U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

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

                  For the fiscal year ended: December 31, 1999.


             [_] Transition Report Under Section 13 or 15(d) of the
                        Securities Exchange Act of 1934

        For the transition period from ______________ to ______________

                         Commission file number: 0-26525

                              BREDA TELEPHONE CORP.
                 (Name of small business issuer in its charter)

                  Iowa                                           42-0895882
     (State or other jurisdiction of                          (I.R.S. Employer
      incorporation or organization)                         Identification No.)

Highway 217 East, P.O. Box 190, Breda, Iowa                         51436
 (Address of principal executive offices)                        (Zip Code)

Registrant's telephone number: (712) 673-2311

Securities registered under Section 12(b) of the Exchange Act: NONE

Securities registered under Section 12(g) of the Exchange Act:

                           Common Stock, no par value
                                (Title of class)

     Check whether the registrant (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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_____

     Check  if  disclosure  of  delinquent  filers  in  response  to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [_]

     State registrant's revenues for its most recent fiscal year: $5,290,546

     State the aggregate market value of the voting and non-voting common equity
held by non-affiliates:  $5,550,399, as of March 1, 2000. The registrant's stock
is not listed on any exchange or otherwise publicly traded, and the value of the
registrant's  stock for this  purpose has been based upon the  current  $149 per
share redemption  price of the registrant's  stock as determined by its board of
directors.  In determining  this figure,  the registrant has assumed that all of
its directors and officers and its manager and  co-manager are  affiliates,  but
this assumption shall not apply to or be conclusive for any other purpose.

     State the number of shares outstanding of each of the registrant's  classes
of common equity,  as of the latest  practicable  date:  37,682 shares of common
stock, no par value, at March 1, 2000.

     Transitional Small Business Disclosure Format: Yes _____ No __X__

<PAGE>


                              BREDA TELEPHONE CORP.
                      1999 FORM 10-KSB - TABLE OF CONTENTS

                                                                            Page

PART I

  Item 1.   Description of Business......................................     1
  Item 2.   Description of Property......................................     2
  Item 3.   Legal Proceedings............................................    21
  Item 4.   Submission of Matters to a Vote of Security Holders..........    21

PART II

  Item 5.   Market for Common Equity and Related Stockholder
              Matters....................................................    21
  Item 6.   Management's Discussion and Analysis or Plan of
              Operation..................................................    28
  Item 7.   Financial Statements.........................................    39
  Item 8.   Changes In and Disagreements with Accountants on
              Accounting and Financial Disclosure........................    60

PART III

  Item 9.   Directors, Executive Officers, Promoters and
              Control Persons; Compliance with Section
              16(a) of the Exchange Act..................................    61
  Item 10.  Executive Compensation.......................................    63
  Item 11.  Security Ownership of Certain Beneficial Owners
              and Management.............................................    67
  Item 12.  Certain Relationships and Related Transactions...............    68
  Item 13.  Exhibits and Reports on Form 8-K.............................    69


                                       (i)

<PAGE>


Cautionary Statement on Forward Looking Statements.

     Certain  statements in this annual report,  including  statements in Item 1
and Item 6, contain forward  looking  statements that involve and are subject to
various  risks,  uncertainties  and  assumptions.   Forward  looking  statements
include,  but are not limited to, statements with respect to anticipated  future
trends in revenues and net income,  projections  concerning  operations and cash
flow, growth and acquisition  opportunities,  management's  plans and intentions
for the future, and other similar forecasts and statements of expectation. Words
such  as  "expects,"   "estimates,"  "plans,"   "anticipates,"   "contemplates,"
"predicts," "intends," "believes," "seeks," "should," "thinks," "objectives" and
other similar expressions or variations thereof are intended to identify forward
looking statements.  Forward looking statements made by Breda and its management
are based on estimates,  projections,  views,  beliefs and  assumptions  made or
existing at the time of such statements and are not guarantees of future results
or  performance.  Breda disclaims any obligation to update or revise any forward
looking  statements based on the occurrence of future events, the receipt of new
information, or otherwise.

     Actual future performance,  outcomes and results may differ materially from
those  expressed in forward  looking  statements as a result of numerous  risks,
uncertainties and assumptions,  all of which are beyond the control of Breda and
its  management.  The risks,  uncertainties  and assumptions  affecting  forward
looking statements include, but are not limited to:

     o    the possible adverse effects to Breda and its  subsidiaries  which may
          arise  under  the  regulations  which  will be  promulgated  under the
          Telecommunications Act of 1996, including increased competition;

     o    adverse changes by the Federal Communications  Commission in the rates
          of  the  access   charges  that  can  be  charged  by  Breda  and  its
          subsidiaries to long distance carriers;

     o    technological  advances in the telecommunications and cable industries
          which may replace or otherwise  adversely affect in a material way the
          existing technologies utilized by Breda and its subsidiaries;

     o    employee relations;

     o    management's business strategies;

     o    general  industry   conditions,   including   consolidations   in  the
          telecommunications and cable industries;

     o    general  economic  conditions  at the  national,  regional  and  local
          levels;

     o    acts or omissions of competitors and other third parties;

     o    changes in or more governmental laws, rules,  regulations or policies;
          and

     o    continued availability of financing, and on favorable terms.


                                      (ii)

<PAGE>


                                     PART I

Item 1.   Description of Business.

          General.

          Breda  Telephone  Corp.  is an Iowa  corporation  with  its  principal
          offices  in Breda,  Iowa.  Breda was  incorporated  in 1964 to provide
          local  telephone  services to Breda,  Iowa and the  surrounding  rural
          area.

          Breda's  principal  business is still  providing  telephone  services.
          Telephone  services  are also now  provided  by two of Breda's  wholly
          owned  subsidiaries,  Prairie  Telephone  Company,  Inc.  and Westside
          Independent  Telephone  Company. A total of seven Iowa towns and their
          surrounding  rural areas  currently  receive  telephone  services from
          Breda, Prairie Telephone or Westside Independent.

          Prairie  Telephone is an Iowa  corporation  that was  incorporated  in
          1968.

          Westside  Independent is an Iowa  corporation that was incorporated in
          1957. Breda acquired the stock of Westside  Independent in June, 1998.
          Breda's acquisition of Westside Independent is discussed below.

          Another of Breda's  wholly owned  subsidiaries,  Tele-Services,  Ltd.,
          provides cable  television  services to eighteen towns in Iowa and one
          town  in  Nebraska.  Tele-Services  is an  Iowa  corporation.  It  was
          incorporated in 1983.

          Westside  Communications,  Inc.  was  a  wholly  owned  subsidiary  of
          Tele-Services  that  provided  cable  television  services to two Iowa
          towns.  Westside  Communications  was dissolved  effective December 2,
          1999,  and  all of its  assets  were  transferred  to,  and all of its
          liabilities   were  assumed  by,   Tele-Services  at  that  time.  The
          dissolution of Westside  Communications and the transfer of its assets
          to   Tele-Services   and  the   assumption  of  its   liabilities   by
          Tele-Services  did  not  have  any  material  adverse  effect  on  the
          operations or financial  condition of  Tele-Services.  The dissolution
          was   effectuated    primarily   for    administrative    convenience.
          Tele-Services  had  acquired the stock of Westside  Communications  in
          June, 1998.  Tele-Services'  acquisition of Westside Communications is
          discussed below.

          Breda's  and  its   subsidiaries'   telephone  and  cable   television
          businesses  are  discussed  in more  detail  below.  Some of the other
          miscellaneous  business  operations of Breda and its  subsidiaries are
          also briefly discussed below.

<PAGE>


          Telephone Services.

          Breda,  Prairie Telephone and Westside  Independent  provide telephone
          services to the following seven Iowa towns and their surrounding rural
          areas:

               o  Breda, Iowa                 o  Pacific Junction, Iowa
               o  Lidderdale, Iowa            o  Yale, Iowa
               o  Macedonia, Iowa             o  Westside, Iowa.
               o  Farragut, Iowa

          Breda provides  services to Breda,  Lidderdale and Macedonia.  Prairie
          Telephone  provides  services to Farragut,  Pacific Junction and Yale.
          Westside  Independent  provides services to Westside.  The surrounding
          rural areas that are served are those within  approximately a ten mile
          to fifteen mile radius of each of the towns.

          All of the towns are in central and southern Iowa.

          The primary services provided by Breda, Prairie Telephone and Westside
          Independent are providing their subscribers with basic local telephone
          service and access  services for long  distance or other calls outside
          the local  calling  area.  As of December 31, 1999,  they were serving
          approximately 2,642 telephone numbers and related access lines. Breda,
          Prairie  Telephone  and Westside  Independent  derive their  principal
          revenues from providing these services.

          They also provide other telephone related services.  For example, they
          sell and  lease  telephone  equipment  to their  subscribers,  provide
          inside wiring and other installation,  maintenance and repair services
          to their  subscribers,  and provide custom  calling  services to their
          subscribers.  They also derive  revenues  from  providing  billing and
          collection  services  for some  long  distance  carriers  for the long
          distance calls made by their subscribers.

          Breda,  Prairie Telephone and Westside  Independent are all subject to
          regulation  by the Iowa  Utilities  Board (IUB).  They  operate  their
          telephone  businesses  pursuant to certificates  and various rules and
          regulations promulgated by the IUB. Although not anticipated to occur,
          the IUB could terminate  their right to provide  services if they fail
          to comply with those rules and regulations.

          As indicated above, the IUB regulates or has the authority to regulate
          many   aspects  of   Breda's,   Prairie   Telephone's   and   Westside
          Independent's  telephone businesses.  The material areas of regulation
          are as follows:


                                       2

<PAGE>


          o    Breda,  Prairie Telephone and Westside Independent are treated as
               "service  regulated"  telephone companies by the IUB, which means
               that  they must  comply  with the  IUB's  rules  and  regulations
               regarding the quality of the services and facilities  provided to
               subscribers.  The  regulations  establish  minimum  standards  of
               quality  for the  services  and  facilities  provided  by  Breda,
               Prairie  Telephone  and  Westside  Independent.   Their  existing
               services and facilities  meet those  standards.  The  regulations
               also  require   them  to  maintain  and  repair  their   existing
               facilities  as  necessary  in order to  continue to meet at least
               those minimum  standards.  The  regulations  also  establish time
               frames  within  which  Breda,   Prairie  Telephone  and  Westside
               Independent  must  respond to requests  for  services  from their
               subscribers.  The  regulations  can be  amended to  increase  the
               minimum standards or to require that additional  services be made
               available to  subscribers.  Past  amendments  have not,  however,
               caused any material  difficulties for Breda, Prairie Telephone or
               Westside Independent.

          o    The IUB must approve of any  expansion in the  telephone  service
               areas currently served by Breda,  Prairie  Telephone and Westside
               Independent.  The primary  factors that will be considered by the
               IUB in the  event  of a  request  for an  expansion  will  be the
               managerial,  financial and technical abilities of Breda,  Prairie
               Telephone or Westside  Independent,  as the case may be. Although
               they do not anticipate material  difficulties in the event of any
               proposed  expansion,  there  is  no  assurance  that  any  future
               proposed  expansion  in  the  service  areas  of  Breda,  Prairie
               Telephone  or Westside  Independent  will be approved by the IUB.
               (FCC approval for any proposed  expansion will also be necessary,
               as discussed below.)

          o    The IUB has  certified  Breda,  Prairie  Telephone  and  Westside
               Independent as "eligible  carriers."  This  certification  allows
               them to receive the universal  services funding  component of the
               support  payment  funding  program  administered  by the  Federal
               Communications Commission.  Breda, Prairie Telephone and Westside
               Independent  were able to obtain the  certification  because they
               are rural telephone providers. They do not anticipate any loss of
               that  certification,  but  the  loss of the  certification  would
               result in them no longer receiving the universal services funding
               component  under the  referenced  FCC program.  Although also not
               anticipated  to occur,  they will also lose the right to  receive
               universal  services  funding  if  they  do  not  provide  certain
               services  supported  by the  universal  services  program.  Those
               services are,  however,  currently only the basic local telephone
               services  provided  by  Breda,  Prairie  Telephone  and  Westside
               Independent.  This  certification  therefore  does not materially
               affect the operation of their  businesses,  and the certification
               was obtained solely because it was necessary in order to be


                                       3

<PAGE>


               eligible to receive universal services funding. They received, in
               the  aggregate,   approximately  $83,814  in  universal  services
               funding in 1998,  and $79,680 in 1999.  The FCC's  allocation  of
               universal services funding and of the other two components of the
               support  payment   funding  program  to  the  numerous   eligible
               recipients is discussed below.

          o    Breda,  Prairie Telephone and Westside  Independent are currently
               treated as rural telephone companies under the Telecommunications
               Act of 1996, which generally means that they may be exempted from
               some of the duties  imposed  on other  telephone  companies  that
               might make it easier for  potential  competitors  to compete with
               those companies. The IUB may withhold this exemption, however, if
               it  finds  that  a  request  by  a   potential   competitor   for
               interconnection  with Breda's,  Prairie  Telephone's  or Westside
               Independent's networks is not unduly economically burdensome,  is
               not technically  unfeasible,  and would not affect the provisions
               of universal  service.  It is not possible to accurately  predict
               whether a competitor will ever request interconnection or whether
               the request would be granted by the IUB. If a request is made and
               the  IUB  withholds  this  exemption,   however,  Breda,  Prairie
               Telephone  and Westside  Independent  would face  competition  in
               providing  telephone  services  that  they  have not faced in the
               past.

          Breda,  Prairie Telephone and Westside Independent are also subject to
          regulation  by the Federal  Communications  Commission.  The  material
          areas of regulation by the FCC are as follows:

          o    The FCC  regulates  the  amount  of  access  charges  that can be
               charged by Breda,  Prairie Telephone and Westside Independent for
               interstate long distance  calls.  The National  Exchange  Carrier
               Association   has  been  delegated  some  authority  by  the  FCC
               regarding the regulation of access charges rates, but all changes
               proposed by NECA must be approved by the FCC. The  regulation  of
               access charges is an area of particular concern to Breda, Prairie
               Telephone and Westside Independent, and is discussed below and in
               the "Overview" section in Item 6 of this annual report.

          o    The FCC must approve of any  expansion in the  telephone  service
               areas currently served by Breda,  Prairie  Telephone and Westside
               Independent.  The primary  factors that will be considered by the
               FCC in the  event  of a  request  for an  expansion  will  be the
               managerial,  financial and technical abilities of Breda,  Prairie
               Telephone  or Westside  Independent,  as the case may be, and the
               antitrust  implications  of the  expansion.  Although they do not
               anticipate any material difficulties in the event of any proposed
               expansion,  there  is  no  guarantee  that  any  future  proposed
               expansion  in the service  areas of Breda,  Prairie  Telephone or
               Westside Independent will be approved by the FCC.


                                       4

<PAGE>


          o    The FCC regulates the amount of support payment funding that will
               be received by Breda, Prairie Telephone and Westside Independent.
               The FCC does so primarily by  targeting  how the support  payment
               funding received from the National Exchange Carriers  Association
               and  the  Universal  Service   Administrative   Company  will  be
               allocated among the various  possible  recipients of the funding.
               The  allocation may vary from year to year depending on the FCC's
               determination. For example, the most recent allocation targeted a
               larger  percentage of the universal  services  funding  component
               than in the past to schools  and  libraries  because of the FCC's
               determination  of a need by those entities for expansion of lines
               for  computers  and  Internet  access.  It  is  not  possible  to
               accurately  predict how the FCC will allocate the support payment
               funding in any year, and although  Breda,  Prairie  Telephone and
               Westside  Independent  currently  contemplate being recipients of
               the funding in every year, the amount of support  payment funding
               received by them will likely vary from year to year. For example,
               Breda, Prairie Telephone,  and Westside Independent  received, in
               the aggregate,  $538,818 in support  payment funding in 1998, but
               they received  $404,136 in 1999. Those amounts include the amount
               of the universal  services  funding  component which is listed in
               the above discussion  regarding the IUB. Breda, Prairie Telephone
               and  Westside  Independent  do not  believe,  however,  that  any
               variance will materially affect their business.

          The regulation of access  charges is an area of particular  concern to
          Breda,  Prairie Telephone and Westside Independent because they derive
          a substantial  amount of their overall  revenues from access  charges.
          They receive  access  charges from long distance  carriers  (sometimes
          referred to in the telephone industry as "inter-exchange  carriers" or
          "IXCs") for providing  intrastate and interstate  exchange services to
          those long distance carriers. In more basic terms, they receive access
          charges for originating  and  terminating  long distance calls made by
          their  subscribers.  The amount of access  charges that can be charged
          for interstate long distance calls is determined by rates  established
          by the FCC.  The FCC can change  those  rates at any time,  and recent
          changes have lowered access rates. Breda anticipates that there may be
          further  reductions in access rates over the next several years. Since
          access charges  constitute a substantial  portion of Breda's,  Prairie
          Telephone's and Westside Independent's total revenues, this is an area
          of material risk to them. A further  discussion of this issue is found
          in the "Overview" section in Item 6 of this annual report.

          Pacific  Junction   Telemarketing  Center,  Inc.  is  a  wholly  owned
          subsidiary   of   Prairie   Telephone.   Pacific   Junction   provides
          telemarketing  services,  and the telemarketing  calls made by Pacific
          Junction  are a major  source of access  charges  revenue  for  Breda.
          Pacific  Junction  experienced  calling number  unavailability  during
          1999,  which  resulted  in  less  hours  spent  on  the  phone  making
          telemarketing  calls,  and  thereby  less access  charges  revenue for
          Breda. It is common in the industry for small telemarketing firms like
          Pacific  Junction to contract with a vendor who solicits calling lists
          and programs from major companies.  Because Pacific Junction's vendor,
          Aegis, began operating its own calling centers


                                       5

<PAGE>


          and did not have a surplus  of  numbers  to  contract  out to  smaller
          telemarketing firms, Pacific Junction terminated its relationship with
          Aegis in May, 1999, and instead contracted with Results Telemarketing,
          Inc. to provide  telemarketing  calling leads. Results  Telemarketing,
          Inc.,  however,  also  has  its  own  telemarketing  centers,  and has
          struggled to provide a continuous  supply of telemarketing  numbers to
          Pacific  Junction.  Also,  the  telemarketing  industry as a whole has
          experienced a downturn in companies  using  telemarketing  services in
          their telemarketing programs. Pacific Junction is therefore soliciting
          free-lance work and new vendor  contacts,  but expects the next twelve
          months to not show a substantial change in telemarketing revenue.

          Breda, Prairie Telephone and Westside Independent each have agreements
          with Iowa  Network  Services.  Under those  agreements,  Iowa  Network
          Services provides Breda,  Prairie  Telephone and Westside  Independent
          with the  lines  and  services  necessary  for them to  provide  their
          telephone subscribers with, among other things, caller ID services and
          what  is  sometimes   referred  to  in  the   telephone   industry  as
          "centralized equal access." As a practical matter, that access is what
          allows their subscribers to choose long distance carriers, which right
          is  required  to be  given to  subscribers  by law.  Breda's,  Prairie
          Telephone's and Westside Independent's telephone systems are tied into
          Iowa Network  Services' fiber optic network and switches.  Although it
          is not  anticipated to occur,  if their  agreements  with Iowa Network
          Services  were  terminated,  it would be difficult  for them to find a
          replacement for Iowa Network Services, and it would be costly for them
          to internalize all of those services.  Prairie  Telephone and Westside
          Independent are each  shareholders of Iowa Network  Services.  Prairie
          Telephone and Westside  Independent each currently own less than 1% of
          Iowa Network Services' outstanding stock.

          Telephone  services  providers  like  Breda,   Prairie  Telephone  and
          Westside  Independent are subject to competition from other providers.
          As a result of the Telecommunications Act of 1996, telephone companies
          are no longer afforded  exclusive  franchise service areas. Under that
          Act, competitors can now offer telephone services to Breda's,  Prairie
          Telephone's and Westside Independent's  subscribers,  and also request
          access to their lines and  network  facilities.  The Act  contemplates
          that  various  regulations  will be  promulgated  by the FCC and state
          regulatory  agencies to implement  various  parts of the Act,  such as
          regulations  setting out the procedures  and methods for  implementing
          and promoting competition in the telephone industry, and standards for
          wholesale pricing,  interconnection rates and for local network rates.
          Some of those  regulations had still not been finalized at the time of
          the  preparation  of this  annual  report,  and some  legal  and court
          actions have been taken by some regulators and others in the telephone
          industry  challenging some aspects of some of the proposed regulations
          and  procedures.  Until those  regulations  are  finalized,  it is not
          possible to predict how the  Telecommunications Act of 1996 may affect
          Breda,  Prairie  Telephone,  Westside  Independent and their telephone
          businesses.  The regulations could,  however,  have a material adverse
          effect, and the Act does open up Breda, Prairie Telephone and Westside
          Independent to competition that they were not subject to in the past.

          Although  competition  is  permitted,  Breda,  Prairie  Telephone  and
          Westside  Independent  currently  do not have  direct  competition  in
          providing basic local telephone service in their


                                       6

<PAGE>


          existing service areas.  They do, however,  experience  competition in
          providing   access  services  and  other  services  to  long  distance
          carriers. For example, they experience competition in providing access
          services for long  distance  when their  subscribers  use private line
          transport, switched voice and data services, microwave, or cellular or
          personal communications service. In those cases, the subscriber is not
          using Breda's,  Prairie Telephone's or Westside Independent's networks
          or switches, so they cannot charge access charges to the long distance
          carrier.  Various other  competitors and forms of competition are also
          likely to arise in the future as  technological  advances occur in the
          telecommunications and cable industries.

