<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, 2003

                                       or

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

                 For the transition period from ___________ to ___________

                        Commission File Number: 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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.

                                 Yes |X| No | |

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

<TABLE>
<CAPTION>
                Class                           Outstanding at May 7, 2003
                -----                           --------------------------
<S>                                             <C>

Common Stock, par value $0.16 per share              15,441,744 Shares
</TABLE>


<PAGE>

                    D&E Communications, Inc. and Subsidiaries
                                    Form 10-Q

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Item No.                                                                    Page
--------                                                                    ----
<S>                                                                         <C>
                         PART I. FINANCIAL INFORMATION

  1.  Financial Statements

          Consolidated Statements of Operations --
                   For the three months ended
                   March 31, 2003 and 2002 ............................       1

          Consolidated Balance Sheets --
                   March 31, 2003 and December 31, 2002 ...............       2

          Consolidated Statements of Cash Flows --
                   For the three months ended
                   March 31, 2003 and 2002 ............................       3

          Consolidated Statements of Shareholders' Equity --
                   For the three months ended
                   March 31, 2003 and 2002 ............................       4

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

  2.  Management's Discussion and Analysis of Financial
          Condition and Results of Operations..........................      17

  3.  Quantitative and Qualitative Disclosures
          about Market Risk ...........................................      39

  4.  Controls and Procedures .........................................      40

                           PART II. OTHER INFORMATION

  1.  Legal Proceedings ...............................................      41

  6.  Exhibits and Reports on Form 8-K ................................      41

      SIGNATURES.......................................................      42

      CERTIFICATIONS...................................................      43
</TABLE>


                                        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                                                                      2003           2002
                                                                                     --------       --------
<S>                                                                                  <C>            <C>
     Communication service revenues .....................................            $ 38,858       $ 15,909
     Communication products sold ........................................               2,645          3,279
     Other ..............................................................                 582            389
                                                                                     --------       --------

     Total operating revenues ...........................................              42,085         19,577
                                                                                     --------       --------

OPERATING EXPENSES
     Communication service expenses (exclusive of
        depreciation and amortization below) ............................              14,956          7,006
     Cost of communication products sold ................................               2,261          2,776
     Depreciation and amortization ......................................               9,551          3,881
     Marketing and customer services ....................................               4,039          2,141
     General and administrative services ................................               6,075          3,536
                                                                                     --------       --------
         Total operating expenses .......................................              36,882         19,340
                                                                                     --------       --------
              Operating income ..........................................               5,203            237
                                                                                     --------       --------

OTHER INCOME (EXPENSE)

     Equity in net losses of affiliates .................................                (678)          (475)
     Interest expense ...................................................              (4,595)          (708)
     Other, net .........................................................                 856              7
                                                                                     --------       --------
         Total other income (expense) ...................................              (4,417)        (1,176)
                                                                                     --------       --------
              Income (loss) from continuing operations before
                  income taxes and dividends on utility
                  preferred stock .......................................                 786           (939)

INCOME TAXES AND DIVIDENDS ON
     UTILITY PREFERRED STOCK

     Income taxes (benefit) .............................................                 315           (150)
     Dividends on utility preferred stock ...............................                  16             16
                                                                                     --------       --------
       Total income taxes and dividends
         on utility preferred stock .....................................                 331           (134)
                                                                                     --------       --------
           Income (loss) from continuing operations .....................                 455           (805)

Discontinued operations:
     Loss from operations of
         Paging business, net of income tax
         benefit of $3 and $2 ...........................................                  (7)            (3)
                                                                                     --------       --------
              Income (loss) before cumulative effect of change in
                accounting principle ....................................                 448           (808)


Cumulative effect of change in accounting principle,
       net of income taxes of $177 ......................................                 260             --
                                                                                     --------       --------

NET INCOME (LOSS) .......................................................            $    708       $   (808)
                                                                                     ========       ========

     Weighted average common shares outstanding .........................              15,421          7,366
     Weighted average common shares and equivalents outstanding .........              15,469          7,366

BASIC AND DILUTED EARNINGS (LOSS)
     PER COMMON SHARE
     Income (loss) from continuing operations ...........................            $   0.03       $  (0.11)
     Loss from discontinued operations ..................................                  --             --
     Cumulative effect of accounting change .............................                0.02             --
                                                                                     --------       --------
       Net income (loss) per common share ...............................            $   0.05       $  (0.11)
                                                                                     ========       ========

     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 per-share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  March 31,      December 31,
                                    ASSETS                                           2003            2002
                                                                                  ---------      ------------
<S>                                                                               <C>            <C>
CURRENT ASSETS
     Cash and cash equivalents ............................................       $   8,947       $  15,514
     Accounts receivable ..................................................          16,983          19,368
     Inventories, lower of cost or market, at average cost ................           3,402           3,475
     Prepaid expenses .....................................................          12,006           7,454
     Other ................................................................           1,522           1,074
                                                                                  ---------       ---------

       TOTAL CURRENT ASSETS ...............................................          42,860          46,885
                                                                                  ---------       ---------

INVESTMENTS
     Investments in and advances to affiliated companies ..................           4,901           5,142
     Investments available-for-sale .......................................           1,400           1,313
                                                                                  ---------       ---------
                                                                                      6,301           6,455
                                                                                  ---------       ---------

PROPERTY, PLANT AND EQUIPMENT
     In service ...........................................................         307,909         307,000
     Under construction ...................................................           5,119           3,456
                                                                                  ---------       ---------
                                                                                    313,028         310,456
     Less accumulated depreciation ........................................         115,878         109,351
                                                                                  ---------       ---------
                                                                                    197,150         201,105
                                                                                  ---------       ---------
OTHER ASSETS
     Assets held for sale .................................................             215           6,665
     Goodwill .............................................................         147,488         147,488
     Intangible assets, net of accumulated amortization ...................         177,414         178,964
         Other ............................................................          13,916          14,256
                                                                                  ---------       ---------
                                                                                    339,033         347,373
                                                                                  ---------       ---------
     TOTAL ASSETS .........................................................       $ 585,344       $ 601,818
                                                                                  =========       =========

                    LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
     Long-term debt maturing within one year ..............................       $     135       $     132
     Accounts payable and accrued liabilities .............................          18,903          20,112
     Accrued taxes ........................................................             872          19,520
     Accrued interest and dividends .......................................           1,990           1,840
     Advance billings, customer deposits and other ........................           9,896           8,535
                                                                                  ---------       ---------
       TOTAL CURRENT LIABILITIES ..........................................          31,796          50,139
                                                                                  ---------       ---------
LONG-TERM DEBT ............................................................         245,731         244,966
                                                                                  ---------       ---------
OTHER LIABILITIES
     Deferred income taxes ................................................          85,186          85,516
     Other ................................................................          21,782          19,148
                                                                                  ---------       ---------
                                                                                    106,968         104,664
                                                                                  ---------       ---------
PREFERRED STOCK OF UTILITY SUBSIDIARY, Series A 4 1/2%,
     par value $100, cumulative, callable at par at the option of the
     Company, authorized 20,000 shares, outstanding 14,456 shares .........           1,446           1,446
                                                                                  ---------       ---------
COMMITMENTS
SHAREHOLDERS' EQUITY
     Common stock, par value $0.16, authorized shares 30,000,000 ..........           2,515           2,512
       Outstanding shares:  15,432,550 at March 31, 2003 and
                            15,413,640 at December 31, 2002
     Additional paid-in capital ...........................................         158,294         158,101

     Accumulated other comprehensive income (loss) ........................          (7,249)         (7,071)
     Retained earnings ....................................................          51,125          52,343

     Treasury stock at cost, 306,910 shares at March 31, 2003 and
              at December 31, 2002 ........................................          (5,282)         (5,282)
                                                                                  ---------       ---------
                                                                                    199,403         200,603
                                                                                  ---------       ---------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ...........................       $ 585,344       $ 601,818
                                                                                  =========       =========
</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,
                                                                                    2003          2002
                                                                                  --------       -------
<S>                                                                               <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES OF
     CONTINUING OPERATIONS .............................................          $  8,970       $   424
                                                                                  --------       -------
CASH FLOWS FROM INVESTING ACTIVITIES
     Capital expenditures, net of proceeds from sales ..................            (3,637)       (5,170)
     Business acquisition costs ........................................                --          (475)
     Proceeds from Conestoga Wireless sale .............................            10,005            --
     Increase in investments and advances to affiliates ................              (521)         (504)
     Decrease in investments and repayments from affiliates ............                84           401
                                                                                  --------       -------
       Net Cash Provided By (Used In) Investing Activities from
               Continuing Operations ...................................             5,931        (5,748)
                                                                                  --------       -------

CASH FLOWS FROM FINANCING ACTIVITIES
     Dividends on common stock .........................................            (1,839)         (860)
     Payments on long-term debt ........................................           (11,232)          (14)
     Proceeds from long-term debt financing ............................            12,000            --
     Net proceeds from (payments on) revolving lines of credit .........                --         5,562
     Proceeds from issuance of common stock ............................               110            98
                                                                                  --------       -------
         Net Cash Provided By (Used In) Financing Activities
           from Continuing Operations ..................................              (961)        4,786
                                                                                  --------       -------

CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS .......................            13,940          (538)

CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS
     Cash Provided by (Used in) Operating Activities of
       Discontinued Operations .........................................           (20,507)        1,022
                                                                                  --------       -------

       Net Cash Provided by (Used In) Discontinued Operations ..........           (20,507)        1,022
                                                                                  --------       -------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS .......................            (6,567)          484

CASH AND CASH EQUIVALENTS
       BEGINNING OF PERIOD .............................................            15,514           615
                                                                                  --------       -------
       END OF PERIOD ...................................................          $  8,947       $ 1,099
                                                                                  ========       =======
</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, 2003 and 2002
                                 (in thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                  2003                       2002
                                                                                  ----                       ----
                                                                          Shares       Amount        Shares       Amount
                                                                         ---------    ---------     ---------    ---------
<S>                                                                      <C>          <C>           <C>          <C>
COMMON STOCK
   Balance at beginning of year .....................................       15,721    $   2,512         7,639    $   1,219

   Common stock issued for Employee Stock Purchase,
     and Dividend Reinvestment Plans ................................           19            3             9            1
                                                                         ---------    ---------     ---------    ---------
   Balance at March 31 ..............................................       15,740        2,515         7,648        1,220
                                                                         ---------    ---------     ---------    ---------

ADDITIONAL PAID-IN CAPITAL
   Balance at beginning of year .....................................                   158,101                     39,956

   Common stock issued for Employee Stock Purchase
     and Dividend Reinvestment Plan .................................                       193                        153
                                                                                      ---------                  ---------
   Balance at March 31 ..............................................                   158,294                     40,109
                                                                                      ---------                  ---------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
   Balance at beginning of year .....................................                    (7,071)                    (2,833)

