000 increase of $853 in net loss ($0.12 per
         share).

              On June 29, 2001 the Financial Accounting Board issued Statements
         of Financial Accounting Standards No. 141, "Business Combinations"
         (SFAS 141) to be used for all business combinations initiated after
         June 30, 2001, and "Goodwill and Other Intangible Assets" (SFAS 142),
         which addresses the accounting for goodwill and intangible assets
         subsequent to their acquisition, effective for fiscal years beginning
         after December 15, 2001. Management is currently evaluating the impact
         these statements will have on D&E's financial position or results of
         operations.


(4) DISCONTINUATION OF REGULATORY ACCOUNTING PRINCIPLES

              In compliance with state statutes, commonly known as Chapter 30,
         D&E Telephone joined in a petition to the Pennsylvania Public Utility
         Commission (PUC) in July 1998 for an alternative form of regulation. In
         response to the PUC's initial Chapter 30 Order, in January 2000, D&E
         Telephone filed a petition for reconsideration. On March 30, 2000, the
         PUC issued a revised Order. D&E accepted the PUC Order and filed an
         amended plan to accelerate network modernization. Various parties to
         the litigation filed exceptions to which D&E Telephone filed a reply.
         On December 21, 2000, the PUC entered an Order granting the exceptions
         in part. Subsequently, D&E Telephone filed a remodified Chapter 30 Plan
         on January 22, 2001 accepting a new ratemaking process in which,
         instead of a rate base/rate of return methodology, prices are adjusted
         in accordance with the Gross Domestic Product Price Index with a
         productivity offset.

              During the periods when D&E Telephone's rates were set using a
         rate base/rate of return methodology, it had collected deferred income
         taxes from customers at rates higher than the current enacted tax rates
         and had established regulatory liabilities for the future return of
         those excess deferred taxes to customers. As a result of the acceptance
         of the new ratemaking process on January 22, 2001, D&E Telephone was no
         longer subject to the requirements of Statement of Financial Accounting
         Standards No. 71 (SFAS 71), "Accounting for the Effects of Certain
         Types of Regulation" and, therefore, it removed those regulatory
         liabilities from its accounts pursuant to SFAS 101, "Regulated
         Enterprises - Accounting for the Discontinuation of Application of FASB
         No. 71". As a result, the elimination of the regulatory liabilities,
         net of income taxes, resulted in a one-time cumulative income effect of
         $107 in the quarter ended March 31, 2001.

                                       7
<PAGE>   10
Form 10-Q

                    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) CONTINGENCIES

              D&E became party to a $40,000 loan agreement from a domestic bank
         to PenneCom in December 1999. PenneCom increased the loan to $50,000 in
         August 2000. D&E, along with the other two investors in EuroTel, each
         pledged investments of $8,667 as collateral for security on the loan.
         Management anticipates the loan, which was used primarily to refinance
         higher interest debt, will be partially repaid following receipt of the
         proceeds of the damage award from Elektrim and new loan terms will be
         negotiated. See footnote 2(b).

              On March 14, 2001, PCS ONE amended its May 2000 financing
         agreement with a bank to increase its credit facility from $70,000 to
         $82,000. The joint venture partners have no guarantee requirement in
         connection with this agreement. D&E and its joint venture partner must
         maintain contributed capital at a level of 66.7% of the funds borrowed.
         On June 30, 2001, the partners had an allowable capital contribution of
         $50,548 making $75,500 of the facility available.


(6) BUSINESS SEGMENT DATA

              Beginning in 2001, D&E restructured its internal reporting to
         manage the financial results through line of business managers. The
         measure of profitability was changed to operating income rather than
         net income because the business lines do not follow corporate structure
         as closely as the previous structure did. The prior year's results have
         been restated to reflect comparative results to the new line of
         business segments. The five segments are ILEC, CLEC, Networking
         Services, Internet Services and Wireless Services. Corporate, Other and
         Eliminations reconciles the segment amounts to the consolidated D&E
         total.

