UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 FORM 10-K x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2008ORo
TRANSITION REPORT PURSUANT TO SECTION 13 OR
 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from __________ to
______________Commission File Number: 0-26525BREDA
 TELEPHONE CORP.(Exact
 name of registrant as specified in its charter)  Iowa

42-0895882(State
 or other jurisdiction of

(I.R.S.
 Employerincorporation
 or organization)

Identification
 No.)  112 East Main, P.O. Box 190, Breda, Iowa

51436(Address
 of principal executive offices)

(Zip
 Code) Registrants telephone
number, including area code: (712) 673-2311 Securities registered
pursuant to Section 12(b) of the Act: None Securities registered
pursuant to Section 12(g) of the Act: Common Stock, no par value Indicate
 by check mark if the registrant is a well-known seasoned issuer, as defined
 in Rule 405 of the Securities Act.Yes     o     No     x    Indicate by check mark if the registrant is not required to file
 reports pursuant to Section 13 or Section 15(d) of the Act.Yes     o     No     xIndicate by check mark whether the registrant (1) has filed all
 reports required to be filed by Section 13 or 15(d) of the Securities
 Exchange Act of 1934 during the preceding 12 months (or for such shorter
 period that the registrant was required to file such reports), and (2) has
 been subject to such filing requirements for the past 90 days.Yes     x     No     oIndicate by check mark if disclosure of delinquent filers pursuant
to
 Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
 herein, and will not 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-K or any amendment to this Form 10-K.xIndicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer
o

Accelerated filer
oNon-accelerated filer
o

Smaller
 reporting company
xIndicate by check mark whether the registrant is a shell company
(as
 defined in Rule 12b-2 of the Exchange Act).Yes     o     No     xThe
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant was $15,505,667 as of March 1, 2009. The
registrants stock is not listed on an exchange or otherwise publicly traded,
and the value of the registrants stock for this purpose has been based upon
the $509 per share redemption price of the registrants stock as determined by
its board of directors and that was in effect on March 1, 2009. In determining
this value, the registrant has assumed that all of its directors and officers,
including its chief executive officer, chief operations officer and chief
financial officer, are affiliates, but this assumption shall not apply to or be
conclusive for any other purpose.

The number of shares outstanding of each of the registrants
classes of
common stock as of March 1, 2009 was 30,851.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the
registrants
definitive proxy statement to be filed with the Securities and Exchange
Commission with respect to the 2009 annual meeting of the shareholders of the
registrant are incorporated by reference into Item 11 of Part III of this Form
10-K.

BREDA TELEPHONE CORP.
FORM 10-K
For the Fiscal Year Ended December 31, 2008

INDEX

Part
 I.Item
 1.
Business.

1Item
 1A.
Risk
 Factors.

12Item
 1B.
Unresolved
 Staff Comments.

12Item
 2.
Properties.

12Item
 3.
Legal
 Proceedings.

15Item
 4.
Submission
 of Matters to a Vote of Security Holders.

16Part
 II.Item
 5.
Market
 for Registrants Common Equity, Related Stockholder Matters and Issuer
 Purchases of Equity Securities.

16Item
 6.
Selected
 Financial Data.

25Item
 7.
Managements
 Discussion and Analysis of Financial Condition and Results of Operations.

25Item
 7A.
Quantitative
 and Qualitative Disclosures About Market Risk.

49Item
 8.
Financial
 Statements.

50Item
 9.
Changes
 in and Disagreements With Accountants on Accounting and Financial Disclosure.

80Item
 9A(T).
Controls
 and Procedures.

80Item
 9B.
Other
 Information.

81Part
 III.Item
 10.
Directors,
 Executive Officers and Corporate Governance.

81Item
 11.
Executive
 Compensation.

85Item
 12.
Security
 Ownership of Certain Beneficial Owners and Management and Related Stockholder
 Matters.

85Item
 13.
Certain
 Relationships and Related Transactions and Director Independence.

87Item
 14.
Principal
 Accountant Fees and Services.

87Part
 IV.Item
 15.
Exhibits
 and Financial Statement Schedules.

88SIGNATURES


91Code of Ethics
Certification of Chief Executive Officer
Certification of Chief Financial Officer
Section 1350 Certification of Chief Executive Officer
Section 1350 Certification of Chief Financial Officer

CAUTIONARY
STATEMENT ON FORWARD LOOKING STATEMENTSAND INDUSTRY AND MARKET DATA

Various discussions
and statements in this annual report are or contain forward looking statements
that express Bredas current beliefs, forecasts, projections and predictions
about future events. All statements other than statements of historical fact
are forward looking statements, and include statements with respect to
financial results and condition; anticipated trends in business, revenues, net
income, net profits or net losses; projections concerning operations, capital
needs and cash flow; investment, business, growth, expansion, acquisition and
divestiture opportunities and strategies; managements plans or intentions for
the future; competitive position or circumstances; and other forecasts,
projections and statements of expectation. Words such as expects,
anticipates, estimates, plans, may, will, contemplates,
forecasts, strategy, future, potential, predicts, projects,
prospects, possible, continue, hopes, intends, believes,
seeks,
should, could, thinks, objectives and other similar expressions or
variations of those words or those types of words help identify forward looking
statements.

Forward
looking statements involve and are subject to various material risks,
uncertainties and assumptions. Forward looking statements are necessarily
subjective and are made based on numerous and varied estimates, projections,
views, beliefs, strategies and assumptions made or existing at the time of such
statements and are not guarantees of future results or performance. Forecasts
and projections are also in all events likely to be inaccurate, at least to
some degree, and especially over long periods of time, and in particular in a
rapidly changing industry such as the communications industry. Forecasts and
projections are also currently difficult to make with any degree of reliability
or certainty given the severe credit, market and other economic circumstances
in existence at the time of the preparation of this annual report. 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. Breda cannot guarantee
Bredas future results, performance or business conditions, and strong or undue
reliance must not be placed on any forward looking statements.

Actual future
 performance, outcomes and results may differ materially from those suggested
 by or expressed in forward looking statements as a result of numerous and
 varied factors, risks and uncertainties, some that are known and some that
 are not, and many of which are beyond the control of Breda and Bredas
 management. It is not possible to predict or identify all of those factors,
 risks and uncertainties, but they include all of the various factors, risks
 and uncertainties discussed in this annual report and the following:
adverse changes by the Federal Communications Commission, the Iowa
 Utilities Board or other regulatory authorities to the access charge rates
 that can be charged by Breda and its subsidiaries to long distance carriers
 or to the rules and(i)

other requirements regarding access charge rates or access charges,
 whether instituted by the regulatory authorities or at the request or by
 reason of court or other actions taken by long distance carriers or other
 interested persons;
technological advances in the telecommunications, cable and related
 industries, which are always occurring and at an ever increasing rate, and
 any one or more of which may replace or otherwise adversely affect in a
 material way the existing technologies utilized by Breda and its
 subsidiaries;
changes in employee relations, including the loss of a key employee
 or employees;
industry conditions and occurrences, including bankruptcies and
 insolvencies of long distance carriers, and consolidations in the
 telecommunications and cable industries, which generally result in
 competitors which are larger and better financed and with greater geographic
 reach, allowing them to compete over broader areas and more effectively;
economic conditions at the national, regional and local levels,
which
 are always somewhat uncertain given that many different tangible and
 intangible factors and occurrences can affect the economy;
political conditions and occurrences at the international,
national,
 regional and local levels, including rumors about, or threats and/or acts of,
 terrorism or war;
the general emotions and psychology of the economy, the markets and
 consumers, which can at times seem to be totally unrelated to actual economic
 or market conditions or other more tangible factors;
litigation;
inaccurate assumptions or predictions by management;
the ability to enter into and maintain agreements which are
necessary
 to provide services, and on terms which are favorable to Breda;
ever increasing costs and expenses which are necessary to
Bredas and
 its subsidiaries businesses but which are outside of Bredas control, such
 as health and other insurance costs;
new third parties entering into Bredas or any of its
subsidiaries
 marketing or service areas;(ii)


acts or omissions of existing and/or new competitors and other
third
 parties, including offering lower prices or new or substitute products or
 services and their use of new marketing strategies and approaches;
the risks associated with technology requirements, technology
 substitution and changes and other technological developments;
changes in or more governmental laws, rules, regulations or
policies;
reductions in or other changes to governmental programs assisting
or affecting
 the telecommunications, cable and related industries, and in particular
 programs which aid providers of those services to rural areas;
the continued availability of financing, and on terms which are
 favorable to Breda, and the cost of financing and consequences of leverage;
 and
the effects of ever increasing and changing competition and
 relationships with other carriers and other parties, including competition or
 relationships which result in Breda or its subsidiaries having to develop new
 pricing for services, such as interexchange access charges and wireless
 access charges, or new marketing strategies or new product offerings, and the
 related risk that Breda or its subsidiaries will not be able to respond on a
 timely or profitable basis to competitive changes or pressures.Breda
may
have obtained industry, market, competitive position and other data used in
this annual report or in Bredas general business plan from Bredas own
research or internal surveys, studies conducted by other persons and/or trade
or industry associations or general publications and other publicly available
information. Breda attempts to utilize third party sources of information which
Breda believes to be materially complete, accurate, balanced and reliable, but
there is no assurance of the accuracy, completeness or reliability of any third
party information. For example, a trade or industry association for an industry
may present information in a manner that is more favorable to that industry
than would be presented by an independent source. Industry publications and
surveys and other publicly available information also generally state that they
have obtained information from sources believed to be reliable, but do not
guarantee the accuracy and completeness of any information.

[THE REST OF THIS PAGE IS INTENTIONALLY LEFT
BLANK]

(iii)

PART I

Item 1.
Business.General Overview.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 provided by three of Bredas wholly owned
 subsidiaries, Prairie Telephone Co., Inc., Westside Independent Telephone
 Company and BTC, Inc. A total of eight Iowa towns and their surrounding rural
 areas currently receive telephone services from Breda, Prairie Telephone,
 Westside Independent or BTC, Inc.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.BTC, Inc. is an Iowa corporation that was incorporated in 1997.
BTC,
 Inc. has provided Internet access services in the Carroll, Iowa market area
 since 1997. BTC, Inc. also provides Internet access services to the customers
 of Breda, Prairie Telephone and Westside Independent who subscribe for
 Internet services. BTC, Inc. has provided long distance services in the
 Carroll, Iowa market area since July, 2000, and local telephone services
 since October, 2003. BTC, Inc. also provides long distance services to the
 customers of Breda, Prairie Telephone and Westside Independent who subscribe
 for long distance services. BTC, Inc. is a wholly owned subsidiary of Prairie
 Telephone.Tele-Services, Ltd. is also a wholly owned subsidiary of Breda.
 Tele-Services provides cable television services to twelve towns in Iowa and
 one town in Nebraska. Tele-Services is an Iowa corporation that was
 incorporated in 1983.Breda and its subsidiaries all conduct business under the names
 W.I.N. or Western Iowa Networks.Bredas and its subsidiaries telephone, Internet
services and cable
 television businesses are discussed in more detail below. Some of the other
 miscellaneous business operations of Breda and its subsidiaries are also
 noted below.1

Local Exchange
 Carrier ServicesBreda, Prairie Telephone, Westside Independent and BTC, Inc.
provide
 telephone services to the following eight Iowa towns and their surrounding
 rural areas:



Breda, Iowa


Pacific Junction, Iowa
Lidderdale,
 Iowa


Yale, Iowa
Macedonia,
 Iowa


Westside,
 Iowa
Farragut,
 Iowa


Carroll,
 IowaAll of the towns are in central and
 southern 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, and BTC, Inc. provides services to
 the city of Carroll. The surrounding rural areas that are served are
 generally those within approximately a ten-mile to fifteen-mile radius of
 each of the towns, except for Carroll. No rural customers are served outside
 of the Carroll city limits.The primary services of Breda, Prairie Telephone, Westside
 Independent and BTC, Inc. are providing their subscribers with basic local
 telephone service and access services for long distance calls outside the
 local calling area. As of December 31, 2008, they were serving approximately
 3368 telephone numbers and related access lines. Breda, Prairie Telephone and
 Westside Independent derive their principal revenues from providing those
 services.BTC, Inc.s principal revenue sources in 2008 were from
providing
 Internet services, conference bridge services, long distance services, basic
 local telephone service and access services for long distance calls outside
 of BTC, Inc.s Carroll, Iowa local calling area. BTC, Inc. provides Internet
 services and long distance services for its own customers and for the
 customers of Breda, Prairie Telephone and Westside Independent.Breda, Prairie Telephone, Westside Independent and BTC, Inc. 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.Broadcast ServicesTele-Services owns and operates the cable television systems in the
 following twelve Iowa towns:2


Arcadia


Hamburg


Sidney
Auburn


Malvern


Tabor
Breda


Oakland


Treynor
Farragut


Riverton


WestsideTele-Services also owns and operates the cable television system
for
 the town of Beaver Lake, Nebraska.Tele-Services provided cable television services to Neola, Iowa
until
 October 1, 2005, when Tele-Services, Ltd. sold the Neola cable television
 system to Walnut Telephone Company. Tele-Services discontinued operations in
 the three small Iowa communities of Bayard, Lohrville and Thurman during the
 third quarter of 2008. Tele-Services sold its Churdan, Iowa and its Grand
 Junction, Iowa cable systems in November, 2008.Tele-Services was providing cable television services to
 approximately 1,757 subscribers as of December 31, 2008.Tele-Services derives its principal revenues from the monthly fees
 which are charged to its cable subscribers for basic and premium cable
 services.Tele-Services provides cable services to each of the towns pursuant
 to franchises or agreements with each of those towns.Internet
 Service ProviderBTC, Inc. provides dial-up and high speed Internet access services
to
 its customers and to customers of Breda, Prairie Telephone and Westside
 Independent. BTC, Inc. was providing dial-up Internet access to approximately
 406 subscribers as of December 31, 2008. Of that amount, approximately 224 were
 subscribers from BTC, Inc.s Carroll, Iowa market area. The area served by
 BTC is currently limited to Carroll, Iowa and various communities surrounding
 Carroll, Iowa. BTC, Inc. was providing satellite, wireless and DSL-related,
 high speed Internet to approximately 1,074 customers as of December 31, 2008.Miscellaneous
 BusinessRevenues are also generated from sales of cellular phones and
related
 service packages, which are made pursuant to Bredas September 1, 1999 agency
 agreement with U.S. Cellular. The agreement allows Breda to sell cellular
 phones and related packages to the public, and Breda receives commissions on
 those sales. The agency agreement provides that it automatically renews for a
 period of one year on each September 1, unless either Breda or U.S. Cellular
 gives the other written notice of nonrenewal at least thirty days before the
 end of the current one-year term, but subject to immediate termination if
 there is a material breach of the agency3

agreement. Breda anticipates that a new agency agreement will need
to
 be entered into with U.S. Cellular at some point. Breda is hopeful, however,
 based on its past negotiations with U.S. Cellular, that any new agreement
 will, at worst, have a neutral impact on Bredas cellular commissions
 revenue.Breda had two cellular phone retail outlets in the Carroll, Iowa
 market, which were located at Bredas and BTC, Inc.s office in Carroll, Iowa
 and the Wal-Mart store in Carroll, Iowa. On February 22, 2008, Breda combined
 its Wal-Mart retail outlet with its Carroll office outlet when Wal-Mart moved
 its former operations to a new Super Walmart store at the edge of Carroll.
 Breda was informed that Super Walmart space allocations would only allow for
 the corporate cellular account, which is a competing service provider to
 Bredas U.S. Cellular service. Breda is continuing to pursue a second retail
 outlet location in Carroll, but has not experienced a slowdown in its
 cellular traffic because it expanded its office hours in its Carroll office
 outlet.Breda and some of its subsidiaries have investments in other
entities
 which are involved in various aspects of the telecommunications industry.For example, Prairie Telephone holds approximately 33% of the units
 of each of Guthrie Group, L.L.C., and Carroll County Wireless, L.L.C. as of
 December 31, 2008. Breda purchased an additional one-third interest in
 Carroll County Wireless, L. L. C. and received FCC approval in early 2009.
 Breda now owns 66.67% of Carroll County Wireless, L.L.C. Guthrie Group,
 L.L.C. holds spectrum for providing personal communications services in some
 telephone exchange areas located in Guthrie County, Iowa. Carroll County
 Wireless, L.L.C. holds spectrum for nearly all of Carroll County, Iowa.
 Spectrum is bandwidth allocated by the FCC which can be used in the
 transmission of voice, data and television communications.Carroll County Wireless, L.L.C. turned up its initial tower to
accept
 roaming traffic in January 2006, and no further towers have been constructed
 to date. Guthrie Group, L.L.C. turned up its tower to receive roaming traffic
 on March 24, 2006. Guthrie Group,
 L.L.C. and Carroll County Wireless, L.L.C. are each continuing to
 evaluate feasibility studies to determine future tower site build-out time
 frames.Breda, Prairie Telephone, Westside Independent and BTC, Inc. do not
 currently own spectrum for all of the telephone exchange service areas
 serviced by them, and there is no guarantee that they will be able to acquire
 spectrum for all of those areas. Breda, Prairie Telephone, Westside Independent
 and BTC, Inc. will also face competition in providing personal communications
 services because no exclusive rights can be acquired with respect to that
 technology.Prairie Telephone owns approximately 9.94% of the units of Bug
Tussel
 Wireless, L.L.C. Bug Tussel Wireless, L.L.C. is located in Green Bay,
 Wisconsin, and its operating plan involves erecting tower sites for wireless
 services. This investment is accounted for using the equity method of
 accounting.4

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 owns 10.38% of
 RSA #1, Ltd. and 7.1% of 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 .67% of Iowa Network Services
 outstanding common stock and .38% of its preferred stock. Westside
 Independent owns .45% of Iowa Network Services outstanding common stock and
 .28% of its preferred stock.Breda is an investor in RSA #9, Ltd. and West Iowa Cellular, Inc.
 Westside Independent is also an investor in West Iowa Cellular, Inc. West
 Iowa Cellular, Inc. and RSA #9, Ltd. provide cellular services in rural areas
 in southern and central Iowa.On December 15, 2008, Breda and the remaining investors in Alpine
 Communications, L.C. purchased the units sold by one of the original
 investors, under their right of first refusal option. With the purchase of
 these additional units of Alpine Communications, L.C. on December 15, 2008,
 Breda owns 22.26754% of the membership interests in Alpine Communications,
 L.C., which provides telecommunications exchange and local access services,
 long distance service, and cable television service in service areas located
 primarily in Clayton County in northeastern Iowa.Breda, Prairie Telephone and Westside Independent each own 10,000
 shares of common stock in Solix, Inc. (formerly NECA Services, Inc.), which
 is a for-profit corporation organized in 2000 to carry on and expand various
 business opportunities which may from time to time be presented to the
 National Exchange Carrier Association, Inc. (NECA). The general business
 plan was that non-regulated business opportunities would be conducted by
 Solix, Inc. so that NECA could concentrate on its traditional core tariff and
 pooling services.Solix, Inc. has, however, attempted to diversify its business. For
 example, Solix, Inc. serves the telecommunications industry through contracts
 with the Universal Service Administrative Company for support of the federal
 schools and libraries and rural health care universal service programs. As
 another example, Solix, Inc. also provides services to various agencies of
 both the state and federal governments, and more than half of Solix, Inc.s
 business in 2008 involved the direct administration of government contracts.Prairie Telephone also owns 35.29% interest in Spiralight Network,
 L.L.C. Spiralight Network, L.L.C. provides fiber transport services in
 Wisconsin, Illinois and Minnesota.Effective January 15, 2009, Prairie Telephone and all unit holders
in
 Spiralight Network, L.L.C. and in Bug Tussel Wireless, L.L.C., in addition to
 all unit holders in various related telecommunications entities, executed an
 Exchange Agreement with5

Hilbert Communications, LLC., whereby Prairie Telephone and the
other
 investors received newly issued units in Hilbert Communications, LLC in
 exchange for units they owned in the various related telecommunications
 entities. Pending FCC approval on the spectrum companies, the following
 companies became wholly-owned subsidiaries of Hilbert Communications: Bug
 Tussel Wireless, LLC; Spiralight Network, LLC; Intelegra, LLC; Cloud1, LLC;
 Dakota Wireless, LLC; Michigan Wireless, LLC, JustKake Investments, LLC and
 Node Two Networks, LLC. Prairie Telephone owns 8.5% of Hilbert
 Communications, LLC.Bredas share of the earnings or losses of some of the above
 investments is reported on Bredas income statement on the equity basis. Some
 of the investments may be a source of cash flow for Breda, Prairie Telephone
 and Westside Independent through distributions which may be made by the
 entities. Breda, Prairie Telephone and Westside Independent do not, however,
 control any distribution decisions for any of those entities, so no
 distributions are ever guaranteed, and the timing and amount of any
 distributions will likely vary greatly from year to year.The value of Bredas, Prairie Telephones and Westside
Independents
 investments in the above entities and of their other investments may 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 their ability to transfer their ownership interests in those
 entities to third parties. Some 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.Breda, Prairie Telephone and Westside Independent were each owners
of
 Class C stock in the Rural Telephone Bank. Breda owned 596 shares, Prairie
 Telephone owned 700 shares, and Westside Independent owned 40 shares. All of
 Bredas, Prairie Telephones and Westside Independents shares were redeemed
 on April 13, 2006 for an aggregate of $1,336,000. The shares were carried at
 cost, and the par value of the shares was $1,336,000. The net of tax gain on
 the redemption of the shares was approximately $698,946.Prairie Telephone sold its 28% ownership interest in Desktop Media,
 L.L.C. to Jaguar Communications, Inc. in September, 2007 for an aggregate of
 $317,383.Breda and its subsidiaries also have various other miscellaneous
 investments. Some of those investments are described in the financial
 statements included in Item 8 of this annual report.Neither Breda nor any of its subsidiaries engage in any material
 research and development activities.6