   Unrealized gain (loss) on investments, net of tax ................                        54                       (657)
   Unrealized loss on interest rate swap agreements, net of tax .....                      (232)                        --
                                                                                      ---------                  ---------
   Balance of March 31 ..............................................                    (7,249)                    (3,490)
                                                                                      ---------                  ---------
RETAINED EARNINGS
   Balance at beginning of year .....................................                    52,343                     10,637
   Net income (loss) ................................................                       708                       (808)
   Dividends on common stock: $0.13, $0.13 per share ................                    (1,926)                      (917)
                                                                                      ---------                  ---------
   Balance at March 31 ..............................................                    51,125                      8,912
                                                                                      ---------                  ---------
TREASURY STOCK
   Balance at beginning of year .....................................         (307)      (5,282)         (277)      (5,104)
   Treasury stock acquired ..........................................           --           --            --           --
                                                                         ---------    ---------     ---------    ---------
   Balance at March 31 ..............................................         (307)      (5,282)         (277)      (5,104)
                                                                         ---------    ---------     ---------    ---------
TOTAL SHAREHOLDERS' EQUITY ..........................................       15,433    $ 199,403         7,371    $  41,647
                                                                         =========    =========     =========    =========
COMPREHENSIVE INCOME (LOSS)
   Net income (loss) ................................................                 $     708                      ($808)
   Unrealized gain (loss) on investments, net of income
     taxes of $33 and ($428) ........................................                        54                       (657)
   Unrealized loss on interest rate swap agreements, net of
     income taxes of ($158) .........................................                      (232)                        --
                                                                                      ---------                  ---------
   Total comprehensive income (loss) ................................                 $     530                    ($1,465)
                                                                                      =========                  =========
</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
                (Dollars in thousands, except per-share amounts)
                                   (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, 2002 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 for the fiscal year ended
      December 31, 2002.

Stock Compensation

            The Company accounts for stock compensation under the intrinsic
      value method of APB Opinion 25 and related interpretations. Based on the
      additional disclosure requirements of SFAS No. 148, the following table
      illustrates the effect on net income and earnings per share if the Company
      had applied the fair value recognition provisions of SFAS No. 123.

<TABLE>
<CAPTION>
                                                                                Three months ended
(In thousands, except per share amounts)                                             March 31,
                                                                                 2003        2002
                                                                               -------     -------
<S>                                                                            <C>         <C>
Net income (loss), as reported ............................................    $   708     $  (808)
    Add: stock-based employee compensation included in
         reported net income (loss), net of related tax ...................         --          --
    Deduct: total stock-based employee compensation expense determined
         under fair value-based method, net of related tax ................        (13)         --
                                                                               -------     -------
    Pro forma net income (loss) ...........................................    $   695     $  (808)
                                                                               =======     =======
Basic and diluted income (loss) per share:
    As reported ...........................................................    $  0.05     $ (0.11)
    Pro forma .............................................................    $  0.05     $ (0.11)
</TABLE>


                                       5
<PAGE>

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

               Item 1. Notes to Consolidated Financial Statements
                (Dollars in thousands, except per-share amounts)
                                   (Unaudited)

      The fair value of options grants of $4.46 and $6.20 in the year ended
December 31, 2002 and options converted at the Conestoga acquisition of $7.20 is
estimated using the Black-Scholes option price model with the following
assumptions that have not changed since no options were granted in 2003:

<TABLE>
<CAPTION>
<S>                                                       <C>
              Dividend yield.........................       2.55%
              Expected life..........................     5 years
              Expected volatility....................      60.30%
              Risk-free interest rate................       4.47%
</TABLE>

(2)   ACCOUNTING CHANGES AND RECENT ACCOUNTING PRONOUNCEMENTS

            In April 2003, the Financial Accounting Standards Board ("FSAB")
      issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments
      and Hedging Activities" ("SFAS No. 149"). SFAS No. 149 amends and
      clarifies the accounting guidance on derivative instruments (including
      certain derivative instruments embedded in other contracts) and hedging
      activities that fall within the scope of SFAS No. 133, "Accounting for
      Derivative Instruments and Hedging Activities." SFAS No. 149 also amends
      certain other existing pronouncements, which will result in more
      consistent reporting of contracts that are derivatives in their entirety
      or that contain embedded derivatives that warrant separate accounting.
      This Statement is effective for contracts entered into or modified after
      June 30, 2003, with certain exceptions, and for hedging relationships
      designated after June 30, 2003. The Company has not yet determined the
      impact this pronouncement will have on the Company's financial position,
      results of operations or cash flows.

            In December 2002, the FASB issued SFAS No. 148, "Accounting for
      Stock-Based Compensation-Transition and Disclosure-an amendment of FASB
      Statement No. 123" ("SFAS No. 148"). This Statement provides alternative
      methods of transition for a voluntary change to the fair value-based
      method of accounting for stock-based employee compensation from the
      intrinsic value-based method of accounting prescribed by Accounting
      Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
      Employees" ("APB No. 25"). In addition, this Statement amends the
      disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
      Compensation" ("SFAS No. 123"), to require prominent disclosures in both
      annual and interim financial statements about the method of accounting for
      stock-based employee compensation and the effect of the method used on
      reported results. As permitted by SFAS No. 148, D&E will continue to
      account for the Company's stock-based compensation in accordance with APB
      No. 25, and the adoption of SFAS No. 148 requires prominent disclosures
      about the effects of SFAS No. 123 on reported income in the interim
      financial statements.

            In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
      Retirement Obligations" ("SFAS No. 143"). This Statement establishes
      accounting practices relating to legal obligations associated with the
      retirement of tangible long-lived assets that result from the acquisition,
      construction, development or normal operation of a long-lived asset. SFAS
      No. 143


                                       6
<PAGE>

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

               Item 1. Notes to Consolidated Financial Statements
                (Dollars in thousands, except per-share amounts)
                                   (Unaudited)

      requires that companies recognize the fair value of a liability for asset
      retirement obligations in the period in which the legal obligations are
      incurred and capitalize that amount as a part of the book value of the
      long-lived asset. That cost is then depreciated over the remaining life of
      the underlying long-lived asset. D&E adopted SFAS No. 143 effective
      January 1, 2003 and recorded an after-tax benefit of approximately $260 as
      a cumulative effect accounting adjustment in the first quarter 2003. The
      adjustment represents the cumulative estimate of cost of removal charged
      to depreciation expense in earlier years.

            The following pro forma amounts have been adjusted for the effect of
      retroactive application on depreciation and costs of removal expense and
      related income taxes which would have been made had the new method been in
      effect at the beginning of 2002.

<TABLE>
<CAPTION>
                                                     Three months ended
                                                       March 31, 2002
                                                       --------------
                                                   As Reported     Pro forma
                                                   -----------     ---------
<S>                                                <C>             <C>
            Net Income                               $ (808)        $ (802)
            Basic Earnings per share                 $(0.11)        $(0.11)
            Diluted Earnings per share               $(0.11)        $(0.11)
</TABLE>

            In 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantees of Indebtedness of Others". D&E applied the initial recognition
      and measurement provisions on a prospective basis effective December 31,
      2002. This interpretation requires that at the time a Company issues a
      guarantee, the Company must recognize a liability for the fair value of
      that obligation under the guarantee. As part of the Company's acquisition
      of Conestoga, D&E assumed a guarantee agreement with Mountain Union for
      lease obligations on the wireless tower sites of Conestoga's wireless
      subsidiary. When D&E entered into the asset purchase agreement with
      Keystone Wireless, whereby Keystone Wireless was assigned the
      responsibility for the leases, Mountain Union declined to release D&E from
      its guarantee. In the event of a default by Keystone Wireless, D&E
      continues to guarantee the wireless tower site lease payments, which cover
      a 10-year period commencing on the commencement date of the lease of each
      tower. As such, the guarantee is a continuing guarantee provided on an
      individual tower site basis. The lease payments start at $1.5 per site per
      month, with provision for an increase of 4% per year. The majority of
      these tower site leases and our guarantee will expire in 2011 and
      thereafter. D&E has estimated and recorded the fair value of the liability
      for the lease guarantees of $3,200 and that is presented as an offset to
      the fair value of the Conestoga assets held for sale at December 31, 2002.

            In January 2003, the FASB issued FASB Interpretation No. 46,
      "Consolidation of Variable Interest Entities -- An Interpretation of
      Accounting Research Bulletin (ARB) No. 51" ("FIN 46"). This interpretation
      clarifies how to identify variable interest entities and how a company
      should assess its interests in a variable interest entity to decide
      whether to consolidate the entity. FIN 46 applies to variable interest
      entities created after January 31, 2003, in which a company obtains an
      interest after that date. Also, FIN 46 applies in the first fiscal quarter
      or interim period


                                       7
<PAGE>

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

               Item 1. Notes to Consolidated Financial Statements
                (Dollars in thousands, except per-share amounts)
                                   (Unaudited)

      beginning after June 15, 2003, to variable interest entities in which a
      company holds a variable interest that it acquired before February 1,
      2003. D&E does not have any ownership in variable interest entities.

            In January 2003, the Emerging Issues Task Force issued EITF 00-21
      "Revenue Arrangements with Multiple Deliverables" (EITF 00-21"). EITF
      00-21 primarily addresses certain aspects of the accounting by a vendor
      for arrangements under which it will perform multiple revenue-generating
      activities. Specifically, it addresses how to determine whether an
      arrangement involving multiple deliverables contains more than one unit of
      accounting. In applying EITF 00-21, separate contracts with the same
      entity or related parties that are entered into at or near the same time
      are presumed to have been negotiated as a package and should, therefore,
      be evaluated as a single arrangement in considering whether there are one
      or more units of accounting. That presumption may be overcome if there is
      sufficient evidence to the contrary. EITF 00-21 also addresses how
      arrangement consideration should be measured and allocated to the separate
      units of accounting in the arrangement. The provisions of EITF 00-21 are
      effective for revenue arrangements entered into in fiscal periods
      beginning after June 15, 2003. D&E is currently evaluating the impact this
      statement will have on its financial position or results of operations.