Financial results for D&E's five operating segments are as follows:

<TABLE>
<CAPTION>
                             External Revenues        Intersegment Revenues        Operating Income (Loss)
                             -----------------        ---------------------        -----------------------
                            Three months ended         Three months ended             Three months ended
                                 June 30,                    June 30,                      June 30,
         Segment            2001          2000          2001          2000            2001           2000
         -------            ----          ----          ----          ----            ----           ----
<S>                       <C>           <C>           <C>            <C>           <C>            <C>
ILEC                      $10,355       $ 9,733       $ 1,222        $   513        $ 2,701        $ 2,531
CLEC                        1,544           893            48             16           (912)          (593)
Networking Services         5,650         3,566            14             49         (1,161)           (24)
Internet Services             366            --             4             --           (483)            --
Wireless Services           2,853         2,007            --             --            256            137
Corporate, Other
   and Eliminations         1,027           611        (1,288)          (578)          (124)          (282)
                          -------       -------       -------        -------        -------        -------
Total                     $21,795       $16,810       $    --        $    --        $   277        $ 1,769
                          =======       =======       =======        =======        =======        =======
</TABLE>

                                       8
<PAGE>   11
Form 10-Q

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

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


Financial results for D&E's five operating segments continued:

<TABLE>
<CAPTION>
                             External Revenues         Intersegment Revenues      Operating Income (Loss)
                             -----------------         ---------------------      -----------------------
                             Six months ended            Six months ended             Six months ended
                                  June 30,                   June 30,                      June 30,
         Segment            2001          2000          2001           2000          2001            2000
         -------            ----          ----          ----           ----          ----            ----
<S>                       <C>           <C>           <C>            <C>          <C>            <C>
ILEC                      $20,486       $19,155       $ 2,211        $   942        $ 4,942        $ 4,690
CLEC                        2,957         1,746            85             25         (1,602)          (953)
Networking Services        11,349         6,558            38             75         (1,913)          (220)
Internet Services             618            --            11             --         (1,137)            --
Wireless Services           5,540         4,163            --             --            492            266
Corporate, Other
   and Eliminations         1,687         2,206        (2,345)        (1,042)          (182)          (527)
                          -------       -------       -------       --------        -------        -------
Total                     $42,637       $33,828       $    --       $     --        $   600        $ 3,256
                          =======       =======       =======       ========        =======        =======
</TABLE>

<TABLE>
<CAPTION>
                                Segment Assets
                                --------------
                             June           December
        Segment            30, 2001         31, 2000
        -------            --------         --------
<S>                       <C>              <C>
ILEC                      $ 139,067        $ 118,898
CLEC                          8,025            7,715
Networking Services          16,330           16,664
Internet Services               901               83
Wireless Services            10,388            6,885
Corporate, Other
   and Eliminations         (33,547)         (26,024)
                          ---------        ---------
Total                     $ 141,164        $ 124,221
                          =========        =========
</TABLE>

                                       9
<PAGE>   12
Form 10-Q

                    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)


              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 six months ended June 30, 2000 have
         been reclassified for comparative purposes.


         RESULTS OF OPERATIONS

              Summary. D&E's business units were previously aggregated into four
         reportable segments. Beginning in 2001, D&E restructured its internal
         reporting to manage the financial results through line of business
         managers. The reorganization was prompted by the need to integrate the
         operations of two companies acquired during 2000 and to manage a larger
         portion of the total company's operations outside of the regulated
         environment in a competitive market. Additionally, D&E reentered the
         internet service provider market as a new business line in the fourth
         quarter of 2000. The measure of profitability was changed to operating
         income rather than net income because the business lines do not follow
         corporate structure and items below operating income, such as income
         taxes, are not allocated to segments. The prior year's results have
         been restated to reflect comparative results to the new line of
         business segments.

              D&E changed its reported segments to ILEC, CLEC, Networking
         Services, Internet Services and Wireless Services. Corporate, Other and
         Eliminations reconciles the segment amounts to the consolidated D&E
         total.

         ILEC -- Incumbent local exchange carrier - provides services in D&E's
         historical market area comprised of exchange services, custom calling
         features, directory publication and billing and collection services.

         CLEC -- Competitive local exchange carrier - provides exchange services
         and custom calling features in markets adjacent to the historical ILEC
         market.

         Networking Services -- provides professional programming and technical
         services for integration of telephone systems sold and cabling with
         local and wide-area computer networks. D&E Telephone and Data Systems,
         Inc. and Alternate Solutions, Inc. merged into one corporation
         operating under the name D&E Networks, Inc.

         Internet Services -- D&E Jazzd, launched during the fourth quarter of
         2000, provides Internet access and web page hosting services.

         Wireless Services -- provides contract services to D&E's joint venture,
         D&E/Omnipoint Wireless Joint Venture, L.P. (PCS ONE).

