<PAGE>
                                  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 March 31, 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 May 7, 2002

Common Stock, par value $0.16 per share         7,373,902  Shares
<PAGE>
                    D&E Communications, Inc. and Subsidiaries
                                    Form 10-Q

                                TABLE OF CONTENTS

Item No.                                                                  Page

                        PART I.  FINANCIAL INFORMATION

   1. Financial Statements

            Consolidated Statements of Operations --
                  For the three months ended
                  March 31, 2002 and 2001 ..............................     1

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

            Consolidated Statements of Cash Flows --
                  For the three months ended
                  March 31, 2002 and 2001 ..............................     3

            Consolidated Statements of Shareholders' Equity --
                  For the three months ended
                  March 31, 2002 and 2001 ..............................     4

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

   2. Management's Discussion and Analysis of Financial
            Condition and Results of Operations.........................    11

   3. Quantitative and Qualitative Disclosures
            about Market Risk ..........................................    32

                         PART II.   OTHER INFORMATION

   1. Legal Proceedings ................................................    33

   6. Exhibits and Reports on Form 8-K .................................    33

      SIGNATURES........................................................    34




                                       i
<PAGE>
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
                                                                 March 31,
OPERATING REVENUE                                           2002          2001

<S>                                                       <C>           <C>
     Communication service revenues                       $ 15,935      $ 14,729
     Communication products sold                             3,279         3,025
     Other                                                     390           401
                                                          --------      --------

        Total operating revenues                            19,604        18,155
                                                          --------      --------

OPERATING EXPENSES

     Communication service expenses (exclusive of
        depreciation and amortization below)                 7,024         6,369
     Cost of communication products sold                     2,776         2,449
     Depreciation and amortization                           3,884         3,529
     Marketing and customer services                         2,149         2,055
     General and administrative services                     3,539         3,665
                                                          --------      --------

        Total operating expenses                            19,372        18,067
                                                          --------      --------

             Operating Income                                  232            88
                                                          --------      --------

OTHER INCOME (EXPENSE)

     Equity in net income (losses) of affiliates              (475)       (1,288)
     Interest expense                                         (708)         (453)
     Other, net                                                  7           331
                                                          --------      --------

        Total other income (expense)                        (1,176)       (1,410)
                                                          --------      --------

             Loss from continuing operations before
                income taxes and dividends on utility
                preferred stock                               (944)       (1,322)

INCOME TAXES AND DIVIDENDS ON
    UTILITY PREFERRED STOCK

     Income taxes                                             (152)          108
     Dividends on utility preferred stock                       16            16
                                                          --------      --------
        Total income taxes and dividends
           on utility preferred stock                         (136)          124
                                                          --------      --------

             Loss from continuing operations                  (808)       (1,446)

     Discontinued operations:
       Loss from operations of discontinued segment
         prior to measurement date, net of income tax
         benefit of $671                                        --        (1,355)
       Gain on disposal of discontinued segment, net
         of operating losses during phase-out period            --            --
                                                          --------      --------
             Loss before extraordinary item                   (808)       (2,801)

     Extraordinary item, net of income
       tax benefit of $107                                      --           107
                                                          --------      --------

NET LOSS                                                  $   (808)     $ (2,694)
                                                          ========      ========
     Weighted average common shares outstanding              7,366         7,384

BASIC AND DILUTED EARNINGS (LOSS)
     PER COMMON SHARE
     Net loss before extraordinary item                   $ (0.11)      $ (0.20)
     Loss from discontinued operations                        0.00         (0.18
     Extraordinary item                                       0.00          0.02
                                                          --------      --------
         Net income (loss) per common share               $ (0.11)      $ (0.36)
                                                          ========      ========

     Dividends per common share                             $ 0.13        $ 0.13
                                                          ========      ========
</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>
                                                                                 March 31,    December 31,
                                            ASSETS                                  2002            2001
CURRENT ASSETS
<S>                                                                              <C>            <C>
         Cash and cash equivalents                                               $   1,099      $     615
         Accounts receivable                                                        10,854         10,105
         Accounts receivable - PCS ONE                                               4,637          5,938
         Inventories, lower of cost or market, at average cost                       1,853          1,781
         Prepaid expenses                                                            5,713          3,817
         Other                                                                         568            494
                                                                                 ---------      ---------
            TOTAL CURRENT ASSETS                                                    24,724         22,750
                                                                                 ---------      ---------
INVESTMENTS
         Investments in and advances to affiliated companies                         6,059          6,431
         Investments available-for-sale                                              3,340          4,425
                                                                                 ---------      ---------
                                                                                     9,399         10,856
                                                                                 ---------      ---------
PROPERTY, PLANT AND EQUIPMENT
         In service                                                                181,244        178,274
         Under construction                                                          4,144          5,034
                                                                                 ---------      ---------
                                                                                   185,388        183,308
         Less accumulated depreciation                                              90,732         88,163
                                                                                 ---------      ---------
                                                                                    94,656         95,145
                                                                                 ---------      ---------
OTHER ASSETS
         Goodwill                                                                    5,126          5,126
         Deferred income taxes                                                       1,628            905
         Other                                                                       9,070          8,096

                                                                                 ---------      ---------
                                                                                    15,824         14,127
                                                                                 ---------      ---------