          Some of the cellular  ventures in which Breda,  Prairie  Telephone and
          Westside  Independent have invested or may later invest in may provide
          cellular services in the telephone exchange areas serviced by them. As
          indicated  in  the   preceding   paragraph,   cellular   services  are
          competitive  with the telephone  services  provided by Breda,  Prairie
          Telephone and Westside Independent.  Breda does not believe,  however,
          that investments in cellular  ventures are inconsistent or in conflict
          with Breda's,  Prairie Telephone's or Westside  Independent's  overall
          business.  Breda also  believes  those  investments  are one method of
          attempting to diversify across the various  telecommunications methods
          which are available today.

          Breda,  Prairie  Telephone and Westside  Independent  also  experience
          competition  in  providing  billing  and  collection  services to long
          distance  carriers.  The competition is from third parties who provide
          similar  services.  The long  distance  carriers are also  starting to
          provide  their  own  billing  and  collection  services,  rather  than
          contracting  for  those  services  with  others  like  Breda,  Prairie
          Telephone and Westside Independent.  Directory advertising is also now
          subject to  competition  because  the  Telecommunications  Act of 1996
          prohibits  Breda,  Prairie  Telephone  and Westside  Independent  from
          requiring  exclusive  listings in their phone  books.  Breda,  Prairie
          Telephone,  Westside  Independent and BTC face competition in the sale
          and lease of telephone,  cellular and related  equipment because there
          are numerous  competitors who sell and lease  telephone,  cellular and
          related equipment.  (BTC is a subsidiary of Prairie Telephone,  and is
          discussed below.) Breda,  Prairie Telephone,  Westside Independent and
          BTC also face competition in providing  internet access,  although the
          competition  was not very  intense or  expansive as of the time of the
          preparation  of this annual  report.  The  cellular  ventures in which
          Breda,  Prairie Telephone and Westside  Independent have invested face
          competition in providing  cellular services and equipment from various
          competitors  offering  cellular and personal  communication  services.
          Competition in all of the foregoing  areas is based primarily on cost,
          service and experience.

          Broadcast Services.

          Tele-Services  owns and operates the cable  television  systems in the
          following eighteen Iowa towns:


                                       7

<PAGE>


          o  Arcadia          o  Grand               o  Oakland
          o  Auburn              Junction            o  Riverton
          o  Bayard           o  Hamburg             o  Sidney
          o  Breda            o  Lohrville           o  Tabor
          o  Churdan          o  Malvern             o  Thurman
          o  Farragut         o  Neola               o  Treynor
                                                     o  Westside

          Tele-Services  also owns and operates the cable television  system for
          the town of Beaver Lake, Nebraska.

          As of December 31, 1999,  Tele-Services was providing cable television
          services to approximately 3,534 subscribers.

          Tele-Services derives its principal revenues from monthly fees charged
          to its cable subscribers for basic and premium cable services provided
          to those subscribers.

          Tele-Services provides cable services to each of the towns pursuant to
          franchises  or  agreements  with each of those  towns.  Those  various
          franchises or  agreements  will expire by their terms in the following
          months:

          o  Arcadia - June, 2009                 o  Lohrville - March, 2008
          o  Auburn - January, 2004               o  Malvern - October, 2001
          o  Bayard - May, 2008                   o  Neola - September, 2002
          o  Beaverlake - December, 2008          o  Oakland - July, 2001
          o  Breda - Year-to-Year Basis*          o  Riverton - February, 2013
          o  Churdan - June, 2008                 o  Sidney - February, 2005
          o  Farragut - January, 2009             o  Tabor - September, 2001
          o  Grand Junction - May, 2008           o  Thurman - February, 2013
          o  Hamburg-Year-to-Year Basis*          o  Treynor - October, 2022
                                                  o  Westside - June, 2009

          *    These  agreements  are in the  process of being  renewed  and are
               currently continued on a year-to-year basis.

          Tele-Services  does  not  anticipate  that  any of its  franchises  or
          agreements  will be  terminated  before  the above  normal  expiration
          dates.  Tele-Services  also  hopes to be able to renew or  extend  the
          franchises or agreements  before they expire,  but no assurance can be
          given  that any  franchises  or  agreements  can or will be renewed or
          extended.

          The  termination of a franchise or agreement  would allow that town to
          deny  Tele-Services  access to its cables for maintenance and services
          purposes. This would create difficulties


                                       8

<PAGE>


          for  Tele-Services  in  properly  serving  its  subscribers,  and,  in
          general, providing cable services to that town.

          The  franchises  or  agreements  with the towns  require the giving of
          notice  to the towns  before  Tele-Services  can  change  their  cable
          services rates, and some of those franchises or agreements may require
          the approval of the town for any  increases  in those rates.  Although
          Tele-Services  does not anticipate any material  difficulties with any
          future proposed rate increases,  there can be no guarantee that future
          proposed increases can be implemented in all of the towns.

          The  Telecommunications  Act of 1996 also  applies  to cable  services
          providers,  and cable  services  providers such as  Tele-Services  are
          therefore  subject to competition from other  providers.  As discussed
          above in this Item regarding the telephone services provided by Breda,
          Prairie Telephone and Westside Independent, various regulations are to
          be promulgated under that Act, but some of those regulations had still
          not been  finalized  at the  time of the  preparation  of this  annual
          report,  and some  legal and  court  actions  have been  taken by some
          regulators and others challenging some aspects of some of the proposed
          regulations and procedures.  Until those regulations are finalized, it
          is not possible to predict how the  Telecommunications Act of 1996 may
          affect  Tele-Services and its cable business.  The regulations  could,
          however, have a material adverse effect. Breda currently contemplates,
          however,  that any  competition  in the cable  industry  arising  as a
          result  of the  Telecommunications  Act of 1996 may  occur at a slower
          pace  than  will be the  case for  telephone  services  providers,  in
          particular  in rural  areas like those  served by  Tele-Services.  One
          result of the  Telecommunications  Act of 1996 with  respect  to cable
          services  providers is that  telephone  services must be allowed to be
          provided through the cable of cable services providers.

          Tele-Services'  franchises or  agreements  with the towns do not grant
          Tele-Services  the exclusive  right to provide  cable  services in the
          towns, and other cable service providers can provide cable services in
          the towns.  There currently are not, however,  any other cable service
          providers  in  any  of  the  towns.  Although  difficult  to  predict,
          Tele-Services  currently does not  contemplate  any competitor  coming
          into the towns  given,  among other  things,  the smaller  size of the
          towns and the costs to expand into them.

          As indicated, although cable services providers like Tele-Services are
          subject to competition from other providers,  Tele-Services  currently
          does not have direct  competition from other cable services  providers
          in  the  towns   Tele-Services   now  services.   There  is,  however,
          competition  in other forms.  For example,  Tele-Services  experiences
          strong  competition  from wireless and satellite  dish  providers.  As
          discussed in Item 6 of this annual report,  that  competition has been
          increasing in recent years.  Various  other  competitors  and forms of
          competition  are also  likely to arise in the future as  technological
          advances occur in the telecommunications and cable industries.


                                       9

<PAGE>


          Tele-Services  is regulated by the FCC. The rules and  regulations  of
          the FCC primarily relate to general  operational and technical issues,
          and they do not  affect  rates or  expansions  of  service  areas.  As
          discussed above,  Tele-Services'  cable services are also regulated in
          the sense that those  services are provided  pursuant to franchises or
          agreements  with  each of the towns in which  Tele-Services  currently
          provides cable services.

          Miscellaneous Businesses.

          Breda  and  some  of  its  subsidiaries  are  also  engaged  in  other
          miscellaneous businesses.

          For example,  Breda,  Prairie Telephone and Westside  Independent also
          provide  internet  access through their telephone lines to subscribers
          desiring  that  access.   They  were  providing   internet  access  to
          approximately 485 subscribers as of December 31, 1999. Internet access
          is also  provided by BTC,  Inc. in some areas which are outside of the
          telephone exchange areas currently served by Breda,  Prairie Telephone
          and Westside Independent.  The area served by BTC is currently limited
          to Carroll,  Iowa and various communities  surrounding Carroll,  Iowa.
          BTC provided internet access to approximately  1,197 subscribers as of
          December  31,  1999.  BTC is a  wholly  owned  subsidiary  of  Prairie
          Telephone. BTC is an Iowa corporation that was incorporated in 1997.

          BTC was organized  primarily to explore the  possibility of becoming a
          competitive  local exchange carrier in some Iowa communities which are
          not served by Breda,  Prairie  Telephone or Westside  Independent.  No
          firm  decision  has been made as to whether  BTC will ever  attempt to
          provide  telephone  services,  however,  and BTC  cannot  provide  any
          telephone   services  in  the  state  of  Iowa  without  first  filing
          satisfactory tariff information with the IUB and the filing and giving
          of various required notices.  BTC would also need to raise significant
          additional  capital  and/or  obtain third party  financing  before BTC
          would  be able to  finance  the  construction  and  start  up of a new
          telephone business.  BTC does provide internet access, as discussed in
          the  preceding  paragraph.  BTC also plans to use part of its business
          location in Carroll,  Iowa as a retail store for the sale and lease of
          telephone,  cellular  and related  equipment  and  merchandise.  It is
          contemplated that the store will open for business in April, 2000.

          Breda and Prairie Telephone have purchased spectrum from Iowa Wireless
          Inc.  for  providing  personal  communications  services in the Breda,
          Lidderdale and Yale telephone  exchange areas. Iowa Wireless Inc. is a
          subsidiary  of Iowa  Network  Services,  Inc.  Spectrum  is  bandwidth
          allocated  by the FCC to  provide  data and voice  communication.  The
          bandwidth of a transmitted  communications  signal is a measure of the
          range  of  frequencies  the  signal  occupies.  In the  communications
          industry, this measurement is defined as megahertz. Iowa Wireless Inc.
          held the 30 MHz license for the Breda,  Lidderdale  and Yale telephone
          exchange  areas,  and Breda and  Prairie  Telephone  purchased  10 MHz
          licenses  for those areas from Iowa  Wireless  Inc. on March 26, 1999.
          They purchased 10 MHz licenses because that was the only license being
          offered by Iowa Wireless Inc. at that time. Each independent telephone
          company in Iowa had first opportunity to purchase the


                                       10

<PAGE>


          spectrum in its local exchange  areas for $3.50 per pop  (population).
          Prairie Telephone  purchased its Yale exchange pops at $3.50 each, for
          a total of  $2,051.  At that time,  a limited  liability  company  was
          formed  by  some  of the  independent  telephone  companies  who  were
          eligible   and   desired  to  own   spectrum   to   provide   personal
          communications  services  in the areas  that  were  close to their own
          local exchange areas. The companies included Prairie Telephone and the
          telephone companies for the Casey, Menlo, and Panora, Iowa, areas. The
          limited  liability  company was named the Guthrie Group,  L.L.C.,  and
          Prairie  Telephone  purchased 100 units in Guthrie Group,  L.L.C.  for
          $10,000. The personal communications service licenses owned by Prairie
          Telephone and the other independent  telephone  companies which became
          members of Guthrie Group,  L.L.C.  will not be included in the Guthrie
          Group, L.L.C. As of the time of the preparation of this annual report,
          Guthrie  Group,  L.L.C.  had  acquired  spectrum  for  some  telephone
          exchange areas located in Guthrie County, Iowa.

          Breda also purchased the personal  communications service licenses for
          its Breda and Lidderdale  exchange  areas for $3.50 per pop,  totaling
          $5,383.  Discussions  have taken place  regarding  the  formation of a
          limited  liability  company  which would  include Breda and some other
          independent  telephone  companies  as members and which might  acquire
          spectrum for personal  communications  service or otherwise  invest in
          personal communications service ventures. No limited liability company
          had been formed and no other  agreements  had been reached at the time
          of the  preparation  of this  annual  report,  however,  but under the
          current discussions Breda and the other members would contribute their
          personal  communications  service  licenses to the  limited  liability
          company and be equal owners of the limited liability company.

          Personal  communications  service  ("PCS") is a relatively new area in
          the  telecommunications  industry.  It is a  wireless  voice  and data
          service  somewhat   similar  to  cellular   telephone   service,   but
          emphasizing  personal service and extended  mobility.  It is sometimes
          referred to as digital cellular (although cellular systems can also be
          digital). Like cellular, PCS is for mobile users and requires a number
          of antennas to blanket an area of  coverage.  As a user moves  through
          and between service areas, the user's phone signal is picked up by the
          nearest  antenna and then forwarded to a base station that connects to
          the  wired  network.  The  phone  itself is  slightly  smaller  than a
          cellular phone.  PCS is being  introduced  first in highly urban areas
          for large numbers of users. The "personal" in PCS  distinguishes  this
          service from cellular by emphasizing that, unlike cellular,  which was
          designed for car phone use with transmitters  emphasizing  coverage of
          highways  and roads,  PCS is designed for greater  user  mobility.  It
          generally  requires more cell  transmitters for coverage,  but has the
          advantage of fewer blind spots.  Technically,  cellular systems in the
          United States operate in the 824-849  megahertz (MHz) frequency bands;
          while PCS operates in the  1850-1990 MHz bands.  Several  technologies
          are used for PCS in the  United  States,  including  Cellular  Digital
          Packet Data and Global System for Mobile communication.  Global System
          for Mobile is more commonly used in Europe and  elsewhere,  and is the
          technology  that is being  employed  by Iowa  Wireless  Inc.  Although
          difficult to predict, personal communications services may become very
          important  in the future and may be highly  competitive  with  current
          cellular services.  Breda and Prairie Telephone have not made any firm
          decision on whether they will ever offer any  personal  communications
          services,  and  they  do not in any  event  contemplate  offering  any
          personal  communications  services  for at  least  one  to two  years,
          primarily   because   those   services  must  first  be  available  in
          surrounding areas before Breda


                                       11

<PAGE>


          and Prairie  Telephone  can provide  those  services.  Breda,  Prairie
          Telephone and Westside  Independent  do not currently own spectrum for
          all of the  telephone  exchange  service areas  currently  serviced by
          them,  and there is no  guarantee  that  they will be able to  acquire
          spectrum for all of those areas.  Also,  Breda,  Prairie Telephone and
          Westside  Independent  will face  competition  in  providing  personal
          communications  services  because no exclusive  rights can be acquired
          with respect to that technology.

          Pacific  Junction   Telemarketing  Center,  Inc.  is  a  wholly  owned
          subsidiary of Prairie  Telephone.  Pacific  Junction  provides general
          telemarketing  services  from its  offices  in Breda,  Iowa.  Although
          Pacific  Junction  can  provide  telemarketing   services  to  various
          customers,  it currently  receives  primarily all of its revenues from
          one  customer.  Pacific  Junction  is an  Iowa  corporation  that  was
          incorporated  in 1987. The long distance  telemarketing  calls made by
          Pacific  Junction  are a major  source of access  charges  revenue for
          Breda.

          Revenues are also generated from sales of cellular  phones and related
          service packages.

          Revenues  may also  arise from  investments  in other  entities  which
          provide  cellular  phone  services or which  invest in other  cellular
          phone or telecommunications  ventures. For example,  Prairie Telephone
          has made  investments  in RSA #1, Ltd. and RSA #7, Ltd. Those entities
          are Iowa limited partnerships which provide cellular services in rural
          areas in central and southern Iowa. Prairie Telephone also owns 20% of
          the  outstanding  stock of Central Iowa  Cellular,  Inc.  Central Iowa
          Cellular,  Inc. owns a 24% partner  interest in Des Moines MSA General
          Partnership.  Des Moines MSA  General  Partnership  provides  cellular
          services to customers within the Des Moines,  Iowa metropolitan  area.
          Prairie Telephone also owns .67% of Iowa Network Services' outstanding
          stock.  Westside  Independent  owns  .45%  of Iowa  Network  Services'
          outstanding stock.

          Breda has made an investment in RSA #9, Ltd. and RSA #8, Ltd. Westside
          Independent  has also made an  investment in RSA #8, Ltd. RSA #8, Ltd.
          and RSA #9, Ltd. provide cellular  services in rural areas in southern
          and central Iowa.  Breda also owns 15.79% of the membership  interests
          in Alpine Communications,  L.C. Alpine  Communications,  L.C. provides
          telecommunications  exchange and local access services,  long distance
          service,  and  cable  television  service  in a service  area  located
          primarily in Clayton County in northeastern  Iowa and Monona County in
          western Iowa.

          Some of the above  investments  may be a source of revenue  for Breda,
          Prairie Telephone and Westside Independent through distributions which
          may be made by the  entities.  None of  Breda,  Prairie  Telephone  or
          Westside Independent controls any distribution decisions,  however, so
          no distributions are ever guaranteed, and the timing and amount of any
          distributions  may  therefore  vary greatly from year to year.  Breda,
          Prairie   Telephone  and  Westside   Independent  have  also  received
          settlement   payments  from  some  of  their   cellular   investments.
          Settlement  payments  are unusual  items which  generally  result from
          payments received for not


                                       12

<PAGE>


          exercising  a right of first  refusal  to  purchase  additional  units
          during a merger or buyout by another company. Breda, Prairie Telephone
          and Westside Independent do not control any settlement  payments,  and
          settlement  payments are in any event usually one-time  events,  so no
          settlement  payments are  guaranteed  and the timing and amount of any
          settlement  payments  will  vary  greatly  from  year to year.  Breda,
          Prairie  Telephone  and Westside  Independent  received the  aggregate
          distributions  and settlements  payments noted below from the entities
          noted below for the years 1997, 1998 and 1999:

<TABLE>
<CAPTION>
                                                           1997      1998      1999

<S>                                                      <C>        <C>       <C>
          o  RSA #1, Ltd. Distribution                    20,000    43,392    73,108
                          Settlement                        -0-     29,545      -0-

          o  RSA #7, Ltd. Distribution                    26,072    66,581      -0-
                          Settlement                        -0-     26,667      -0-

          o  RSA #8, Ltd.                                   -0-       -0-       -0-

          o  RSA #9, Ltd. Distribution                      -0-       -0-     50,001

          o  Iowa Network Services Dividends               6,561     6,561     4,374
             (Breda & Westside)

          o  Des Moines MSA General Distribution          27,993      -0-       -0-
             Partnership/Central    Settlement              -0-    353,000      -0-
             Iowa Cellular, Inc.
</TABLE>

          Breda has not received any distributions  from Alpine  Communications,
          L.C. Breda has, however,  received an annual fee of $5,000 from Alpine
          Communications, L.C. in consideration for Breda's manager serving as a
          manager  for  Alpine  Communications,  L.C.  Breda  has also  received
          $24,000 in each of 1998 and 1999 in consideration  for Breda's manager
          serving on the board of directors of Central Iowa Cellular, Inc.

          The value of Breda's,  Prairie Telephone's and Westside  Independent's
          underlying  investments  in the  above  ventures  and in  their  other
          investments  may also vary  significantly  from year to year. They may
          also face  difficulties  in realizing  upon some of their  investments
          because   there  is  no  public  or  other  active  market  for  those
          investments  and  because  some of the  entities  in which  they  have
          invested  have   agreements  in  place  which  place   limitations  or
          restrictions on Breda's, Prairie Telephone's or Westside Independent's
          right to transfer their ownership interests in those entities to third
          parties. Most of those limitations and restrictions are in the form of
          a right of first  refusal under which the entity is given the right to
          match any offer  received  by Breda,  Prairie  Telephone  or  Westside
          Independent.


                                       13

<PAGE>


          Prairie  Telephone is currently in the process of negotiating the sale
          of its stock in Central Iowa Cellular,  Inc. to AirTouch. A definitive
          agreement  has  not  been  reached  with  AirTouch,  and  there  is no
          assurance or guarantee  whatsoever that any agreement will be reached,
          but under the current  discussions  Prairie  Telephone may sell all of
          its shares of stock in Central  Iowa  Cellular,  Inc. to AirTouch  for
          approximately $5,350,000.

          Breda and its  subsidiaries  also  have  various  other  miscellaneous
          investments.   Those   investments  are  described  in  the  financial
          statements included in Item 7 of this annual report.

          Neither  Breda  nor any of its  subsidiaries  engage  in any  material
          research and development activities.

          Employees.

          As of  December  31,  1999,  Breda had 24 full time  employees.  Breda
          employs all of those  employees,  but those employees also provide the
          labor  and  services  for  Prairie  Telephone,  Westside  Independent,
          Tele-Services  and BTC.  The  salaries and other costs and expenses of
          the employees are allocated among Breda and its subsidiaries  based on
          time  sheet  allocations.  There  currently  are  not  any  collective
          bargaining or other labor  agreements  with any of Breda's  employees,
          and only two of Breda's employees have written employment  agreements.
          Those employment agreements are with the manager and the co-manager of
          Breda.

          Pacific  Junction  had 3 full-time  employees as of December 31, 1999.
          Pacific  Junction  currently  has no  collective  bargaining  or labor
          agreements with any of its employees.