              Operating revenues increased 29.7% for the three months ended June
         30, 2001 compared with the same period of 2000. The six month year to
         date operating revenues for 2001 were 26.0% higher than the six months
         ended June 30, 2000.

                                       10
<PAGE>   13
Form 10-Q

                    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 ILEC exchange service business grew revenue 13.0% in the three
         months and 12.9% in the six months ended June 30, 2001 compared with
         the same periods in 2000.

         - CLEC Services, which began operations late in 1999, saw revenues
         increase 75.1% from the second quarter of 2000 and 71.8% for the six
         months ended June 30, 2001 compared with 2000.

         - The increased revenues from the two computer services companies
         acquired during 2000 accounted for a 56.7% and 71.7% increase in
         Networking Services revenues in the three months and six months of 2001
         respectively versus the same periods of 2000.

         - Internet Services, which started in the fourth quarter of 2000, had
         $370 in revenues for the three months and $629 for the six months ended
         June 30, 2001 with no similar amounts in 2000.

         - Support services to the wireless affiliate PCS ONE increased 42.2%
         for the three months and 33.1% for the six months of 2001 versus the
         three and six months ended June 30, 2000.

         - Corporate and other revenues reconciling to the consolidated total
         decreased $288 during the current quarter and $1,822 for the six months
         primarily from increased ILEC Intersegment revenue to the CLEC and
         partially from one non-recurring benefit reimbursement item related to
         the European operations in the first quarter of 2000.

              Operating profit as a percentage of revenue decreased to 1.3% for
         the second quarter of 2001 compared to 10.5% for the second quarter of
         2000 as a result of the expenses related to the development of new
         businesses.

              Other income and expense changes included an additional $3,300 of
         income from recognition of a portion of the Elektrim arbitration award
         as equity in the earnings of EuroTel during the second quarter of 2001.
         In the second quarter of 2000 a loss of $2,965 was recognized on a
         permanent decline in market value of the investment in OneMain shares.

              Three months ended June 30, 2001 compared
              to the three months ended June 30, 2000

              Operating Revenues. Consolidated total operating revenues for the
         three months ended June 30, 2001 were $21,795, up 29.7% from $16,810
         for the second quarter in 2000. The primary reason for this increase
         was the acquisition of CompuSpirit, Inc. (CSI) on April 28, 2000 and
         Alternate Solutions, Inc. (ASI) on August 1, 2000.

              ILEC segment revenues increased 13.0% to $11,577 in 2001 from
         $10,246 in 2000. The increase was primarily attributable to an increase
         of 33.5% in network access revenues from special access, intrastate
         access and switched message data access payments from other carriers.
         Local network services revenues decreased 3.4% as a net result of an
         increase in the number of telephone access lines in service, offset by
         decreases related to extended toll free calling service

                                       11
<PAGE>   14
Form 10-Q

                    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)


         area and a reduction from SAB 101 net deferrals.

              CLEC segment revenues increased 75.1% to $1,592 in 2001 from $909
         in 2000 as a result of the addition of new customers in the business
         that began operations late in 1999.

              Networking Services segment revenues increased 56.7% to $5,664 in
         2001 from $3,615 in 2000. The acquisitions of CSI at the end of April
         2000 and ASI in August 2000 primarily accounted for the increase.
         Professional programming and computer networking services revenues
         increased over 200% for commercial and government clients primarily
         from the acquired companies. Telephone equipment sales increased $216
         or approximately 8.0% during the second quarter of 2001 compared to the
         same period in 2000.

              Internet Services segment revenues were $370 in 2001 with no
         comparative amount in 2000 for the services that were initiated for
         single user, business, DSL and web hosting subscribers in the fourth
         quarter of 2000. Revenues increased 42.9% from $259 in the preceding
         quarter.

              Wireless Services segment revenues increased 42.2% to $2,853 in
         2001 from $2,007 in 2000. The increase was the result of expansion of
         sales and customer support services provided to PCS ONE.


              Operating Expenses and Operating Income. Consolidated operating
         expenses for the three months ended June 30, 2001 were $21,518, up from
         $15,041 in 2000. The primary reason for the increase was the expenses
         related to CSI and ASI, which were acquired on April 28, 2000 and
         August 1, 2000, respectively. The continued development of the
         competitive local exchange services, and addition of internet access
         services through the launch of D&E Jazzd, caused expenses to increase
         over the same period last year. Support service costs for the PCS ONE
         affiliate also increased over 2000 as the wireless business growth
         continued.