        TOTAL ASSETS                                                             $ 144,603      $ 142,878
                                                                                 =========      =========
                             LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
         Borrowings under line of credit                                         $   7,319      $   1,757
         Long-term debt maturing within one year                                        52             52
         Accounts payable and accrued liabilities                                   15,031         16,319
         Accrued taxes                                                                 201            352
         Accrued interest and dividends                                                120            333
         Advance billings, customer deposits and other                               5,670          3,668
                                                                                 ---------      ---------
            TOTAL CURRENT LIABILITIES                                               28,393         22,481
                                                                                 ---------      ---------
LONG-TERM DEBT                                                                      58,110         58,124
                                                                                 ---------      ---------
OTHER LIABILITIES
         Equity in net losses of discontinued operations in
             excess of investments and advances                                      8,893         10,388
         Other                                                                       6,114          6,564
                                                                                 ---------      ---------
                                                                                    15,007         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                 1,220          1,219
           Outstanding shares:             7,371,417 at March 31, 2002
                                           7,362,226 at December 31, 2001
         Additional paid-in capital                                                 40,109         39,956
         Accumulated other comprehensive income (loss)                              (3,490)        (2,833)
         Retained earnings                                                           8,912         10,637
         Treasury stock at cost, 276,903 shares at March 31, 2002
               276,900 shares at December 31, 2001                                  (5,104)        (5,104)
                                                                                 ---------      ---------
                                                                                    41,647         43,875
                                                                                 ---------      ---------
         TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                              $ 144,603      $ 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>
                                                                                     Three Months Ended
                                                                                          March 31,
                                                                                    2002            2001
                                                                                    ----            ----
<S>                                                                               <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES OF
           CONTINUING OPERATIONS                                                  $    421      $  1,849
                                                                                  --------      --------

CASH FLOWS FROM INVESTING ACTIVITIES
           Capital expenditures, net of proceeds from sales and removal costs       (5,170)       (9,909)
           Business acquisition costs                                                 (475)           --
           Proceeds from sale of temporary investments                                  --         8,669
           Purchase of temporary investments                                            --        (8,667)
           Increase in investments and advances to affiliates                         (504)       (1,470)
           Decrease in investments and repayments from affiliates                      401            --
                                                                                  --------      --------

             Net Cash Used In Investing Activities from Continuing Operations       (5,748)      (11,377)
                                                                                  --------      --------

CASH FLOWS FROM FINANCING ACTIVITIES
           Dividends on common stock                                                  (860)         (859)
           Payments on long-term debt                                                  (14)          (21)
           Net proceeds from (payments on) revolving lines of credit                 5,562         8,231
           Proceeds from issuance of common stock                                       98            88
                                                                                  --------      --------

             Net Cash Provided By Financing Activities from
                 Continuing Operations                                               4,786         7,439
                                                                                  --------      --------

CASH USED IN CONTINUING OPERATIONS                                                    (541)       (2,089)

CASH USED IN (PROVIDED BY) DISCONTINUED OPERATIONS
           Cash Provided by Operating Activities of Discontinued Operations             --           241
           Cash Provided by (Used in) Investing Activities of
             Discontinued Operations                                                 1,025        (1,072)
                                                                                  --------      --------

             Net Cash Provided By (Used In) Discontinued Operations                  1,025          (831)
                                                                                  --------      --------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       484        (2,920)

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

      END OF PERIOD                                                               $  1,099      $    607
                                                                                  ========      ========
</TABLE>






                     See notes to consolidated financial statements.
                                       3
<PAGE>
                    D&E Communications, Inc. and Subsidiaries

                 Consolidated Statements of Shareholders' Equity

               For the three months ended March 31, 2002 and 2001

                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                       2002                          2001
                                                                -----------------------      ----------------------
                                                                 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 Employee Stock Purchase, Long-
         Term Incentive and Dividend Reinvestment Plans                 9             1             8             1

                                                                 --------      --------      --------      --------
      Balance at March 31                                           7,648         1,220         7,616         1,215
                                                                 --------      --------      --------      --------

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

      Common stock issued for Employee Stock Purchase, Long-
         Term Incentive and Dividend Reinvestment Plans                             153                        148

                                                                               --------                    --------
      Balance at March 31                                                        40,109                      39,522
                                                                               --------                    --------

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

      Unrealized gain (loss) on investments                                        (657)                       464

                                                                               --------                   --------
      Balance at March 31                                                        (3,490)                       931
                                                                               --------                   --------

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

      Net loss                                                                     (808)                    (2,694)
      Dividends on common stock: $.13, $.13 per share                              (917)                      (920)

                                                                               --------                   --------
      Balance at March 31                                                         8,912                     14,752
                                                                               --------                   --------

TREASURY STOCK
      Balance at beginning of year                                  (277)       (5,104)         (226)       (4,059)

      Treasury stock acquired                                         --            --            --            --

                                                                --------      --------      --------      --------
      Balance at March 31                                           (277)       (5,104)         (226)       (4,059)
                                                                --------      --------      --------      --------

TOTAL SHAREHOLDERS' EQUITY                                          7,371      $ 41,647         7,390      $ 52,361
                                                                 ========      ========      ========      ========

COMPREHENSIVE INCOME (LOSS)
      Net loss                                                                    $(808)                    $(2,694)
      Unrealized gain (loss) on investments, net of income
           taxes of ($428) and $219                                                (657)                        464

                                                                               --------                    --------
      Total comprehensive income (loss)                                         $(1,465)                    $(2,230)
                                                                               ========                    ========
</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)   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.

          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 ended March 31, 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.


(2)   DISCONTINUED OPERATIONS

         On April 1, 2002, we sold our fifty percent partnership interest in
      D&E/Omnipoint Wireless Joint Venture, L.P. (PCS ONE) to VoiceStream
      Wireless Corporation for $117,000 less working capital and long-term debt
      adjustments. We received approximately $74,000 in cash, which remains
      subject to post closing adjustments as set forth in the sale agreement
      that we expect to be finalized in the second quarter of 2002. We estimate
      that we will have to pay approximately $33,400 in taxes, which we expect
      to pay in the third quarter of 2002, and $1,800 for selling costs the
      majority of which have been paid. In addition to the cash consideration,
      we received equipment from VoiceStream with a fair value of approximately
      $3,000. The proceeds from the sale of PCS ONE will be used to help finance
      our pending acquisition of Conestoga Enterprises, Inc. (see Note 5). The
      carrying value of our investments and advances to PCS ONE is a liability
      of $8,893 at March 31, 2002. We estimate that the gain on sale to be
      recognized will be approximately $54,347, net of estimated taxes of
      $30,746 (including deferred taxes of $2,654). In addition, we will
      collect, in full, the March 31, 2002 balance of our receivable from PCS
      ONE, the majority of which was collected at closing.