          Breda and Pacific Junction also utilize  part-time  employees on an as
          needed basis. Pacific Junction utilizes up to approximately  seventeen
          part time  employees  at a time,  primarily  for the purpose of making
          telemarketing calls.

          Acquisitions.

          As indicated  above,  Breda acquired all of the issued and outstanding
          stock of Westside  Independent on June 1, 1998.  Westside  Independent
          was serving  approximately  342 telephone  numbers and related  access
          lines at that  time.  The  total  purchase  price  paid by  Breda  was
          $2,010,038.  Westside  Independent also redeemed some of its shares of
          outstanding stock as part of the transaction. The aggregate redemption
          price paid by Westside  Independent for those shares was  $918,875.17.
          The purchase price  (excluding the redemption  amount paid by Westside
          Independent)  exceeded  the fair value of the net  assets of  Westside
          Independent,  as shown on Westside Independent's financial statements,
          by  $1,178,472.  The  excess was  recorded  as  goodwill  and is being
          amortized on a straight-line  basis over a period of fifteen years. As
          discussed above, Westside


                                       14

<PAGE>


          Independent  provides  telephone  services to subscribers in Westside,
          Iowa and its surrounding rural areas.

          In a related transaction, Tele-Services acquired all of the issued and
          outstanding  stock of Westside  Communications,  Inc. on June 1, 1998.
          Westside Communications,  Inc. owned and operated the cable television
          systems  in  Westside,   Iowa,  and  Arcadia,   Iowa.  The  number  of
          subscribers for cable television  services in those towns at that time
          was approximately 297. The total cost of the acquisition was $254,289,
          which   exceeded  the  fair  value  of  the  net  assets  of  Westside
          Communications,  Inc.,  as  shown  on  its  financial  statements,  by
          $157,611.  The excess was recorded as goodwill and is being  amortized
          on a straight-line  basis over a period of fifteen years. As discussed
          above,  Westside  Communications,  Inc.  was  held as a  wholly  owned
          subsidiary  of  Tele-Services  until  December 2, 1999,  at which time
          Westside Communications,  Inc. was dissolved. Westside Communications,
          Inc.'s  cable  operations  are  now  operated  by  and  through  Tele-
          Services.

          On October 31, 1998,  Tele-Services  purchased the Auburn,  Iowa cable
          television  system from  NewPath  Communications,  L.C.  The number of
          cable  subscribers in Auburn,  Iowa at that time was approximately 91.
          The  purchase  price  was  $64,610.  Tele-Services  also  assumed  the
          obligations and liabilities of NewPath Communications, L.C. which were
          to arise after the closing:

          o    under its  franchise  with the city of Auburn  and under  certain
               leases; and

          o    for the  performance  and delivery of services to  subscribers to
               the cable system.

          Each of the above  transactions was treated as a business  combination
          accounted for as a purchase.

          Sale of Direct Broadcast Satellite Operation.

          On  January  11,  1999,  Breda  sold  substantially  all of its assets
          comprising  its direct  broadcast  satellite  operation.  The purchase
          price received by Breda was $8,274,689. The sale resulted in a pre-tax
          gain of $7,436,415,  which was included in Breda's  operations  during
          the first quarter of 1999. The buyer also assumed:

          o    Breda's  obligations to its direct broadcast  satellite  services
               subscribers for refundable  deposits and advance payments made by
               those subscribers; and

          o    Breda's  obligations  otherwise arising after the closing date of
               the sale under Breda's various licenses and contracts  related to
               its direct broadcast satellite business and assets.


                                       15

<PAGE>


          Breda  also  executed  a  noncompetition  agreement  as  part  of  the
          transaction.

          Breda's direct broadcast  satellite operation included its licenses to
          provide direct broadcast  satellite services in five Iowa counties and
          four  counties  in  Nebraska.  At the  time  of the  sale,  Breda  was
          providing direct broadcast  satellite services to approximately  4,048
          subscribers.

          One factor which caused Breda to sell the direct  broadcast  satellite
          operation was Breda's determination that the purchase price offered by
          the buyer was quite favorable. Breda had also determined that the cash
          available  from the sale  would  provide  it with  funds for  possible
          acquisition  of  additional  telephone  lines in areas that Breda knew
          were going to become  available from GTE and US West after the closing
          of the sale.  Breda  believed  that the sale of the  direct  broadcast
          satellite operation would also be beneficial to Breda because it would
          allow  Breda  to focus on its core  business  of  providing  telephone
          services.   Another   factor   contributing   to  the   sale  was  the
          consolidation  occurring in the direct broadcast  satellite  industry,
          which  Breda  believed  would  make it more  difficult  for  Breda  to
          efficiently compete in the industry. Breda's original contract for its
          direct broadcast  satellite  operation was also nearing  renewal,  and
          there was some  uncertainty  concerning its renewal.  This uncertainty
          also contributed to the decision to sell the operation.

Item 2.   Description of Property.

          Breda and some of its  subsidiaries  own or lease various real estate.
          The following paragraphs briefly describe that real estate and how the
          real estate is currently used.

          Breda owns or leases the following real estate:

          o    Breda's corporate offices are located at Highway 217 East, Breda,
               Iowa.  The real  estate  and  building  are  leased  by Breda and
               Prairie  Telephone  from  Tele-Services.  The  aggregate  monthly
               rental  payable by both  Breda and  Prairie  Telephone  under the
               lease is $1,000. They also pay utilities and insurance. The lease
               has a one-year term, and automatically renews for additional one-
               year terms.  The  building has  approximately  4,560 square feet.
               Breda and Prairie Telephone utilize the entire building.

          o    Breda owns  certain  real  estate and a  warehouse  which is also
               located at Highway  217 East,  Breda,  Iowa.  The  warehouse  has
               approximately  6,720  square  feet,  and is  used  primarily  for
               storage of inventory and various equipment  (trucks,  generators,
               trailers, plows, etc.).


                                       16

<PAGE>


          o    Breda owns certain  real estate and a building  located just east
               of Breda,  Iowa.  The building  houses  equipment used to switch,
               record and transmit  telephone  calls.  This type of equipment is
               sometimes   referred  to  in  the  industry  as  "central  office
               equipment." The equipment is used in providing telephone services
               to  Breda  and the  surrounding  rural  area.  The  building  has
               approximately 960 square feet.

          o    Breda  owns the real  estate  and  building  located  at 109 West
               Second Street,  Lidderdale,  Iowa. The building houses  equipment
               used  to  switch,   record  and  transmit  telephone  calls.  The
               equipment is used in providing  telephone  services to Lidderdale
               and the  surrounding  rural area. The building has  approximately
               600 square feet.

          o    Breda  owns the real  estate  and  building  located  at 310 Main
               Street,  Macedonia,  Iowa. The building houses  equipment used to
               switch,  record and transmit  telephone  calls.  The equipment is
               used  in  providing  telephone  services  to  Macedonia  and  the
               surrounding rural area. The building has approximately 600 square
               feet.

          Prairie Telephone owns or leases the following real estate:

          o    Prairie Telephone's  corporate offices are located at Highway 217
               East,  Breda,  Iowa.  The real estate and  building are leased by
               Prairie  Telephone  and Breda from  Tele-Services,  as  described
               above.

          o    Prairie  Telephone  owns the real estate and building  located at
               508 Dupont Street,  Farragut, Iowa. The building houses equipment
               used  to  switch,   record  and  transmit  telephone  calls.  The
               equipment is used in providing telephone services to Farragut and
               the surrounding rural area. The building has approximately  2,400
               square feet.

          o    Prairie  Telephone owns a warehouse  which is also located at 508
               Dupont Street,  Farragut,  Iowa. The warehouse has  approximately
               2,600  square  feet,  and is used for  storage of  inventory  and
               equipment (trucks, generators, trailers, plows, etc.).

          o    Prairie  Telephone  owns the real estate and building  located at
               707 Phillips  Street,  Farragut,  Iowa. The building was formerly
               used to house equipment used in providing telephone services, but
               is currently vacant.

          o    Prairie  Telephone  owns the real estate and building  located at
               804  Washington  Avenue,  Pacific  Junction,  Iowa.  The building
               houses equipment used to


                                       17

<PAGE>


               switch,  record and transmit  telephone  calls.  The equipment is
               used in providing  telephone services to Pacific Junction and the
               surrounding  rural area.  The  building has  approximately  2,000
               square feet.

          o    Prairie  Telephone  owns the real estate and building  located at
               600 Washington Street,  Pacific Junction,  Iowa. The building was
               formerly  used to house  equipment  used in  providing  telephone
               services, but is currently vacant.

          o    Prairie  Telephone  owns the real estate and building  located at
               226 Main,  Yale,  Iowa.  The building  houses  equipment  used to
               switch,  record and transmit  telephone  calls.  The equipment is
               used in providing  telephone services to Yale and the surrounding
               rural area. The building has approximately 1,125 square feet.

          Pacific  Junction's  (Prairie  Telephone's   wholly-owned  subsidiary)
          offices  are  located at 120 Main,  Breda,  Iowa.  The real estate and
          building are leased by Pacific Junction.  The aggregate monthly rental
          payable by Pacific Junction under the lease is $500.  Pacific Junction
          also pays real estate  taxes,  utilities and all other  expenses.  The
          term of the  lease  runs  until  March  31,  2001.  The  building  has
          approximately  1,679 square feet. Pacific Junction utilizes all of the
          building.

          BTC  owns the real  estate  and  building  located  at 526 N.  Carroll
          Street,  Carroll, Iowa. The building houses some equipment used by BTC
          in providing  internet  access,  but it was initially  acquired and is
          still  being  held  for  potential  future  use by BTC if and when BTC
          provides any telephone  services.  BTC was also remodeling part of the
          building at the time of the  preparation  of this annual report into a
          retail store for the sale and lease of telephone, cellular and related
          equipment and merchandise. It is contemplated that the store will open
          for business in April,  2000. BTC's building has  approximately  1,804
          square feet.

          Westside  Independent owns the real estate and building located at 131
          South Main Street, Westside, Iowa. The building is used for Westside's
          corporate  offices,  and also houses equipment used to switch,  record
          and  transmit  telephone  calls.  The  equipment  is used in providing
          telephone  services to Westside and the  surrounding  rural area.  The
          building also houses some equipment used by Tele-Services in its cable
          business. The building has approximately 1,600 square feet.

          Tele-Services owns the following real estate:

          o    Tele-Services  owns certain real estate and a building located at
               Highway  217  East,  Breda,  Iowa.  This  property  serves as the
               corporate offices of Breda and Prairie  Telephone,  and is leased
               to them by Tele-Services. The lease is briefly described above in
               the description of Breda's properties.


                                       18

<PAGE>


          o    Tele-Services  also owns buildings located in eighteen  different
               towns which house some equipment used to receive,  descramble and
               transmit television signals.  This type of equipment is sometimes
               referred  to  in  the  industry  as  "head-end   equipment."  The
               buildings each have  approximately 150 square feet. The buildings
               are located on real estate in each of the eighteen  towns,  which
               is generally made available to Tele-Services  under its franchise
               agreement  with those  towns.  Tele-Services'  use of some of the
               real estate is pursuant  to an oral  agreement.  Some of the real
               estate is owned by the towns.  Tele-Services  pays a very nominal
               consideration for the use of some of the real estate, and in some
               cases is not  required  to pay any  consideration.  Tele-Services
               does not  believe it will be  difficult  or cost  prohibitive  to
               obtain other real estate for the buildings or the  equipment,  if
               that became necessary for some reason.

          All of the real estate and  substantially  all of the other  assets of
          Breda,  Prairie  Telephone and  Tele-Services are subject to mortgages
          and  security  agreements  given by those  corporations  to the  Rural
          Telephone Finance  Cooperative to stand as security and collateral for
          the loans made by the Rural  Telephone  Finance  Cooperative to Breda,
          Prairie Telephone and Tele-Services. The loans are also each evidenced
          by a loan  agreement  and a secured  promissory  note.  The  principal
          amounts  available  under  the loan  agreements  were  $2,421,053  and
          $2,361,153 for Breda, $1,444,545 for Prairie Telephone, and $2,040,000
          for Tele-Services.

          Tele-Services cannot, however,  request any further advances under its
          loan agreement,  and the aggregate  principal amount outstanding under
          Tele-Services'  loan agreement and secured promissory note as of March
          1, 2000 was $994,264.

          The loan agreement given by both Breda and Prairie Telephone was given
          for the purpose of repaying  their  existing  lines of credit with the
          Rural  Telephone  Finance  Cooperative and  consolidating  their other
          outstanding  loans,  and the aggregate amount  outstanding  under that
          loan  agreement  as of March 1, 2000 was  $2,211,926  for  Breda,  and
          $1,353,248 for Prairie Telephone.

          Breda's other loan  agreement  allowed it to borrow funds for purposes
          of the purchase of Westside  Independent  by Breda and the purchase of
          Westside Communications,  Inc. by Tele-Services.  The aggregate amount
          outstanding  under  that  loan  agreement  as of  March  1,  2000  was
          $2,268,040.

          Breda's mortgages and security agreements also secure a 1993 loan from
          the Rural  Telephone  Finance  Cooperative in the aggregate  principal
          amount of  $722,250.  The loan was  granted  for Breda to finance  the
          purchase  of its  former  direct  broadcast  satellite  division.  The
          aggregate amount outstanding under that loan as of March 1, 2000 was


                                       19

<PAGE>


          $328,864.

          Prairie  Telephone and Breda also have lines of credit  available from
          the  Rural   Telephone   Finance   Cooperative   in  the  amounts  of,
          respectively, $250,000 and $750,000. Those lines of credit are subject
          to renewal on an annual basis, and will currently expire in January of
          2001.  The lines of  credit  are also  secured  by the  mortgages  and
          security interests discussed above.

          The Rural Telephone Finance Cooperative  required Westside Independent
          to execute a guaranty of the loan made by the Rural Telephone  Finance
          Cooperative  to Breda to finance the purchase of Westside  Independent
          by Breda and the purchase of Westside Communications by Tele-Services.
          Westside  Independent's guaranty is secured by a mortgage and security
          agreement  which covers its real estate and  substantially  all of its
          other assets.

          Breda believes that its real estate,  buildings and other improvements
          and  the  real  estate,   buildings  and  other  improvements  of  its
          subsidiaries  are adequate to conduct their businesses as conducted or
          proposed  to be  conducted  on the date of the  filing of this  annual
          report  with  the  SEC.   Breda  also   believes   that  its  and  its
          subsidiaries'  buildings and improvements have been maintained in good
          repair  and  condition,   ordinary  wear  and  tear  and  depreciation
          excepted.  Breda also  believes the  buildings  and  improvements  are
          adequately insured.

          Breda,  Prairie  Telephone  and  Westside  Independent  also  each own
          various equipment used to switch,  record and transmit telephone calls
          in the areas serviced by them. BTC also owns certain  equipment.  This
          equipment  is all  housed in  buildings  owned or  leased by them,  as
          discussed  above.  Breda believes that the normal and ordinary  useful
          life of this  type of  equipment  is  approximately  5-12  years.  The
          current  equipment  was  purchased at various times over the period of
          1998 to 1999.  Breda  believes the equipment is now in good  operating
          condition  and  repair,   considering   ordinary  wear  and  tear  and
          depreciation.  Breda, Prairie Telephone,  Westside Independent and BTC
          also own  miscellaneous  lines,  cables  and other  equipment  used to
          provide telephone services and internet access.

          Tele-Services  owns various equipment used to receive,  descramble and
          transmit  cable  signals,   including  various  electronic   receiving
          equipment  and  electronic  conductors  and devices.  The equipment is
          sometimes  called "head end"  equipment.  The  equipment is located in
          various  towns as  discussed  above.  Tele-Services  also  owns  other
          miscellaneous cables and equipment used in its business.

          Breda, Prairie Telephone, Westside Independent, Tele-Services, and BTC
          also hold various  easements  for their  various  telephone  and cable
          lines and other  property.  Some of those  easements  are on or across
          real estate of the cities or other governmental


                                       20

<PAGE>


          authorities whose areas are being served,  and others are on or across
          private property.

Item 3.   Legal Proceedings.

          Breda currently is not aware of any pending legal  proceeding to which
          Breda is a party or to which any of Breda's property is subject, other
          than routine  litigation  that is incidental  to its  business.  Breda
          currently  is also  not  aware  that  any  governmental  authority  is
          contemplating  any  legal  proceeding  against  Breda  or  any  of its
          property.

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

          No matters  were  submitted  to a vote of the  shareholders  of Breda,
          through the  solicitation  of proxies or  otherwise,  during the three
          months ended December 31, 1999.


                                     PART II

Item 5.   Market for Common Equity and Related Stockholder Matters.

          Breda is authorized to issue 5,000,000  shares of common stock.  Breda
          had 37,682  shares of its common  stock issued and  outstanding  as of
          March 1, 2000. Those shares were held by  approximately  630 different
          shareholders.

          Breda's  common stock is not listed on any  exchange,  and there is no
          public  trading  market for Breda's  common stock.  Breda has also not
          agreed to register any shares of its common stock under any federal or
          state  securities  laws. An investment in Breda's common stock is also
          not a liquid investment because the Restated Articles of Incorporation
          of Breda establish various  conditions on the issuance of, and various
          restrictions  on the transfer of,  shares of its common  stock.  Those
          conditions   and   restrictions   are   summarized  in  the  following
          paragraphs.

          The common stock can only be issued to:

          o    residents of the Breda or  Lidderdale  telephone  exchange  areas
               served by Breda who subscribe to Breda's telephone services, and

          o    entities  which have their  principal  place of  business  in the
               Breda or Lidderdale  telephone exchange areas served by Breda and
               which subscribe to Breda's telephone services.

          As indicated,  only  residents of the Breda and  Lidderdale  telephone
          exchange service areas served by Breda are eligible to purchase stock.
          Although Breda also provides telephone services to Macedonia, Iowa and
          the surrounding area, residents of Macedonia, Iowa and


                                       21

<PAGE>


          the  surrounding  rural area cannot acquire any shares of common stock
          of Breda even if they are  receiving  telephone  services  from Breda.
          Subscribers  to any  services  from any of Breda's  subsidiaries  also
          cannot  buy  common  stock of Breda  unless  they  otherwise  meet the
          requirements discussed above in this paragraph.

          Since  approximately  January 1, 1996,  no person has been  allowed to
          purchase  more than  thirty  shares  of common  stock  from  Breda.  A
          shareholder  can  own  more  than  thirty  shares,  subject  to the 1%
          limitation  discussed  in the  following  paragraph,  but only  thirty
          shares can be acquired through issuance of the shares by Breda.

          No  shareholder  may  own  more  than  1%  of  the  total  issued  and
          outstanding common stock of Breda, unless:

          o    the shareholder  already exceeded that percentage on February 28,
               1995, or

          o    the  shareholder  goes  over 1% as a result  of  Breda  redeeming
               shares of its common stock from other shareholders.

          In  either  of those  cases,  the  shareholder  may not  increase  the
          percentage of shares owned by the  shareholder.  If a shareholder owns
          5% or more of the  ownership  interests of an entity which owns shares
          of Breda's  common stock,  the shares of Breda's  common stock held by
          that  entity  and  by the  shareholder  will  be  added  together  for
          determining whether the 1% limitation is exceeded.

          There can generally only be one shareholder for each telephone  number
          served by Breda.  There can also generally only be one shareholder for
          each household  receiving  telephone  services from Breda, even if the
          household has more than one telephone number.

          Breda's board of directors  determines  the purchase price payable for
          newly-issued  shares  of  Breda's  common  stock.   Breda's  board  of
          directors also  determines  the redemption  price that will be paid by
          Breda if it  elects  to  redeem a  shareholder's  shares in any of the
          circumstances  in which Breda has the right to purchase  those shares.
          Breda has that right if:

          o    the  shareholder  is no longer  receiving  services  from  Breda,
               unless the  shareholder  already was not receiving  services from
               Breda on February 28, 1995;

          o    the  shareholder  no longer  resides  in the Breda or  Lidderdale
               telephone exchange areas served by Breda,  unless the shareholder
               already resided outside those areas on February 28, 1995; or


                                       22

<PAGE>


          o    the  shareholder  dies,  unless the heir of the shares of Breda's
               stock meets the eligibility requirements for ownership of Breda's
               stock.