              ILEC segment operating expenses increased primarily in cost of
         network operations, depreciation, and general and administrative
         expenses. These increases were driven primarily by increased network
         administration, computer expenses, increased depreciation of plant
         additions and employee benefit costs. Operating income increased $170
         or 6.7% for the segment.

              The CLEC segment experienced essentially all of its operating
         expense increase in the area of direct cost of network operations and
         network access expenses. Digital electronic switching and circuit
         equipment expenses increased as a result of expanding the network to
         accommodate a growing customer base. Network access expense increased
         from the growing volume of new subscribers being serviced. The
         operating loss for CLEC operations increased to $912 in 2001 from $593
         in the second quarter of 2000 as a result of the system build out in
         advance of subscriber additions.

              Networking Services segment expenses increased primarily as a
         result of the larger number of employees providing services in the
         newly acquired companies and $316 for amortization of

                                       12
<PAGE>   15
Form 10-Q

                    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)


         goodwill in 2001 related to the acquisitions. Segment expenses also
         increased as a result of the cost of products sold for telephony
         equipment sales. The operating loss for the segment was $1,161 in 2001,
         compared with $24 in the second quarter of 2000.

              Internet Services segment operating expenses were $853 for the
         quarter ended June 30, 2001. The expenses exceeded revenues as a result
         of developing operating capability ahead of the development of a
         customer base and as a result of advertising the new business service.
         The operating loss for the second quarter of 2001 was $483. Expenses
         decreased 6.6% from the previous quarter resulting in a $171 decrease
         in operating loss from the first quarter of 2001.

              Wireless Services segment operating expenses increased as the
         demand from PCS ONE for support services increased, but certain legal
         expenses incurred in 2000 were not repeated in 2001. The operating
         income was $256 for the second quarter of 2001, compared with $137 for
         the same period in 2000.

              Other Income (Expense). Other income (expense) for the three
         months ended June 30, 2001 was a net expense of $1,072, compared with a
         net expense of $6,568 in the second quarter of 2000. Equity in the net
         losses of affiliates was $1,038 in the second quarter of 2001, compared
         with $3,661 in the second quarter of 2000. D&E's share in the increased
         losses of PCS ONE was $521. D&E's share of EuroTel results was a $12
         greater loss excluding $3,333 from D&E's share of the income recognized
         related to the arbitration award. The remainder of the Award will be
         recorded when payment is received.

              Interest expense increased 6.7% to $464 in 2001 from $435 in 2000.
         Bank borrowing increased to cover the construction costs of a new
         building and other capital additions. The additional interest expense
         due to the increased borrowings was partially offset by increased
         capitalization of interest expense in connection with the building
         expansion. Additionally, along with the change in accounting for
         estimated regulated liabilities, D&E Telephone discontinued recording
         interest income credits to allowance for funds used during
         construction, and began to credit interest expense.

              Income taxes. Income taxes were a benefit of $744 for the three
         months ended June 30, 2001, compared to a benefit of $1,045 in 2000.
         The change was primarily related to the valuation allowance that
         eliminates the tax effect of the results from the European affiliate.
         The results for the second quarter 2001 included $3,333 from the
         Elektrim arbitration award.


              Six months ended June 30, 2001 compared
              to the six months ended June 30, 2000

              Operating Revenues. Consolidated total operating revenues for the
         six months ended June 30, 2001 were $42,637, up 26.0% from $33,828 for
         the first half in 2000. The primary reasons for this increase were the
         acquisitions of CSI on April 28, 2000 and ASI on August 1, 2000 and the
         new internet service initiated late in 2000.

                                       13
<PAGE>   16
Form 10-Q

                    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)


              ILEC segment revenues increased 12.9% to $22,697 in 2001 from
         $20,097 in the first half of 2000. The increase was primarily
         attributable to an increase of 30.6% in network access revenues from
         special access, intrastate access and switched message data access
         payments from other carriers. Long distance minutes and message volumes
         decreased approximately 16% offsetting the increases from access
         revenue.

              CLEC segment revenues increased 71.8% to $3,042 in 2001 from
         $1,771 in the first half of 2000 as a result of the addition of new
         customers in the business that began operations late in 1999.