(3)   EARNINGS PER SHARE

            Basic earnings per share amounts are based on income divided by the
      weighted average number of shares of common stock outstanding during the
      period. Diluted earnings per share amounts are based on income divided by
      the weighted average number of shares of common stock outstanding during
      the period after giving effect to dilutive common stock equivalents from
      assumed conversions of employee stock options. The following table shows
      how earnings per share were computed for the periods presented:

<TABLE>
<CAPTION>
                                                                Three months ended March 31,
                                                                ----------------------------
                                                                     2003         2002
                                                                   --------     --------
<S>                                                                <C>          <C>
Basic earnings (loss) per share computation
Income (loss) from continuing operations                           $    455     $   (805)
Loss from discontinued operations                                        (7)          (3)
Cumulative effect of accounting change                                  260           --
                                                                   --------     --------
Net income (loss)                                                  $    708     $   (808)
                                                                   ========     ========
Weighted average shares (thousands)                                  15,421        7,366
                                                                   --------     --------
Basic earnings (loss) per share
Income (loss) from continuing operations                           $   0.03     $  (0.11)
Loss from discontinued operations                                        --           --
Cumulative effect of accounting change                                 0.02           --
                                                                   --------     --------
</TABLE>


                                       8
<PAGE>

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

               Item 1. Notes to Consolidated Financial Statements
                (Dollars in thousands, except per-share amounts)
                                   (Unaudited)

<TABLE>
<S>                                                                <C>          <C>
Net income (loss)                                                  $   0.05     $  (0.11)
                                                                   ========     ========
Diluted earnings (loss) per share computation
Income (loss) from continuing operations                           $    455     $   (805)
Loss from discontinued operations                                        (7)          (3)
Cumulative effect of accounting change                                  260           --
                                                                   --------     --------
Net income (loss)                                                  $    708     $   (808)
                                                                   ========     ========
Weighted average shares (thousands)                                  15,421        7,366
Plus incremental shares from assumed stock option exercises              48           --
                                                                   --------     --------
Adjusted weighted average shares                                     15,469        7,366
                                                                   --------     --------
Diluted earnings (loss) per share
Income (loss) from continuing operations                           $   0.03     $  (0.11)
Loss from discontinued operations                                        --           --
Cumulative effect of accounting change                                 0.02           --
                                                                   --------     --------
Net income (loss)                                                  $   0.05     $  (0.11)
                                                                   ========     ========
</TABLE>

(4)   ACQUISITION

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

            The following unaudited pro forma combined results of operations is
      provided for illustrative purposes only and assumes that this acquisition
      had occurred as of the beginning of 2002. The following pro forma
      information should not be relied upon as necessarily being indicative of
      the historical results that would have been obtained if this acquisition
      had occurred at the beginning of 2002, nor the results that may be
      obtained in the future.

<TABLE>
<CAPTION>
                                                              Three months ended
                                                                March 31, 2002
                                                              ------------------
<S>                                                           <C>
      Pro forma operating revenues                                 $43,478
      Pro forma income before extraordinary items                   (1,104)
      Pro forma net income                                          (1,104)
      Pro forma income per share                                   $ (0.07)
</TABLE>


                                       9
<PAGE>

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

               Item 1. Notes to Consolidated Financial Statements
                (Dollars in thousands, except per-share amounts)
                                   (Unaudited)

(5)   INTANGIBLE ASSETS

            The intangible assets and related accumulated amortization recorded
      on our balance sheets are as follows:

<TABLE>
<CAPTION>
                                    As of March 31, 2003     As of December 31, 2002
                                  ------------------------   ------------------------
                                   Gross                      Gross
                                  carrying   Accumulated     carrying    Accumulated
                                   amount    amortization     amount     amortization
                                  --------   ------------    --------    ------------
<S>                               <C>        <C>             <C>         <C>
Indefinite-lived intangibles:
Franchises                        $104,800     $     --      $104,800     $     --
Finite-lived intangibles:
Customer relationships              75,700       (4,595)       75,700       (3,217)
Trademarks and
      Trade names                    1,200         (333)        1,200         (233)
Non-compete agreements               1,424         (782)        1,424         (710)
                                  --------     --------      --------     --------
Total intangible assets           $183,124     $ (5,710)     $183,124     $ (4,160)
                                  ========     ========      ========     ========
</TABLE>

            Aggregate amortization expense related to these intangible assets
      recorded for the three-months ended March 31, 2003 and 2002, was $1,550
      and $73, respectively.

(6)   DISCONTINUED OPERATIONS

D&E Wireless

            D&E owned a fifty percent partnership interest in PCS ONE and
      performed related contract services to PCS ONE, which constituted a
      separate segment of D&E's business. On October 17, 2001, D&E entered into
      a definitive agreement to sell its interest in PCS ONE to VoiceStream
      Wireless Corporation.

            The assets and liabilities and results of operations of D&E Wireless
      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 disposal date (the
      phase-out period), losses from PCS ONE were deferred because it was
      reasonably assured that the ultimate disposition of this business would
      result in the recognition of a gain.

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

            Upon completion of the sale, D&E received $74,168 in cash, subject
      to post closing adjustments as set forth in the sale agreement. These
      adjustments were finalized in the third quarter of 2002 and resulted in
      additional cash proceeds of $2,294, which were collected in


                                       10
<PAGE>

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

               Item 1. Notes to Consolidated Financial Statements
                (Dollars in thousands, except per-share amounts)
                                   (Unaudited)

      October 2002. In addition, we received equipment with a fair value of
      approximately $2,014. Selling and other estimated costs were approximately
      $3,836 and the gain on sale was $84,738 after eliminating the $10,098
      liability for the equity in net losses of discontinued D&E Wireless
      operations in excess of investments and advances. The associated income
      taxes were $29,301 resulting in an after tax gain of $55,437.

            During the three-month period ended March 31, 2003, D&E paid $20,500
      in taxes related to gain on sale of PCS ONE which are included in cash
      used in investing activities of discontinued operations in the statement
      of cash flows.

            Summarized financial information for the discontinued operations of
      our wireless business is as follows:

<TABLE>
<CAPTION>
                                                              Three months ended
                                                                March 31, 2002
                                                                --------------
<S>                                                           <C>
Revenue                                                            $ 2,782
Expenses                                                             2,445
                                                                   -------
   Operating income                                                    337
Equity in net loss of PCS ONE                                       (1,605)
Other income (expense)                                                  --
                                                                   -------
   Loss from discontinued operations before taxes                   (1,268)
Losses during phase-out period deferred
   against gain on disposal                                          1,268
                                                                   -------
   Net losses from discontinued operations
      before taxes                                                      --
Income taxes                                                            --
                                                                   -------
   Loss from discontinued operations, net of taxes                 $    --
                                                                   -------
</TABLE>

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

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

Paging Services

            During the third quarter of 2002, D&E committed to a plan to sell
      the $215 total assets of Conestoga Mobile Systems' ($205) and D&E's paging
      operations ($10). As such, the assets are reported as held for sale and
      the results of operations are reported in discontinued operations in
      accordance with SFAS No. 144 "Accounting for the Impairment or Disposal of
      Long-Lived Assets." The assets are not depreciated while they are held for
      sale. In January 2003, we entered into an agreement to sell our paging
      operations' assets for $215. D&E expects that the transaction


                                       11
<PAGE>

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

               Item 1. Notes to Consolidated Financial Statements
                (Dollars in thousands, except per-share amounts)
                                   (Unaudited)

      will close in the second quarter of 2003. No liabilities are expected to
      be included as part of the sale.

            Summarized income statement information for the discontinued
      operations of the paging services, including Conestoga Mobile Systems'
      operations post D&E's acquisition on May 24, 2002, were as follows:

<TABLE>
<CAPTION>
                                                             Three months ended
                                                                 March 31,
                                                              2003        2002
                                                             ------      ------
<S>                                                          <C>         <C>
Revenue ................................................     $  172      $   26
Expenses ...............................................        182          31
                                                             ------      ------
Operating loss .........................................        (10)         (5)
Income taxes ...........................................         (3)         (2)
                                                             ------      ------
Loss from paging operations, net of taxes ..............     $   (7)     $   (3)
                                                             ======      ======
</TABLE>

(7)   SALE OF CONESTOGA WIRELESS ASSETS

            In connection with the acquisition of Conestoga, the Company had
      committed to a plan to sell the assets of Conestoga's wireless segment. As
      such, these assets are reported as held for sale in accordance with SFAS
      No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets."
      The assets are not depreciated while they are held for sale.

            On November 12, 2002, D&E entered into a definitive agreement to
      sell substantially all of the assets of the Conestoga wireless segment to
      Keystone Wireless, LLC ("Keystone"), a Delaware limited liability company.
      Keystone is an affiliate of PC Management, Inc., a Ft. Myers,
      Florida-based company that owns and manages wireless communications
      systems throughout the United States. The sale was completed on January
      14, 2003. Upon completion of the sale, and subject to certain purchase
      price adjustments to be determined after closing, D&E received $10,000 in
      cash and a $10,000 face value secured promissory note issued by Keystone.
      The promissory note requires monthly principal payments for 48 months
      beginning in January 2005. The note bears interest from the date of the
      note, at the 60 day LIBOR rate plus 5% and is receivable beginning on
      December 31, 2003 and on the last day of each quarter thereafter. As this
      note receivable is from a highly leveraged entity and the business sold
      has not generated positive cash flows, D&E will record value to the note
      when cash recoveries are received. The note carries certain rights where
      we can convert a portion or all of the principal balance of the note into
      equity interests of Keystone. The conversion period begins on December 31,
      2004 and ends May 1, 2005.

            The results of operations of the Conestoga wireless segment held for
      sale are not reported in discontinued operations because D&E has
      continuing involvement after the sale as a result of D&E's continued
      guarantees on wireless tower site leases and D&E's responsibilities under
      a Build-to-Suit Agreement. No gain or loss was recorded as a result of the
      sale. However a loss of


                                       12
<PAGE>

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

               Item 1. Notes to Consolidated Financial Statements
                (Dollars in thousands, except per-share amounts)
                                   (Unaudited)

      $675 related to D&E's estimated commitments in the Build-to-Suit Agreement
      has been recorded in communication services expenses in 2002. The fair
      value of the Conestoga wireless segment of $6,450 included in the final
      purchase price allocation was determined as follows:

<TABLE>
<S>                                                                    <C>
Cash .........................................................         $ 10,000
Less: costs to sell and purchase price adjustments ...........             (350)
Fair value of lease guarantees ...............................           (3,200)
                                                                       --------
Total ........................................................         $  6,450
                                                                       ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                    December 31, 2002
                                                                    -----------------
<S>                                                                 <C>
Inventories .....................................................       $   166
Property and equipment ..........................................         9,084
PCS licenses ....................................................           400
                                                                        -------
     Total assets sold ..........................................         9,650
                                                                        -------
  Less: Fair value of lease guarantees remaining with D&E .......        (3,200)
                                                                        -------
     Net assets sold ............................................       $ 6,450
                                                                        =======
</TABLE>

(8)   INVESTMENTS IN AFFILIATED COMPANIES

            D&E owns a one-third investment in EuroTel, a domestic corporate
      joint venture. EuroTel holds a 100% investment in PenneCom, B.V.
      (PenneCom), an international telecommunications holding company, and holds
      a 27.85% investment in Pilicka, a telecommunications company located in
      Poland. D&E also owns a 28.88% direct investment in Pilicka. D&E accounts
      for both its investment in EuroTel and its investment in Pilicka using the
      equity method of accounting.