          The board of directors has historically established the issuance price
          and the  redemption  price at  approximately  75% of the book value of
          Breda. The board of directors has historically made this determination
          at or around the annual meeting of the board,  which is generally held
          in April or May based upon Breda's then most recent  year-end  audited
          financial  statements.  Breda's  fiscal year ends on December  31. The
          issuance price and the redemption  price as so determined by the board
          of directors then generally applies until the board of directors makes
          a new determination at or around the next annual meeting of the board.
          Under  this  approach,   the  issuance  price  and  redemption   price
          determined  by the board of directors at or around its annual  meeting
          in 1995, 1996, 1997, 1998 and 1999 was,  respectively,  $27, $31, $41,
          $64 and $82.  The  board of  directors  departed  from its  historical
          practice,  however,  on  November 2, 1999,  by  adopting a  resolution
          fixing the issuance price for  newly-issued  shares and the redemption
          price to be $149 per  share.  The $149  amount is not based on Breda's
          book value,  but rather is roughly  based upon the average sales price
          of $150.58 per share in the auction  that was held in October of 1999.
          The  auction is  discussed  below.  The board of  directors  took this
          action because it believed the  above-referenced  auction  provided it
          with a basis to make a more current  determination  on this issue. The
          board of  directors  also  believed it was  appropriate  to make a new
          determination  of the issuance  price and  redemption  price given the
          sale of Breda's direct broadcast satellite operation. The sale of that
          operation  resulted in a pre-tax gain of $7,436,415.  The sale was not
          included in Breda's  books until the first  quarter of 1999,  however,
          and  was  therefore  not  included  in  the  1998  year-end  financial
          statements  utilized by the board of directors in establishing the $82
          purchase  price at or around the 1999  annual  meeting of the board of
          directors.  The board of  directors  currently  intends  to  otherwise
          address this issue on an annual basis,  however,  consistent  with the
          above-described  historical  practices  of  the  board  of  directors.
          Accordingly,  it is  contemplated  that the  board of  directors  will
          establish a new issuance price and  redemption  price at or around the
          2000 annual meeting of the board of directors, and that the price will
          be set at approximately  75% of the book value of Breda as of December
          31, 1999. Breda estimates that the issuance price and redemption price
          that will be set at or around the 2000 annual  meeting of the board of
          directors  will be  approximately  $180.  The board of directors  may,
          however,  change or depart from any of the practices described in this
          paragraph at any time and in its discretion.

          Since there is no public trading market or any other principal  market
          for  Breda's  common  stock,  repurchases  of  common  stock  by Breda
          currently is the primary  method for a shareholder  to be able to sell
          the  shareholder's  shares.  As discussed  below,  an auction at which
          shareholders  desiring to sell their  shares of Breda's  common  stock
          were  given  the  opportunity  to sell  those  shares  to other  Breda
          shareholders  was held in  October  of 1999,  but there are no current
          plans  to  arrange  any  other  auctions  in the  future.  Breda  also
          maintains a list of shareholders desiring to sell their shares, and of
          other shareholders


                                       23

<PAGE>


          desiring to purchase those shares, as discussed below.

          In any of the  circumstances  where  Breda  has the  right to redeem a
          shareholder's  shares,  a shareholder may, with the consent of Breda's
          board of  directors,  transfer  the  shareholder's  shares to  another
          person who is eligible to be a shareholder  by reason of the fact that
          the person is  receiving  services  from Breda and is  residing in the
          Breda or Lidderdale telephone exchange areas served by Breda.

          No shareholder  can sell or transfer any of his or her shares of Breda
          to any  person who is not  eligible  to be a  shareholder  in Breda by
          reason of the fact that the person is  receiving  services  from Breda
          and is residing in the Breda or Lidderdale  telephone  exchange  areas
          served by Breda,  with one  exception.  The exception is that a person
          who was a shareholder  on July 20, 1995,  may make a one time transfer
          of the shares  held by the  person on that date to a family  member of
          the shareholder (which means a spouse,  natural born or adopted child,
          grandchild, parent, grandparent, or sibling) even if the family member
          is not receiving  services from Breda and is not residing in the Breda
          or  Lidderdale   telephone  exchange  areas  served  by  Breda.  These
          transfers are not subject to Breda's right of first refusal  described
          in the following paragraph. Any family member receiving shares by this
          process  does not have the same right,  however,  and can only sell or
          transfer  the  shares in  accordance  with the  Amended  and  Restated
          Articles of Incorporation of Breda.

          Any  shareholder  who wants to sell or  transfer  his or her shares in
          Breda  to  another  shareholder  or  person  who is  eligible  to be a
          shareholder must first give Breda the right to purchase the shares. In
          this case, the  shareholder  must give Breda at least sixty days prior
          written notice of the proposed  sale,  including a copy of the written
          offer to purchase  the shares.  Breda may elect to purchase the shares
          for the same price offered to the shareholder at any time within sixty
          days after it  receives  the  notice  from the  shareholder.  If Breda
          elects to buy the shares,  it must pay the purchase price in full upon
          the shareholder  surrendering the stock certificates for the shares to
          Breda.

          Breda's bylaws may also contain provisions restricting the transfer of
          shares. The current bylaws do not contain any restrictions, other than
          some of those  described in this annual report,  but the bylaws can be
          amended by the directors or shareholders at any time.

          Over the  period of  January  1, 1996  through  June 24,  1996,  Breda
          repurchased  four hundred and  twenty-four  shares of its common stock
          from two shareholders,  at a purchase price of $27 per share. Over the
          period of June 25, 1996 through February 20, 1997,  Breda  repurchased
          seven hundred and eighty-nine shares from nine different shareholders,
          at a purchase price of $31 per share.  Over the period of February 21,
          1997  through  March 1, 1998,  Breda  repurchased  one  thousand  nine
          hundred  and  ninety-six  shares of its  common  stock  from  fourteen
          different shareholders, at a purchase price of $41 per share. Over the
          period of March 2, 1998 through December 31, 1998, Breda


                                       24

<PAGE>


          repurchased  three hundred and fifty-eight  shares of its common stock
          from  five  different  shareholders,  at a  purchase  price of $64 per
          share.  No shares  were  repurchased  by Breda  during  the  period of
          December 31, 1998 through December 31, 1999,  except that in November,
          1999,  Breda did effectuate a repurchase of forty shares by depositing
          the purchase  price for those forty shares with the  appropriate  Iowa
          authorities  under Iowa's  escheat laws. The forty shares were held of
          record by twenty different  shareholders that Breda had been unable to
          locate.  The  purchase  price  utilized  for this purpose was the then
          current $149 per share price as  established by the board of directors
          pursuant to the  procedures  which are  discussed  above in this Item.
          Breda also  deposited  the amount of the April 21, 1999  dividend that
          was otherwise payable on the forty shares.  The total amount deposited
          by Breda was $6,080,  with $120 of that amount being for the April 21,
          1999 dividend.

          There may have been transfers  among the  shareholders of Breda during
          the above  periods for which Breda did not exercise its right of first
          refusal.

          Breda's  ability to repurchase any of its shares is subject to certain
          restrictions in its loan agreements with the RFTC. Those  restrictions
          are discussed below in this Item.

          Breda has not agreed to  register  any of its  shares of common  stock
          under any  federal  or state  securities  laws.  After  Breda has been
          subject to the reporting  requirements of the Securities  Exchange Act
          of 1934 for a period of ninety days, Rule 144 under the Securities Act
          of 1933 will be  available  to permit  the  resale of shares of common
          stock by shareholders,  subject to certain  restrictions  contained in
          Rule 144,  including the requirement that the shareholder has held his
          or her  shares  for a period of one year  prior to the date of resale.
          Once a  shareholder  (other  than a  shareholder  who is an officer or
          director  of Breda) has held his or her  shares of common  stock for a
          period of two years, the shareholder will be able to resell the shares
          without restriction under Rule 144.

          The marketability and value of Breda's shares of common stock may also
          be  limited by other  terms of the common  stock.  For  example,  each
          shareholder  is entitled to only one vote on each matter  presented to
          the  shareholders,  regardless of the number of shares of common stock
          held by the shareholder, with one exception regarding shareholders who
          previously held Class A stock of Breda.  Those  shareholders  have one
          vote for each share of former Class A stock previously held by them on
          February 28, 1995, until one of the following occurs:

          o    the shareholder no longer receives service from Breda,

          o    the  shareholder  no longer  resides  in the Breda or  Lidderdale
               telephone exchange area served by Breda,

          o    the shareholder dies, or


                                       25

<PAGE>


          o    the  shareholder  transfers the  shareholder's  shares to someone
               else

          As of March 1, 2000,  there were 21 shareholders  with multiple voting
          rights arising from their prior  ownership of Class A stock,  and they
          have one vote for each  share of the former  Class A stock  previously
          held by them.

          An auction was held on October 24, 1999, where  shareholders  desiring
          to  sell  their  shares  of  Breda's   common  stock  were  given  the
          opportunity to sell those shares to other Breda shareholders  desiring
          to purchase  additional shares of Breda's common stock. Breda paid the
          costs of the  auction,  except that the sellers  paid the auction fees
          and clerking  fees related to their  shares.  The auction was provided
          for the  convenience  of  Breda's  shareholders,  and no  shares  were
          repurchased  or issued by Breda  pursuant to the  auction.  A total of
          1,924 shares of common stock were sold by 32 different shareholders to
          25 other  shareholders of Breda, for purchase prices ranging from $145
          per share to $180 per share. As discussed above,  Breda had a right of
          first  refusal to purchase all of the shares sold in the auction,  but
          elected  not to  exercise  its  right.  Breda did,  however,  offer to
          purchase shares in the auction for $142 per share,  but no shareholder
          chose to sell the  shareholder's  shares to Breda at that  price.  The
          $142 figure was  approximately  60% of Breda's book value per share as
          of the close of the second  quarter in 1999.  No officers or directors
          of Breda sold or purchased  any shares in the auction.  Breda does not
          have any plans to arrange any other auctions in the future.

          The  board  of  directors  of  Breda  has  also  determined  to  allow
          shareholders  to advise Breda of the fact that they desire to sell any
          or all of their shares of Breda's common stock to any qualified buyer,
          and to allow  qualified  buyers to advise  Breda of the fact that they
          desire  to  purchase   shares  of  Breda's  common  stock  from  other
          shareholders  of Breda.  Breda will keep a list of those  shareholders
          and  qualified  buyers,  and  make the  list  available  to all of the
          shareholders  and qualified buyers on the list. A qualified buyer is a
          person who is a resident of the Breda or Lidderdale telephone exchange
          areas served by Breda who subscribes to Breda's telephone services, or
          an entity  which has its  principal  place of business in the Breda or
          Lidderdale   telephone  exchange  areas  served  by  Breda  and  which
          subscribes to Breda's telephone  services.  A person or entity cannot,
          however,  be a qualified  buyer if the person or entity  already  owns
          more  than 1% of the total  issued  and  outstanding  shares of common
          stock of Breda.  Also, a qualified  buyer cannot  purchase shares from
          any  shareholder  of Breda to the extent that the shares  purchased by
          the qualified  buyer would cause the qualified  buyer to own more than
          1% of the total  issued  and  outstanding  shares  of common  stock of
          Breda.  If a person owns 5% or more of the  ownership  interests of an
          entity  which  owns  shares of  Breda's  common  stock,  the shares of
          Breda's  common  stock held by that  entity and by the person  will be
          added together for determining  whether the 1% limitation is exceeded.
          The 1% limitation is set forth in the Amended and Restated Articles of
          Incorporation  of Breda.  The terms of any sale between a  shareholder
          and a qualified  buyer will be negotiated by them,  and no one will be
          required to sell or buy any shares  because their name is on the list.
          Breda also


                                       26

<PAGE>


          retains its right to purchase any shares being sold by any shareholder
          to any  qualified  buyer under the right of first  refusal  granted to
          Breda in its Amended and Restated Articles of Incorporation.

          Two separate sales of shares have occurred between shareholders on the
          list.  One sale  involved  two  shares,  which  were sold for $149 per
          share. The other sale involved 31 shares, which were sold for $150 per
          share.  Breda  elected not to exercise  its right of first  refusal on
          either of those sales.

          Breda  does  not  participate  in,  and  has  no  responsibility  for,
          negotiating  the terms and  conditions  of any sale of shares  between
          anyone on the list.  Breda did,  however,  advise its  shareholders by
          letter in February,  2000, that it recommended that shareholders cease
          buying and selling  shares  until Breda was able to share  information
          with the  shareholders  concerning  some corporate  actions that could
          affect the value of Breda's common stock. Breda did not identify those
          corporate actions in the letter,  but the corporate actions that Breda
          was  making  reference  to in that  letter was the  potential  sale of
          Prairie  Telephone's  stock in Central Iowa Cellular,  Inc.,  which is
          discussed  in Item 1 of this  annual  report.  Although  no  letter of
          intent or any  other  agreements  for the sale of that  stock had been
          entered  into at the time of the letter to the  shareholders,  Prairie
          Telephone  had been  contacted  about the  possibility  of selling its
          shares in Central Iowa Cellular,  Inc. at that time. Breda will advise
          its  shareholders of the terms of that  transaction if and when it has
          been finalized.

          Through  December  31,  1999,  Breda  had only  declared  and paid one
          dividend to its shareholders since Breda was incorporated in 1964. The
          dividend was declared on April 21, 1999. It was in the amount of $3.00
          per share, for an aggregate dividend of $113,166.

          Payment of  dividends  is within the  discretion  of Breda's  board of
          directors, and out of funds legally available therefore as provided in
          the Iowa Business  Corporation Act. Breda's ability to declare and pay
          dividends  is also  restricted  by some of the  covenants  in its loan
          agreements with the RFTC.  Under those  agreements,  Breda may not pay
          any dividends  without the prior written  approval of the RFTC unless,
          after the payment, Breda is in compliance with the various ratios, net
          worth and margin requirements set forth in the loan agreements.  Breda
          also may not pay any  dividends if Breda is in default  under the loan
          agreements or if the payment of the dividends  would cause Breda to be
          in breach of the loan agreements.

          Those  restrictions  in the RFTC loan agreements also apply to Breda's
          purchase  or  redemption  of  any  of  its  stock  and  to  any  other
          distributions  to its  shareholders,  so the restrictions may preclude
          Breda from being able to  repurchase  its shares of stock as otherwise
          discussed in this Item.


                                       27

<PAGE>


          Breda does not currently  believe,  however,  that the restrictions in
          the RFTC loan agreements will preclude Breda from paying any dividends
          or  distributions  or from  repurchasing  any of its  shares of common
          stock, should Breda otherwise determine to do so.

          No shares  of stock  were  issued  by Breda in all of 1999.  There are
          currently no outstanding warrants, options or other rights to purchase
          any shares of common stock of Breda,  and there are also  currently no
          outstanding  securities  which are  convertible  into common  stock of
          Breda.  Breda's  shares of common stock are not  convertible  into any
          other securities.

Item 6.   Management's Discussion and Analysis or Plan of Operation.

          Overview.

          This  Item  6  should  be  read  in  conjunction  with  the  financial
          statements and related notes included in Item 7 of this annual report.

          Breda's  primary source of revenues on a  consolidated  basis with its
          subsidiaries is from the telephone services provided by Breda, Prairie
          Telephone and Westside Independent.

          The  operating  revenues from their  telephone  services are primarily
          derived from the following types of fees and charges:

          o    Flat  monthly  fees  charged  to  subscribers   for  basic  local
               telephone  services.  As of March 1, 2000, those fees varied from
               approximately  $11.50 to $35.00 per  month.  The  monthly  fee is
               higher for subscribers who elect to have additional  services and
               features, such as custom features.

          o    Access charges  payable by long distance  carriers for intrastate
               and interstate  exchange services provided to those long distance
               carriers.  Access  charges  may be at a flat,  fixed  rate or may
               depend upon usage.  As  discussed  above in Item 1 of this annual
               report, access rates are subject to regulation by the FCC. Access
               charges  constitute  a  substantial  part  of  Breda's,   Prairie
               Telephone's and Westside  Independent's  revenues, and a material
               risk to them arises from the  regulation of access  charges rates
               by the FCC.  A recent  change in the FCC's  regulations  led to a
               reduction  in the  access  charges  received  by  Breda,  Prairie
               Telephone and Westside Independent,  and is discussed in the next
               paragraph.   As  is  also  discussed  below,   Breda  anticipates
               continuing  pressure for the lowering of access charges rates, so
               further reductions in access charges rates is a possibility.


                                       28

<PAGE>


               The amount of access charges payable to telephone  companies like
               Breda, Prairie Telephone and Westside Independent who utilize the
               "average  schedule"  basis for receiving  access charges is based
               on, among other  things,  the number of miles of their cable over
               which  they   transfer   long   distance   calls  made  by  their
               subscribers.  The FCC  approved  some  changes  proposed  by NECA
               regarding  this  practice  effective  in July,  1998.  Under  the
               changes,  Breda,  Prairie Telephone and Westside  Independent now
               receive a substantially lower access charge rate for any miles of
               cable over 100 miles.  The  access  charge  rate for any miles of
               cable over 100 miles became approximately $.05 per mile under the
               changes,  rather  than the rate of  approximately  $1.00 per mile
               which  previously  applied and which still  currently  applies to
               miles of cable up to 100 miles.  These  reductions did not have a
               material  adverse  effect,   however,  given  that  total  access
               revenues have been  increasing in recent  years.  Breda  believes
               those increases are,  however,  attributable to increased numbers
               of  subscribers,  increased  calling  patterns and  technological
               advances.  There is no assurance that these trends will continue,
               and it is  unlikely  that  there  will  be any  further  material
               increases in the number of subscribers without the acquisition of
               additional calling areas by Breda,  Prairie Telephone or Westside
               Independent.  As discussed below,  however, they currently do not
               foresee the possibility of any such acquisitions.

               As  indicated  above,  Breda,   Prairie  Telephone  and  Westside
               Independent  utilize the "average  schedule"  basis for receiving
               access  charges.  This is the  approach  taken  by  most  smaller
               telephone  companies.  Another approach  currently  available for
               receiving  access  charges  is  the  "cost"  approach.  Telephone
               companies  make  filings with the FCC which set forth their costs
               of providing long distance  services.  Under the average schedule
               approach,  access charges are based upon, in general, the average
               of all of those costs and certain other factors  intended to take
               into  account  the size of the  particular  telephone  company in
               question.

               It is difficult to predict what, if any,  future  changes will be
               made  by the  FCC in its  regulations  governing  access  charges
               rates,  other  than that if future  changes  are made,  they will
               likely have the result of lowering Breda's,  Prairie  Telephone's
               and Westside  Independent's  total access charges revenue.  Breda
               believes  that there will be  continuing  pressure by the FCC and
               other  regulatory  authorities to lower access charges rates over
               the next one to four years. Breda also anticipates, however, that
               there will be significant resistance in the telephone industry to
               any further  lowering of access charges rates, and Breda does not
               anticipate any material  reduction in access charges rates in the
               next twelve months. As indicated above,  however, it is difficult
               to predict  what changes  will be made in access  charges  rates,
               other than that any


                                       29

<PAGE>


               changes will be to lower access charges rates.  Those  reductions
               could be material and have a material  adverse effect on Breda's,
               Prairie Telephone's and Westside Independent's business.

               If future adverse changes occur, one option Breda may consider is
               changing  from the average  schedule  basis to the cost basis for
               receiving  access charges.  If Breda  determines to consider this
               option,  it contemplates  utilizing the services of third parties
               who have experience in studying these two options and advising as
               to what option is the best approach for the telephone  company in
               question. There is no guarantee,  however, that a change from the
               average  schedule  to the cost  basis  will  offset  any  adverse
               changes in the  regulations  of the FCC governing  access charges
               rates,  or that even if this  change is  beneficial  at one time,
               that subsequent  changes in the FCC's  regulations will not cause
               the average  schedule  basis to once again be more  favorable  to
               Breda,  Prairie  Telephone  and Westside  Independent.  If Breda,
               Prairie  Telephone and Westside  Independent ever elect to change
               to the cost basis,  however,  the FCC's current regulations would
               not  allow  them to change  back to the  average  schedule  basis
               because  the FCC  currently  treats  this  change  as a one time,
               permanent election.

          o    Revenue  from the sale and lease of customer  premises  telephone
               equipment  and  other  similar  items  and  other   miscellaneous
               customer  services,  such as custom calling  services.  Since the
               completion of the upgrading of their  telephone  switches in 1998
               and 1999, Breda,  Prairie Telephone and Westside Independent have
               had the capability to offer many more custom calling  features to
               their   subscribers.   Breda,   Prairie  Telephone  and  Westside
               Independent  have been  marketing  extended  packages  and custom
               calling  features  to  their  subscribers  in the  hope  that may
               increase and  maximize  subscriber  usage of the newly  available
               packages and features.  Revenues from custom calling services are
               not,  however,  ever anticipated to be a major or material source
               of revenue.

          o    Fees from long  distance  providers  for billing  and  collection
               services  for long  distance  calls made by  subscribers.  Breda,
               Prairie  Telephone  and  Westside  Independent  are  experiencing
               increased  competition  in this area.  As  discussed in Item 1 of
               this annual report, their competitors include other third parties
               providing these services,  and competition from the long distance
               providers  themselves since some providers have decided to handle
               their own billing and collection.

          Breda,  Prairie Telephone,  Westside Independent and BTC each generate
          revenues from providing  internet  access and from sales and leases of
          other  equipment and  facilities  for private line data  transmission,
          such as local area networks, virtual private networks and


                                       30

<PAGE>


          wide  area   networks.   During   1999,   there  was  an  increase  of
          approximately  65% in the combined  internet  customer  base of Breda,
          Prairie   Telephone,   Westside   Independent   and  BTC.  BTC  itself
          experienced an increase of approximately  68% in its internet customer
          base. BTC's current customer base is limited to Carroll,  Iowa and the
          surrounding  communities.  Although  they did not  face  any  material
          competition in providing internet access in their service areas at the
          time of the  preparation  of this annual  report,  Breda believes that
          Breda,  Prairie  Telephone,  Westside  Independent  and BTC will  face
          increased  competition  in the future  through,  among  possibly other
          things,  the  increased  provision  of  internet  access and  services
          through cable;  technological advances that may allow cable access and
          services  to  be  provided  through  new  methods;   and  mergers  and
          consolidations within the telecommunications industry which may create
          new  competitors  with  expanded  resources and the ability to provide
          expanded services.