Regulatory
 Requirements and OversightBreda, Prairie Telephone, Westside Independent and BTC, Inc. 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.The material areas of regulation by the IUB are as
follows:
Breda, Prairie Telephone, Westside Independent and BTC, Inc. 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, Westside Independent and
 BTC, Inc. 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, Westside Independent and BTC, Inc. 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, Westside Independent or
 BTC, Inc.
The IUB must approve of any expansion beyond the telephone service
 areas currently served by Breda, Prairie Telephone, Westside Independent and
 BTC, Inc. 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, Westside Independent or BTC, Inc., 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, Westside
 Independent or BTC, Inc. would be approved by the IUB. (The approval of the
 Federal Communications Commission will also be necessary for any proposed
 expansion, as discussed below.)
The IUB has designated Breda, Prairie Telephone and Westside
Independent
 as eligible telecommunications carriers. This designation allows them to
 receive the universal services funding component of the support payment
 funding program administered by the Federal Communications Commission. The
 1996 Telecom Act mandated goals of universal service to promote the
 availability of quality services at just, reasonable, and affordable rates;
 increasing access to advanced telecommunications services throughout the
 nation; and advancing the availability of such services to all consumers,7

including those in low income, rural, insular, and high cost areas
at
 rates that are reasonably comparable to those charged in urban areas. Four
 funding programs within universal services funding are broken out to meet
 these goals: High Cost; Schools and Libraries; Low Income; and Rural
 Healthcare. Breda, Prairie Telephone and Westside Independent were able to
 obtain the eligible telecommunications carrier designation because they are
 able to provide the services which are supported by the Universal Services
 Fund. Although not anticipated to occur, their designation as an eligible
 telecommunications carrier could be lost if they fail to provide the services
 supported by the universal services program, which would result in them no
 longer being able to receive universal services funding. Those services are,
 however, currently only the basic local telephone services provided by Breda,
 Prairie Telephone and Westside Independent. They received universal services
 funding of approximately $910,608 in the aggregate in 2006, $1,030,599 in the
 aggregate in 2007, and $1,020,202 in the aggregate in 2008. Breda anticipates
 receiving High Costs program and Low Income program universal services
 funding in 2009 in an amount comparable to that received in 2008.BTC, Inc. has been designated as an eligible telecommunications
 carrier by the IUB. Since BTC, Inc. is a competitive local exchange carrier
 in the Carroll, Iowa market, however, it is only eligible to receive High
 Cost universal service funds if the incumbent local exchange carrier receives
 those funds. The incumbent local exchange carrier is Qwest, and Qwest does
 not receive universal service funding for the Carroll, Iowa market. BTC, Inc.
 is therefore not eligible for the High Cost universal service funding
 program. BTC is, however, able to be reimbursed for the Low Income universal
 service funding program.
Breda, Prairie Telephone, Westside Independent and BTC, Inc. are
 currently treated as rural telephone companies under the Telecommunications
 Act of 1996. This treatment may at times exempt them from some of the
 interconnection and other duties which are 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, Westside Independents or BTC, Inc.s networks is not
 unduly economically burdensome, is not technically unfeasible, and would not affect
 the provision of universal service. It is not possible to 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, Westside Independent and BTC,
 Inc. would face competition in providing telephone services that they have
 not faced in the past.Breda, Prairie Telephone, Westside Independent and BTC, Inc. are
also
 subject to8

regulation by the Federal Communications Commission
(FCC). The
 material areas of regulation by the FCC are as follows:
The FCC regulates the access charge rates that can be charged by
 Breda, Prairie Telephone, Westside Independent and BTC, Inc. for interstate
 long distance calls. The National Exchange Carrier Association has been
 delegated some authority by the FCC regarding the regulation of access charge
 rates, but all changes proposed by the National Exchange Carrier Association
 must be approved by the FCC. The regulation of access charge rates is an area
 of particular concern and risk to Breda, Prairie Telephone, Westside
 Independent and BTC, Inc., and is discussed below and in Item 7 of this
 annual report.
The FCC must approve of any expansion beyond the telephone service
 areas currently served by Breda, Prairie Telephone, Westside Independent and
 BTC, Inc. 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, Westside Independent or BTC, Inc., 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, Westside Independent or BTC., Inc.
 would be approved by the FCC.
The FCC regulates the amount of support payment funding that will
be
 received by Breda, Prairie Telephone and Westside Independent. A material
 risk to Breda arises from the regulation of support payment funding by the
 FCC since support payment funding constitutes a substantial part of Bredas
 revenues. The FCC regulates support payment funding 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,
 and it is not possible to predict how the FCC will allocate the support
 payment funding in any year. The amount of support payment funding received
 by Breda, Prairie Telephone and Westside Independent will therefore vary from
 year to year. For example, they received, in the aggregate, support payment
 funding of $1,830,898 in 2006, $1,873,353 in 2007, and $1,812,971 in 2008.
 Those amounts include the amount of the universal services funding component
 which is listed in the above discussion regarding the IUB. BTC, Inc. is not
 eligible to be a member of the National Exchange Carriers Association
 because, among other reasons, BTC, Inc. is not an incumbent local exchange
 carrier. BTC, Inc. therefore does not receive support payment funding from
 the National Exchange Carriers Association.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 affect9

rates or expansions of service areas. 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.Competitive
 Position and Factors Affecting Bredas Operating PerformanceBreda believes that a number of industry and company-specific
factors
 are affecting and will continue to affect Bredas competitive position and
 results of operations. These factors include the following:
The effect on Bredas revenues of declining numbers of access
lines
 caused by customer migration to cell phone usage only; technology advances
 allowing the provisioning of Internet services on the same access line as
 voice service; technology advances provisioning residential and business
 voice services over data circuits (VOIP); and the declining population base
 in the rural areas served by Breda and its subsidiaries.Bredas strategic response to these trends includes efforts to
 introduce and provide enhanced local services and additional services like
 voice mail, dial-up and DSL Internet access, long distance services, and to
 provide cellular services through its agency agreement with U.S. Cellular.
 Breda also seeks to maximize its telecom industry offerings by partnering
 with surrounding telephone companies in wireless service ventures and through
 investment in cellular partnerships within the state of Iowa and surrounding states.
 Breda has also undertaken to compete with Qwest for voice, long distance, and
 Internet service customers in the county seat of Carroll, Iowa.
The effect on Bredas revenues from current and potential
future
 changes in access rate regulation at the state and federal levels and in
 universal services funding by the FCC.The IUB has reduced intrastate access rates by 2.7 cents per minute
 effective February 7, 2009. Discussions to reduce interstate access rates and
 to reduce and revamp universal services funding also continue at the federal
 level at the FCC.
The effect on Bredas revenues from rate and pricing
structure caused
 by the competition of multiple providers in the Carroll, Iowa market. The
 incumbent local exchange carrier (Qwest), the local cable TV provider
 (Mediacom) and additional outside competitors in that market have all
 partnered with telecommunication providers that can bring additional service
 components to complete a bundled service offering to the customer in what is
 known in the industry as the triple play. Customers receive local phone
 service, blocks of long distance service10

minutes, Internet services, and broadcast services (cable TV or
 satellite TV) for a competitive price.Breda has switching capabilities for the Carroll, Iowa market that
 allows Breda to offer another flavor of high-speed Internet services, in
 addition to its voice, long distance and present Internet services. The
 switching capabilities would also allow Breda to bring fiber to the home,
 which would be an overbuild of the Carroll market, and would allow Breda to
 be self-reliant in providing communication services to that community by no
 longer needing to lease access lines from Qwest to provide services. Bredas subsidiary,
 BTC, Inc. received final approval for release of funds for a $10,000,000
 broadband loan from the RUS (Rural Utilities Services) on Friday, March 13,
 2009. The funds will be used to overbuild Carroll, Iowa, and bring the most
 advanced telecommunications network possible through fiber optic technology
 to each home and business. Breda anticipates that construction will begin by
 late third quarter 2009 and will be completed in 2011. State of the art video
 services will be offered in addition to the already-listed telecommunication
 services.Breda will modify its package offerings and pricing structures as
it
 rolls out the advanced services in Carroll, Iowa.
The effect on Bredas revenues from decreased customer counts
for
 dialup Internet as well as cable TV services. Competition and bundled
 services, declining population bases in some of Bredas and its subsidiaries
 rural service areas, and cost of technology upgrades play a role in the
 competition for and retention of customers. Breda continues to consolidate
 cable TV programming transmission equipment in its communities where it is
 geographically feasible, in order to reduce system and service costs which
 are incurred to provide the cable TV services. Breda discontinued its cable
 TV services in third quarter 2008 to 127 customers in the small Iowa rural
 communities of Bayard, Lohrville, and Thurman. Breda is attempting to sell
 all remaining cable TV exchanges except for those communities in which it
 offers local telephone service.
The effect on Bredas revenues from decreased access revenue
caused
 by a decrease in the number of long distance calls originating from, or
 terminating to, an access line in one of Bredas telephone exchanges. The
 proliferation of wireless phone usage, and the designation of new technology
 by the FCC as data services, instead of voice services, have both decreased
 the minutes of use on Bredas networks, which results in less access
 revenue, and caused the industry access payment structure to be renegotiated
 by the new technology providers and wireless providers.11

A more detailed discussion of some of the above factors is included
 in Item 7 of this annual report.Service MarksBreda has registered the mark W.I.N. Western Iowa
Networks with the
 United States Patent and Trademark Office, and Breda and its subsidiaries
 have all conducted their businesses under the names W.I.N. or Western Iowa
 Networks since the second quarter of 2001. Bredas use of the mark and
 related logos is intended to create an integrated, unified marketing approach
 for all of the products and services of Breda and its subsidiaries and to
 increase awareness of those products and services.EmployeesAs of December 31, 2008, Breda had 34 full time employees and 1
part
 time employee. Breda employs all of those employees, but those employees also
 provide the labor and services for Prairie Telephone, Westside Independent,
 Tele-Services and BTC, Inc. 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 three of Bredas employees
 have written employment agreements. Those employment agreements were with the
 chief executive officer, the chief operations officer and the chief financial
 officer of Breda. Breda may utilize part-time employees on an as needed
 basis.Item 1A.
Risk Factors.This Item is not applicable to smaller reporting companies such as
 Breda.Item 1B.
Unresolved Staff Comments.This Item is not applicable to smaller reporting companies such as
 Breda.Item 2.
Properties.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:
Bredas corporate offices are located at 112 East Main,
Breda, Iowa.
 The building has approximately 7,680 square feet, and is utilized by Breda,
 Tele-Services, Prairie Telephone, Westside Independent and BTC, Inc.
There is a building attached to Bredas corporate office
building
 which12

serves as Bredas central office building. 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. As noted, Bredas corporate office building is also located on a portion
 of this real estate.
Breda owns certain real estate and a warehouse which is also
located
 at 112 East Main, 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.).
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.
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.
Breda leases a portion of the building owned by BTC, Inc. at 603 N.
 Adams, Carroll, Iowa. Breda utilizes its portion of the building as a retail
 store for the sale and lease of telephone, cellular and related equipment and
 merchandise.Prairie Telephone owns or leases the following real estate:
Prairie Telephones corporate offices are located in
Bredas
 corporate office building at 112 East Main, Breda, Iowa.
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.
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.).13


Prairie Telephone owns the real estate and building located at 500
 Washington Avenue, Pacific Junction, Iowa. The building houses equipment used
 to 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.
Prairie Telephone owns the real estate and a second building
located
 at 500 Washington Street, Pacific Junction, Iowa. The building was formerly
 used to house equipment used in providing telephone services, but is
 currently vacant.
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.BTC, Inc. owns the real estate and building located at 603 N.
Adams,
 Carroll, Iowa. The building has approximately 4,450 square feet. The building
 is used as a satellite administrative office, and houses sales and marketing
 staff and customer service representatives. The building is the main location
 for walk-in, customer traffic for telephone and Internet services in the
 Carroll market area. Breda leases a portion of the building for use as a
 retail store for the sale of cellular and related equipment and merchandise.BTC, Inc. owns a second building located at 603 N. Adams, Carroll,
 Iowa. The building houses equipment used by BTC, Inc. in providing telephone
 services and Internet access services. The building has approximately 280
 square feet.Westside Independent owns the real estate and building located at
131
 South Main Street, Westside, Iowa. The building 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 also been used as the city offices for Westside,
 Iowa, since approximately April 1, 2003. Breda does not charge any rent to
 the city of Westside for its use of the building. The building was also
 previously used for Westside Independents corporate offices. The building
 has approximately 1,600 square feet.Tele-Services owns buildings located in thirteen different towns
 which house some equipment used to receive, descramble and transmit
 television signals. The equipment is sometimes referred to in the cable
 industry as head-end equipment. The buildings each have approximately 150
 square feet. Tele-Services owns the real estate which houses its buildings in
 Malvern, Iowa and in Beaver Lake, Nebraska. The rest of Tele-Services
 buildings are located on real estate in each of the towns,14

which is generally made available to Tele-Services under its
 franchise or other agreement with those towns, but 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, but in some cases Tele-Services 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 becomes necessary for some reason.Breda, Prairie Telephone, Westside Independent and BTC, Inc. also
 each own various equipment used to switch, record and transmit telephone
 calls in the areas serviced by them. The 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 from between
 approximately 5-12 years. The current equipment was purchased at various
 times over the period of 1998 to 2008. 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, Inc. 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. Breda believes that the normal and ordinary useful life of
 this type of equipment is approximately 10 years. 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, Inc. 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, while others are on or across private property.All of the real estate and substantially all of the other assets of
 Breda, Prairie Telephone, Westside Independent 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 loans
 from the Rural Telephone Finance Cooperative. All of the real estate and
 substantially all of the other assets of BTC, Inc. are subject to mortgage
 and security agreements in favor of the Rural Utilities Service (RUS).Item 3.
Legal Proceedings.Except as noted in the following paragraph, as of the date of this
 annual report, Breda was not aware of any material pending legal proceeding
 to which Breda or any of its subsidiaries was a party or of which any of
 Bredas or any of its subsidiaries respective property was the subject,
 other than ordinary routine litigation, if any, that15

was incidental to Bredas or the subsidiaries business.
Except as
 noted in the following paragraph, as of the date of this annual report, Breda
 was not aware that any governmental authority was contemplating any material
 proceeding against Breda or any of its subsidiaries or any of their
 respective property.As discussed in Bredas Form 10-Q for the quarter ended June
30,
 2008, Verizon filed a complaint with the Iowa Utilities Board on May 29, 2008
 against BTC, Inc. alleging violations of the terms, conditions and
 application of the intrastate tariffs of BTC, Inc. regarding its conference
 bridging services. The Iowa Utilities Board, on January 22, 2009, issued an
 order denying the respondents (one of which was BTC, Inc.) motion to
 dismiss. The IUB therefore docketed the case and established a procedural
 schedule. Now that the IUB has ruled, it is considered a contested case and
 Verizon has sent a data request to BTC, Inc. Verizon and BTC, Inc. have been
 in active settlement negotiations, and the data response date was set back to
 March 30, 2009. It is anticipated that this data response date will continue
 to be delayed as long as the settlement negotiations remain active.Item 4.
Submission of Matters to a Vote of Security Holders.No matter was submitted to a vote of the shareholders of Breda,
 through the solicitation of proxies or otherwise, during the period of
 October 1, 2008 through December 31, 2008.PART IIItem 5.
Market for Registrants Common Equity,
 Related Stockholder Matters and Issuer Purchases of Equity Securities.Bredas authorized stock consists of 5,000,000 shares of
Class A
 Common Stock, no par value, and 5,000,000 shares of Class B Common Stock, no
 par value. The Class A Common Stock is comprised of three series, consisting
 of 4,968,984 shares of Series 1 Class A Common Stock, 30,959 shares of Series
 2 Class A Common Stock, and 57 shares of Series 3 Class A Common Stock. As of
 March 1, 2009, Breda had the following outstanding shares of stock: (i) 2,324
 shares of the Series 1 Class A Common Stock, which were held by 58 different
 shareholders; (ii) 24,487 shares of the Series 2 Class A Common Stock, which
 were held by 537 different shareholders; (iii) 47 shares of the Series 3
 Class A Common Stock, which were held by 19 different shareholders; and (iv)
 3,993 shares of Class B Common Stock, which were held by 100 different
 shareholders.Breda had a total of 661 shareholders as of March 31, 2009. Some of
 the shareholders own shares of more than one of the series of the Class A
 Common Stock, however, and that is why the total number of shareholders noted
 in the preceding paragraph exceeds 661. The determination of the number of
 shareholders is based upon the number of record holders of the shares as
 reflected in Bredas internal stock records.16

Bredas common stock is not listed on any exchange, and there
is no
 public trading market for Bredas common stock. An investment in Bredas
 common stock is also not a liquid investment because the Articles of
 Restatement of Breda establish various restrictions and conditions on the
 issuance and ownership of, and on the transfer of, shares of its stock.For example, Breda has the first right and option to purchase any
or
 all of the shares of the Class A Common Stock or the Class B Common Stock of
 any shareholder which are the subject of any assignment. An assignment for
 this purpose means any sale, transfer, assignment, gift, bequest or other
 disposition or conveyance of any shares of stock, whether voluntarily or
 involuntarily or by operation of any process of law, or otherwise, and
 whether or not for any value or consideration. An assignment includes, for
 example, an assignment occurring in connection with the death of a
 shareholder who is an individual, the dissolution of a shareholder which is
 an entity, the bankruptcy or insolvency of a shareholder, or the exercise of
 any rights by any creditor of a shareholder. The purchase price payable by
 Breda if Breda determines to exercise its right to purchase any shares of the
 Class A Common Stock or the Class B Common Stock in connection with any
 assignment other than a voluntary sale of shares is the fair value of the
 shares as determined by the board of directors, in its sole discretion.. The
 purchase price payable by Breda if the assignment is a voluntary sale of the
 shares by a shareholder for value will be the amount of the purchase price
 payable by the proposed transferee in the sale. Breda also has the right and
 option to purchase any or all of the shares of the Series 1 Class A Common
 Stock if the holder of the shares ceases to be an eligible telephone
 subscriber. The purchase price in this circumstance is the fair value of the
 shares as determined by the board of directors, in its sole discretion. Breda
 will pay the purchase price for any shares purchased by Breda within 90 days
 of the date of Bredas written notice to the shareholder of Bredas exercise
 of its right and option to purchase the shares.The board of directors had historically established the purchase
 price at approximately 75% of the book value of Breda, but the board began to
 establish the purchase price at approximately 70% of the book value of Breda
 in 2002.The board of directors has historically made this determination
once
 per year, in March, April or May, based upon Bredas then most recent
 year-end financial statements. Bredas fiscal year ends on December 31. The
 price is then generally announced and becomes effective at the annual
 shareholders meeting for that year. The purchase price then generally applies
 until the board of directors makes a new determination and announces the new
 purchase price at the next annual shareholders meeting. The board of
 directors has, however, departed from its historical practice on a couple of
 occasions, primarily in connection with the sale of assets in a transaction
 which was material to Breda. Beginning with the fiscal year ended December
 31, 2006, the board of directors determined to notify shareholders of the
 established purchase price by letter sent with the dividend payments on or
 before each April 1st.17