         The investment in PCS ONE and the related contract services provided to
      PCS ONE, which also will be discontinued subsequent to the sale,
      previously constituted a separate segment of our business. As


                                       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)





     such, the assets and liabilities and results of operations of the wireless
     services segment were reported as discontinued operations in accordance
     with APB Opinion No. 30 with a measurement date of December 31, 2001. In
     accordance with EITF 85-36, beginning January 1, 2002, through April 1,
     2002 (the phase-out period), we deferred losses from the wireless business
     because it was reasonably assured that the ultimate disposition of this
     business would result in the recognition of a gain. These losses will be
     deferred until the gain on sale is recognized, which will be in the second
     quarter of 2002. Summarized financial information for the discontinued
     operations of our wireless business is as follows:

<TABLE>
<CAPTION>
                                                   Three months ended March 31,
                                                   ----------------------------
                                                         2002         2001
                                                         ----         ----
<S>                                                    <C>          <C>
Revenue                                                $ 2,782      $ 2,687
Expenses                                                 2,445        2,451
                                                       -------      -------
   Operating income                                        337          236
Equity in net loss of PCS ONE                           (1,605)      (2,267)
Other income (expense)                                      --            5
                                                       -------      -------

   Loss from discontinued operations before taxes       (1,268)      (2,026)
Losses during phase-out period deferred
   against gain on disposal                              1,268           --
                                                       -------      -------
   Net losses from discontinued operations
      before taxes                                          --       (2,026)
Income taxes                                                --          671
                                                       -------      -------

   Loss from discontinued operations, net of taxes     $    --      ($1,355)
                                                       -------      -------
</TABLE>

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

<TABLE>
<CAPTION>
                     Three months ended March 31,
                      ----------------------------
                         2002          2001
                        ----           ----
<S>                   <C>           <C>
Net sales             $ 12,312      $  7,702
Net loss              $(3,211)      $(4,779)
Our share of loss     $(1,605)      $(2,389)
</TABLE>


(3)   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 that 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 by transferring PenneCom's entire equity
      interests in Pilicka to EuroTel and the EuroTel investors, including D&E.

                                       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)




      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 these transactions, D&E now has a 31.00% direct
      ownership in Pilicka and a 7.52% indirect 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 ended March 31,
                        2002         2001
<S>                   <C>          <C>
Net sales             $ 2,308      $ 1,708
Net loss              $  (692)     $(2,637)
Our share of loss     $  (231)     $  (879)
</TABLE>


      The summarized results of operations of Pilicka were as follows:

<TABLE>
<CAPTION>
             Three months ended March 31,
                        2002
<S>                   <C>
Net sales             $ 2,308
Net loss              $  (788)
Our share of loss     $  (244)
</TABLE>



(4)   ACCOUNTING CHANGES AND RECENT ACCOUNTING PRONOUNCEMENTS

         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.

         The elimination of goodwill amortization would have reduced net loss by
      approximately $246 for the three months ended March 31, 2001, or $0.03 per
      basic and diluted share. Pro forma


                                       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)




     net loss and loss per share information are shown as if the provisions of
     SFAS No. 142 were in effect for fiscal 2001.

<TABLE>
<CAPTION>
                                        Three months ended March 31,
      (Dollars in thousands, except
            per share amounts)               2002         2001
                                             ----         ----

<S>                                        <C>          <C>
Reported net loss                          $   (808)    $ (2,694)
Add: Goodwill amortization                       --          246
                                          ---------    ---------
Adjusted net loss                          $   (808)    $ (2,448)
                                          ---------    ---------

Basic and diluted earnings per share:
Reported net loss                          $  (0.11)    $  (0.36)
Add: Goodwill amortization                       --         0.03
                                          ---------    ---------
Adjusted net loss                          $  (0.11)    $  (0.33)
                                          ---------    ---------
</TABLE>


         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 Statement of Financial Accounting Standards 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.

         Statement of Financial Accounting Standards No. 143, "Accounting for
      Obligations Associated with the Retirement of Long-Lived Assets" (SFAS
      143) was recently issued to provide accounting guidance for legal
      obligations associated with the retirement of long-lived assets. SFAS 143
      is effective for fiscal years beginning after June 15, 2002. We are
      currently evaluating the impact this statement will have on our financial
      position and results of operations.



(5)   COMMITMENTS AND CONTINGENCIES

         As previously reported, on November 21, 2001, we entered into an
      agreement and plan of merger, which became effective on December 3, 2001
      and was subsequently amended on January 9, 2002, to acquire Conestoga
      Enterprises, Inc., a neighboring rural local telephone company providing
      integrated communications services throughout the eastern half of
      Pennsylvania. Total merger consideration is estimated to be approximately
      $272,000, which includes the payment of up to approximately $150,000 in
      cash and the issuance of shares of our common stock. In addition, we will
      assume Conestoga's existing indebtedness, which totaled approximately
      $80,300 at March 31, 2002. Completion of the merger is subject to approval
      by both D&E's and Conestoga's shareholders and other customary closing
      conditions. All regulatory approvals for the merger have been received,
      including the Federal Communications Commission's consent to the merger,
      which has become final and non-appealable. Assuming we obtain the
      approvals of D&E's 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's shareholders at their respective shareholders meetings
     scheduled for May 23, 2002, we expect to complete the acquisition promptly
     thereafter.

          We have obtained a commitment from a bank 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 credit facility to fund a portion of the cash consideration
     of the Conestoga acquisition. While we have the bank financing commitment,
     we are also exploring a $175,000 private placement of senior notes that
     would be issued in lieu of the new bank financing and used, together with
     the net cash proceeds from the recent sale of our interest in PCS ONE, to
     pay the cash consideration of the acquisition, as well as to repay certain
     existing indebtedness and pay related fees and expenses. The notes will be
     sold, if at all, pursuant to an exemption from registration under the
     Securities Act of 1933, as amended.



(6)   BUSINESS SEGMENT DATA

         Our segments, excluding the Wireless Services segment, which is now
      reported as a discontinued segment, are RLEC, CLEC, Internet Services and
      Systems Integration. 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.