          Breda's other primary source of revenue on a  consolidated  basis with
          its  subsidiaries  is generated from  Tele-Services'  cable  business.
          Tele-Services'  operating  revenues arise  primarily from monthly fees
          for  basic  and  premium   cable   services   provided  to  its  cable
          subscribers.  Tele-Services'  main  competition  at  the  time  of the
          preparation of this annual report was from  satellite dish  providers.
          Recent  actions by the FCC have allowed  satellite  dish  providers to
          provide local  channels,  which could have an adverse  effect on Tele-
          Services, given that its ability to provide local channels was, in the
          past,  one  reason  subscribers  might  choose   Tele-Services'  cable
          services over a satellite dish. Other rulings and decisions by the FCC
          are  possible,  and may provide  satellite  dish  providers,  or other
          providers  as changes  in the  telecommunications  and cable  industry
          occur, with equal or greater  advantages than  Tele-Services can offer
          to its  subscribers,  which could  obviously have an adverse effect on
          Tele-Services' business.  Breda currently believes,  however, that the
          cable services provided by Tele-Services will continue to be desirable
          for at least those  subscribers who desire a lower priced product that
          allows  local  channel  options.  Another  difficulty  being  faced by
          Tele-Services at the time of the preparation of this annual report was
          the trend of the  companies  which  provide  programming  licensing to
          cable services  providers to require the cable  services  providers to
          include  particular  channels  on  their  systems  as a  condition  of
          receiving a programming  license.  Tele-Services  anticipates  that it
          will need to upgrade its plant,  equipment  and cables in order to add
          more channel  line-ups so that it can stay competitive and continue to
          be able to obtain programming licenses.  The cost of those upgrades in
          the next twelve months, however, is estimated to be less than $50,000.

          Other  revenues  arise from the  telemarketing  activities  of Pacific
          Junction and investments in various cellular limited  partnerships and
          cellular corporations.  Those sources of revenue are briefly discussed
          in  Item 1 of this  annual  report.  Other  miscellaneous  sources  of
          revenue  are  also  discussed  in the  financial  statements  found at
          Section 7 of this annual report.


                                       31

<PAGE>


          The following  table reflects,  on a consolidated  basis for Breda and
          its  subsidiaries,  the percentage of revenue derived from Breda's and
          its subsidiaries'  various  businesses and investments as of the close
          of the past two fiscal years:

                                                         1998        1999
                                                         ----        ----

               Local Network(1)                           6.1%        9.7%
               Network Access(2)                         37.8%       42.1%
               Billing and Collection(3)                  1.5%        1.4%
               Cable and Direct Broadcast
                 Satellite Services(4)                   33.1%       19.8%
               Telemarketing Services(5)                  8.9%        7.5%
               Miscellaneous(6)                          12.6%       19.5%
                                                         -----       -----
                        Total                             100%        100%

          (1)  Includes  flat  monthly  fees  charged to  subscribers  by Breda,
               Prairie  Telephone  and  Westside  Independent  for  basic  local
               telephone services.

          (2)  Includes  universal  services  funding amounts and access charges
               payable by long distance  carriers for  intrastate and interstate
               exchange services provided to those long distance carriers.

          (3)  Includes  fees from  long  distance  providers  for  billing  and
               collection services for long distance calls made by subscribers.

          (4)  Includes  monthly  fees  charged  for  basic  and  premium  cable
               services,  and direct broadcast  satellite  services.  The direct
               broadcast satellite operation was sold in January, 1999.

          (5)  Includes revenues from telemarketing services.

          (6)  Includes  monthly fees charged for  internet  services,  cellular
               commissions, advertising fees, and miscellaneous revenues.

          Year Ended December 31, 1998 to Year Ended December 31, 1999.

          There was a decrease in total operating  revenues for the twelve month
          period ended  December 31, 1999,  when  compared to the same period in
          1998, of $1,255,034,  or 19.2%. The significant factor contributing to
          the decrease was the fact that no direct  broadcast  service  revenues
          were received after the January 11, 1999 sale of the direct  broadcast
          satellite operation. For example, during the twelve month period ended
          December 31, 1998, direct broadcast service revenues represented 18.2%
          of total  operating  revenues,  or  $1,191,897.  Two  other  important
          components  of the  decrease  in  total  operating  revenues  were the
          decreases in the revenues  from  telemarketing  services and in access
          charges.  Telemarketing  revenues  of Pacific  Junction  decreased  by
          $182,674,  or 31.4%,  because of some calling  number  unavailability,
          which   resulted   in  Pacific   Junction   not  being  able  to  make
          telemarketing calls. Access charges revenues decreased by $240,877, or
          9.8%,  because of a reduction in the reimbursement rate for interstate
          access charges and because of a decline in the volume of telemarketing
          calls made by Breda's subsidiary,  Pacific Junction. The telemarketing
          calls made by Pacific


                                       32

<PAGE>


          Junction  are  estimated to  represent  approximately  5% of the total
          consolidated access revenue in 1999.

          There was an increase in local network  services  revenue of $115,430,
          or 29%,  during the twelve month period ended December 31, 1999,  when
          compared to the same period in 1998.  This  increase was due primarily
          to two  factors.  One was an  increase of 340  telephone  subscribers,
          which  resulted  from the purchase of Westside  Independent  Telephone
          Company in June of 1998. The other factor was a rate  increase,  which
          went into effect in April 1999.

          There was also an increase in cable television revenues of $77,976, or
          8%, when comparing the two periods.  This increase resulted  primarily
          from three  factors.  One was a rate  increase  that was  effective on
          April 1, 1999.  The second was the  addition  of 90 cable  subscribers
          from Auburn,  Iowa as of November 1, 1998.  The third was the addition
          of 301 additional cable subscribers  resulting from the acquisition of
          Westside Communications, Inc. in June, 1998.

          There was also an  increase  in  revenues  from  internet  services of
          $183,434,  or 83.6%,  when  comparing  the two periods.  This increase
          resulted from an increased customer base.

          There was a decrease  in total  operating  expenses  of  $601,874,  or
          11.8%,  for the twelve  month period  ended  December  31, 1999,  when
          compared to the same period in 1998.  Programming expenses declined by
          $936,283, or 77.7%, when comparing the two periods because of the sale
          of the direct broadcast satellite operation. The remaining programming
          expenses  are  attributable  to  cable  television  operations.  Plant
          operations  increased  by $39,627,  or 2.8%,  when  comparing  the two
          periods.  This increase  primarily  reflects wage and price increases.
          The increase would have been higher,  but the additional  expenditures
          incurred  with  updating  switches in four of the  telephone  exchange
          service  areas  in  1999  have  been  capitalized.   There  were  also
          additional  expenses  incurred  during the twelve  month  period ended
          December  31,  1999 with  equipment  updates  to add cable  television
          channels in most of the 19 towns  served by  Tele-Services.  Corporate
          operations  expenses  increased by $290,777,  or 43.4%, when comparing
          the two periods.  This increase  relates to expenditures  and benefits
          for additional staff for a full year in 1999, as compared to a partial
          year in 1998. Legal,  accounting and other expenses were increased due
          to Breda becoming a reporting company under Securities Exchange Act of
          1934.  It is  estimated  that  these  types  of  expenditures  totaled
          approximately  $125,000 in 1999.  These  types of expenses  will be an
          ongoing operating  expense for Breda.  Breda also invested in computer
          training for its office staff  members and in switch  training for its
          technicians  with  the  installation  of the  upgraded  switches.  The
          education  expenses were  approximately  $25,000 for the  twelve-month
          period ending December 31, 1999. Customer operation expenses decreased
          by $108,795,  or 13.4%,  when comparing the two periods.  The decrease
          resulted partially from the fact that Breda did not need to provide


                                       33

<PAGE>


          customer services for the direct broadcast  satellite  operation after
          the sale of that  operation  in January,  1999.  The main  decrease in
          customer  operation  expense  was  caused  by a  decrease  in  Pacific
          Junction's telemarketing payroll expenditures, which decrease resulted
          from the  unavailability  of numbers for  calling.  The  upgrading  of
          switch  equipment  and  other  capital  improvements  resulted  in  an
          increase in  depreciation  expense of $105,047,  or 11.6%,  again when
          comparing the two periods.

          Non-operating  income before income taxes increased by $7,330,637,  or
          12,014.9%,  during the twelve month  period  ended  December 31, 1999,
          when  compared to the same period in 1998.  Most of this  increase was
          the result of the $7,436,415 gain on the sale of the direct  broadcast
          satellite  operation and the interest  income  increase of $271,719 on
          the funds  invested  from that sale.  The  twelve-month  period  ended
          December  31,  1999,  reflected  a $13,136  increase  in  income  from
          cellular  partnerships  when  compared  to the  same  period  in 1998.
          However,  the twelve  month  period  ended  December  31,  1999,  also
          reflected   no  income   from   non-recurring   cellular   partnership
          settlements, as compared to the twelve month period ended December 31,
          1998, which showed a $409,212 income from that source. The loss on the
          disposal  of assets in 1999 and 1998 was,  respectively,  $73,996  and
          $118,443, and resulted from writing off the undepreciated basis in the
          old switches that were replaced in 1999 and 1998. The loss on the sale
          of  investments  in 1999 of  $78,771,  as compared to a $8,853 gain in
          1998,  was a result  of the  liquidation  of  investments  not held to
          maturity to pay income taxes on the sale of the  satellite  operation.
          Interest  expense  increased  $15,816,  or 3.2%,  for the twelve month
          period ended  December 31, 1999,  when  compared to the same period in
          1998.  There was no increase in  outstanding  debt,  and this increase
          resulted  from the increase in the variable  interest  rate payable on
          some of the outstanding  debt with the RFTC,  which is discussed below
          and in Item 2 of this Annual Report.

          Income taxes increased by $2,514,264 for the twelve-month period ended
          December  31,  1999,  when  compared to the same  period in 1998.  The
          increase resulted  primarily from taxes on the gain on the sale of the
          direct broadcast satellite operation.

          Net income increased by $4,163,213 for the  twelve-month  period ended
          December  31,  1999,  when  compared to the same  period in 1998.  The
          increase was  attributable  mainly to the sale of the direct broadcast
          satellite operation.

          Liquidity and Capital  Resources at Twelve  Months Ended  December 31,
          1999.

          Breda's net working capital was a positive $885,642 as of the close of
          December  1999.  This  represents  an  increase of  $1,311,164  in net
          working  capital from year-end 1998. The positive  working  capital at
          year-end 1999 was due mainly to two factors. One factor was a $796,660
          combined  decrease in the current  portion of  long-term  debt and the
          absence of an outstanding  line of credit balance.  A $750,000 line of
          credit advance was taken from the Rural Telephone Finance  Cooperative
          in December of 1998, and paid back on


                                       34

<PAGE>


          January 12,  1999.  The second  factor was a $542,330  overpayment  of
          income  taxes  showing  as a  current  asset on the  balance  sheet on
          December 31, 1999.

          Breda had a decrease in cash and cash  equivalents of $371,618  during
          the twelve months ended  December 31, 1999,  when compared to the year
          ended December 31, 1998.  This resulted in a balance of $411,341 as of
          December 31, 1999.  While  Breda's  current  investments  decreased by
          $19,740,  its overall current and long-term  investments  increased by
          $2,867,839.  The increase in the overall cash and investments resulted
          primarily  from the  proceeds  received  from  the sale of the  direct
          broadcast  satellite  operation  after income taxes were paid. A small
          portion  of  those  proceeds  was used to  finance  the  seven  switch
          conversions completed in 1998 and 1999.

          Breda's net working  capital was a positive  $885,642 at December  31,
          1999.  Estimated  income tax  payments  were funded  from  non-current
          assets  during this time period and prepaid  income  taxes of $542,330
          are reflected in current assets as of December 31, 1999. These prepaid
          taxes will be used to offset the first Year 2000 estimated  income tax
          installment  due in April  2000.  Breda has a $750,000  line of credit
          with Rural Telephone  Finance  Cooperative and Prairie Telephone has a
          line of credit with Rural Telephone Finance  Cooperative for $250,000.
          It  is  anticipated  that  these  options  will  be  investigated  for
          quarterly  income tax payments in lieu of  redeeming  held-to-maturity
          investments.  Overall current liabilities  decreased by $1,064,972 for
          the twelve  months ended  December  31, 1999,  as compared to the year
          ended  December  31,  1998.  Accounts  payable  decreased by $225,363,
          mainly due to the fact that there were no outstanding direct broadcast
          satellite  programming  fees for the last  month of the  fiscal  year,
          given the sale of the direct broadcast  satellite operation on January
          11, 1999. As previously  noted,  there was also a zero balance for the
          line of credit as of  December  31,  1999,  as compared to $750,000 on
          December 31,  1998.  Other  investments  increased by $257,466 for the
          twelve-month  period ending December 31, 1999. This increase  resulted
          from increased investments in cellular partnerships.

          A final balloon  payment of $79,382 was made in October of 1999 on the
          real estate contract  entered into by  Tele-Services  for the building
          utilized  by  Breda  and  Prairie   Telephone   as  their  office  and
          headquarters.

          Breda's  primary ongoing  capital  investment  activity will currently
          continue  to be  additions  to  property,  plant  and  equipment.  For
          example,  Breda  continues  to make  investments  in  state-of-the-art
          technology  in  order to try to offer  subscribers  the best  possible
          service.  Capital  expenditures  for  1999  were  $1,249,414,  and are
          currently expected to be approximately $528,000 in 2000.


                                       35

<PAGE>


          Breda does anticipate that  substantial  expenditures  will need to be
          made for  software  upgrades  that will become  necessary in order for
          Breda,  Prairie Telephone and Westside Independent to become compliant
          with  the  requirements  of  the  Communications  Assistance  for  Law
          Enforcement  Act  ("CALEA").  CALEA was passed in 1994 in  response to
          rapid  advances  in   telecommunications   technology,   such  as  the
          implementation of digital technology and wireless services,  that have
          threatened  the  ability  of  law  enforcement  officials  to  conduct
          authorized electronic surveillance.  CALEA requires telecommunications
          carriers to modify their equipment, facilities, and services to ensure
          that they are able to comply with authorized electronic  surveillance.
          These  modifications  were  originally  scheduled  to be  completed by
          October 25, 1998, but in accord with an extension  granted by the FCC,
          must now  generally  be  completed  by June  30,  2000.  However,  for
          wireline,  cellular,  and broadband personal  communications  services
          carriers,   implementation   of  a  packet-mode   capability  and  six
          Department of  Justice/Federal  Bureau of  Investigation  "punch list"
          capabilities  must be  completed  by  September  30,  2001.  Breda  is
          currently seeking  estimates for the cost to upgrade Breda's,  Prairie
          Telephone's and Westside Independent's software as necessary to become
          compliant  with  the  Act,  but,  as  indicated,   Breda   anticipates
          substantial   expenditures   will  be   necessary,   and  that   those
          expenditures  may be as much as  approximately  $200,000.  Breda does,
          however,  intend to attempt to seek an extension of the time period in
          which Breda,  Prairie  Telephone and Westside  Independent must become
          compliant  with the Act, so that the  software  upgrades  necessary to
          become  compliant  with the Act can be made over an extended basis and
          as part of the software enhancements that will be necessary as part of
          Breda's,   Prairie  Telephone's  and  Westside   Independent's  normal
          operations. If Breda were granted that extension, it is estimated that
          the extension would be for a one- year period.

          As of December 31, 1999, Breda and its subsidiaries had  approximately
          $7,156,342  in  outstanding  loans  with the Rural  Telephone  Finance
          Cooperative.  Those  loans are  discussed  in more detail in Item 2 of
          this  annual  report.  Of the  outstanding  debt with the RFTC on that
          date,  approximately  $2,268,040 was at a fixed interest rate of 7.35%
          per annum,  and  carried a ten year term.  The  variable  rates on the
          remaining  RFTC debt  exceed that fixed rate and could  affect  future
          borrowing  decisions and the  allocation of  outstanding  debt between
          fixed and variable rates.

          Breda also plans to continue to consider  expanding  its core business
          of providing  telephone services by looking at any opportunities which
          may arise to acquire  additional  telephone lines. For example,  Breda
          considered and pursued the  acquisition of the telephone lines sold by
          GTE and US West in 1999. Those telephone lines were, however, acquired
          by other  telephone  companies.  One of the  purchasers of some of the
          telephone  lines  of GTE  was  Iowa  Network  Services.  As  discussed
          elsewhere,   Iowa  Network  Services   provides  various  services  to
          telephone  companies,  including Breda, Prairie Telephone and Westside
          Independent. Although no definite plans exist, it is possible that


                                       36

<PAGE>


          Iowa Network  Services may  consider  selling some of those  telephone
          lines in the next two to five years.  If that occurs,  Breda,  Prairie
          Telephone  and  Westside   Independent  will  consider   pursuing  the
          acquisition of those telephone lines. There is no assurance,  however,
          that Iowa Network  Services will ever sell any of the telephone lines,
          or if it does, that Breda,  Prairie Telephone or Westside  Independent
          will determine to pursue those  acquisitions  or will be successful in
          acquiring any lines even if they determine to pursue them.  Breda also
          has an interest in Alpine  Communications,  L.C.,  which was formed by
          several independent telephone companies.  Alpine Communications,  L.C.
          has purchased  former US West telephone  properties in Iowa. Given the
          recent  acquisitions  of the GTE and US West telephone  lines by other
          telephone companies,  Breda currently does not foresee the possibility
          of the  acquisition  of any  additional  telephone  lines,  other than
          perhaps from Iowa Network Services as discussed above.

          Breda,  Prairie Telephone and Westside  Independent  currently have no
          definite plans to provide any material additional or improved services
          to their subscribers.  This determination may change quickly, however,
          given the rapidly changing  technology in the  telecommunications  and
          cable industries.

          As  discussed  in Item 1 of this  annual  report,  Breda  and  Prairie
          Telephone have purchased spectrum for providing personal communication
          services in the Breda,  Lidderdale and Yale telephone  exchange areas.
          Prairie  Telephone has also become a member in Guthrie Group,  L.L.C.,
          which is a limited  liability  company which was organized to purchase
          spectrum for providing personal communications services in the Guthrie
          County,  Iowa area. Breda is also currently  contemplating  becoming a
          member in a limited  liability  company which may acquire spectrum for
          providing  personal  communication  services in other areas.  Personal
          communication   services   is   a   relatively   new   area   in   the
          telecommunications  industry  and  includes  wireless  voice  and data
          communication.  Although difficult to predict,  personal communication
          services  may become  very  important  in the future and may be highly
          competitive  with  current  cellular   services.   Breda  and  Prairie
          Telephone  have not made any firm  decision on whether  they will ever
          offer  any  personal  communication  services,  and they do not in any
          event contemplate offering any personal  communication services for at
          least one to two years, primarily because those services must first be
          available in surrounding  areas before Breda and Prairie Telephone can
          provide those services. Breda estimates that it will take at least one
          to two years  for the  surrounding  areas to build out their  personal
          communication  systems to the point where Breda and Prairie  Telephone
          could connect to those systems.  Breda, Prairie Telephone and Westside
          Independent  do not  currently  own spectrum for all of the  telephone
          exchange  service areas  currently  serviced by them,  and there is no
          guarantee that they will be able to acquire  spectrum for all of those
          areas.  Also, Breda,  Prairie Telephone and Westside  Independent will
          face competition in providing personal  communication services because
          no  exclusive   rights  can  be  acquired  with  respect  to  personal
          communication services. The area of personal communication


                                       37

<PAGE>


          services is therefore an uncertain area for Breda,  Prairie  Telephone
          and Westside Independent.

          Personal  communication  services are  competitive  with the telephone
          services otherwise  provided by Breda,  Prairie Telephone and Westside
          Independent.  Breda does not believe,  however,  that  investments  in
          personal  communication  services or in ventures which may be involved
          in personal  communication  services are  inconsistent  or in conflict
          with Breda's,  Prairie Telephone's or Westside  Independent's  overall
          business.  Breda also believes  positioning itself to be able to offer
          personal  communication  services or investing in other ventures which
          may offer personal  communication  services are a method of attempting
          to diversify across the various  telecommunications  methods which are
          available today or may become important in the future.

          To date neither Breda nor any of its  subsidiaries has experienced any
          material difficulties regarding Year 2000 issues.

          There are no current plans to expand the cable  services  areas of, or
          the  cable   services   provided   by,   Tele-Services   and  Westside
          Communications.

          Breda and its  subsidiaries  have and will  continue to incur  capital
          expenditures in connection with upgrading their  telephone,  cable and
          other equipment and systems.

          Breda  believes  that the funds from the sale of its direct  broadcast
          satellite  division,  along  with  its  anticipated  normal  operating
          revenues,  will generate  sufficient working capital for Breda and its
          subsidiaries  to meet  their  current  operating  needs  and  maintain
          historical fixed asset addition levels.


                                       38

<PAGE>


Item 7.   Financial Statements.