The new purchase price consequently becomes effective on or around
 April 1st of each year instead of the annual meeting date.Under this approach, the issuance price and redemption price in
1995,
 1996, 1997, 1998 and 1999 was, respectively, $27, $31, $41, $64 and $82.The board of directors departed from its historical practice on
 November 2, 1999, by adopting a resolution fixing the purchase price at $149
 per share. The $149 amount was not based on Bredas book value, but rather
 was 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 that action because it believed the referenced
 auction provided it with a basis to make a more current determination on this
 issue. The board of directors also believed that it was appropriate to make a
 new determination of the purchase price given the sale of Bredas direct
 broadcast satellite operation on January 11, 1999. 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, and was therefore not included
 in the 1998 year-end financial statements which had been utilized by the
 board of directors in establishing the $82 purchase price in early 1999.The board of directors returned to its historical practices at its
 meeting on March 13, 2000, at which time the board of directors adopted a
 resolution fixing the purchase price at $180 per share. The $180 amount was
 determined based upon Bredas 1999 audited financial statements, and was
 announced at, and became effective at, the May 17, 2000 annual meeting of the
 shareholders of Breda. If the above described historical practices were
 followed, the $180 per share amount would have continued until the next
 annual determination was made by the board of directors and announced at the
 annual shareholders meeting for 2001.The board of directors determined to again depart from its
historical
 practices on this issue, however, at a meeting of the board of directors held
 on June 12, 2000. At that meeting, the directors adopted a resolution fixing
 Bredas purchase price for shares of its common stock at $235 per share. The
 board of directors took this action because it believed that it was
 appropriate to make a new determination of the purchase price to reflect the
 receipt by Prairie Telephone of most of the net after-tax proceeds of the
 sale by Prairie Telephone of its shares of stock in Central Iowa Cellular,
 Inc. The $235 per share amount was determined by taking approximately 75% of
 the then net after-tax proceeds of the sale on a per share basis and adding
 that figure to the last determined purchase price of $180 per share. The
 shareholders of Breda were notified of the increase in the purchase price
 from $180 to $235 per share by letter dated June 14, 2000.At the time the board made its determination on June 12, 2000,
 Prairie Telephone had received approximately $5,108,280, before taxes, and it
 was estimated that Prairie Telephone would retain approximately $3,147,676 of
 that amount, after taxes. For purposes of determining the new purchase price
 discussed above, Prairie Telephones18

basis in its 3,000 shares of common stock of Central Iowa Cellular,
 Inc. of approximately $206,770 was deducted from the after-tax amount of
 $3,147,676.The board of directors has followed Bredas historical
practices
 since that time, by announcing a new purchase price of:
$258
 per share at the May 16, 2001 annual meeting of the shareholders,
$280 per
 share at the May 21, 2002 annual meeting of the shareholders,
$303.00 per
 share at the May 20, 2003 annual meeting of the shareholders,
$326 per
 share at the May 18, 2004 annual meeting of the shareholders,
$357 per
 share at the May 17, 2005 annual meeting of the shareholders,
$394 per
 share, by letter to the shareholders dated July 12, 2006,
$457 per
 share, by letter to the shareholders dated April 2, 2007, and
$509 per
 share, by letter to the shareholders dated April 1, 2008.
$547 per
 share, by letter to the shareholders dated April 1, 2009.The per share amount was established based upon Bredas book
value as
 reflected in its most recent year-end financial statements, consistent with
 Bredas historical practices, except that, since 2002, the purchase price has
 been set at approximately 70% of the book value.The per share amounts that were announced by the letters to the
 shareholders were announced by those letters instead of at the annual meeting
 of the shareholders, given delays that were experienced by Breda in either
 holding those annual meetings, or in the boards desire to maintain the
 marketability of Bredas shares.The increase in the purchase price from $394 per share to $457 per
 share which was announced by the April 2, 2007 letter to the shareholders was
 primarily the result of Bredas receipt of $1,336,000 for the redemption of
 its 1,336 shares of Class C stock in the Rural Telephone Bank. Bredas
 pre-tax gain was approximately $1,170,211 and its after tax gain was
 approximately $698,946.The board of directors currently intends to continue to address
this
 issue on an annual basis consistent with the above described historical
 practices, except that the board of directors may determine to depart from
 those historical practices again in the future in the event of the occurrence
 of what the board of directors believes are material or significant events.19

The purchase price as determined by the board of directors has
 increased from $27 per share in 1995 to the current $547 per share amount
 described above. Breda does not believe that the amount of this increase is
 indicative of potential future increases, however, in particular given that:
The referenced
 increase was due primarily to three one-time material events, and
Breda does not currently foresee any material increase in revenues
 from its or any of its subsidiaries normal and ordinary course business
 operations, and, in fact, sees continuing downside pressure on those
 revenues.Since there is no public trading market or any other principal
market
 for Bredas common stock, sales of common stock to other shareholders and
 repurchases of common stock by Breda currently are the primary methods for a
 shareholder to be able to sell the shareholders shares. Bredas repurchases
 of its common stock are discussed below in this Item.An auction was held in October, 1999, 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. There are no current plans to
 arrange any other auctions in the future.Breda maintains a list of shareholders desiring to sell their
shares,
 and of other shareholders desiring to purchase those shares, as discussed
 below.None of Bredas shares of common stock were purchased by or
on behalf
 of Breda or any affiliated purchaser (as defined in Rule 10b-18(a)(3) of the
 Securities Exchange Act of 1934) of Breda during the period of October 1,
 2008 to December 31, 2008. As of the date of this annual report, Breda did
 not have any publicly announced plans or programs with respect to purchases
 of its shares of common stock.Given that repurchases of common stock by Breda is currently one of
 the primary methods for a shareholder to be able to sell the shareholders
 shares, the following paragraphs provide some information on Bredas past
 purchases of its common stock from its shareholders from 2000 through 2008.During 2000, Breda repurchased 441 shares of its common stock from
14
 different shareholders, at a purchase price of $235 per share.During 2001, Breda repurchased a total of 2,216 shares of its
common
 stock from 26 different shareholders. Two hundred twenty of those shares were
 purchased at $235 per share, and the rest of those shares (1,996) were
 purchased at $258 per share.20

Breda repurchased a total of 2,025 shares of its common stock
during
 2002 from 32 different shareholders. Two hundred eighty-seven of those shares
 were purchased for $258 per share. The rest of those shares (1,738) were
 purchased for $280 per share.Breda repurchased a total of 1,306 shares of its common stock
during
 2003 from 23 different shareholders. One hundred eighty-eight of those shares
 were purchased at $280 per share, and the rest of those shares (1,118) were
 purchased for $303 per share.During 2004, Breda repurchased a total of 524 shares of its common
 stock from 13 different shareholders. Two hundred three of those shares were
 purchased at $303 per share. The rest of those shares (321) were purchased
 for $326 per share.Breda repurchased a total of 147 shares of its common stock during
 2005 from 8 different shareholders. All of those shares were purchased at
 $357 per share.Breda repurchased a total of 7 shares of its common stock during
2006
 from 1 shareholder, at a purchase price of $394 per share.Breda repurchased a total of 80 shares of its common stock during
 2007 from 1 shareholder, at a purchase price of $457 per share.Breda repurchased a total of 85 shares of its common stock during
 2008 from 2 shareholders, at a purchase price of $457 per share.There may have been transfers among the shareholders of Breda
during
 some of the above periods for which Breda did not exercise its right of first
 refusal. Some of those transfers are noted below.Bredas ability to repurchase any of its shares is subject to
certain
 restrictions in its loan agreements with the RTFC. Those restrictions are
 discussed below in this Item.The board of directors determined in late 1999 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, and to allow persons to advise Breda of the
 fact that they desire to purchase shares of Bredas common stock. Breda keeps
 a list of those shareholders and buyers, and will make the list available to
 all of the shareholders and buyers on the list. The terms of any sale between
 a shareholder and a buyer will be negotiated by them, and no one is required
 to sell or buy any shares because their name is on the list. Breda also
 retains its right to purchase any shares which are intended to be sold by any
 shareholder to any buyer under the right of first refusal granted to Breda in
 its Articles of Restatement.During the calendar year 2000, 5 separate sales of shares occurred
 between shareholders on the list. Two sales each involved 2 shares, which
 were sold for $235 per share. One sale involved 53 shares, which were sold
 for $235 per share. One sale21

involved 31 shares, which were sold for $155 per share. One sale
 involved 2 shares, which were sold for $149 per share. Breda elected not to
 exercise its right of first refusal on any of these shares.During the calendar year 2001, 3 separate sales of shares occurred
 between shareholders on the list. Two sales each involved 7 shares, which
 were sold for $258 per share. The other sale involved 43 shares, which were
 also sold for $258 per share. Breda elected not to exercise its right of
 first refusal on any of these shares.During the calendar year 2002, 3 separate sales of shares occurred
 between shareholders on the list. Two sales involved 2 shares which were sold
 for $258 per share. The other sale involved 3 shares which were also sold for
 $258 per share. Breda elected not to exercise its right of first refusal on
 any of these shares.During the calendar year 2003, 1 sale of shares occurred between
 shareholders on the list. The sale involved 2 shares, which were sold for
 $280 per share.There were no sales of shares between shareholders on the list
during
 the calendar year 2004.During the calendar year 2005, 6 separate sales of shares occurred
 between shareholders on the list. One sale involved 12 shares which were sold
 for $326 per share. One sale involved 28 shares which were sold for $357 per
 share. Two sales involved 2 shares each which were sold for $357 per share.
 One sale involved 16 shares which were sold for $367 per share. The last sale
 involved 21 shares which were sold for $357 per share. Breda elected not to
 exercise its right of first refusal on any of these shares.During the calendar year 2006, 6 separate sales of shares occurred
 between shareholders on the list or among family members. One sale involved
 80 shares, which were sold for $400 per share. One sale involved 1 share
 which was sold for $357. Another sale involved 10 shares which were sold for
 $410 per share. Two sales involved 40 shares, which were sold for $400 per
 share. Another sale involved 2 shares, which were sold for $394 per share.
 Breda elected not to exercise its right of first refusal with respect to any
 of these shares.There were 21 separate transfers of shares during the calendar year
 2007 between shareholders on the list or among family members. A summary of
 those transfers is as follows:1.
Two shares were sold for $394 per share.2.
Forty-five shares were sold for $394 per share.3.
Two shares were sold for $400 per share.4.
Eleven shares were sold for $457 per share.5.
Two shares were sold for $457 per share.6.
Ten shares were sold for $460 per share.22

7.
Two shares were sold for $457 per share.8.
Eight shares were sold for $450 per share.9.
Thirty shares were sold for $457 per share.10.
Two shares were sold for $457 per share.11.
Ten shares were sold for $457 per share.12.
Thirty shares were sold for $457 per share.13.
Ten shares were sold for $457 per share.14.
One hundred twenty shares were sold for $457 per share.15.
Fifty-three shares were sold for $457 per share.16.
One hundred ten shares were sold for $457 per share.17.
Nine shares were sold for $457 per share.18.
Eighty-three shares were sold for $457 per share.19.
Forty-seven shares were sold for $457 per share.20.
Two hundred forty two shares were sold to four employees for fair
 market value as determined by the employer.21.
Ten shares were sold for $480 per share.There were 38 separate transfers of shares during the calendar year
 2008 between shareholders on the list or among family members. A summary of
 those transfers is as follows:1.
Ten shares were transferred between spouses.2.
Two shares were sold for $460 per share.3.
Thirteen shares were sold for $457 per share.4.
One hundred sixty shares were transferred equally (32 shares) to
five
 family members and two shares were sold for $457 per share.5.
Fifteen shares were sold for $457 per share.6.
Ninety-two shares were transferred to family members as follows:
 eight individuals received eight shares each and four individuals received
 seven shares each.7.
Fifty shares were sold for $462 per share.8.
Sixty-seven shares were transferred to a family member.9.
One hundred shares were transferred to three family members as
 follows: two individuals received 33 shares each and one individual received
 34 shares.10.
One hundred eighty shares were transferred equally (20 shares) to
 nine individuals.11.
One hundred shares were sold for $457 per share.12.
Two hundred twelve shares were transferred equally to four
 individuals.13.
Two shares were transferred from one spouse to another.14.
Three shares were transferred from one spouse to another.15.
Two shares were sold for $509 per share.16.
Two shares were sold for $509 per share.17.
Two shares were sold for $509 per share.18.
Fifteen shares were sold for $510 per share.23

19.
Thirty shares were sold for $1 per share.20.
Four shares were transferred equally to four individuals.21.
Two hundred twelve shares were transferred to the
shareholders son.22.
Twelve shares were sold for $509 per share.23.
Thirty eight shares were sold for $509 per share.24.
Two shares were sold for $509 per share.25.
Two shares were sold for $509 per share.26.
Fifty six shares were sold for $514 per share.27.
Ten shares were transferred to brother.28.
Two shares were transferred to related party.29.
Two shares were sold for $509 per share.30.
Thirteen shares were sold for $509 per share.31.
Two shares were transferred to former spouse.32.
Ten shares were transferred to spouse.33.
One hundred forty eight shares were transferred to
shareholders
 trust.34.
One hundred twenty five shares were transferred to sister.35.
Thirty four shares were transferred to children.36.
Thirty shares were sold for $1 plus other consideration.37.
Thirty shares were sold for $509 per share.38.
Fourteen shares were transferred to spouse.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.No shares of stock were issued by Breda in 2008.As of the date of this annual report, Breda did not have any equity
 compensation plans (including any individual compensation arrangements) in
 place for any directors, officers, employees or other persons.As of the date of this annual report, Breda had no plans to, and
had
 not agreed to, register any of its common stock under any federal or state securities
 laws.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 or exchangeable for
 common stock of Breda. Bredas shares of common stock are not convertible
 into any other securities.Breda has declared and paid 10 dividends to its shareholders since
 Breda was incorporated in 1964. The dividends were declared in March or April
 of each of 1999 through 2008. The first six dividends were in the amount of
 $3.00 per share, the 2005, 2006 and 2007 dividends were in the amount of
 $7.00 per share, and the 2008 dividend was in the amount of $8.00 per share.
 The aggregate dividend paid was, respectively, $113,166, $113,046, $111,087,
 $104,214, $98,436, $94,479, $218,190, $217,161, $217,112, and $246,808. At
 its board meeting on March 16, 2009, Breda24

declared an $8.00 per share dividend for shareholders of record on
 March 17, 2009, payable on or before April 1, 2009, and totaling $246,808.Payment of dividends is within the discretion of Bredas
board of
 directors, and out of funds legally available therefor 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
 RTFC. Under those agreements, Breda may not pay any dividends without the
 prior written approval of the RTFC 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.The restrictions in the RTFC 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 also preclude Breda from being able
 to repurchase its shares of stock as otherwise discussed above.Breda does not currently believe, however, that the restrictions in
 the RTFC loan agreements will preclude Breda from paying any dividends or
 distributions or from repurchasing any of its shares of common stock during
 2009, should Breda otherwise determine to do so.Although Breda has declared a dividend in each of the years from
1999
 through 2008, there is no assurance that regular dividends will continue to
 be able to be paid by Breda in the future given both the general economic
 outlook that was in existence at the time of the preparation of this annual
 report and given the revenue pressures being felt by Breda at that time. It
 is possible, therefore, that no, or perhaps reduced, distributions will be
 declared and paid by Breda in future years.Item 6.
Selected Financial Data.This Item is not applicable to smaller reporting companies such as
 Breda.Item 7.
Managements Discussion and Analysis of
 Financial Condition and Results of Operation.Except for any historical information, the following discussion
 contains forward-looking statements that are subject to risks and
 uncertainties, and which speak only as of the date of this annual report. No
 one should place strong or undue reliance on any forward-looking statements.
 Bredas actual results or actions may differ materially from these
 forward-looking statements for many reasons, including the risks and other
 matters noted at the beginning of this annual report. This Item should be
 read in conjunction with the financial statements and related notes and with
 the understanding that Bredas actual future results may be materially
 different from what is currently expected or projected by Breda.25

Overview.GeneralBreda is a provider of telecommunication services to residential
and
 business customers in the west central region and the southwest region of
 rural Iowa. Breda and its subsidiaries, Prairie Telephone Co., Inc., Westside
 Independent Telephone Company, Tele-Services, Ltd. and BTC, Inc., all conduct
 business under the names W.I.N. or Western Iowa Networks.Breda and its subsidiaries operate seven telephone exchanges as the
 historical or incumbent local exchange carrier (ILEC). BTC, Inc. offers
 competitive local exchange carrier (CLEC) services in Carroll, Iowa. Qwest is
 the incumbent local exchange carrier for that area. The telecommunications
 services provided by Breda or its subsidiaries include long distance
 services, dial-up and high speed Internet services, satellite Internet
 services, and cable TV services.Operating SegmentsBreda organizes its business into three reportable segments. Those
 segments are local exchange carrier services, broadcast services, and
 Internet service provider services. Breda has organized its business into
 those segments because the segments are each strategic business units that
 are managed separately and that offer different products and services in
 different regulatory environments.Local Exchange Carrier Services.This segment provides telephone, data services, and other services to
 customers in the local exchanges served by Breda and its telephone
 subsidiaries. Breda also provides long distance services to its customers in
 all of its ILEC exchanges and its CLEC exchange and the surrounding areas.Broadcast Services.This segment provides cable television services to customers in a total
 of fourteen towns in Iowa and one town in Nebraska.Internet Services.This segment provides Internet access to customers in the local exchanges
 and the surrounding areas and in the Carroll, Iowa market area. The Internet
 services are provided through BTC, Inc.The segments in which Breda and its subsidiaries operate are as
 follows:Local Exchange CarrierBreda
Prairie Telephone Co., Inc. 
 Westside Independent Telephone Company BTC, Inc.26

Broadcast Services 
Tele-Services, Ltd.Internet Service Provider BTC, Inc.BTC, Inc. is a subsidiary of Prairie Telephone. BTC, Inc. provides
Internet
 services to its customers and to the customers of Breda, Prairie Telephone
 and Westside Independent who subscribe for Internet services. BTC, Inc. is
 also a CLEC providing local and long distance telephone services to customers
 in the Carroll, Iowa market area, where Qwest is the incumbent local exchange
 carrier.Bredas primary source of consolidated revenues is from the
telephone
 services provided by Breda, Prairie Telephone, Westside Independent and BTC,
 Inc. The operating revenues from telephone services are primarily derived
 from the following types of fees and charges:
Flat monthly fees charged to subscribers for basic local telephone
 services. As of March 1, 2009, those fees varied from approximately $15.00 to
 $35.00 per month. The monthly fee is higher for subscribers who elect to have
 additional services and features, such as custom features.
Access charge revenues payable by long distance carriers for
 intrastate and interstate exchange services provided to those long distance
 carriers. Access charge revenues constitute a substantial part of Bredas
 consolidated revenues, and the regulation of access charge rates by the
 Federal Communications Commission and the Iowa Utilities Board creates a
 material risk to Breda and its subsidiaries, as is discussed in more detail
 below.
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. Revenues from custom calling features are
 not, however, a material source of revenue.
Fees from long distance providers for billing and collection
services
 for long distance calls made by subscribers. Breda, Prairie Telephone and
 Westside Independent have been experiencing increased competition in this
 area over the past several years. The competitors include other third parties
 providing these services, and the long distance providers themselves since
 some providers have decided to handle their own billing and collection. Breda
 may at some point make a determination to stop providing billing and
 collection services for other carriers.
Fees from per minute rate plans and calling plan fees on long
 distance calls made by subscribers of Breda, Prairie Telephone, Westside
 Independent and BTC, Inc.27


Breda, Prairie Telephone, Westside Independent and BTC, Inc. 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 wide area networks. They
 are experiencing intense services and pricing competition in providing
 Internet access.As noted above, access charge revenues constitute a substantial
part
 of Bredas consolidated revenues, and the regulation of access charge rates
 by the FCC and the IUB creates a material risk to Breda and its subsidiaries.The National Exchange Carrier Association (NECA) has been delegated
 some authority by the FCC regarding the regulation of interstate access
 charge rates. In a letter dated January 15, 2007, NECA notified Breda that
 beginning July 1, 2007 most carriers could expect an overall average cost
 settlement decrease of 7.27% as a result of the new settlement formulas filed
 by NECA with the FCC in December 2006. Overall, NECA projected that the
 majority of companies settlements will decrease between 5% and 15%. The
 decrease generally reflects new overall reduced cost levels and decreases due
 to Line Haul Distance Sensitive formula structure changes. NECAs 2007
 Modification of Average Schedules filing included a proposed 24-month
 transition plan to help companies adjust to reduced settlements.While Breda and its subsidiaries have experienced an overall
increase
 in average monthly settlement revenue mainly due to the increase in
 interstate access rate payments for the individual elements making up the
 interstate access rate that also became effective on July 1, 2007, Breda is
 beginning to see decreases in the interstate access minutes on which these
 rates are applied because more customers are using cell phones to make their
 long distance calls.On June 16, 2008, NECA filed changes to Interstate Tariff #5. In
that
 tariff filing, NECA proposed an average increase of 4.6% for its traffic
 sensitive switched access rates, and an average increase of .2% for its
 special access rates, with an effective date of July 1, 2008. AT&T and
 Verizon asked the FCC to suspend and investigate NECAs tariff filing, but the
 FCC rejected this request on June 30, 2008, and the interstate tariff rates
 went into effect July 1, 2008.The FCC currently has an open docket on inter-carrier compensation,
 which was initiated to identify a unified approach to intercarrier compensation.
 The current intercarrier compensation system distinguishes between different
 types of carriers and services, such as local and long-distance or wireless
 and wireline, and the FCC has indicated that the FCC plans to replace the
 current system with a unified intercarrier compensation system. The FCC
 initiated a rule making proceeding to consider this matter and the questions
 that the FCC are examining include the effect that any change in the
 compensation system will have on consumers and the universal service fund.28