            In July 2002, EuroTel initiated a legal action against an investment
      bank, and an individual, alleging violations of applicable law relating to
      the advice given by the investment bank and the individual to a
      prospective buyer not to close on the purchase of Pilicka. Management of
      EuroTel believes that, based on the advice of its legal counsel, the suit
      is meritorious. However, the ultimate outcome of the litigation cannot be
      determined and no amount has been recognized for possible collection of
      any claims in the litigation. Legal costs are expected to continue to be
      incurred in pursuit of such litigation.

            The summarized results of operations of EuroTel were as follows:

<TABLE>
<CAPTION>
                                                  Three months ended March 31,
                                                  ----------------------------
                                                     2003           2002
                                                     ----           ----
<S>                                                <C>            <C>
Net sales                                          $    --        $ 2,308
Net loss                                              (959)          (692)
Our share of loss                                     (320)          (231)
</TABLE>


                                       13
<PAGE>

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

               Item 1. Notes to Consolidated Financial Statements
                (Dollars in thousands, except per-share amounts)
                                   (Unaudited)

            The summarized results of operations of Pilicka were as follows:

<TABLE>
<CAPTION>
                                                    Three months ended March 31,
                                                        2003           2002
                                                        ----           ----
<S>                                                    <C>            <C>
Net sales                                              $2,350         $2,308
Net loss                                                 (827)          (788)
Our share of loss                                        (239)          (244)
</TABLE>

(9)   LONG-TERM DEBT

            The following table sets forth the total long-term debt outstanding:

<TABLE>
<CAPTION>
                                                Interest              March 31,   December 31,
                                                  Rate     Maturity     2003         2002
                                                --------   --------   ---------   ------------
<S>                                             <C>        <C>        <C>         <C>
Senior Secured Revolving Credit Facility ....     5.30%       2009     $ 41,550     $ 32,250
Senior Secured Term Loan B ..................     5.34%       2010      119,000      125,000
Senior Secured Term Loan A ..................     5.44%       2011       47,500       50,000
Secured Term Loan ...........................     9.34%       2014       20,000       20,000
Secured Term Loan ...........................     9.36%       2014       15,000       15,000
Capital lease obligations ...................                             2,816        2,848
                                                                       --------     --------
                                                                        245,866      245,098
Less current maturities .....................                               135          132
                                                                       --------     --------
Total long-term debt ........................                          $245,731     $244,966
                                                                       ========     ========
</TABLE>

            The Senior Secured Credit Facility includes a mandatory repayment of
      principal from any single asset sale or series of related transactions,
      which total more than $1,000. Consequently, as a result of the collection
      of $10,000 from the sale of Conestoga Wireless, D&E made the following
      payments in the first quarter of 2003 that permanently reduced the total
      loan availability:

<TABLE>
<S>                                                                             <C>
          Senior Secured Revolving Credit Facility .........................    $1,500
          Senior Secured Term B ............................................     6,000
          Senior Secured Term A ............................................     2,500
</TABLE>

            D&E's indebtedness requires the Company to maintain compliance with
      certain financial and operational covenants. The most restrictive covenant
      is the total leverage ratio. The tax liability incurred by D&E in
      connection with the sale of its PCS ONE partnership interest in April
      2002, $20,500, was originally scheduled to be paid prior to the closing of
      the credit agreement but was deferred and paid in March 2003. As a result,
      for the purposes of calculating compliance with the debt service coverage
      ratio in the credit agreement for the quarter ended March 31, 2003, such
      tax liability was excluded, with the consent of the lenders, from the
      covenant calculation. As such, D&E was in compliance with all covenants at
      March 31, 2003.


                                       14
<PAGE>

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

               Item 1. Notes to Consolidated Financial Statements
                (Dollars in thousands, except per-share amounts)
                                   (Unaudited)

(10)  BUSINESS SEGMENT DATA

            Our segments, excluding the Paging segment, which is now reported as
      a discontinued segment, are RLEC, CLEC, Internet Services, Systems
      Integration and Conestoga Wireless. The measure of profitability for our
      segments is operating income.


                                       15
<PAGE>


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

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

            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                   2003        2002        2003         2002         2003         2002
                          ----        ----        ----         ----         ----         ----
<S>                     <C>         <C>         <C>          <C>          <C>          <C>
RLEC                    $25,746     $10,600     $ 1,956      $   846      $ 7,712      $ 2,290
CLEC                      8,386       1,689         150          107         (961)        (873)
Internet Services         1,269         880         151            6         (176)        (288)
Systems Integration       5,171       5,490          10            7       (1,163)        (697)
Conestoga Wireless          456          --           4           --         (380)          --
Corporate, Other
  and Eliminations        1,057         918      (2,271)        (966)         171         (195)
                        -------     -------     -------      -------      -------      -------
Total                   $42,085     $19,577     $    --      $    --      $ 5,203      $   237
                        =======     =======     =======      =======      =======      =======
</TABLE>

<TABLE>
<CAPTION>
                                     Segment Assets
                                     --------------
                                 March         December
      Segment                   31, 2003       31, 2002
      -------                   --------       --------
<S>                             <C>            <C>
RLEC                            $487,639       $489,950
CLEC                              63,967         62,973
Internet Services                  6,357          8,068
Systems Integration               19,879         20,358
Conestoga Wireless                   552          8,511
Corporate, Other
   and Eliminations                6,950         11,958
                                --------       --------
Total                           $585,344       $601,818
                                ========       ========
</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,
                                                                  2003        2002
                                                                  ----        ----
<S>                                                             <C>          <C>
Operating income from reportable segments .................     $ 5,032      $   432
Corporate, other and eliminations .........................         171         (195)
Equity in net losses of affiliates ........................        (678)        (475)
Interest expense ..........................................      (4,595)        (708)
Other, net ................................................         856            7
                                                                -------      -------
Income (loss) from continuing operations before income
  taxes and dividends on utility preferred stock ..........     $   786      $  (939)
                                                                =======      =======
</TABLE>


                                       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)

            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, 2002 as filed on Form
      10-K with the SEC. 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, 2002 have been
      reclassified for comparative purposes.

      OVERVIEW

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

            We are a provider of integrated communications services to
      residential and business customers throughout the eastern half of
      Pennsylvania. We operate rural telephone companies, or rural local
      exchange carriers, or ("RLECs"), in parts of Berks, Lancaster, Union
      counties and smaller portions of three other adjacent counties in
      Pennsylvania, and competitive local telephone companies, or CLECs, in
      the Lancaster, Harrisburg, Reading, Altoona, Pottstown, State College and
      Williamsport, Pennsylvania metropolitan areas, which we refer to as our
      "edge-out" markets. We offer our customers a comprehensive package of
      communications services, including local and long distance telephone, high
      speed data, and Internet access services. We also provide business
      customers with integrated voice and data network solutions including the
      related communications and computer equipment in areas that extend beyond
      the markets listed above.

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

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


                                       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)

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

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

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

            Conestoga Wireless revenue was derived from providing wireless
      Personal Communication Service, including local and long distance
      telephone services, and from the sale of wireless communications
      equipment. We market these products and services in certain of our RLEC
      and CLEC markets. We sold this segment on January 14, 2003.

            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 wages and employee benefit
      costs, and equipment and materials used in the course of the installation
      and provision of our products and services. Our Conestoga Wireless Segment
      incurs costs related to network facilities to provide wireless Personal
      Communication Service, engineering costs, network access costs and costs
      of wireless communications equipment sold.

            We incur access line-related capital expenditures associated with
      access line additions, expenditures for upgrading existing facilities and
      costs related to the provision of DSL and dial-up Internet services in our
      RLEC and CLEC territories. We believe that our capital expenditures
      related to CLEC access line growth are generally associated with
      additional customers and


                                       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)

      therefore tend to result in incremental revenue. We believe that our
      additional capital expenditures relating to our investment in software and
      systems will maintain our competitive position in the marketplace.

            We own a one-third investment in EuroTel L.L.C. (EuroTel), a
      domestic corporate joint venture. EuroTel holds a 27.85% investment in
      Pilicka Telefonia, Sp.zo.o (Pilicka), a telecommunications company located
      in Poland. Also, we own 28.88% and the other EuroTel founders own 43.27%
      of Pilicka. As such, we have a 28.88% direct ownership in Pilicka and a
      9.28% indirect ownership in Pilicka, through our 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 these investments.

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

            Upon completion of the sale, D&E received $74,168 in cash, subject
      to post closing adjustments as set forth in the sale agreement. These
      adjustments were finalized in the third quarter of 2002 and resulted in
      additional cash proceeds of $2,294, which were collected in October 2002.
      In addition, we received equipment with a fair value of approximately
      $2,014. Selling and other estimated costs were approximately $3,836 and
      the gain on sale was $84,738 after eliminating the $10,098 liability for
      the equity in net losses of discontinued D&E Wireless operations in excess
      of investments and advances. The associated income taxes were $29,301
      resulting in an after tax gain of $55,437.

            Conestoga's wireless business was sold on January 14, 2003, and
      Conestoga and D&E's paging businesses are classified as assets held for
      sale on the balance sheet. The paging business has been reported as a
      discontinued operation. On January 28, 2003, we entered into a definitive
      sales agreement to sell Conestoga and D&E's paging businesses and expect
      to close the sale during the second quarter of 2003. Conestoga Wireless is
      included as part of operating activity and not as a discontinued operation
      because under accounting rules there is deemed to be continuing
      involvement as a result of our commitment to building out tower sites and
      a continuing lease guarantee related to certain tower sites.