                                       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)



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

<TABLE>
<CAPTION>
                          External Revenues     Intersegment Revenues     Operating Income (Loss)
                          Three months ended      Three months ended      Three months ended
                               March 31,               March 31,                March 31,
 Segment                  2002        2001        2002          2001        2002         2001
<S>                     <C>         <C>         <C>          <C>          <C>          <C>
RLEC                    $10,646     $10,131     $   846      $   990      $ 2,301      $ 2,241
CLEC                      1,686       1,412         107           38         (865)        (690)
Internet Services           837         251           6            7         (307)        (654)
Systems Integration       5,490       5,699           7           24         (697)        (752)
Corporate, Other
   and Eliminations         945         662        (966)      (1,059)        (200)         (57)
                        -------     -------     -------      -------      -------      -------
Total                   $19,604     $18,155     $    --      $    --      $   232      $    88
                        =======     =======     =======      =======      =======      =======
</TABLE>



<TABLE>
<CAPTION>
                              Segment Assets
                          March          December
  Segment                31, 2002        31, 2001
<S>                     <C>            <C>
RLEC                    $ 155,189      $ 151,303
CLEC                       13,224         12,232
Internet Services           1,883          1,775
Systems Integration        14,479         14,787
Corporate, Other
   and Eliminations       (40,172)       (37,219)
                        ---------      ---------
Total                   $ 144,603      $ 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
                                                             March 31,
                                                        2002         2001
<S>                                                   <C>          <C>
Operating income from reportable segments             $   432      $   145
Corporate, other and eliminations                        (200)         (57)
Equity in net losses of affiliates                       (475)      (1,288)
Interest expense                                         (708)        (453)
Other, net                                                  7          331
                                                      -------      -------
Loss from continuing operations before income
   taxes and dividends on utility preferred stock     $  (944)     $(1,322)
                                                      =======      =======
</TABLE>




                                       10
<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 of Form 10-Q, as well as our audited consolidated
      financial statements for the year ended December 31, 2001 as filed on Form
      10-K/A with the SEC on April 24, 2002. Monetary amounts presented in the
      following discussion are rounded to the nearest thousand dollars. Certain
      items in the financial statements for the three months ended March 31,
      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 south central Pennsylvania. We operate an incumbent rural local
      telephone company, or RLEC, in parts of Berks, Lancaster and Lebanon
      counties in Pennsylvania, and a competitive local telephone company, or
      CLEC, in the Lancaster and Harrisburg, 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 the wireless services segment, which, as
      discussed below, is now reported as a discontinued segment, are RLEC,
      CLEC, Internet Services and Systems Integration. 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.

         Our RLEC revenue is derived primarily from network access charges,
      local telephone service, enhanced telephone services and regional toll
      service. Network access revenue consists primarily of charges paid by long
      distance companies for access to our network in connection with the
      completion of long distance telephone calls and payments from end-users.
      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 call waiting, caller ID, voicemail and PhoneGuard(TM), 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 primarily 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 and
      local calls and the delivery of other services. 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 call
      waiting, caller ID, voicemail and PhoneGuard(TM). Long distance revenue
      consists of charges for both national and regional long distance service
      provided on a resale basis.


                                       11
<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.

         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 service. Our Systems Integration
      business incurs expenses primarily related to equipment and materials used
      in the course of the installation and provision of service.

         We incur access line-related capital expenditures associated with
      access line growth, 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.

         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. 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 this investment.


                                       12
<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)

         On April 1, 2002, we sold our fifty percent partnership interest in
      D&E/Omnipoint Wireless Joint Venture, L.P. (PCS ONE) to VoiceStream
      Wireless Corporation for $117,000 less working capital and long-term debt
      adjustments. We received approximately $74,000 in cash, which remains
      subject to post closing adjustments as set forth in the sale agreement
      that we expect to be finalized in the second quarter of 2002. We estimate
      that we will have to pay approximately $33,400 in taxes, which we expect
      to pay in the third quarter of 2002, and $1,800 for selling costs the
      majority of which have been paid. In addition to the cash consideration,
      we received equipment from VoiceStream with a fair value of approximately
      $3,000. The proceeds from the sale of PCS ONE will be used to help finance
      our pending acquisition of Conestoga Enterprises, Inc. The carrying value
      of our investments and advances to PCS ONE is a liability of $8,893 at
      March 31, 2002. We estimate that the gain on sale to be recognized will be
      approximately $54,347, net of estimated taxes of $30,746 (including
      deferred taxes of $2,654). In addition, we will collect, in full, the
      March 31, 2002 balance of our receivable from PCS ONE, the majority of
      which was collected at closing.

         As previously reported, on November 21, 2001, we entered into an
      agreement and plan of merger, which became effective on December 3, 2001
      and was subsequently amended on January 9, 2002, to acquire Conestoga
      Enterprises, Inc., a neighboring rural local telephone company providing
      integrated communications services throughout the eastern half of
      Pennsylvania. Total merger consideration is estimated to be approximately
      $272,000, which includes the payment of up to approximately $150,000 in
      cash and the issuance of shares of our common stock. In addition, we will
      assume Conestoga's existing indebtedness, which totaled $81,339 at
      December 31, 2001. Completion of the merger is subject to approval by both
      D&E's and Conestoga's shareholders and other customary closing conditions.
      All regulatory approvals for the merger have been received, including the
      Federal Communications Commission's consent to the merger, which has
      become final and non-appealable. Assuming we obtain the approvals of D&E's
      and Conestoga's shareholders at their respective shareholders meetings
      scheduled for May 23, 2002, we expect to complete the acquisition promptly
      thereafter.