In early October 2008, Verizon and AT&T submitted a proposal to
 the FCC that would, among other things, establish a unified $.0007
 terminating access rate for all rate of return carriers, like Breda, and
 would apply to all traffic exchanged with or on the public switched telephone
 network, including IP based traffic. The $.0007 access proposal by Verizon
 and AT&T would have relieved Verizon, AT&T and other larger carriers
 of more than $8 billion in annual access and intercarrier compensation
 responsibilities. Most small telephone company costs are above ten cents per
 minute to provide this service on their volume of minutes, and Breda is no
 exception. This proposal has the potential to cripple the rural telephone
 industry. The FCC appeared to be taking this proposal seriously, and it was
 later learned that FCC Chairman Martin had put together a confidential plan
 on intercarrier compensation and universal service reform that he planned to
 include on the agenda for the FCCs November 4, 2008 meeting, and that would
 not be released to the public until the November 4th meeting.
 After significant industry outcry on the national, state, and intermediate
 carrier level, as well as from fellow FCC commissioners and policymakers,
 Chairman Martin pulled the proposal off the agenda for the November 4, 2008
 meeting. In lieu of adopting Chairman Martins plan, which would have been
 devastating to rural carriers, the FCC issued a Further Notice on
 intercarrier compensation and universal service system. It is anticipated
 that nothing further will happen until the Democrats appointees are in place
 at the FCC.Breda continues to work with two Iowa industry associations in
 reviewing and submitting comments on intercarrier compensation plans, which
 are now before the FCC.Breda believes that changes in access charges will likely occur,
and
 that if any of the plans known today are adopted, as currently proposed,
 there will be substantial reductions in access revenues. Since access charge
 revenues constitute a substantial portion of Bredas total consolidated
 revenues, this is an area of material risk to Breda and its subsidiaries.Breda and its subsidiaries are also subject to risk regarding
changes
 in intrastate access charge rates because concerns have been raised by the
 Iowa legislature and the IUB regarding intrastate rates, and whether
 alternative intrastate intercarrier compensation mechanisms should be
 investigated. Various individuals and consulting representatives have been
 analyzing and attempting to develop comments relating to a potential state
 universal service fund. The IUB had postponed comments until October 26,
 2008, and there were a number of significant details that had not yet been
 discussed or determined by the IUB. On October 28, 2008, the Iowa Telecom
 Association (ITA) filed its comments on whether Iowa needs a State USF
 funding mechanism. In its filing, the ITA linked the State USF discussion
 with the tariff battle that has consumed much of this year and reminded the
 IUB of the severe impact of proposed access reduction. The ITA noted that if
 access policy changes cause high-cost carriers, such as Breda, to be unable
 to recover their costs of providing intrastate services from increased local
 rates to the customer and reduced29

access charges, then a State USF would be necessary as a cost
 recovery mechanism.Breda believes it is likely that the discussion of a state
universal
 service fund will need to be coordinated with emerging FCC developments.
 While various industry organizations have compiled data and worked on this
 issue since 2003, no final plan had been adopted on a statewide level. Since
 access charge revenues constitute a substantial portion of Bredas total
 consolidated revenues, this is an area of material risk to Breda and its
 subsidiaries.Regarding intrastate rates, the ITA filed the 9-1-2007 tariff which
 was allowed to go into effect, but it was later challenged by Sprint, Verizon
 and AT&T. The IUB conducted a hearing on the ITA Intrastate Access Tariff
 on April 1 and 2, 2008. Sprint, Verizon and AT&T asked the IUB to reduce
 the intrastate access rates in the ITA tariff from present levels down to the
 NECA interstate levels. Specifically, the interexchange carriers requested
 that the IUB eliminate the 1.5-cent transport interconnection charge, reduce
 the local switching charge by 1.9 cents, and eliminate the 3-cent common
 carrier line charge. The total requested reduction would be 6.4 cents on each
 intrastate minute. The parties involved in the hearing had until April 25,
 2008 to file post-hearing briefs. The IUB issued a final order on May 30,
 2008 where it directed the ITA to, within 30 days, remove the 1.5 cent
 transport interconnection rate element and to lower the local switching rate
 element to 2.4435 cents per minute to mirror the NECA interstate tariff rate.
 The IUB also stated that it would open a rule making to determine whether to
 eliminate the 3-cent common carrier line charge. All telephone companies such
 as Breda concurring in the ITA intrastate tariff would have been required by
 June 29, 2008, to reduce their intrastate access charges by 3.5 cents.The IUB did note that it was sensitive to the potential revenue
 losses that some independent local exchange carriers would experience from
 this action. On June 19, 2008, the ITA filed an Application for Rehearing or
 Reconsideration and for Stay of Order Pending Application with the IUB in the
 intrastate tariff docket. ITA submitted data to show that of 136 companies
 studied who concur in the ITA Tariff, the total revenue loss from the IUBs
 Order would exceed $14 million per year. ITA also submitted data that showed
 an average rate increase of over $5.65 per line per month would be necessary
 to recoup this revenue loss. Their data also showed that this order would
 have a significant impact on rural carrier investments and would cause a
 significant drain of resources out of rural Iowa. Bredas independent
 analysis showed that Bredas average rate increase to offset the projected
 revenue shortfall would average $5.69 per line per month, and that some of
 Bredas individual ILECs would be over $8 per line per month to offset the
 projected revenue shortfall. Breda determined that its intrastate access
 revenue shortfall if the IUB Order were to be implemented could exceed
 $221,450 per year.The ITA asked the IUB to enter a stay that delayed the June
29th
 deadline for ITA to reduce its intrastate access rates while the IUB
 considered the economic impact of its Order. The ITA also requested the IUB
 open an investigation docket or a rulemaking30

docket to consider reasonable approaches to the determination of
Iowa
 intrastate access rates; establish a three-year phase-in period for
 implementation of the 1/3 reduction in the intrastate access charges; and
 delay implementation of the Order for 90 days. On June 27, 2008, the IUB
 granted ITAs application for Stay of the May 30, 2008 order on intrastate
 access, and it also granted the ITAs Motion for Rehearing to further consider
 the existing record and the arguments. The rates collected since the June 27,
 2008 date were being collected subject to refund.In its January 8, 2009 Order Denying Requests for Reconsideration,
 the IUB reaffirmed its May 30, 2008 ruling, which directed ITA to eliminate
 the 1.5 cent TIC charge and reduce the local switching charge to 2.4435 cents
 per minute to mirror the NECA No. 5 Tariff. The Board gave ITA 30 days, or
 until February 9, 2009 to file the new tariff, upon which date the new rates
 would be effective. Also in the Order, the IUB rejected the carriers request
 that companies who concur in ITAs tariff give the interexchange carriers
 retrospective refunds back to summer of 2007. The IUB also did not order
 refunds back to the original June 29, 2008 effective tariff date. ITA filed
 the revised ITA Access Tariff No. 1 on January 30, 2009, which deleted the
 1.5 cent transport interconnection charge and reduced the local switching
 rate to $.02808, which mirrored the NECA Tariff effective on July 1, 2008.
 The net effect was a 2.7 cent decrease per minute of intrastate access
 traffic, which as noted previously will decrease Bredas revenue by more than
 $200,000 per year. No intrastate tariff that would mirror the other elements
 of the NECA interstate access rate has been filed in response to the July 1,
 2008 interstate filing at the FCC.Breda believes that it is extremely likely that the IUB could again
 reduce intra-state access rates by eliminating the 3-cent carrier common line
 rate element, and if that occurs, it will have a negative impact on Bredas
 operating income, with an additional decrease in access revenue of more than
 $200,000 per year.Universal service funding is also an important part of Bredas
 consolidated revenues, and the regulation of universal service funding by the
 FCC is another area of material risk to Breda and its subsidiaries. The
 universal service funds are also now being paid to more telecommunications
 providers than in the past. Breda anticipates that there may be changes in
 the future on how universal service funds are disbursed among the numerous
 eligible telecommunications providers.In August 2005, the FCC opened an extremely broad comment
proceeding
 on Universal Service Funding (USF), in which it sought input on a variety of
 specific USF proposals offered by members of the Federal-State Joint Board on
 Universal Service. State industry associations have been meeting with FCC
 staff members and with various Washington legislative staff members to discuss
 proposed legislation preserving and improving USF, including how funds are
 expended and assessing levels of broadband deployment in Iowa. The issues at
 stake are both on how the revenue is assessed and generated for the USF, and
 the criteria for the disbursement of funds from the universal service pool.
 Some of the suggested changes on the revenue side of the debate would be to
 have all current entities paying into the USF31

continue to pay into the fund; have any service provider that uses
 telephone numbers, IP (Internet Protocol) addresses or their functional
 equivalents to provide real-time voice communications pay into the fund; and
 any provider that offers a network connection for a fee to the public,
 including DSL, cable modem connections, WiMax and broadband over power lines,
 pay into the fund. This would increase the revenue base to more than just
 carriers providing telephone line services.On the disbursement side, some proposals would limit the number of
 eligible telecommunication carriers by specifying the criteria that must be
 met by recipients, including that the provider must provide service
 throughout their service area; remain functional in emergency situations; and
 satisfy both consumer protection and service quality standards. Unlike
 present USF payments, the proposals include that USF payments would allow
 recovery based on actual costs, rather than the incumbent carriers costs.On August 29, 2008, NECA filed its 2009 Modifications of the
Average
 Schedule USAC High Cost Loop (HCL) support formula for companies that have
 less than 700 access lines per exchange. These revisions are made each year,
 but the projected 2009 impacts were much greater than previous years and will
 have more of a negative effect on average schedule companies, such as Breda.
 Modifications are scheduled to take effect January 1, 2009. During each year
 the capped National Average Cost Per Loop (NACPL) adjusts upward because of
 quarterly data submissions by cost companies. Because of this upward adjustment
 in the NACPL, which serves as a base to determine the HCL for average
 schedule companies such as Breda, the payments to average schedule companies
 for all months of the year are reduced. Although cost per loop values for
 most of the average schedule companies are projected to increase, the
 payments to average schedule companies will be reduced, due to the cap on
 payments. The estimated HCL support paid to rural companies in 2009 is
 expected to decrease by $13.3 million. Breda is expecting a decrease in its
 HCL support payments for 2009 of $213,924, or 49.45%. Breda is expecting a
 decrease in its local switching support payments for 2009 of $17,314, or
 8.16%.On May 1, 2008, the FCC voted in favor of an interim cap on
payments
 to competitive eligible telecommunications carriers under the USF High Cost
 funding program. Most CETC recipients are wireless carriers, and the FCC is
 attempting to slow the growth of payments to CETCs, which have grown from
 approximately $1.5 million in 2000 to more than $1 billion in 2007. On July
 2, 2008, the Federal Register published the FCC order adopting an interim cap
 on USF payments to CETCs. The order become effective on August 1, 2008, and
 is still in place as of the date of this annual report.Breda believes that federal universal service fund criteria will
 continue to change but is unable to determine estimated time frames or
 estimated financial ramifications of all of the provisions as of the date of
 this annual report. Because of the decrease in intrastate access rates
 implemented by the IUB on February 7, 2009, and the changes being implemented
 on the federal level with the federal universal service fund, Breda32

and its representative industry members are studying the
feasibility
 of a state universal service fund. Because of the preliminary nature of these
 discussions, Breda is not able to estimate what financial ramifications, if
 any, could come from such a fund.Phantom traffic is another issue related to intercarrier
 compensation. Studies have shown that a sizable portion (sometimes up to
 20-30%) of traffic now terminating on ILEC switches is being delivered in a
 form in which billing information is absent, lost, stripped or altered.
 Studies have also shown that ILECs, such as Breda, could be losing between
 10-15% of revenue as a result of phantom traffic. Another problem is that
 even when the originating service provider of the phantom traffic is
 discovered, it is difficult to get proper payment from the provider, in part
 because there are no penalties imposed for failing to make payment. In
 November 2006, supporters of the Missoula Plan filed a proposal for a uniform
 process for the creation and exchange of call detail data to be implemented
 as part of an interim phantom traffic solution. The proposal sets forth
 standards and details responsibilities by which carriers are to create call
 detail records and call summary information, as well as applicable charges
 for the records. The FCC has put this proposal out for public comment. Breda
 and other carriers believe that penalty and arbitration provisions should
 also be implemented in addition to the proposed truth in labeling
 requirements. The Iowa Telecommunications Association Qwest Committee is
 also working with Qwest to address the issue of phantom traffic that
 traverses its network, and for which Qwest refuses to pay terminating access
 charges to ILECs. No final resolution had come out of these efforts as of
 the date of this annual report.Beginning in late 2006, AT&T began withholding payment of
access
 charges from many of the Iowa ILECs and CLECs that provided
 conference-bridging services because AT&T thought the ILEC and CLEC
 access charges and traffic volumes were too high. Within a matter of weeks,
 Qwest, Verizon, Sprint and AT&T Wireless also began to withhold payment
 of access charges. In response, and consistent with the FCCs explicit orders
 on this matter, seven of the Iowa ILECs filed a collection action in federal
 district court for collection of these charges.Breda is not a party to any of these lawsuits or collection
actions,
 and was being paid for conference bridging services by most carriers until
 mid year 2007. Beginning in May 2007, and continuing through the date of this
 annual report, BTC, Inc. began to receive dispute notifications from the
 various major interexchange carriers disputing the volume of minutes and
 disputing interstate and intrastate switched access charges billed by BTC,
 Inc. to them. BTC, Inc. has contacted legal counsel for assistance in its
 collection actions against Verizon Business, Sprint, AT&T and Qwest. In
 addition to working with legal and industry consultants on collection
 actions, BTC, Inc. is also monitoring the outcome of the various court
 proceedings in Iowa, Minnesota, and New York, as well as oral arguments and
 proceedings before the FCC and the Iowa Utilities Board. While BTC, Inc.s
 situation is not identical to these proceedings, some of the rulings will be
 applicable to BTC, Inc.s situation. The FCC has ruled in prior cases
 involving carrier non-payment of access charges that carriers33

could not take these kinds of self-help actions and
could not block
 traffic traversing their networks.On October 2, 2007, the FCC issued an Order granting in part and
denying
 in part the complaint filed by Qwest Communications against Farmers and
 Merchants Mutual Telephone Company of Wayland, Iowa. The FCC found that the
 telephone company had not acted unlawfully by imposing interstate access
 charges for conference bridge services. While the FCC ruled that the
 telephone company did generate an excessive rate of return, the telephone
 companys tariff was found to be lawful under the Telecommunications Act, and
 therefore Qwest could not recover damages. Qwest filed a Petition for Partial
 Reconsideration of the FCCs order on November 1, 2007, and the FCC issued an
 Order on January 29, 2008 granting in part Qwests request to have Farmers
 produce certain documents that it had produced in a related proceeding before
 the IUB. The FCC also granted Qwests petition for additional FCC proceedings
 to consider the relevance of that new evidence. BTC, Inc. anticipates
 continued rulings and decisions on many of these outstanding cases and
 proceedings within six months.On October 2, 2007, the FCC also published a rulemaking proceeding
to
 investigate cost and tariffing issues raised by allegations that some rural
 local exchange carriers are experiencing significant increases in access
 demand, resulting in unreasonable access rates. The FCC is seeking comment on
 several possible approaches to address alleged access stimulation strategies.
 One proposal being considered would require carriers to file revised tariffs
 if demand increased beyond a threshold level. The FCC is requesting information
 on rate-of-return ILECs, such as Breda, Prairie Telephone and Westside
 Independent, price-cap ILECs, and CLECs such as BTC, Inc. No final
 determinations have been made as of the date of this annual report.On May 29, 2008, Verizon filed a complaint with the IUB against
BTC,
 Inc. alleging violations of the terms, conditions, and application of the
 intrastate tariffs of BTC, Inc. regarding its conference bridging services.
 Bredas legal counsel is in rate negotiations with Verizon, and the referenced
 case is also proceeding as negotiations are taking place. Breda and AT&T
 settled their rate negotiations when a Settlement Agreement and Release was
 signed by both parties on December 22, 2008. Breda anticipates initiating
 rate negotiations with each of the individual carriers during the 2009 year.Another access revenue challenge faced by Breda and its
counterparts
 in the industry has been the amount of traffic coming over Qwests facilities
 which is considered unbillable.Breda and other Iowa ILECs received a letter from Qwest dated
 February 9, 2007 outlining a change in its billing systems effective April 1,
 2007. Under the new billing system, Qwest will pay terminating charges to
 ILECs and Iowa Network Services for Qwests own intraLATA retail toll, but
 will dispute any billings for all other traffic. Qwest will make payment
 based on Qwests toll call detail. Iowa34

Network Services will receive the new Qwest toll records for all of
 the independent telephone companies utilizing Iowa Network Services. Qwest
 will also provide the Iowa Telecommunications Associations Qwest Traffic
 committee with reports for analysis to attempt to identify carriers which are
 delivering traffic through Qwest but for which Qwest is refusing to pay
 terminating charges to the ILEC. Qwest has implemented this process and
 continues to dispute any billings for traffic that traverses their facilities
 but is not identifiable to the ILECs.Bredas other primary source of consolidated revenue is
generated
 from Tele-Services cable business. Tele-Services operating revenues are
 generated 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. The FCC has allowed satellite dish providers to provide local
 channels since 1999, which had an adverse effect on Tele-Services because 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
 or other providers with equal or greater advantages than Tele-Services, which
 could result in further adverse effects on Tele-Services business. The
 telecommunications and cable industries are also continually changing, and
 technological advances may provide Tele-Services subscribers with other
 options which could have material adverse effects on Tele-Services.
 Tele-Services is also faced with a declining population base in its service
 areas, which results in a lower potential customer base.Another issue faced by Tele-Services is that the companies which
 provide programming licensing to cable services providers are requiring 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 continue to need to upgrade its plant, equipment and cables in order
 to add more channel line-ups so that it will continue to be able to obtain
 programming licenses and in order to stay competitive.A significant increase in programming costs began January 1, 2009,
 when the must-carry, three-year contracts for commercial television
 stations ended. According to FCC rules, commercial television stations are
 required to make elections between retransmission consent and must-carry
 status. The FCC required that the original elections were made by June 17, 1993,
 and subsequent elections were made at three-year intervals with the election
 to be made by October 1st, and an effective date of January 1st.
 The most recent three-year period ended on December 31, 2008, but
 Tele-Services was notified prior to the October 1, 2008 date, that most all
 of the commercial television stations were electing retransmission status for
 the three-year period beginning January 1, 2009, and as part of that status,
 that retransmission agreements would need to be negotiated and signed in
 order to continue carriage of these stations after January 1, 2009. By the
 stations electing retransmission status, Tele-Services is now required to pay
 these stations a per subscriber fee per month, or quarterly, or annually, to
 carry these stations. These are new programming charges35

that were not present in the past when the stations had been
 designated as must-carry stations. Tele-Services completed all negotiations
 with the commercial television stations by the January 1, 2009 date, and the
 additional cost to provide the same line-up of commercial televisions
 stations averaged between $1.35 to $2.20 per customer per month depending on
 the location of the cable TV system and the stations included in the channel
 line-up.The Deficit Reduction Omnibus Reconciliation Act of 2005 included
the
 digital television transition legislation. The Act established February 17,
 2009 as the deadline for broadcasters to transition from analog to digital
 spectrum, but in February 2009, Congress passed a bill, which President Obama
 signed, that postponed the DTV transition until June 12, 2009. All of
 Tele-Services cable service systems are analog systems. Tele-Services has
 installed the equipment in each of its cable TV communities to receive and convert
 the digital signal to an analog signal, and is in compliance with all
 requirements of the Deficit Reduction Omnibus Reconciliation Act of 2005. If
 Tele-Services were to provide total digital transmission of all programming,
 it would require significant upgrades to Tele-Services plant, equipment, and
 cables. As noted previously, Tele-Services is actively pursuing the sale of
 eight of its remaining thirteen communities. It turned down three of its
 smallest communities in second quarter 2008, and sold two additional
 communities in the fourth quarter 2008.The State of Iowa passed a Statewide Cable Franchise Bill on May
30,
 2007 with an immediate effective date. The utilities division of the Iowa
 Department of Commerce will now issue franchises. A competitive provider must
 notify the communities it intends to serve. At that time, an incumbent
 operator with an active local franchise can decide whether to also seek a
 state franchise. The Department will have 15 days to award the franchises,
 which will be for a term of 10 years. Competitive providers will have to pick
 up a portion of the basic maintenance of current, noncommercial institutional
 networks, but municipalities will have to take over that cost after 10 years.
 This bill allows incumbent cable providers to utilize the current franchising
 process, or, upon expiration of their local franchise, to opt in to the
 state-issued franchise. New cable providers can chose to use either the state
 or a local franchise. The legislation caps the franchise fee for a new market
 entrant under the state franchise at the lower of the same percentage as the
 incumbent provider or five percent of gross revenues. The legislation also
 requires competitive cable providers under the state franchise to provide the
 same amount of public, education and government access (PEG) channels as an
 incumbent provider, and to pay PEG fees if the incumbent is paying PEG fees.
 In the state franchise, build-out requirements are eliminated and cities
 maintain control over rights-of-way.BTC utilized the Statewide Cable Franchise Bill by filing an
 Application for Certificate of Franchise Authority with the IUB on March 19,
 2009. BTC is seeking franchise authority to provide video services to the
 city of Carroll, Iowa as part of its fiber-to-the-home project. As indicated
 previously, BTC received RUS release of funds approval on March 13, 2009 for
 this project.36

Other miscellaneous sources of revenue are discussed in the
financial
 statements included in Section 8 of this annual report.The following table reflects, on a consolidated basis for Breda and
 its subsidiaries, the approximate percentage of Bredas and its subsidiaries
 aggregate revenue which was derived from the three segments described above
 and from investments as of the close of each of the past three fiscal years:2008


2007


2006Local
 exchange carrier (1)


85.8
%


86.9
%


84.4
%Broadcast
 (2)


6.8
%


6.8
%


8.4
%Internet
 service provider (3)


7.4
%


6.3
%


7.2
%100.0
%


100.0
%


100.0
%(1)
This segment
 includes (i) flat monthly fees charged to subscribers by Breda, Prairie
 Telephone, Westside Independent and BTC, Inc. for basic local telephone
 services, (ii) universal services funding amounts and access charges payable
 by long distance carriers for intrastate and interstate exchange services
 provided to those long distance carriers, (iii) fees from long distance
 providers for billing and collection services for long distance calls made by
 subscribers, (iv) per minute rates and calling plans rates for long distance
 services, and (v) monthly cellular commissions, advertising fees, and
 miscellaneous revenues.(2)
This segment
 includes monthly fees charged for basic and premium cable services.(3)
This segment
 includes monthly fees charged for Internet services.Twelve months ended December 31, 2008 Compared to Twelve months ended
 December 31, 2007OPERATING
 REVENUESThe
 following table sets forth the components of Bredas revenues for the twelve
 months ended December 31, 2008, compared to the same period in 2007.37

Years Ended
 December 31,

Change2008

2007

Amount

PercentOPERATING REVENUESLocal Exchange CarrierLocal network
services

$
935,396

$
917,101

$
18,295


2.0
%Network access
services


7,892,827


6,428,950


1,463,877


22.8
%Long distance
services


269,347


315,704


(46,357
)