              Networking Services segment revenues increased 71.7% to $11,387 in
         2001 from $6,633 in the first half of 2000. The acquisitions of CSI at
         the end of April 2000 and ASI in August 2000 primarily accounted for
         the increase. Professional programming and computer networking services
         revenues increased for commercial and government clients primarily from
         the acquired companies. Communication products sold increased $347 or
         6.4% during the first half of 2001 compared to the same period in 2000.

              Internet Services segment revenues were $629 in 2001 with no
         comparative amount for the services that were initiated for single
         user, business, DSL and web hosting subscribers in the fourth quarter
         of 2000.

              Wireless Services segment revenues increased 33.1% to $5,540 in
         2001 from $4,163 in 2000. The increase was the result of growth in
         sales and additional customer support services provided to PCS ONE.


              Operating Expenses and Operating Income. Consolidated operating
         expenses for the six months ended June 30, 2001 were $42,037, up from
         $30,572 in 2000. The primary reason for the increase was the expenses
         related to CSI and ASI acquired during 2000. The continued development
         of the competitive local exchange services, and addition of internet
         access services through the launch of D&E Jazzd, caused expenses to
         increase over the same period last year. Support service costs for the
         PCS ONE affiliate also increased over 2000 as the wireless business
         growth continued.

              ILEC segment operating expenses increased primarily in cost of
         network operations, depreciation, and general and administrative
         expenses. These increases were driven primarily by increased network
         administration costs, operational computer expenses, increased
         depreciation expense from plant additions, information technology
         expenses and employee benefit costs. Operating income increased $252 or
         5.4% for the segment.

              The CLEC segment experienced essentially all of its operating
         expense increase in the area of direct cost of network operations and
         network access expenses. Digital electronic switching, circuit
         equipment and network administration expenses increased as a result of
         expanding the network to

                                       14
<PAGE>   17
Form 10-Q

                    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)


         accommodate a growing customer base. Network access expense increased
         from the growing volume of new subscribers being serviced. The
         operating loss for CLEC operations increased to $1,602 in 2001 from
         $953 in the first half of 2000 as a result of the system build out in
         advance of subscriber additions.

              Networking Services segment expenses increased primarily as a
         result of the larger number of employees providing services in the
         newly acquired companies and $736 in 2001 for amortization of goodwill
         related to the acquisitions of CSI and ASI in 2000. Segment expenses
         also increased $1,279 from increased costs of products sold. The
         operating loss for the segment was $1,913 in 2001, compared with $220
         in the first half of 2000.

              Internet Services segment operating expenses were $1,766 for the
         six months ended June 30, 2001. The expenses exceeded revenues as a
         result of developing operating capability ahead of the development of a
         customer base and as a result of advertising the new business service.
         The operating loss for the first half of 2001 was $1,137.

              Wireless Services segment operating expenses increased as the
         demand from PCS ONE for support services increased, but certain legal
         expenses incurred in 2000 were not repeated in 2001, causing a smaller
         increase in expenses than in revenues. The operating income was $492
         for the first half of 2001, compared with $266 for the same period in
         2000.


              Other Income (Expense). Other income (expense) for the six months
         ended June 30, 2001 was a net expense of $4,744, compared with a net
         expense of $9,283 in the first half of 2000. Equity in the net losses
         of affiliates was $4,593 in the first half of 2001, compared with
         $6,479 in the first half of 2000. D&E's share in the increased losses
         of PCS ONE was $1,048. D&E's share of EuroTel results was a $281
         greater loss, excluding $3,333 from D&E's share of the income
         recognized related to the arbitration award. The remainder of the Award
         will be recorded when payment is received.

              Interest expense increased 11.4% to $918 in 2001 from $824 in
         2000. Bank borrowing increased to cover the construction costs of a new
         building and other capital additions. The resulting increase in
         interest expense was partially offset by capitalization of interest
         expense of approximately $252 in connection with the building
         expansion. Additionally, along with the change in accounting for
         estimated regulated liabilities, D&E Telephone discontinued recording
         interest income credits to allowance for funds used during
         construction, and began to credit interest expense.


              Income taxes. Income taxes were a benefit of $1,309 for the six
         months ended June 30, 2001, compared to $967 in 2000. The change was
         primarily related to the valuation allowance that eliminates the tax
         benefit or expense from the equity in income of the European affiliate.
         The European results changed to an income of $442 in 2001 from a loss
         of $2,597 in 2000.