                                       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)

RESULTS OF OPERATIONS

      The following table is a summary of our operating results by segment for
      the three months ended March 31, 2003 and 2002:

<TABLE>
<CAPTION>
                                                                                                            CORPORATE,
                                                             INTERNET        SYSTEMS        CONESTOGA       OTHER AND       TOTAL
                                       RLEC       CLEC       SERVICES      INTEGRATION       WIRELESS      ELIMINATIONS    COMPANY
                                       ----       ----       --------      -----------      ---------      ------------    -------
<S>                                  <C>        <C>          <C>           <C>              <C>            <C>             <C>
     MARCH 31, 2003 (1)
Revenues - External                  $25,746     $ 8,386      $ 1,269         $ 5,171         $   456         $ 1,057      $42,085
Revenues - Intercompany                1,956         150          151              10               4          (2,271)          --
                                     -------     -------      -------         -------         -------         -------      -------
Total Revenues                        27,702       8,536        1,420           5,181             460          (1,214)      42,085
                                     -------     -------      -------         -------         -------         -------      -------

Depreciation and Amortization          7,766         975          169             424              --             217        9,551
Other Operating Expense               12,224       8,522        1,427           5,920             840          (1,602)      27,331
                                     -------     -------      -------         -------         -------         -------      -------
Total Operating Expenses              19,990       9,497        1,596           6,344             840          (1,385)      36,882
                                     -------     -------      -------         -------         -------         -------      -------

Operating Income (Loss)                7,712        (961)        (176)         (1,163)           (380)            171        5,203
                                     -------     -------      -------         -------         -------         -------      -------

     MARCH 31, 2002 (1)
Revenues - External                  $10,600     $ 1,689      $   880         $ 5,490         $    --         $   918      $19,577
Revenues - Intercompany                  846         107            6               7              --            (966)          --
                                     -------     -------      -------         -------         -------         -------      -------
Total Revenues                        11,446       1,796          886           5,497              --             (48)      19,577
                                     -------     -------      -------         -------         -------         -------      -------

Depreciation and Amortization          3,117         245           98             314              --             107        3,881
Other Operating Expenses               6,039       2,424        1,076           5,880              --              40       15,459
                                     -------     -------      -------         -------         -------         -------      -------
Total Operating Expenses               9,156       2,669        1,174           6,194              --             147       19,340
                                     -------     -------      -------         -------         -------         -------      -------

Operating Income (Loss)                2,290        (873)        (288)           (697)             --            (195)         237
                                     -------     -------      -------         -------         -------         -------      -------
</TABLE>

----------

      (1)   We acquired Conestoga Enterprises, Inc. on May 24, 2002.

CONSOLIDATED OPERATIONS

            Three months ended March 31, 2003 compared
            to the three months ended March 31, 2002

            Consolidated operating revenues from continuing operations increased
      $22,508, or 115.0%, to $42,085 for the first quarter of March 31, 2003,
      from $19,577 in the same period of 2002. The revenue increase was
      primarily due to the inclusion of Conestoga's revenues, totaling $24,051,
      with no amount included in 2002 prior to its acquisition on May 24, 2002.
      The former D&E operating divisions realized a $1,543 decrease in revenues
      with increased revenues primarily from an increase in the number of
      customers in our Internet Services and CLEC segments more than offset by a
      decrease in our Systems Integration segment revenues. This decrease is
      primarily related to reductions in customer spending for communications
      related infrastructure that we believe is a result of a slowing economy.


                                       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)

            Consolidated operating income from continuing operations increased
      $4,966, to $5,203, for the first quarter of 2003, from $237 in the same
      period of 2002. Operating income as a percentage of revenue increased to
      12.4% in the first quarter of 2003 compared to 1.2% in the same period of
      2002. The improvement was primarily attributable to the Conestoga
      acquisition.

            Other income and expense was a net expense of $4,417 in the first
      quarter of 2003 compared to a net expense of $1,176 in the same period of
      2002. Our equity in the losses of our European affiliates increased to
      $678 in the first quarter of 2003 from $475 in the same period of 2002.
      Interest expense increased to $4,595 in the first quarter of 2002,
      compared to $708 in the same period of 2002, primarily as a result of
      increased borrowings to complete the Conestoga acquisition on May 24,
      2002. Other income increased $849 in 2003 from the prior year, primarily
      from a $1,204 dividend received, and discounted to a present value of
      $801, on our investment in our primary lender compared with $94 received
      in the first quarter of 2002.

            Income taxes were $315 in the first quarter of 2003 compared to a
      benefit of $150 in the same period of 2002. Discontinued paging operations
      resulted in a loss of $7 after tax in the first quarter of 2002 versus a
      loss of $3 in the first quarter of 2002, which did not include Conestoga's
      paging business before the acquisition. In 2003 we recorded $260 of income
      after taxes for the cumulative effect of adopting Statement of Financial
      Accounting Standards No. 143, "Accounting for Asset Retirement
      Obligations" effective January 1, 2003. The adjustment represents the
      cumulative estimate of cost of removal charged to depreciation expense in
      earlier years. Our net income was $708, or $0.05 per share (including
      $0.02 for the cumulative effect of SFAS No. 143), in the first quarter of
      2003 compared to a net loss of $808, or $0.11 per share, in the first
      quarter of 2002.

RLEC SEGMENT RESULTS

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED MARCH 31,
                                             2003            2002        % CHANGE
                                           --------        --------      --------
<S>                                        <C>             <C>           <C>
      Revenues:
          Local Telephone Service          $  8,085        $  3,537        128.6%
          Network Access                     14,019           5,709        145.6%
          Other                               5,598           2,200        154.5%
                                           --------        --------
      Total Revenues                         27,702          11,446        142.0%
                                           --------        --------

      Depreciation and Amortization           7,766           3,117        149.1%
      Other Operating Expenses               12,224           6,039        102.4%
                                           --------        --------
      Total Operating Expenses               19,990           9,156        118.3%
                                           --------        --------

      Operating Income                     $  7,712        $  2,290        236.8%
                                           --------        --------

      Access Lines at March 31              144,934          62,104        133.4%
                                           --------        --------
</TABLE>


                                       21
<PAGE>

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

                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                        (Dollar amounts are in thousands)

            RLEC segment revenues increased $16,256, or 142.0%, to $27,702 in
      2003, from $11,446 in 2002. The increase was primarily attributable to the
      inclusion of Conestoga's revenues, totaling $15,983 with no amount
      included in 2002 prior to its acquisition on May 24, 2002. The revenue
      increase also included a rate increase in local telephone service in July
      2002. We have filed another rate rebalancing request with the Pennsylvania
      Public Utility Commission on April 30, 2003. The request, to be effective
      July 1, 2003, is designed to be revenue-neutral, with no impact on our
      RLECs' total operating revenues. In our original D&E RLEC division, we
      experienced an increase of $211 in basic local telephone service and an
      increase of $299 in network access offset by decreases of $183 in regional
      long distance toll service and decreases of $54 in other revenues.

            RLEC operating expenses increased $10,834 or 118.3%, to $19,990 in
      the first quarter of 2003, from $9,156 in the same period of the prior
      year. The first quarter of 2003 expenses included $11,239 from the
      Conestoga acquisition, while our D&E RLEC experienced a decrease of $405,
      with depreciation expense increasing $268, direct cost of operations
      decreasing $199 and general and administrative expense decreasing $417,
      both largely relating to reduced computer costs, and other operating
      expenses decreasing $57.

CLEC SEGMENT RESULTS

<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED MARCH 31,
                                             2003             2002            % CHANGE
                                           --------         --------          --------
<S>                                        <C>              <C>               <C>
      Revenues:
          Local Telephone Service          $  2,208         $    560           294.3%
          Network Access                      1,238              384           222.4%
          Long Distance                       4,927              775           535.7%
          Other                                 163               77           111.7%
                                           --------         --------
      Total Revenues                          8,536            1,796           375.3%
                                           --------         --------

      Depreciation and Amortization             975              245           298.0%
      Other Operating Expenses                8,522            2,424           251.6%
                                           --------         --------
      Total Operating Expenses                9,497            2,669           255.8%
                                           --------         --------

      Operating Loss                       $   (961)        $   (873)          (10.1%)
                                           --------         --------

      Access Lines at March 31               33,276            8,420           295.2%
</TABLE>

            CLEC segment revenues increased $6,740 or 375.3%, to $8,536 in the
      first quarter of 2003, from $1,796 in the same period of 2002. The
      increase was primarily attributable to the inclusion of Conestoga's
      revenues, totaling $5,952 with no amount included in 2002 prior to its
      acquisition on May 24, 2002. The increase was also related to our original
      D&E CLEC's addition of access lines for new customers that primarily
      increased local telephone service revenues $293, increased network access
      revenues by $192, long distance revenues by $230 and other miscellaneous
      revenues increased $73.


                                       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)

            Operating expenses for the CLEC segment increased $6,828 or 255.8%,
      to $9,497 in the first quarter of 2003, from $2,669 in the same period of
      2002. In addition to $6,477 of expenses from the Conestoga acquisition,
      our D&E CLEC experienced expense increases of $351 related to additional
      network access expense 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 since the first quarter of 2002.

INTERNET SERVICES SEGMENT RESULTS

<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED MARCH 31,
                                             2003            2002           % CHANGE
                                           -------         -------          --------
<S>                                        <C>             <C>              <C>
      Revenues                             $ 1,420         $   886            60.3%

      Depreciation and Amortization            169              98            72.4%
      Other Operating Expenses               1,427           1,076            32.6%
                                           -------         -------
      Total Operating Expenses               1,596           1,174            35.9%
                                           -------         -------

      Operating Loss                       $  (176)        $  (288)           38.9%
                                           -------         -------

      Customers at March 31
           DSL                               6,124           2,482           146.7%
           Dial-up Access                   12,967          11,533            12.4%
           Web-hosting Services                701             515            36.1%
</TABLE>

            Internet Services segment revenues increased $534, or 60.3%, to
      $1,420 in the first quarter of 2003, from $886 in the same period of 2002.
      The increase was primarily attributable to the inclusion of Conestoga's
      revenues, totaling $332 with no amount included in 2002 prior to its
      acquisition on May 24, 2002. The remaining increase resulted from an
      increase in the number of dial-up single user residential and business
      customers, as well as DSL customers and web hosting subscribers in our
      original market areas and the expansion into parts of Conestoga's
      territory.

            Operating expenses for the Internet Services segment increased $422,
      or 35.9%, to $1,596 in the first quarter of 2003, from $1,174 in the same
      period of 2002. The increased expenses were primarily related to including
      the Conestoga operations.


                                       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)

SYSTEMS INTEGRATION SEGMENT RESULTS

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED MARCH 31,
                                             2003           2002         % CHANGE
                                           -------         -------       --------
<S>                                        <C>             <C>           <C>
      Revenues                             $ 5,181         $ 5,497          (5.7%)

      Depreciation and Amortization            424             314          35.0%
      Other Operating Expenses               5,920           5,880           0.7%
                                           -------         -------
      Total Operating Expenses               6,344           6,194           2.4%
                                           -------         -------

      Operating Loss                       $(1,163)        $  (697)        (66.9%)
                                           -------         -------
</TABLE>

            Systems Integration segment revenues decreased $316, or 5.7%, to
      $5,181 in the first quarter of 2003, from $5,497 in the same period of
      2002. The change was attributable to an increase of $1,810 from inclusion
      of Conestoga's revenues in 2003 that was offset by a decline of $2,126 in
      our original D&E Systems Integration business. The decreases included a
      reduction of $1,555 in telecommunications and computer equipment sold,
      $565 in computer services revenue and $6 other miscellaneous revenues.
      This decline was primarily related to 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 increased
      $150, or 2.4%, to $6,344 in the first quarter 2003, from $6,194 in the
      same period of 2002. In addition to $2,013 of increased expenses from
      Conestoga in 2003, the cost of products sold decreased by $1,197 in 2003
      from the first quarter of 2002 in our original D&E Systems Integration
      business and other operating expenses decreased $666.