-14.7
%Cellular
services


1,725,510


1,561,915


163,595


10.5
%Billing and
collection services


12,230


11,284


946


8.4
%Uncollectibles


(2,750,042
)

(328,979
)

(2,421,063
)

-735.9
%Miscellaneous


191,791


203,788


(11,997
)

-5.9
%$
8,277,059

$
9,109,763

$
(832,704
)

-9.1
%Broadcast Services

$
651,163

$
711,461

$
(60,298
)

-8.5
%Internet services

$
713,359

$
658,653

$
54,706


8.3
%$
9,641,581

$
10,479,877

$
(838,296
)

-8.0
%There was a decrease in total operating revenues for the
twelve-month
 period ended December 31, 2008 (when compared to the twelve-month period
 ended December 31, 2007) of $838,296, or 8%.Local Exchange Carrier Services  ($832,704)Local exchange carrier services revenues accounted for 85.8% of all
 operating revenue in the twelve-month period ended December 31, 2008. There
 was a $832,704, or 9.1%, decrease in local exchange carrier services revenues
 for the twelve-month period ended December 31, 2008, when compared to the
 twelve-month period ended December 31, 2007.Local network services revenues increased $18,295, or 2%, for the
 twelve months ended December 31, 2008, as compared to the same period in
 2007, primarily because of the increased number of customers taking phone
 service from Breda in its CLEC town of Carroll, Iowa. Bredas long distance
 services revenue decreased $46,357, or 14.7%, for the twelve months ended
 December 31, 2008, as compared to the twelve-month period ended December 31,
 2007. Breda has experienced the same industry-wide trend whereby subscribers
 are utilizing their package of minutes on their cell phone plans to make more
 of their long distance calls instead of using their long distance service
 through their local telephone provider such as Breda.Network access services increased $1,463,877, or 22.8%, for the
 twelve-month period ended December 31, 2008, when compared to the
 twelve-month period ended December 31, 2007. This increase mainly resulted
 from increased terminating access revenues generated from traffic delivered
 to Bredas conference bridges in Carroll, Iowa. Breda has contracted with
 conference bridge vendors for the transport of long distance calls over
 Bredas networks. Breda began billing for these services in September 2006,
 and began billing for additional conference bridge services in March 2007.
 Bredas conference38

bridge services generated approximately $4,957,310 of access
 revenue for the twelve-month period ending December 31, 2008, compared to
 approximately $3,055,159 for the twelve-month period ending December 31,
 2007. Network access services revenue no longer includes originating and
 terminating access revenues received on toll traffic generated by Bredas
 Internet service subscribers in Bredas southern Iowa exchanges to reach
 Bredas Internet service equipment in Breda, Iowa. During 2008, Breda
 upgraded its network to use Ethernet to provide its Internet services to most
 of its subscribers. This method of provisioning does not generate access
 revenue. For the twelve-month period ended December 31, 2007, Internet
 customers had generated $230,762 in access revenue. During 2008 Breda was
 able to offer high speed Internet services to most of its dial-up customers.
 Many customers switched to Bredas high speed Internet services, which is not
 provisioned with the use of the toll traffic network, so while Breda
 experienced an increase in its Internet service revenues, it did cause a
 decrease in Bredas network access services revenue. Bredas access revenue has
 also increased because of its increased customer base, and particularly the
 Carroll, Iowa, CLEC customer base, taking its long distance services. These
 customers generate access revenue when they use Bredas networks to make long
 distance calls.Cellular services increased $163,595, or 10.5%, for the
twelve-month
 period ended December 31, 2008, when compared to the twelve-month period
 ended December 31, 2007. The overall number of customers served between the
 two years increased 9.7%, and there was a corresponding increase in the
 amount of commissions received on the cellular services sold and an increase
 in cellular equipment sales for the twelve-month period ended December 31,
 2008, when compared to the twelve-month period ended December 31, 2007.Uncollectibles decreased $2,421,052, or 735.9%, for the
twelve-month
 period ended December 31, 2008, when compared to the twelve-month period
 ended December 2007. This decrease is mainly attributable to a $2,498,747
 allowance for doubtful interexchange carrier accounts taken by Breda for
 estimated uncollectible conference bridge network access revenue. Other than
 the complaint Verizon filed with the Iowa Utilities Board on May 29, 2008,
 Breda is not a party to any legal action with any carriers but Breda is
 working to receive payment on some of its conference bridge access minutes.
 Breda set up the allowance because historically carriers have received
 concessions in payment disputes, which allow them to pay only a portion of
 what they owe to telephone companies.Miscellaneous revenue decreased $11,997, or 5.9%, for the
 twelve-month period ended December 31, 2008, when compared to the
 twelve-month period ended December 2007. The main components of miscellaneous
 revenue were the receipt of rent from other telephone companies or industry
 carriers for the lease of capacity over fiber optic rings owned by Breda, or
 owned jointly with neighboring telephone companies, and the receipt of
 switching services revenue. Billing and collection revenue increased slightly
 but remains an overall decreasing revenue stream since most carriers now bill
 for their own long distance services instead of paying a carrier, such as
 Breda, to bill these services for them. Industry guidelines no longer allow
 payment for the provisioning of tandem services to neighboring telephone
 companies so these companies rerouted traffic that was39

previously tandemed by Breda. Effective August 15, 2007, Breda no
 longer provided and received payment for these services which resulted in a
 decrease in revenue.Broadcast Services  ($60,298)Broadcast services decreased $60,298, or 8.5%, for the twelve-month
 period ended December 31, 2008, when compared to the twelve-month period
 ended December 31, 2007. Bredas subsidiary, Tele-Services, continues to lose
 customers and to face stiff competition from satellite providers, who are
 able to provide extensive channel line-up packages, and who are now able to
 also include local channels in their package offerings. Another factor faced
 by Tele-Services is the declining population base in the small rural
 communities served by Tele-Services. Tele-Services discontinued operations in
 three of its small cable TV communities in the second quarter of 2008. The
 Iowa communities whose cable TV services were discontinued were Bayard,
 Lohrville and Thurman. Tele-Services also sold its cable TV properties in the
 Iowa communities of Churdan and Grand Junction in the fourth quarter of 2008.
 Tele-Services is actively pursuing the sale of eight of its remaining
 thirteen cable TV properties.Internet Services  $54,706Internet services revenue increased $54,706, or 8.3%, for the
 twelve-month period ended December 31, 2008, when compared to the
 twelve-month period ended December 31, 2007. Breda has experienced a 40.7%
 increase in its high speed Internet customer base when comparing the two
 periods, which has offset the decrease in Bredas dialup Internet customer
 base. The decrease in dialup Internet customers is the result of the intense
 competition by multiple suppliers in the Carroll, Iowa market area, and the
 migration of customers to high speed Internet because of an overall decrease
 in the price for high speed Internet. Breda is gaining high speed Internet
 customers in the Carroll, Iowa area because BTC, Inc. is offering bundled
 services packages that include Internet services, as well as local telephone
 and other communication services. On November 1, 2008, Breda implemented both
 lowered rates and increased bandwidth for its residential customers in
 Carroll, Iowa. All current customers receiving 256K on that date began
 receiving 1 MB of bandwidth, and all customers receiving 1 MB of bandwidth
 began receiving 3 MB of bandwidth on that date. On November 1, 2008,
 residential pricing for 1 MB of service dropped from $47.99 per month to
 $29.99 per month. Breda had last adjusted its Internet services pricing in
 May 2007 when Breda had consolidated its high-speed Internet offering into
 two price and bandwidth options. Breda continues to face intense competition
 by multiple suppliers in the Carroll, Iowa market area.OPERATING
 EXPENSESThe following table sets forth the components of Bredas
operating
 costs for the twelve months ended December 31, 2008, compared to the same
 period in 2007.40

Years Ended
 December 31,

Change2008

2007

Amount

PercentOPERATING EXPENSESCost of services

$
5,197,522

$
5,271,344

$
(73,822
)

-1.4
%Depreciation and
 amortization


973,789


1,016,247


(42,458
)

-4.2
%Selling, general and
 administration


2,360,566


2,227,901


132,665


6.0
%$
8,531,877

$
8,515,492

$
16,385


0.2
%Cost of Services  ($73,822)Cost of services decreased $73,822, or 1.4%, for the twelve-month
 period ended December 31, 2008, when compared to the twelve-month period
 ended December 31, 2007. Plant specific operations, which decreased $101,918,
 or 4.2%, was mainly attributable to a decrease in fiber lease expense and a
 decrease in plant repairs and maintenance. Both of these decreases are
 attributable to the upgrade of Bredas network during 2008, and the
 installation of new meta-switches in four of its exchanges. Plant nonspecific
 operations increased $18,412, or 5.1%, and was mainly attributable to
 increased postage, utility, and provisioning costs. Long distance
 provisioning costs increased $25,651, or 12.9%, and reflects the increased
 rate per minute costs that Breda must pay to its brokers to provide long
 distance services to its customers. These rates are reflective of the
 somewhat higher access rates that the underlying carriers must pay in Iowa.
 Cellular provisioning costs increased $155,108, or 13%, and reflect the
 increased cost of equipment and accessories to serve the 9.7% increase in the
 cellular customers base in 2008 when comparing to the twelve-month period
 ended December 31, 2007. Internet provisioning costs decreased $181,671, or
 28.5%, and resulted from Bredas upgrade of its network and its ability to
 provision its Internet services over Ethernet, which not only allows Breda to
 provision at a lower cost but because of its increased bandwidth
 capabilities, Breda can provision many more customers on these facilities
 without having to expand its capacity. Bredas cost of nonregulated services
 decreased $6,705, or 11.5%, and is attributable to the decreased number of
 key systems sold during the twelve months ended December 31, 2008, when
 compared to the twelve month period ended December 31, 2007.While Tele-Services overall customer growth for
Tele-Services cable
 TV services continued to decline, its programming fees increased $17,301, or
 4.1%, for the twelve-month period ended December 31, 2008, when compared to
 the twelve-month period ended December 31, 2007. Even though Tele-Services is
 a member of an industry programming purchasing group, it continues to see
 significant increases in the programming rates paid by Tele-Services in order
 to offer its cable TV offerings.Depreciation and Amortization ($42,458)Depreciation and amortization expense decreased $42,458, or 4.2%,
for
 the twelve-month period ended December 31, 2008, when compared to the
 twelve-month period ended December 31, 2007. While Breda is now depreciating
 over $1,000,000 in new plant assets41

for a switch in its CLEC operations, for Emergency Alert Equipment
in
 its cable TV operations from 2006, for a new operating software support
 system, network upgrades, and new and upgraded Internet service facilities
 from 2007, many of its 2008 capital improvements such as the four
 meta-switches did not become operational until close to year-end 2008. A
 significant portion of Breda assets is becoming depreciated in full, which
 offsets the depreciation for new assets being placed in service. Breda
 anticipates a significant increase in its depreciation expense in 2009 as
 many of 2008s capital projects become operational.Selling, General and Administration  $132,665Selling, general and administration expenses increased $132,665, or
 6%, for the twelve-month period ended December 31, 2008, when compared to the
 twelve-month period ended December 31, 2007. Property and general taxes
 decreased $9,370, or 4.4%, for the twelve-month period ended December 31,
 2008, when compared to the twelve-month period ended December 31, 2007.
 Corporate operations increased $110,817, or 9.4%, during the twelve-month
 period ended December 31, 2008, when compared to the same period in 2007,
 because of increased legal and consulting fees in 2008. Breda had legal and
 consulting fees associated with strategic planning opportunities regarding
 its investment in Alpine Communications, L.C., Hilbert Communications, LLC,
 the 700 MHz auction as well as its strategic planning for its own operations.
 Customer operations increased $31,218, or 3.7%, for the twelve-month period
 ended December 31, 2008, when compared to the twelve-month period ended
 December 31, 2007, and mainly resulted from increased wages and benefits
 effective during 2008, and the increased advertising expenses for the
 roll-out and upgrade of Bredas Internet and other service offerings.OTHER INCOME
 (EXPENSE)The following table sets forth the components of other income
 (expense) for the twelve-month period ended December 31, 2008, compared to the
 same period in 2007.Years Ended
 December 31,

Change2008

2007

Amount

PercentOTHER INCOME (EXPENSE)Interest and dividend
 income

$
442,973

$
486,217

$
(43,244
)

-8.9
%Gain or (Loss) on sale of
 investments


6,018


68,058


(62,040
)

-91.2
%Gain on disposal of assets


15,561


13,958


1,603


11.5
%Interest expense


(77,354
)

(91,871
)

14,517


-15.8
%Income from equity investments


1,750,682


1,447,478


303,204


20.9
%Loss on impairment of note
 receivable


(445,253
)




(445,253
)

-100.0
%Other, net


(43,477
)

(43,965
)

488


1.1
%$
1,649,150

$
1,879,875

$
(230,725
)

-12.3
%Interest and Dividend Income.Interest
 and dividend income decreased $43,244, or 8.9%, for the twelve-month period
 ended December 31, 2008, when compared to the twelve-month period ended
 December 31, 2007. This decrease in interest and dividend income was due to
 the decreased investments in both temporary investments and marketable
 securities on which Breda generates interest income. Two of Bredas
 subsidiaries, Prairie42

Telephone and Westside Independent, received dividends totaling
 $67,011 from their investment in Iowa Network Services during the
 twelve-month period ending December 31, 2008, and for which the corresponding
 income during the twelve-month period ended December 31, 2007 was $49,115.
 Breda also generates interest income on its outstanding notes receivable.Gain or (loss) on sale of investments.The
 $6,018 gain on sale of investments for the twelve-month period ended December
 31, 2008, is a combination of the net gains and losses on the redemption of
 temporary investments. The $68,058 gain on sale of investments for the
 twelve-month period ended December 31, 2007, is a combination of a $97,100
 gain on the sale of Prairie Telephones investment in Desktop Media, LLP and
 the net gains and losses on the redemption of temporary investments.Gain or (loss) on disposal of assets.The
 $15,561 gain on disposal of assets for the twelve-month period ended December
 31, 2008 represents the gain from the sale or trade-in of service vehicles
 and generators, the gain on the sale of cable TV properties, and the
 retirement of the Lidderdale switch. The $13,958 gain on disposal of assets
 for the twelve-month period ended December 31, 2007 represents the gain from
 the sale or trade-in of service vehicles, and the gain on the sale of a small
 parcel of land, and a small central office building, in Farragut, Iowa.Interest Expense.The
 $14,517, or 15.8%, decrease in interest expense for the twelve-month period
 ended December 31, 2008, when compared to the twelve-month period ended
 December 31, 2007, is the result of the reduction of the Rural Telephone
 Finance Cooperative loan balance on which interest is calculated because of
 the payment of the scheduled principal payments on the loan. The interest
 rate on the RTFC loan was fixed at 7.35% for a 10-year period. The ten-year
 period ended July 17, 2008, and the RTFC loan reverted to a variable rate
 loan on that date. Interest accrued at the rate of 6.5% for the time period
 July 17, 2008 through September 30, 2008, and accrued at the rate of 7.0% for
 time period October 1, 2008 through December 31, 2008.Income from Equity Investments.Income
 from equity investments increased $303,204, or 20.9%, for the twelve-month
 period ended December 31, 2008, when compared to the twelve-month period
 ended December 31, 2007. The equity investments income shown on Bredas
 financial statements is Bredas pro-rata share of the net income or net loss
 of each equity investment, based on Bredas percentage of ownership in each
 equity investment. The increase in equity investments income reported on
 Bredas income statement for the twelve-month period ended December 31, 2008
 is a reflection of the net increases and decreases in the net income of
 Bredas equity investments. Most of Bredas equity investments are in
 cellular partnerships. Some of these cellular investments now receive
 universal service funding which has increased their overall operating
 revenue. An additional source of income from equity investments arises from
 Bredas ownership interest in Alpine Communications, L.C., an operating
 telephone company in northeastern Iowa, and in Bug Tussel, LLC, a wireless
 cell site provider, and in Spiralight Network, LLC, a fiber optic network
 provider in rural areas of Wisconsin and Illinois.43

Loss on Impairment of Note Receivable.The
 $445,253 loss on impairment of note receivable for the twelve-month period
 ended December 31, 2008, represents an impairment recorded against Bredas
 note receivable from Spiralight Network, LLC, for which there is not
 corresponding entry during the twelve-month period ended December 31, 2007.Other, net.The
 $488, or 1.1%, increase in other net income for the twelve-month period ended
 December 31, 2008, when compared to the twelve-month period ended December
 31, 2007, is mainly attributable to decreased partnership-related costs.Income Tax Expense.Income
 taxes decreased $535,631, or 39.2%, for the twelve-month period ended
 December 31, 2008, when compared to the same period in 2007. The effective
 tax rate in 2008 is 30.5%, compared to a 35.5% tax rate in 2007. The
 effective tax rate differs from the U.S. statutory rate due to state income
 taxes, and the proportion of income from investments, which are exempt from
 income tax.Net Income.Net
 income decreased $549,775, or 22.1%, for the twelve-month period ended
 December 31, 2008, when compared to the same period in 2007.Liquidity and Capital Resources at Twelve Months Ended December 31,
 2008.Bredas short-term and long-term liquidity requirements arise
 primarily from the following: operations and working capital requirements;
 capital expenditures; interest payments on the long term financing from the
 Rural Telephone Finance Cooperative; dividend payments on Bredas common stock;
 redemption of Bredas common stock; and potential industry-related
 acquisitions or investments.Breda intends to fund the operations, working capital requirements,
 capital expenditures, interest payments, dividend payments, and stock
 redemptions from cash from operations. Breda also intends to fund any smaller
 industry-related acquisitions or investments from cash from operations. Breda
 received approval on March 13, 2009 for funds release on a $10,000,000
 broadband loan from the RUS. Breda plans to use this funding for the fiber
 optic network build-out in Carroll, Iowa, during the 2009, 2010 and 2011
 construction seasons. For the twelve months ended December 31, 2008 and 2007,
 cash provided by operating activities was $2,772,282 and $3,099,063, respectively.To fund any significant future acquisitions or investments, Breda
 would consider the redemption of its short-term and long-term marketable
 securities investments; the use of its revolving lines of credit with the
 Rural Telephone Finance Cooperative; or as noted previously, the addition of
 long-term debt from industry lenders. Breda presently has an unused line of
 credit with the Rural Telephone Finance Cooperative of $1,500,000, and
 Prairie Telephone has an unused line of credit with the Rural Telephone
 Finance Cooperative of $500,000. Bredas believes that its present revenues
 would be able to sustain the costs of additional debt if the need arose. All
 potential acquisitions or investments will, however, be evaluated on their
 own merits44

for, among other things, potential cash and revenue production, and
 if the potential return on investment will be sufficient to incur the
 additional debt.Breda has historically funded its operations and capital
expenditure
 requirements primarily from cash from operations. The following table
 summarizes Bredas short-term liquidity, as of December 31, 2008, and
 December 31, 2007.As ofDecember 31,
 2008

December 31,
 2007Short-Term
 LiquidityCurrent
Assets

$
6,559,666

$
4,342,424Current
Liabilities


2,076,864


1,544,835Net Working
Capital

$
4,482,802

$
2,797,589Cash and Cash
Equivalents

$
1,237,007

$
1,104,327Short Term
Marketable Securities

$
604,435

$
480,311Available on
Line of Credit

$
2,000,000

$
2,000,000Current assets increased $2,217,242, or 51.1%, for the year ended
 December 31, 2008, when compared to the year ended December 31, 2007, and was
 due mainly to three items. The first was the $256,804 increase in cash, cash
 equivalents, and marketable securities. The second was the $1,550,374
 increase in accounts receivable, which was due to unpaid conference bridge
 access services (as discussed previously, Verizon, Sprint, Qwest and other
 carriers are refusing to pay for these services). The third was the $704,301
 increase in deferred income taxes. An increase in Bredas book to tax
 differences for items such as bonus depreciation used for tax purposes on its
 significant capital improvements of the four meta-switches and the network
 upgrades increased the deferred income taxes. Breda had a $660,624 decrease
 in the current portion of Bredas notes receivable. At December 31, 2008,
 Breda held a $519,012 promissory note, less allowance of $445,253, from its
 unconsolidated affiliate, Spiralight Network, LLC, which earns interest at
 the rate of 8.5% per annum. At December 31, 2007, Prairie Telephone held a
 $480,000 note receivable from Jaguar Communications, Inc. earning interest at
 the rate of 4.81%, and which was acquired with Prairie Telephones sale of
 its interest in Desktop Media, LLC in September 2007. Breda also held a
 promissory note from Spiralight Network, LLC at December 31, 2007 in the
 amount of $480,000. The Jaguar Communications, Inc. note was paid in full as
 of December 31, 2008.Current liabilities increased $532,029, or 34.4%, for the year
ended
 December 31, 2008, when compared to the year ended December 31, 2007.
 Accounts payable increased $901,390, or 106%, when comparing the two periods,
 which is mainly attributable to an increase in the amount incurred as of
 December 31, 2008 for the provisioning of conference bridge services as
 compared to the amounts incurred for those services as of December 31, 2007.
 Other increased accounts payable resulted from construction projects and
 associated consulting fees. Accrued taxes decreased $390,660, or 100%, for
 the year ended December 31, 2008, when compared to the year ended December
 31, 2007. The accrued taxes decrease was primarily the result of the decrease
 in federal and state income45

taxes
 payable resulting from the decreased revenue received in the AT&T
 conference bridge settlement agreement.The
 following table summarizes Bredas sources and uses of cash for the twelve
 months ended December 31, 2008 and 2007.For the Years Ended
 December 31,2008