                                       15
<PAGE>   18
Form 10-Q

                    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 extraordinary charge was the result of the reversal of certain
         tax liabilities established under regulatory accounting rules. As a
         result of moving to an alternative form of regulation during the first
         quarter of 2001, $107 of previously established liabilities was
         reversed. See Note 4 to the company's financial statements included in
         this report.


         FINANCIAL CONDITION

              Liquidity and Capital Resources. D&E believes that it has adequate
         internal and external resources available to meet ongoing operating
         requirements, including expansion and modernization of the existing
         local exchange network and business development activities. D&E expects
         that foreseeable capital requirements for its existing businesses will
         be financed by a combination of internally generated funds, existing
         cash or temporary investments, and additional short or long-term debt
         or equity financing. Management has negotiated increases in its two
         unsecured lines of credit and has initiated a search for long-term debt
         financing to fund growth of new business development activities and to
         enhance D&E's capital structure within management's guidelines.

              During the six months ended June 30, 2001, cash provided from
         operations was $8,233. Capital expenditures were $17,201. Capital
         addition expenditures included $6,260 for a new office building under
         construction and $4,069 for computer equipment and software purchased
         primarily to upgrade the billing system. Central office switching and
         remote network monitoring equipment purchases totaled $3,649. CLEC and
         internet expansion expenditures were other significant expenditures
         during the period. Investments in and advances to affiliates used
         $12,782 of capital for PCS ONE and EuroTel. The primary use of cash in
         financing activities was $1,720 for dividend payments. Cash balances
         decreased $2,159 and long-term debt, primarily from unsecured lines of
         credit, which D&E intends to refinance as long-term, increased $21,347
         to cover the cash outflow.

              At June 30, 2001, $8,667 was invested in U. S. Treasury securities
         held as collateral for a bank loan made to PenneCom. D&E also had
         $13,617 available from its total unsecured lines of credit of $35,000.
         D&E's ratio of total debt to total debt plus capital increased to
         44.7% at June 30, 2001 from 27.8% at December 31, 2000.


         OTHER

              D&E adopted Securities and Exchange Commission Staff Accounting
         Bulletin No. 101, "Revenue Recognition in Financial Statements"
         (SAB101) in the fourth quarter of 2000, retroactive to January 1, 2000.
         SAB 101 provides guidance on recognition of certain non-recurring fees,
         such as service activation and installation fees, and associated
         incremental direct expenses over the expected term of the customer
         relationship. The cumulative effect of a change in accounting principle
         was reported in our Form 10-K for the year ended December 31, 2000. The
         previously reported quarterly information for the three months ended
         June 30, 2000 are restated in

                                       16
<PAGE>   19
Form 10-Q

                    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)


         this Form 10-Q to reflect a decrease of $912 ($0.12 per share)
         cumulative effect of the change in accounting principle, net of tax
         benefit of $267 as of January 1, 2000. Also we have restated
         communication service revenues, other revenues, communication service
         expenses, marketing and customer services expenses and equity in net
         losses of affiliates for the impact of SAB 101. The impact decreased
         the second quarter 2000 revenue by $2, expenses by $24 and increased
         operating income by $22. The year to date restatement in 2000 increased
         revenue by $4, expenses by $48 and decreased operating income by $44.
         Additionally, D&E's share of EuroTel's impact was a decrease of $521 in
         pretax income. The restatements resulted in an increase in net loss of
         $853 ($0.12 per share) for the six months ended June 30, 2000.

              In compliance with state statutes, commonly known as Chapter 30,
         D&E Telephone joined in a petition to the Pennsylvania Public Utility
         Commission (PUC) in July 1998 for an alternative form of regulation. In
         response to the PUC's initial Chapter 30 Order, in January 2000, D&E
         Telephone filed a petition for reconsideration. On March 30, 2000, the
         PUC issued a revised Order. D&E accepted the PUC Order and filed an
         amended plan to accelerate network modernization. Various parties to
         the litigation filed exceptions to which D&E Telephone filed a reply.
         On December 21, 2000, the PUC entered an Order granting the exceptions
         in part. Pursuant thereto, D&E Telephone filed a remodified Chapter 30
         Plan on January 22, 2001 accepting a new ratemaking process in which,
         instead of a rate base/rate of return methodology, prices are adjusted
         in accordance with the Gross Domestic Product Price Index with a
         productivity offset. The PUC subsequently entered an Order directing
         minor modifications in the plan. D&E expects to file these
         modifications on or before August 29, 2001.