CONESTOGA WIRELESS SEGMENT RESULTS

            Conestoga Wireless segment revenues were $460 for the two weeks
      before the business was sold on January 14, 2003. There was no activity
      recorded in 2002 before the May 24, 2002 Conestoga acquisition. Expenses
      for the final period were $840 resulting in an operating loss of $380. See
      the Section titled "Factors Affecting Our Prospects."

OTHER INCOME (EXPENSE)

            Other income and expense was a net expense of $4,417 in the first
      quarter of 2003, compared to a net expense of $1,176 in the same period of
      2002. Our equity in the losses of our European affiliates increased to
      $678 in the first quarter of 2003, from $475 in the same period of 2002.
      Interest expense increased to $4,595 in the first quarter of 2002,
      compared to $708 in the same period of 2002, primarily as a result of
      increased borrowings to complete the Conestoga acquisition on May 24,
      2002. Other income increased $849 in 2003 from the prior year, primarily


                                       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)

      from a $1,204 dividend received, and discounted to a present value of
      $801, on our investment in our primary lender, compared with $94 received
      in the first quarter of 2002.

INCOME TAXES

            Income taxes were $315 in the first quarter of 2003 compared to a
      benefit of $150 in the same period of 2002. The effective tax rate for
      continuing operations was 40.1% for the first quarter of 2003 and a
      benefit rate of 16.0% for the same period of the prior year.

DISCONTINUED OPERATIONS

            Our paging operations resulted in a loss of $7 after a tax benefit
      of $3 in the first quarter of 2003. The first quarter of 2002, not
      including any Conestoga paging, was a loss of $3 after a tax benefit of
      $2. Management expects that the sale of our paging operations will close
      in the second quarter of 2003. No liabilities are expected to be included
      as part of the sale.

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 $8,970 in the first
      quarter of 2003, compared with $424 in the same period of 2002. The
      increase is primarily due to the inclusion of Conestoga's cash flow
      activity in 2003.

            Net cash provided by investing activities was $5,931 in the first
      quarter of 2003, compared with a net cash use of $5,748 in the same period
      of 2002. The proceeds from the Conestoga Wireless sale was $10,005, which
      more than covered the $3,637 of capital additions and $437 of net increase
      to investments and advances to affiliates. Capital additions in 2003 were
      primarily for computer equipment, outside plant facilities and network
      infrastructure. The 2002 cash use was primarily for $5,170 of capital
      additions as well as $475 of Conestoga acquisition costs and a net
      increase of $103 in investments and advances to affiliates. Capital
      additions were primarily for digital electronic switching equipment and
      network infrastructure expansion.

            Net cash used in financing activities was $961 in the first quarter
      of 2003, compared with $4,786 of net cash provided in the same period of
      2002. In the first quarter of 2003, payment of dividends of $1,839 was the
      major financing use of funds while long-term debt borrowing net of


                                       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)

      payments made on long-term debt provided $768 and common stock issuance
      provided $110. On March 14, 2003, we borrowed $12,000 to use along with
      cash from operations to pay $20,700 of federal taxes primarily related to
      the sale of our D&E wireless investment. In the first quarter of 2002,
      revolving lines of credit provided $5,562, of which $860 was used to pay
      quarterly dividends.

OTHER

            During 2002, we directly wrote off $632, related to the WorldCom
      bankruptcy, in addition to our portion of losses that are shared through
      the NECA settlement pool process. During April 2003 we sold our major
      claims against WorldCom and recovered cash, $294 of which is a direct
      recovery of our loss.

EXTERNAL SOURCES OF CAPITAL AT MARCH 31, 2003

            As of March 31, 2003, our credit facility consists of Term Loan A,
      (a $50,000 single draw 10-year senior term loan with a remaining balance
      of $47,500), Term Loan B, (a $125,000 single draw 8.5-year senior term
      loan with a remaining balance of $119,000) and an 8.5-year senior reducing
      revolving credit facility, with a reduced total availability of $73,500,
      of which $41,550 is borrowed. The revolving credit facility, of which
      $31,950 was available as of March 31, 2003, is available to fund capital
      expenditures, acquisitions, general corporate purposes and working capital
      needs. In connection with the Conestoga acquisition, we acquired their
      long-term loans of $35,000.

            The Term Loan A for $47,500 requires interest only payments for
      three years, with increasing quarterly principal payments from the third
      quarter of 2004 through the second quarter 2011. The Term Loan B for
      $119,000 requires interest only payments for two years, with increasing
      quarterly principal payments from the third quarter of 2004 through the
      fourth of quarter 2010. The revolving credit facility requires interest
      only payments for two years, with increasing quarterly principal
      reductions of the amount available to borrow from the third quarter of
      2004 through the fourth quarter of 2010. 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 $35,000
      Conestoga loans require interest only payments for three years with equal
      quarterly payments from the first quarter of 2005 through the fourth
      quarter of 2014.

            The credit facility includes a number of significant covenants that
      impose restrictions on our business. These covenants include, among
      others, restrictions on expansion of our CLEC business into new markets,
      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.


                                       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)

            Upon completion of the sale of Conestoga Wireless on January 14,
      2003, we received approximately $10,005 and, as required by the Senior
      Secured Credit Facility mandatory repayment terms, subsequently repaid
      $2,500 of the Term A loan, $6,000 of the Term B loan and $1,500 on our
      revolving credit facility. As of March 31, 2003, we had no other unsecured
      lines of credit.

            Our borrowing capacity at March 31, 2003, as limited by our
      covenants, is $75,000 senior reducing revolving credit loan, reduced to
      $73,500 for 8.5 years, of which $41,550 was drawn.

            As of March 31, 2003, the full amount of the revolver was available
      for borrowing without breaking any of the covenants. For further
      information regarding our long-term debt, see note 9 to our consolidated
      financial statements. Our ratio of total debt to total debt plus capital
      increased to 55.0% at March 31, 2003 from 54.8% at December 31, 2002.

COMMITMENTS, CONTINGENCIES AND PROJECTED USES OF CAPITAL

            We believe that our most significant commitments, contingencies and
      projected uses of funds in 2003, other than for operations, include
      capital expenditures, the payment of quarterly common stock dividends and
      other contractual obligations. On April 24, 2003, we declared a quarterly
      common stock dividend of $0.125 per share payable on June 15, 2003 to
      holders of record on June 2, 2003. We expect that this dividend will
      result in an aggregate payment of approximately $1,900. We believe that we
      have adequate internal and external resources available to meet ongoing
      operating requirements.

            On May 24, 2002, pursuant to the merger agreement with Conestoga,
      D&E assumed Conestoga's obligations under a Build-to-Suit Agreement
      ("BTS") with Mountain Union Telecom LLC ("Mountain Union"). The
      obligations related to the construction of 20 wireless communications
      towers for Conestoga's wireless subsidiary, Conestoga Wireless Company
      ("CWC"). In November 2002, D&E entered into an asset purchase agreement
      with Keystone Wireless, LLC ("Keystone Wireless") for the sale of the
      wireless telephone assets of CWC. Although D&E sold the assets of this
      business on January 14, 2003, its obligations under the BTS were not
      assumed by Keystone Wireless. Under the BTS, D&E is obligated to work with
      Mountain Union to find and develop 20 wireless tower sites, and after
      construction of each tower, enter into a long-term operating lease with
      Mountain Union for space on the tower. At closing on the sale of CWC,
      Keystone Wireless assumed 9 leases of tower space under the BTS. Keystone
      Wireless is also contractually obligated to enter into up to 6 additional
      operating leases for tower space under the BTS, provided that sites
      therefore can be located and the towers built under the BTS. Consequently,
      Keystone Wireless is committed to leasing space on a total of 15 towers
      under the BTS, provided that sites therefore can be located and the towers
      built under the BTS. Should any of the obligations under the BTS to build
      20 towers remain unfulfilled, D&E could be subject to penalties for
      nonperformance. Because the underlying assets of CWC were sold under the
      asset purchase agreement, D&E has considered any remaining obligations and
      potential


                                       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)

      penalties under the BTS a contingent liability. As of March 31, 2003, D&E
      has recorded an estimated $675 for its remaining commitment under the BTS.

            As part of the Company's acquisition of Conestoga, D&E assumed a
      guarantee agreement with Mountain Union for lease obligations on the
      wireless tower sites of Conestoga's wireless subsidiary. When D&E entered
      into the asset purchase agreement with Keystone Wireless, whereby Keystone
      Wireless was assigned the responsibility for the leases, Mountain Union
      declined to release D&E from its guarantee. In the event of a default by
      Keystone Wireless, D&E continues to guarantee the wireless tower site
      lease payments, which cover a 10-year period commencing on the
      commencement date of the lease of each tower. As such, the guarantee is a
      continuing guarantee provided on an individual tower site basis. The lease
      payments start at $1.5 per site per month, with provision for an increase
      of 4% per year. The majority of these tower site leases and our guarantee
      will expire in 2011 and thereafter. D&E has estimated and recorded the
      fair value of the liability for the lease guarantees of $3,200 and that is
      presented as an offset to the fair value of the Conestoga assets held for
      sale at December 31, 2002.

            We hold a 33% interest in EuroTel and a 28.88% interest in Pilicka,
      both of which we account for under the equity method of accounting. Thus,
      neither the assets nor the liabilities of EuroTel or Pilicka are presented
      on a consolidated basis on our balance sheets. We have also committed to
      loan EuroTel, on an equal basis with the other investors in EuroTel,
      certain of its operating cash needs. In the first quarter of 2003, D&E
      made advances of $458 to EuroTel and we expect that our total 2003
      advances will be approximately $1,200 in the aggregate. Additionally, we
      have provided a letter of commitment to advance funds to Pilicka for 2003
      however, management does not anticipate having to advance funds to Pilicka
      during 2003.

CRITICAL ACCOUNTING POLICIES

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

            We have identified the following critical accounting policies as
      those that are the most significant to our financial statement
      presentation and that require difficult, subjective and complex judgments.


                                       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)

      REVENUE RECOGNITION

            Revenues for all of our business segments are generally recorded
      when services are provided or products are delivered. Our RLEC and CLEC
      pricing is subject to oversight by both state and federal regulatory
      commissions.

            Such regulation also covers services, competition and other public
      policy issues. Different interpretations by regulatory bodies may result
      in adjustments in future periods to revenues derived from our RLEC and
      CLEC operations. We monitor these proceedings closely and make adjustments
      to revenue accordingly.