2007Net Cash
 Provided (Used)Operating Activities

$
2,772,282

$
3,099,063Investing Activities


(2,166,239
)

(2,343,043
)Financing Activities


(473,363
)

(429,401
)For the
 twelve months ended December 31, 2008 and 2007, cash provided by operating
 activities was $2,772,282 and $3,099,063, respectively.Cash used in
 investing activities decreased $176,804 for the twelve-month period ended
 December 31, 2008, when compared to the twelve-month period ended December
 31, 2007. Capital expenditures for the twelve-month period ended December 31,
 2008 were $2,763,756, and were $1,319,496 for the same period in 2007. The
 purchase of equity investments in Alpine Communications, LC and Swisher
 Telephone was $1,422,000 for the twelve-month period ending December 31,
 2008, and was $169,412 for the twelve-month period ended December 31, 2007.
 The purchase of marketable securities was $419,433 for the twelve-month
 period ended December 31, 2008, and was $2,040,367 for the twelve-month
 period ended December 31, 2007. Proceeds from the sale of marketable
 securities to fund the capital improvements was $2,192,168 in the
 twelve-month period ended December 31, 2008, and was $1,574,000 in the twelve-month
 period ended December 31, 2007.Cash used in
 financing activities was $473,363 for the twelve-month period ended December
 31, 2008, and $429,401 for the twelve-month period ended December 31, 2007.
 During the twelve-month period ended December 31, 2008, cash was used to
 repay $187,710 of long term debt, to pay dividends to the shareholders of $8
 per share totaling $246,808, and to redeem common stock for $38,845. Breda
 used cash during the twelve-month period ended December 31, 2007 to repay
 $175,729 of Rural Telephone Finance Cooperative long term debt, to pay
 dividends to shareholders of $7 per share totaling $217,112, and to redeem
 common stock for $36,560.Long Term DebtAs of
 December 31, 2008, Breda had outstanding $951,495 of long-term debt with the
 Rural Telephone Finance Cooperative. This debt carried a fixed rate of
 interest of46

7.35% until
 July 17, 2008, at which time the debt reverted to a variable rate loan. The
 interest rate from July 17, 2008 to December 31, 2008 ranged from 6.5% to 7%
 per annum. Substantially all of the assets of Breda are pledged as security
 for the long-term debt. The Rural Telephone Finance Cooperative notes are to
 be paid in equal quarterly installments covering principal and interest until
 paid in full by the year 2013.The security
 and loan agreements underlying the Rural Telephone Finance Cooperative 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. Breda is restricted from making any distributions, except as
 might be specifically authorized in writing in advance by the Rural Telephone
 Finance Cooperative note holders, unless Bredas minimum net worth meets the
 minimum requirements set forth in the loan agreement, and distributions are
 limited to certain levels of prior year cash margins. Breda is also required
 to achieve a debt service coverage ratio of not less than 1.25 to 1 and a
 times interest earned ratio of not less than 1.5 to 1.Obligations and CommitmentsBredas
 ongoing capital commitments include capital expenditures and debt service
 requirements. For the twelve months ended December 31, 2008, capital
 expenditures were $2,763,756.Bredas
 contractual obligations as of December 31, 2008 are:2009

$
200,5072010


214,1772011


228,7792012


244,3772013


63,655Breda
 believes that cash provided by operations and current cash balances will be
 adequate to meet Bredas currently foreseeable operational, capital
 expenditure, and debt service requirements for its present operations.
 Bredas actual cash needs and the availability of required funding may,
 however, differ from Bredas expectations and estimates, and those
 differences could be material. Future capital requirements would depend on
 many factors, including, among others, the demand for Bredas services in
 Bredas existing markets and regulatory, technological and competitive
 developments.Off-Balance Sheet Risk and Concentration of Credit Risk;
Investment
 PolicyBreda has no
 off-balance sheet exposure or risk.Breda has
 certain financial instruments, which could potentially subject Breda to
 concentrations of credit risk. The financial instruments consist primarily of
 trade receivables and cash and temporary cash investments.47

Breda
 adheres to an investment policy for its marketable securities which allows
 investments in the following:


Securities
 issued or guaranteed by the U.S. Government or its agencies.
Corporate or
 municipal bonds rated A or better by a major rating service.
Money market
 funds investing in U.S. Government, U.S. Agency or highly rated municipal
 securities.Recent Accounting PronouncementIn May 2008,
 The Financial Accounting Standards Board (FASB) issued a Statement of
 Financial Accounting Standards FAS No. 157  Fair Value Measurements. This
 Statement defines fair value, establishes a framework for measuring fair
 value in generally accepted accounting principles (GAAP), and expands
 disclosures about fair value measurements. This Statement does not require
 any new fair value measurements, but for some entities, the application of
 the Statement would change current practice.While the
 fair value concept has been in place for many decades, the FASB has deferred
 the use of fair value for all assets and liabilities, and currently only
 mandates it for financial assets and liabilities. The new required estimates
 are intended to provide investors with the value of an asset or liability on
 the measurement day, rather than reporting a value based on some future date,
 such as a future settlement or maturity date.Whether and
 when fair value is required depends on the types of financial assets that are
 the subject of the accounting and, to varying degrees, the reporting entitys
 intent with respect to those assets. Fair value is used on an ongoing basis
 principally for derivatives, trading securities, and available-for-sale
 securities. Fair value also is used to recognize impairments, that is,
 declines in the value of financial assets in down markets. And while loans
 held for investment are subject to impairment, they are not necessarily
 written down to fair value, but more typically to the present value of
 expected future cash flows discounted at the loans original effective
 interest rate.Bredas
 marketable securities are held-to-maturity securities, not trading securities.
 Breda therefore reports the fair value of these bonds and securities as a
 footnote to its financial statements. The issuance of the Statement of
 Financial Accounting Standards FAS No. 157  Fair Value Measurements had no
 effect on Bredas financial position, results of operations or cash flows.In July
 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty
 in Income Taxesan interpretation of FASB Statement No. 109. FIN48

48 clarifies
 the accounting for uncertainty in income taxes recognized in accordance with
 Statement of Financial Accounting Standards No. 109, Accounting for Income
 Taxes. Guidance is provided on derecognition, classification, interest and
 penalties accounting in interim periods, disclosure and transition. FIN 48
 requires that Breda recognize in its financial statements the impact of a tax
 position, if that position is more likely than not of being sustained on
 audit, based on the technical merits of the position. The provisions of FIN
 48 were effective as of the beginning of Bredas 2007 fiscal year, with the
 cumulative effect of the change in accounting principle recorded as an
 adjustment to opening retained earnings. Adoption of FIN 48 on January 1,
 2007, had no effect on Bredas financial position, results of operations or
 cash flows.Item 7A.
Quantitative and Qualitative Disclosures About Market
Risk.This Item is
 not applicable to smaller reporting companies such as Breda.49

Item 8.
Financial Statements.Breda Telephone Corp. 
And Subsidiaries 
Breda, IA

Consolidated Financial Statements 
For the Years 
Ended December 31, 2008 and 2007

50

BREDA TELEPHONE CORP. AND SUBSIDIARIES 
BREDA, IOWA

Contents

PageConsolidated
 Financial Statements:Independent Auditors Report


52Consolidated Balance Sheets


54Consolidated Statements of Income


55Consolidated Statements of Stockholders Equity


56Consolidated Statements of Cash Flows


57Notes to Consolidated Financial Statements


5851

REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM

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, 2008 and
2007, 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.

Except as
discussed in the following paragraph, we conducted our audits in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. The company is not required to have, nor were we
engaged to perform an audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Companys internal control over financial reporting.
Accordingly, we express no such opinion. 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.

We were unable
to perform audit procedures for 2008 supporting the Companys investments in
Spiralight Network LLC, RSA 7 Limited Partnership, Iowa 8 Monona Limited
Partnership, and RSA No. 9 Limited Partnership stated at $3,161,819 at December
31, 2008, or its equity in earnings in such partnerships of $1,134,097, which
is included in net income for the year ended as described in Note 4 to the
financial statements. We were unable to perform audit procedures for 2007
supporting the Companys investment in Iowa 8 Monona Limited Partnership stated
at $1,492,056 at December 31, 2007, or its equity in earnings in such
partnership of $470,430, which is included in net income for the year ended as
described in Note 4 to the financial statements.

52

In our
opinion, except for the effects of such adjustments, if any, as might have been
determined to be necessary had we been able to examine evidence regarding the
investment and earnings of Spiralight Network LLC, RSA 7 Limited Partnership,
Iowa 8 Monona Limited Partnership, and RSA No. 9 Limited Partnership, 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, 2008 and 2007, and the results of their
operations and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.

/s/ Kiesling
 Associates LLPWest Des
 Moines, IowaMarch 27,
 200953

BREDA TELEPHONE CORP. AND SUBSIDIARIES 
BREDA, IOWA

CONSOLIDATED BALANCE SHEETS 
December 31, 2008 and December 31, 2007

December 31,
 2008

December 31,
 2007ASSETSCURRENT ASSETSCash and cash
equivalents

$
1,237,007

$
1,104,327Marketable
securities


604,435


480,311Accounts
receivable, net of allowances of
 $3,415,824 and $676,422 in 2008 and 2007, respectively


3,290,640


1,740,266Interest
receivable


81,730


98,013Notes
receivable, less impairment of
 $445,253 in 2008


73,759


734,383Inventory, at
average cost


227,731


152,857Prepaid income
taxes


406,451


Other


111,261


17,973Deferred income
taxes


718,595


14,2946,751,609


4,342,424OTHER NONCURRENT
ASSETSMarketable
securities


5,440,550


7,374,754Investments in
unconsolidated affiliates at
 equity


8,593,958


7,950,825Other
investments at cost


599,131


611,707Goodwill


896,812


896,81215,530,451


16,834,098PROPERTY, PLANT AND
EQUIPMENT


6,809,652


5,015,302TOTAL ASSETS

$
29,091,712

$
26,191,824LIABILITIES
 AND STOCKHOLDERS EQUITYCURRENT LIABILITIESCurrent portion
of long-term debt

$
200,507

$
187,710Accounts
payable


1,751,821


850,432Accrued
taxes


191,943


390,659Other


124,536


116,0342,268,807


1,544,835LONG-TERM DEBT, less current
portion


750,988


951,495OTHER NONCURRENT
LIABILITIES


1,947,128


1,213,607MINORITY INTERESTSTOCKHOLDERS
EQUITYCommon stock,
Class A - no par value,
 5,000,000 shares authorized, 27,924 and 28,923 shares issued and outstanding
 at $509 and $457 stated values, respectively


14,213,316


13,217,811Common stock,
Class B - no par value,
 5,000,000 shares authorized, 2,927 and 2,013 shares issued and outstanding at
 $509 and $457 stated values, respectively


1,489,843


919,941Retained
earnings


8,421,630


8,344,13524,124,789


22,481,887TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY

$
29,091,712

$
26,191,824The accompanying notes are an integral part
of these consolidated financial statements.

54

BREDA TELEPHONE CORP. AND SUBSIDIARIES 
BREDA, IOWA

CONSOLIDATED STATEMENTS OF
INCOME 
For the Years Ended 2008 and 2007

For the Years Ended2008

2007OPERATING REVENUES

$
9,641,581

$
10,479,877OPERATING EXPENSESCost of
services


5,197,522


5,271,344Depreciation
and amortization


973,789


1,016,247Selling,
general, and administrative


2,360,566


2,227,9018,531,877


8,515,492OPERATING INCOME


1,109,704


1,964,385OTHER INCOME
(EXPENSES)Interest and
dividend income


442,973


486,217Gain on sale of
investments


6,018


68,058Gain on
disposal of assets


15,561


13,958Interest
expense


(77,354
)

(91,871
)Income from
equity investments


1,750,682


1,447,478Loss on
impairment of note receivable


(445,253
)

Other,
net


(43,477
)

(43,965
)1,649,150


1,879,875INCOME BEFORE
INCOME TAXES


2,758,854


3,844,260INCOME
TAXES


830,299


1,365,930NET
INCOME

$
1,928,555

$
2,478,330NET INCOME PER
COMMON SHARE

$
62.50

$
79.94DIVIDENDS PER
COMMON SHARE

$
8.00

$
7.00The accompanying notes are an integral part
of these consolidated financial statements.

55

BREDA TELEPHONE CORP. AND SUBSIDIARIES
BREDA, IOWA

CONSOLIDATED STATEMENTS OF
STOCKHOLDERS EQUITY

Common Stock, A and B Class

Retained
 EarningsShares

Amount


TotalBalance at December 31,
2006


31,016

$
12,220,304

$
8,036,925

$
20,257,229Comprehensive
income:Net
Income








2,478,330


2,478,330Dividends
paid








(217,112
)

(217,112
)Common stock
redeemed, net


(80
)

(36,560
)




(36,560
)Stated value
stock adjustment





1,954,008


(1,954,008
)Balance at December 31,
2007


30,936


14,137,752


8,344,135


22,481,887Comprehensive
income:Net
Income








1,928,555


1,928,555Dividends
paid








(246,808
)

(246,808
)Common stock
redeemed, net


(85
)

(38,845
)




(38,845
)Stated value
stock adjustment





1,604,252


(1,604,252
)Balance at December 31,
2008


30,851

$
15,703,159

$
8,421,630

$
24,124,789The accompanying notes are an integral part
of these consolidated financial statements.

56

BREDA TELEPHONE CORP. AND SUBSIDIARIES 
BREDA, IOWA

CONSOLIDATED STATEMENTS OF
CASH FLOWS 
For the Years Ended December 31, 2008 and 2007

2008

2007CASH FLOWS FROM OPERATING
ACTIVITIESNet
income

$
1,928,555

$
2,478,330Adjustments to reconcile net income
to cash provided by operating
 activities:Depreciation
and amortization


973,789


1,016,247Minority
interestsDeferred income
taxes


29,220


(148,024
)Amortization of
investment premium/discount
 - net


43,363


42,832Equity income in unconsolidated
affiliates, net of distributions
 received of $2,529,549 and $1,228,440 in 2008 and 2007, respectively


778,867


(219,038
)(Gain) or loss
on disposal of property


(15,561
)

(13,958
)Loss on
impairment of note receivable


445,253


(Gain) or loss
on sale of marketable
 securities


(6,018
)

(13,063
)(Gain) or loss
on sale of equity
 investments





(97,100
)Changes in
assets and liabilities:Increase in
assets


(2,108,704
)

(731,908
)Increase in
liabilities


703,518


784,745Net cash provided by operating
activities


2,772,282


3,099,063CASH FLOWS FROM INVESTING
ACTIVITIESCapital
expenditures


(2,763,756
)

(1,319,496
)Proceeds from
the sale of assets


18,835


18,385Purchase of
marketable securities


(419,433
)

(2,040,367
)Purchase of
equity investments


(1,422,000
)

(169,412
)Purchase of
other investments - at cost


(15,621
)

(5,055
)Proceeds from
the sale of marketable
 securities


2,192,168


1,574,000Proceeds from
the sale of equity
 investments





63,000Proceeds from
the sale of other investments
 - at cost


28,197


15,902Proceeds from
the receipt of principal on
 note receivable


254,383


(480,000
)Issuance of
notes receivable


(39,012
)

Net cash used
in investing activities


(2,166,239
)

(2,343,043
)CASH FLOWS FROM FINANCING
ACTIVITIESRepayment of
long term debt


(187,710
)

(175,729
)Common stock
redeemed, net


(38,845
)

(36,560
)Dividends
paid


(246,808
)

(217,112
)Net cash used
in financing activities

$
(473,363
)
$
(429,401
)Net Increase in Cash and Cash
Equivalents

$
132,680

$
326,619Cash and Cash Equivalents at
Beginning of
 Period


1,104,327


777,708Cash and Cash Equivalents at End
of Period

$
1,237,007

$
1,104,327Supplemental Disclosures of Cash
Flow
 InformationCash paid
during the period for:Interest

$
77,354

$
91,871Income
taxes

$
1,388,117

$
1,236,856The accompanying notes are an integral part
of these consolidated financial statements.

57

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
BREDA, IOWA

NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESNature of Business

The Breda Telephone Corporation (herein referred to as the
Company)
is a provider of telecommunications exchange and local access services, long
distance services, cable television services and Internet services in a service
area located primarily in western Iowa. The company is also involved in retail
sales of cellular equipment and service plans for cellular partnerships of
which it owns interests, and sales of other telecommunications equipment.

Basis of Presentation

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

The accounting records for the Companys cable television
operations
are maintained in accordance with the Uniform System of Accounts for CATV
Companies prescribed by the National Association of Regulatory Utility
Commissioners.

Principles of Consolidation

The consolidated financial statements include the accounts of the
Company and its 100% owned subsidiaries, Prairie Telephone Co., Inc.,
Tele-Services, Ltd., and Westside Independent Telephone Company. The financial
statements of Prairie Telephone Co., Inc. include the accounts of Prairie and
its 100% owned subsidiary, BTC, Inc. All material intercompany transactions have
been eliminated in consolidation.

Cash Equivalents

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

58

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

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

Marketable debt and 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. Marketable debt and 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 uses the specific identification method of
computing realized gains and losses.

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

Inventory

Inventory includes both merchandise held for resale and material
and
supplies. Merchandise held for resale is recorded at the lower of cost or
market with cost determined by the average cost method. Materials and supplies,
used in the construction of the Companys facilities to provide
telecommunications services, are recorded at average cost.

Goodwill

Goodwill is deemed to have an indefinite life and is stated at the
lower of cost or fair value. The asset is subject to periodic impairment tests.

Property, Plant and Equipment

Telephone and cable television plant 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.

59

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)Property, Plant and Equipment (Continued)

Renewals and betterments of units of property are charged to
telephone
and cable television plant in service. When plant is retired, its cost is
removed from the asset account and charged against accumulated depreciation
less any salvage realized. No gains or losses are recognized in connection with
routine retirements of depreciable 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

The Company
would provide for impairment losses on long-lived assets when indicators of
impairment are present and the estimated undiscounted cash flows 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 taxes arise from differences between the book and tax basis of plant
assets, certain investments, receivables and goodwill. 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.

60

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)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,
Internet and cable television service revenues are recognized over the period a
subscriber is connected to the network.

Network access
and long distance service revenues are derived from charges for access to the
Companys local exchange network. The interstate portion of access revenues is
based on an average schedule settlement formula administered by the National
Exchange Carrier Association (NECA), which is regulated by the FCC. The
intrastate portion of access revenues is billed based upon the Companys tariff
for access charges filed with the Iowa Utilities Board (IUB). 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. Long distance revenues are recognized
at the time a call is placed based on the minutes of traffic processed at
contracted rates.

Cellular sales
and commission revenues are recognized at the time of customer activation.

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

Reclassifications

Certain
reclassifications have been made to the 2007 consolidated financial statements
to conform with the 2008 presentation.

61

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 2.
MARKETABLE SECURITIESThe amortized
cost and fair value of held-to-maturity securities are:

Unamortized
 Cost

Gross
 Unrealized
 Gains

Gross
 Unrealized
 Losses

FairValueDecember 31,
2008Held-to-Maturity:Municipal bonds

$
3,641,774

$
77,334

$
(37,007
)
$
3,682,101Government securities


2,403,211


13,959


(181,423
)

2,235,747$
6,044,985

$
91,293

$
(218,430
)
$
5,917,848December 31,
2007Held-to-Maturity:Municipal bonds

$
4,848,490

$
59,473

$
(23,457
)
$
4,884,506Government securities


3,006,575


10,572


(39,972
)

2,977,175$
7,855,065

$
70,045

$
(63,429
)
$
7,861,6812008

2007Amounts
 classified as:Current

$
604,435

$
480,311Noncurrent


5,440,550


7,374,754Total

$
6,044,985

$
7,855,065The amortized cost and fair value of marketable debt securities at
December 31, 2008, by contractual maturity are shown below. Expected maturities
may differ from contractual maturities because the issuers of the securities
may have the right to prepay obligations without prepayment penalties.

Unamortized
 Cost

Fair Value$
604,435

$
615,314Due
 after one year through three years


1,212,452


1,235,195Due
 after three years through five years


1,251,194


1,263,663Due
 after five years


2,976,904


2,803,676$
6,044,985

$
5,917,84862

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 3.
NOTE RECEIVABLENotes
receivable consist of the following:

December
 31,
 2008

December
 31,
 2007Jaguar Communications, Inc.
 - 4.81%





254,383Spiralight Network, LLC -
 8.5%


519,012


480,000519,012


734,383Less
impairment


(445,253
)

73,759


734,383Less current
portion


(73,759
)

(734,383
)$


$
The Company, Desktop Media, LLC, and each of Desktop Media,
LLCs
members signed a purchase agreement with Jaguar Communications, Inc., on June
28, 2007. Upon the closing of this purchase agreement, the Company surrendered
its $439,974 instrument of indebtedness in exchange for a 28% equity interest
in Desktop Media, LLC. The company had held a 17% ownership interest. The sale
of Desktop Media, LLC, to Jaguar Communications, Inc. was finalized on September
28, 2007. The Company received cash of $63,000 and a short-term promissory note
of $254,383, for its 28% ownership interest in Desktop Media, LLC. The
promissory note dated September 28, 2007, accrued interest from September 28,
2007, at a rate of 4.81 percent per annum until payment was made in full, which
was the earlier of (i) the twelve month anniversary of the date of the note, or
(ii) upon the payment to Jaguar of the initial Foundation for Rural Service
disbursement with respect to Jaguars currently pending loan request with the
Rural Utilities Service (RUS). Jaguar paid the note balance and accrued
interest in August of 2008.