              During the periods when D&E Telephone's rates were set using a
         rate base/rate of return methodology, it had collected deferred income
         taxes from customers at rates higher than the current enacted tax rates
         and had established regulatory liabilities for the future return of
         those excess deferred taxes to customers. As a result of the acceptance
         of the new ratemaking process on January 22, 2001, D&E Telephone was no
         longer subject to the requirements of Statement of Financial Accounting
         Standards No. 71 (SFAS 71), "Accounting for the Effects of Certain
         Types of Regulation" and, therefore, it removed those regulatory
         liabilities from its accounts pursuant to SFAS 101, "Regulated
         Enterprises - Accounting for the Discontinuation of Application of FASB
         No. 71". As a result, the elimination of the regulatory liabilities,
         net of income taxes, resulted in a cumulative income effect of $107 in
         the quarter ended March 31, 2001.

              On March 14, 2001, PCS ONE amended its May 2000 financing
         agreement with a bank to increase its credit facility from $70,000 to
         $82,000. The joint venture partners have no guarantee requirement in
         connection with this agreement. D&E and its joint venture partner must
         maintain contributed capital at a level of 66.7% of the funds borrowed.
         On June 30, 2001, the partners had an allowable capital contribution of
         $50,548 making $75,500 of the facility available.

                                       17
<PAGE>   20
Form 10-Q

                    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)


         FORWARD-LOOKING STATEMENTS

              This quarterly report contains certain forward-looking statements
         as to the future performance of D&E and its various domestic and
         international joint venture investments. This report also includes
         statements regarding future financing plans for expanding its
         competitive businesses. Actual results may differ as a result of
         factors over which D&E has no control, including, but not limited to,
         regulatory factors, uncertainties and economic fluctuations in the
         domestic and foreign markets in which the companies compete,
         foreign-currency risks and increased competition in domestic markets
         due in large part to continued deregulation of the telecommunications
         industry.

                                       18
<PAGE>   21
Form 10-Q

                    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.

                                       19
<PAGE>   22
                    D&E Communications, Inc. and Subsidiaries
                           Part II - Other Information


         Item 1. Legal Proceedings

         Sale of Pilicka Telefonia S.A. to Elektrim S.A.

              In April 1999, PenneCom B.V. (PenneCom), a Netherlands limited
         liability company which provides communications services in Central
         Europe and is wholly-owned indirectly by EuroTel, L.L.C. (EuroTel), a
         domestic limited liability company in which D&E Investments, Inc. has a
         one-third ownership interest, signed an agreement to sell its shares of
         Pilicka Telefonia, Sp.zo.o. (Pilicka), a Polish limited liability
         company, to Elektrim S.A. (Elektrim), a Polish corporation, for $140
         million in cash and notes. However, a few days before the transaction
         was set to close, Elektrim issued written notice that it was
         repudiating the purchase agreement, alleging that unspecified actions
         of representatives of Pilicka and PenneCom constituted fraudulent
         inducement, thereby rendering the purchase agreement void. On August 2,
         1999, PenneCom filed an arbitration request with the International
         Court of Arbitration at the International Chamber of Commerce seeking
         specific performance of the agreement as well as compensatory and
         punitive damages.

              On May 9, 2001, the tribunal of three International Chamber of
         Commerce (ICC) arbitrators found in favor of PenneCom and awarded
         payment by Elektrim to PenneCom of the following sums: (1) $22,986,945
         together with interest at an annual rate of 10% effective from August
         1, 1999 to the date of payment; (2) $367,500 in respect of costs paid
         by PenneCom to the Arbitration Court; and (3) $2,000,000 towards
         PenneCom's legal costs (the Award).

              On May 21, 2001, PenneCom submitted to the Arbitration Court a
         formal application for correction of a computational error in the
         Award. PenneCom has requested the arbitral tribunal to correct the
         Award to reflect that the following sums are due to PenneCom from
         Elektrim: (1) $32,986,945 with interest at 10% per annum from August 1,
         1999 to the date of payment; (2) $367,500 in respect of costs of the
         Arbitration Court; and (3) $2,000,000 towards PenneCom's legal costs.
         PenneCom expects to receive a decision from the ICC Secretariat on its
         application shortly.