                                       13
<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)



RESULTS OF OPERATIONS

      The following table is a summary of our operating results by segment for
      the three months ended March 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                                          CORPORATE,
                                                               INTERNET      SYSTEMS      OTHER AND          TOTAL
                                      RLEC           CLEC      SERVICES    INTEGRATION    ELIMINATIONS      COMPANY

<S>                                 <C>           <C>          <C>         <C>            <C>             <C>
    MARCH 31, 2002
Revenues - External                 $ 10,646      $  1,686      $    837      $  5,490          $945      $ 19,604
Revenues - Intercompany                  846           107             6             7          (966)           --
                                    --------      --------      --------      --------      --------      --------
Total Revenues                        11,492         1,793           843         5,497           (21)       19,604
                                    --------      --------      --------      --------      --------      --------
Depreciation and Amortization          3,117           245            98           314           110         3,884
Other Operating Expenses               6,074         2,413         1,052         5,880            69        15,488
                                    --------      --------      --------      --------      --------      --------
Total Operating Expenses               9,191         2,658         1,150         6,194           179        19,372
                                    --------      --------      --------      --------      --------      --------
Operating Income (Loss)                2,301          (865)         (307)         (697)         (200)          232
                                    --------      --------      --------      --------      --------      --------
Adjusted EBITDA (1)                    5,418          (620)         (209)         (383)          (90)        4,116
                                    --------      --------      --------      --------      --------      --------

Net cash provided by
   continuing                                                                                                  421
operating activities

Net cash provided by /
used in continuing
investing activities                                                                                        (5,748)

Net cash provided by /
used in financing
activities                                                                                                   4,786


    MARCH 31, 2001
Revenues - External                 $ 10,131      $  1,412      $    251      $  5,699         $ 662      $ 18,155
Revenues - Intercompany                  990            38             7            24        (1,059)           --
                                    --------      --------      --------      --------      --------      --------
Total Revenues                        11,121         1,450           258         5,723          (397)       18,155
                                    --------      --------      --------      --------      --------      --------
Depreciation and Amortization          2,635            98            45           647           104         3,529
Other Operating Expense                6,245         2,042           867         5,828          (444)       14,538
                                    --------      --------      --------      --------      --------      --------
Total Operating Expenses               8,880         2,140           912         6,475          (340)       18,067
                                    --------      --------      --------      --------      --------      --------
Operating Income (Loss)                2,241          (690)         (654)         (752)          (57)           88
                                    --------      --------      --------      --------      --------      --------
Adjusted EBITDA (1)                    4,876          (592)         (609)         (105)           47         3,617
                                    --------      --------      --------      --------      --------      --------

Net cash provided by
   continuing                                                                                                1,849
operating activities

Net cash provided by /
used in continuing
investing activities                                                                                       (11,377)

Net cash provided by /
used in financing
activities                                                                                                   7,439
</TABLE>


(1) We compute Adjusted EBITDA by adding depreciation and amortization expense
to operating


                                       14
<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. Adjusted EBITDA is presented because we believe it is frequently used by
securities analysts, investors and other interested parties in the evaluation of
companies in our industry. However, other companies in our industry may
calculate Adjusted EBITDA differently than we do. Adjusted EBITDA is not a
measurement of financial performance under generally accepted accounting
principles and should not be considered as a substitute for cash flow from
operating activities as a measure of liquidity or a substitute for net income as
an indicator of operating performance or any other measure of performance
derived in accordance with generally accepted accounting principles.


CONSOLIDATED OPERATIONS

         Three months ended March 31, 2002 compared
         to the three months ended March 31, 2001

         Consolidated operating revenues from continuing operations increased
      8.0% to $19,604 for the first quarter of 2002 from $18,155 in the same
      period of 2001. The revenue increase was primarily due to an increase in
      the number of customers in our Internet Services and CLEC segments and
      increases in local telephone service revenues in our RLEC segment. A
      decrease in our Systems Integration segment revenues partially offset the
      increase due to the discontinuation of an agreement with a vendor to sell
      its software and from reductions in customer spending for communications
      related infrastructure that we believe is a result of a slowing economy.

         Consolidated operating income from continuing operations increased $144
      to $232 for the first quarter of 2002 from $88 in the same
      period of 2001. Operating income as a percentage of revenue increased to
      1.2% in the first quarter of 2002 compared to 0.5% in the same period of
      2001. The improvement was partially attributable to the discontinuance of
      goodwill amortization in Systems Integration during the quarter ended
      March 31, 2002 due to the adoption of SFAS 142 (see Note 4 to our
      financial statements), and reduced Internet Services advertising and
      marketing expense, offset by continued CLEC operating expense growth as we
      commenced operations in our Harrisburg, Pennsylvania market.

         Other income and expense was a net expense of $1,176 in the first
      quarter of 2002 compared to a net expense of $1,410 in the same period of
      2001. Our equity in the losses of our European affiliates decreased to
      $475 in the first quarter of 2002 from $1,288 in the same period of 2001
      partially as a result of legal expenses included in 2001 related to
      arbitration proceedings that were subsequently settled in our favor.
      Interest expense increased by $254 and interest income decreased by $316
      in the first quarter of 2002 compared to the same period of 2001, both as
      a result of increased borrowings and uses of existing cash and cash
      equivalents for capital expenditures and business acquisition costs
      incurred during the period from April 1, 2001 to March 31, 2002.

         Income taxes were a benefit of $152 in the first quarter of 2002
      compared to an expense of $108 in the same period of 2001. Discontinued
      operations resulted in a loss of $1,355 after tax in the first quarter of
      2001 with the loss of $1,605 in the first quarter of 2002 being deferred
      in

                                       15

<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)



     accordance with EITF 85-36 (see Note 2 to the financial statements). Our
     net loss was $808, or $0.11 in the first quarter of 2002 compared to a net
     loss of $2,694, or $0.36 in the first quarter of 2001.


RLEC SEGMENT RESULTS
                                    THREE MONTHS ENDED MARCH 31,
                                    2002       2001      % CHANGE
                                  -------     -------     -------
Revenues:
    Local Telephone Service       $ 3,537     $ 3,104     13.9%
    Network Access                  5,709       5,885     (3.0%)
    Other                           2,246       2,132      5.3%
                                  -------     -------
Total Revenues                     11,492      11,121      3.3%
                                  -------     -------


Depreciation and Amortization       3,117       2,635     18.3%
Other Operating Expenses            6,074       6,245     (2.7%)
                                  -------     -------
Total Operating Expenses            9,191       8,880      3.5%
                                  -------     -------

Operating Income                    2,301       2,241      2.7%
                                  -------     -------

Access Lines at March 31           62,104      61,567      0.9%
                                  -------     -------


         RLEC segment revenues increased 3.3% to $11,492 in 2002 from $11,121 in
      2001. The increase was primarily attributable to a rate increase in local
      telephone service in December 2001. We experienced a decrease of 3.0% in
      network access revenues as a result of lower call volumes and a decrease
      in certain rate elements reimbursed from other carriers. Other revenue
      increases were largely attributable to an increase in directory
      advertising related to publication of a larger directory and receipt of
      final settlement of the previous year's directory revenue.