The Company originated a promissory note to its unconsolidated
affiliate, Spiralight Network, LLC, on September 5, 2007. The original amount
of the note was $480,000 and accrued interest from September 5, 2007, at a rate
of 8.5 percent per annum until payment was scheduled to be made in full on
September 14, 2008. On September 14, 2008, the due date was extended one year,
and $39,012 of accrued interest from September 5, 2007 through September 14,
2008, was added to the original note, bringing the note balance to $519,012.
Interest will continue to accrue at 8.5 percent per annum until the loan is
paid in full on September 14, 2009. The note may be prepaid. The Company has a
35.29% ownership interest in Spiralight Network, LLC. On December 31, 2008, the
Company recorded an allowance against the note of $445,253, to offset
additional losses in 2008 exceeding the companys equity basis in Spiralight.

63

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 4.
OTHER INVESTMENTSINVESTMENTS IN
UNCONSOLIDATED AFFILIATES AT EQUITY

Investments in unconsolidated affiliates at equity include
investments
in partnerships, limited liability companies and joint ventures as follows:

2008

2007Alpine
 Communications, L.C.

$
3,085,415

$
2,227,935West
 Iowa Cellular, Inc.


1,632,882


1,492,056RSA
 #1, Ltd.


1,561,117


1,395,594RSA
 #7, Ltd.


555,730


554,043RSA
 #9, Ltd.


973,207


1,024,903Quad
 County Communications


37,021


102,928Carroll
 County Wireless, L.L.C.


68,097


66,764Guthrie
 Group, L.L.C.


31,488


40,222Bug
 Tussel Wireless, L.L.C.


649,001


673,466Spiralight
 Network, L.L.C.





372,914$
8,593,958

$
7,950,825The Company has a 22.27% ownership interest in Alpine
Communications,
L.C. (Alpine) at December 31, 2008 and a 17.42% ownership interest at December
31, 2007. Alpine owns and operates several wireline telephone exchanges in
northeastern Iowa, and also provides Internet and cable television services in
and around its wireline service territory.

The following is a summary of condensed financial information
pertaining to the company described above as of December 31, 2008 and 2007 and
the twelve months then ended.

Alpine Communications, L.C.2008

2007Assets

$
24,706,029

$
24,059,444Liabilities


13,928,446


12,223,043Equity

$
10,777,583

$
11,836,401Revenues

$
7,981,757

$
7,699,177Expenses


6,196,723


5,721,682Net
 Income

$
1,785,034

$
1,977,49564

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 4.
OTHER INVESTMENTS (Continued)The Companys percentage ownership interests in partnerships
providing
cellular telephone services within their respective service areas at December
31, 2008 and 2007 are as follows:

West Iowa
 Cellular, Inc.,
25.0%RSA #1, Ltd.
10.3%RSA #7, Ltd.
7.1%RSA #9, Ltd.
16.7%The following is a summary of condensed financial information
pertaining to the companies described above as of December 31, 2008 and 2007
and the twelve months then ended.

2008West Iowa 
 Cellular, Inc.

RSA #1

RSA #7

RSA #9Assets

$
6,942,909

$
15,635,382

$
10,806,436

$
7,822,542Liabilities


411,378


1,413,854


3,039,166


1,983,413Equity

$
6,531,531

$
14,221,528

$
7,767,270

$
5,839,129Revenues

$
3,675,022

$
10,374,220

$
21,795,116

$
13,048,641Expenses


1,511,719


7,008,521


16,138,900


9,353,024Net
 Income

$
2,163,303

$
3,365,699

$
5,656,216

$
3,695,6172007West Iowa 
 Cellular, Inc.

RSA #1

RSA #7

RSA #9Assets

$
6,318,015

$
13,798,319

$
10,852,365

$
7,840,536Liabilities


349,787


1,171,448


3,108,684


1,691,242Equity

$
5,968,228

$
12,626,871

$
7,743,681

$
6,149,294Revenues

$
3,172,534

$
9,546,084

$
19,339,038

$
12,046,486Expenses


1,290,809


6,573,884


14,396,749


8,811,605Net
 Income

$
1,881,725

$
2,972,200

$
4,942,289

$
3,234,881As discussed previously in Note 3, the Company sold its ownership
interest in Desktop Media, LLC, on September 28, 2007. The Company had owned a
28% interest in Desktop on September 28, 2007. Desktop operates in southeastern
Minnesota and is a provider of Internet and telephone services.

This investment was accounted for under the equity method with the
Company recognizing their proportionate share of income and losses to the
extent that the investment exceeds losses.

65

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 4.
OTHER INVESTMENTS (Continued)Accordingly, the recorded investment amount in Desktop was
eliminated
at December 31, 2004. In 2005, additional losses in excess of the basis
totaling $46,717 were applied against the outstanding note receivable.

The Companys basis in the outstanding note receivable of
$439,974 on
the date of the sale was $220,283. The Company reported a $97,100 gain on the
sale of its ownership interest in Desktop Media, LLC, upon its receipt of
$63,000 in cash on September 28, 2007. At that time the company also received a
short-term promissory note of $254,383 from Jaguar Communications, Inc., as
noted previously.

The Company has a 33.33% ownership interest in Quad County
Communications (Quad County) at December 31, 2008 and 2007. This entity owns
and operates a fiber optic network.

The following is a summary of condensed financial information
pertaining to the company described above as of December 31, 2008 and 2007 and
the twelve months then ended.

Quad County Communications2008

2007Assets

$
116,125

$
317,942Liabilities


5,061


9,159Equity

$
111,064

$
308,783Revenues

$
35,407

$
190,867Expenses


67,330


50,574Net
 Income

$
(31,923
)
$
140,29366

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 4.
OTHER INVESTMENTS (Continued)The Companys percentage interests in Carroll County
Wireless, L.L.C.
and Guthrie Group, L.L.C. are each 33.33% at December 31, 2008 and 2007. Both
companies have purchased the licenses to provide personal communication
services (PCS); however, neither company has begun providing PCS services as of
December 31, 2008.

The following is a summary of condensed financial information
pertaining to the companies described above as of December 31, 2008 and 2007
and the twelve months then ended.

2008Carroll County 
 Wireless, L.L.C.

Guthrie 
 Group, L.L.C.Assets

$
204,291

$
94,463Liabilities





Equity

$
204,291

$
94,463Revenues

$
45,671

$
4,814Expenses


41,671


37,017Net
 Income

$
4,000

$
(32,203
)2007Carroll County 
 Wireless, L.L.C.

Guthrie 
 Group, L.L.C.Assets

$
200,291

$
120,667Liabilities





Equity

$
200,291

$
120,667Revenues

$
41,984

$
4,403Expenses


30,806


47,963Net
 Income

$
11,178

$
(43,560
)67

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2008 and 2007

NOTE 4.
OTHER INVESTMENTS (Continued)The Company has a 9.94% ownership interest in Bug Tussel Wireless
LLC
(Bug Tussel) at December 31, 2008 and 2007. Bug Tussel has constructed a
wireless network in rural Wisconsin, which provides roaming services to
cellular carriers offering service in the state.

The following is a summary of condensed financial information
pertaining to the company described above as of December 31, 2008 and 2007 and
the twelve months then ended.

Bug Tussel Wireless, L.L.C.2008

2007Assets

$
17,627,571

$
14,954,261Liabilities


12,955,330


9,398,031Equity

$
4,672,241

$
5,556,230Revenues

$
14,031,407

$
11,242,608Expenses


14,256,407


9,838,227Net
 Income

$
(225,000
)
$
1,404,381The Company has a 35.29% ownership interest in Spiralight Networks
LLC
(Spiralight) at December 31, 2008 and 2007. Spiralight provides fiber optic
transport services in Wisconsin, Illinois and Minnesota.

This investment is accounted for under the equity method with the
Company recognizing their proportionate share of income and losses to the
extent that the investment exceeds losses. Accordingly, the recorded investment
amount in Spiralight was eliminated at June 30, 2008. At December 31, 2008,
additional losses in excess of the basis totaling $484,264 were applied against
the outstanding note receivable.

The following is a summary of condensed financial information
pertaining to the company described above as of December 31, 2008 and 2007 and
the twelve months then ended.

Spiralight Network, L.L.C.2008

2007Assets

$
2,100,128

$
3,342,987Liabilities


3,251,268


2,286,398Equity

$
(1,151,140
)
$
1,056,589Revenues

$
3,236,060

$
2,632,734Expenses


5,886,060


4,434,893Net
 Income

$
(2,650,000
)
$
(1,802,159
)68

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 4.
OTHER INVESTMENTS (Continued)Partnership investments above with less than a 20% ownership are
carried at equity due to the level of influence the Company has with respect to
each investment. Investments in limited liability companies are on the equity
method if ownership is more than 3-5%.

LONG-TERM
INVESTMENTS AT COST

Long-term investments at cost include nonmarketable equity
securities
and certificates as follows:

2008

2007NECA
 Services, Inc. - stock

$
300,000

$
300,000Rural
 Telephone Finance Cooperative - certificates


171,110


173,352Iowa
 Network Services - stock


78,705


78,705NRTC
 Patronage Capital - certificates


32,390


48,650Other


16,926


11,000$
599,131

$
611,707NOTE 5.
GOODWILLGoodwill
consists of the following:

2008

2007Balance,
 beginning of year

$
896,812

$
896,812Goodwill
acquired





Goodwill
impairment





Balance,
 end of year

$
896,812

$
896,812The Company annually assesses its recorded balances of goodwill and
indefinite lived intangible assets. As a result, the Company determined no
impairment needed to be recorded for the years ended December 31, 2008 and
2007.

69

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 6.
PROPERTY, PLANT AND EQUIPMENTProperty,
plant and equipment includes the following:

2008

2007Telephone
 plant in service:Land

$
43,408

$
41,408Buildings


1,488,045


1,406,982Other general
support assets


2,398,948


2,305,688Central office
assets


5,566,624


4,063,231Cable and wire
facilities


6,025,376


5,086,640Other plant and
equipment


1,148,988


1,075,93916,671,389


13,979,888Cable
 television plant in service:Land

$
8,847

$
8,846Buildings


132,673


132,673Other plant and
equipment


182,497


207,753Towers,
antennas and head end equipment


1,613,382


1,613,382Cable and wire
facilities


1,573,544


1,573,544Franchises


30,092


30,0923,541,035


3,566,290Total property,
plant and equipment


20,212,424


17,546,178Less
accumulated depreciation


13,727,112


13,008,7676,485,312


4,537,411Plant under
construction


324,340


477,891$
6,809,652

$
5,015,302Telephone cable and wire facilities of approximately $814,000 and
cable
television head end equipment of approximately $506,000 were fully or nearly
fully depreciated in 2008. Depreciation on depreciable property resulted in
composite rates of 5.2% and 6.0% for 2008 and 2007, respectively.

70

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 7.
INCOME TAXESIncome taxes
reflected in the Consolidated Statements of Income consist of the following:

2008

2007Federal
 income taxes:Current tax
expense

$
509,074

$
1,147,635Deferred tax
expense


55,623


(112,633
)State
 income taxes:Current tax
expense


292,005


366,319Deferred tax
expense


(26,403
)

(35,391
)Total
 income tax expense

$
830,299

$
1,365,930Deferred federal and state tax liabilities and assets reflected in
the
Consolidated Balance Sheets are summarized as follows:

2008

2007Deferred
 tax liabilitiesFederal

$
1,645,669

$
1,097,484State


538,397


341,792Total deferred
tax liabilities


2,184,066


1,439,276Deferred
 tax assetsFederal


(671,364
)

(178,802
)State


(284,169
)

(61,161
)Total deferred
tax assets


(955,533
)

(239,963
)Net deferred
tax liabilities

$
1,228,533

$
1,199,313Current
 portion

$
(718,595
)
$
(14,294
)Long-term
 portion


1,947,128


1,213,607Net deferred
tax liability

$
1,228,533

$
1,199,31371

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

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:

2008

2007Statutory
 federal income tax rate


34.0
%

34.0
%State
 income taxes, net of federal benefit


10.1
%

10.1
%Amortization
 of bond premiums


1.0
%

0.4
%Dividends
 received deduction


(8.0
)%

(0.5
)%Tax
 exempt interest


(9.1
)%

(2.2
)%Other


2.5
%

(6.3
)%Effective
income tax rate


30.5
%

35.5
%The Company files consolidated tax returns including their
subsidiaries, Prairie Telephone Co., Inc., Westside Independent Telephone
Company, and Tele-Services, Ltd. BTC, Inc. is a subsidiary of Prairie Telephone
Co., Inc.

NOTE 8.
LONG-TERM DEBTLong-term debt
consists of:

2008

2007Rural Telephone Finance
Cooperative (RTFC)
 7.00% (Variable Rate)

$
951,495

$
1,139,205Less current
portion


200,507


187,710$
750,988

$
951,495The annual requirements for principal payments on long-term debt
for
the next five years are as follows:

2009

$
200,5072010


214,1772011


228,7792012


244,3772013


63,65572

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 8.
LONG-TERM DEBT (Continued)On July 17, 2008, interest on the RTFC loan switched from
calculating
at a fixed rate based on a 360-day year, to calculating at a variable rate
based on a 365-day year. At that time the interest rate also changed from 7.35
percent to 6.5 per cent. On October 1, 2008, the interest changed from 6.5 per
center to 7.0 per cent. The following is a summary of the changes in the
interest rate through December 31, 2008, as described above.

Fixed
 rate prior to 7/17/2008 - variable rate thereafter
7.35%7/17/2008
 to 10/01/2008
6.50%10/01/2008
 to 12/31/2008
7.00%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 beginning two to three years after
date of issue and expiring 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. As of December 31, 2008 and December 31, 2007, all
loan covenants were met.

The Company has a line of credit with the RTFC for $1,500,000. The
approved line of credit is available until November 15, 2010. The interest rate
at December 31, 2008 is 8.5%. No funds were advanced under the line at December
31, 2008. In addition, the Company has a line of credit with the RTFC for
$500,000. This approved line of credit is available until November 30, 2010.
The interest rate at December 31, 2008 is 8.5%. No funds were advanced under
the line at December 31, 2008.

73

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 9.
OPERATING SEGMENTS INFORMATIONThe Company organizes its business into three reportable segments:
local exchange carrier (LEC) services, broadcast services and Internet service
provider (ISP) services. The LEC services segment provides telephone, data
services and other services to customers in local exchanges. The broadcast
services segment provides cable television services to customers in Iowa and
Nebraska. The ISP services segment provides Internet access to customers within
the local exchanges and the surrounding areas.

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.

Local
 Exchange
 Carrier

Broadcast

Internet
 Service
 Provider

Total2008Revenues and sales

$
8,277,059

$
651,163

$
713,359

$
9,641,581Interest income


407,138


16,962


18,873


442,973Interest expense


(77,354
)







(77,354
)Depreciation and
amortization


797,112


35,478


141,199


973,789Income tax expense
(benefit)


866,403


(174,132
)

138,028


830,299Segment profit (loss)


2,453,972


(193,502
)

(331,915
)

1,928,555Segment assets


24,603,860


478,407


3,817,502


28,899,769Expenditures for segment
assets


3,021,459


(75,806
)

(181,897
)

2,763,7562007Revenues and sales

$
9,109,763

$
711,461

$
658,653

$
10,479,877Interest income


464,531


14,442


7,245


486,217Interest expense


(91,871
)







(91,871
)Depreciation and
amortization


787,175


69,421


159,650


1,016,247Income tax expense
(benefit)


1,306,950


(145,410
)

204,390


1,365,930Segment profit (loss)


3,319,045


(202,015
)

(638,700
)

2,478,330Segment assets


23,798,048


651,181


1,742,595


26,191,824Expenditures for segment
assets


1,356,650


(78,056
)

40,903


1,319,49674

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 10. NET INCOME PER COMMON SHARE

Net income per common share for 2008 and 2007 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, 2008 and 2007 were 30,859 and 31,003,
respectively.

NOTE 11. STOCK VALUE ADJUSTMENT

During March 2008, the board of directors authorized a $52
increase in
the stated value of each share of common stock from $457 to $509. There were
30,851 shares outstanding at the time of the value adjustment, which reduced
retained earnings by $1,604,252.

During April 2007, the board of directors authorized a $63
increase in
the stated value of each share of common stock from $394 to $457. There were
31,016 shares outstanding at the time of the value adjustment, which reduced
retained earnings by $1,954,008.

75

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 12. STOCK RESTRICTIONS

The Companys Articles of Restatement became effective on
March 29,
2007. One of the changes originating with the Articles of Restatement was the
addition of a second class of common stock. The Company is authorized to issue
10,000,000 shares, comprised of the following two classes: (i) 5,000,000 shares
of Class A Common Stock, no par value; and (ii) 5,000,000 shares of Class B
Common Stock, no par value.

The Class A Common Stock is comprised of the following three
series:

(i)
Series 1  these shares represent Class A shares issued after
March
 29, 2007. These shares have voting rights of one vote per shareholder,
 regardless of the number of Class A shares held.(ii)
Series 2  these shares were issued and outstanding
immediately prior
 to the March 29, 2007 effective date and with respect to which the holders of
 such shares had one vote per shareholder, regardless of the number of Class A
 shares held. The shares had previously been shares of the former Class A
 stock of the Corporation that were issued and outstanding on February 28,
 1995.(iii)
Series 3  these shares were issued and outstanding
immediately prior
 to the March 29, 2007 effective date and with respect to which the holders of
 such shares had one vote for each such share. The shares had previously been
 shares of the former Class A stock of the Corporation that were issued and
 outstanding on February 28, 1995. These shares have voting rights of one vote
 per share.The Class B
Common Stock represent non-voting shares issued after March 29, 2007.

76

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 12. STOCK RESTRICTIONS (Continued)

Restrictions
on the stock include the following:


Individuals
 purchasing Class A, Series 1 stock must be living within the Breda and
 Lidderdale service areas of the Company and subscribe to its telephone
 services. Individuals or entities can purchase Class B, non-voting stock
 without service area or service participation restrictions.
Shareholders
 are individually limited to ownership of not more than one percent of the
 joint outstanding Class A and Class B stock unless ownership was prior to the
 Articles of Restatement. There may be two stockholders per household and
 their joint ownership may not exceed two percent of the joint outstanding
 Class A and Class B stock.
Shareholders
 shall not sell any shares of stock owned unless the Company has been given
 first right of refusal.
Stock
 transfers require 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 BENEFITS

The Company has a defined benefit pension plan covering most
employees.
The multi employer retirement program is with the National Telephone
Cooperative Association (NTCA) and has been approved by the Internal Revenue
Service. Pension costs expensed and capitalized for 2008 and 2007 were $128,624
and $158,110, respectively. The Company makes annual contributions to the plan
equal to amounts accrued for pension expense.

NOTE 14. ASSET RETIREMENT OBLIGATION

Generally accepted accounting principles require entities to
record the
fair value of a liability for legal obligations associated with an asset
retirement in the period in which the obligations are incurred. When the
liability is initially recorded, the entity capitalizes the cost of the asset
retirement obligation by increasing the carrying amount of the related
long-lived asset. Over time, the liability is accreted to its present value
each period, and the capitalized cost is depreciated over the useful life of
the related asset.

The Company has determined it does not have a material legal
obligation
to remove long-term assets and accordingly, there have been no liabilities
recorded for the years ended December 31, 2008 and 2007.

77

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 15. RELATED PARTY TRANSACTIONS

The Company receives commission revenue from RSA #9, Ltd.
Partnership
(RSA #9) based on cellular service activation and retention. The Company has a
16.7% ownership interest in RSA #9. Commissions received by the Company for the
years ended December 31, 2008 and 2007 were approximately $1,281,000 and
$1,143,000, respectively. At December 31, 2008 and 2007, $172,796 and $156,870
were due from RSA #9 for commissions.

NOTE 16. CONCENTRATION OF CREDIT RISK

The Company grants credit to local service customers, all of whom
are
located in the service area, broadcast customers, Internet customers and
telecommunications intrastate and interstate long distance carriers.

The Company received 53% of its 2008 revenues from access revenues
and
assistance provided by the Federal Universal Service Fund. As a result of the
Telecommunications Act of 1996, the manner in which access revenues and
Universal Service Funds are determined is currently being modified by
regulatory bodies.

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and cash equivalents,
along with both temporary and long-term 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.

The Company maintains its cash in bank deposit accounts which, at
times, may exceed federally insured limits. The Company has not experienced any
losses in such accounts. The Company believes it is not exposed to any
significant credit risk on cash and cash equivalents.

The Company routes conference bridging minutes of use through its
switch in Carroll, Iowa. The Company generates revenues from this service based
on tariffed rates per minutes of use, which is charged to interexchange
carriers. In April 2007 certain interexchange carriers began disputing the
charges and the volume of minutes on which the charges were billed, and stopped
payment until the dispute could be settled. The Company is currently
corresponding with the interexchange carriers regarding the payment of the
unpaid access charges. The Companys estimated unpaid access charges resulting
from conference bridge services as of December 31, 2008 is $5,844,593. The
Company has recorded an estimated allowance of $3,131,299 for non-payment of
these charges as of December 31, 2008, and has accrued additional accounts
payable for related costs associated with the conference bridge minutes of
$1,545,294.

78

BREDA TELEPHONE CORPORATION AND SUBSIDIARIES 
BREDA, IOWA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
December 31, 2008 and 2007

NOTE 17. NONCASH INVESTING ACTIVITIES

Noncash investing activities included $7,657 during the year ended
December 31, 2008 relating to plant and equipment additions placed in service
during 2008, which are reflected in accounts payable at year-end.