              On June 6, 2001, the District Court in Warsaw, VII Civil and
         Registration Section, issued an attachment order (the Attachment Order)
         as security for the amount due to PenneCom from Elektrim under the
         Award. The Attachment Order secures PenneCom's claim against Elektrim
         in the amount of $31,872,191 through a seizure of shares held by
         Elektrim in Elektrim Telekomunikacja Sp. z o.o. (the Shares), a joint
         venture between Elektrim and Vivendi Universal of France.

              Elektrim has notified PenneCom that Elektrim now wants to pay to
         PenneCom the full amount due under the Award in order to obtain the
         release of the Shares. Elektrim also has expressed its intention to pay
         the amount of any amended Award. PenneCom currently is drafting legal
         documentation to effect the transfers.

              On August 6, 2001, PenneCom was notified that on July 23, 2001,
         the Arbitration Court issued an amended award, correcting the Award to
         reflect that the following sums as due to

                                       20
<PAGE>   23
                    D&E Communications, Inc. and Subsidiaries
                           Part II - Other Information


         PenneCom from Elektrim: (1) $30,000,000 with interest at 10% per annum
         from August 1, 1999 to the date of payment; (2) $367,500 in respect of
         the costs of the Arbitration Court; and (3) $2,000,000 towards
         PenneCom's legal costs.

              D&E is involved in other various legal proceedings arising in the
         ordinary course of its business. In the opinion of management, the
         ultimate resolution of these matters will not have a material adverse
         effect on D&E's consolidated financial condition or results of
         operations.


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

         (a) Date of Meeting. The Annual Meeting of Shareholders was held on
         April 26, 2001.

         (b) Matters Voted Upon at Annual Meeting. The vote tabulations in
         respect to the three matters voted upon at the 2001 Annual Meeting were
         as follows:

               (1)  Election of the following directors to hold office for a
                    three year term to expire in 2003.

<TABLE>
<CAPTION>
                          Director                   For           Withheld
                          --------                   ---           --------
<S>                                               <C>              <C>
                    Mr. Paul W. Brubaker          6,534,469           3,235
                    Mr. Robert A. Kinsley         6,432,515         105,189
                    Mr. Steven B. Silverman       6,534,113           3,591
                    MRS. ANNE B. SWEIGART         6,533,625           4,079
</TABLE>

               (2)  Approval of the 2001 Stock Compensation Plan and Policy for
                    Non-Employee Directors of D&E Communications, Inc.

<TABLE>
<CAPTION>
                          In Favor                  Against         Abstain
<S>                                                 <C>             <C>
                         6,387,495                   56,569          93,640
</TABLE>

               (3)  Ratification of the Board of Directors' selection of
                    PricewaterhouseCoopers LLP as independent accountants in
                    2001.

<TABLE>
<CAPTION>
                          In Favor                  Against         Abstain
<S>                                                 <C>             <C>
                         6,519,094                    3,908          14,702
</TABLE>


         The terms of John Amos, Thomas H. Bamford, Ronald E. Frisbie, Robert M.
         Lauman, G. William Ruhl, W. Garth Sprecher and D. Mark Thomas continued
         after the Annual Meeting.

                                       21
<PAGE>   24
                    D&E Communications, Inc. and Subsidiaries
                           Part II - Other Information


         Item 6. Exhibits and Reports on Form 8-K


         (a) Exhibits:


              No exhibits are filed herewith.


         (b) Reports on Form 8-K:

              One current report on Form 8-K dated May 24, 2001, was filed
         during the quarter ended June 30, 2001. The report summarized an
         arbitration panel ruling on May 9, 2001 that Elektrim breached its
         agreement with PenneCom regarding the sale of Pilicka, PenneCom's
         telecommunications subsidiary in Poland. The arbitration panel's ruling
         required Elektrim to pay approximately $30 million in damages, interest
         and costs to PenneCom.


                                       22
<PAGE>   25
                    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.



                                           D&E Communications, Inc.



Date: August 9, 2001
                                   By: /s/ Anne B. Sweigart
                                       ---------------------------------------
                                       Anne B. Sweigart
                                       President, Chairman of the Board, and
                                       Chief Executive Officer



Date: August 9, 2001
                                   By: /s/ Thomas E. Morell
                                       ---------------------------------------
                                       Thomas E. Morell
                                       Vice President, Chief Financial Officer
                                       and Treasurer


                                       23