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

      REGULATED ASSET DEPRECIATION

            We use a composite group remaining life method and straight-line
      composite rates to depreciate the regulated property assets of our RLEC
      and CLEC segments. Under this method, when we replace or retire such
      assets, we deduct the original cost of these assets and charge it to
      accumulated depreciation. The effect of this accounting is to amortize any
      gains or losses on dispositions over the service lives of the remaining
      regulated telephone property assets rather than recognizing such gain or
      loss in the period of retirement.

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


                                       29
<PAGE>

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

                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                        (Dollar amounts are in thousands)

      IMPAIRMENT OF LONG-LIVED ASSETS

            Long-lived assets, including our property, plant and equipment and
      our finite-lived intangibles, are reviewed for impairment whenever events
      or changes in circumstances indicate that the carrying value of an asset
      may not be recoverable. Recoverability is assessed based on future cash
      flows expected to result from the use of the asset and its eventual
      disposition. If the sum of the undiscounted cash flows is less than the
      carrying value of the asset, an impairment loss is recognized. Any
      impairment loss, if indicated, would be measured as the amount by which
      the carrying amount of the asset exceeds the estimated fair value of the
      asset. While we have never recorded a material impairment charge for
      long-lived assets, future events or changes in circumstances could result
      in a material charge to earnings.

      IMPAIRMENT OF GOODWILL AND INDEFINITE-LIVED INTANGIBLES

            Upon the adoption of SFAS 142, "Goodwill and Other Intangible
      Assets," on January 1, 2002, goodwill and indefinite-lived intangibles are
      no longer subject to amortization. Goodwill and indefinite-lived
      intangibles are subject to at least an annual assessment for impairment by
      comparing carrying value to fair value, which we will perform annually as
      of April 30. There is a two-step process for assessment for impairment of
      goodwill. The first step is to identify a potential impairment by
      comparing the fair value of reporting units to their carrying value. If
      the results of the first step of the impairment testing indicate a
      potential impairment, the second step would be completed to measure the
      amount of any impairment loss. We continually evaluate whether events and
      circumstances have occurred that indicate the remaining balances of
      goodwill and indefinite-lived intangibles may not be recoverable. In
      evaluating impairment, we estimate the sum of the expected future cash
      flows derived from such goodwill and indefinite-lived intangibles. Such
      evaluations for impairment are significantly impacted by estimates of
      future revenues, costs and expenses, the market price of our stock and
      other factors. While we have never recorded a material impairment charge
      for goodwill and indefinite-lived intangibles, future events or changes in
      circumstances could result in a material charge to earnings.

      INVESTMENT IN UNCONSOLIDATED AFFILIATES

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


                                       30
<PAGE>

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

                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                        (Dollar amounts are in thousands)

      RETIREMENT BENEFITS

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

      INCOME TAXES

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

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

RECENT ACCOUNTING PRONOUNCEMENTS

            In April 2003, the Financial Accounting Standards Board ("FSAB")
      issued SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments
      and Hedging Activities" ("SFAS No. 149"). SFAS No. 149 amends and
      clarifies the accounting guidance on derivative instruments (including
      certain derivative instruments embedded in other contracts) and hedging
      activities that fall within the scope of SFAS No. 133, "Accounting for
      Derivative Instruments and Hedging Activities." SFAS No. 149 also amends
      certain other existing pronouncements, which will result in more
      consistent reporting of contracts that are derivatives in their entirety
      or that contain


                                       31
<PAGE>

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

                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                        (Dollar amounts are in thousands)

      embedded derivatives that warrant separate accounting. This Statement is
      effective for contracts entered into or modified after June 30, 2003, with
      certain exceptions, and for hedging relationships designated after June
      30, 2003. The Company has not yet determined the impact this pronouncement
      will have on the Company's financial position, results of operations or
      cash flows.

            In December 2002, the FASB issued SFAS No. 148, "Accounting for
      Stock-Based Compensation-Transition and Disclosure-an amendment of FASB
      Statement No. 123" ("SFAS No. 148"). This Statement provides alternative
      methods of transition for a voluntary change to the fair value-based
      method of accounting for stock-based employee compensation from the
      intrinsic value-based method of accounting prescribed by Accounting
      Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to
      Employees" ("APB No. 25"). In addition, this Statement amends the
      disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
      Compensation" ("SFAS No. 123"), to require prominent disclosures in both
      annual and interim financial statements about the method of accounting for
      stock-based employee compensation and the effect of the method used on
      reported results. As permitted by SFAS No. 148, D&E will continue to
      account for the Company's stock-based compensation in accordance with APB
      No. 25, and the adoption of SFAS No. 148 requires prominent disclosures
      about the effects of SFAS No. 123 on reported income in the interim
      financial statements.

            In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
      Retirement Obligations" ("SFAS No. 143"). This Statement establishes
      accounting practices relating to legal obligations associated with the
      retirement of tangible long-lived assets that result from the acquisition,
      construction, development or normal operation of a long-lived asset. SFAS
      No. 143 requires that companies recognize the fair value of a liability
      for asset retirement obligations in the period in which the legal
      obligations are incurred and capitalize that amount as a part of the book
      value of the long-lived asset. That cost is then depreciated over the
      remaining life of the underlying long-lived asset. D&E adopted SFAS No.
      143 effective January 1, 2003 and recorded an after-tax benefit of
      approximately $260 as a cumulative effect accounting adjustment in the
      first quarter of 2003. The adjustment represents the cumulative estimate
      of cost of removal charged to depreciation expense in earlier years.

            In 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantees of Indebtedness of Others". D&E applied the initial recognition
      and measurement provisions on a prospective basis effective December 31,
      2002. This interpretation requires that, at the time a Company issues a
      guarantee, the Company must recognize a liability for the fair value of
      that obligation under the guarantee. As part of the Company's acquisition
      of Conestoga, D&E assumed a guarantee agreement with Mountain Union for
      lease obligations on the wireless tower sites of Conestoga's wireless
      subsidiary. When D&E entered into the asset purchase agreement with
      Keystone Wireless, whereby Keystone Wireless was assigned the
      responsibility for the leases, Mountain Union declined to release D&E from
      its guarantee. In the event of a default by Keystone Wireless, D&E
      continues to guarantee the wireless tower site lease payments, which cover
      a 10-year period commencing on the commencement date of the lease of each
      tower. As such, the


                                       32
<PAGE>

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

                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                        (Dollar amounts are in thousands)

      guarantee is a continuing guarantee provided on an individual tower site
      basis. The lease payments start at $1.5 per site per month, with provision
      for an increase of 4% per year. The majority of these tower site leases
      and our guarantee will expire in 2011 and thereafter. D&E has estimated
      and recorded the fair value of the liability for the lease guarantees of
      $3,200 and that is presented as an offset to the fair value of the
      Conestoga assets held for sale at December 31, 2002.

            In January 2003, the FASB issued FASB Interpretation No. 46,
      "Consolidation of Variable Interest Entities -- An Interpretation of
      Accounting Research Bulletin (ARB) No. 51" ("FIN 46"). This interpretation
      clarifies how to identify variable interest entities and how a company
      should assess its interests in a variable interest entity to decide
      whether to consolidate the entity. FIN 46 applies to variable interest
      entities created after January 31, 2003, in which a company obtains an
      interest after that date. Also, FIN 46 applies in the first fiscal quarter
      or interim period beginning after June 15, 2003, to variable interest
      entities in which a company holds a variable interest that it acquired
      before February 1, 2003. D&E does not have any ownership in variable
      interest entities.

            In January 2003, the Emerging Issues Task Force issued EITF 00-21
      "Revenue Arrangements with Multiple Deliverables" (EITF 00-21"). EITF
      00-21 primarily addresses certain aspects of the accounting by a vendor
      for arrangements under which it will perform multiple revenue-generating
      activities. Specifically, it addresses how to determine whether an
      arrangement involving multiple deliverables contains more than one unit of
      accounting. In applying EITF 00-21, separate contracts with the same
      entity or related parties that are entered into at or near the same time
      are presumed to have been negotiated as a package and should, therefore,
      be evaluated as a single arrangement in considering whether there are one
      or more units of accounting. That presumption may be overcome if there is
      sufficient evidence to the contrary. EITF 00-21 also addresses how
      arrangement consideration should be measured and allocated to the separate
      units of accounting in the arrangement. The provisions of EITF 00-21 are
      effective for revenue arrangements entered into in fiscal periods
      beginning after June 15, 2003. D&E is currently evaluating the impact this
      statement will have on its financial position or results of operations.

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-


                                       33
<PAGE>

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

                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                        (Dollar amounts are in thousands)

      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

      Our increased indebtedness could restrict our operations.

            As of March 31, 2003, we had approximately $245,866 of total
      indebtedness, including current maturities, which increased in connection
      with the Conestoga acquisition. This increased indebtedness could restrict
      our operations due to the following factors, among others:

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

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

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

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

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

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

      The agreements governing our indebtedness could restrict our operations
      and ability to make acquisitions.


                                       34
<PAGE>

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

                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                        (Dollar amounts are in thousands)

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

      -     incur more indebtedness;

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

      -     make acquisitions or investments;

      -     use assets as security in other transactions;

      -     enter into transactions with affiliates;

      -     merge or consolidate with others;

      -     dispose of assets or use asset sale proceeds;

      -     create liens on our assets;

      -     expand our CLEC marketing areas; and

      -     extend credit.

      We may be unable to integrate successfully the business operations of D&E
      and Conestoga, and such inability could have an adverse impact on our
      profitability.

            The integration of the systems and operations of D&E and Conestoga
      will involve significant risks. D&E and Conestoga have different operating
      support systems, including billing, accounting, order management, toll
      rating, trouble reporting and customer service systems, which may be
      difficult to integrate. In addition, some of Conestoga's employees are
      members of a labor union and are subject to the terms of a collective
      bargaining agreement. Because D&E's 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.

      We have continuing involvement in the Conestoga wireless segment after its
      sale which may adversely affect the continuing operations of the business.

            In connection with the acquisition of Conestoga, we committed to a
      plan to sell the assets of Conestoga's wireless segment. The sale was
      completed on January 14, 2003. We will have


                                       35
<PAGE>

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

                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                        (Dollar amounts are in thousands)

      continuing involvement after the sale as a result of our continued
      guarantees of lease obligations on the wireless tower sites that were sold
      and our responsibilities under build-to-suit agreements. Payments required
      under the build-to-suit agreement and payments, if any, that become due
      under the wireless tower site guarantees could restrict our operations by
      reducing the funds available for working capital, capital expenditures,
      acquisitions and other general corporate purposes.

      The communications industry is increasingly competitive, and this
      competition has resulted in pricing pressure on our service offerings. We
      may experience increased competitive pressures which could have a negative
      effect on our revenues and earnings.