79

Item 9.
Changes In and Disagreements With
 Accountants on Accounting and Financial Disclosure.Breda has not had any change in its accountants or any
disagreements
 with its accountants which are required to be disclosed under this Item.Item 9A(T).
Controls and Procedures.Evaluation of
 Disclosure Controls and ProceduresThe principal executive officer and the principal financial officer
 of Breda have evaluated the effectiveness of Bredas disclosure controls and
 procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of
 1934) as of the end of the period covered by this annual report, and they
 have concluded that the disclosure controls and procedures have been
 effective for the purposes for which they are intended. Breda believes that a
 control system, no matter how well designed and operated, cannot provide
 absolute assurance that the objectives of the control system are met, and no
 evaluation of controls can provide absolute assurance that all control issues
 and instances of fraud, if any, within a company have been detected.Managements
 Annual Report on Internal Control Over Financial ReportingThe management of Breda is responsible for establishing and
 maintaining adequate internal control over financial reporting for Breda.
 Bredas internal control system was designed to, in general, provide
 reasonable assurance to Bredas management and board of directors regarding
 the preparation and fair presentation of published financial statements, but
 because of its inherent limitations, internal control over financial
 reporting may not prevent or detect misstatements. Also, projections of any
 evaluation of effectiveness to future periods are subject to the risk that
 controls may become inadequate because of changes in conditions, or that the
 degree of compliance with the policies or procedures may deteriorate.Bredas management assessed the effectiveness of Bredas
internal
 control over financial reporting as of December 31, 2008. The framework used
 by management in making that assessment was the criteria set forth in the
 document entitled Guidance for Smaller Public Companies Reporting on
 Internal Control over Financial Reporting issued by the Committee of
 Sponsoring Organizations of the Treadway Commission. Based on that
 assessment, Bredas management has determined that as of December 31, 2008,
 Bredas internal control over financial reporting was not effective based on
 those criteria because Breda has not completed its work with its Internal
 Control consultant. The completion of all requirements of the SEC under
 Section 404 of the Sarbanes-Oxley Act of 2002 was not completed as of the
 date of this filing.This annual report does not include an attestation report of
Bredas
 registered public accounting firm regarding internal control over financial
 reporting. Managements80

report was not subject to attestation by Bredas registered
public
 accounting firm pursuant to temporary rules of the Securities and Exchange
 Commission that permit Breda to provide only managements report in this
 annual report.Changes in
 Internal Control Over Financial ReportingNo change in Bredas system of internal control over financial
 reporting occurred during the period of October 1, 2008 through December 31,
 2008 that has materially affected, or is reasonably likely to materially
 affect, Bredas internal control over financial reporting.Item 9B.
Other Information.Breda did not have any information which was required to be
disclosed
 in a report on Form 8-K during the period of October 1, 2008 through December
 31, 2008 which was not reported on Form 8-K.PART IIIItem 10.
Directors, Executive Officers and Corporate
 Governance.Directors and
 OfficersThe directors and executive officers of Breda as of the date of
this
 annual report were as follows:Name

Age

Position(s)Charles
 Thatcher

57

President
 andDirectorDaniel
 Nieland

52

Vice
 President andDirectorRick
 Anthofer

52

Treasurer
 andDirectorNeil Kanne

62

Secretary
 and DirectorClifford
 Neumayer

60

DirectorRobert Buelt

50

DirectorDean
 Schettler

56

Director81

Charles (Chuck) Thatcher has been a director of Breda since May,
 2001. His current term as a director of Breda will end at the annual
 shareholders meeting which will be held in 2010. He has also served as a
 director of each of Bredas subsidiaries since May, 2001. Mr. Thatcher has been
 the President of Breda and of each of Bredas subsidiaries since June 14,
 2005. Mr. Thatcher has been an owner of Midwest Wholesale Building Products
 in Carroll, Iowa for over 20 years. Midwest Wholesale Building Products is a
 wholesaler/retailer of lumber, building products and materials.Daniel Nieland has been a director of Breda since May 17, 2005, and
 his current term as a director will end at the annual shareholders meeting
 which will be held in 2011. Mr. Nieland has also served as a director of each
 of Bredas subsidiaries since May, 2005. Mr. Nieland has been the vice
 president of Breda and each of Bredas subsidiaries since June 10, 2008. Mr.
 Nieland has been self-employed as a farmer since 1978. He has served as a
 board member of Mt. Carmel Mutual Insurance Association in Breda, Iowa since
 approximately 1988. Mr. Nieland has served as a Carroll County Supervisor
 since January 2007.Rick Anthofer has been a director of Breda since August, 2003. His
 current term as a director will end at the annual meeting of the shareholders
 which is held in 2009. He has also served as a director of each of Bredas
 subsidiaries since August, 2003. Mr. Anthofer has served as the Treasurer of
 Breda and each of Bredas subsidiaries since June 14, 2005. Mr. Anthofer has
 been the vice president of Breda Savings Bank, in Breda, Iowa, since
 approximately September 15, 1999. He was an agricultural and commercial loan
 officer and an assistant vice president at Carroll County State Bank in
 Carroll, Iowa, for approximately 13 years prior to that time. Mr. Anthofer
 has been a member of the Breda, Iowa City Council since 1988.Neil Kanne has been a director of Breda since May, 2004, and his
term
 as a director will end at the annual shareholders meeting which will be held
 in 2010. He has also served as a director of each of Bredas subsidiaries
 since May, 2004. Mr. Kanne has been the Secretary of Breda and of each of
 Bredas subsidiaries since October 30, 2006. Mr. Kanne has been self-employed
 as a farmer since 1970.Clifford Neumayer has been a director of Breda since October 25,
 2006, and his current term as a director will end at the annual shareholders
 meeting which will be held in 2009. Mr. Neumayer has also served as a
 director of each of Bredas subsidiaries since October 2006. Mr. Neumayer was
 also a director of Breda and each of Bredas subsidiaries from April, 1996
 until May 17, 2005. He was the vice president of Breda and each of Bredas
 subsidiaries from May 7, 1996 through June 9, 2003, and the president of
 Breda and each of its subsidiaries from June 9, 2003 until June 14, 2005. Mr.
 Neumayer has been self-employed as a farmer since 1970.Robert Buelt has been a director of Breda since October, 2006, and
 his current term as a director will end at the annual shareholders meeting
 which will be held in 2009. Mr. Buelt has also served as a director of each
 of Bredas subsidiaries since October, 2006. Mr. Buelt was the clubhouse
 manager for Breda Golf Club, Ltd. from March 1,82

1999 until November 1, 2001. He has been the assistant manager of
the
 Carroll Car Credit Company since November 1, 2001, and has been the owner and
 operator of Buelt Hatchery and Storage since January 1, 1985. Carroll Car
 Credit Company helps individuals establish and reestablish credit to purchase
 vehicles available from Carroll Car Credit Company. Buelt Hatchery and
 Storage is a mini-storage unit facility.Dean Schettler has been a director of Breda since May 22, 2008, and
 his current term as a director will end at the annual meeting of the
 shareholders which is held in 2011. Mr. Schettler has also served as a
 director of each of Bredas subsidiaries since May, 2008. Mr. Schettler was a
 director of Breda and each of Bredas subsidiaries from April, 1997 until October
 25, 2006. He was the President of Breda and each of Bredas subsidiaries from
 May 11, 1998 through June 9, 2003, and he was the Vice President of Breda and
 each of Bredas subsidiaries from June 9, 2003 until June 14, 2005. Mr.
 Schettler was employed by Pella Corporation in Pella, Iowa from August, 1986
 until April 27, 2007. He was a moulder technician until August 1997, and he
 was a production coordinator from that time until April, 2007. Pella
 Corporation is a window and door manufacturer. He has been the owner and
 president of Keystone Petroleum Products, LLC, d/b/a Sheppys Short Stop in
 Breda, Iowa since April 27, 2007.Number and Term of
 Director; OfficersThe Board of Directors of Breda consists of seven members. Each
 director is elected to a three year term and until his or her successor is
 elected, or until his or her death, resignation or removal. The terms of
 office of the directors are staggered, so that three of the directors terms
 expire in one year, two expire the next year, and two expire the following
 year.Each director must be a Class A Common Stock shareholder, and a
 director will automatically cease to be a director if he or she ceases to
 hold any shares of the Class A Common Stock. Each director must also be at least
 18 years old. No individual may serve more than three consecutive terms as a
 director, and if an individual has served for three consecutive terms as a
 director, that individual must be off the Board for at least one year before
 the individual can again be elected as a director.The executive officers of Breda are elected annually by the Board
of
 Directors at its annual organizational meeting, and hold office until the
 next annual organizational meeting of the Board of Directors and until their
 respective successors are chosen or until their death, resignation or
 removal. The annual organizational meeting of the Board of Directors is the
 first regularly scheduled meeting of the Board of Directors which is held
 after the annual shareholders meeting. Each officer, other than the chief
 executive officer, the chief operations officer and the chief financial
 officer, must also be a director of Breda.83

Significant EmployeesBreda had three employees who made a significant contribution to
Bredas
 business in 2008, and those employees are the following:Name
Age
PositionSteve
 Frickenstein
57
Chief
 Executive OfficerCharles
 Deisbeck
42
Chief
 Operations OfficerJane A.
 Morlok
55
Chief
 Financial OfficerMr. Frickenstein became employed as the chief executive officer of
 Breda effective on July 1, 2006. Mr. Frickenstein served as a general manager
 of construction support for AT&T from May 1, 2000 through July 22, 2005.
 He provided various consulting services to Breda during the period of
 January, 2006 to June, 2006. Mr. Frickenstein has 36 years of experience in
 the telecommunications industry, and he began his career as a lineman for
 Illinois Bell. He also had assignments in Europe and with Bell Labs in New Jersey.Mr. Deisbeck became employed as the chief operations officer of
Breda
 effective on July 1, 2006. Mr. Deisbeck was an operations manager at Choice
 One Communications in Milwaukee, Wisconsin, from September, 2000, to October,
 2002. He served as the operations manager at Red River Telephone Company in
 Abercrombie, North Dakota, from October, 2002, until June 30, 2006. He has
 held various plant operations positions in the telecommunications industry
 since 1988.Ms. Morlok was the chief financial officer and co-chief executive
 officer of Breda from March 20, 1998 to July 1, 2006. She also served as
 Bredas interim chief executive officer from April 11, 2006 until July 1,
 2006. Her title since July, 2006 has been chief financial officer.Audit Committee
 and Audit Committee Financial ExpertBreda does not have a separately-designated standing audit
committee,
 and Bredas entire board of directors performs any functions that would
 otherwise be performed by an audit committee.Bredas board of directors has determined that Breda does not
have an
 audit committee financial expert, as that term is defined in the applicable
 regulations of the Securities and Exchange Commission, serving on its board
 of directors. There are various factors which may contribute to the fact that
 Breda does not have an audit committee financial expert serving on its board
 of directors. For example, although Breda is subject to the reporting
 requirements of the Securities Exchange Act of 1934,84

it is a relatively small company, and its corporate offices are
 located in a small, rural community in Iowa, both of which facts limit its
 ability to identify and to attract an audit committee financial expert. Also,
 under Bredas governing documents, an individual can only be a director of
 Breda if the individual holds shares of the Class A common stock of Breda,
 and there are restrictions on who can hold shares of the Class A common stock
 of Breda. There is therefore a limited pool of individuals who are even eligible
 to be considered for a director position with Breda. There are also
 limitations on the number of shares which can be held by any shareholder. For
 example, no shareholder may own more than 2% of the total issued and
 outstanding common stock of Breda. In addition, each shareholder is generally
 entitled to only one vote on each matter submitted to the shareholders,
 regardless of the number of shares held by the shareholder. Those
 restrictions may limit the number of individuals who desire to be a shareholder
 in Breda. Further, all nominees for election as a director of Breda are
 nominated by the shareholders, and the shareholders may not take into
 consideration some of the particular issues that are raised or attempted to
 be addressed by the Securities Exchange Act of 1934 and its implementing
 regulations. Bredas board of directors believes that all of these factors
 make it unlikely that Breda will have an audit committee financial expert
 serving on its board of directors in future years.Procedures for
 Recommending Nominees to Bredas Board of DirectorsThere were no material changes in 2008 to the procedures by which
the
 shareholders of Breda may recommend nominees for election as a director of
 Breda.Code of EthicsBreda has adopted a code of ethics that applies to Bredas
principal
 executive officer, principal financial officer, principal accounting officer
 or controller, or persons performing similar functions. A copy of the code of
 ethics is filed as an exhibit to this annual report.Item 11.
Executive Compensation.The information required by this Item is incorporated by reference
 from the Compensation Of Executive Officers And Directors section in
 Bredas definitive proxy statement to be filed by Breda with respect to the
 annual meeting of the shareholders of Breda which will be held in 2009, which
 definitive proxy statement shall be filed within one hundred and twenty days
 after the end of the fiscal year covered by this annual report.Item 12.
Security Ownership of Certain Beneficial
 Owners and Management and Related Stockholder Matters.The following table sets forth certain information regarding the
 beneficial ownership of Bredas common stock as of March 1, 2009 by the
 directors and executive officers85

of Breda.
 Breda had 30,851outstanding shares of common stock on March 1, 2009.Title of Class

Name of
 Beneficial Owner

Amount and Nature
 of
 Beneficial Ownership1

Percent of ClassSeries 1 and

Charles
 Thatcher,Series 2
 Class A

Director andCommon Stock

President

422

.136%Series 2
 Class A

Daniel
 Nieland,Common Stock

Director andVice
 President

1

.003%Series 2
 Class A

Rick
 Anthofer,Common Stock

Director andTreasurer

53

.172%Series 2
 Class A

Neil Kanne,Common Stock

Director andSecretary

2

.006%Series 3
 Class A

Dean
 Schettler,Common Stock

Director

2

.006%Series 1 and

CliffordSeries 2
 Class A

Neumayer,

1863

.603%Common Stock

DirectorSeries 2
 Class A

Robert
 Buelt,Common Stock

Director

1514

.490%All
 directors andofficers as
 agroup (7
 persons)

437

1.416%1
Unless
 otherwise indicated by a footnote, all of the shares are directly owned by
 the listed individual and are not pledged as security by the listed
 individual.2
Sixteen
 of these shares are held by Mr. Thatchers spouse. Twenty five shares are
 shares of the Series 1 Class A Common Stock. All of the other shares are
 Series 2 Class A Common Stock.3
Five
 of these shares are held by Mr. Neumayers spouse and are shares of Series 1
 Class A Common Stock.4
Sixteen
 of these shares are held by Mr. Buelts spouse and twelve of these shares are
 held by Mr. Buelts son.Steve Frickenstein, Charles Deisbeck and Jane Morlok are employed
as,
 respectively, Bredas chief executive officer, chief operations officer and
 chief financial officer. None of them own any shares of Bredas common stock.86

To Bredas
 knowledge, as of March 1, 2009:
No person or group was the beneficial owner of more than 5% of
 Bredas outstanding common stock, and no person or group held more than 5% of
 Bredas outstanding common stock pursuant to any voting trust or similar
 agreement; and
There were no arrangements, including any pledge of common stock by
 any person, the operation of which may at a subsequent date result in a
 change in control of Breda.As of the date of this annual report, Breda did not have any
 compensation plans, including any individual compensation arrangements, under
 which shares of the common stock of Breda are authorized for issuance.Item 13.
Certain Relationships and Related
 Transactions and Director Independence.Transactions With
 Related PersonsThere were no transactions since the beginning of Bredas
fiscal year
 ended December 31, 2008, and there are no currently proposed transactions, in
 which Breda was or is to be a participant where the amount involved exceeds
 $120,000, and in which any of the following types of persons had, or will
 have, a direct or indirect material interest:
any director or executive officer of Breda;
any person who is known by Breda to own of record or beneficially
 more than 5% of Bredas outstanding shares of common stock; or
any immediate family member of any of the foregoing
persons.The directors of Breda are Charles Thatcher, Rick Anthofer, Neil
 Kanne, Clifford Neumayer, Dean Schettler, Robert Buelt and Daniel Nieland.
 Each of the directors meets the standards of independence under the
 Governance Guidelines and applicable NASDAQ Stock Market listing standards,
 including that each director is free of any relationship that would interfere
 with his individual exercise of independent judgment.Item 14.
Principal Accountant Fees and Services.The following paragraphs describe the aggregate fees that were
billed
 to Breda by Kiesling Associates, LLP for the fiscal years ended December 31,
 2007 and December 31, 2008.87

Audit Fees.Breda was billed $37,650 and $33,519 for, respectively, the fiscal
 years ended December 31, 2007 and December 31, 2008 for the audit of Bredas
 annual financial statements and review of the financial statements included
 in Bredas quarterly reports on Form 10-Q or services that are normally
 provided by the accountant in connection with statutory and regulatory
 filings or engagements for those two fiscal years.Audit Related Fees.Breda was billed $18,407 and $11,921 for, respectively, the fiscal
 years ended December 31, 2007 and December 31, 2008 for assurance and related
 services that were reasonably related to the performance of the audit or
 review of Bredas financial statements and which are not reported under
 Audit Fees above. The nature of those services was compliance, assurance
 and review work in connection with SEC filings.Tax Fees.Breda was billed $4,700 and $4,900 for, respectively, the fiscal
 years ended December 31, 2007 and December 31, 2008 for tax compliance, tax
 advice and tax planning services. The nature of those services was tax return
 and estimated tax preparation work.All Other Fees.Breda was billed $3,885 and $2,900 for, respectively, the fiscal
 years ended December 31, 2007 and December 31, 2008 for products and services
 which are not described under Audit Fees, Audit Related Fees and Tax
 Fees above. The nature of those products and services was consulting on
 industry related issues.Each specific, one-time engagement of Kiesling Associates, LLP is
 approved by the board of directors of Breda. The board of directors does
 pre-approve on a quarterly basis a budget for the provision of services, such
 as industry consulting, accounting seminars, or tariff consulting, by
 non-audit personnel of Kiesling Associates, LLP.PART IVItem 15.
Exhibits and Financial Statement Schedules.(a)
Financial
 Statements and SchedulesThe financial statements are set forth under Item 8 of this annual
 report. Financial statement schedules have been omitted because they are not
 required or are not applicable, or the information is otherwise included in
 this annual report.88

(b)
ExhibitsThe following
 exhibits are filed as part of this annual report. Exhibits previously filed
 are incorporated by reference, as noted.Incorporated by ReferenceExhibit
 Number

Exhibit
 Description

Filed Herewith;
 Page Number

Form

Period
 Ending

Exhibit

Filing
 Date3.1

Articles of
 Restatement



10-QSB

3/31/07

3.1

5/14/073.2

Second
 Amended and



8-K



3.2

4/4/07Restated
 Bylaws10.1

Employment



10-QSB

9/30/08

10.1

11/13/08Agreement
 dated July10, 2008
 with JaneMorlok10.2

Employment



10-QSB

6/30/06

10.2

8/11/06Agreement
 dated June14, 2006
 with SteveFrickenstein10.3

Employment



10-QSB

6/30/06

10.3

8/11/06Agreement
 dated June14, 2006
 with CharlesDeisback14

Code of
 Ethics

E-131

Rule
 13a-14(a)Certifications31.1
Certification
 of

E-11Chief
 Executive Officer31.2
Certification
 of

E-13Chief
 Financial Officer32

Section 1350Certifications89

32.1
Certification
 of

E-15Chief
 ExecutiveOfficer32.2
Certification
 of

E-16Chief
 FinancialOfficer[THE REST OF THIS PAGE IS INTENTIONALLY LEFT
BLANK]

90

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
 31, 2009
By:
/s/ Steve
 FrickensteinSteve
 Frickenstein, Chief Executive OfficerBy:
/s/ Jane
 MorlokJane Morlok,
 Chief Financial OfficerIn 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/ Daniel
 Nieland

By:
/s/ Neil
 KanneDaniel
 Nieland, Vice President and Director

Neil Kanne,
 Secretary and DirectorDate: March
 31, 2009


Date: March
 31, 2009By:
/s/ Rick
 Anthofer

By:
/s/ Robert
 BueltRick
 Anthofer, Treasurer and Director

Robert
 Buelt, DirectorDate: March
 31, 2009


Date: March
 31, 2009By:
/s/ Clifford
 Neumayer

By:
/s/ Dean SchettlerClifford
 Neumayer, Director


Dean
 Schettler, DirectorDate: March
 31, 2009


Date: March
 31, 2009By:
/s/ Charles
 Thatcher

By:
/s/ Jane
 MorlokCharles
 Thatcher, President and Director

Jane Morlok,
 Chief Financial OfficerDate: March
 31, 2009


Date: March
 31, 2009By:
/s/ Steve
 Frickenstein

By:
/s/ Charles
 DeisbeckSteve
 Frickenstein, Chief Executive Officer

Charles
 Deisbeck, Chief Operations OfficerDate: March
 31, 2009


Date: March
 31, 200791

EXHIBIT INDEXExhibits to Form 10-K of Breda Telephone
Corp.
for the Fiscal Year Ended December 31, 2008

Description of Exhibit.14.

Code of Ethics

E-131.

Rule 13a-14(a)/15d-14(a) Certifications31.1
Rule 13(a)-14(a) Certification of Chief Executive
Officer

E-1131.2
Rule 13(a)-14(a) Certification of Chief Financial
Officer

E-1332.

Section 1350 Certifications32.1
Section 1350 Certification of Chief Executive
Officer

E-1532.2
Section 1350 Certification of Chief Financial
Officer

E-16