                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                        CONSOLIDATED FINANCIAL STATEMENTS
                     Years Ended December 31, 1999 and 1998
                       WITH INDEPENDENT AUDITOR'S REPORTS


                                       39

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                                    CONTENTS

                                                                            Page

Independent Auditor's Report                                                 41

Consolidated Financial Statements:

   Consolidated Balance Sheets                                            42-43

   Consolidated Statements of Income                                         44

   Consolidated Statements of Stockholders' Equity                           45

   Consolidated Statements of Cash Flows                                     46

   Notes to Consolidated Financial Statements                             47-59


                                       40

<PAGE>


                          INDEPENDENT AUDITOR'S REPORT


To the Board of Directors
Breda Telephone Corporation and Subsidiaries
Breda, Iowa

We have audited the accompanying  consolidated balance sheets of Breda Telephone
Corporation (an Iowa  corporation)  and subsidiaries as of December 31, 1999 and
1998, and the related  consolidated  statements of income,  stockholders' equity
and cash flows for the years then ended. These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Breda  Telephone
Corporation  and  subsidiaries as of December 31, 1999 and 1998, and the results
of its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.


Emmetsburg, Iowa
February 18, 2000


                                       41

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 1998


   ASSETS                                                 1999          1998
   ------                                              -----------   -----------
CURRENT ASSETS
   Cash and cash equivalents                           $   411,341   $   782,959
   Current portion of investments                           94,810       114,550
   Accounts receivable                                     681,675       649,044
   Income taxes refundable                                 542,330            --
   Interest receivable                                      67,580        21,455
   Inventories                                              88,479        80,279
   Other                                                    77,527        69,263
                                                       -----------   -----------
                                                         1,963,742     1,717,550
                                                       -----------   -----------

OTHER NONCURRENT ASSETS
   Investments, less current portion                     4,417,624     1,530,045
   Other investments                                     2,725,488     2,468,022
   Intangibles, net of accumulated amortization          1,222,372     1,753,447
   Deferred income taxes                                    11,360            --
   Other                                                        --        21,390
                                                       -----------   -----------
                                                         8,376,844     5,772,904
                                                       -----------   -----------

PROPERTY, PLANT AND EQUIPMENT                            6,340,193     6,185,874
                                                       -----------   -----------

TOTAL ASSETS                                           $16,680,779   $13,676,328
                                                       ===========   ===========


                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                       42

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 1999 and 1998


<TABLE>
<CAPTION>
   LIABILITIES AND STOCKHOLDERS' EQUITY                            1999          1998
   ------------------------------------                        -----------   -----------
<S>                                                            <C>           <C>
CURRENT LIABILITIES
   Current portion of long-term debt                           $   608,412   $   655,072
   Line of credit                                                       --       750,000
   Accounts payable                                                239,787       465,150
   Accrued taxes                                                   125,643       177,033
   Other                                                           104,258        95,817
                                                               -----------   -----------
                                                                 1,078,100     2,143,072
                                                               -----------   -----------

LONG-TERM DEBT, less current portion                             6,547,930     7,156,342
                                                               -----------   -----------

DEFERRED INCOME TAXES                                                   --       268,888
                                                               -----------   -----------

STOCKHOLDERS' EQUITY
   Common stock - no par value,  5,000,000 shares authorized
     37,682 and 37,722 shares issued and outstanding at $149
     and $64 stated value, respectively                          5,614,618     2,414,208
   Retained earnings                                             3,440,131     1,693,818
                                                               -----------   -----------
                                                                 9,054,749     4,108,026
                                                               -----------   -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                     $16,680,779   $13,676,328
                                                               ===========   ===========


                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                       43

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                        CONSOLIDATED STATEMENTS OF INCOME
                     Years Ended December 31, 1999 and 1998

                                                       1999             1998
                                                   -----------      -----------
OPERATING REVENUES
   Local network services                          $   512,829      $   397,399
   Network access services                           2,224,956        2,465,833
   Cable television services                         1,047,667          969,691
   Telemarketing services                              398,763          581,437
   Internet services                                   402,730          222,176
   Direct broadcast services (DBS)                          --        1,191,897
   Billing and collection services                      75,926          100,570
   Miscellaneous                                       627,675          616,577
                                                   -----------      -----------
                                                     5,290,546        6,545,580
                                                   -----------      -----------
OPERATING EXPENSES
   Plant specific operations                         1,313,580        1,161,568
   Plant nonspecific operations                         99,353          202,533
   Cost of programming                                 268,932        1,214,420
   Depreciation and amortization                     1,012,964          907,917
   Customer operations                                 701,364          810,159
   Corporate operations                                961,065          670,288
   General taxes                                       151,355          143,602
                                                   -----------      -----------
                                                     4,508,613        5,110,487
                                                   -----------      -----------
OPERATING INCOME                                       781,933        1,435,093
                                                   -----------      -----------
OTHER INCOME (EXPENSE)
   Interest and dividend income                        473,964          202,245
   Interest expense                                   (503,302)        (487,486)
   Interest capitalized                                 26,441               --
   Gain on sale of DBS investment                    7,436,415               --
   Gain (loss) on sale of investments                  (78,771)           8,853
   Loss on disposal of assets                          (73,996)        (118,443)
   Loss on extinguishment of debt                           --          (66,913)
   Income from cellular partnership                    123,109          109,973
   Income from cellular settlement                          --          409,212
   Loss on joint venture, net                          (15,864)         (15,702)
   Other income                                          3,654           19,274
                                                   -----------      -----------
                                                     7,391,650           61,013
                                                   -----------      -----------
INCOME BEFORE INCOME TAXES                           8,173,583        1,496,106
                                                   -----------      -----------
INCOME TAXES                                         3,107,734          593,470
                                                   -----------      -----------
NET INCOME                                         $ 5,065,849      $   902,636
                                                   ===========      ===========

NET INCOME PER COMMON SHARE                        $    134.44      $     23.86
                                                   ===========      ===========
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                       44

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     Years Ended December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                          Common Stock            Retained
                                     Shares         Amount        Earnings       Total
                                   ----------    -----------    -----------    ----------
<S>                                    <C>       <C>            <C>            <C>
Balance at December 31, 1997           37,928    $ 1,555,048    $ 1,666,332    $3,221,380

   Comprehensive income:
      Net income                                                    902,636       902,636

   Common stock redeemed, net            (206)       (15,990)                     (15,990)

   Stated value stock adjustment                     875,150       (875,150)
                                   ----------    -----------    -----------    ----------

Balance at December 31, 1998           37,722      2,414,208      1,693,818     4,108,026

   Comprehensive income:
      Net income                                                  5,065,849     5,065,849

   Dividends paid ($3/share)                                       (113,166)     (113,166)

   Common stock redeemed, net             (40)        (5,960)                      (5,960)

   Stated value stock adjustment                   3,206,370     (3,206,370)
                                   ----------    -----------    -----------    ----------

Balance at December 31, 1999           37,682    $ 5,614,618    $ 3,440,131    $9,054,749
                                   ==========    ===========    ===========    ==========
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                       45

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 1999 and 1998

<TABLE>
<CAPTION>
                                                                 1999           1998
                                                             -----------    -----------
<S>                                                          <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net Income                                                $ 5,065,849    $   902,636
   Adjustments to reconcile net income to net cash
     provided by operating activities:
       Depreciation and amortization                           1,012,964        907,917
       Amortization of investment tax credits                     (9,769)        (9,769)
       Deferred income taxes                                    (270,479)      (146,224)
       Gain on sale of DBS investment                         (7,436,415)            --
       Loss on disposal of assets                                 73,996        118,443
       Change in method of accounting                                 --         49,115
       Changes in operating assets and liabilities:
          (Increase) decrease in assets                         (656,382)       109,690
          Decrease in liabilities                               (268,312)      (410,324)
                                                             -----------    -----------
       Net cash provided by (used in) operating activities    (2,488,548)     1,521,484
                                                             -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES
   Capital expenditures                                       (1,249,414)    (1,955,965)
   Salvage, net of removal cost                                    6,475        162,377
   Purchase of investments                                    (2,867,839)       122,925
   Increase in other investments                                (257,466)       (99,961)
   Purchase of intangibles                                       (28,825)            --
   Proceeds from sale of DBS investment                        8,038,197             --
                                                             -----------    -----------
       Net cash provided by (used in) investing activities     3,641,128     (1,770,624)
                                                             -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Common stock redeemed                                          (5,960)       (15,990)
   Proceeds from long-term debt                                       --      3,650,050
   Proceeds from line of credit                                       --        750,000
   Repayment of long-term debt                                  (655,072)    (3,964,846)
   Repayment of line of credit                                  (750,000)            --
   Dividends paid                                               (113,166)            --
                                                             -----------    -----------
       Net cash provided by (used in) financing activities    (1,524,198)       419,214
                                                             -----------    -----------

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                   (371,618)       170,074
                                                             -----------    -----------

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                   782,959        612,885
                                                             -----------    -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                     $   411,341    $   782,959
                                                             ===========    ===========
</TABLE>


                 The accompanying notes are an integral part of
                    these consolidated financial statements.


                                       46

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          The Breda  Telephone  Corporation is a provider of  telecommunications
          exchange  and  local  access  services,   cable  television  services,
          telemarketing  services,   internet  services  and  telecommunications
          equipment in a service area located primarily in west central Iowa.

          The accounting policies of the Company and its subsidiaries conform to
          generally  accepted   accounting   principles  and  reflect  practices
          appropriate  to  the  telephone  and  cable   television   industries.
          Management   uses   estimates   and   assumptions   in  preparing  its
          consolidated  financial  statements.  Those  estimates and assumptions
          affect the reported  amounts of assets and  liabilities,  revenues and
          expenses,  and the  disclosure of contingent  assets and  liabilities.
          Telephone  operations  reflect practices  appropriate to the telephone
          industry.  The  accounting  records of the Company are  maintained  in
          accordance  with the  Uniform  System  of  Accounts  for Class A and B
          Telephone   Companies   prescribed   by  the  Federal   Communications
          Commission as modified by the Iowa State Utilities Division (ISUD).

          Principles of Consolidation

          The consolidated  financial  statements  include the accounts of Breda
          Telephone  Corporation  and  its  wholly-owned  subsidiaries,  Prairie
          Telephone   Company,    Inc.,   Westside   Telephone   Company,    and
          Tele-Services,  Ltd.  (herein  referred  to  as  "the  Company").  All
          material   intercompany   transactions   have   been   eliminated   in
          consolidation.

          Cash and Cash Equivalents

          All highly liquid  investments with a maturity of three months or less
          at the time of purchase are considered cash equivalents.

          Investments

          Debt and marketable  equity securities bought and held principally for
          selling in the near future are  classified as trading  securities  and
          carried at fair value.  Unrealized holding gains and losses on trading
          securities  are  reported  in  earnings.  Debt and  marketable  equity
          securities classified as available-for-sale  are carried at fair value
          with  unrealized  holding  gains and  losses  recorded  as a  separate
          component  of  stockholders'  equity.  Debt  securities  for which the
          Company has both the  positive  intent and ability to hold to maturity
          are classified as held-to-maturity  and are carried at amortized cost.
          The  Company  used the FIFO  method of  computing  realized  gains and
          losses.

          Non-marketable   equity  investments,   over  which  the  Company  has
          significant influence or a 20% ownership,  are reflected on the equity
          method. Other non-marketable equity investments are stated at cost.


                                       47

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued)

          Property, Plant and Equipment

          Property,  plant and  equipment  are  capitalized  at  original  cost,
          including  the  capitalized  cost of  salaries  and wages,  materials,
          certain payroll taxes, and employee benefits.

          The Company provides for depreciation for financial reporting purposes
          on the  straight-line  method by the application of rates based on the
          estimated   service  lives  of  the  various  classes  of  depreciable
          property. These estimates are subject to change in the near term.

          Renewals and betterments of units of property are charged to telephone
          plant in service. When telephone plant is retired, its cost is removed
          from the asset account and charged  against  accumulated  depreciation
          together  with  removal  cost less any salvage  realized.  No gains or
          losses are  recognized  in  connection  with  routine  retirements  of
          depreciable telephone property. Repairs and renewals of minor items of
          property are included in plant specific operations expense.

          Repairs  of other  property,  as well as  renewals  of minor  items of
          property are included in plant specific  operations expense. A gain or
          loss is recognized when other property is sold or retired.

          Long-Lived Assets, Including Intangibles

          The Company would provide for impairment losses on long-lived  assets,
          including   intangibles   used  in  operations,   when  indicators  of
          impairment are present and the undiscounted cash flows estimated to be
          generated by those assets are less than the assets'  carrying  amount.
          Based on current  conditions,  management  does not believe any of its
          long-lived assets are impaired.

          Income Taxes

          Income taxes are  accounted  for using a liability  method and provide
          for the tax  effects  of  transactions  reported  in the  consolidated
          financial  statements including both taxes currently due and deferred.
          Deferred taxes are adjusted to reflect  deferred tax  consequences  at
          current  enacted tax rates.  Deferred income taxes reflect the net tax
          effects of  temporary  differences  between  the  carrying  amounts of
          assets  and  liabilities  for  financial  reporting  purposes  and the
          amounts used for income tax  purposes.  Significant  components of the
          Company's  deferred tax assets and liabilities  arise from differences
          between the basis of property,  plant and  equipment  and  partnership
          profits and losses. The deferred tax assets and liabilities  represent
          the future tax return  consequences of those  differences,  which will
          either be taxable or deductible  when the assets and  liabilities  are
          recovered or settled.

          Revenue Recognition

          The Company  recognizes  revenues when earned regardless of the period
          in which they are billed. The Company is required to provide telephone
          service to subscribers within its defined service territory.

          Local network service,  internet service and cable television  service
          revenues are  recognized  over the period a subscriber is connected to
          the network.


                                       48

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued)

          Network  access  revenues  are derived  from charges for access to the
          Company's local exchange  network.  The interstate  portion of network
          access revenues are received through pooling arrangements administered
          by the National Exchange Carrier  Association  (NECA) based on average
          schedule  formulas.  The intrastate portion of network access revenues
          are billed based upon the  Company's  tariff for access  charges filed
          with the ISUD.  The charges  developed  from these tariffs are used to
          bill the connecting long distance provider and revenues are recognized
          in the  period  the  traffic is  transported  based on the  minutes of
          traffic carried.

          Other  revenues  include  telemarketing   services  and  contractually
          determined  arrangements  for the provision of billing and  collecting
          services  and are  recognized  in the  period  when the  services  are
          performed.

          The  Company  uses  the  reserve  method  to  recognize  uncollectible
          accounts receivable.

          Reclassifications

          Certain  reclassifications  have  been  made  to  the  1998  financial
          statements to conform with the 1999 presentation.

NOTE 2.   INVESTMENTS

          The  amortized  cost  and  fair  value of  investments  classified  as
          held-to-maturity and available-for-sale are as follows:

<TABLE>
<CAPTION>
                                                                 Gross            Gross
                                               Amortized      Unrealized        Unrealized          Fair
               December 31, 1999                  Cost           Gains            Losses            Value
               -----------------               ----------      ---------       -----------       ----------
<S>                                            <C>             <C>             <C>               <C>
          Held-to-Maturity:
             Municipal Bonds                   $4,361,468      $   2,050       $  (141,995)      $4,221,523
             U.S. Treasury Notes                   59,894                           (5,908)          53,986
             Government Securities                 51,663                           (3,506)          48,157

          Available-for-Sale:
             Marketable equity securities          39,409                           (1,534)          37,875
                                               ----------      ---------       -----------       ----------
                                               $4,512,434      $   2,050       $  (152,943)      $4,361,541
                                               ==========      =========       ===========       ==========

               December 31, 1998
               -----------------
          Held-to-Maturity:
             Municipal Bonds                   $1,518,112      $  18,566       $    (1,213)      $1,535,465
             U.S. Treasury Notes                   35,195          1,893                             37,088
             Government Securities                 51,879                           (1,316)          50,563

          Available-for-Sale:
             Marketable equity securities          39,409            529                             39,938
                                               ----------      ---------       -----------       ----------
                                               $1,644,595      $  20,988       $    (2,529)      $1,663,054
                                               ==========      =========       ===========       ==========
</TABLE>


                                       49

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 2.   INVESTMENTS, (Continued)

                                              1999            1998
                                           ----------      ----------
               Amounts classified as:
                  Current                  $   94,810      $  114,550
                  Noncurrent                4,417,624       1,530,045
                                           ----------      ----------
                                           $4,512,434      $1,644,595
                                           ==========      ==========

          There were no sales of  available-for-sale  securities  during 1999 or
          1998 and; therefore,  no proceeds nor any realized gains or losses for
          either year.

          Investments  classified as  held-to-maturity at December 31, 1999, are
          summarized below by contractual maturity date:

               Due in one year or less                    $   55,401
               Due after one year through five years       1,789,955
               Due after five years                        2,627,669
                                                          ----------
                                                          $4,473,025
                                                          ==========

NOTE 3.   OTHER INVESTMENTS

          Other  investments  include   non-marketable   equity  securities  and
          certificates,  along with capital  contributions  to partnerships  and
          limited liability companies, and joint ventures as shown below:

<TABLE>
<CAPTION>
                                                                  1999         1998
                                                               ----------   ----------
<S>                                                            <C>          <C>
          Alpine Communications, L.C                           $  781,579   $  600,000
          Rural Telephone Finance Cooperative - certificates      533,319      538,422
          RSA #1, Ltd.                                            348,542      348,542
          RSA #7, Ltd.                                            144,049      144,049
          RSA #8, Ltd.                                            310,491      210,129
          Central Iowa Cellular, Inc.                             206,770      206,770
          Rural Telephone Bank - stock                            164,841      162,806
          Quad County Communications                              136,192      152,057
          Iowa Network Services - stock                            78,705       78,705
          Other                                                    21,000       26,542
                                                               ----------   ----------
                                                               $2,725,488   $2,468,022
                                                               ==========   ==========
</TABLE>

          The  Company  has a 15.79%  interest  in Alpine  Communications,  L.C.
          (Alpine).  The Alpine group  includes  several  Independent  Telephone
          Companies  whom have  formed an entity and have  purchased  U.S.  West
          telephone properties in Iowa.

          The Company's  percentage interests in RSA #1, Ltd., RSA #7, Ltd., RSA
          #8, Ltd. and Central Iowa Cellular, Inc. (Des Moines MSA) partnerships
          are 9.2%, 7.1%, 11.7% and 4.8%,  respectively at December 31, 1999. In
          addition,   the  Company  owns  a  16.7%  interest  in  RSA  #9,  Ltd.
          partnership of which they have no original cash investment.


                                       50

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 3.   OTHER INVESTMENTS, (Continued)

          Additionally,  Westside Independent  Telephone Company, a wholly-owned
          subsidiary  of Breda  Telephone  Corporation,  has a 33.33%  ownership
          interest in Quad County  Communications.  Condensed financial data for
          Quad County Communications is as follows:

                                                1999             1998
                                             ---------        ---------
               Ordinary income (loss)        $ (47,593)       $ (47,190)
               Interest income                      --               85
                                             ---------        ---------
               Net income (loss)             $ (47,593)       $ (47,105)
                                             =========        =========

               Current assets                $   5,924        $   5,625
               Non-current assets              415,109          461,729
               Current liabilities              12,456           11,184
               Non-current liabilities               0                0

          The investment in Quad County Communications is being accounted for on
          the equity method. The remaining  investments are accounted for on the
          cost method.

NOTE 4.   INTANGIBLES

          During 1999, the Company purchased PCS licenses for $28,825. The costs
          are being  amortized on the  straight-line  basis over ten years.  The
          amount charged to expense and accumulated amortization during 1999 was
          $1,442.

          On June 1, 1998,  the  Company  acquired  100%  ownership  of Westside
          Independent  Telephone  Company.  The  total  cost of the  acquisition
          exceeded  the fair  value of the net  assets of  Westside  Independent
          Telephone Company by $1,178,472.  This excess was recorded as goodwill
          and is being amortized on the straight-line  basis over fifteen years.
          Accumulated amortization as of December 31, 1999 and 1998 was $124,452
          and $45,848, respectively.

          Additionally  on June 1, 1998,  Tele-Services,  Ltd.,  a  wholly-owned
          subsidiary of Breda Telephone Corporation,  acquired 100% ownership of
          Westside  Communications,  Inc.  The  total  cost  of the  acquisition
          exceeded the fair value of the net assets of Westside  Communications,
          Inc. by  $157,611.  This excess was also  recorded as goodwill  and is
          being  amortized  on  the  straight-line  basis  over  fifteen  years.
          Accumulated  amortization as of December 31, 1999 and 1998 was $16,642
          and $6,130, respectively.

          In 1992, the Company entered into an agreement with the National Rural
          Telecommunications  Cooperative  (NRTC)  for the  exclusive  right  to
          market and sell Direct Broadcast  Service (DBS) to certain  residences
          in ten Iowa and Nebraska counties. The agreement remains in effect for
          ten years from the service commencement date or until the satellite is
          removed,  which ever occurs earlier.  The DBS  distribution  rights of
          $640,012 are being amortized on the  straight-line  basis over fifteen
          years.  Accumulated amortization at December 31, 1998 was $170,670 and
          amortization  expense  for 1998 was  $42,668.  See  note  sixteen  for
          disposition of DBS investment.