         RLEC operating expenses increased 3.5% to $9,191 in the first quarter
      of 2002 from $8,880 in the same period of the prior year. Depreciation
      expense increased $482 as a result of capital additions in the prior year,
      primarily from a new building placed into service and general purpose
      computer additions. Other expense decreases were primarily related to a
      decrease in long-term incentive plan costs.




                                       16
<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)



CLEC SEGMENT RESULTS

<TABLE>
<CAPTION>
                                         THREE MONTHS ENDED MARCH 31,
                                         2002        2001       % CHANGE
                                       --------     -------      ------
Revenues:
<S>                                    <C>          <C>          <C>
    Local Telephone Service            $   560      $   285       96.5%
    Network Access                         384          344       11.6%
    Long Distance                          775          779       (0.5%)
    Other                                   74           42       76.2%
                                       -------      -------
Total Revenues                           1,793        1,450       23.7%
                                       -------      -------


Depreciation and Amortization              245           98      150.0%
Other Operating Expenses                 2,413        2,042       18.2%
                                       -------        -----
Total Operating Expenses                 2,658        2,140       24.2%
                                       -------        -----

Operating Loss                            (865)        (690)     (25.4%)
                                       -------        -----

Access Lines at March 31                 8,420        4,872       72.8%
</TABLE>


         CLEC segment revenues increased 23.7% to $1,793 in the first quarter of
      2002 from $1,450 in the same period of 2001. The increase was from the
      addition of access lines for new customers that increased local telephone
      service revenues and an increase in network access revenues.

         Operating expenses for the CLEC segment increased 24.2% to $2,658 in
      the first quarter of 2002 from $2,140 in the same period of 2001. The
      primary increases related to 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.

INTERNET SERVICES SEGMENT RESULTS

<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED MARCH 31,
                                         2002         2001       % CHANGE
                                       --------     ---------     -------
<S>                                    <C>           <C>         <C>
Revenues                               $    843      $    258      226.7%


Depreciation and Amortization                98            45      117.8%
Other Operating Expenses                  1,052           867       21.3%
                                       --------      --------
Total Operating Expenses                  1,150           912       26.1%
                                       --------      --------

Operating Loss                             (307)         (654)      53.1%
                                       --------      --------

Customers at March 31
    DSL                                   2,482         1,118      122.0%
    Dial-up Access                       11,533         4,357      164.7%
    Web-hosting Services                    515           204      152.5%
</TABLE>



                                       17
<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 $585 to $843 in the first
      quarter of 2002 from $258 in the same period of 2001. Dial up services for
      single user residential and business customers, as well as DSL customers
      and web hosting subscribers increased over 100% in the first quarter of
      2002 from 2001.

         Operating expenses for the Internet Services segment increased 26.1% to
      $1,150 in the first quarter of 2002 from $912 in the same period of 2001.
      Direct costs of operations increased $183 relating to providing service to
      the larger customer base.

SYSTEMS INTEGRATION SEGMENT RESULTS

<TABLE>
<CAPTION>
                                        THREE MONTHS ENDED MARCH 31,
                                        2002          2001     % CHANGE
                                       -------      -------    --------
<S>                                    <C>          <C>          <C>
Revenues                               $ 5,497      $ 5,723      (3.9%)


Depreciation and Amortization              314          647      (51.5%)
Other Operating Expenses                 5,880        5,828       0.9%
                                       -------       ------
Total Operating Expenses                 6,194        6,475      (4.3%)
                                       -------       ------

Operating Loss                            (697)        (752)      7.3%
                                       -------       ------
</TABLE>


         Systems Integration segment revenues decreased 3.9% to $5,497 in the
      first quarter of 2002 from $5,723 in the same period of 2001. This decline
      was partially related to discontinuation of an agreement with a vendor to
      sell its software and partially from reductions in customer spending for
      communications related infrastructure that we believe is a result of a
      slowing economy.

         Operating expenses for the Systems Integration segment decreased 4.3%
      to $6,194 in the first quarter 2002 from $6,475 in the same period of
      2001. The decrease in amortization relates to the discontinuance of
      amortizing goodwill from two acquisitions in 2000 due to the adoption of a
      new accounting pronouncement. Other operating expense changes in the first
      quarter of 2002 primarily related to increased cost of equipment sold
      offset by lower general and administrative expenses including a decrease
      in long-term incentive plan costs.


      OTHER INCOME (EXPENSE)

         Other income (expense) was a net expense of $1,176 in the first quarter
      of 2002, compared with a net expense of $1,410 in the same period of 2001.
      Our equity in the losses of our European affiliates decreased to $475 in
      the first quarter of 2002 from $1,288 in 2001 partially as a result of
      decreased arbitration expenses.

         Interest expense increased 56.3% to $708 in the first quarter of 2002
      from $453 in the same period of 2001. Bank borrowing increased to finance
      the construction costs of a new building in 2001 and other capital
      additions as well as to finance costs related to the acquisition of
      Conestoga. Interest income decreased to $2 in the first quarter of 2002
      from $318 in the first


                                       18
<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 2001 as a result of our use of existing cash and cash
     equivalents for capital additions and investment in affiliates.


      INCOME TAXES

         Income taxes were a benefit of $152 in the first quarter of 2002
      compared to an expense of $108 in the same period of 2001. The change
      resulted from recording a benefit in 2002 related to first quarter 2002
      losses from our European affiliates that are now determined to be
      deductible. In the first quarter 2001, a valuation allowance was recorded
      to offset the tax benefit from the European losses because of the
      uncertainty at that time of being able to deduct the losses.