            As an integrated communications provider, we face competition from:

      -     competitive local exchange carriers, including Adelphia,
            Commonwealth Telephone Enterprises and XO Communications;

      -     wireless service providers, including Cingular, Verizon Wireless,
            AT&T Wireless, Nextel and T-Mobile

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

      -     cable television companies, including Adelphia, Comcast and Pencor
            Services;

      -     providers of communications services such as long distance services,
            including, AT&T, Sprint, WorldCom and Verizon Communications; and

      -     systems integration providers, including Morefield, Williams,
            IntelliMark and Weidenhammer Systems Corp.

            Many of our competitors are, or are affiliated with, major
      communications companies. These competitors have substantially greater
      financial and marketing resources and greater name recognition and more
      established relationships with a larger base of current and potential
      customers than we. Accordingly, it may be more difficult to compete
      against these large 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 any
      of our markets.

      We may be unable to secure unbundled network elements at reasonable rates,
      in which case our CLEC growth may be delayed and the quality of service
      may decline.

            In providing our CLEC service, we interconnect with and use other
      telephone companies' networks to access certain of their customers.
      Therefore, we depend, in certain circumstances, upon the technology and
      capabilities of these other telephone companies, the quality and
      availability of other telephone companies' facilities and other telephone
      companies' maintenance of these facilities. We must also maintain
      efficient procedures for ordering, provisioning,


                                       36
<PAGE>

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

                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                        (Dollar amounts are in thousands)

      maintaining and repairing facilities from these other telephone companies.
      We may not be able to obtain the facilities and services of satisfactory
      quality 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 (DSL) services. To provide
      unbundled DSL-capable lines that connect each end-user to 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 could harm our CLEC business.

      If we expand our CLEC operations, the success of this expansion will be
      dependent on interconnection agreements, permits and rights-of-way. The
      failure to obtain these agreements and permits on favorable terms could
      hamper any such expansion.

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

      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 we may not be able to do so
      in a cost-effective manner. Federal and state regulatory trends toward a
      more competitive market place through reduced competitive entry standards
      are likely to have negative effects on our business and our ability to
      compete. For example, the FCC is currently considering the issue of
      wireless local number portability. The final disposition of this issue is
      unclear at this time; however, the potential exists for a ruling that
      would have a negative impact on our RLEC and CLEC operations. In this
      regard, the regulatory environment governing ILEC operations has been and


                                       37
<PAGE>

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

                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations
                        (Dollar amounts are in thousands)

      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 pro-competitive policies could have a negative effect on
      our ILEC operating results yet at the same time present operating
      opportunities to our CLEC business.

      We no longer have a limited suspension from certain interconnection
      requirements of the Telecommunications Act of 1996. As a result, we may be
      subject to additional competition for telecommunications services.

            Our RLEC services held a limited suspension until January 2003 from
      certain interconnection requirements of the Telecommunications Act of
      1996. The suspension protected the interconnection services in our RLEC
      markets by excluding us from requirements to allow competitors to have
      access to our customers by relying upon our services and facilities. Since
      we, along with all other RLECs in Pennsylvania, did not receive additional
      extensions of this suspension, competitors will be allowed to seek removal
      of our rural exemption for the purposes 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 revenues
      and earnings.

      The Systems Integration Segment could be affected by the overall economic
      climate.

            The sale of equipment and services in the Systems Integration
      business is dependent upon the willingness of companies to invest in
      improvements in their information and communications systems. General
      economic conditions play a role in companies' investment decisions that
      directly affect the potential sales of Systems Integration equipment and
      services. The current economic climate may negatively impact the
      willingness of companies to make these types of investments.

      Impairment of Goodwill and Indefinite-Lived Intangibles.

            The annual tests for impairment of goodwill and indefinite-lived
      intangibles which we will perform as of April each year may result in an
      unplanned expense and reduction of asset value if future cash flow
      estimates are insufficient to justify the goodwill and indefinite-lived
      intangible assets' carrying values.


                                       38
<PAGE>

Form 10-Q

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

                 Item 3. Quantitative and Qualitative Disclosure
                               About Market Risks
                        (Dollar amounts are in thousands)

            We are highly leveraged and, as a result, our cash flows and
      earnings are exposed to fluctuations in interest rates. Our debt
      obligations are U.S. dollar denominated. Our market risk, therefore, is
      the potential loss arising from adverse changes in interest rates and
      changes in our leverage ratio which may increase the margin added to the
      interest rate as provided in our loan agreement. As of March 31, 2003, our
      debt can be categorized as follows:

<TABLE>
<S>                                                                    <C>
Fixed interest rates:
   Secured Term Loans ........................................         $    35,000
Subject to interest rate fluctuations:
   Senior Secured Revolving Credit Facility ..................         $    41,550
   Senior Secured Term Loans .................................         $   166,500
</TABLE>

            As part of our loan covenant conditions, we have arranged interest
      rate protection on one-half of the total amount of senior indebtedness
      outstanding, with a weighted average life of at least 2 years. As of March
      31, 2003, our bank debt is as follows:

<TABLE>
<CAPTION>
                                                                                          AVERAGE
                                                                           PRINCIPAL        RATE         FAIR VALUE
                                                                           ---------      -------        ----------
<S>                                                                        <C>            <C>            <C>
Rates fixed for two years through interest rate swaps .........            $ 35,000         6.29%         $ 35,000
Rates fixed for three years through interest rate swaps .......            $ 35,000         6.93%         $ 35,000
Rates fixed for four years through interest rate swaps ........            $ 35,000         7.23%         $ 35,000
Fixed rate debt, rates fixed for twelve years .................            $ 35,000         9.35%         $ 40,946
Total fixed rates 58% of total debt ...........................            $140,000         6.37%         $145,946
Variable rate debt 42% of total debt ..........................            $103,050         5.33%         $103,050
</TABLE>

            If interest rates rise above the rates of the variable debt, we
      could realize additional interest expense of $515 for each 50 basis points
      above the variable rates. If rates were to decline, we would realize less
      interest expense of approximately $515 for each 50 basis point decrease in
      rates.

            The interest rate swaps were arranged to hedge against the effect of
      interest rate fluctuations. The swaps were arranged with three banks that
      participate in our senior indebtedness. Under these interest rate swap
      contracts, we agree to pay an amount equal to a specified fixed-rate of
      interest times a notional principal amount and to receive in turn an
      amount equal to a specified variable-rate of interest times the same
      notional amount. The notional amounts of the contracts are not exchanged.
      Net interest positions are settled quarterly.


                                       39
<PAGE>

Form 10-Q

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

                 Item 3. Quantitative and Qualitative Disclosure
                               About Market Risks
                        (Dollar amounts are in thousands)

<TABLE>
<CAPTION>
                                                                       AVERAGE
                                      NOTIONAL            AVERAGE     RECEIVED
         TERMS OF SWAPS                AMOUNTS           PAY RATE       RATE         FAIR VALUE
         --------------                -------           --------       ----         ----------
<S>                                <C>                   <C>          <C>          <C>
     11/25/02 to 11/25/04          $       35,000         6.29%         5.17%      $         618
     12/04/02 to 12/04/05          $       35,000         6.93%         5.30%      $         865
     11/25/02 to 11/25/06          $       35,000         7.23%         5.17%      $       1,187
</TABLE>

            If interest rates rise above the rates fixed by these swaps, we
      could realize other income of $525 for each 50 basis points above the
      fixed rates. If rates were to decline, we would realize other expense of
      approximately $525 for each 50 basis point decrease in rates.

            Our cash and cash equivalents consist of cash and highly liquid
      investments having initial maturities of three months or less. While these
      investments are subject to a degree of interest rate risk, it is not
      considered to be material.

                         Item 4. Controls and Procedures

            Within the 90 days prior to the filing date of this report, the
      Corporation carried out an evaluation, under the supervision and with the
      participation of the Corporation's management, including the Corporation's
      Chief Executive Officer and Chief Financial Officer, of the effectiveness
      of the design and operation of our disclosure controls and procedures
      pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the
      Corporation's Chief Executive Officer and Chief Financial Officer
      concluded that the Corporation's disclosure controls and procedures are
      effective. Disclosure controls and procedures are controls and procedures
      that are designed to ensure that information required to be disclosed in
      Corporation reports filed or submitted under the Exchange Act is recorded,
      processed, summarized and reported within the time periods specified in
      the Securities and Exchange Commission's rules and forms.

            There have been no significant changes in our internal controls or
      in other factors that could significantly affect internal controls
      subsequent to the date we carried out this evaluation.


                                       40
<PAGE>

                    D&E Communications, Inc. and Subsidiaries
                           Part II - Other Information

Item 1. Legal Proceedings

      In July 2002, EuroTel initiated a legal action in United States District
Court for the Southern District of New York against an investment bank, and an
individual, alleging violations of applicable law relating to the advice given
by the investment bank and the individual to a prospective buyer not to close on
the purchase of Pilicka. Management of EuroTel believes that, based on the
advice of its legal counsel, the suit is meritorious. However, the ultimate
outcome of the litigation cannot be determined and no amount has been recognized
for possible collection of any claims in the litigation. Legal costs are
expected to continue to be incurred in pursuit of such litigation.

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

Item 6. Exhibits and Reports on Form 8-K

(a)   Exhibits:

<TABLE>
<CAPTION>
Exhibit                    Identification of
  No.                          Exhibit                                Reference
-------                        -------                                ---------
<S>            <C>                                                  <C>
  99.1         Certification of Chief Executive Officer             Filed herewith.

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

(b)   Reports on Form 8-K:

      One current report on Form 8-K dated January 29, 2003, was filed during
the quarter ended March 31, 2003. The report announced the completion of the
sale of the assets of the Company's subsidiary, Conestoga Wireless Company.


                                       41
<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, 2003
                                    By:  /s/ G. William Ruhl
                                        ----------------------------------------
                                           G. William Ruhl
                                           Chief Executive Officer


Date: May 15, 2003
                                    By:  /s/ Thomas E. Morell
                                        ----------------------------------------
                                           Thomas E. Morell
                                           Senior Vice President,
                                           Chief Financial Officer and Treasurer


                                       42
<PAGE>



                    D&E Communications, Inc. and Subsidiaries

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

CERTIFICATIONS

I, G. William Ruhl, certify that:

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

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

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

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

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

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

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

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

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


                                       43
<PAGE>

                    D&E Communications, Inc. and Subsidiaries

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

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

Date: May 15, 2003


                                                     /s/ G. William Ruhl
                                                     --------------------------
                                                     G. William Ruhl
                                                     Chief Executive Officer


                                       44
<PAGE>


                    D&E Communications, Inc. and Subsidiaries

I, Thomas E. Morell, certify that:

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

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

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

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

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

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

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

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

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

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

      6.    The registrant's other certifying officers and I have indicated in
            this quarterly report whether or not there were significant changes
            in internal controls or in other factors that


                                       45
<PAGE>

                    D&E Communications, Inc. and Subsidiaries

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

Date: May 15, 2003


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


                                       46