                                       51

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 5.   PROPERTY, PLANT AND EQUIPMENT

          Property, plant and equipment includes the following:

                                                           1999         1998
                                                       -----------   -----------
          Telephone Plant in Service -
             Land                                      $    39,008   $    39,008
             Buildings                                     694,945       687,545
             Other general support assets                  988,906       880,367
             Central office assets                       2,098,570     1,981,453
             Cable and wire facilities                   3,651,397     3,546,900
             Other plant and equipment                     588,439       484,891
                                                       -----------   -----------
                                                         8,061,265     7,620,164
                                                       -----------   -----------
          Cable Television Plant in Service -
             Franchise                                      32,992        32,992
             Land                                            8,586         8,586
             Buildings                                     237,557       237,557
             Towers, antennas and head end equipment     1,473,562     1,458,476
             Cable and wire facilities                   1,558,797     1,537,812
             Other plant and equipment                     189,320       207,492
                                                       -----------   -----------
                                                         3,500,814     3,482,915
                                                       -----------   -----------
          DBS Plant in Service -
             Leased dishes                                      --       319,940
                                                       -----------   -----------
                 Total property, plant and equipment    11,562,079    11,423,019
                 Less accumulated depreciation           5,221,886     5,237,145
                                                       -----------   -----------
                                                       $ 6,340,193   $ 6,185,874
                                                       ===========   ===========

          Application  of rates to the  various  classes  of  plant  produced  a
          composite rate of  depreciation on average  depreciable  plant for the
          years ended December 31, 1999 and 1998 of 8.0% and 7.6%, respectively.


                                       52

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 6.   LONG-TERM DEBT

          Long-term debt consists of the following:

                                                       1999             1998
                                                   -----------      -----------
          Rural Telephone Finance Cooperative
             7.25% (Variable Rate)                 $   328,864      $   459,342
             7.00% (Variable Rate)                     994,264        1,172,817
             6.95% (Variable Rate)                   1,353,248        1,415,110
             6.95% (Variable Rate)                   2,211,926        2,313,042
             7.35% (Fixed Rate)                      2,268,040        2,371,721

          Building Mortgage Note - 7.00%                    --           79,382
                                                   -----------      -----------
                 Total long-term debt                7,156,342        7,811,414
                 Less current portion                 (608,412)        (655,072)
                                                   -----------      -----------
                                                   $ 6,547,930      $ 7,156,342
                                                   ===========      ===========

          The annual  requirements for principal  payments on long-term debt for
          the next five years are as follows:

                                                 Principal
                                                 ---------
                    2000                          $608,412
                    2001                           643,059
                    2002                           579,166
                    2003                           561,969
                    2004                           562,809

          Substantially  all assets of the Company  are pledged as security  for
          the  long-term  debt  under  certain  loan  agreements  with the Rural
          Telephone Finance Cooperative  (RTFC).  These mortgage notes are to be
          repaid in equal quarterly installments covering principal and interest
          and expire by the year 2013.

          The security and loan  agreements  underlying  the RTFC notes  contain
          certain restrictions on distributions to stockholders,  investment in,
          or loans to others,  and payment of management  fees or an increase in
          management   fees.   The  Company  is   restricted   from  making  any
          distributions,  except as might be specifically  authorized in writing
          in advance by the RTFC  noteholders,  unless minimum net worth exceeds
          40% and distributions are limited to certain levels of prior year cash
          margins.  In  addition,  the  Company  is  required  to achieve a debt
          service  coverage  ratio of not less  than  1.25 and a times  interest
          earned ratio of not less than 1.5.  These ratios are to be  determined
          by averaging  each of the two highest  annual  ratios during the three
          most recent fiscal years.

          The  Company  received  approval on a line of credit from the RTFC for
          $750,000.  The approved line of credit was available until January 13,
          2000 at a rate of 7.6%. The Company had not drawn down any funds as of
          December  31,  1999.  The  line of  credit  has  been  renewed  for an
          additional twelve month period.


                                       53

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 6.   LONG-TERM DEBT, (Continued)

          In addition, Prairie Telephone Company, Inc. a wholly-owned subsidiary
          of Breda Telephone Corporation,  received approval on a line of credit
          from the RTFC for  $250,000.  This  approved  line of credit  was also
          available  until  January 13, 2000 at a rate of 7.6%.  The Company had
          not drawn down any funds as of December 31,  1999.  The line of credit
          has been renewed for an additional twelve month period.

          At December 31, 1998,  the Company had an  outstanding  line of credit
          balance with the RTFC of $750,000.  The principal  and interest,  at a
          rate of 6.7%, was paid during first quarter 1999.

NOTE 7.   INCOME TAXES

          Income  taxes  reflected  in the  Consolidated  Statements  of  Income
          consist of the following:

                                                          1999           1998
                                                      -----------     ---------
          Federal income taxes -
             Current tax expense                      $ 2,584,445     $ 562,083
             Deferred tax benefit                        (205,565)     (109,668)
             Amortization of investment tax credits        (9,769)       (9,769)
          State income taxes -
             Current tax expense                          803,537       187,380
             Deferred tax benefit                         (64,914)      (36,556)
                                                      -----------     ---------
          Total income tax expense                    $ 3,107,734     $ 593,470
                                                      ===========     =========

          Deferred  federal and state tax  liabilities and assets are summarized
          as follows:

                                                          1999           1998
                                                      -----------     ---------
          Deferred Tax Liabilities
             Federal                                  $   296,855     $ 411,632
             State                                         93,744       137,211
                                                      -----------     ---------
                Total Deferred Tax Liabilities            390,599       548,843
                                                      -----------     ---------
          Deferred Tax Assets
             Federal                                      346,185       257,453
             State                                        109,322        85,818
                                                      -----------     ---------
                Total Deferred Tax Assets                 455,507       343,271
                                                      -----------     ---------
             Net Deferred Tax (Liability) Asset       $    64,908     $(205,572)
                                                      ===========     =========
          Current portion                             $        --     $      --
          Long-term portion                                64,908      (205,572)
                                                      -----------     ---------
             Net Deferred Tax (Liability) Asset       $    64,908     $(205,572)
                                                      ===========     =========

          The tax  provision  differs  from the expense  that would  result from
          applying  the federal  statutory  rates to income  before taxes as the
          result of state income taxes being  deductible in determining  taxable
          income and the amortization of investment tax credits.


                                       54

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 7.   INCOME TAXES, (Continued)

          The following is a reconciliation  of the statutory federal income tax
          rate of 34% to the Company's effective income tax rate:

                                                          1999         1998
                                                         ------       ------
          Statutory federal income tax rate                34.0%        34.0%
          State income taxes, net of federal benefit        5.1          6.4
          Amortization of investment tax credits           (1.1)        (1.2)
          Amortization of goodwill                           --           .5
                                                         ------       ------
               Effective income tax rate                   38.0%        39.7%
                                                         ======       ======

NOTE 8.   OPERATING SEGMENTS INFORMATION

          The Company organizes its business into two reportable segments: local
          exchange  carrier  (LEC)  services  and  broadcast  services.  The LEC
          services  segment  provides  telephone,  data and  other  services  to
          customers in local exchanges.  The broadcast services segment provides
          cable  television  to  customers  in Iowa and Nebraska and during 1998
          included  DBS.  The  Company  also  has  operations  in  internet  and
          telemarketing  services that do not meet the  quantitative  thresholds
          for reportable segments.

          The Company's  reportable  business  segments are  strategic  business
          units that offer  different  products and  services.  Each  reportable
          segment is managed separately primarily because of different products,
          services  and   regulatory   environments.   LEC  segments  have  been
          aggregated because of their similar characteristics.

          The segment's  accounting  policies are the same as those described in
          the summary of significant accounting policies.

<TABLE>
<CAPTION>
                                               Local
                                              Exchange
                 1999                         Carriers     Broadcast     Other         Total
          -------------------------------   -----------   ----------   ---------    -----------
<S>                                         <C>           <C>          <C>          <C>
          Revenues and sales                $ 3,551,877   $1,047,667   $ 691,002    $ 5,290,546
          Intersegment revenue and sales             --           --          --             --
          Interest and dividend income          458,901       15,063          --        473,964
          Interest expense                      429,750       73,552          --        503,302
          Depreciation and amortization         634,664      344,195      34,105      1,012,964
          Income tax expense (benefit)          363,435    2,786,595     (42,296)     3,107,734
          Segment profit (loss)                 552,861    4,578,358     (65,370)     5,065,849
          Segment assets                     14,346,890    1,845,056     735,919     16,927,865
          Expenditures for segment assets     1,071,365       37,512     140,537      1,249,414
</TABLE>


                                       55

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 8.   OPERATING SEGMENTS INFORMATION, (Continued)

<TABLE>
<CAPTION>
                                              Local
                                             Exchange
                     1998                    Carriers     Broadcast       Other         Total
                     ----                  -----------   -----------    ---------    -----------
<S>                                        <C>           <C>            <C>          <C>
          Revenues and sales               $ 3,653,189   $ 2,161,588    $ 730,803    $ 6,545,580
          Intersegment revenue and sales            --            --           --             --
          Interest and dividend income         180,710        19,966        1,569        202,245
          Interest expense                     396,234        91,252           --        487,486
          Depreciation and amortization        506,279       386,241       15,397        907,917
          Income tax expense (benefit)         670,706       (48,580)     (28,656)       593,470
          Segment profit (loss)              1,080,635      (136,905)     (41,094)       902,636
          Segment assets                    10,128,218     2,963,322      708,829     13,800,369
          Expenditures for segment assets    1,258,653       206,030      491,282      1,955,965
</TABLE>

<TABLE>
<CAPTION>
             Reconciliation of Segment Information         1999            1998
             -------------------------------------     ------------    ------------
<S>                                                    <C>             <C>
          REVENUES:
             Total revenues for reportable segments    $  4,599,544    $  5,814,777
             Other revenues                                 691,002         730,803
                                                       ------------    ------------
                 Consolidated Revenues                 $  5,290,546    $  6,545,580
                                                       ============    ============
          PROFIT:
             Total profit for reportable segments      $  5,131,219    $    943,730
             Other profit (loss)                            (65,370)        (41,094)
                                                       ------------    ------------
                 Net Income                            $  5,065,849    $    902,636
                                                       ============    ============
          ASSETS:
             Total assets for reportable segments      $ 16,191,946    $ 13,091,540
             Other assets                                   735,919         708,829
             Elimination of intercompany receivables       (247,086)       (124,041)
                                                       ------------    ------------
                 Consolidated Assets                   $ 16,680,779    $ 13,676,328
                                                       ============    ============
</TABLE>

NOTE 9.   SUPPLEMENTAL CASH FLOW INFORMATION

          Non-cash investing and financing  activities  included $191,321 during
          the year ended  December  31,  1998,  relating to plant and  equipment
          additions  placed in service  during 1998 which are  reflected  in the
          outstanding line of credit at year end.

          Additionally,  during  1998 the Company  purchased  all of the capital
          stock  of  Westside   Independent   Telephone   Company  and  Westside
          Communications, Inc. for $2,264,327. The following is a summary of the
          purchase which was entirely debt financed.


                                       56

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 9.   SUPPLEMENTAL CASH FLOW INFORMATION, (Continued)

          Fair value of telephone plant                   $   638,724
          Fair value of CATV plant                            212,560
          Current Assets                                       38,675
          Other Investments                                   404,472
          Goodwill                                          1,336,083
          Current Liabilities                                 (40,759)
          Deferred Credits                                   (325,428)
                                                          -----------
                                                          $ 2,264,327
                                                          ===========

          Cash paid for interest,  net of amounts capitalized for 1999 and 1998,
          totaled $476,861 and $487,486, respectively.

          Cash paid for income  taxes and  estimated  income  taxes for 1999 and
          1998 totaled $3,990,528 and $981,473, respectively.

NOTE 10.  NET INCOME PER COMMON SHARE

          Net income per common share for 1999 and 1998 was computed by dividing
          the weighted average number of shares of common stock outstanding into
          the net income.  The weighted average number of shares of common stock
          outstanding for the years ended December 31, 1999 and 1998 were 37,682
          and 37,831, respectively.

NOTE 11.  STATED VALUE STOCK ADJUSTMENT

          During 1999,  the board of directors  authorized an additional  $85.00
          increase in the stated value of each share of common stock from $64.00
          to $149.00.  There were 37,722 shares  outstanding  at the time of the
          value adjustment, which reduced retained earnings by $3,206,370.

          The 1998 authorized increase was $23.00 and increased the stated value
          of each share of common stock from $41.00 to $64.00. There were 38,050
          shares outstanding at the time of the value adjustment,  which reduced
          retained earnings by $875,150.

NOTE 12.  STOCK RESTRICTIONS

          The  Company  has one  class of  common  stock.  Each  stockholder  is
          entitled  to one  vote  regardless  of the  number  of  shares  owned.
          Restrictions on the stock include the following:

          o    Individuals  purchasing new shares of stock must be living within
               the service area of the Company and  subscribe  to the  Company's
               telephone services. In addition,  new stockholders are limited to
               purchasing no more than thirty shares of stock  directly from the
               Company.

          o    Stockholders  are  limited  to  ownership  of not  more  than one
               percent of the outstanding  shares of stock unless  ownership was
               prior to the restated Articles of Incorporation.

          o    Stockholders  shall not sell any shares of stock owned unless the
               Company has been given first right of refusal.

          o    In households with multiple individuals,  only one person must be
               deemed the subscriber of Company services.


                                       57

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 12.  STOCK RESTRICTIONS, (Continued)

          o    A one-time  stock  transfer to a family  member  (spouse,  child,
               grandchild,  parent,  grandparent, or sibling) is allowed even if
               such transferee resides outside of the telephone exchange service
               area and is not a subscriber of the Company's telephone services.

          o    Stock transfers require the consent of the board of directors.

          The Company may adopt bylaws  which may further  restrict the transfer
          or ownership of capital stock of the Company.

NOTE 13.  EMPLOYEE BENEFIT PLAN

          The Company adopted for its employees who have met certain eligibility
          requirements,  a  defined  benefit  retirement  and  security  program
          sponsored  by the  National  Telephone  Cooperative  Association.  The
          multi-employer  plan calls for the Company to contribute  8.6% of each
          enrolled   employee's   annual  gross   salary.   As  a  condition  of
          participation,  each  participating  employee  must also  contribute a
          minimum 3% of their annual  gross  salary.  Contributions  made by the
          Company  totaled  $63,722 and $63,045 for the years ended December 31,
          1999 and 1998, respectively.

NOTE 14.  CONCENTRATIONS OF CREDIT RISK

          The  Company  grants  credit  to local  telephone  service  and  cable
          television  service  customers,   all  of  whom  are  located  in  the
          franchised  service areas,  and to  telecommunications  intrastate and
          interstate long distance carriers.

          The Company has received  approximately 42% of its operating  revenues
          from access revenues and assistance  provided by the Federal Universal
          Service Fund.  The manner in which access  revenues are  determined by
          regulatory  bodies and universal  service  funding is  determined  for
          qualifying  organizations  is currently  being modified as a result of
          the Telecommunications Act of 1996.

          Financial   instruments  that  potentially   subject  the  Company  to
          concentrations  of credit risk  consist  principally  of cash and cash
          equivalents,  along with both current and noncurrent investments.  The
          Company places its cash,  cash  equivalents and investments in several
          financial  institutions  which limits the amount of credit exposure in
          any one financial institution.

          Additionally, Pacific Junction Telemarketing Center, Inc. wholly-owned
          subsidiary of Prairie Telephone Company,  Inc., received nearly all of
          its telemarketing  service revenues from one customer during both 1999
          and 1998;  however,  it was a different  customer  each year.  For the
          years ended  December  31, 1999 and 1998,  the  telemarketing  service
          revenues   from  the  major   customer  were  $226,243  and  $579,836,
          respectively.  At December 31, 1999 and 1998, the amount due from each
          respective  customer,  included in accounts  receivable on the balance
          sheet, was $46,305 and $101,676, respectively.


                                       58

<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 15.  ACQUISITIONS

          On  June  1,  1998,  Breda  Telephone  Corporation  acquired  Westside
          Independent  Telephone Company in a business combination accounted for
          as a purchase.  The Company purchased stock and the purchase price was
          then allocated to the respective  assets  acquired in the  transaction
          based on fair value.  Westside Independent  Telephone Company owns and
          provides the telephone  service in Westside,  Iowa.  The operations of
          Westside   Independent   Telephone   Company   are   included  in  the
          accompanying  financial statements since the date of acquisition.  The
          total cost of the acquisition was $2,010,038,  which exceeded the fair
          value of the net assets of Westside  Independent  Telephone Company by
          $1,178,472. The excess was recorded as goodwill and is being amortized
          on the straight-line basis over fifteen years.

          Additionally on June 1, 1998 in a related transaction,  Tele-Services,
          Ltd.,  a  wholly-owned  subsidiary  of  Breda  Telephone  Corporation,
          acquired Westside Communications,  Inc. in a business combination also
          accounted for as a purchase.  Tele-Services, Ltd. also purchased stock
          and the purchase  price was then  allocated to the  respective  assets
          acquired   in  the   transaction   based  on  fair   value.   Westside
          Communications,  Inc. owned and operated the cable television  systems
          in  Westside   and  Arcadia,   Iowa.   The   operations   of  Westside
          Communications,  Inc.  are  included  in  the  accompanying  financial
          statements  since the date of acquisition,  as well. The total cost of
          the acquisition was $254,289, which exceeded the fair value of the net
          assets of Westside  Communications,  Inc. by $157,611.  The excess was
          recorded as goodwill and is being amortized on the straight-line basis
          over fifteen years.

          The  total  cost of both  acquisitions  was  $2,264,327  and the total
          goodwill recorded was $1,336,083. See note four for additional details
          regarding both transactions.

          On October 31, 1998,  Tele-Services,  Ltd.  purchased the Auburn cable
          television  system from New Path  Communications,  L.C.  This business
          combination  was also accounted for as a purchase.  The purchase price
          of $64,610 was allocated to the  respective  assets  purchased and two
          months of operations were recorded as of December 31, 1998.

          Assuming these acquisitions had occurred on January 1, 1998, unaudited
          pro forma  consolidated  revenues for the year ended December 31, 1998
          would have been $6,713,000.  After considering pro forma  adjustments,
          such as  additional  amortization  expense as a result of goodwill and
          certain other acquisition related  transactions,  pro forma income and
          earnings per share would not have been  materially  different from the
          reported  amounts for 1998.  The  unaudited  pro forma amounts are not
          indicative of what the actual consolidated results of operations might
          have been if the  acquisitions  had been effective at the beginning of
          1998.

NOTE 16.  DISPOSITION OF DBS INVESTMENT

          On January 11, 1999, the Company sold  substantially all of its assets
          and  liabilities  related  to the  Direct  Broadcast  Satellite  (DBS)
          investment.   The  Company   received  cash  of  $8,038,197   and  the
          transaction  resulted in a gain of  $7,436,415,  which was included in
          operations during the first quarter of 1999.

NOTE 17.  SUBSEQUENT EVENT

          Subsequent  to  year-end,  the Company and all other  stockholders  of
          Central Iowa Cellular,  Inc. (CIC) have reached a tentative  agreement
          with a qualified  purchaser to sell all of the  outstanding  shares of
          CIC  stock.  The  transaction,   which  requires  various   regulatory
          approvals, is expected to close during the second quarter of 2000. The
          sale will be a cash  transaction,  resulting in an estimated after tax
          gain of $3,500,000.


                                       59

<PAGE>


Item 8.   Changes  In and  Disagreements  With  Accountants  on  Accounting  and
          Financial Disclosure.

          Breda has not had any change in its accountants  during the last three
          years, or any  disagreements  with its accountants  during that period
          which are of the type required to be disclosed under this Item.

          Anderson  and  Company,  in  Emmetsburg,  Iowa,  has served as Breda's
          accounting  firm for over 20 years.  Anderson  and  Company was merged
          into Kiesling  Associates LLP, effective as of June 1, 1999.  Kiesling
          Associates LLP's principal office is located in Madison, Wisconsin. It
          also has offices in other  cities,  including  Des Moines,  Iowa,  and
          Emmetsburg,  Iowa.  The merger of Anderson and Company  into  Kiesling
          Associates LLP


                                       60

<PAGE>


          did not arise  from any  disagreements  with  Breda and was  otherwise
          unrelated to Breda, and Breda has engaged  Kiesling  Associates LLP as
          Breda's accounting firm.


                                    PART III

Item 9.   Directors,   Executive   Officers,   Promoters  and  Control  Persons;
          Compliance With Section 16(a) of the Exchange Act.

          Directors and Officers.

          The directors and executive officers of Breda are as follows:

              Name                       Age               Position(s)
              ----                       ---               -----------

          Dean Schettler                  47               President and
                                                           Director

          Clifford Neumayer               51               Vice-President and
                                                           Director

          Larry Daniel                    57               Secretary and
                                                           Director

          Scott Bailey                    37               Treasurer and
                                                           Director

          Dave Hundling                   52               Director

          John Wenck                      61               Director

          Dave Grabner                    51               Director

          Dean  Schettler  has been the  President and a director of Breda since
          April,  1997. His current term as a director will end in May, 2000. He
          has  also  held  each  of  those   positions   with  each  of  Breda's
          subsidiaries  since April,  1997.  Mr.  Schettler has been employed by
          Pella Corporation,  Pella, Iowa, since August,  1986. He was a moulder
          technician  until  August,  1997.  Since  that  time  he  has  been  a
          production  coordinator.  Pella  Corporation  is  a  window  and  door
          manufacturer.