      DISCONTINUED OPERATIONS

         On April 1, 2002, we completed the sale of our investment in PCS ONE,
      which has been reported as discontinued operations. In accordance with
      Generally Accepted Accounting Principles, the results of our discontinued
      wireless segment are not included in our results of operations for the
      quarter ended March 31, 2002. In the corresponding quarter in 2001, our
      loss included a loss of $1,355 from the wireless services segment.


      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 $421 in the first
      quarter of 2002 compared with $1,849 in the same period of 2001. Increased
      operating expenses relating to the expansion of our CLEC and Internet
      Services segments was the primary cause of the decline.

         Net cash used in investing activities was $5,748 in the first quarter
      of 2002 primarily for $5,170 of capital additions and $475 for business
      acquisition costs. Capital additions were primarily for digital electronic
      switching equipment and network infrastructure expansion. In the first
      quarter of 2001, $9,909 was invested in capital additions including $4,528
      for construction of an office building and $3,623 for computer equipment
      and software to upgrade our billing system.

         Net cash provided by financing activities was $4,786 in the first
      quarter of 2002. Revolving lines of credit provided $5,562, of which $860
      was used to pay quarterly dividends. In the first quarter of 2001, $8,231
      was provided from bank lines of credit and $859 was used to pay


                                       19
<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)

     quarterly dividends.


      EXTERNAL SOURCES OF CAPITAL AT MARCH 31, 2002

         As of March 31, 2002, we had a $100,000 credit facility consisting of a
      $50,000 single draw 10-year term loan, of which $50,000 was outstanding,
      and a $50,000 8.5-year senior reducing revolving credit facility, of which
      $8.0 million was drawn. The term loan was used to refinance existing
      indebtedness in November 2001. The revolving credit facility, if used, is
      expected to fund capital expenditures, acquisitions, general corporate
      purposes and working capital needs.

         The 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
      repayments from the third quarter of 2003 through the fourth quarter of
      2009. Interest on both the loan and the revolving credit facility is
      payable at a base rate or at LIBOR rates plus an applicable margin based
      on our leverage ratio. A commitment fee must be paid on the unused portion
      of the revolving credit facility.

         The credit facility includes a number of significant covenants that
      impose restrictions on our business. These covenants include, among
      others, restrictions on additional indebtedness, mergers, 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 and maximum leverage ratio. In connection with the Conestoga
      acquisition, our credit facility will be amended as described below in
      "Commitments, Contingencies and Projected Uses of Capital."

         As of March 31, 2002 we also had two lines of credit totaling $20,000
      of which $7,319 was borrowed. Our borrowings under these two lines of
      credit are limited by covenants contained in the agreements related to our
      $100,000 credit facility.

         Upon completion of the sale of our interest in PCS ONE on April 1,
      2002, we received approximately $74,000 and subsequently repaid the
      outstanding balances on our revolving credit facility and our bank lines
      of credit.

         For further information regarding our lines of credit and long-term
      debt, see Note 9 to our consolidated financial statements included in our
      Annual Report on Form 10-K/A for the year-ended December 31, 2001.


      COMMITMENTS, CONTINGENCIES AND PROJECTED USES OF CAPITAL

         Our most significant commitment for 2002 is our pending merger with
      Conestoga, which we expect to complete promptly following our annual
      meeting of shareholders on May 23, 2002. Total merger consideration is
      estimated to be


                                       20
<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)


     approximately $272,000, which includes the payment of up to approximately
     $150,000 in cash and the issuance of shares of our common stock. In
     addition, we will assume Conestoga's existing indebtedness, which totaled
     approximately $80,300 at March 31, 2002.

         We currently intend to fund the cash portion of the merger
      consideration with our cash on hand, which includes cash proceeds received
      on April 1, 2002 from the sale of our interest in our PCS ONE joint
      venture, and through borrowings under our amended credit facility or with
      proceeds of a senior notes offering, both as discussed below.

         We have obtained a commitment from a bank to amend 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 commitment, we will
      incur debt issuance costs of approximately $5,550, which will be amortized
      over the 8-1/2-year life of the debt. If we complete the financing
      contemplated by the bank's commitment, we will amend our existing credit
      facility to, among other things, increase the applicable margins for
      determining the interest rates, grant the lender a security interest in
      our assets with respect to all credit facility borrowings and include
      additional financial covenants.

         While we have a bank financing commitment, we are exploring an offering
      under Rule 144A of the Securities Act of 1933 to "qualified institutional
      buyers" of $175,000 of senior notes. The senior notes would be issued in
      lieu of the new bank debt financing and would be used, together with cash
      on hand, to fund the cash portion of the merger consideration and to repay
      certain existing debt. We expect the senior notes, if issued, to be
      unsecured obligations, guaranteed by our domestic subsidiaries, with
      interest only payments due semi-annually and principal payments due at
      maturity, which is expected to be ten years from the date of issuance. If
      we complete the notes offering, we will not increase our capacity under
      the credit facility, as described above. We will, however, amend our
      existing credit facility to, among other things, increase the applicable
      margins for determining the interest rates, grant the lender a security
      interest in our assets with respect to all credit facility borrowings and
      include additional financial covenants.

         In addition to the Conestoga merger, 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 quarterly common stock dividends and other contractual obligations. On
      April 25, 2002, we declared a quarterly common stock dividend of $0.125
      per share payable on June 15, 2002 to holders of record on June 10, 2002.
      We expect that this dividend will result in an aggregate payment of
      approximately $1,600 to $2,100, depending on the share exchange election
      of the Conestoga shareholders. We believe that we have adequate internal
      and external resources available to meet ongoing operating requirements.

         We hold a 31% 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 plan to advance funds
      to EuroTel and Pilicka, on an equal basis with the other investors in
      EuroTel, for certain of their operating cash needs for the fiscal year
      2002. In 2001, D&E made advances of $9,920 and we expect that our 2002
      advances will be approximately $1,000 in the aggregate. We believe that
      we have no obligation to fund EuroTel or Pilicka, and we currently are
      exploring strategic alternatives with regard to our investment in those
      entities.


                                       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)

      RECENT ACCOUNTING PRONOUNCEMENTS

         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.

         Statement of Financial Accounting Standards No. 143, "Accounting for
      Obligations Associated with the Retirement of Long-Lived Assets" (SFAS
      143) was recently issued to provide accounting guidance for legal
      obligations associated with the retirement of long-lived assets. SFAS 143
      is effective for fiscal years beginning after June 15, 2002. We are
      currently evaluating the impact this statement will have on our financial
      position and results of operations.


                                       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)

      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 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 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;


                                       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)

     -    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 VoiceStream Wireless;

     -    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, Williams,
          IntelliMark and Weidenhammer Systems.

      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. In addition, we cannot assure you that we will
      be able to achieve or maintain adequate technology to remain competitive.
      Accordingly, it may be difficult to compete in our markets.

      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 operating results.

      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.

      Our RLEC operations have received a limited suspension until July 2002
      from certain interconnection requirements of the Telecommunications Act of
      1996. The suspension reduces our interconnection obligations in our RLEC
      territory by excluding us from requirements to allow competitors access to
      our customers by relying upon our services and facilities. We intend to
      seek a renewal of this suspension, but there can be no assurance that the
      Pennsylvania Public Utility Commission will grant our request. If we do
      not receive additional extensions of this suspension, competitors will be
      allowed to seek removal of our rural exemption for the purposes


                                       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)

     of entering our territory and using our services and facilities through
     interconnection agreements to provide competitive services. The
     introduction of new competitors could result in the loss of customers and
     have a negative effect on our operating results.

      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' lines and other telephone
      companies' maintenance of these lines. We must also maintain efficient
      procedures for ordering, provisioning, maintaining and repairing lines
      from these other telephone companies. We may not be able to obtain the
      lines 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 INTO NEW MARKETS, 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 into new markets, 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


                                       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)

     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-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 April 22, 2002, the voting trust beneficially owned 38.6% of our
      outstanding shares of common stock. Upon completion of the Conestoga
      acquisition, the voting trust will control the largest voting interest in
      the combined company, which is expected to be between approximately 16.8%
      and 22.4% 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.


                                       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)


      IN THE EVENT THAT WE COMPLETE OUR PENDING MERGER TRANSACTION WITH
      CONESTOGA ENTERPRISES, INC., IN ADDITION TO THE PRECEDING RISKS, THE
      COMBINED COMPANY MAY BE SUBJECT TO THE FOLLOWING ADDITIONAL RISKS:

      THE COMBINED COMPANY MAY BE UNABLE TO INTEGRATE SUCCESSFULLY THE BUSINESS
      OPERATIONS OF D&E AND CONESTOGA AND SUCH INABILITY COULD HAVE AN ADVERSE
      IMPACT ON ITS 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 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 AS A RESULT OF THE MERGER COULD RESTRICT THE
      COMBINED COMPANY'S OPERATIONS.

      As of March 31, 2002, we had approximately $65,481 of total indebtedness,
      including current maturities. In connection with the Conestoga
      acquisition, we expect to increase our borrowings to finance a portion of
      the cash needed to pay Conestoga shareholders in the merger and through
      the assumption of Conestoga's existing indebtedness. This increased
      indebtedness could restrict the combined company's operations after the
      merger due to the following factors, among others:

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

     - the combined company's indebtedness may limit its ability to obtain
     additional financing on satisfactory terms, if at all;

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

     - the combined company's level of indebtedness may make it more vulnerable
     to economic or industry downturns;

     - the combined company may not have the ability to pay dividends to its
     shareholders; and

     - the combined company's debt service obligations increase its
     vulnerabilities to competitive pressures, as it may be more leveraged than
     many of its competitors.


                                       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)

      THE COMBINED COMPANY'S CREDIT FACILITIES WILL CONTAIN COVENANTS THAT WILL
      SIGNIFICANTLY RESTRICT ITS OPERATIONS.

      The existing credit facilities of D&E and Conestoga, and any future
      agreements governing the indebtedness of D&E and Conestoga, including
      agreements in connection with a potential offering of senior notes under
      Rule 144A of the Securities Act that we are exploring, contain or will
      contain covenants imposing financial and operating restrictions on the
      combined company's business. These restrictions may limit the combined
      company's ability to take advantage of potential business opportunities as
      they arise and adversely affect the conduct of the combined company's
      business. These covenants will place restrictions on the ability of the
      combined company and its 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; and
     -    extend credit.

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

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

      Following the Conestoga acquisition, D&E and Conestoga intend to dispose
      of Conestoga's wireless assets and business. Until the Conestoga wireless
      business is sold, the combined company 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 the combined company's operating results and may
      adversely affect its business by requiring additional financing to fund
      operations. The proceeds to be realized by the combined company from a
      sale of Conestoga's wireless assets and business are uncertain.


                                       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)

      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, the combined
      company 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 the
      combined company were unable to dispose of that portion of the Conestoga
      wireless business and were restricted from providing services in the
      Reading, Pennsylvania market, the combined company may incur significantly
      greater losses from that business than those previously incurred by
      Conestoga.




                                       29
<PAGE>
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.





                                       30
<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:


   No exhibits are filed herewith.


(b)   Reports on Form 8-K:

   One current report on Form 8-K dated January 9, 2002, was filed during the
quarter ended March 31, 2002. The report announced the signing of an Amended and
Restated Agreement and Plan of Merger between D&E Communications, Inc., D&E
Acquisition Corp., a wholly-owned subsidiary of D&E and Conestoga Enterprises,
Inc.





                                       31
<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.



                                    D&E Communications, Inc.



Date: May 15, 2002
                              By:   /s/    G. William Ruhl
                                   --------------------------------
                                           G. William Ruhl
                                           Chief Executive Officer



Date: May 15, 2002
                              By:   /s/    Thomas E. Morell
                                   --------------------------------
                                           Thomas E. Morell
                                           Vice President, Chief Financial
                                           Officer and Treasurer










                                       32