          Clifford Neumayer has been the  Vice-President and a director of Breda
          since April, 1996. His current term as a director of Breda will end in
          April,  2002.  He has also held each of those  positions  with each of
          Breda's  subsidiaries  since April,  1996. Mr.  Neumayer has been self
          employed as a farmer since 1970.


                                       61

<PAGE>


          Larry  Daniel has been the  Secretary  and a director  of Breda  since
          April,  1995.  His  current  term as a  director  of Breda will end in
          April,  2001.  He has also held each of those  positions  with each of
          Breda's  subsidiaries since April, 1995. Mr. Daniel is a self-employed
          farmer, and has been for at least the last five years.

          Scott  Bailey has been a director  of Breda  since  April,  1998.  His
          current  term as a director of Breda will end in April,  2001.  He has
          also served as a director of each of Breda's subsidiaries since April,
          1998.  He has been  Breda's  treasurer,  and the  treasurer of Breda's
          subsidiaries  since April, 1999. Mr. Bailey was the finance manager of
          marketing and sales for Pella  Corporation,  Pella, Iowa, from August,
          1993,  to  September,  1995.  He  has  been  a  controller  for  Pella
          Corporation since September, 1995 to the present. Pella Corporation is
          a window and door manufacturer.

          Dave  Hundling  has been a director of Breda since  April,  1997.  His
          current term as a director of Breda will end in May, 2000. He has also
          served as a director  of each of  Breda's  subsidiaries  since  April,
          1997. Mr. Hundling is also a self employed farmer, and has been for at
          least the last five years.

          John Wenck has been a director of Breda since April, 1997. His current
          term as a director of Breda will end in May,  2000. He has also served
          as a director of each of Breda's  subsidiaries  since April, 1997. Mr.
          Wenck is currently self employed as a farmer.  He was also  previously
          employed by the United Parcel Service as a delivery driver.

          Dave  Grabner  has been a director  of Breda since  April,  1999.  His
          current  term as a director of Breda will end in April,  2002.  He has
          also served as a director of each of Breda's subsidiaries since April,
          1999. Mr. Grabner is currently  self employed as an  electrician,  and
          has been for at least  the last  five  years.  He was also  previously
          self-employed as a farmer.

          The number of directors for Breda is currently fixed at seven. Each of
          Breda's directors is elected to a three year term and until his or her
          successor  is  elected.  The  terms  of the  directors  of  Breda  are
          staggered,  so  that  approximately  one-third  of the  directors  are
          elected each year. If a person has served for three  consecutive terms
          as a director, that person must be off the board for at least one year
          before the person can again be elected as a director. Each director of
          Breda  must also be a  shareholder  of  Breda,  and a  director  shall
          automatically  cease to be a director if he or she sells or  transfers
          all of his or her shares of common stock in Breda.  Each director must
          also be at least 18 years of age.

          The  officers of Breda are elected  annually by the board of directors
          at its annual  meeting,  and hold office until the next annual meeting
          of the  board of  directors  and  until  their  successor  is  chosen.
          Officers  may also be removed by the board of  directors  at any time,
          with or without  cause.  Each  officer  must also be a director  and a
          shareholder of Breda.


                                       62

<PAGE>


          Breda believes that two of its employees are and will continue to make
          a significant  contribution  to its business.  Those  employees are as
          follows:

                   Name                  Age               Position
                   ----                  ---               --------
          Robert J. Boeckman              38               Manager

          Jane A. Morlok                  46               Co-Manager

          Both Mr.  Boeckman and Ms. Morlok are employed  pursuant to employment
          agreements with Breda.  Those  employment  agreements are discussed in
          Item 10 of this annual report.

          Mr.  Boeckman has been employed by Breda in various  capacities  since
          May, 1982. Prior to January,  1995, he was Breda's assistant  manager.
          He has been the manager since January, 1995, and he was also given the
          title of chief operating officer in March, 1998.

          Ms. Morlok has been the  co-manager of Breda since March 30, 1998. Ms.
          Morlok  was  the  assistant   administrator/CFO  of  Manning  Regional
          Healthcare  Center in Manning,  Iowa from July of 1987 until March 20,
          1998.  Her  responsibilities  in  that  position  included  budgeting,
          reimbursement  and rate  setting for the hospital and nursing home run
          by the Manning Regional  Healthcare  Center,  as well as daily general
          ledger operations and IRS filings.  She also provided similar services
          to several other affiliated corporations.


          Section 16(a) Beneficial Ownership Reporting Compliance.

          Two of Breda's directors,  Clifford Neumayer and David Grabner,  filed
          amendments  to their  initial Form 3 filings with the SEC on March 10,
          2000.  The  purpose  of Mr.  Neumayer's  amendment  was to delete  the
          information  in  Mr.  Neumayer's  Form  3  which  stated  that  he had
          beneficial  ownership of fifteen  shares of Breda's common stock which
          were held by another  individual  and one share held by a partnership.
          After further  review,  it was determined  that the individual did not
          own any shares of Breda's common stock,  and that Mr. Neumayer was not
          one of the partners of the  partnership.  The purpose of Mr. Grabner's
          amendment was to add the  information  that Mr.  Grabner  beneficially
          owns  the  one  share  of  Breda's  common  stock  that is held by Mr.
          Grabner's spouse.

Item 10.  Executive Compensation.

          Summary Compensation Table.

          The following summary  compensation  table shows the compensation paid
          by Breda to Robert J. Boeckman, Breda's manager, in the 1999, 1998 and
          1997 fiscal years. Mr. Boeckman's services as the manager of Breda are
          similar to those normally provided by


                                       63

<PAGE>


          the chief executive officer of an Iowa corporation.

                           Summary Compensation Table

<TABLE>
<CAPTION>
          Name and                                             Other Annual         All Other
          Position                Year   Salary(1)   Bonus     Compensation(2)   Compensation(3)
          --------                ----   ---------   -----     ---------------   ---------------
<S>                               <C>     <C>        <C>            <C>              <C>
          Robert J. Boeckman,     1999    $74,159    $  -0-         $  617           $14,568
              Manager             1998    $70,700    $2,000         $4,737           $13,951
                                  1997    $67,142    $2,000         $3,015           $13,157
</TABLE>

          (1) This amount  includes a contribution  by Mr. Boeckman of 3% of his
          annual gross salary pursuant to Breda's defined benefit retirement and
          security  program,  which  is  sponsored  by  the  National  Telephone
          Cooperative  Association.  As a  condition  of  participation  in that
          program,  Mr.  Boeckman must  contribute a minimum of 3% of his annual
          gross salary. See also the "All Other Compensation" column above.

          (2) This amount includes payments to Mr. Boeckman by Breda from a fund
          established  by Breda  based  upon sales of cell  phones.  The fund is
          allocated equally among the employees employed at Breda's and Westside
          Independent's  offices.  All employees  share in the fund even if they
          are not  involved  in the sale of cell  phones.  Mr.  Boeckman  is not
          involved in those sales.  The amount also  includes a yearly  clothing
          allowance and the estimated  yearly value of services  provided to Mr.
          Boeckman by Breda or its  subsidiaries at no cost.  Those services are
          local telephone  service,  basic cable service,  internet access,  and
          cellular phone service.

          (3) This  amount  represents  contributions  by Breda on behalf of Mr.
          Boeckman to Breda's defined benefit  retirement and security  program,
          which is sponsored by the National Telephone Cooperative  Association.
          The program  requires  Breda to  contribute an amount equal to 8.6% of
          Mr.  Boeckman's  annual  gross  salary.  See  also  footnote  1  above
          regarding Mr.  Boeckman's  contributions  to the program.  This amount
          also includes a long term  disability  contribution of 1.02% of salary
          and  employer-paid  premiums on health,  life and accidental death and
          dismemberment insurance.

          Dean  Schettler is the president of Breda.  No information is provided
          for Mr.  Schettler in the summary  compensation  table because he does
          not receive  compensation  in his capacity as the  president of Breda.
          Mr. Schettler does receive compensation for his services as a director
          of Breda. The compensation payable to directors is discussed below.

          No officer's or employee's total annual salary, bonus and other annual
          compensation  exceeded  $100,000  during any of the 1997, 1998 or 1999
          fiscal years.

          Director Compensation.

          All of Breda's  directors  currently  receive  $100 for each  regular,
          special and  conference  call meeting of the board of  directors.  The
          vice-president,  secretary  and  treasurer  of  Breda  also  currently
          receive an  additional  $25 for each regular,  special and  conference
          call  meeting of the board of  directors,  and the  president of Breda
          receives an additional $50


                                       64

<PAGE>


          per meeting.  Those  payments are made to those  individuals  in their
          capacities as directors, and are based upon their additional duties at
          the meetings of the board of directors. Breda's directors received the
          same amounts in 1998, except that the  vice-president of Breda did not
          receive an additional $25 per meeting in 1998.

          All of Breda's  directors  currently  receive $125 per day for all day
          meetings of the board of directors.  The directors  also received $125
          per day for all day meetings of the board of directors in 1998.

          All of Breda's  directors also currently receive $125 for each outside
          meeting  attended by a director and which lasts over three hours.  The
          directors  receive  one-half of their  regular  meeting  rate for each
          outside  meeting which lasts less than three hours.  Outside  meetings
          are not formal meetings of the board of directors. Examples of outside
          meetings include conventions and city council meetings.

          Breda's directors are also reimbursed for mileage and for any expenses
          paid by them on account of  attendance  at any meeting of the board of
          directors or other  meetings  attended by them in their  capacity as a
          director of Breda.

          Breda's  directors may also receive  internet access from Breda or its
          subsidiaries  at no  cost.  The  current  estimated  yearly  value  of
          internet access is $300.  They were also entitled to receive  internet
          access in 1998.

          Employment Agreements.

          Breda has entered into  employment  agreements  with Robert  Boeckman,
          Breda's  manager,  and with Jane  Morlok,  Breda's  co-manager.  Those
          employment  agreements are discussed below. Breda is in the process of
          negotiating a new employment  agreement with both Mr. Boeckman and Ms.
          Morlok,  but no definitive  agreements had been reached at the time of
          the preparation of this annual report.

          Mr.   Boeckman.   Mr.  Boeckman  is  responsible  for  the  day-to-day
          operations of Breda under his  employment  agreement.  The term of the
          employment  agreement  will  currently  end on December 31, 2001.  The
          employment agreement will automatically extend for successive one year
          periods, however, unless Breda or Mr. Boeckman provides the other with
          written  notice  prior  to  April 1 in any  year of  their  desire  to
          terminate the employment  agreement at the end of that year. Breda may
          also  terminate the employment  agreement for any reason,  including a
          breach or default by Mr.  Boeckman,  by giving Mr.  Boeckman  at least
          ninety days notice of his last day of employment with Breda.

          Mr.  Boeckman's  salary is increased  under the  employment  agreement
          effective  January 1 of each year to an amount  equal to the  previous
          year's  salary,  plus 3 1/2% of the previous  year's  salary,  and the
          additional amount determined by multiplying the previous year's


                                       65

<PAGE>


          salary by the percentage  increase as shown in the U.S.  Department of
          Labor cost of living index for the previous year. In other words,  Mr.
          Boeckman's yearly salary is increased by 3 1/2% percent plus a cost of
          living  increase  based  on any  increase  in the U.S.  Department  of
          Labor's cost of living index.

          If Mr. Boeckman becomes totally disabled,  he will continue to receive
          his then  current  salary  until  benefits  under  Breda's  disability
          program become payable to him.

          If he dies while employed,  Mr.  Boeckman's estate or other designated
          beneficiary  will  receive his salary up to the date of death,  and an
          additional  six  months of salary at the rate at the time of death and
          the salary  equivalent of all accrued unused vacation time at the date
          of death.

          If Breda  terminates Mr.  Boeckman's  employment  without  cause,  Mr.
          Boeckman  will  receive a payment from Breda of an amount equal to the
          remaining  salary  that  would  have  been  paid to him up to the then
          expiration date of the employment agreement.

          Mr.  Boeckman may  terminate his  employment  with Breda if there is a
          change in the majority ownership of Breda. In that event, Mr. Boeckman
          will be entitled to receive a payment from Breda of an amount equal to
          the  remaining  salary that would have been paid to him up to the then
          expiration date of the employment agreement.

          Mr.  Boeckman  is  also  reimbursed  by  Breda  under  the  employment
          agreement for all necessary and reasonable expenses incurred by him in
          performing services for Breda.

          Mr.  Boeckman is also entitled to the same benefits and under the same
          conditions  as are  available  to other full time  employees of Breda.
          Some  of  those   benefits   include  life  insurance  and  disability
          insurance, and participation in Breda's defined benefit retirement and
          security  program.  Breda  contributes  an amount equal to 8.6% of Mr.
          Boeckman's annual gross salary under that program.

          Mr.  Boeckman may also receive an annual  bonus in the  discretion  of
          Breda's board of directors. He received a $2,000 bonus in each of 1997
          and 1998.

          Ms.  Morlok.  Ms. Morlok is employed as Breda's  co-manager  under her
          employment agreement. The term of the employment agreement will end on
          March 30, 2000. It is contemplated that Ms. Morlok will continue to be
          employed  as Breda's  co-manager  after that date on a  month-to-month
          basis. Breda may terminate Ms. Morlok's employment at any time for any
          reason by giving her thirty days prior written  notice.  In that case,
          however,  Breda must pay Ms.  Morlok an amount equal to the  remaining
          salary that would have been paid to her through the normal termination
          date  of the  employment  agreement.  Breda  may  also  terminate  the
          employment  agreement  on  five  days  prior  written  notice  if  the
          termination is for cause. The employment agreement will also terminate
          thirteen


                                       66

<PAGE>


          weeks after Ms. Morlok is determined to be totally disabled.

          Ms. Morlok's  current annual salary under the employment  agreement is
          $61,000. Her salary is reviewed at least every six months.

          She  also  receives   various  other  benefits  under  the  employment
          agreement,  such as  three  weeks  paid  vacation  per  year;  health,
          disability  and life  insurance;  a death  benefit;  participation  in
          Breda's defined benefit  retirement and security  program;  a clothing
          allowance; and free local telephone and basic cable services.

          Breda  does  not  have  any  written  employment  agreements  with any
          officers or any other employees.

Item 11.  Security Ownership of Certain Beneficial Owners and Management.

          Breda is only authorized to issue common stock.

          The  following  table sets forth some  information  on the  percentage
          ownership of Breda's common stock as of March 1, 2000 by:

          o    each  person  known by Breda to be the  beneficial  owner of more
               than 5% of Breda's common stock;

          o    each of Breda's directors;

          o    each of Breda's officers;

          o    the person employed by Breda as its manager; and

          o    all directors and officers of Breda and the manager of Breda as a
               group.

                            Security Ownership Table

          Name and Address of
            Beneficial Owner           Number of Shares     Percentage Ownership
            ----------------           ----------------     --------------------
          Dean Schettler                      30                    .08%
          16326 120th St.
          Breda, Iowa 51436

          Clifford Neumayer                  181                    .48%
          11846 Ivy Avenue
          Breda, Iowa 51436


                                       67

<PAGE>


          Larry Daniel                         2                    .005%
          15731 Robin Avenue
          Glidden, Iowa 51433

          Dave Hundling                      108                    .29%
          12245 Birch Avenue
          Breda, Iowa 51436

          John Wenck                           6                    .02%
          23909 140th St.
          Carroll, Iowa 51401

          Scott Bailey                        20                    .05%
          12424 120th Street
          Breda, Iowa 51436

          Dave Grabner                        55*                   .15%
          11098 130th Street
          Breda, Iowa 51436

          Robert Boeckman                     30                    .08%
          23678 150th Street
          Carroll, Iowa 51401

          All directors and officers         432                   1.15%
          and the manager as a group
          (8 persons)

          *    One of these shares is held by Mr. Grabner's spouse.

          To Breda's  knowledge,  no person is the beneficial owner of more than
          5% of Breda's common stock.

Item 12.  Certain Relationships and Related Transactions.

          Breda  has not been a party  to any  transaction  during  the last two
          years, or proposed  transaction,  of the type required to be disclosed
          under this Item.  The  transactions  to which  this Item  applies  are
          transactions  involving  Breda and in which any of the following types
          of persons had or is to have a direct or indirect material interest:

          o    any director or officer of Breda,

          o    any nominee for election as a director of Breda,


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          o    any beneficial owner of more than 5% of Breda's common stock, or

          o    any  member of the  immediate  family of any person  referred  to
               above.

Item 13.  Exhibits and Reports on Form 8-K.

          Exhibits.

          The following are the exhibits to this annual report.

          Exhibit No.         Description of Exhibit

             2.1              Stock  Purchase  Agreement  dated May 22, 1998, by
                              and  between   Arthur   Zerwas  and  Mary  Zerwas,
                              Westside Independent  Telephone Company, and Breda
                              Telephone Corporation, along with the Amendment to
                              the Stock Purchase  Agreement  dated May 22, 1998.
                              (Filed  as  Exhibit  2.1 to  Breda's  Registration
                              Statement  on Form 10-SB,  File No.  0-26525,  and
                              incorporated herein by this reference.)

             2.2              Stock  Purchase  Agreement  dated May 22, 1998, by
                              and between  Arthur  Zerwas and Mary  Zerwas,  and
                              Breda   Tele-Services,   Ltd.,   along   with  the
                              Amendment to the Stock  Purchase  Agreement  dated
                              May 22,  1998.  (Filed as  Exhibit  2.2 to Breda's
                              Registration  Statement  on Form  10-SB,  File No.
                              0-26525,   and   incorporated   herein   by   this
                              reference.)

             2.3              Asset Purchase Agreement dated October 6, 1998, by
                              and  between  NewPath  Communications,   L.C.  and
                              Tele-Services,  Ltd.  (Filed  as  Exhibit  2.3  to
                              Breda's Registration Statement on Form 10-SB, File
                              No.  0-26525,  and  incorporated  herein  by  this
                              reference.)

             2.4              Asset Purchase Agreement by and between Golden Sky
                              Systems,  Inc.  and  Breda  Telephone  Corporation
                              dated as of  November  30,  1998,  along  with the
                              Amendment of Asset Purchase  Agreement dated as of
                              January 11, 1999. (Filed as Exhibit 2.4 to Breda's
                              Registration  Statement  on Form  10-SB,  File No.
                              0-26525,   and   incorporated   herein   by   this
                              reference.)

             3.1              Amended and Restated  Articles of Incorporation of
                              Breda  Telephone  Corp.  (Filed as Exhibit  3.1 to
                              Breda's Registration


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<PAGE>


                              Statement  on Form 10-SB,  File No.  0-26525,  and
                              incorporated herein by this reference.)

             3.2              Amended  and  Restated  Bylaws of Breda  Telephone
                              Corp.  (Filed as Exhibit 3.2 to Amendment No. 1 to
                              Breda's Registration Statement on Form 10-SB, File
                              No.  0-26525,  and  incorporated  herein  by  this
                              reference.)

          **10.1              Employment   Contract  between  Breda  and  Robert
                              Boeckman   (Filed  as  Exhibit   10.1  to  Breda's
                              Registration  Statement  on Form  10-SB,  File No.
                              0-26525,   and   incorporated   herein   by   this
                              reference.)

          **10.2              Employment Agreement between Breda and Jane Morlok
                              (Filed as  Exhibit  10.2 to  Breda's  Registration
                              Statement  on Form 10-SB,  File No.  0-26525,  and
                              incorporated herein by this reference.)

              21              List of  Subsidiaries.  (Filed  as  Exhibit  21 to
                              Breda's Registration Statement on Form 10-SB, File
                              No.  0-26525,  and  incorporated  herein  by  this
                              reference.)

             *27              Financial Data Schedule.

          *    Included with this filing.

          **   Management contracts or compensatory plan or arrangement required
               to be filed as exhibits pursuant to Item 13(a) of Form 10-KSB.

          Reports on Form 8-K.

          Breda did not file any  reports on Form 8-K  during  the three  months
          ended December 31, 1999.


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                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                             BREDA TELEPHONE CORP.


Date: March 28, 2000.                         By: /s/ Dean Schettler
                                                  ------------------------------
                                                  Dean Schettler, President


     In  accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.


By: /s/ Clifford Neumayer                    By:  /s/ Larry Daniel
    ---------------------------------             -----------------------------
    Clifford Neumayer, Vice-President             Larry Daniel, Secretary
    and Director                                  and Director

Date: March 28, 2000.                        Date: March 28, 2000.


By: /s/ Dave Hundling                        By:  /s/ John Wenck
    ---------------------------------             -----------------------------
    Dave Hundling, Director                       John Wenck, Director

Date: March 28, 2000.                        Date: March 28, 2000.


By: /s/ Dean Schettler                       By:  /s/ Dave Grabner
    ---------------------------------             -----------------------------
    Dean Schettler, President                     Dave Grabner, Director
    and Director

Date: March 28, 2000.                        Date: March 28, 2000.


By: /s/ Scott Bailey                         /s/ Robert J. Boeckman
    ---------------------------------        ----------------------------------
    Scott Bailey, Treasurer                  Robert J. Boeckman, Manager
    and Director

Date: March 28, 2000.                        Date: March 28, 2000.


                                             /s/ Jane Morlok
                                             ----------------------------------
                                             Jane Morlok, Co-Manager

                                             Date: March 28, 2000.


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